The United States Trade Representative has determined, pursuant to Section 301 of the Trade Act of 1974, that Nicaragua’s “abuses of labor rights, abuses of human rights and fundamental freedoms, and dismantling of the rule of law” are unreasonable and burden or restrict U.S. commerce. Based on this determination, USTR has proposed a range of actions, including the suspension of certain benefits under the Central America-Dominican Republic-United States Free Trade Agreement (CAFTA-DR) and/or 100% duties on some or all products of Nicaragua. Comments on USTR’s proposed actions are due November 19, 2025.
USTR Finds Certain Conditions in Nicaragua Unreasonable
USTR initiated this Section 301 investigation in December 2024 and received over 150 comments concerning Nicaragua’s record with respect to labor rights, human rights, and the rule of law. The Government of Nicaragua opted not to hold consultations with the United States with respect to this investigation.
USTR’s October 2025 determination, embodied in a 46-page report, was issued over a month ahead of the one-year statutory deadline for completion of the investigation. Consistent with the investigation’s focus, USTR’s report emphasizes three main themes in determining that certain acts, policies, or practices were “unreasonable” within the meaning of Section 301:
- Abuses of internationally recognized labor rights;
- Dismantling of the rule of law in Nicaragua; and
- Abuses of human rights, religious, and fundamental freedoms.
USTR further determined that these acts burdened U.S. Commerce by, for example, (1) creating unfair conditions of competition through worker exploitation and wage suppression; (2) confiscating property of U.S. persons or businesses; and (3) creating a “high-risk environment” for U.S. companies investing and conducting business in Nicaragua.
Findings May Indicate Future Section 301 Framing
Tariffs have become a pillar of the Trump Administration’s trade and economic policy. This is reflected in actions taken under a variety of legal authorities, including the International Emergency Economic Powers Act (IEEPA) and Section 232 of the Trade Expansion Act of 1962, in addition to Section 301. Certain tariff regimes created pursuant to IEEPA have been held unlawful by federal courts including the U.S. Court of International Trade and the U.S. Court of Appeals for the Federal Circuit, with further review before the U.S. Supreme Court now pending. Ultimately, the IEEPA tariffs may be held unlawful, in whole or in part. Were that to happen, various officials have signaled an intent to pursue the Trump Administration’s tariff aims under different statutory authorities. Section 301 presents one such potential alternative.
This is the second Section 301 determination issued under the second Trump Administration, and the first issued under the shadow of adverse IEEPA rulings. Although other U.S. trading partners do not share Nicaragua’s circumstances, USTR’s focus in this Section 301 determination nevertheless offers some indication of where “fallback” Section 301 investigations, if any, may direct their attention. The issue of labor rights features prominently in both the Nicaragua Section 301 report and the trade dealmaking pursued after the various IEEPA tariff regimes were imposed. Likewise, the report’s discussion of bureaucratic delays, arbitrary valuations, and excessive fines for shipments of goods into Nicaragua echoes concerns expressed in the 2025 National Trade Estimate report concerning the customs administration in other trading partners.
In some respects, USTR’s rationales for finding that these abuses burden or restrict U.S. Commerce are also general in nature. For example, Nicaragua’s customs administration issues are said to have “lost sales and exports for U.S. enterprises” to “benefit domestic competitors” and have “increased costs for U.S. exporters of virtually all products.” With respect to labor rights, the core of USTR’s reasoning focuses on the link between the suppression of rights and the suppression of wages, which “artificially suppress{} costs, creating unfair competition” such that “U.S. workers and businesses must compete with imported products that have been unfairly advantaged by Nicaragua’s artificial low-wage costs.” USTR could seek to apply the theory underlying these findings to other circumstances where thematically similar issues exist.
Recommended Actions Include Tariffs and Suspended Free Trade Benefits
In the event of an affirmative determination, Section 304(a)(1)(B) instructs USTR to “determine what action, if any” should be taken in response. USTR has done so here, finding that the preconditions for “discretionary action” under Section 301(b) have been satisfied and proposing “that appropriate action would include:”
- Suspension of all or some tariff concessions and cumulation of Nicaraguan content for partners in the CAFTA-DR. USTR suggests this suspension of benefits take place either immediately or phased in over a period of up to 12 months.
- Application of tariffs up to 100 percent on all or some Nicaraguan imports, immediately or phased in over a period of up to 12 months. If only some Nicaraguan imports are subjected to tariffs, a portion have tariffs applied “immediately,” with others phased in over up to 12 months.
USTR requests that interested parties submit comments regarding these proposed actions. With respect to the timing of implementation, USTR asks that commenters specifically address whether implementation “would be practicable or effective to obtain the elimination of Nicaragua’s acts, policies, and practices or would cause disproportionate economic harm to U.S. interests, including small- or medium-size businesses and consumers.” The specific mention of “consumers” is distinct among the Trump Administration’s various tariff-related comment requests this year.
Written comments and supporting materials are due to be submitted through the online USTR portal by November 19, 2025 (Docket No. USTR-2025-0006).
Preparing Supply Chains
Cassidy Levy Kent’s attorneys, economists, compliance experts, and licensed customs brokers are ready to help companies develop strategic responses to the latest changes in U.S. tariff policy and plan for potential developments. Cassidy Levy Kent has extensive experience counseling clients to plan compliant supply chains that manage tariff risks. We routinely assist with preparing and filing comments for consideration in tariff investigations. Our team’s deep familiarity with trade law and policy enables clients to adapt and stay ahead of the curve.