The Caribbean Basin Initiative (CBI)

The Caribbean Basin Initiative (CBI)

The CBI is a broad programme of the US Government, which aims to promote economic development through private sector initiative in Central American and Caribbean Countries.  A major goal of the CBI is to expand foreign and domestic investment in non-traditional sectors, thereby diversifying CBI countries’ economies and expanding their exports.  The Caribbean Basin Economic Recovery Act of 1983 (amended in 1990) provides duty-free entry to the United States for a broad range of products from CBI beneficiary countries (see Appendix A) for an indefinite period.

Products are deemed eligible for CBI duty-free treatment if the following conditions are met:

  1. The merchandise must be imported directly from a beneficiary country into the customs territory of the United States.
  2. The merchandise must have been produced in a beneficiary country.This requirement is satisfied when (a) goods are wholly the growth, product, or manufacture of a beneficiary country or (b) the goods have been substantially transformed into a new and different article of commerce in a beneficiary country, as determined by US Customs.

  3. At least thirty-five percent (35%) of the appraised value of the article imported into the United States must consist of the cost or value of materials produced in one or more beneficiary countries and/or the direct costs of processing operations performed in one or more beneficiary countries.The Commonwealth of Puerto Rico and the U.S. Virgin Islands are defined as beneficiary countries for purposes of this requirement; therefore value attributed to Puerto Rico or the U.S. Virgin Islands may also be counted.

In addition, the cost or value of materials produced in the customs territory of the United States (other than Puerto Rico) may be counted, but only to a maximum of fifteen percent (15%) of the appraised value of the imported article.  The cost or value of material imported into a beneficiary country from a non-beneficiary country may be included in calculating the thirty-five percent (35%) value-added requirement for an eligible article if the materials are first substantially transformed into new and different articles of commerce and are then used as constituent materials in the production of the eligible article.

It is important to note that the thirty-five per-cent (35%) value-added and substantial transformation requirements do not apply to products manufactured or assembled wholly from U.S. components (other than textiles and apparel, petroleum and certain products derived from petroleum) and ingredients (other than water).

In addition, the general value-added and substantial transformation rule is also excluded in the case of products that are the growth, product, or manufacture of Puerto Rico that are subsequently processed or advanced in value in another CBI beneficiary country.