3.3 The single-document FYDUCA process

The single-document Central American Invoice and Single Declaration (FYDUCA) is a best practice for simplifying formalities and using e-government practices to improve services and reduce costs. Under the Guatemala–Honduras deep integration agreement, the FYDUCA is the only legal or fiscal document used for trading between the countries. It constitutes both (a) an invoice supporting the transfer and acquisition of goods or the provision of services between economic agents of the countries in the customs union, and (b) a declaration of the withholding or liquidation and payment of taxes. The export process using FYDUCA is reduced to the following steps: 1. The transferor (exporter) accesses the electronic platform of its tax administration and fills out the FYDUCA with data about its company, the acquirer (importer), the merchandise traded, and the transportation that will carry the merchandise. 2. Once the FYDUCA has been completed and validated in the computer system, it is transmitted to the tax administration of the acquiring country (importer), where the tax obligation is determined and a value added tax (VAT) or sales tax payment slip is generated. From that moment, 24 hours is allowed for the acquirer to pay the tax obligation electronically to the tax administration of the acquiring country. The VAT must be paid before goods enter the territory of the acquiring country. 3. Once that tax payment has been made, the transporter carries the goods to the TF Center (fast-track lane) at the border, where the tax authority of the acquiring country electronically validates that the tax has been paid and registers in the system that the goods have entered the country. 4. Immigration exit and entry processes are carried out in the same center. 5. Once both validation and immigration procedures have been completed, the transport leaves the border post and goes to its destination, where the acquirer records in the electronic system that the merchandise has been received.

Source: World Bank.

Guatemala–Honduras trade, with cotton, paper articles, iron and steel, and plastic and plastic articles among the main products crossing the border. Enhanced border efficiency could boost the competitiveness of these supply chains and accelerate a deeper regional integration.

The Guatemala–Honduras agreement shows how a DTA can enhance TF between two countries despite challenges that had kept an earlier regional trade agreement from achieving the free movement of goods. The bilateral agreement included measures to promote border agency cooperation between the partner countries, simplify formalities using information and communications technology, and establish an institutional framework to coordinate implementation. The success in this case study highlights the importance of DTA provisions for cooperation and institutional arrangements to establish structures for implementation and mechanisms to involve the private sector.