[WPRT 107-4]
[From the U.S. Government Printing Office]



107th Congress                                                    WMCP:
                            COMMITTEE PRINT                       
 1st Session                                                      107-4
_______________________________________________________________________

                                     


                      COMMITTEE ON WAYS AND MEANS

                     U.S. HOUSE OF REPRESENTATIVES


                               __________
 
                      OVERVIEW AND COMPILATION OF

                          U.S. TRADE STATUTES

                               __________

                              2001 EDITION


                                     
[GRAPHIC] [TIFF OMITTED] TONGRESS.#13


                               JUNE 2001

 Prepared for the use of Members of the Committee on Ways and Means by 
members of its staff. This document has not been officially approved by 
      the Committee and may not reflect the views of its Members.

                               ----------

                   U.S. GOVERNMENT PRINTING OFFICE
71-824                     WASHINGTON : 2001


            For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 
                                 20402
  

                      COMMITTEE ON WAYS AND MEANS


                     U.S. HOUSE OF REPRESENTATIVES


                              ----------                              


                      ONE HUNDRED SEVENTH CONGRESS


                WILLIAM M. THOMAS, California, Chairman


                              ----------                              


                    Allison H. Giles, Chief of Staff

    This document was prepared by the staff of the Committee on 
Ways and Means and is issued under the authority of Chairman 
William M. Thomas. This document has not been reviewed or 
officially approved by the Members of the Committee.


                         LETTER OF TRANSMITTAL


                              ----------                              


                                  House of Representatives,
                               Committee on Ways and Means,
                                                     Washington, DC

    Hon. William M. Thomas
    Chairman, Committee on Ways and Means,
    House of Representatives, Washington, DC.

    Dear Mr. Chairman: In 1987, the Committee first published a 
resource document entitled ``Overview and Compilation of U.S. 
Trade Statutes'' for use by Committee Members and interested 
parties in the international trade community. This document was 
unique in that it contained not only an overview of the 
operation of foreign trade statutes, but also an overview of 
the operation of foreign trade statutes, but also an up-to-date 
statutory text of such laws, which integrated numerous separate 
acts of Congress into a single statutory compilation.
    This document was so well received by Members of Congress, 
congressional staff, government officials, the international 
trade community and the general public that an updated version 
was published in 1989 and updated and expanded versions were 
published in 1991, 1993 1995, and 1997. In order to update the 
changes in various trade statutes since the publication of the 
1997 edition, the staff has prepared a new version, 
incorporating all statutory provisions enacted through the 
106th Congress.
    As was the case with the earlier versions, the statutory 
authorities selected are the major provisions of federal law 
which are directly related to the conduct of U.S. international 
trade. The compilation is not meant to be a comprehensive 
treatise of every trade-related law or program, nor does it 
cover provisions to regulate domestic commerce. The laws and 
programs which are within the jurisdiction of the Committee on 
Ways and Means are the main focus of this document and are 
discussed in the greatest detail. In addition, some of the laws 
and programs described may be within the jurisdiction of other 
committees of the House of Representatives. These provisions 
are included in order to provide a complete survey of the 
principal trade authorities.
    The document has been prepared by the Committees' trade 
staff with assistance from the Office of the Legislative 
Counsel and various government agencies, to which the staff 
extends its most sincere thanks.

                                 (III)


                                   IV

    Any suggestions on how to improve this document as a 
reference tool in subsequent editions of this publication are 
always welcome.

            Sincerely yours,

                                             Angela Ellard,
                                          Staff Director & Counsel,
                                              Subcommittee on Trade


                                PREFACE


    The role of Congress in formulating international economic 
policy and regulating international trade in based on a 
specific constitutional grant of power. Article I of the U.S. 
Constitution sets forth the various powers and responsibilities 
of the legislature. Article I, section 8 lists certain specific 
express powers of the Congress. Among these express powers are 
the powers:

        ``to lay and collect taxes, duties, imposts and excises 
        .  .  . [and] to regulate commerce with foreign 
        nations, and among the several states.  .  .  .''

    The Congress therefore is the fundamental authority 
responsible for federal government regulation of international 
transactions. Within the House of Representatives, jurisdiction 
over trade legislation lies in the Committee on Ways and Means, 
based on its jurisdiction over taxes, tariffs, and trade 
agreements, Throughout the history of U.S. trade law and 
policy, the Committee on Ways and Means has been at the 
forefront of its development. The Committee's jurisdiction 
ranges from regulation of tariff affairs, to regulation of non-
tariff trade barriers such as quotas and standards, regulation 
of unfair trade practices such as dumping, subsidization, or 
counterfeiting, provisions of temporary relief from import 
competition and adjustment assistance, providing for bilateral 
and multilateral trade agreements with foreign trading 
partners, and responsibility for authorizing and overseeing the 
departments and agencies charged with implementation of the 
trade laws and programs.
    The difficulties of retaining and exercising full control 
over international trade matters within the legislative branch 
were recognized by Congress shortly after enactment of the 
Smoot-Hawley Tariff Act of 1930. In 1934, the Congress enacted 
the Reciprocal Trade Agreements Act which delegated to the 
President authority to negotiate international trade agreements 
for the reduction of tariffs. This Act, which marked the 
beginning of the trade agreements program for the United 
States, represented the first significant delegation of 
authority from Congress to the President with respect to 
international trade policy.
    Since 1934, the delegation of authority from Congress to 
the President has varied in scope and degree, reflecting 
congressional concern over maintaining careful control of 
international trade policy. When the trade agreements 
negotiating authority granted to the President expired in 1967, 
for example, it was not renewed again until 1974. In the Trade 
Act of 1974, presidential negotiating authority was 
substantially revised, extended to non-tariff as well as tariff 
negotiations, and made subject to specific consultation and 
notification requirements both prior to and during the course 
of negotiation. The Omnibus Trade and Competitiveness Act of 
1988, in addition to providing negotiating authority and 
explicit negotiating

                                  (V)


                                   VI

objectives for the Uruguay Round, expands the consultation 
requirements between the USTR and the Congress and requires the 
formulation of an annual trade policy agenda. Both the Uruguay 
Round Agreements Act and the North American Free Trade 
Agreement Implementation Act provide for the involvement of 
Congress in a number of key trade policy areas. The Trade and 
Development Act of 2000 marks important changes in U.S. 
preferential benefits for the Canbbean Basin and provides such 
benefits for the first time to the nations of sub-Sahanan 
Africa. Finally, legislation in 2000 concerning normal trade 
relations for the People's Republic of China represents the 
congressional views on the accession of this important country 
to the World Trade Organization.
    Due to the central role of Congress in formulating 
international economic policy, an understanding of U.S. 
international trade law and policy must begin with the 
statutory authorities and programs which provide the foundation 
for our trade policy. This document provides two essential 
tools for those interested in obtaining a better understanding 
of U.S. trade law and policy. Part I contains a general 
overview of current provisions of our trade laws. This over 
view was prepared by the staff of the Subcommittee on Trade 
with the assistance of the Congressional Research Service and 
provides a thorough yet understandable explanation of how these 
laws operate. Part II contains a compilation of the actual text 
of these laws, as amended. This updated statutory compilation 
incorporates all major provisions of U.S. trade law and 
includes all amendments to theses laws as of the beginning of 
the 107th Congress. While this integrated text should not be 
treated as a substitute for official public laws or the United 
States Code, it is an accurate and highly useful document which 
integrates numerous separate Acts of Congress into one text. We 
hope this document will prove useful to official policymakers 
as well as the interested public.


                            C O N T E N T S

                              ----------                              
                                                                   Page

Letter of transmittal............................................   iii
Preface..........................................................     v
Subject index....................................................  1171

                            PART I: OVERVIEW

Chapter 1: Tariff and customs laws...............................     1
    Harmonized Tariff Schedule of the United States..............     1
    Generalized System of Preferences (GSP)......................    14
        Title V of the Trade Act of 1974, as amended.............    14
    Caribbean Basin Initiative (CBI).............................    21
    Caribbean Basin Trade Partnership Act........................    22
    Andean Initiative............................................    34
    African Growth and Opportunity Act...........................    37
    Customs valuation............................................    48
        The GATT/WTO Customs Valuation Agreement.................    49
        Current law..............................................    51
    Customs user fees............................................    58
    Other customs laws...........................................    63
        Country-of-origin marking................................    63
        NAFTA rules of origin....................................    66
        Drawback.................................................    67
        Protests and administrative review.......................    69
        Copyrights and trademark enforcement.....................    71
        Penalties................................................    72
        Import prohibitions/restrictions relating to dog and cat 
          fur products...........................................    74
        Commercial operations....................................    75
    Foreign trade zones..........................................    78
Chapter 2: Trade remedy laws.....................................    83
    The antidumping and countervailing duty laws.................    83
        CVD law: subsidy determination...........................    83
        AD law: less-than-fair-value (LTFV) determination........    89
        AD and CVD laws: material injury determination...........    94
        Issues common to AD and CVD investigations...............    95
        Enforcement of U.S. rights under trade agreements and 
          response to certain foreign practices: sections 301-310 
          of the Trade Act of 1974, as amended...................   108
        International consultations and dispute settlement.......   109
        Enforcement authority and procedures (section 301).......   110
        Identification of intellectual property rights priority 
          countries (Special 301)................................   116
        Identification of trade liberalization priorities (Super 
          301)...................................................   123
        Foreign direct investment................................   127
        Foreign anticompetitive practices........................   128
        Unfair practices in import trade (section 337 of the 
          Tariff Act of 1930, as amended)........................   128
        Import relief (safeguard) authorities....................   132
        Sections 201-204 of the Trade Act of 1974, as amended....   132
        Section 406 of the Trade Act of 1974: market disruption 
          by imports from Communist countries....................   139
        Sections 421-423 of the Trade Act of 1974, as amended: 
          market disruption by imports from the People's Republic 
          of China...............................................   140
        Section 1102 of the Trade Agreements Act of 1979: public 
          auction of import licenses.............................   142
    Trade adjustment assistance..................................   142
        Chapters 2, 3, and 5 of title II of the Trade Act of 
          1974, as amended.......................................   142
        TAA program for workers..................................   144
        NAFTA Worker Security Act................................   149
        TAA program for firms....................................   151
Chapter 3: Other laws regulating imports.........................   153
    Authorities to restrict imports of agricultural and textile 
      products...................................................   153
        Section 204 of the Agricultural Act of 1956, as amended..   153
            Multifiber Arrangement (MFA).........................   153
            Uruguay Round Agreement on Textiles and Clothing.....   156
            Bilateral textile agreements.........................   158
        Textiles and apparel trade under the North American Free 
          Trade Agreement........................................   159
        Section 22 of the Agricultural Adjustment Act of 1933....   159
        Agriculture trade under the North American Free Trade 
          Agreement Implementation Act...........................   160
        Agriculture trade under the Uruguay Round Agreements Act.   162
        Meat Import Act of 1979..................................   164
        Reciprocal meat inspection requirement...................   164
        Sugar tariff-rate quotas under Harmonized Tariff Schedule 
          authorities............................................   165
        Import prohibitions on certain agricultural commodities 
          under marketing orders (section 8e of the Agricultural 
          Adjustment Act, as amended)............................   166
    Authorities to restrict imports under certain environmental 
      laws.......................................................   167
        Marine Mammal Protection Act of 1972, as amended.........   167
        International Dolphin Conservation Act of 1992...........   168
        Endangered Species Act of 1973, as amended...............   169
        Tariff Act of 1930, as amended: wild mammals and birds...   169
        Section 8 of the Fishermen's Protective Act of 1967, as 
          amended (``Pelly Amendment'')..........................   170
        High Seas Driftnet Fisheries Enforcement Act.............   170
        Wild Bird Conservation Act of 1992.......................   171
        Atlantic Tunas Convention Act of 1995....................   171
        Conservation of Sea Turtles..............................   172
    National security import restrictions........................   174
        Section 232 of the Trade Expansion Act of 1962...........   174
        Section 233 of the Trade Expansion Act of 1962...........   175
    Balance of payments authority (section 122 of the Trade Act 
      of 1974)...................................................   176
    Product standards............................................   178
        Agreement on Technical Barriers to Trade.................   179
        Uruguay Round Agreement on Technical Barriers to Trade...   181
        The North American Free Trade Agreement..................   182
        Title IV of the Trade Agreements Act of 1979, as amended.   182
    Government procurement.......................................   183
        Buy American Act.........................................   184
        1979 GATT Agreement on Government Procurement............   184
        1994 WTO Agreement on Government Procurement.............   186
        The North American Free Trade Agreement..................   187
        Title III of the Trade Agreements Act of 1979, as amended   188
        Title VII of the Omnibus Trade and Competitiveness Act of 
          1988, as amended.......................................   189
Chapter 4: Laws regulating export activities.....................   195
    Export controls..............................................   195
        Background...............................................   195
        Export Administration Act of 1979........................   196
        Export Administration Amendments Act of 1985.............   198
        Omnibus Trade and Competitiveness Act of 1988............   199
    Export promotion of goods and services.......................   200
        Export Enhancement Act of 1988...........................   200
        Fair Trade in Auto Parts Act of 1988.....................   201
    Agricultural export sales and promotion......................   202
        Public Law 480...........................................   202
        Export credit guarantee and export promotion programs....   202
Chapter 5: Authorities relating to political or economic security   205
    International Emergency Economic Powers Act..................   205
    Trading With the Enemy Act...................................   211
    Narcotics Control Trade Act..................................   214
    The International Security and Development Cooperation Act of 
      1985.......................................................   215
    The Iran and Libya Sanctions Act of 1996.....................   215
    Embargo on transactions with Cuba............................   216
    The Cuban Liberty and Democratic Solidarity Act..............   218
    Iraq Sanctions Act of 1990...................................   220
    Exemptions for food and medicine from U.S. International 
      Trade Sanctions............................................   220
    The Hong Kong Policy Act.....................................   222
    Section 27 of the Merchant Marine Act, 1920 (Jones Act)......   222
    Section 721 of the Defense Production Act of 1950, as amended 
      (``Exon/Florio'')..........................................   223
Chapter 6: Reciprocal trade agreements...........................   225
    Reciprocal trade agreement objectives and authorities........   225
        Trade negotiating objectives.............................   226
        General tariff authority.................................   227
        Multilateral trade agreement authority...................   228
        Bilateral trade agreement authority......................   229
        Reciprocal competitive opportunities.....................   230
        Specific trade agreement authorities.....................   230
        Trade negotiation procedural requirements................   232
    Congressional fast track implementing procedures.............   232
    Uruguay Round Agreements.....................................   235
        Uruguay Round Agreements Act.............................   237
    Specific foreign trade barriers..............................   241
        Sections 181 and 182 of the Trade Act of 1974, as amended   241
        Telecommunications Trade Act of 1988.....................   242
    Normal Trade Relations (nondiscriminatory) treatment.........   246
    North American trade relations...............................   259
        North American Free Trade Agreement......................   260
        North American Free Trade Agreement Implementation Act of 
          1993...................................................   260
    United States-Israel trade relations.........................   261
        Title IV of the Trade and Tariff Act of 1984.............   262
        United States-Israel Free Trade Area Agreement...........   263
        United States-Israel Free Trade Area Implementation Act 
          of 1985................................................   264
        West Bank and Gaza Strip Free Trade Benefits.............   264
    United States-Canada trade relations.........................   265
        United States-Canada Free-Trade Agreement................   266
        United States-Canada Free-Trade Agreement Implementation 
          Act of 1988............................................   267
Chapter 7: Organization of trade policy functions................   269
    Congress.....................................................   269
    Executive branch.............................................   270
        Interagency trade process................................   270
        Office of the U.S. Trade Representative..................   271
        Department of Commerce...................................   273
        U.S. Customs Service.....................................   274
    U.S. International Trade Commission..........................   275
    Private or public sector advisory committees.................   276

              PART II: COMPILATION OF U.S. TRADE STATUTES

Chapter 8: Tariff and customs laws...............................   279
    A. Implementation of the Harmonized Tariff Schedule of the 
      United States..............................................   279
        Sections 1201-1217 of the Omnibus Trade and 
          Competitiveness Act of 1988............................   279
        Section 484(e) of the Tariff Act of 1930, as amended.....   288
    B. Excerpts from the Harmonized Tariff Schedule of the United 
      States (HTS) relating to special duty treatment............   289
        1. American goods returned (HTS item 9801.00.10).........   289
        2. American goods repaired or altered abroad (HTS items 
          9802.00.40, .50).......................................   291
            American metal articles processed abroad (HTS item 
              9802.00.60)........................................   291
            American components assembled abroad (HTS item 
              9802.00.80)........................................   291
        3. Personal (tourist) exemptions (HTS items 9804.00.65, 
          .70, .72)..............................................   296
        4. Noncommercial Importations of Limited Value (HTS items 
          9816.00.20, and 9816.00.40)............................   300
        3. Classification of Personal Effect of Participants in 
          International Athletic Events (HTS items 9817.60.00)...   302
        6. Products of U.S. insular possessions (General Note 
          3(a)(iv))..............................................   304
        7. Rates of duty on certain motor vehicles (General Note 
          3(d))..................................................   305
    C. Generalized System of Preferences.........................   307
        Title V of the Trade Act of 1974, as amended.............   307
        General Note 4 of the Harmonized Tariff Schedule.........   319
    D. Caribbean Basin Initiative (CBI)..........................   321
        Caribbean Basin Economic Recovery Act, as amended........   321
        Caribbean Basin Economic Recovery Expansion Act of 1990..   348
        Section 423 of the Tax Reform Act of 1986, as amended 
          (treatment of imports of ethyl alcohol)................   354
        General Note 7(a) of the Harmonized Tariff Schedule......   358
    E. Andean Initiative (Andean Trade Preference Act, as 
      amended)...................................................   358
    F. African Growth and Opportunity Act........................   367
    G. Customs valuation (Section 402 of the Tariff Act of 1930, 
      as amended)................................................   381
    H. Customs user fees.........................................   389
        Section 13031 of the Consolidated Budget Reconciliation 
          Act of 1985, as amended................................   389
        Sections 111(f), 112, and 113 of the Customs and Trade 
          Act of 1990, as amended................................   402
        Section 1893(f) of the Tax Reform Act of 1986, as amended   403
    I. Other customs laws........................................   403
        1. Country of origin marking.............................   403
            Section 304 of the Tariff Act of 1930, as amended....   403
            Section 1907 (b) and (c) of the Omnibus Trade and 
              Competitiveness Act of 1988........................   410
            Section 210 of the Motor Vehicle Information and Cost 
              Savings Act........................................   411
        2. Drawback (section 313 of the Tariff Act of 1930, as 
          amended)...............................................   415
        3. Entry of merchandise (section 484 of the Tariff Act of 
          1930, as amended)......................................   424
        4. Protests and further administrative reviews...........   429
        5. Copyrights and trademark enforcement..................   435
            Section 101 of the Copyright Revision Act of 1976....   435
            Section 526 of the Tariff Act of 1930, as amended....   436
            Section 431 of the Tariff Act of 1930, as amended....   438
        6. Penalties (sections 592 and 592A of the Tariff Act of 
          1930, as amended)......................................   440
        7. National Customs Automation Program (sections 411-414 
          of the Tariff Act of 1930, as amended).................   452
        8. Commercial operations.................................   456
            Section 9503(c) of the Omnibus Budget Reconciliation 
              Act of 1987........................................   456
            Section 301 of the Customs Procedural Reform and 
              Simplification Act of 1978, as amended.............   456
    J. Foreign Trade Zones (Act of June 18, 1934, as amended)....   459
    K. Implementation of the GATT Agreement on Trade in Civil 
      Aircraft...................................................   468
        Title VI of the Trade Agreements Act of 1979.............   468
        Section 234 of the Trade and Tariff Act of 1984..........   469
        General Note 6 of the Harmonized Tariff Schedule.........   470
Chapter 9: Trade remedy laws.....................................   473
    A. Authorities to respond to foreign subsidy and dumping 
      practices..................................................   473
        1. Countervailing duties.................................   473
            Section 753 of the Tariff Act of 1930, as amended....   473
            Section 261 (a)-(c) of the Uruguay Round Agreements 
              Act................................................   477
            Subtitle A of title VII (sections 701-709) of the 
              Tariff Act of 1930, as amended.....................   478
        2. Antidumping duties (subtitle B of title VII (sections 
          731-739) of the Tariff Act of 1930, as amended)........   501
        3. Administrative review of antidumping and 
          countervailing duties (subtitle C of title VII 
          (sections 751, 752, 761, and 762) of the Tariff Act of 
          1930, as amended)......................................   527
        4. General provisions relating to antidumping and 
          countervailing duties (subtitle D of the VII (sections 
          771-782) of the Tariff Act of 1930, as amended)........   540
        5. Continued dumping and subsidies offset................   597
        6. Judicial and panel review of antidumping and 
          countervailing duty actions............................   600
            Section 516A of the Tariff Act of 1930, as amended...   600
            Section 129 of the Uruguay Round Agreements Act......   613
        7. Third-country dumping (section 1317 of the Omnibus 
          Trade and Competitiveness Act of 1988).................   616
        8. Antidumping petitions by third countries (section 783 
          of the Tariff Act of 1930, as amended).................   617
        9. Antidumping Act of 1916...............................   618
    B. Enforcement of United States rights under trade agreements 
      and response to certain foreign trade practices............   621
        Sections 301-310 of the Trade Act of 1974, as amended....   621
        Sections 281 and 282 of the Uruguay Round Agreements Act, 
          as amended.............................................   637
        Section 307(b) of the Trade and Tariff Act of 1984.......   645
        Foreign air transportation (section 2 of the 
          International Air Transportation Fair Competitiveness 
          Act of 1974, as amended, and the Federal Aviation Act 
          of 1958, as amended)...................................   646
        Section 19 of the Merchant Marine Act of 1920, as amended   648
        Section 10002 of the Foreign Shipping Practices Act of 
          1988...................................................   651
    C. Unfair practices in import trade (section 337 of the 
      Tariff Act of 1930, as amended)............................   654
    D. Safeguard actions (sections 201-204 of the Trade Act of 
      1974, as amended)..........................................   662
    E. Relief from market disruption by imports from Communist 
      countries (section 406 of the Trade Act of 1974, as 
      amended)...................................................   680
    F. Relief from market disruption by imports from the People's 
      Republic of China..........................................   682
    G. Authority to auction import licenses (section 1102 of the 
      Trade Agreements Act of 1979)..............................   691
    H. Trade adjustment assistance (chapters 2, 3, 4, and 5 title 
      II of the Trade Act of 1974, as amended)...................   691
    I. Sections 401 and 408 of the Trade and Development Act of 
      2000.......................................................   724
Chapter 10: Other laws regulation imports........................   727
    A. Authorities to restrict imports of agricultural and 
      textile products...........................................   727
        Section 204 of the Agricultural Act of 1956, as amended..   727
        Section 22 of the Agricultural Adjustment Act of 1933, as 
          amended................................................   727
        Tariff-rate quotas and safeguards (sections 404 and 405 
          of the Uruguay Round Agreements Act)...................   729
        Reciprocal meat inspection requirement (section 20(h) of 
          the Federal Meat Inspection Act).......................   732
        Sugar tariff-rate quotas under headnote authority........   732
        Import prohibitions on certain agricultural commodities 
          under marketing orders (section 8e of the Agricultural 
          Adjustment Act, as amended)............................   736
    B. Authorities to restrict imports under certain 
      environmental laws.........................................   738
        Marine Mammal Protection Act of 1972, as amended 
          (excerpts).............................................   738
        Section 9 of the Endangered Species Act of 1973, as 
          amended................................................   753
        Section 527 of the Tariff Act of 1930, as amended........   757
        Section 8 of the Fishermen's Protective Act of 1967, as 
          amended................................................   762
        High Seas Driftnet Fisheries Enforcement Act (excerpts)..   764
        Sections 105 and 108 of the Wild Bird Conservation Act of 
          1992...................................................   769
        Atlantic Tunas Convention Act of 1975, as amended 
          (excerpts).............................................   771
        Conservation of Sea Turtles..............................   773
    C. National security import restrictions (sections 232 and 
      233 of the Trade Expansion Act of 1962, as amended)........   774
    D. Balance of payments authority (section 122 of the Trade 
      Act of 1974)...............................................   777
    E. Implementation of the GATT Agreement of Technical Barriers 
      to Trade (product standards) (title IV of the Trade 
      Agreements Act of 1979)....................................   780
    F. Government procurement....................................   790
        1. Buy American requirements.............................   790
            Buy American Act (title III of the Act of March 3, 
              1933, as amended)..................................   790
            Section 833 of the Defense Production Act of 1950, as 
              amended............................................   795
            Act of October 29, 1949..............................   795
        2. Implementation of the GATT Agreement on Government 
          Procurement (Title III of the Trade Agreements Act 
          1979, as amended)......................................   796
Chapter 11: Laws regulation export activities....................   811
    A. Export controls...........................................   811
        Export Administration Act of 1979, as amended............   811
    B. Export financing and promotion............................   821
        1. Agriculture export sales and promotion................   821
            Agricultural Trade Development and Assistance Act of 
              1954, as amended (excerpts)........................   821
            Agricultural Trade Act of 1978, as amended (excerpts)   821
            Section 1123 of the Food Security Act of 1985........   826
        2. Export promotion of goods and services................   827
            Sections 2303, 2306, and 2312 of the Export 
              Enhancement Act of 1988, as amended................   827
Chapter 12: Authorities relating to political or economic 
  security.......................................................   833
    A. Economic authorities in national emergencies..............   833
        International Emergency Economic Powers Act, as amended..   833
        Section 5(b) of the Trading With the Enemy Act, as 
          amended................................................   837
    B. Trade sanctions against uncooperative major drug producing 
      or drug-transit countires (Narcotics Control Trade Act)....   839
    C. Economic sanctions against terrorism or missile 
      proliferation..............................................   845
        Sections 504 and 505 of the International Security and 
          Development Cooperation Act of 1985....................   845
        Section 73 of the Arms Export Control Act................   846
    D. Economic sanctions against chemical and biological weapons   848
        Chemical and Biological Weapons Control and Warfare 
          Elimination Act of 1991................................   848
        Section 81 of the Arms Export Control Act................   856
    E. Embargo on trade with Cuba................................   859
        Section 620(a) of the Foreign Assistance Act of 1961, as 
          amended................................................   859
        Cuban Democracy Act of 1992 (title XVII of the National 
          Defense Authorization Act for Fiscal Year 1993)........   860
        Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 
          1996 (excerpts)........................................   867
    F. Economic sanctions against Iraq, Iran, and Libya..........   875
        Iraq Sanctions Act of 1990 (sections 586-586J of the 
          Foreign Assistance and Related Programs Appropriation 
          Act, 1991) (excerpts)..................................   875
        Iran-Iraq Arms Non-Proliferation Act of 1992 (title XVI 
          of the National Defense Authorization Act for Fiscal 
          Year 1993).............................................   880
        Compliance with United Nations sanctions against Iraq....   883
        Iran and Libya Sanctions Act of 1996.....................   884
    G. United States-Hong Kong Policy Act of 1992................   900
    H. Restrictions on transport of merchandise by foreign 
      vessels (section 27 of the Merchant Marine Act, 1920, as 
      amended)...................................................   907
    I. Authority to review certain mergers, acquisitions, and 
      takeovers (section 721 of the Defense Production Act of 
      1950, as amended)..........................................   910
Chapter 13: Reciprocal trade agreements..........................   913
    A. U.S. negotiating objectives...............................   913
        Section 1101 of the Omnibus Trade and Competitiveness Act 
          of 1988................................................   913
        Section 1124 and 3004 of the Omnibus Trade and 
          Competitiveness Act of 1988............................   918
        Sections 131, 132, 135, and 315 of the Uruguay Round 
          Agreements Act, as amended.............................   919
        Section 409 of the Trade and Development Act of 2000.....   922
        Section 108 of the North American Free Trade Agreement 
          Implementation Act.....................................   924
    B. General trade agreement and implementation authorities....   926
        1. ``Fast track'' auhority (expired) (sections 1102, 
          1103, 1105, and 1107 of the Omnibus Trade and 
          Competitiveness Act of 1988, as amended)...............   926
        2. Uruguay Round/WTO implementation, tariff 
          modifications, and dispute settlement (sections 101(a), 
          102, 111(a, c, and e), and 121-130 of the Uruguay Round 
          Agreements Act.........................................   935
    C. Specific trade agreement authorities......................   951
        1. Compensation authority (section 123 of the Trade Act 
          of 1974, as amended)...................................   951
        2. Termination and withdrawal authority (section 125 of 
          the Trade Act of 1974).................................   952
        3. Accession of State trading regimes to the GATT or the 
          WTO (section 1106 of the Omnibus Trade and 
          Competitiveness Act of 1988, as amended)...............   954
        4. GATT and WTO authorizations...........................   955
            Section 121 of the Trade Act of 1974, as amended.....   955
            Section 101(c) of the Uruguay Round Agreements Act...   956
    D. Trade negotiation procedural requirements.................   956
        Sections 131-134 of the Trade Act of 1974, as amended....   956
        Sections 127(a) and (b) of the Trade Act of 1974.........   959
    E. Identification of, and action on, specific foreign trade 
      barriers...................................................   959
        1. National trade estimates report (section 181 of the 
          Trade Act of 1974, as amended).........................   959
        2. Intellectual property rights (section 182 of the Trade 
          Act of 1974, as amended)...............................   961
        3. Telecommunications trade (Telecommunications Trade Act 
          of 1988)...............................................   965
    F. Normal Trade Relations (nondiscriminatory) treatment......   974
        1. NTR principle.........................................   974
            Section 5003 of Public Law 105-206: Clarification of 
              Designation of Normal Trade Relations..............   974
            Section 251 of the Trade Expansion Act of 1962.......   975
            Section 126(a) of the Trade Act of 1974..............   975
            Section 1103(a)(3) of the Omnibus Trade and 
              Competitiveness Act of 1988........................   975
        2. Trade relations with nonmarket economy countries......   976
            General note 3(b) of the Harmonized Tariff Schedule..   976
            Title IV of the Trade Act of 1974, as amended........   976
            Sections 1 and 2 of Public Law 102-182 (NTR treatment 
              for Hungary and Czechoslovakia)....................   982
            Title I of Public Law 102-182 (NTR treatment for 
              Estonia, Latvia, and Lithuania)....................   983
            Section 1 of Public Law 102-420 (NTR withdrawal from 
              Serbia and Montenegro).............................   985
            Public Law 104-162...................................   985
            Public Law 104-171...................................   986
            Public Law 104-203...................................   987
            Section 2424 of Public Law 106-36....................   988
            Sections 301-302 of Public Law 106-200...............   989
            Public Law 106-286...................................   990
            Sections 3001-3002 of Public Law 106-476: Extension 
              of Nondiscriminatory Treatment to Georgia..........  1006
    G. Trade relations with North America (North American Free 
      Trade Agreement Implementation Act, as amended)............  1007
    H. Bilateral trade relations with Israel.....................  1071
        Section 102(b)(1) of the Trade Act of 1974, as amended...  1071
        Title IV of the Trade and Tariff Act of 1984, as amended.  1072
        United States-Israel Free Trade Area Implementation Act 
          of 1985, as amended....................................  1075
    I. Bilateral trade relations with Canada.....................  1081
        United States-Canada Free-Trade Agreement Implementation 
          Act of 1988, as amended................................  1081
        Automotive Products Trade Act of 1965, as amended........  1107
        General note 5 of the Harmonized Tariff Schedule.........  1116
Chapter 14: Organization of trade policy functions...............  1119
    A. Congress..................................................  1119
        1. Congressional advisers (section 161 of the Trade Act 
          of 1974, as amended)...................................  1119
        2. Reports to Congress...................................  1121
            Sections 162 and 163 of the Trade Act of 1974, as 
              amended............................................  1121
            Section 2202 of the Omnibus Trade and Competitiveness 
              Act of 1988........................................  1124
        3. Congressional fast track procedures with respect to 
          presidential actions (sections 151-154 of the Trade Act 
          of 1974, as amended)...................................  1125
        4. Trade agreement implementation authority and amendment 
          procedures.............................................  1133
            Sections 111(b) and 115 of the Uruguay Round 
              Agreements Act.....................................  1133
            Sections 103 and 104 of the North American Free Trade 
              Agreement Implementation Act.......................  1134
            Sections 2(a) and 3(c) of the Trade Agreements Act of 
              1979...............................................  1135
    B. Executive branch..........................................  1137
        1. Interagency trade organization........................  1137
            Section 242 of the Trade Expansion Act of 1962, as 
              amended............................................  1137
            Reorganization Plan No. 3 of 1979....................  1138
            Section 306 of the Trade and Tariff Act of 1984......  1142
        2. Office of the United States Trade Representative 
          (section 141 of the Trade Act of 1974, as amended).....  1144
    C. United States International Trade Commission..............  1149
        1. Organization, general powers, procedures..............  1149
            Sections 330, 331, 333-335, and 339 of the Tariff Act 
              of 1930, as amended................................  1149
            Section 603 of the Trade Act of 1974.................  1156
            Section 175(a)(1) of the Trade Act of 1974...........  1157
        2. Investigations (section 443 of the Tariff Act of 1930, 
          as amended)............................................  1157
    D. Private or public sector advisory committees (section 135 
      of the Trade Act of 1974, as amended)......................  1159

                                APPENDIX

Descriptions of major regional and multilateral trade 
  organizations..................................................  1165
    World Trade Organization (WTO)...............................  1165
    Organization for Economic Cooperation and Development (OECD).  1166
    United Nations Conference on Trade and Development (UNCTAD)..  1166
    World Customs Organization...................................  1167
    European Union (EU)..........................................  1167
    Asia-Pacific Economic Cooperation (APEC).....................  1167
    MERCOSUR.....................................................  1168
    Association of Southeast Asian Nations (ASEAN)...............  1168
    Cairns Group.................................................  1169


                            PART I: OVERVIEW

                              ----------                              


                   Chapter 1: TARIFF AND CUSTOMS LAWS

            Harmonized Tariff Schedule of the United States

Historical background

    The Harmonized Tariff Schedule of the United States (HTS) 
was enacted by subtitle B of title I of the Omnibus Trade and 
Competitiveness Act of 1988 \1\ and became effective on January 
1, 1989.\2\ The HTS replaced the Tariff Schedules of the United 
States (TSUS), enacted as title I of the Tariff Act of 1930 (19 
U.S.C. 1202) by the Tariff Classification Act of 1962; \3\ the 
TSUS had been in effect since August 31, 1963.
---------------------------------------------------------------------------
    \1\ Public Law 100-418, approved August 23, 1988.
    \2\ Presidential Proclamation No. 5911, November 19, 1988.
    \3\ Public Law 87-456, approved May 24, 1962.
---------------------------------------------------------------------------
    The HTS is based upon the internationally adopted 
Harmonized Commodity Description and Coding System (known as 
the Harmonized System or HS) of the Customs Cooperation 
Council. Incorporated into a multilateral convention effective 
as of January 1, 1988, the HS was derived from the earlier 
Customs Cooperation Council Nomenclature, which in turn was a 
new version of the older Brussels Tariff Nomenclature. The HS 
is an up-to-date, detailed nomenclature structure intended to 
be utilized by contracting parties as the basis for their 
tariff, statistical and transport documentation programs.
    The United States did not adopt either of the two previous 
nomenclatures but, because it was a party to the convention 
creating the Council and because of the potential benefits from 
using a modern, widely adopted nomenclature, became involved in 
the technical work to develop the HS. Section 608(c) of the 
Trade Act of 1974 \4\ directed the U.S. International Trade 
Commission (ITC) to investigate the principles and concepts 
which should underlie such an international nomenclature and to 
participate fully in the Council's technical work on the HS. 
The ITC, the U.S. Customs Service (which represents the United 
States at the Council), and other agencies were involved in 
this work through the mid and late 1970's; in 1981, the 
President requested that the ITC prepare a draft conversion of 
the U.S. tariff into the nomenclature format of the HS, even as 
the international efforts to complete the nomenclature 
continued. The Commission's report and converted tariff were 
issued in June 1983. After considerable review and the receipt 
of comments from interested parties, legislation to repeal the 
TSUS and replace it with the HTS was introduced. Following the 
August 23, 1988 enactment of the Omnibus Trade and 
Competitiveness Act, the United States became a party to the HS 
Convention, joining over 75 other major trading partners.
---------------------------------------------------------------------------
    \4\ Public Law 93-618, approved January 3, 1975.
---------------------------------------------------------------------------
Structure of the HTS

    Under the HS Convention, the contracting parties are 
obliged to base their import and export schedules on the HS 
nomenclature, but the rates of duty are set by each contracting 
party. The HS is organized into 21 sections and 96 chapters, 
with accompanying general interpretive rules and legal notes. 
Goods in trade are assigned in the system, in general, to 
categories beginning with crude and natural products and 
continue in further degrees of complexity through advanced 
manufactured goods. These product headings are designated, at 
the broadest coverage level, with 4-digit numerical codes and 
are further subdivided into narrower categories assigned 2 
additional digits. The contracting parties must employ all 4- 
and 6-digit provisions and all international rules and notes 
without deviation; they may also adopt still narrower 
subcategories and additional notes for national purposes, and 
they determine all rates of duty. Thus, a common product 
description and numbering system to the 6-digit level of detail 
exists for all contracting parties, facilitating international 
trade in goods. Two final chapters, 98 and 99, are reserved for 
national use (chapter 77 is reserved for future international 
use).
    The HTS therefore sets forth all the international 
nomenclature through the 6-digit level and, where needed, 
contains added subdivisions assigned 2 more digits, for a total 
of 8 at the tariff-rate line (legal) level. Two final (non-
legal) digits are assigned as statistical reporting numbers 
where further statistical detail is needed (for a total of 10 
digits to be listed on entries). Chapter 98 comprises special 
classification provisions (former TSUS schedule 8), and chapter 
99 (former appendix to the TSUS) contains temporary 
modifications pursuant to legislation or to presidential 
action.
    Each section's chapters contain numerous 4-digit headings 
(which may, when followed by 4 zeroes, serve as U.S duty rate 
lines) and 6- and 8-digit subheadings. Additional U.S. notes 
may appear after HS notes in a chapter or section. Most of the 
general headnotes of the former TSUS appear as general notes to 
the HTS set forth before chapter 1, along with notes covering 
more recent trade programs (and the non-legal statistical 
notes). These notes contain definitions or rules on the scope 
of the pertinent provisions, or set additional requirements for 
classification purposes. In addition, the HTS contains a table 
of contents, an index, footnotes, and other administrative 
material, which are provided for ease of reference and, along 
with the statistical reporting provisions, have no legal 
significance or effect.
    The HTS is not published as a part of the statutes and 
regulations of the United States but is instead subsumed in a 
document produced and updated regularly by the ITC entitled 
``Harmonized Tariff Schedule of the United States: Annotated 
for Statistical Reporting Purposes.'' Changes in the TSUS 
became so frequent and voluminous that its inclusion in title 
19 of the United States Code effectively ceased with the 1979 
supplement to the 1976 edition. The Commission is charged by 
section 1207 of the 1988 Omnibus Trade and Competitiveness Act 
(19 U.S.C. 3007) with the responsibility of compiling and 
publishing, ``at appropriate intervals,'' and keeping up to 
date the HTS and any related materials. The initial document 
appeared as USITC Publication 2030. That document, and 
subsequent issuances, have included both the current legal text 
of the HTS and all statistical provisions adopted under section 
484(f) of the Tariff Act of 1930 (19 U.S.C. 1484(f)). It is 
presented as a looseleaf publication so that pages being issued 
in supplements to modify the schedule's basic edition for any 
year edition may be inserted as replacements. Two or more 
supplements may appear between the publication of each basic 
edition.
    Unlike the TSUS, which applied exclusively to imported 
goods, the HTS can, for almost all goods, be used to document 
both imports and exports. The small number of exceptions 
enumerated before chapter 1 require particular exports to be 
reported under schedule B provisions. That schedule, which 
prior to 1989 served as the means of reporting all exports, has 
been converted to the HS nomenclature structure. For certain 
goods that are significant U.S. exports, variations in the 
desired product description and detail compel the use of 
schedule B reporting provisions that cannot be accommodated in 
the HTS under the international nomenclature structure.
    The HTS, like its predecessor the TSUS, is presented in a 
tabular format containing 7 columns, each with a particular 
type of information. A sample page of the HTS is set forth on 
the next page.

                                                 HARMONIZED TARIFF SCHEDULE OF THE UNITED STATES (1997)
                                                      Annotated for Statistical Reporting Purposes
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                         Rates of duty
                                                                      ----------------------------------------------------------------------------------
    Heading/       Stat.       Article description        Units of                                1
   subheading      suffix                                 quantity    --------------------------------------------------------             2
                                                                                 General                     Special
--------------------------------------------------------------------------------------------------------------------------------------------------------
7213                       Bars and rods, hot-rolled,                                              ..........................
                            in irregularly wound
                            coils, of iron or non
                            alloy steel:
7213.10.00             00    Concrete reinforcing      kg............  3.4%                        Free (E,IL,J)               20%
                              bars and rods..........                                              0.4% (CA)
                                                                                                   2.9% (MX)
7213.20.00             00    Other, of free-cutting    kg............  1.3%                        Free (E,IL,J)               5.5%
                              steel..................                                              0.1% (CA)
                                                                                                   1.1% (MX)
                             Other:..................
7213.91                       Of circular cross                                                    ..........................
                               section measuring less
                               than 14 mm in
                               diameter:
7213.91.30             00      Not tempered, not       kg............  1.3%                        Free (E,IL,J)               5.5%
                                treated and not                                                    0.1% (CA)
                                partly manufactured..                                              1.1% (MX)
                               Other:
7213.91.45             00       Containing by weight   kg............  1.3%                        Free (E,IL,J)               5.5%
                                 0.6 percent or more                                               0.1% (CA)
                                 of carbon...........                                              1.1% (MX)
7213.91.60             00       Other................  kg............  1.6%                        Free (E,IL,J)               6%
                                                                                                   0.2% (CA)
                                                                                                   1.3% (MX)
7213.99.00                    Other..................  ..............  1.3%                        Free (E,IL,J)               5.5%
                                                                                                   0.1% (CA)
                                                                                                   1.1% (MX)
                       30      Of circular cross
                                section:
                                With a diameter of 14  kg
                                 mm or more but less
                                 than 19 mm..........

                       60       With a diameter of 19  kg
                                 mm or more..........
                       90      Other.................  kg
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The  first  column,  entitled  ``Heading/subheading,''  
sets  forth  the 4-, 6-, or 8-digit number assigned to the 
class of goods described to its right. It should be recalled 
that 8-digit-level provisions bear the only numerical codes at 
the legal level which are determined solely by the United 
States, because the 4- and 6-digit designators are part of the 
international convention.
    The second column is labeled ``Stat. suffix,'' meaning 
statistical suffix. Wherever a tariff rate line is annotated to 
permit collection of trade data on narrower classes of 
merchandise, the provisions adopted administratively by an 
interagency committee under section 484(f) of the 1930 Act (19 
U.S.C. 1484(f)) are given 2 more digits which must be included 
on the entry filed with customs officials. Where no annotations 
exist, 2 additional zeroes are added to the 8-digit legal code 
applicable to the goods in question. The goods falling in all 
10-digit statistical reporting numbers of a particular 8-digit 
legal provision receive the same duty treatment.
    The third column, ``Article description,'' contains the 
detailed description of the goods falling within each tariff 
provision and statistical reporting number.
    In the fourth column, ``Units of quantity,'' the unit of 
measure in which the goods in question are to be reported for 
statistical purposes is set forth. These units are 
administratively determined under section 484(f) of the Tariff 
Act of 1930. In many instances, the unit of quantity is also 
the basis for the assessment of the duty. For many categories 
of products, two or three different figures in different units 
must be reported (e.g., for some textiles, weight and square 
meters; for some apparel, the number of garments, value, and 
weight), with the second unit of quantity frequently being the 
basis for administering a measure regulating imports, such as a 
quota. If an ``X'' appears in this column, only the value of 
the shipment must be reported.
    The remaining columns appear under the common heading 
``Rates of duty'' and are designated as column 1 (subdivided 
into ``General'' and ``Special'' subcolumns) and column 2. 
These columns contain the various rates of duty that apply to 
the goods of the pertinent legal provision, depending on the 
source of the goods and other criteria. Their application to 
goods originating in particular countries is discussed below 
under the heading ``Applicable duty treatment.''
    A rate of duty generally has one of three forms: ad 
valorem, specific or compound. An ad valorem rate of duty is 
expressed in terms of a percentage to be assessed upon the 
customs value of the goods in question. A specific rate is 
expressed in terms of a stated amount payable on some quantity 
of the imported goods, such as 17 cents per kilogram. Compound 
duty rates combine both ad valorem and specific components 
(such as 5 percent ad valorem plus 17 cents per kilogram).
    Chapter 98 comprises special classification provisions 
permitting, in specified circumstances, duty-free entry or 
partial duty-free entry of goods which would otherwise be 
subject to duty. The article descriptions in the provisions of 
this chapter enunciate the circumstances in which goods are 
eligible for this duty treatment. Some of the goods eligible 
for such duty treatment include: articles reimported after 
having been exported from the United States; goods subject to 
personal exemptions (such as those for returning U.S. 
residents); government importations; goods for religious, 
educational, scientific, or other qualifying institutions; 
samples; and, articles admitted under bond.
    Chapter 99 contains temporary modifications of the duty 
treatment of specified articles in the other chapters. 
Additional duties and suspensions or reductions of duties 
enacted by Congress are included, as are temporary 
modifications (increases or decreases in duty rates) and import 
restrictions (quotas, import fees, and so forth) proclaimed by 
the President under trade agreements or pursuant to 
legislation. Separate subchapters contain temporary special 
duty treatment for certain goods of Canada or of Mexico 
pursuant to the NAFTA. However, antidumping and countervailing 
duties imposed under the authority of the Tariff Act of 1930, 
as amended, are not included. These duties are announced in the 
Federal Register.

Applicable duty treatment

    Column 1--General.--The rates of duty appearing in the 
``General'' subcolumn of column 1 of the HTS are imposed on 
products of countries that have been extended most-favored-
nation (MFN) or non-discriminatory trade treatment by the 
United States, unless such imports are claimed to be eligible 
for treatment under one of the preferential tariff schemes 
discussed below. The general duty rates are concessional and 
have been set through reductions of full statutory rates in 
negotiations with other countries, generally under the GATT.
    Column 1--Special.--General Note 3 to the HTS sets forth 
the special tariff treatment afforded to covered products of 
designated countries or under specified measures. These 
programs and the corresponding symbols by which they are 
indicated in the ``Special'' subcolumn along with the 
appropriate rates of duty are as follows:

    Generalized System of Preferences [GSP]  A or A*
    Automotive Products Trade Act [APTA]...  B
    Agreement on Trade in Civil Aircraft     C
     [ATCA].
    North American Free Trade Agreement:...
      Goods of Canada......................  CA
      Goods of Mexico......................  MX
    Caribbean Basin Economic Recovery Act    E or E*
     [CBERA].
    United States-Israel Free Trade Area...  IL
    Andean Trade Preference Act [ATPA].....  J or J*


The presence of one or more of these symbols indicates the 
eligibility of the described articles under the respective 
program. In the case of the GSP (when in effect), a symbol 
followed by an asterisk indicates that, although the described 
articles are generally eligible for duty-free entry, such 
tariff treatment does not apply to products of the designated 
beneficiary countries specified in General Note 4(d). In the 
case of CBERA and the ATPA, the asterisk indicates that some of 
the described articles are ineligible for duty-free entry. 
These programs are discussed in greater detail below.
    Column 2.--The column 2 rates of duty apply to products of 
countries that have been denied MFN status by the United States 
(see General Note 3(b)); these rates are the full statutory 
rates, generally as enacted by the Tariff Act of 1930. (See 
separate description of most-favored-nation treatment and HTS 
General Note 3(b) for a list of countries subject to column 2 
rates of duty.)

Special duty exemptions and preferences

    Certain notable provisions in chapter 98 of the HTS grant 
duty-free entry to various categories of American goods 
returned from abroad and allow U.S. tourists to import foreign 
articles free of duty. Other provisions in the general notes of 
the HTS provide duty-free entry to imports from the U.S. 
insular possessions, to imports of Canadian auto products under 
the Automotive Products Trade Act, and to articles imported for 
use in civil aircraft under the Agreement on Trade in Civil 
Aircraft.
    American goods returned (HTS subheading 9801.00.10).--
American goods not advanced or improved abroad may be returned 
to the United States free of duty under HTS subheading 
9801.00.10. The courts have interpreted this provision to allow 
duty-free entry of American goods which had been exported for 
sorting, separating (e.g., by grade, color, size, etc.), 
culling out, and discarding defective items and repackaging in 
certain containers, so long as the goods themselves were not 
advanced in value or improved in condition while abroad.
    American goods repaired or altered abroad (HTS subheading 
9802.00.40).--HTS subheading 9802.00.40 provides that goods 
exported from the United States for repairs or alterations 
abroad are subject to duty upon their reimportation into the 
United States (at the duty rate applicable to the imported 
article) only upon the value of such repairs or alterations. 
The provision applies to processing such as restoration, 
renovation, adjustment, cleaning, correction of manufacturing 
defects, or similar treatment that changes the condition of the 
exported article but does not change its essential character. 
The value of the repairs or processing for purposes of 
assessing duties is generally determined, in accordance with 
U.S. note 3 to subchapter II of chapter 98, by--
          (1) the cost of the repairs or alterations to the 
        importer; or
          (2) if no charge is made, the value of the repairs or 
        alterations, as set out in the customs entry.
However, if the customs officer finds that the amount shown in 
the entry document is not reasonable, the value of the repairs 
or alterations will be determined in accordance with the 
valuation standards set out in section 402 of the Tariff Act of 
1930, as amended.\5\
---------------------------------------------------------------------------
    \5\ 19 U.S.C. 1401a.
---------------------------------------------------------------------------
    American metal articles processed abroad (HTS subheading 
9802.00.60).--HTS subheading 9802.00.60 provides that an 
article of metal (except precious metal) which is exported from 
the United States for processing abroad may be subject to duty 
on the value of the processing only upon its return to the 
United States. To qualify for this duty treatment, the exported 
article (1) must have been manufactured or subjected to a 
process of manufacture in the United States; and (2) must be 
returned ``for further processing'' in the United States.
    The term ``processing'' refers to such operations as 
melting, molding, casting, machining, grinding, drilling, 
tapping, threading, cutting, punching, rolling, forming, 
plating, and galvanizing.
    As in the case of articles imported under subheading 
9802.00.40 (repairs or alterations), discussed above, the duty 
on metal articles processed abroad is assessed against the 
value of such processing, determined in accordance with U.S. 
note 3 to subchapter II of chapter 98.
    American components assembled abroad (HTS subheading 
9802.00.80).--Articles assembled abroad from American-made 
components may be exempt from duty on the value of such 
components when the assembled article is imported into the 
United States under HTS subheading 9802.00.80. This provision 
enables American manufacturers of relatively labor-intensive 
products to take advantage of low-cost labor and fiscal 
incentives in other countries by exporting American parts for 
assembly in such countries and returning the assembled products 
to the United States, with partial exemption from U.S. duties.
    Subheading 9802.00.80 applies to articles assembled abroad 
in whole or in part of fabricated components, the product of 
the United States, which--
          (1) were exported in condition ready for assembly 
        without further fabrication;
          (2) have not lost their physical identity in such 
        articles by change in form, shape, or otherwise; and
          (3) have not been advanced in value or improved in 
        condition abroad except by being assembled and by 
        operations incidental to the assembly process such as 
        cleaning, lubricating, and painting.
    The exported articles used in the imported goods must be 
fabricated U.S. components, i.e., U.S.-manufactured articles 
ready for assembly in their exported condition, except for 
operations incidental to the assembly process. Integrated 
circuits, compressors, zippers, and precut sections of a 
garment are examples of fabricated components, but uncut bolts 
of cloth, lumber, sheet metal, leather, and other materials 
exported in basic shapes and forms are not considered to be 
fabricated components for this purpose.
    To be considered U.S. components, the exported articles do 
not necessarily need to be fabricated from articles or 
materials wholly produced in the United States. If a foreign 
article or material undergoes a manufacturing process in the 
United States resulting in its ``substantial transformation'' 
into a new and different article, then the component that 
emerges may qualify as an exported product of the United States 
for purposes of subheading 9802.00.80.
    The assembly operations performed abroad can involve any 
method used to join solid components together, such as welding, 
soldering, gluing, sewing, or fastening with nuts and bolts. 
Mixing, blending, or otherwise combining liquids, gases, 
chemicals, food ingredients, and amorphous solids with each 
other or with solid components is not regarded as 
``assembling'' for purposes of subheading 9802.00.80.
    The rate of duty that applies to the dutiable portion of an 
assembled article is the same rate that would apply to the 
imported article. The assembled article is also treated as 
being entirely of foreign origin for purposes of any import 
quota or similar restriction applicable to that class of 
merchandise, and for purposes of country-of-origin marking 
requirements. All requirements regarding labeling, radiation 
standards, flame retarding properties, etc., that apply to 
imported products apply equally to subheading 9802.00.80 
merchandise.
    An article imported under subheading 9802.00.80 is treated 
as a foreign article for appraisement purposes. That is, the 
full appraised value of the article must first be determined 
under the usual appraisement provisions. The dutiable value, 
however, is determined by deducting the cost or value of the 
American-made fabricated components from the appraised value of 
the assembled merchandise entered under subheading 9802.00.80.
    Personal (tourist) exemption.--Subchapter IV of chapter 98 
of the HTS sets forth various personal exemptions for residents 
and non-residents that arrive in the United States from abroad. 
The relevant customs regulations are set forth at 19 CFR 148 et 
seq. In particular, HTS subheading 9804.00.65 provides that 
U.S. residents returning from a journey abroad may import up to 
400 dollars' worth of articles free of duty. The articles must 
be for personal or household use and may include not more than 
1 liter of alcoholic beverages, not more than 200 cigarettes 
and not more than 100 cigars.
    The technical amendment to the Balanced Budget Act of 1997 
(Public Law 105-277) inadvertently removed the personal 
exemption relating to domestically produced cigarettes re-
imported into the United States. As a result, travelers 
bringing cigarettes puchased outside the United States did not 
receive the personal exemption for these cigarettes (i.e., they 
were not permitted to bring these cigarettes into the United 
States). Section 4003 of the Tariff Suspension and Trade Act of 
2000 (Public Law 106-476) re-instated that exemption.
    Special rules provide increased duty-free allowances for 
U.S. residents returning from U.S. insular possessions or from 
beneficiary countries under the Caribbean Basin Economic 
Recovery Act (CBERA) and under the Andean Trade Preference Act 
(ATPA). An increased duty-free allowance of $1200 is provided 
under HTS subheading 9804.00.70 for U.S. residents returning 
from the U.S. insular possessions, and an increased duty-free 
allowance of $600 is provided under HTS subheading 9804.00.72 
for U.S. residents returning from beneficiary countries under 
the CBERA and the ATPA. U.S. note 3 to chapter 98 provides 
that, in addition to being exempt from customs duty, all such 
articles are exempt from any internal revenue taxes as well.
    The Tariff Suspension and Trade Act of 2000 (Public Law 
106-476) provides for staged reductions of duty rates 
applicable to merchandise accompanying persons entering the 
United States, and merchandise from American Samoa, Guam, or 
the U.S. Virgin Islands. Purchases for personal and household 
use accompanying the returning traveler in excess of the $400 
duty-free allowance had been subject to flat rate of duty of 10 
percent, if the person claiming the benefit had not received 
the benefit within the past thirty days. In addition, non-
commercial importations from U.S. insular possessions exceeding 
$1200 (American Samoa, Guam, or the U.S. Virgin Islands) were 
subject to a 5 percent rate of duty. This legislation provides 
a staged reduction of the 10 percent duty-rate as follows: 5 
percent effective January 1, 2000, 4 percent effective January 
1, 2001, and 3 percent effective January 1, 2002. The 
legislation also provides a staged reduction of the 5 percent 
rate of duty for articles imported from American Samoa, Guam, 
or the U.S. Virgin Islands as follows: 3 percent effective 
January 1, 2000, 2 percent effective January 1, 2001, and 1.5 
percent effective January 1, 2002.
    The Miscellaneous Trade and Technical Corrections Act of 
1996 (Public Law 104-295) amended the exemption from duty for 
personal and household goods accompanying returning U.S. 
residents. Section 321(a)(2)(B) of the Tariff Act of 1930 
originally applied to returning residents arriving from foreign 
countries other than the insular possessions. Due to a split in 
tariff classification numbers, the tariff numbers applicable to 
residents returning from a foreign country were inadvertently 
dropped. The Miscellaneous Trade and Technical Corrections Act 
of 1996 restored HTS number 9804.00.65 to correct the error and 
allow the Customs Service to apply administrative exemptions 
from duty for personal and household goods of returning 
residents arriving from foreign countries other than insular 
possessions. It ensures that U.S. residents returning from 
foreign countries other than insular possessions are entitled 
to bring articles for personal or household use free of duty, 
if such articles are valued at not more than $400. The 
provision was made retroactive to December 8, 1993, the date on 
which the customs provisions within the NAFTA (Public Law 103-
182) became law.
    In addition, the Miscellaneous Trade and Technical 
Corrections Act of 1996 (Public Law 104-295) amended the 
personal allowance exemption for merchandise purchased in duty-
free sales enterprises. Previously, under section 555(b)(6) of 
the Tariff Act of 1930 (19 U.S.C. 1555(b)(6)), merchandise 
purchased in duty-free sales enterprises which was brought back 
to U.S. customs territory was not eligible for a duty-free 
exemption under the personal allowance exemption for returning 
U.S. residents. The Miscellaneous Trade and Technical 
Corrections Act of 1996 amended section 555(b)(6) to make 
merchandise purchased by returning U.S. residents in duty-free 
enterprises eligible for a duty-free exemption under HTS 
subheadings 9804.00.65, 9804.00.70, and 9804.00.72, if the 
person meets the eligibility requirements of the exemption. 
This provision does not apply in the case of travel involving 
transit to, from, or through an insular possession of the 
United States.
    Duty-free treatment for personal effects of participants in 
international sporting events.--The Miscellaneous Trade and 
Technical Corrections Act of 1999 (Public Law 106-36) extended 
until December 2002 duty-free treatment for the personal 
effects of participants in, officials of, and accredited 
members of delegations to certain international athletic events 
held in the United States provided that these items are not 
intended for sale or distribution in the United States. The 
provision also exempted the articles covered under this 
provision from taxes and fees and gave the Secretary of the 
Treasury discretion to determine which athletic events, 
articles, and persons are covered under this provision. The 
Tariff Suspension and Trade Act of 2000 (Public Law 106-476) 
made this exemption permanent under new HTS subheading 
9817.60.00.
    Products of U.S. insular possessions (General Note 
3(a)(iv)).--Imports from the Virgin Islands, Guam, American 
Samoa, Wake Island, Kingman Reef, Johnson Island, and Midway 
Islands are entitled to duty-free entry under certain 
conditions, designed to promote the economic development of 
these U.S. insular possessions. This provision does not apply 
to Puerto Rico, which is part of the ``customs territory of the 
United States.''
    As provided in General Note 3(a)(iv) of the HTS, an article 
imported directly from a possession is exempt from duty if--
          (1) it was grown or mined in the possession;
          (2) it was produced or manufactured in the 
        possession, and the value of foreign materials 
        contained in that article does not exceed 70 percent of 
        its total value. Materials of U.S. origin are not 
        considered foreign for this purpose. Likewise, 
        materials that could be imported into the United States 
        duty free (except from Cuba or the Philippines) are not 
        counted as foreign materials for purposes of the 70 
        percent foreign-content limitation; or
          (3) in the case of any article excluded from duty-
        free entry under section 213(b) of the Caribbean Basin 
        Economic Recovery Act, it was produced or manufactured 
        in the possession, and the value of foreign materials 
        does not exceed 50 percent of its total value.
    In addition, an article previously imported into the United 
States with duty or tax paid thereon, shipped to a possession 
without benefit of remission, refund, or drawback of such duty 
or tax, may be returned to the United States duty free. General 
Note 3(a)(iv) also provides that articles from insular 
possessions are entitled to no less favorable duty treatment 
than that accorded to eligible articles under the Generalized 
System of Preferences and the Caribbean Basin Initiative 
described below.
    In applying the 70 percent foreign-materials test, Customs 
determines the value of the foreign materials by their actual 
purchase price, plus the transportation cost to the possession, 
excluding any duties or taxes assessed by the possession and 
excluding any post-landing charges. The value thus determined 
is then compared with the appraised value of the products 
imported into the United States, determined in accordance with 
the usual appraisement methods. If the differential is 30 
percent or more, the foreign materials limitation is satisfied. 
This procedure is set out in 19 C.F.R. 7.8(d).
    As previously noted, the product imported from a possession 
must have been produced or manufactured there (unless grown or 
mined there). It is not sufficient for foreign goods to be 
shipped to a possession for nominal handling or manipulation, 
followed by a price mark-up to meet the 70 percent test.
    Extension of United States Insular Possession Program.--The 
Miscellaneous Trade and Technical Corrections Act of 1999 
(Public Law 106-36) (the Act) amended the U.S. notes to Chapter 
71 by adding an additional U.S. Note 3. This amendment extends 
to certain fine jewelry the same trade benefits enjoyed by 
watch makers in U.S. insular possessions under the Production 
Incentive Certificate (PIC) program. U.S. Note 5 allows 
producers of watches located in U.S. insular possessions to 
benefit from the PIC system, which permits watch producers to 
import specified quantities of watches, watch movements, and 
watch parts. The benefits provided under Note 5 are based on 
the amount of wages paid to produce such watches in insular 
possessions. New Note 3(a) permits the inclusion of wages paid 
for jewelry production in the insular possessions as an offset 
to duties paid on watches, watch movements, and watch parts 
imported into the United States. Note 3(b) provides that the 
extension of Note 5 benefits to jewelry may not result in any 
increase in the authorized amount to benefits established by 
Note 5, and Note 3 (c) prohibits diminishing of benefits that 
had been available to watch poducers under paragraph (h)(iv) of 
Note 5 to Chapter 91.
    Canadian motor vehicles and original equipment entry 
pursuant to the Automotive Products Trade Act of 1965 (APTA) 
(General Note 5).--Throughout the HTS there are a number of 
specific provisions which provide for duty-free entry of 
imported motor vehicles and specified original equipment parts 
that qualify as ``Canadian articles'' under General Note 5. 
These provisions were added to the HTS pursuant to the 
Automotive Products Trade Act of 1965,\6\ which was enacted to 
implement the U.S.-Canadian Automotive Agreement. The purpose 
of the Agreement was to create a North American common market 
for motor vehicles and original equipment parts (replacement 
parts are not covered).
---------------------------------------------------------------------------
    \6\ Public Law 89-283, 19 U.S.C. 2001, et seq.
---------------------------------------------------------------------------
    The term ``Canadian article'' refers to an article produced 
in Canada but does not include any article produced with non-
Canadian or non-U.S. materials unless the article satisfies the 
criteria set forth in the NAFTA (General Note 12).
    Most of the product categories established by the APTA are 
applicable to ``original motor-vehicle equipment,'' which is 
defined in General Note 5(a)(ii) as a Canadian fabricated 
component intended for use as original equipment in the 
manufacture of a motor vehicle in the United States and which 
was obtained from a Canadian supplier pursuant to ``a written 
order, contract, or letter of intent of a bona fide motor-
vehicle manufacturer in the United States.'' The phrase ``bona 
fide motor-vehicle manufacturer'' is defined as a person 
determined by the Secretary of Commerce to have produced at 
least 15 motor vehicles in the previous 12 months and to have 
the capacity to produce at least 10 motor vehicles per week.
    Civil aircraft products (ATCA) (General Note 6).--Title VI 
of the Trade Agreements Act of 1979 gave the President the 
authority to proclaim new headnote 3 to part 6C of schedule 6; 
to make specific headnotes to designated TSUS items in order to 
implement the Tokyo Round Agreement on Trade in Civil Aircraft; 
and to provide duty-free treatment, in accordance with the 
annex to the Agreement for the civil aircraft articles 
described therein. These changes were implemented by 
Presidential Proclamation 4707 of December 11, 1979. This duty 
treatment is continued in the ``Special'' rates subcolumn of 
the HTS.
    The provisions work much like those implementing the APTA 
in that a number of specific product breakouts are spread 
throughout the HTS providing duty-free entry to specifically 
described articles which are ``certified for use in civil 
aircraft'' in accordance with General Note 6.
    Section 234 of the Trade and Tariff Act of 1984 enacted on 
October 30, 1984, gave the President the authority to make 
additional tariff breakouts in designated TSUS items in order 
to provide duty-free coverage comparable to the expanded 
coverage provided by all other signatories to the Aircraft 
Agreement pursuant to the extension of the annex to the 
Agreement agreed to in Geneva on October 6, 1983. This duty 
treatment has been continued in the ``Special'' rates subcolumn 
of the HTS for the relevant articles.
    The Miscellaneous Trade and Technical Corrections Act of 
1996 (Public Law 104-295) significantly amended General Note 6. 
The note now requires importers of duty-free civil aircraft 
parts to maintain such supporting documentation as the 
Secretary of the Treasury may require. Importers must also 
certify that the imported article is a civil aircraft, or has 
been imported for use in a civil aircraft and will be so used. 
The importer may amend the entry or file a written statement to 
claim duty-free treatment under General Note 6 at any time 
before the liquidation of the entry becomes final, except that 
any refund resulting from any such claim shall be without 
interest.
    The amendment to General Note 6 also changed the definition 
of ``civil aircraft'' to mean any aircraft, aircraft engine, or 
ground flight simulator (including parts, components, and 
subassemblies thereof):
          (A) that is used as original or replacement equipment 
        in the design, development, testing, evaluation, 
        manufacture, repair, maintenance, rebuilding, 
        modification, or conversion of aircraft; and
          (B)(1) that is manufactured or operated pursuant to a 
        certificate issued by the Federal Aviation 
        Administration (FAA), or pursuant to the approval of 
        the airworthiness authority in the country of 
        exportation, if such approval is recognized by the FAA 
        as an acceptable substitute for an FAA certificate;
          (2) for which an application for such certificate has 
        been submitted to, and accepted by, the FAA by an 
        existing type and production certificate holder; or
          (3) for which an application for such approval or 
        certificate will be submitted in the future by an 
        existing type and production certificate holder, 
        pending the completion of design or other technical 
        requirements stipulated by the FAA. This section 
        applies only to quantities of parts, components, and 
        subassemblies as are required to meet the design and 
        technical requirements stipulated by the FAA. The 
        Commissioner of Customs may also require the importer 
        to estimate the quantities of parts, components, and 
        subassemblies covered under this section.
The term ``civil aircraft'' does not include any aircraft, 
aircraft engine, or ground flight simulator purchased for use 
by the Department of Defense or the U.S. Coast Guard, unless 
such aircraft, aircraft engine, or ground flight simulator 
satisfies the requirements outlined above.

                Generalized System of Preferences (GSP)

              TITLE V OF THE TRADE ACT OF 1974, AS AMENDED

    The concept of a Generalized System of Preferences (GSP) 
was first introduced in the United Nations Conference on Trade 
and Development (UNCTAD) in 1964. Developing countries (LDCs) 
asserted that one of the major impediments to accelerated 
economic growth and development was their inability to compete 
on an equal basis with developed countries in the international 
trading system. Through tariff preferences in developed country 
markets, the LDCs claimed they could increase exports and 
foreign exchange earnings needed to diversify their economies 
and reduce dependence on foreign aid.
    After several international meetings and long internal 
debate, in 1968 the United States joined other industrialized 
countries in supporting the concept of GSP. As initially 
conceived, GSP systems were to be (1) temporary, unilateral 
grants of preferences by developed to developing countries; (2) 
designed to extend benefits to sectors of developing country 
economies which were not competitive internationally; and (3) 
designed to include safeguard mechanisms to protect domestic 
industries sensitive to import competition from articles 
receiving preferential tariff treatment. In the early 1970's, 
19 other members of the Organization for Economic Cooperation 
and Development (OECD) also instituted and have since renewed 
GSP schemes.
    In order to implement their GSP systems, the developed 
countries obtained a waiver from the most-favored-nation (MFN) 
obligation of article I of the General Agreement on Tariffs and 
Trade (GATT), which provides that trade must be conducted among 
countries on a non-discriminatory basis. A 10-year MFN waiver 
was granted in June 1971 and was made permanent in 1979 through 
the ``enabling clause'' of the Texts Concerning a Framework for 
the Conduct of World Trade concluded in the Tokyo Round of GATT 
multilateral trade negotiations. The enabling clause, which has 
no expiration date, provides the legal basis for ``special and 
differential treatment'' for developing countries. The enabling 
clause also requires that developing countries accept the 
principle of graduation, under which such countries agree to 
assume ``increased GATT responsibilities as their economies 
progress.''

U.S. GSP basic authority

    Statutory authority for the U.S. Generalized System of 
Preferences program is set forth in title V of the Trade Act of 
1974, as amended.\7\ Authority to grant GSP duty-free treatment 
on eligible articles from beneficiary developing countries 
(BDCs) became effective under that Act on January 3, 1975, for 
a 10-year period expiring on January 3, 1985. The program was 
actually implemented on January 1, 1976 under Executive Order 
11888. Relatively minor amendments to the statute were made 
under section 1802 of the Tax Reform Act of 1976 \8\ and 
section 1111 of the Trade Agreements Act of 1979.\9\ Title V of 
the Trade and Tariff Act of 1984 \10\ renewed the GSP program 
for 8\1/2\ years until July 4, 1993, with significant 
amendments effective on January 4, 1985, particularly with 
respect to the criteria for designating beneficiary countries 
and limitations on duty-free treatment.
---------------------------------------------------------------------------
    \7\ Public Law 93-618, approved January 3, 1975.
    \8\ Public Law 94-455, approved October 4, 1976.
    \9\ Public Law 96-39, approved July 26, 1979.
    \10\ Public Law 98-573, title V, approved October 30, 1984.
---------------------------------------------------------------------------
    The GSP program was extended without amendment for 15 
months, until September 30, 1994, by section 13802 of the 
Omnibus Budget Reconciliation Act of 1993.\11\ The program was 
again extended without amendment for 10 months, until July 31, 
1995, by section 601 of the Uruguay Round Agreements Act.\12\
---------------------------------------------------------------------------
    \11\ Public Law 103-66, approved August 10, 1993.
    \12\ Public Law 103-465, approved December 8, 1994.
---------------------------------------------------------------------------
    Subtitle J of title I of the Small Business Jobs Protection 
Act of 1996 renewed the GSP program for 1 year and 10 months, 
through May 31, 1997, with amendments effective October 1, 
1996. This law also revised and reorganized title V.\13\ An 
additional technical change was made by the Miscellaneous Trade 
and Technical Corrections Act of 1996.\14\ Section 1011 of the 
Omnibus Appropriations Bill for Fiscal Year 1999 (Public Law 
105-277) extended to program through June 30, 1999, and section 
508 of the Ticket to Work and Work Incentives Improvement Act 
of 1999 (Public Law 106-170) extended it through September 30, 
2001. The Africa Growth and Opportunity Act, signed into law by 
the President on May 18, 2000 (Public Law 106-200) extended 
regular and enhanced GSP benefits through September 30, 2008, 
for eligible countries in sub-Saharan Africa.
---------------------------------------------------------------------------
    \13\ Public Law 104-188, approved August 20, 1996.
    \14\ Public Law 104-295, approved October 11, 1996.
---------------------------------------------------------------------------
    The U.S. Trade Representative (USTR) administers the GSP 
program and makes recommendations to the President through an 
interagency committee that conducts annual reviews under 
regulatory procedures of petitions by interested parties and 
self-initiated actions to add or remove GSP eligibility for 
individual products or countries.
    Section 501 of the Trade Act of 1974, as amended, 
authorizes the President to provide GSP duty-free treatment on 
any eligible article from designated beneficiary developing 
countries, subject to certain conditions and limits, having due 
regard for (1) the effect of such action on furthering the 
economic development of developing countries through the 
expansion of their exports; (2) the extent other major 
developed countries are undertaking a comparable effort to 
assist developing countries by granting generalized preferences 
on their products (i.e., burden-sharing); (3) the anticipated 
impact on U.S. producers of like or directly competitive 
products; and (4) the extent of the BDC's competitiveness with 
respect to eligible articles. In 1999, the program provided 
duty-free treatment on imports valued at about $13.7 billion 
from 146 designated developing countries and territories.

Designation of beneficiary developing countries

    Section 502 of the Trade Act of 1974 authorizes the 
President to designate a country or territory as a BDC. It also 
authorizes the President to designate any BDC as a least-
developed beneficiary developing country (LDBDC). However, the 
President is expressly prohibited from designating the 
following developed countries as BDCs:

Australia                   Japan
Canada                      Monaco
European Union              New Zealand
  member states             Norway
Iceland                     Switzerland

    The President is also prohibited from designating any 
country for GSP benefits which:
          (1) is a communist country unless (a) its products 
        receive non-discriminatory (MFN) treatment; (b) it is a 
        WTO member and a member of the International Monetary 
        Fund (IMF); and (c) it is not dominated or controlled 
        by international communism;
          (2) is party to an arrangement and participates in 
        any action which withholds supplies of vital commodity 
        resources or raises their price to unreasonable levels, 
        causing serious disruption of the world economy;
          (3) affords ``reverse preferences'' to other 
        developed countries which have or are likely to have a 
        significant adverse effect on U.S. commerce;
          (4) has nationalized or expropriated U.S. property, 
        including patents, trademarks, or copyrights, or taken 
        actions with similar effect, unless the President 
        determines and reports to Congress there is adequate 
        and effective compensation, negotiations underway to 
        provide compensation, or a dispute over compensation is 
        in arbitration;
          (5) fails to recognize as binding or to enforce 
        arbitral awards in U.S. favor;
          (6) aids or abets by granting sanctuary from 
        prosecution to, any individual or group which has 
        committed international terrorism, or is the subject of 
        a determination by the Secretary of State under section 
        6(j)(1)(A) of the Export Administration Act of 1979 (50 
        U.S.C. app. 2405) regarding repeated support for 
        terrorism; or
          (7) has not taken or is not taking steps to afford 
        internationally recognized workers rights to its 
        workers.\15\
---------------------------------------------------------------------------
    \15\ Defined by amendment under section 503 of the 1984 Act for 
purposes of GSP to include:
    ``(A) the right to association;
    ``(B) the right to organize and bargain collectively;
    ``(C) a prohibition on the use of any form of forced or compulsory 
labor;
    ``(D) a minimum age for the employment of children; and
    ``(E) acceptable conditions of work with respect to minimum wages, 
hours of work, and occupational safety and health''.
---------------------------------------------------------------------------
    The President may waive conditions (4), (5), (6), and (7), 
if he determines and reports with reasons to the Congress that 
designation of the particular country is in the national 
economic interest. Section 412 of the Trade and Development Act 
of 2000 (Public Law 106-200) added a new eligibility criterion 
to this list which prohits the President from designating a 
country for GSP benefits if it has not implemented its 
commitments to eliminate the worst forms of child labor.
    In addition, the President must take certain other factors 
into account under section 502(c) in designating BDCs: (1) an 
expressed desire of the country to be designated; (2) the 
country's level of economic development; (3) whether other 
major developed countries extend GSP to the country; (4) the 
extent the country has assured the United States it will 
provide ``equitable and reasonable access'' to its markets and 
basic commodity resources and refrain from engaging in 
unreasonable export practices; (5) the extent the country is 
providing adequate and effective means under its laws for 
foreign nationals to secure, exercise, and enforce exclusive 
rights in intellectual property; (6) the extent the country has 
taken action to reduce trade distorting investment practices 
and policies and reduce or eliminate barriers to trade in 
services; and (7) whether the country has taken or is taking 
steps to afford its workers internationally-recognized worker 
rights.
    If the President determines that a BDC has become a ``high 
income'' country as defined by the World Bank, the President is 
required to remove the country from eligibility under the 
program. The statute provides for a transition period of up to 
2 years for country graduation from the GSP program. In 1994 
the World Bank designated countries with a per capita GNP of 
approximately $8,600 as ``high income'' countries.
    Before designating any country as a BDC, the President must 
notify the Congress of his intention and the considerations 
entering into the decision. Before terminating designation of 
any beneficiary, the President must provide the Congress and 
the country concerned at least 60 days advance notice of his 
intention, together with the reasons. The President must 
withdraw or suspend the designation if he determines the 
country no longer meets the conditions for designation.
    The countries currently designated as BDCs of GSP are 
listed under General Note 4(a) of the Harmonized Tariff 
Schedule of the United States (HTS). Countries designated as 
LDBDCs are listed under General Note 4(b). On March 21, 1995, 
the President notified Congress of his determination to 
designate the West Bank and Gaza Strip as a beneficiary 
country.\16\
---------------------------------------------------------------------------
    \16\ Message from the President of the United States transmitting 
notification of his intent to add the West Bank and Gaza Strip to the 
list of beneficiary developing countries under the Generalized System 
of Preferences (GSP), pursuant to 19 U.S.C. 2462(a), House Document 
104-47, March 21, 1995.
---------------------------------------------------------------------------
    On June 30, 1999, pursuant to section 502 of the Trade Act 
of 1974, President Clinton designated Gabon and Mongolia as 
beneficiary developing countries for purposes of GSP. He futher 
determined, pursuant to section 502, that GSP benefits for 
Mauritania, which were suspended on June 25, 1993, should be 
reinstated.\17\ On August 27, 2000, pursuant to sections 501 
and 502, President Clinton designated Nigeria as a beneficiary 
country.\18\
---------------------------------------------------------------------------
    \17\ Presidential Proclamation No. 7206, June 30, 1999, 64 Fed. 
Reg. 36229-36231.
    \18\ Presidential Proclamation No. 7335, August 27, 2000, 65 Fed. 
Reg. 52903.
---------------------------------------------------------------------------

Eligible articles

    The President designates articles under section 503 
eligible for GSP duty-free treatment after considering advice 
required through public hearings, from the U.S. International 
Trade Commission (ITC) on the probable domestic economic 
impact, and from executive branch agencies.
    In general, GSP duty-free treatment is prohibited by 
statute on textile and apparel articles which were not eligible 
articles on January 1, 1994; watches, except those watches 
entered after June 30, 1989, that the President specifically 
determines, after public notice and comment, will not cause 
material injury to watch or watch band, strap, or bracelet 
manufacturing and assembly operations in the United States or 
U.S. insular possessions; \19\ import-sensitive electronic 
articles; import-sensitive steel articles; footwear, handbags, 
luggage, flat goods (e.g., wallets, change purses, eyeglass 
cases), work gloves, and leather wearing apparel which were 
ineligible for GSP as of January 1, 1995; and import-sensitive 
semi-manufactured and manufactured glass products. The 
President must also exclude any other articles he determines to 
be import sensitive in the context of GSP. Articles are 
ineligible for GSP during any period they are subject to import 
relief under sections 201-204 of the Trade Act of 1974 or to 
national security actions under section 232 of the Trade 
Expansion Act of 1962. Also, no quantity of an agricultural 
product subject to a tariff-rate quota that exceeds the in-
quota quantity may be eligible for duty-free treatment under 
GSP.
---------------------------------------------------------------------------
    \19\ This amendment was made by section 1903 of the Omnibus Trade 
and Competitiveness Act of 1988, Public Law 100-418, approved August 
23, 1988.
---------------------------------------------------------------------------
    The President may designate any article that is the growth, 
product or manufacture of an LDBDC as an eligible article with 
respect to LDBDCs after receiving advice from the ITC, if he 
determines such an article is not import-sensitive in the 
context of imports from LDBDCs. However, he may not designate 
the statutorily exempt articles--textiles and apparel, footwear 
and related articles, and watches. The President must notify 
Congress at least 60 days in advance of LDBDC designations.
    The USTR has established by regulation an interagency 
procedure for annual review of petitions from any interested 
party to have articles added to, or removed from, the GSP 
eligible list. The interagency committee also considers 
modifications on its own motion. However, section 503 prohibits 
consideration of an article for designation of eligibility for 
3 years following formal consideration and denial of that 
article.
    GSP duty-free treatment applies only to an eligible article 
which is the growth, product, or manufacture of a BDC (i.e., 
has undergone ``substantial transformation'' in an exporting 
BDC) \20\ and which meets the following rule-of-origin 
requirements:
---------------------------------------------------------------------------
    \20\ An amendment made by section 226 of the Caribbean Basin 
Economic Recovery Act of 1990, Public Law 101-382, title II, approved 
August 20, 1990, 19 U.S.C. 2463(b), conformed GSP rules to treatment 
under the Caribbean Basin Initiative.
---------------------------------------------------------------------------
          (1) the article must be imported directly from a BDC 
        into the U.S. customs territory; and
          (2) the sum of (a) the cost or value of materials 
        produced in a beneficiary country, plus (b) the direct 
        cost of processing performed in such country is not 
        less than 35 percent of the appraised value of the 
        article when it enters into the U.S. customs territory.
    Materials and processing costs in two or more beneficiary 
countries which are members of the same association of 
countries which is a customs union or free trade area may be 
treated as one BDC and cumulated to meet the 35 percent minimum 
local content. Materials imported into a BDC may be counted 
toward the 35 percent minimum valued-added requirement only if 
they are substantially transformed into new and different 
articles in the BDC, before they are incorporated into the GSP 
eligible article.

Treatment of sugar imports under GSP

    Under the tariff-rate quota system for sugar,\21\ the 
Secretary of Agriculture establishes the quota quantity that 
can be entered at the lower tier import duty rate, and the U.S. 
Trade Representative (USTR) allocates the quantity among sugar 
exporting quantities. The quantities allocated to beneficiary 
countries under the Generalized System of Preferences receive 
duty-free treatment. Imports above the in-quota amount from 
beneficiary countries are tariffed at the higher, over-quota 
rate. Certificates of quota eligibility (CQE) are issued to the 
exporting countries and must be returned with the shipment of 
sugar in order to receive quota treatment.
---------------------------------------------------------------------------
    \21\ Presidential Proclamation No. 6763, December 23, 1994, 60 Fed. 
Reg. 1007.
---------------------------------------------------------------------------

Limitations on preferential treatment

    The President has general authority under section 503(c) to 
withdraw, suspend, or limit application of GSP and restore 
column 1 normal trade relations (NTR) or most-favored-nation 
(MFN) duties with respect to any article or any country after 
considering the factors in sections 501 and 502(c), but he 
cannot establish any intermediate rates of duty. Since 1981, 
this authority has been used in the context of the annual 
interagency review process for ``discretionary graduation'' 
from GSP of particular products from particular countries which 
have demonstrated their competitiveness and to promote a 
shifting of benefits to less advanced developing countries.
    Pursuant to the authority of this section, the President on 
January 29, 1988, notified the Congress of his intention to 
remove Hong Kong, the Republic of Korea, Singapore, and Taiwan 
from their status as beneficiaries under the GSP program,\22\ 
effective on January 2, 1989. Removal from GSP status was based 
on the President's assessment that these four BDCs had 
``achieved an impressive level of economic development and 
competitiveness, which can be sustained without the preferences 
provided by the program.'' Similarly, on October 17, 1996, the 
President made a determination that Malaysia was ``sufficiently 
advanced in economic development and improved trade 
competitiveness'' and that designation of Malaysia as a 
beneficiary developing country would be terminated efffective 
January 1, 1997.\23\ Pursuant to 502(e) of the Act the 
President also determined on October 17, 1996, that Cyprus, 
Aruba, Macau, the Netherlands Antilles, Greenland, and the 
Cayman Islands meet the definition of a ``high income'' country 
as defined by official statistics of the World Bank, 
terminating preferential treatment under GSP for imports from 
these countries effective January 1, 1998. \24\
---------------------------------------------------------------------------
    \22\ Message from the President of the United States transmitting 
notification of his intent to remove Hong Kong, the Republic of Korea, 
Singapore, and Taiwan from the list of beneficiary developing countries 
under the Generalized System of Preferences (GSP), pursuant to 19 
U.S.C. 2462(a), House Document 100-162, February 1, 1988.
    \23\ Presidential Proclamation No. 6942, October 17, 1996, 61 Fed. 
Reg. 54719.
    \24\ Ibid.
---------------------------------------------------------------------------
    On July 6, 2000, Clinton proclaimed that according to 
section 502(e), Malta, French Polynesia, New Caledonia, and 
Slovenia meet the definition of ``high income'' countries as 
defined by the official statistics of the International Bank 
for Reconstruction and Development. Therefore, he terminated 
the preferential treatment under the GSP for articles that are 
currently eligible for such treatment from these countries, 
effective January 1, 2002. On July 6, 2000, President Clinton 
announced the suspension of Belarus's GSP benefits ``because it 
has not taken and is not taking steps to afford workers in that 
country internationally recognized worker rights.'' \25\
---------------------------------------------------------------------------
    \25\ Presidential Proclamation No. 7328, July 6, 2000, 65 Fed. Reg. 
42595-42596.
---------------------------------------------------------------------------
    In addition to the annual review of petitions on article or 
country eligibility, section 503(c) establishes statutory 
``competitive need'' limitations on GSP duty-free treatment, 
subject to waiver under certain conditions. The basic purposes 
of the competitive need limitations are to (1) establish a 
benchmark for determining when products from particular 
countries are competitive in the U.S. market and therefore no 
longer warrant preferential tariff treatment; and (2) to 
reallocate GSP benefits to less competitive producing 
countries. The limits have also provided some measure of import 
protection to domestic producers of like or directly 
competitive products.
    Under the competitive need limits, if imports of a 
particular article from a particular BDC exceed either (1) a 
value level adjusted annually (in calendar year 1996, $75 
million, and in each subsequent year, the amount for the 
preceding year plus $5 million); or (2) 50 percent of total 
U.S. imports of the article in a particular calendar year, GSP 
treatment on that article from that country must be removed and 
the normal rate of duty imposed on all imports of the article 
from that country by July 1 of the following year. GSP 
treatment may be reinstated in a subsequent calendar year if 
imports of the product from the excluded country have fallen 
below the competitive need ceilings then in effect during the 
preceding calendar year.
    There are four statutory circumstances in which competitive 
need limits may not apply:
          (1) If the President determines that an article like 
        or directly competitive with a particular GSP article 
        was not produced in the United States on January 1, 
        1995, then that article is exempt from the 50-percent, 
        but not the dollar value, competitive need limit.
          (2) The President may waive the 50-percent, but not 
        the dollar, competitive need limit on articles for 
        which total U.S. imports are de minimis, i.e., not more 
        than $13 million in calendar year 1996, and in each 
        subsequent year, the amount for the preceding year plus 
        $500,000.
          (3) Neither of the competitive need limits applies to 
        any BDC the President determines to be a least 
        developed developing country.
          (4) The President may waive the competitive need 
        limits for a particular country based on a 
        determination that (a) there has been an historical 
        preferential trade relationship between the United 
        States and such country; (b) there is a treaty or trade 
        agreement in force covering economic relations between 
        such country and the United States; and (c) such 
        country does not discriminate against or impose 
        unjustifiable or unreasonable barriers to U.S. 
        commerce. This waiver authority, which was designed for 
        possible exemption of the Philippines, has never been 
        utilized.
    The President may waive competitive need limits on any 
article if he (1) receives ITC advice on whether any U.S. 
industry is likely to be adversely affected; (2) determines a 
waiver is in the national economic interest based upon the 
country designation factors under sections 501 and 502(c) as 
amended; and (3) publishes his determination. In making the 
national interest determination the President must give great 
weight to (1) assurances of equitable and reasonable market 
access in the BDC; and (2) the extent the country provides 
adequate and effective intellectual property rights protection. 
Total waivers for all countries above existing competitive need 
limits cannot exceed 30 percent of total GSP duty-free imports 
in any year, of which not more than one-half (i.e., 15 percent 
of total GSP duty-free imports) may apply to waivers on 
articles from countries which account for at least a 10-percent 
share of total GSP duty-free imports or have a per capita GNP 
of $5,000 or more in that year.

Other provisions

    Section 504 requires the President to submit an annual 
report to the Congress on the status of internationally-
recognized worker rights within each BDC, including the 
findings of the Secretary of Labor with respect to each BDC's 
implementation of its international commitments to eliminate 
the worst forms of child labor.
    Section 506 requires appropriate U.S. agencies to assist 
BDCs to develop and implement measures designed to assure that 
the agricultural sectors of their economies are not directed to 
export markets to the detriment of foodstuff production for 
their own citizens.

                    Caribbean Basin Initiative (CBI)

    The Caribbean Basin Economic Recovery Act (CBERA),\26\ 
commonly referred to as the Caribbean Basin Initiative or CBI, 
was enacted on August 5, 1983, authorizing the grant of certain 
U.S. unilateral preferential trade and tax benefits for 
Caribbean Basin countries and territories.
---------------------------------------------------------------------------
    \26\ Public Law 98-67, title II, approved August 5, 1983, 19 U.S.C. 
2701 et seq.
---------------------------------------------------------------------------
    The centerpiece of the CBI is authority granted to the 
President to provide unilateral duty-free treatment on U.S. 
imports of eligible articles from designated Caribbean Basin 
countries and territories. Duty-free treatment became effective 
as of January 1, 1984, and currently applies to imports from 24 
designated beneficiary countries or territories.\27\
---------------------------------------------------------------------------
    \27\ Anguilla, Cayman Islands, Suriname, and the Turks and Caicos 
Islands are not currently designated; Aruba, originally part of the 
Netherlands Antilles, is designated separately.
---------------------------------------------------------------------------
    The United States developed this program for responding to 
the economic crisis in the Caribbean in close consultation with 
governments and private sectors of potential recipients and 
with other donor countries in the region. On February 24, 1982, 
President Reagan outlined the CBI before the Organization of 
American States and on March 17, 1982, he first submitted this 
plan to the Congress. H.R. 7397, containing amended versions of 
the trade and tax proposals, was passed by the House of 
Representatives in the 97th Congress on December 17, 1982, but 
was not acted on by the Senate. The President resubmitted the 
House-passed version of the plan on February 23, 1983; the 
Initiative as further amended became title II of the conference 
report on H.R. 2973, to repeal the withholding of tax from 
interest and dividends, agreed to by both Houses on July 28, 
1983. Separate foreign assistance legislation increased aid to 
the region as the third element of the program.
    Following extensive congressional consideration and 
consultations with representatives of the countries involved 
and U.S. private sector interests on measures to improve the 
program, the Caribbean Basin Economic Recovery Expansion Act of 
1990, so-called CBI II, was enacted as title II of the Customs 
and Trade Act of 1990.\28\ CBI II amended the CBERA to make the 
trade benefits permanent by repealing the 12-year September 30, 
1995, termination date and to make certain improvements in the 
trade and tax benefits. The Act also included measures to 
promote tourism and created a scholarship assistance program 
for the region.
---------------------------------------------------------------------------
    \28\ Public Law 101-382, title II, approved August 20, 1990.
---------------------------------------------------------------------------

                 Caribbean Basin Trade Partnership Act

    Based on the success of the CBI program and in response to 
the devastation caused to the region by Hurricanes Georges and 
Mitch in September and October of 1998, H.R. 984, the Caribbean 
and Central American Relief and Economic Stabilization Act, a 
bill to grant NAFTA parity to nations in the Caribbean Basin 
was introduced on March 9, 1999. It was approved by the Ways 
and Means Committee on March 31, 2000. No further action on 
H.R. 984 was taken in the House.
    On June 22, 1999, the Senate Committee on Finance 
considered draft legislation reported titled ``The United 
States-Caribbean Basin Trade Enhancement Act.'' The provisions 
in this version marked up by the Committee on Finance differed 
from the trade provisions in H.R. 984, as approved by the 
Committee on Ways and Means, by requiring that imports of 
apparel products from the Caribbean Basin region qualifying for 
duty-free and quota free entry be made of fabric of U.S. 
origin.
    On November 3, 1999, the Senate passed H.R. 434, the 
African Growth and Opportunity Act, as amended, by a vote of 
76-19. During Senate consideration of the bill, the text of S. 
1389, ``The United States-Caribbean Basin Trade Enhancement 
Act,'' was added as an amendment. The House passed the 
conference report on H.R. 434 by a vote of 309-110 on May 4, 
2000. The Senate passed the conference report by a vote of 77-
19 on May 11, 2000. On May 4, 2000, the conference report on 
H.R. 434 was filed (H. Rept. 106-606), and the bill was signed 
into law on May 18, 2000 (P.L. 106-200).
    The new legislation, entitled the Caribbean Basin Trade 
Partnership Act (CBTPA), builds on the Caribbean Basin Economic 
Recovery Act and extends additional trade benefits through 
2008. The CBTPA, an enhanced CBI program covering more 
products, in based on the view that economic recovery in the 
region will be achieved most effectively by creating 
opportunities to expand international trade. Likewise, the 
success of the original CBI program indicates that increasing 
international trade with the CBI regions will also promote the 
growth of United States exports, decrease illegal immigration, 
and improve regional cooperation in efforts to fight drug 
trafficking. Finally, CBTPA is intended to foster increased 
opportunities for U.S. companies in the textile and apparel 
sector to expand co-production arrangements with countries in 
the CBI region, thereby sustaining and preserving manufacturing 
operations in the United States that would otherwise be 
relocated to the Far East.
    In general, the CBTPA extends NAFTA declining or duty-free 
tariff treatment to several categories of goods excluded from 
the CBI. With respect to apparel products, the CBTPA extends 
duty-free benefits to: (1) apparel made in the Caribbean Basin 
from U.S. yarn and fabric; (2) knit apparel made in CBI from 
regional fabric made with U.S. yarn and to knit-to-shape 
apparel (except socks), up to a cap of 250 million square meter 
equivalents, with a growth riate of 16% per year for the first 
three years, and (3) an additional category of regional knit 
apparel products up to a cap a 4.2 million dozen, growing 16% 
per year for the first three years.
    The CBTPA requires that eligible countries implement 
Customs procedures to guard against transshipment.\29\ Under a 
``one strike and you are out'' provision, if an exporter is 
determined to have engaged in illegal transhipment of textile 
and apparel products from a CBI country, the President is 
required to deny all benefits under the bill to that exporter 
for a period of two years.
---------------------------------------------------------------------------
    \29\ Presidential Proclamation 7351 of October 10, 2000 (65 Fed. 
Reg. 60,236, October 4, 2000) designated Belize, Costa Rica, Dominican 
Republic, El Salvador, Guatemala, Haiti, Honduras, Jamaica, Nicaragua, 
and Panama as countries that USTR has determined implement and follow 
or are making substantial progress toward implementing and following, 
the customs procedures required by the CBTPA and, therefore, are 
eligible for enhanced apparel benefits provided under the Act.
---------------------------------------------------------------------------

Beneficiary countries or territories

    Section 212 of the CBERA lists the following 27 countries 
and territories as potentially eligible for designation by the 
President as CBI beneficiary countries:

Anguilla                           Guatemala
Antigua and Barbuda                Guyana
Bahamas, The                       Haiti
Barbados                           Honduras
Belize                             Jamaica
Cayman Islands                     Montserrat
Costa Rica                         Netherlands Antilles
Dominica                           Nicaragua
Dominican Republic                 Panama
El Salvador                        Saint Christopher and Nevis
Grenada                            Saint Lucia
Saint Vincent and the              Trinidad and Tobago
  Grenadines                       Turks and Caicos Islands
Suriname                           Virgin Islands, British

    The countries currently designated as CBI beneficiaries are 
listed under General Note 7 of the Harmonized Tariff Schedule 
of the United States.

General Designation Criteria

    On October 2, 2000, USTR designated all 24 current 
beneficiaries under the CBERA as ``CBTPA'' beneficiary 
countries.\30\ As noted above, ten countries receive enhanced 
apparel benefits.
---------------------------------------------------------------------------
    \30\ 65 Fed. Reg. 60,236.
---------------------------------------------------------------------------
    Section 212(b) of the CBERA, as amended, prohibits the 
President from designating a country or territory as a 
beneficiary of CBI trade or tax benefits if it:
          (1) is a Communist country;
          (2) has nationalized or expropriated U.S. property, 
        including any patent, trademark, or other intellectual 
        property, or taken actions with similar effect, without 
        compensation or submission to arbitration;
          (3) fails to recognize or enforce awards arbitrated 
        in favor of U.S. citizens;
          (4) affords preferential tariff treatment to products 
        of other developed countries that has or is likely to 
        have a significant adverse effect on U.S. commerce;
          (5) broadcasts U.S. copyrighted material without the 
        owners' consent;
          (6) has not signed an extradition agreement with the 
        United States; and
          (7) has not or is not taking steps to afford 
        internationally-recognized worker rights (as defined 
        for the Generalized System of Preferences program) to 
        workers in the country (including any designated zone 
        in that country).
    The President may waive conditions (1), (2), (3), (5), and 
(7) if he determines that designation of the particular country 
would be in the national economic or security interest of the 
United States and so reports to the Congress.
    In addition, the President must take into account certain 
other factors under section 212(c) in determining whether to 
designate a country a CBI beneficiary: (1) the country's 
expressed desire to be designated; (2) economic conditions and 
living standards in the country; (3) the extent the country has 
assured the United States it will provide equitable and 
reasonable access to its markets and basic commodity resources; 
(4) the degree the country follows accepted rules of 
international trade under the World Trade Organization and 
applicable trade agreements; (5) the degree the country uses 
export subsidies or imposes export performance or local content 
requirements; (6) the degree the country's trade policies 
contribute to regional revitalization; (7) the degree the 
country is undertaking self-help measures; (8) whether or not 
the country has taken or is taking steps to afford its workers 
(including in any designated zone of the country) 
internationally-recognized worker rights; (9) the extent the 
country provides adequate and effective means under its law for 
foreign nationals to secure, exercise, and enforce exclusive 
rights in intellectual property; (10) the extent the country 
prohibits its nationals from broadcasting U.S. copyrighted 
materials without permission; and (11) the extent to which the 
country is prepared to cooperate in the administration of the 
CBI. The President must notify the Congress of his intention to 
designate countries, together with the considerations entering 
the decision.
    The President may later withdraw or suspend the designation 
of any country as a beneficiary country or withdraw, suspend, 
or limit the application of duty-free treatment for any 
eligible article of any country if he determines that, based on 
changed circumstances, such country would be barred from 
designation under the criteria set forth in subsection (b) of 
section 212.\31\ The President is required to publish at least 
30 days advance notice of such proposed action in the Federal 
Register. During the 30-day notice period, USTR is required to 
hold a public hearing and accept public comments on the 
proposed action.
---------------------------------------------------------------------------
    \31\ Section 1909 of the Omnibus Trade and Competitiveness Act 
(Public Law 100-418).
---------------------------------------------------------------------------
    The President must submit a complete report to the Congress 
by October 1, 1993, and every 3 years thereafter regarding the 
operation of the CBI. This report must include general reviews 
of CBI beneficiary countries based upon all section 212 
designation criteria.

Designation Criteria for CBTPA Benefits

    In designating a country as eligible for the enhanced CBTPA 
benefits, the President is to take into account the existing 
eligibility criteria established under CBERA, as well other 
appropriate criteria, including whether a country has 
demonstrated a commitment to undertake its WTO obligations and 
participate in negotiations toward the completion of the FTAA 
or comparable trade agreement, the extent to which the country 
provides intellectual property protection consistent with or 
greater than that afforded under the Agreement on Trade-Related 
Aspects of Intellectual Property Rights, the extent to which 
the country provides internationally recognized worker rights, 
whether the country has implemented its commitments to 
eliminate the worst form of child labor, the extent to which a 
country has taken steps to become a party to and implement the 
Inter-American Convention Against Corruption, and the extent to 
which the country applies transparent, nondiscriminatory and 
competitive procedures in government procurement equivalent to 
those included in the WTO Agreement on Government Procurement 
and otherwise contributes to efforts in international fora to 
develop and implement international rules in transparency in 
government procurement.

Eligible articles

    CBI duty-free treatment under section 213(a) of the CBERA 
applies only to articles which meet three rule-of-origin 
requirements:
          (1) The article must be imported directly from a 
        beneficiary country into the U.S. customs territory;
          (2) The article must contain a minimum 35 percent 
        local content of one or more beneficiary countries (up 
        to 15 percent of the total value of the article from 
        U.S.-made materials may count toward the 35 percent 
        requirement); and
          (3) The article must be wholly the growth, product, 
        or manufacture of a beneficiary country or, if it 
        contains foreign materials, be substantially 
        transformed into a new or different article in a 
        beneficiary country.
Other provisions and regulations preclude minor pass-through 
operations or transshipments from qualification.
    Special criteria have been established for the duty-free 
entry of ethanol under the CBI program. The Tax Reform Act of 
1986 \32\ amended the 1983 CBI legislation to require 
increasing amounts of CBI feedstock in order for ethanol to 
qualify for duty-free treatment--30 percent in 1987; 60 percent 
in 1988; and 75 percent in 1989 and thereafter. Several 
companies were ``grandfathered'' for 2 years, allowing them to 
operate under pre-1986 criteria through 1989.
---------------------------------------------------------------------------
    \32\ Public Law 99-514, section 423, approved October 22, 1986.
---------------------------------------------------------------------------
    The Omnibus Trade and Competitiveness Act of 1988 \33\ 
extended the ``grandfather'' through the end of 1989 for six 
dehydration plants already built or under construction but 
imposed an import cap of 20 million gallons per facility. The 
Act also requested reports by the ITC and the General 
Accounting Office (GAO) on whether or not the current local 
feedstock requirements make CBI ethanol production economically 
feasible. Those reports concluded that CBI ethanol production 
would not be economically feasible under those local feedstock 
requirements.
---------------------------------------------------------------------------
    \33\ Public Law 100-418, section 1910, approved August 23, 1988.
---------------------------------------------------------------------------
    The Steel Trade Liberalization Program Implementation Act 
of 1989 \34\ provided that for calendar years 1990 and 1991, 
ethanol (and any mixture thereof) that is only dehydrated 
within a CBI beneficiary country or an insular possession 
receives duty-free treatment only if it meets the applicable 
local feedstock requirement: (1) no feedstock requirement is 
imposed on imports up to a level of 60 million gallons or 7 
percent of the domestic ethanol market (as determined by the 
ITC, based on the 12-month period ending on the preceding 
September 30), whichever is greater; (2) a local feedstock 
requirement of 30 percent by volume applies to the next 35 
million gallons of imports above the 60 million gallon or 7 
percent level described above; and (3) a local feedstock 
requirement of 50 percent by volume applies to any additional 
imports. Ethyl alcohol (or a mixture thereof) that is produced 
by a process of full fermentation in an insular possession or 
beneficiary country continues to be eligible for duty-free 
treatment in unlimited quantities without regard to feedstock 
requirements.
---------------------------------------------------------------------------
    \34\ Public Law 101-221, section 7, approved December 12, 1989.
---------------------------------------------------------------------------
    The Customs and Trade Act of 1990 extended the above 
provisions through 1992. The Omnibus Budget Reconciliation Act 
of 1990 \35\ further extended them through September 30, 2000.
---------------------------------------------------------------------------
    \35\ Public Law 101-508, section 11502, approved November 5, 1990.
---------------------------------------------------------------------------
    Section 213(b) of the CBERA exempts the following articles 
from CBI duty-free treatment: textiles and apparel subject to 
textile agreements; footwear, handbags, luggage, flat goods 
(such as wallets, change purses and key and eyeglass cases), 
work gloves, and leather wearing apparel not eligible for duty-
free treatment under the GSP program as of August 5, 1983; 
canned tuna; petroleum and petroleum products; and watches and 
watch parts containing components from non-most-favored-nation 
(column 2) sources.
    Section 212 of CBI II amended section 213 of the CBERA to 
authorize the President to proclaim a tariff reduction of 20 
percent, but not more than 2.5 percent ad valorem on any 
article, in the duties applicable to handbags, luggage, flat 
goods, work gloves, and leather wearing apparel not designated 
as eligible articles under the GSP program on August 5, 1983 
from CBI beneficiary countries, to be phased in in five equal 
annual stages beginning on January 1, 1992.
    Section 222 of CBI II also extended duty-free treatment to 
articles, other than textiles and apparel and petroleum and 
petroleum products, that are processed or assembled wholly from 
U.S. fabricated components or materials or processed wholly 
from U.S. ingredients (except water) in a CBI beneficiary 
country and neither the components, materials, and ingredients 
after export from the United States nor the article itself 
before importation into the United States enters the commerce 
of any third country.
    Under the tariff-rate quota system for sugar,\36\ the 
Secretary of Agriculture establishes the quota quantity that 
can be entered at the lower tier import duty rate, and the U.S. 
Trade Representative (USTR) allocates the quantity among sugar 
exporting quantities. The quantities allocated to beneficiary 
countries under the Caribbean Basin Initiative receive duty-
free treatment. Imports above the in-quota amount from 
beneficiary countries are tariffed at the higher, over-quota 
rate. Certificates of quota eligibility (CQE) are issued to the 
exporting countries and must be returned with the shipment of 
sugar in order to receive quota treatment.
---------------------------------------------------------------------------
    \36\ Presidential Proclamation No. 6763, December 23, 1994, 60 Fed. 
Reg. 1007.
---------------------------------------------------------------------------
    Section 213(c) requires the President to suspend duty-free 
treatment on imports of sugar and beef products from any 
beneficiary country that does not submit a satisfactory stable 
food production plan within 90 days after its designation, or 
while the country is not making a good faith effort to 
implement the plan or the plan is not achieving its purpose. 
The President must withhold suspension if the country agrees to 
consultations within a reasonable period of time and undertakes 
to formulate and implement remedial action.
    The import relief procedures and authorities under sections 
201-204 of the Trade Act of 1974, as amended, and national 
security measures under section 232 of the Trade Expansion Act 
of 1962 apply to imports from CBI beneficiary countries. 
Section 213(e) authorizes the President to suspend CBI duty-
free treatment and proclaim a rate of duty or other relief 
measures on CBI imports as on imports of the article from non-
CBI countries. Alternatively, the President may maintain duty-
free treatment or establish a margin of preference on imports 
from CBI countries. In its report to the President on import 
relief investigations covering CBI eligible articles, the ITC 
must state whether its findings with respect to serious injury 
to the domestic industry and its recommended remedy apply to 
imports from CBI beneficiary countries.
    Under a special procedure under section 213(b), petitioners 
for import relief on agricultural perishable products may also 
file a request with the Secretary of Agriculture for emergency 
relief. Within 14 days, the Secretary must determine whether 
there is reason to believe a CBI perishable product is being 
imported in such increased quantities as to be a substantial 
cause of serious injury to the domestic industry, and recommend 
to the President emergency relief, if warranted. The President 
must determine within 7 days after receiving the Secretary's 
recommendation whether to take emergency action restoring the 
normal rate of duty pending final action on the import relief 
petition.
    Section 215 requires the ITC to report annually to the 
Congress on the actual economic impact and its assessment of 
the probable future effects of the Act on the U.S. economy 
generally and on specific domestic industries. Section 216 also 
requires an annual report to the Congress by the Secretary of 
Labor on the impact of the CBI on U.S. labor.

Enhanced Temporary Trade Benefits under the CBTPA

    Under NAFTA, imported products from Mexico receive NAFTA 
declining tariff or duty-free and quota-free treatment. Chapter 
Four of NAFTA establishes rules of origin for identifying goods 
that are to be treated as ``originating in the territories of 
NAFTA parties'' and are therefore eligible for preferential 
treatment accorded to originating goods under NAFTA, including 
reduced duties and duty-free and quota-free treatment.
    The CBTPA provides that NAFTA tariff treatment applies to 
articles eligible under CBI that meet NAFTA rules of origin 
(treating the United States and CBI beneficiary countries as 
``parties'' under the agreement for this purpose). Customs 
procedures applicable to exporters under NAFTA also must be met 
for partnership countries (i.e. CBTPA eligible) to quality for 
parity treatment. Imports of articles eligible under the CBI 
but which do not meet the conditions of NAFTA parity would 
continue to be excluded from the program.
    Under the CBTPA, NAFTA tariff treatment applies to goods 
excluded from the CBI, except to textiles and apparel. More 
specifically, for imports of canned tuna, petroleum and 
petroleum products, footwear, handbags, luggage, flat goods, 
work gloves, and leather-wearing apparel, the legislation 
provided an immediate reduction in tariffs equal to the 
preference Mexican products enjoy under NAFTA. The applicable 
duty paid by importers on such goods is equal to the duty 
applicable to the same goods if entered from Mexico.
    In order for their products to qualify for any of the 
preferences afforded under this Act, whether applied to 
textiles and apparel or other products, the beneficiary country 
must comply with customs procedures equivalent to those 
required under the NAFTA.

Temporary Trade Benefits for Apparel Imports Under CBTPA

    The CBTPA provides duty-free, quota-free treatment to the 
following apparel products:
    (1) apparel articles assembled in an eligible CBI 
beneficiary country from U.S. fabrics wholly formed from U.S. 
yarns and cut in the United States that would enter the United 
States under Harmonized Tariff Schedule (HTS) item number 
9802.00.80 (a provision that otherwise allows an importer to 
pay duty solely on the value-added abroad when U.S. components 
are shipped abroad for assembly and re-imported into the United 
States);
    (2) apparel articles assembled in a CBTPA country from 
fabrics wholly formed and cut in the United States, from yarns 
wholly formed in the United States that are (I) entered under 
subheading 9802.00.80 of the HTS or (II) entered under chapter 
61 or 62 of the HTS, if, after such assembly, the articles 
would have qualified for entry under subheading 9802.00.80 but 
for the fact that the articles were embroidered or subjected to 
stone-washing, enzyme-washing, acid washing, perma-pressing, 
oven-baking, bleaching, garment-dyeing, screen printing, or 
other similar processes;
    (3) apparel articles cut in a CBTPA beneficiary country 
from fabric wholly formed in the United States from yarns 
wholly formed in the United States, if such articles are 
assembled in such country with thread formed in the United 
States;
    (4) certain apparel articles knit-to-shape (other than 
socks provided for in heading 6115 of the HTS) in a CBTPA 
beneficiary country from yarns wholly formed in the United 
States, and knit apparel articles (other than certain T-shirts, 
as described below) cut and wholly assembled in one or more 
CBTPA beneficiary countries from fabric formed in one or more 
CBTPA beneficiary countries or the United States from yarns 
wholly formed in the United States, in an amount not to exceed 
250 million square meter equivalents (SMEs) during the one-year 
period beginning on October 1, 2000. That amount will increase 
by 16 percent, compounded annually, in each succeeding one-year 
period through September 30, 2004. In each one-year period 
thereafter through September 30, 2008, the amount will be the 
amount that was in effect for the one-year period ending on 
September 30, 2004, or such other amount as may be provided by 
law. For T-shirts, other then underwear T-shirts, the amount 
eligible for duty-free, quota-free treatment is 4.2 million 
dozen during the one-year period beginning on October 1, 2000. 
That amount will be increased by 16 percent, compounded 
annually, in each succeeding 1-year period through September 
30, 2004 and thereafter will be the amount in effect for the 
period ending on September 30, 2004, or such other amount as 
may be provided by law. The conference agreement provides that 
it is the sense of Congress that the Congress should determine, 
based on the record of expansion of exports from the United 
States as a result of the preferential treatment of articles 
under this provision, the percentage by which the amounts 
referred to above the respect to knit-to-shape articles and T-
shirts should be compounded for the one-year periods occurring 
after the period ending on September 30, 2004;
    (5) certain brassieres, subject to the requirements set 
forth in the Act;
    (6) certain articles assembled from fibers, yarns or fabric 
not widely available in commercial quantities, with reference 
to the relevant provisions of the NAFTA; the conference 
agreement also authorizes the President to extend duty-free and 
quota-free treatment to certain other fibers, fabrics and 
yarns. Any interested party may submit to the President a 
request for extension of benefits to fibers, fabrics and yarns 
not available. The requesting party will bear the burden of 
demonstrating that a change is warranted by providing 
sufficient evidence. The President must make a determination 
within 60 calendar days of receiving a request from an 
interested party;
    (7) certain handloomed, handmade and folklore articles; and
    (8) certain textile luggage, as described in the 
legislation.

The CBTPA establishes certain special rules relating to apparel 
        products:

    (1) Findings and trimmings.--Articles otherwise eligible 
for preferential treatment shall not be ineligible for such 
treatment because the article contains findings or trimmings of 
foreign origin, if such findings and trimmings do not exceed 25 
percent of the cost of the components of the assembled product. 
However, sewing thread shall not be treated as a finding or 
trimming for purposes of apparel articles cut in a CBTPA 
beneficiary country from fabric wholly formed in the United 
States from yarns wholly formed in the United States, where 
preferential treatment in contingent upon assembly with thread 
formed in the United States.
    (2) Interlinings.-- Articles otherwise eligible for 
preferential treatment shall not be ineligible for such 
treatment because the articles contain certain interlinings, as 
described in the legislation, of foreign origin, if the value 
of such interlinings (and any findings and trimmings) does not 
exceed 25 percent of the cost of the components of the 
assembled articles. This rule will not apply if the President 
determines that United States manufacturers are producing such 
interlinings in the United States in commercial quantities;
    (3) DeMinimis.--An article otherwise ineligible for 
preferential treatment because the article contains fibers or 
yarns not wholly formed in the United States or in one or more 
beneficiary countries shall not be ineligible for such 
treatment if the total weight of all such fibers or yarns is 
not more then seven percent of the total weight of the good. 
However, in order for an apparel article containing elastomeric 
yarns to be eligible for preferential treatment, such yarns 
must be wholly formed in the United States.
    (4) Special Origin Rule.--An article otherwise eligible for 
preferential treatment shall not be ineligible for such 
treatment because the article contains nylon filament yarn 
(other then eleastomeric yarn), if entered under certain tariff 
headings from a country that is a party to an agreement with 
the United States establishing a free trade area which entered 
into force before January 1, 1995.
    The CBTPA establishes a transition period that began on 
October 1, 2000 and ends on the earlier of September 30, 2008, 
or the date on which the Free Trade Area of the Americas or 
another free trade agreement as described in the legislation 
enters into force with respect to the United States and the 
CBTPA beneficiary country.

Customs Procedures and Penalties for Transshipment

    Under the NAFTA, Parties to the Agreement must observe 
Customs procedures and documentation requirements, which are 
established in Chapter 5 of NAFTA. Requirements regarding 
Certificates of Origin for imports receiving preferential 
tariffs are detailed in Article 502.1 of NAFTA. The CBTPA 
requires the Secretary of the Treasury to prescribe regulations 
that require, as a condition of entry, that any importer of 
record claiming preferential tariff treatment for textile and 
apparel products under the bill must comply with requirements 
similar in all material respects to the requirements regarding 
Certificates of Origin contained in Article 502.1 of NAFTA, for 
a similar importation from Mexico. In addition, if an exporter 
is determined under the laws of the United States to have 
engaged in illegal transshipment of textile or apparel products 
from a partnership country, then the President shall deny all 
benefits under the bill to such exporter, and to any successors 
of such exporter, for a period of two years.
    In cases where the President has requested a beneficiary 
country to take action to prevent transshipment and the country 
has failed to do so, the President shall reduce the quantities 
of textile and apparel articles that may be imported into the 
United States from that country by three times the quantity of 
articles transshipped, to the extent that such action is 
consistent with WTO rules.

Other trade benefits

    Under the antidumping and countervailing duty laws, imports 
from two or more countries subject to investigation must 
generally be aggregated for the purpose of determining whether 
the unfair trade practice causes material injury to a U.S. 
industry, absent certain exceptions. Section 224 of CBI II 
created an exception to the general cumulation rule for imports 
from CBI beneficiary countries. If imports from a CBI country 
are under investigation in an antidumping or countervailing 
duty case, imports from that country may not be aggregated with 
imports from non-CBI countries under investigation for purposes 
of determining whether the imports from the CBI country are 
causing, or threatening to cause, material injury to a U.S. 
industry. They may be aggregated with imports from other CBI 
countries under investigation. Imports from CBI countries 
continue to be cumulated with imports from non-CBI countries 
for purposes of determining material injury in investigations 
of imports from non-CBI countries.
    CBI II also increased the duty-free tourist allowance for 
U.S. residents returning directly or indirectly from a CBI 
beneficiary country from $400 to $600 and allows such tourists 
to enter 1 additional liter of alcoholic beverages duty free if 
produced in a CBI beneficiary country.

Measures for Puerto Rico and U.S. insular possessions

    The CBERA contains a number of provisions to maintain and 
improve the competitive position of Puerto Rico and the U.S. 
insular possessions (including the Virgin Islands, American 
Samoa, Guam):
          (1) Imports from Puerto Rico and the Virgin Islands 
        may be counted toward the 35 percent minimum local 
        content rule of origin requirement for CBI duty-free 
        treatment. Section 235 of the Tariff and Trade Act of 
        1984 amended section 213(a) also to permit articles 
        from CBI beneficiary countries to enter under bond for 
        processing or manufacture in Puerto Rico without 
        payment of duty upon withdrawal if they meet CBI rule 
        of origin requirements. As amended by CBI II, any 
        article which is the growth, product, or manufacture of 
        Puerto Rico qualifies for duty-free treatment under the 
        CBI if (a) the article is imported directly from a CBI 
        beneficiary country into the United States; (b) the 
        article was advanced in value in a CBI beneficiary 
        country; and (c) if any materials are added to the 
        article in a CBI beneficiary country, such materials 
        are a product of a beneficiary country or the United 
        States.
          (2) The permissible foreign content was increased 
        from 50 to 70 percent for duty-free treatment of 
        imports of CBI eligible articles from U.S. insular 
        possessions.
          (3) Duty-free entry of alcoholic beverages by 
        returning U.S. residents arriving directly from insular 
        possessions was increased from 4 to 5 liters provided 
        at least 1 liter is the product of an insular 
        possession. CBI II increased the duty-free allowance 
        for U.S. residents returning from U.S. insular 
        possessions from $800 to $1,200.
          (4) Section 221 of the CBERA amended section 7652 of 
        the Internal Revenue Code to require that all excise 
        taxes collected on foreign rum imported into the United 
        States, whether or not from Caribbean countries, be 
        paid to the treasuries of Puerto Rico and the Virgin 
        Islands. Section 214(c) requires the President to 
        consider compensatory measures for the governments of 
        Puerto Rico and the Virgin Islands if there is a 
        reduction in the amount of rum excise tax rebates.
          (5) The term ``industry'' under the import relief 
        provisions of section 201 of the Trade Act of 1974 was 
        clarified to enable producers in the insular 
        possessions to petition for import relief.
          (6) Non-toxic rum stillage discharges in the Virgin 
        Islands are exempt from certain provisions of the 
        Federal Water Pollution Control Act if the discharges 
        are 1,500 feet from the shore and are determined by the 
        Governor of the Virgin Islands not to constitute a 
        health or environmental hazard.

Tax measures

    Section 222 of the CBERA amended section 274(h) of the 
Internal Revenue Code to allow deductions for business expenses 
incurred while attending conventions and meetings in a 
designated Caribbean Basin beneficiary country (or Bermuda) if 
the country enters into an executive agreement with the United 
States to provide, on a reciprocal basis, for information 
relating to U.S. tax matters to be made available to U.S. tax 
officials, including agreement to exchange bearer share and 
bank account information for criminal tax purposes. No 
deduction is available for attending a convention in a country 
found by the Secretary of the Treasury to discriminate in its 
tax laws against conventions held in the United States.
    Under section 936 of the Internal Revenue Code, qualified 
investment income earned in U.S. possessions is exempt from 
U.S. tax. Most of the tax benefits claimed under this provision 
are claimed by corporations in Puerto Rico. Prior to the Tax 
Reform Act of 1986 (1986 Act), this investment income, commonly 
referred to as ``qualified possessions source investment 
income'' or QPSII, had to be derived from sources inside Puerto 
Rico. Section 936(d)(4), added to the Code in the 1986 Act, 
amended the definition of QPSII to allow for investments 
outside of Puerto Rico. Under section 936(d)(4), interest 
income will qualify as QPSII if derived from loans by qualified 
financial institutions (including the Puerto Rican Government 
Development Bank) for the acquisition of active business assets 
and for the construction of development projects located in 
eligible Caribbean Basin countries. Section 227 of CBI II 
requires the government of Puerto Rico to take such steps as 
may be necessary to ensure that at least $100,000,000 of new 
investments which qualify under section 936(d)(4) in eligible 
Caribbean Basin countries shall be made each calendar year. 
Refinancings of existing investments shall not constitute ``new 
investments'' for this purpose.
    In general, section 1601y of the Small Business Job 
Protection Act of 1996: (1) repealed the QPSII exclusion 
effective July 1, 1996; (2) repealed the section 936 credit for 
new businesses effective for taxable years beginning after 
December 31, 1995; and (3) repealed the section 936 credit for 
existing possession businesses effective for taxable years 
beginning before January 1, 2006.\37\
---------------------------------------------------------------------------
    \37\ Public Law 104-188, section 1601, approved August 20, 1996, 26 
U.S.C. 30A.
---------------------------------------------------------------------------

Tourism promotion and scholarship assistance

    Section 233 of CBI II required the Commissioner of Customs 
to carry out preclearance operations during fiscal years 1991 
and 1992 at a U.S. Customs Service facility in a Caribbean 
Basin country which the Commissioner considered appropriate for 
testing the extent to which the availability of preclearance 
operations can assist in the development of tourism in the 
region. The Commissioner of Customs and Commissioner of the 
Immigration and Naturalization Service were to first determine 
the viability of establishing such operations in either Aruba 
or Jamaica. The Commissioner of Customs was required to submit 
a report to the Congress as soon as practicable after September 
30, 1992, regarding the program, including the efficacy of 
extending preclearance operations to other Caribbean countries. 
In December 1994, the Customs Service signed a bilateral 
agreement with the government of Aruba regarding the future 
construction of a preclearance facility.
    Section 231 of CBI II requires the Administrator of the 
Agency for International Development (AID) to establish and 
administer a program of scholarship assistance, in cooperation 
with state governments, universities, community colleges, and 
businesses, to enable students (particularly the economically 
and socially disadvantaged) from CBI beneficiary countries that 
also receive U.S. foreign assistance to study in the United 
States. The Administrator may make grants to states (including 
the District of Columbia, Puerto Rico, and U.S. possessions and 
territories) to provide scholarship assistance for 
undergraduate degree programs and for training programs of at 
least 1 year in study areas related to the critical development 
needs of the students' respective countries. The federal share 
for each year for which a state receives payment will be not 
less than 50 percent, funded from amounts otherwise made 
available for Latin American and Caribbean regional programs 
under the economic support fund of the Foreign Assistance Act 
of 1961. To the maximum extent practicable, each participating 
state shall enlist private sector assistance to meet the non-
federal share of payments.

Meetings of Caribbean Trade Ministers and USTR

    CBTPA directs the President to convene a meeting with the 
trade ministers of partnership countries in order to establish 
a schedule of regular meetings, to commence as soon as 
practicable, of the trade ministers and USTR. The purpose of 
the meetings is to advance consultations between the United 
States and partnership countries concerning the likely timing 
and procedures for initiating negotiations for partnership 
countries to: (1) accede to NAFTA; or (2) enter into 
comprehensive, mutually advantageous trade agreements with the 
United States that contain comparable provisions to NAFTA, and 
would make substantial progress in achieving the negotiation 
objectives listed in Section 108(b)(5) of Public Law 103-182.

                           Andean Initiative

    The Andean Trade Preference Act (ATPA), commonly referred 
to as the Andean Initiative, was enacted on December 4, 1991 as 
title II of Public Law 102-182, to authorize preferential trade 
benefits for the Andean nations similar to those benefits to 
beneficiary countries under the Caribbean Basin Initiative 
program. On July 23, 1990, President Bush announced that he 
would seek congressional approval of a special preferential 
tariff program for four Andean countries--Bolivia, Ecuador, 
Colombia, and Peru--to fulfill a commitment made at the 
February 1990 Cartagena Drug Summit to expand economic 
incentives to encourage these countries to move out of the 
production, processing, and shipment of illegal drugs into 
legitimate products. Increased access to the U.S. market 
through tariff preferences was part of a package of measures 
that included expanded agricultural development assistance, 
additional product coverage under the Generalized System of 
Preferences program, and negotiation of long-term trade and 
investment liberalization building on the ``Enterprise for the 
Americas Initiative'' announced by the President on June 27, 
1990.
    On October 5, 1990, President Bush transmitted to Congress 
proposed implementing legislation. H.R. 661, the ``Andean Trade 
Preference Act of 1991,'' was introduced on January 28, 1991 
reflecting the Administration's proposal. The bill as reported 
to the House on November 19 was amended during consideration by 
the Committee on Ways and Means to conform the country 
designation criteria, rule-of-origin requirements, and the 
import relief and emergency relief criteria to the conditions 
and procedures for granting duty-free treatment under the CBI 
program. Certain preferential trade benefits, as well as the 
tax benefits under the CBI program, were maintained for the 
Caribbean Basin countries and not extended to the Andean 
countries by the legislation. The authority for the Andean 
Initiative was also limited to a 10-year period, to terminate 
as of December 4, 2001. H.R. 661 as amended was incorporated in 
a House amendment to a Senate amendment to H.R. 1724, passed by 
both Houses in a conference report on November 26, 1991.
    The ATPA went into effect on December 4, 1991. The 
designations of Columbia and Bolivia as ATPA beneficiary 
countries became effective July 22, 1992.\38\ Designations of 
Ecuador \39\ and Peru \40\ became effective, respectively, on 
April 30, 1993 and August 31, 1993.
---------------------------------------------------------------------------
    \38\ Presidential Proclamation 6455 and 6456; 57 Fed. Reg. 30069 
and 30097.
    \39\ Presidential Proclamation 6544; 58 Fed. Reg. 195547.
    \40\ Presidential Proclamation 6585; 58 Fed. Reg. 43239.
---------------------------------------------------------------------------

Beneficiary countries

    The ATPA authorizes the President to proclaim duty-free 
treatment on all eligible articles from Bolivia, Ecuador, 
Colombia, and Peru as potential beneficiary countries. 
Designation by the President of beneficiary status is subject 
to seven conditions identical to the mandatory criteria for 
designation under the CBI program and subject to the same 
authority to waive certain conditions in the U.S. national 
economic or security interest. A country is prohibited from 
designation under these conditions if it is a communist 
country, has nationalized or expropriated U.S. property without 
compensation or submission to arbitration, fails to recognize 
arbitral awards in favor of U.S. citizens, affords preferential 
tariff treatment to products of other developed countries 
having or likely to have a significant adverse effect on U.S. 
commerce, broadcasts U.S. copyrighted material without the 
owner's consent, has not signed an extradition agreement with 
the United States, or has or is not taking steps to afford 
internationally-recognized worker rights. In addition, the 
President must take into account 12 discretionary factors prior 
to designating any of the 4 countries, similar to factors under 
the CBI, plus whether the country has met narcotics cooperation 
certification criteria required to be eligible for U.S. foreign 
aid.
    Before designating any country, the President must notify 
the Congress of his intention to make the designation and the 
considerations entering into the decision. The President may 
withdraw or suspend beneficiary country status or duty-free 
treatment on any article if he determines subsequently that the 
country should be barred from designation as a result of 
changed circumstances.

Eligible articles

    Duty-free treatment is granted under the ATPA to any 
otherwise eligible article which is the growth, product, or 
manufacture of a designated beneficiary country if (1) that 
article is imported directly from a beneficiary country into 
the U.S. customs territory; and (2) the sum of the cost or 
value of materials produced in one or more Andean beneficiary 
countries or one or more CBI beneficiary countries, plus the 
direct costs of processing operations performed in one or more 
Andean or CBI beneficiary countries is not less than 35 percent 
of the appraised value of the article. Puerto Rico and the 
Virgin Islands are also considered beneficiary countries for 
this purpose. Up to 15 percent of the value attributable to the 
cost or value of materials produced in the United States may be 
applied toward the 35 percent minimum local content 
requirement. These rules and requirements to preclude 
transshipment or pass-through operations are identical to CBI 
provisions, except that content from CBI beneficiary countries 
may also be counted toward the minimum 35 percent local content 
requirement for determining the product of an Andean country.
    A statutory list of products that are ineligible for duty-
free treatment under the ATPA is also identical to the product 
exclusion list under the CBI except that rum is also excluded 
from ATPA eligibility in order to preserve preferential 
benefits for Caribbean, Virgin Islands, and Puerto Rican 
producers. Unlike under the CBI, duty-free treatment does not 
apply to imports of certain excluded articles assembled or 
processed wholly from U.S. components or materials.
    In addition to rum, ATPA duty-free treatment does not apply 
to textiles and apparel articles subject to textile agreements; 
footwear not designated eligible for GSP duty-free treatment; 
canned tuna; petroleum or petroleum products; certain watches 
and watch parts; certain leather-related products; and sugar, 
syrups, and molasses subject to over-quota rates of duty. As 
under the CBI and GSP programs, duty-free treatment applies 
only to imports of sugar entering within the tariff-quota 
level; over-quota sugar imports remain subject to a high 
tariff. As under the CBI, duty rate reductions of 20 percent, 
not to exceed 2.5 percent ad valorem, implemented in five equal 
annual stages beginning January 1, 1992, apply to imports of 
Andean leather-related products (handbags, luggage, flat goods, 
work gloves, and leather wearing apparel).

Import safeguard provisions

    Authorities under the ATPA to grant import relief measures 
and to take emergency action on imports of agricultural 
perishables are identical to provisions under the CBI program. 
The President may suspend duty-free treatment and proclaim a 
duty rate on any eligible article under the import relief 
provisions of the Trade Act of 1974 or the national security 
provisions of the Trade Expansion Act of 1962. The U.S. 
International Trade Commission must state in its report to the 
President on any import relief investigation involving an 
eligible article under the ATPA whether and to what extent its 
injury findings and remedy recommendations apply to imports of 
the article from beneficiary countries.
    Under an emergency relief procedure for agricultural 
perishables, petitions may be filed with the Secretary of 
Agriculture at the same time as a petition for import relief is 
filed with the ITC. Within 14 days, the Secretary advises the 
President whether he has reason to believe that a perishable 
product from a beneficiary country is being imported in such 
increased quantities as to be a substantial cause of serious 
injury or threat thereof to the domestic industry and that 
emergency action is warranted, or publishes notice and advises 
the petitioner of a determination not to recommend emergency 
action. Within 7 days after receiving a recommendation, the 
President must proclaim the withdrawal of duty-free treatment 
or publish notice of his determination not to take emergency 
action.
    No proclamation under the ATPA shall affect fees imposed 
pursuant to section 22 of the Agricultural Adjustment Act of 
1933.

Other provisions

    The ATPA increased the duty-free tourist allowance for U.S. 
residents returning from Andean beneficiary countries from $400 
to $600 and 1 additional liter of alcoholic beverages may enter 
duty free if produced in an Andean beneficiary country.
    The President must submit a triennial report to the 
Congress on the operation of the program. The ITC must report 
annually to the Congress on the economic impact of the ATPA on 
U.S. industries and consumers and on the effectiveness of duty-
free treatment in promoting drug-related crop eradication and 
crop substitution efforts of beneficiary countries. The 
Secretary of Labor must also report annually on the impact of 
the ATPA on U.S. labor.

                   African Growth and Opportunity Act

    The African Growth and Opportunity Act, commonly referred 
to as the African Trade Bill or AGOA, was enacted as title I of 
the Trade and Development Act of 2000 \41\, to authorize the 
grant of certain U.S. unilateral preferential trade benefits to 
sub-Saharan African countries pursuing political and economic 
reform.
---------------------------------------------------------------------------
    \41\ Public Law 106-200, approved May 18, 2000.
---------------------------------------------------------------------------

Background

    Section 134 of the Uruguay Round Agreements Act (URAA) \42\ 
required the President to produce a comprehensive trade and 
development policy for African countries. The President's first 
report was submitted to Congress on February 5, 1996. Among 
other things, the President's report proposed the creation of 
the Africa Trade and Development Coordinating Group, an 
interagency group to be co-chaired by the National Security 
Council and the National Economic Council.
---------------------------------------------------------------------------
    \42\ Public Law 103-465, approved December 8, 1994, 19 U.S.C. 3554.
---------------------------------------------------------------------------
    On September 26, 1996, H.R. 4198 was introduced in the 
House of Representatives to authorize a new trade and 
investment policy for sub-Saharan Africa. The bill called for 
the designation of countries in sub-Saharan Africa pursuing 
market-based economic reform to participate in the benefits of 
the bill. H.R. 4198 proposed the creation of a United States-
Sub-Saharan Africa Trade and Economic Cooperation Forum to 
provide a regular opportunity for the discussion of trade 
liberalization among eligible countries and sought the 
establishment of a United States-Sub-Saharan Africa Free Trade 
Area. In addition, the bill provided for the elimination of 
quotas on textile and apparel products from Kenya and 
Mauritius, the only sub-Saharan African countries subject to 
quota on these products. No action was taken on H.R. 4198 in 
the 104th Congress.
    The second of the President's five reports pursuant to 
section 134 of the URAA was transmitted to Congress on February 
18, 1997. The report set forth a policy framework structured 
around five basic objectives, including trade liberalization 
and promotion, investment liberalization and promotion, 
development of the private sector, infrastructure enhancement, 
and economic reform.
    On April 24, 1997, H.R. 4198 was reintroduced in the 105th 
Congress as H.R. 1432, the African Growth and Opportunity Act. 
As introduced, H.R. 1432 included new language offering 
enhanced benefits under the Generalized System of Preferences 
(GSP) for sub-Saharan African countries meeting the bill's 
eligibility requirements.
    The third Presidential report required by section 134 of 
the URAA was submitted to Congress on December 23, 1997. The 
report indicated the Administration's strong support for the 
passage of H.R. 1432 and described the five major components of 
the Administration's Partnership for Economic Growth and 
Opportunity in Africa: (1) enhanced trade benefits; (2) 
technical assistance; (3) enhanced dialogue with African 
countries; (4) financing and debt relief; and (5) continued 
U.S. leadership in multilateral fora to support private sector 
development, trade development, and institutional capacity 
building in African countries.
    H.R. 432 was passed by the House of Representatives on 
March 11, 1998. No further action was taken on H.R. 1432 in the 
105th Congress, S. 2400 was introduced in the Senate on July 
21, 1998. Title I of S. 2400 was entitled the African Growth 
and Opportunity Act and differed primarily from H.R. 1432 by 
imposing a requirement that imports of textile and apparel 
products from sub-Saharan Africa qualifying for duty-free and 
quota-free entry be made from fabric of U.S. origin. S. 2400 
was not considered by the Senate during the 105th Congress.
    On January 15, 1999, the President's fourth report pursuant 
to the URAA was submitted to Congress. The President's report 
indicated the Administration's continued support for the 
passage of the African Growth and Opportunity Act and laid out 
the key policy objectives of the President's Partnership for 
Economic Growth and Opportunity in Africa for stimulating 
economic growth in sub-Saharan Africa and facilitating the 
region's integration into the global economy.
    On February 2, 1999, H.R. 1432 was reintroduced in the 
106th Congress as H.R. 434, H.R. 434 was passed by the House of 
Representatives on July 16, 1999.
    On July 16, 1999, S. 1387, also entitled the African Growth 
and Opportunity Act, was introduced in the Senate. The text of 
S. 1387 was similar to title I of S. 2400 from the 105th 
Congress.
    On November 3, 1999, the Senate passed H.R. 434, as 
amended. During Senate consideration of the bill, the House-
passed version of the African Growth and Opportunity Act was 
replaced with the text of S. 1387. H.R. 434 was passed by the 
Senate as the Trade and Development Act of 2000, with title I 
comprising the African Growth and Opportunity Act.
    On January 21, 2000, the President submitted his fifth and 
final report required by section 134 of the URAA. The 
President's report reiterated the Administration's support for 
enactment of H.R. 434. In addition, it described the ways the 
U.S. Government agencies work to support economic reform in 
sub-Saharan Africa, enhance U.S.-sub-Saharan African economic 
engagement, increase African integration into the multilateral 
trading system, and promote sustainable economic development.
    On May 4, 2000, the conference report on H.R. 434, the 
Trade and Development Act of 2000, was filed (H. Rept. 106-606) 
and passed by the House of Representatives. The African Growth 
and Opportunity Act was contained in title I of the conference 
report. The Senate passed the conference report on May 11, 
2000. The bill was signed into law by the President on May 18, 
2000 (P.L. 106-200). The trade provisions in the African Growth 
and Opportunity Act have an effective date of October 1, 2000 
through September 30, 2008.

Beneficiary Countries

    Section 107 of the African Growth and Opportunity Act 
(AGOA) lists the following 48 countries, or their successor 
political entities, as potentially eligible for designation by 
the President as beneficiary countries:

Angola             Eritrea             Nigeria
Benin              Ethiopia            Republic of Congo
Bostswana          Gabon               Rwanda
Burkina Faso       Gambia              Sao Tome and 
Burundi            Ghana                 Principe
Cameroon           Guinea-Bissau       Senegal
Cape Verde         Kenya               Seychelles
Central African    Lesotho             Sierra Leone
  Republic         Liberia             Somalia
Chad               Madagascar          South Africa
Comoros            Malawi              Sudan
Democratic         Mali                Swaziland
  Republic of      Mauritania          Tanzania
  Congo            Mauritius           Togo
Cote d'Ivoire      Mozambique          Uganda
Djibouti           Namibia             Zambia
Equatoria Guinea   Niger               Zimbabwe

    Section 111(a) of AGOA amends title V of the Trade Act of 
1974 by inserting a new section 506A on the designation of sub-
Saharan African countries for the benefits of the Act. The new 
section 506A authorizes the President to designate a country 
listed in section 107 of AGOA as a beneficiary sub-Saharan 
African country if: (1) the President determines that the 
country meets the eligibility requirements set forth in section 
104 of AGOA in effect on the date of enactment; and (2) the 
country otherwise meets the GSP eligibility criteria.\43\
---------------------------------------------------------------------------
    \43\ Presidential Proclamation 7350 of October 2, 2000 (65 (Fed. 
Reg. 59321, October 4, 2000) designated 34 countries in sub-Saharan 
African as beneficiary sub-Saharan African countries for the purposes 
of AGOA. All countries listed above except Angola, Burkina Faso, 
Burundi, Comoros, Democratic Republic of Congo, Cote d'Ivoire, 
Equatorial Guinea, Gambia, Liberia, Somalia, Sudan, Swaziland, Togo, 
and Zimbabwe were designated by Presidential Proclamation 7350, 
Swaziland was designated as a beneficiary country for the purposes of 
AGOA by Presidential Proclamation 7400 of January 17, 2001 (66 Fed. 
Reg. 7373, January 23, 2001).
---------------------------------------------------------------------------
    Section 104(a) of AGOA, as enacted, authorizes the 
President to designate a sub-Saharan African country as an 
eligible sub-Saharan African country if the President 
determines that the country has established, or is making 
continual progress toward establishing:
          (1) a market-based economy that protects private 
        property rights, incorporates an open rules-based 
        trading system, and minimizes government interference 
        in the economy through measures such as price controls, 
        subsidies, and government ownership of economic assets;
          (2) the rule of law, political pluralism, and the 
        right to due process, a fair trial, and equal 
        protection under the law;
          (3) the elimination of barriers to United States 
        trade and investment, including by:
            (A) the provision of national treatment and 
        measures to create and environment conducive to 
        domestic and foreign investment;
            (B) the protection of intellectual property; and
            (C) the resolution of bilateral trade and 
        investment disputes;
          (4) economic policies to reduce poverty, increase the 
        availability of health care and educational 
        opportunities, expand physical infrastructure, promote 
        the development of private enterprise, and encourage 
        the formation of capital markets through micro-credit 
        or other programs;
          (5) a system to combat corruption and bribery, such 
        as signing and implementing the Convention on Combating 
        Bribery of Foreign Public Officials in International 
        Business Transactions; and
          (6) protection of internationally recognized worker 
        rights, including the right of association, the right 
        to organize and bargain collectively, a prohibition on 
        the use of any form of forced or compulsory labor, a 
        minimum age for the employment of children, and 
        acceptable conditions of work with respect to minimum 
        wages, hours of work, and occupational safety and 
        health.
    In designating a country as an eligible sub-Saharan African 
country, the President must also find under section 104(a) that 
it: (1) does not engage in activities that undermine U.S. 
national security or foreign policy interests; and (2) does not 
engage in gross violations of internationally recognized human 
rights or provide support for acts of international terrorism 
and cooperates in international efforts to eliminate human 
rights violations and terrorist activities.
    If the President determines that a beneficiary sub-Saharan 
African country is not making continual progress in meeting the 
eligibility requirements, then under section 506A(a)(3) of the 
Trade Act of 1974 the President must terminate the designation 
of that country as a beneficiary sub-Saharan African country 
effective on January 1, of the year following the year in which 
the determination is made.
    The President is required under section 106 of AGOA to 
submit a comprehensive report to Congress, not late than 1 year 
after the date of enactment of AGOA, and annually thereafter 
through 2008, on the trade and investment policy of the United 
States for sub-Saharan Africa and on the implementation of AGOA 
and the amendments made by it. Section 506A(c) of the Trade Act 
of 1974 requires the President to include his country 
eligibility determinations, along with explanations of his 
determinations and specific analysis of the eligibility 
requirements, in the annual report.

Eligible articles

    Section 111(A) of AGOA amends the GSP provisions in title V 
of the Trade Act of 1974 by inserting a new section 506A. 
Section 506A(b)(1) of the Trade Act of 1974 authorizes the 
President to provide duty-free treatment for imports from 
beneficiary sub-Saharan African countries of any article, other 
than textiles or apparel products or textile luggage, that is 
designated as import sensitive under the GSP statute, provided 
that, after receiving advice from the U.S. International Trade 
Commission (ITC), the President determines that the article is 
not import sensitive in the context of imports from beneficiary 
sub-Saharan African countries.\44\ The general rules of origin 
governing duty-free entry under GSP apply, except that, in 
determining whether products are eligible for the enhanced 
benefits of AGOA, up to 15 percent of the appraised value of a 
product at the time of importation may be derived from material 
produced in the United States. In addition, under section 
506A(b)(2) of the Trade Act of 1974, the cost or value of 
materials produced in any beneficiary sub-Saharan African 
country may be applied in determining whether a product meets 
the applicable rules of origin for the enhanced GSP benefits of 
AGOA. Section 111(b) of AGOA amends GSP to waive permanently 
the competitive need limits that would otherwise apply to 
beneficiary sub-Saharan African countries. Section 114 of AGOA 
inserts a new section 506B in the Trade Act of 1974 providing 
that the enhanced GSP benefits for sub-Saharan African 
countries are in effect through September 30, 2008.
---------------------------------------------------------------------------
    \44\ Presidential Proclamation 7388 of December 18, 2000 (65 Fed. 
Reg. 80723, December 21, 2000) lists the articles determined by the 
President to be non-import sensitive in the context of imports from 
beneficiary sub-Saharan African countries and therefore eligible for 
duty-free treatment under the enhanced GSP benefits in AGOA.
---------------------------------------------------------------------------
    Section 112 of AGOA provides preferential treatment to 
certain textile and apparel articles imported directly into the 
customs territory of the United States from beneficiary sub-
Saharan African countries meeting the transshipment 
requirements set forth in section 113 of AGOA (see description 
below). Under section 112(b), the following textile and apparel 
articles may enter the United States free of duty and 
quantitative restrictions:
          (1) apparel articles assembled in one or more 
        beneficiary sub-Saharan African countries from fabrics 
        wholly formed and cut in the United States, from yarns 
        wholly formed in the United States;
          (2) apparel articles cut and assembled in one or more 
        beneficiary sub-Saharan African countries from fabrics 
        wholly formed in the United States from yarns wholly 
        formed in the United States, and assembled with thread 
        formed in the United States;
          (3) sweaters knit-to-shape in one or more beneficiary 
        sub-Saharan African countries made from cashmere and 
        fine merino wool;
          (4) apparel articles both cut (or knit-to-shape) and 
        sewn, or otherwise assembled, in one or more 
        beneficiary sub-Saharan African countries from fabric 
        or yarn not formed in the United States or a 
        beneficiary sub-Saharan African country, to the extent 
        that apparel articles of such fabrics or yarns would be 
        eligible for preferential treatment, without regard to 
        the source of the fabric or yarn, under Annex 401 of 
        the North American Free Trade Agreement (NAFTA); and
          (5) certified handloomed, handmade and folklore 
        articles.\45\
---------------------------------------------------------------------------
    \45\ Executive Order 13191 of January 17, 2001 (66 Fed. Reg. 7271, 
January 22, 2001) delegated authority to the Committee for the 
Implementation of Textile Agreements (CITA), after consultation with 
the Commissioner of the U.S. Customs Service, to consult with 
beneficiary sub-Saharan African countries and to determine which, if 
any, particular textile and apparel goods shall be treated as being 
handloomed, handmade, or folklore articles for the purposes of section 
112(b)(6) of AGOA.
---------------------------------------------------------------------------
    Section 112b(b)(3) of AGOA also provides that certain other 
apparel articles, up to 1.5% of total U.S. apparel imports (in 
square meter equivalents) for the first year of the bill, 
growing in equal increments in each of the seven succeeding 
one-year periods, to a maximum of 3.5% of U.S. apparel imports 
in the last year of the bill, may enter the customs territory 
of the United States from beneficiary sub-Saharan African 
countries free of duty and quantitative restrictions. The 
following apparel articles are eligible for preferential 
treatment under this cap:
          (1) through September 30, 2004, apparel articles 
        wholly assembled in one or more lesser developed 
        beneficiary sub-Saharan African countries (defined as 
        beneficiary sub-Saharan African countries with a per 
        capita gross national product of less than $1,500 in 
        1998, as measured by the World Bank),\46\ without 
        regard to the origin of the fabric; and
---------------------------------------------------------------------------
    \46\ Presidential Proclamation 7350of October 2, 2000 (65 Fed. Reg. 
59321, October 4, 2000) lists designated beneficiary sub-Saharan 
African countries to be considered as lesser developed beneficiary sub-
Saharan African countries for the purposes of section 112(b)(3)(B) of 
AGOA. They are: Benin, Cape Verde, Cameroon, Central African Republic, 
Chad, Republic of Congo, Djibouti, Eritrea, Ethiopia, Ghana, Guinea, 
Guinea-Bissau, Kenya, Lesotho, Madagascar, Malawi, Mali, Mauritania, 
Mozambique, Nigher, Nigeria, Rwanda, Sao Tome and Principe, Senegal, 
Sierra Leone, Tanzania, Uganda, and Zambia. Swaziland was also 
designated as a lesser developed beneficiary sub-Saharan African 
country for the purposes of AGOA by Presidential Proclamation 7400 of 
January 17, 2001 (66 Fed. Reg. 7373, January 23, 2001).
---------------------------------------------------------------------------
          (2) apparel articles wholly assembled in one or more 
        beneficiary sub-Saharan African countries from fabric 
        wholly formed in one or more beneficiary countries from 
        yarn originating either in the United States or in one 
        or more beneficiary countries.
    Section 112(b)(3)(C) provides import relief within the cap 
in the form of a tariff snapback if the Secretary of Commerce 
determines that an article qualifying for duty-free treatment 
under the cap from a single beneficiary sub-Saharan African 
country is being imported in such increased quantities and 
under such conditions as to cause ``serious damage, or threat 
thereof'' to the domestic industry producing the like or 
directly competitive article. In determining whether a domestic 
industry has been seriously damaged, or is threatened with 
serious damage, the Secretary is required to examine the effect 
of the imports on relevant economic indicators such as domestic 
production, sales, market share, capacity utilization, 
inventories, employment, profits, exports, prices, and 
investment.
    The Secretary of Commerce is required to made a 
determination on whether import relief is warranted if there 
has been a surge in imports under the cap from a single 
beneficiary sub-Saharan African country based on import data. 
The Secretary is also required to initiate such an inquiry 
within 10 days of receiving a written request and supporting 
information from an interested party. Notice of the initiation 
of an inquiry, and the Secretary's subsequent determination, 
are to be published in the Federal Register. The Secretary of 
Commerce is required to establish procedures to ensure 
participation in the inquiry by interested parties. If relevant 
information is not available on the record or any party 
withholds information that has been requested by the Secretary, 
the Secretary can make the determination on the basis of the 
facts available. When the Secretary relies on information 
submitted in the inquiry as facts available, the Secretary 
must, to the extent practicable, corroborate the information 
from independent sources that are reasonably available.
    Section 112(b)(3)(C) defines the term ``interested party'' 
for the purposes of the subparagraph as: (1) any producer of a 
like or directly competitive article; (2) a certified union or 
recognized union or group or workers which is representative of 
an industry engaged in the manufacture, production or sale in 
the United States of a like or directly competitive article; 
(3) a trade or business association representing producers or 
sellers of like or directly competitive articles; (4) producers 
engaged in the production of essential inputs for like or 
directly competitive articles; (5) a certified union or group 
of workers which is representative of an industry engaged in 
the manufacture, production or sale of essential inputs for 
like or directly competitive articles; (5) a certified union or 
group of workers which is representative of an industry engaged 
in the manufacture, production or sale of essential inputs for 
like or directly competitive articles; or (6) a trade or 
business association representing companies engaged in the 
manufacture, production or sale of such essential inputs.
    Section 112(b)(5)(B) of AGOA authorizes the President, at 
the request of any interested party and subject to certain 
requirements, to proclaim duty-free and quota-free treatment 
for apparel articles both cut (or knit-to-shape) and sewn or 
otherwise assembled in one or more beneficiary sub-Saharan 
African countries, from fabric or yarn not formed in the United 
States or a beneficiary sub-Saharan African country (in 
addition to those fabrics and yarns already listed in Annex 401 
of the NAFTA) if:
          (1) the President determines that such yarns or 
        fabrics cannot be supplied by the domestic industry in 
        commercial quantities in a timely manner;\47\
---------------------------------------------------------------------------
    \47\ Executive Order 13191 of January 17, 2001 (66 Fed. Reg. 7271, 
January 22, 2001) delegated authority to CITA to determine whether 
yarns or fabrics cannot be supplied by the domestic industry in 
commercial quantities in a timely manner for the purposes of section 
112(b)(5)(B)(i) of AGOA.
---------------------------------------------------------------------------
    The President has obtained advice regarding the proposed 
action from the appropriate advisory committee established 
under section 135 of the Trade Act of 1974 \48\ and the ITC;
---------------------------------------------------------------------------
    \48\ 19 U.S.C. 2155.
---------------------------------------------------------------------------
          (3) within 60 calendar days after the request, the 
        President has submitted a report to the Committee on 
        Ways and Means in the House of Representatives and the 
        Committee on Finance in the Senate that sets forth:
            (A) the action proposed to be proclaimed and the 
        reasons for such action; and
            (B) the advice obtained from the advisory committee 
        and the ITC;
          (4) a period of 60 calendar days, beginning with the 
        first day on which the President has met the reporting 
        requirements has expires; and
          (5) the President has consulted with such committees 
        regarding the proposed action during the 60 day period.
    Section 112(c) of AGOA provides for the elimination of 
quotas on textile and apparel exports to the United States from 
Kenya and Mauritius within 30 days after the countries adopt 
efficient visa systems to guard against unlawful transshipment 
of textile and apparel goods and the use of counterfeit 
documents related to the importation of such articles into the 
United States.\49\ The U.S. Customs Service is required to 
provide technical assistance to Kenya and Mauritius in the 
development and implementation of the visa systems.
---------------------------------------------------------------------------
    \49\ Presidential Proclamation 7350 of October 2, 2000 (65 Fed. 
Reg. 59321, October 4, 2000) delegated authority to perform the 
functions specified in section 112(c) of AGOA to USTR.
---------------------------------------------------------------------------
    With regard to findings and trimmings, section 112(d)(1)(A) 
and AGOA provides that an article eligible for preferential 
treatment shall not be ineligible for such treatment because it 
contains findings or trimmings of foreign origin, if the value 
of such findings and trimmings does not exceed 25 percent of 
the costs of the components of the assemble article. Examples 
of findings and trimmings are sewing thread, hooks and eyes, 
snaps, buttons, ``bow buds,'' decorative lace trim, elastic 
strips, and zippers, including zipper tapes and labels. Elastic 
strips are considered findings or trimmings only if they are 
each less then one inch in width and used in the production of 
brassieres. For apparel articles free of duty and quantitative 
restrictions under AGOA by virtue of being cut and assembled in 
one or more beneficiary sub-Saharan African countries from 
fabrics wholly formed in the United States from yarn formed in 
the United States and assembled with U.S. thread, sewing thread 
is not included in the findings and trimmings exception.
    On certain interlinings of foreign origin, section 
112(d)(1)(B) provides that an apparel article otherwise 
eligible for preferential treatment shall not be ineligible 
because it contains such interlinings, if their value (and any 
findings and trimmings) does not exceed 25 percent of the cost 
of the components of the assembled article. Interlinings 
eligible for such treatment are defined are defined as a chest 
type plate, a ``hymo'' piece, or ``sleeve header,'' of woven or 
weft-inserted warp knit construction and of coarse animal hair 
or man-made filaments. This treatment must be terminated if the 
President makes a determination that U.S. manufacturers are 
producing such interlinings in the United States in commercial 
quantities.\50\
---------------------------------------------------------------------------
    \50\ Executive Order 13191 of January 17, 2001 (66 Fed. Reg. 7271, 
January 22, 2001) delegated authority to the CITA to determine whether 
U.S. manufacturers are producing interlinings in the United States in 
commercial quantities for the purposes of section 112(d)(1)(B)(iii) of 
AGOA. The Executive Order further directs CITA to establish procedures 
to ensure appropriate public participation in such determination and 
requires that CITA's determinations under the provision be published in 
the Federal Register.
---------------------------------------------------------------------------
    A de minims rule is also established in section 112(d)(2) 
to provide that an article otherwise eligible for preferential 
treatment shall not be ineligible for such treatment because 
the article contains fibers or yarns not wholly formed in the 
United States or one or more beneficiary sub-Saharan African 
countries if the total weight of all such fibers and yarns is 
not more than seven percent of the total weight of the article.

Protections against transshipment

    Section 113(a) of AGOA provides that the preferential 
treatment provided to textile and apparel articles in section 
112(a) shall not be extended to imports from a beneficiary sub-
Saharan African country unless that country:\51\
---------------------------------------------------------------------------
    \51\ Presidential Proclamation 7350 of October 2, 2000 (65 Fed. 
Reg. 59321, October 4, 2000) delegated authority to make the findings 
identified in section 113(a) of AGOA to USTR.
---------------------------------------------------------------------------
          (1) has adopted an efficient visa system, domestic 
        laws, and enforcement procedures applicable to covered 
        articles to prevent unlawful transshipment and the use 
        of counterfeit documents related to the entry of the 
        articles into the United States;\52\
---------------------------------------------------------------------------
    \52\ Executive Order 13191 of January 17, 2001 (66 Fed. Reg. 7271, 
January 22, 2001) delegated authority to USTR to direct the 
Commissioner of the U.S. Customs Service to take such actions as may be 
necessary to ensure that textile and apparel articles described in 
section 112(b) of AGOA that are entered, or withdrawn from warehouse, 
for consumption are accompanied by an appropriate export visa if the 
preferential treatment described in section 112(a) of AGOA is claimed 
with respect to such articles.
---------------------------------------------------------------------------
          (2) has enacted legislation or promulgated 
        regulations to permit U.S. Customs Service verification 
        teams to have the access necessary to investigate 
        thoroughly allegations of transshipment;
          (3) agrees to report, on a timely basis, export and 
        import information requested by the U.S. Customs 
        Service;
          (4) will cooperate fully with the U.S. Customs 
        Service to prevent circumvention and transshipment as 
        provided in Article 5 of the WTO Agreement on Textiles 
        and Clothing;\53\
---------------------------------------------------------------------------
    \53\ Article 5 of the WTO Agreement on Textiles and Clothing 
provides that cooperation to prevent circumvention transshipment 
includes: investigation of circumvention practices; exchange of 
documents, correspondence, reports, and other relevant information to 
the extent available; and facilitation of plant vists and contacts.
---------------------------------------------------------------------------
          (5) agrees to require all producers and exporters of 
        covered articles in that country to maintain complete 
        records of the production and the export of covered 
        articles, including materials used in the production, 
        for at least two years after the production or export; 
        and
          (6) agrees to report on a timely basis, at the 
        request of the U.S. Customs Service, documentation 
        establishing the country of origin of covered articles 
        as used by that country in implementing an effective 
        visa system.
    Section 113(A) defines country of origin documentation to 
include documentation such as production records, information 
relating to the place of production, the number and 
identification of the types of machinery used to production, 
the number of workers employed in production, and certification 
from both the manufacturer and the exporter.
    Section 113(b)(1) requires importers to comply with U.S. 
Customs Service requirements similar in all material respects 
to the requirements regarding Certificates of Origin contained 
in Article 502.1 of the NAFTA for a similar importation from a 
NAFTA partner.\54\ Furthermore, in order to qualify for 
preferential treatment and for a Certificate of Origin to be 
valid with respect to any article for which preferential 
treatment is claimed, the President is required to determine 
that each country has implemented and follows, or is making 
substantial progress toward implementing and following, 
procedures similar in all material respects to the relevant 
procedures and requirements under chapter 5 of the NAFTA on 
Customs Procedures.\55\ Section 113(b)(2) states that the 
Certificate of Origin is not required if such Certificate of 
Origin would not be required under Article 503 of the NAFTA (as 
implemented into U.S. Law) if the article were imported from 
Mexico.\56\ Under section 113(b)(3), if the President 
determines, based on sufficient evidence, that an exporter has 
engaged in transshipment, then the President is required to 
deny for a period of five years all benefits under section 112 
of AGOA to such exporter, any successor, and any other entity 
owned or operated by the principal of the exporter.\57\
---------------------------------------------------------------------------
    \54\ Article 502.1 of the NAFTA requires an importer that claims 
preferential tariff treatment for a good imported into its territory 
from the territory of another Party to: (1) make a written declaration, 
based on a valid Certificate of Origin, that the good qualifies as an 
Originating good; (2) have the Certificate in its possession at the 
time the declaration is made; (3) provide, on the request of that 
Party's customs administration, a copy of the Certificate; and (4) 
promptly make a corrected declaration and pay any duties owed where the 
importer has reason to believe that a Certificate on which a 
declaration was based contains information that is not correct.
    \55\ Presidential Proclamation 7350 of October 2, 2000 (65 Fed. 
Reg. 59321) delegated authority to perform the functions specified in 
section 113(b)(1)(B) of AGOA to USTR.
    \56\ Article 503 of the NAFTA provides an exemption from the 
Certificate of Origin requirements for: (1) a commercial importation of 
a good whose value does not exceed $1,000, or such higher amount that a 
Party may establish, except that it may require that the invoice 
accompanying the importation include a statement certifying that the 
good qualifies as an originating good; (2) a non-commercial importation 
of a good whose value does not exceed $1,000, or such higher amount 
that a Party may establish; or (3) an importation of a good for which 
the NAFTA partner into whose territory the good is imported has waived 
the requirement for a Certificate of Origin. These exceptions are 
permitted provided that the importation does not form part of a series 
of importations that may reasonably be considered to have been 
undertaken or arranged for the purpose of avoiding the Certificate of 
Origin requirements.
    \57\ Executive Order 13191 of January 17, 2001 (66 Fed. Reg. 7271, 
January 22, 2001) delegated authority to CITA to determine, after 
consultation with the Commissioner of the U.S. Customs Service, based 
on sufficient evidence, whether an exporter has engaged in 
transshipment and to deny for a period of five years all benefits under 
section 112 of AGOA to any such exporter, any successor of such 
exporter, and any other entity owned or operated by the principal of 
such exporter. The Executive Order further requires CITA to publish its 
determinations under this section in the Federal Register.
---------------------------------------------------------------------------
    Transshipment is defined to have occurred in section 
113(b)(4) when preferential treatment for a textile or apparel 
article has been claimed under AGOA on the basis of material 
false information concerning the country of origin, 
manufacture, processing, or assembly of the article or any of 
its components. False information is material if disclosure of 
the true information would mean or would have meant that the 
article is or was ineligible for preferential treatment.
    Section 113(b)(5) requires the U.S. Customs service to 
monitor and the Commissioner of Customs to report to Congress 
on an annual basis beginning no later than March 31, 2001 on 
the effectiveness of the visa systems, the implementation of 
legislation and regulations described by sub-Saharan African 
countries, and the measures taken to deter circumvention as 
described in Article 5 of the WTO Agreement on Textiles and 
Clothing.
    Section 113(c) requires the U.S. Customs Service to provide 
technical assistance to beneficiary sub-Saharan African 
countries in the development and implementation of effective 
visa systems and domestic laws. In addition, the U.S. Customs 
Service is required to provide assistance in training sub-
Saharan African officials in anti-transshipment enforcement and 
to the extent feasible, in developing and adopting electronic 
visa systems. The U.S. Customs Service is also required in 
section 113(c) to send production verification teams to at 
least four beneficiary sub-Saharan African countries each year. 
Section 113(d) authorizes additional resources to the U.S. 
Customs Service to provide technical assistance to sub-Saharan 
African countries and to increase transshipment enforcement.

United States-Sub-Saharan Africa Trade and Economic Cooperation Forum

    In order to foster close economic ties between the United 
States and sub-Saharan Africa, section 105 of AGOA requires the 
President to convene annual high-level meetings between 
appropriate officials of the United States Government and 
officials of the governments of sub-Saharan African countries. 
Not later than 12 months after the date of enactment,\58\ the 
President, after consulting with Congress and the governments 
concerned, is required to establish a United States-Sub-Saharan 
Africa Trade and Economic Cooperation Forum.
---------------------------------------------------------------------------
    \58\ Public Law 106-200, approved May 18, 2000.
---------------------------------------------------------------------------
    In creating the Forum, section 105(c)(1) requires the 
President to direct the Secretary of Commerce, the Secretary of 
the Treasury, the Secretary of State, and the USTR to host the 
first annual meeting with their counterparts from the 
governments of sub-Saharan African countries meeting the 
eligibility criteria in section 104. The purpose of the meeting 
is to discuss expanding trade and investment relations between 
the United States and sub-Saharan Africa and the implementation 
of AGOA, including encouraging joint ventures between small and 
large businesses. The President is also required to direct the 
Secretaries and the USTR to invite to the meeting 
representatives from appropriate sub-Saharan African regional 
organizations and government officials from the other 
appropriate countries in sub-Saharan Africa.
    Section 105(c)(2) requires the President, in consultation 
with Congress, to encourage U.S. nongovernmental organization 
(NGOs) to host annual meetings with NGOs from sub-Saharan 
Africa in conjunction with the annual Forum meetings. Section 
105(c)(3) requires the President, in consultation with 
Congress, to encourage similar meetings between representatives 
of the U.S. and sub-Saharan African private sector.
    Under section 105(c)(3), the President is required to meet, 
to the extent practicable, with the heads of governments of 
sub-Saharan African countries eligible under section 104, and 
those sub-Saharan African countries that the President 
determines are taking substantial positive steps toward meeting 
those eligibility requirements, not less than once every two 
years for the purpose of discussing expanding trade and 
investment relations between the United States and sub-Saharan 
African and the implementation of AGOA, including encouraging 
joint ventures between small and large businesses.

Free trade agreements with sub-Saharan African countries

    Congress declares in Section 116 of AGOA that free trade 
agreements should be negotiated, where feasible, with 
interested countries in sub-Saharan Africa, in order to serve 
as the catalyst for increasing trade between the United States 
and sub-Saharan Africa and increasing private sector investment 
in sub-Saharan Africa.
    Section 116(b)(1) requires the President, taking into 
account the provisions of the treaty establishing the African 
Economic Community and the willingness of the governments of 
sub-Saharan African countries to engaged in negotiations to 
enter into free trade agreements, to prepare and transmit to 
Congress not later than 12 months after the date of enactment 
\59\ a plan for the purpose of negotiating and entering into 
one or more trade agreements with interested beneficiary sub-
Saharan African countries.
---------------------------------------------------------------------------
    \59\ Public Law 106-200, approved May 18, 2000.
---------------------------------------------------------------------------

                           Customs Valuation


Historical background

    In order to assess applicable duty rates under the 
Harmonized Tariff Schedule of the United States (HTS) and to 
collect appropriate import statistics, the dutiable value of 
all imported merchandise must be determined. The process by 
which Customs determines the dutiable value of imported 
merchandise is referred to as ``appraisement'' or 
``valuation.''
    Merchandise exported to the United States on or after July 
1, 1980, is subject to appraisement under a uniform system of 
valuation established by title II of the Trade Agreements Act 
of 1979. Title II, which implements the Customs Valuation 
Agreement (entitled the Agreement on Implementation of Article 
VII of the General Agreement on Tariffs and Trade) negotiated 
as one of the Tokyo Round of multilateral trade negotiations 
(MTN) agreements, was put into effect by Presidential 
Proclamation 4768 of June 28, 1980.\60\
---------------------------------------------------------------------------
    \60\ 45 Fed. Reg. 45135 (1980).
---------------------------------------------------------------------------
    Title II revised section 402 of the Tariff Act of 1930 \61\ 
and repealed the American Selling Price (ASP) method of 
valuation. However, under section 204(c) of the Trade 
Agreements Act of 1979, the ASP method of valuation continues 
to apply to certain rubber footwear exported to the United 
States before July 1, 1981. Title II also repealed the 
alternative valuation system under section 402a of the Tariff 
Act of 1930.\62\
---------------------------------------------------------------------------
    \61\ 19 U.S.C. 1401a.
    \62\ 19 U.S.C. 1402.
---------------------------------------------------------------------------
    Prior to the Trade Agreements Act of 1979, separate 
valuation standards--commonly referred to as the ``old law'' 
and the ``new law''--existed side by side. Section 402a of the 
Tariff Act of 1930 was called the ``old law'' because it was 
enacted as part of the Tariff Act of 1930. It provided for the 
following order of progression in appraising merchandise: (1) 
foreign value or export value, whichever is higher; (2) U.S. 
value; (3) cost of production. It also provided for the 
application of the ASP basis of appraisement for designated 
articles such as benzenoid chemicals and certain footwear. The 
ASP method was based on the value of a domestic product rather 
than an imported product in order to protect the U.S. industry 
from foreign competition.
    During the early 1950's the Department of the Treasury 
proposed eliminating the foreign value basis of appraisement, 
which as its name implies is based on the value of merchandise 
sold in foreign markets. The Department of the Treasury argued 
that data for determining export value were more readily 
available and the elimination of foreign value would streamline 
the appraisement process by obviating the need to make 
simultaneous appraisements under export value and foreign 
value.
    In response to these proposals, the Customs Simplification 
Act of 1956 created a new group of valuation standards. These 
standards were contained in section 402 of the Tariff Act of 
1930 \63\ and referred to as the ``new law.'' The ``new law'' 
eliminated the foreign value standard and made export value the 
primary basis for appraisement. With certain modifications, 
both U.S. value and cost of production (renamed the constructed 
value) were retained as the first and second alternative 
standards. The meaning of each standard was modified, however, 
by changes in the statutory language and by the inclusion in 
the law of definitions for certain of the terms.
---------------------------------------------------------------------------
    \63\ 19 U.S.C. 1401a.
---------------------------------------------------------------------------
    However, Congress was unwilling to make these changes 
applicable to all imported articles. Because the new provisions 
were expected to have a duty-reducing effect for many articles, 
the Secretary of the Treasury was instructed to prepare a list 
of commodities which, if appraised under the new valuation 
standards, would have been appraised at 95 percent or less of 
the value at which they were actually appraised in the 12 
months ending June 30, 1954 (i.e., dutiable value reduced by 5 
percent or more). The articles so identified were published in 
Treasury Decision 54521 (January 20, 1958), which is referred 
to as ``the Final List'' and such articles continued to be 
appraised under the ``old law'' standards of section 402a of 
the Tariff Act. Thus, after the enactment of the Customs 
Simplification Act of 1956,\64\ there were nine separate bases 
of appraisement (five under the old law and four under the new) 
applicable to imported products.
---------------------------------------------------------------------------
    \64\ Act of August 2, 1956, ch. 887.
---------------------------------------------------------------------------
    It was largely this complexity of U.S. valuation laws as 
well as foreign objections to the American Selling Price basis 
of appraisement which prompted our trading partners to enter 
into negotiations at the Tokyo Round of MTN on the development 
of a new system of customs valuation.

                The GATT/WTO Customs Valuation Agreement

    The Customs Valuation Agreement was signed by most major 
U.S. trading partners at the conclusion of the Tokyo Round. The 
WTO Agreement on Customs Valuation, which is essentially the 
same document, is included in the Uruguay Round Agreements 
applicable to all WTO members. Internationally-agreed rules 
governing customs valuation will apply to the overwhelming 
majority of trading countries. Newly joining developing 
countries may delay implementation for up to 5 years.
    The Agreement consists of four major parts in addition to a 
preamble and three annexes. Part I sets out the substantive 
rule of customs valuation, the substance of which was codified 
in U.S. law by the Trade Agreements Act of 1979 as an amendment 
to section 402 of the Tariff Act of 1930. Part II provides for 
the international administration of the Agreement and for 
dispute resolution among signatories. Part III provides for 
special and differential treatment for developing countries, 
and part IV contains so-called final provisions dealing with 
matters such as acceptance and accession of the Agreement, 
reservations, and servicing of the Agreement.
    Administration and dispute resolution.--As mentioned above, 
the Agreement establishes two committees--a ``Committee on 
Customs Valuation'' (referred to as ``the Committee'') and a 
``Technical Committee on Customs Valuation'' (referred to as 
the ``Technical Committee'')--to administer the Agreement and 
creates a mechanism for resolving disputes between parties to 
the Agreement. The rules under the WTO Dispute Settlement 
Understanding apply to disputes over the interpretation or 
application of the Agreement.
    The Committee, which is composed of representatives from 
each of the parties, meets annually in Geneva ``to consult on 
matters relating to the administration of the customs valuation 
system by any party to Agreement as it might affect the 
operation of this Agreement or the furtherance of its 
objectives, and to carry out such other responsibilities as may 
be assigned to it by the parties.'' The WTO secretariat acts as 
the secretariat to the Committee, and the Office of the U.S. 
Trade Representative is the U.S. representative to this 
Committee.
    The Technical Committee was created under the auspices of 
the Customs Cooperation Council (CCC) to carry out the 
responsibilities assigned to it by the parties and set forth in 
annex II to the Agreement with a view towards achieving 
uniformity in interpretation and application of the Agreement 
at the technical level. Among the responsibilities assigned to 
the Technical Committee are--
          (1) to examine specific technical problems arising in 
        the administration of the customs valuation systems and 
        to give advisory opinions offering solutions to such 
        problems;
          (2) to study, as requested, and prepare reports on 
        valuation laws, procedures and practices as they relate 
        to the Agreement; and
          (3) to furnish such information and advice on customs 
        valuation matters as may be requested by parties to the 
        Agreement.
    The Technical Committee meets periodically in Brussels, and 
the U.S. Customs Service serves as the U.S. representative to 
this technical committee.
    Dispute resolution.--Several steps are provided for a party 
to follow if it considers that any benefit accruing to it under 
the Agreement is being nullified or impaired, or if any 
objectives of the Agreement are being impeded by the actions of 
another party.
    First, the aggrieved party should request consultations 
with the party in question with a view to reaching a mutually 
satisfactory solution. If no mutually satisfactory solution is 
reached between the parties within a reasonably short period of 
time, the Committee shall meet at the request of either party 
(within 30 days of receiving such request) and attempt to 
facilitate a mutually satisfactory solution. If the dispute is 
of a technical nature, the Technical Committee will be asked to 
examine the matter and report to the Committee within 3 months.
    In the absence of a mutually agreeable solution from the 
Committee up to this point, the Committee shall, upon the 
request of either party, establish a panel (within 3 months 
from the date of the parties' request for the Committee to 
investigate where the matter is not referred to the Technical 
Committee, otherwise within 1 month from the date of the 
Technical Committee's report) to examine the matter and make 
such finding as will assist the Committee in making 
recommendations or giving a ruling on the matter.
    After the investigation is complete, the Committee shall 
take appropriate action (in the form of recommendations or 
rulings). If the Committee considers the circumstances to be 
serious enough, it may authorize one or more parties to suspend 
the application to any other party of obligations under the 
valuation agreement.
    Special and different treatment.--Part III of the Agreement 
allows developing countries which are party to the Agreement--
          (1) to delay application of its provisions for a 
        period of 5 years from the date the Agreement enters 
        into force;
          (2) to delay application of articles 1, 2(b)(iii) and 
        6 (both of which provide for a determination of the 
        computed value of imported goods) for a period of 3 
        years; and
          (3) to receive technical assistance (such as training 
        of personnel, assistance in preparing implementation 
        measures and advice on the application of the 
        Agreement's provisions) upon request, from developed 
        countries party to the Agreement.

                            Current Law \65\

    Section 402 of the Tariff Act of 1930 \66\ as amended by 
the Trade Agreements Act of 1979 establishes ``Transaction 
Value'' as the primary basis for determining the value of 
imported merchandise. Generally, transaction value is the price 
actually paid or payable for the goods, with additions for 
certain items not included in that price.
---------------------------------------------------------------------------
    \65\ Most of the description of current law was taken from 
``Customs Valuation Under the Trade Agreements Act of 1979,'' 
Department of the Treasury, U.S. Customs Service, Office of Commercial 
Operations, October 1981.
    \66\ 19 U.S.C. 1401a.
---------------------------------------------------------------------------
    If the first valuation basis cannot be used, the secondary 
bases are considered. These secondary bases, in the order of 
precedence for use, are: transaction value of identical or 
similar merchandise; deductive value; computed value. The order 
of precedence of the last two bases can be reversed if the 
importer so requests. Each of these bases is discussed in 
detail below:
    Transaction value of imported merchandise.--Several 
concepts relating to the transaction value of imported 
merchandise are also applicable to the transaction value of 
identical or similar merchandise, as discussed in the next 
section. These concepts, concerning the nature of transaction 
value itself, are discussed in terms of the transaction value 
of imported merchandise.

                              DEFINITIONS

    The transaction value of imported merchandise (i.e., the 
merchandise undergoing appraisement) is defined as the price 
actually paid or payable for the merchandise when sold for 
exportation to the United States, plus amounts equal to:
          (1) the packing costs incurred by the buyer;
          (2) any selling commission incurred by the buyers;
          (3) the value of any assist; \67\
---------------------------------------------------------------------------
    \67\ An ``assist'' is any of the following items that the buyer of 
imported merchandise provides directly or indirectly, and free of 
charge or at reduced cost, for use in the production of or the sale for 
export to the United States of the imported merchandise:
---------------------------------------------------------------------------

          Materials, components, parts, and similar items incorporated 
        in the imported merchandise;
          Tools, dies, molds, and similar items used in producing the 
        imported merchandise;
          Merchandise consumed in producing the imported merchandise;
          Engineering, development, artwork, design work, and plans and 
        sketches that are undertaken outside the United States.
---------------------------------------------------------------------------
    The last item listed above (``Engineering, development . . .'') 
will not be treated as an assist if the service or work is (1) 
performed by a person domiciled within the United States, (2) performed 
while that person is acting as an employee or agent of the buyer of the 
imported merchandise, and (3) incident to other engineering, 
development, artwork, design work, or plans or sketches undertaken 
within the United States.
---------------------------------------------------------------------------
          (4) any royalty or license fee that the buyer is 
        required to pay as a condition of the sale; and
          (5) the proceeds, accruing to the seller, of any 
        subsequent resale, disposal, or use of the imported 
        merchandise.
    These amounts (1 through 5) are added only to the extent 
that each is not included in the price, and is based on 
information establishing the accuracy of the amount. If 
sufficient information is not available, then the transaction 
value cannot be determined; and the next basis of value, in 
order of precedence, must be considered for appraisement.
    The price actually paid (or payable) for the imported 
merchandise is the total payment, excluding international 
freight, insurance, and other C.I.F. charges, that the buyer 
makes to the seller.
    Amounts to be disregarded in determining transaction value 
are:
          (1) The cost, charges, or expenses incurred for 
        transportation, insurance, and related services 
        incident to the international shipment of the goods 
        from the country of exportation to the place of 
        importation in the United States.
          (2) Any decrease in the price actually paid or 
        payable that is made or effected between the buyer and 
        seller after the date of importation of the goods into 
        the United States.
    As well as, if identified separately:
          (3) Any reasonable cost or charge incurred for 
        constructing, erecting, assembling, maintaining, or 
        providing technical assistance with respect to the 
        goods importation into the United States; or 
        transporting the goods after importation.
          (4) The customs duties and other federal taxes, 
        including any federal excise tax for which sellers in 
        the United States are ordinarily liable.

         LIMITATIONS ON THE APPLICABILITY OF TRANSACTION VALUE

    The transaction value of imported merchandise is the 
appraised value of that merchandise, provided certain 
limitations do not exist. If any of these limitations are 
present, then transaction value cannot be used as the appraised 
value, and the next basis of value will be considered. The 
limitations can be divided into four groups:
    (1) Restrictions on the disposition or use of 
merchandise.--The first category of limitations which preclude 
the use of transaction value is the imposition of restrictions 
by a seller on a buyer's disposition or use of the imported 
merchandise. Exceptions are made to this rule. Thus, certain 
restrictions are acceptable, and their presence will still 
allow the use of transaction value. The acceptable restrictions 
are: (a) those imposed or required by law, (b) those limiting 
the geographical area in which the goods may be resold, and (c) 
those not substantially affecting the value of the goods. An 
example of the last restriction occurs when a seller stipulates 
that a buyer of new-model cars cannot sell or exhibit the cars 
until the start of the new sales year.
    (2) Conditions for which a value cannot be determined.--If 
the sale of, or the price actually paid or payable for, the 
imported merchandise is subject to any condition or 
consideration for which a value cannot be determined, then 
transaction value cannot be used. Some examples of this group 
include when the price of the imported merchandise depends on 
(a) the buyer's also buying from the seller other merchandise 
in specified quantities, (b) the price at which the buyer sells 
other goods to the seller, or (c) a form of payment extraneous 
to the imported merchandise, such as, the seller's receiving a 
specified quantity of the finished product that results after 
the buyer further processes the imported goods.
    (3) Proceeds accruing to the seller.--If part of the 
proceeds of any subsequent resale, disposal, or use of the 
imported merchandise by the buyer accrues directly or 
indirectly to the seller, then transaction value cannot be 
used. There is an exception. If an appropriate adjustment can 
be made for the partial proceeds the seller receives, then 
transaction value can still be considered. Whether an 
adjustment is made depends on whether the price actually paid 
or payable includes such proceeds and, if it does not, the 
availability of sufficient information to determine the amount 
of such proceeds.
    (4) Related-party transactions where the transaction value 
is unacceptable.--Finally, the relationship between the buyer 
and seller may preclude the application of transaction value. 
The fact that the buyer and seller are related \68\ does not 
automatically negate using their transaction value; however, 
the transaction value must be acceptable under prescribed 
procedures. To be acceptable for transaction value, 
relationship between the buyer and seller must not have 
influenced the price actually paid or payable. Alternatively, 
the transaction value may be acceptable if the imported 
merchandise closely approximates any one of the following test 
values, provided these values relate to merchandise exported to 
the United States at or about the same time as the imported 
merchandise:
---------------------------------------------------------------------------
    \68\ For appraisement purposes, any of the following persons are 
considered related--
---------------------------------------------------------------------------

          Members of the same family, including brothers and sisters 
        (whether by whole or half blood), spouse, ancestors, and lineal 
        descendants;
          Any officer or director of an organization and such 
        organization;
          An officer or director of an organization and an officer or 
        director of another organization, if each such individual is 
        also an officer or director in the other organization;
          Partners;
          Employer and employee;
          Any person directly or indirectly owning, controlling, or 
        holding with power to vote, 5 percent or more of the 
        outstanding voting stock or shares of any organization and such 
        organization;
          Two or more persons directly or indirectly controlling, 
        controlled by, or under common control with, any person.
          (A) The transaction value of identical merchandise, 
        or of similar merchandise, in sales to unrelated buyers 
        in the United States,
          (B) The deductive value or computed value for 
        identical merchandise or similar merchandise, or
          (C) The transaction value of imported merchandise in 
        sales to unrelated buyers of merchandise, for 
        exportation to the United States, that is identical to 
        the imported merchandise under apprisement, except for 
        having been produced in a different country. No two 
        sales to unrelated buyers can be used for comparison 
        unless the sellers are unrelated.
    The test values are used for comparison only. They do not 
form a substitute basis of valuation.
    In determining whether the transaction value is close to 
one of the foregoing test values (A, B, or C), an adjustment is 
made if the sales involved differ in commercial levels, 
quantity levels; the costs, commissions, values, fees, and 
proceeds described in (1) through (5) of the ``definition'' of 
value; and the costs incurred by the seller in sales in which 
he and the buyer are not related that are not incurred by the 
seller in sales in which he and the buyer are related.
    As stated, the test values are alternatives to the 
relationship criterion. If one of the test values is met, it is 
not necessary to examine the question of whether the 
relationship influenced the price.
    Transaction value of identical merchandise or similar 
merchandise.--If the transaction value of imported merchandise 
cannot be determined, then the customs value of the imported 
goods being appraised is the transaction value of identical 
merchandise. If merchandise identical to the imported goods 
cannot be found or an acceptable transaction value for such 
merchandise does not exist, then the customs value is the 
transaction value of similar merchandise.
    The same additions, exclusions, and limitations, previously 
discussed in determining the transaction value of imported 
merchandise, also apply in determining the transaction value of 
identical or similar merchandise.
    Besides the data common to all three transaction values, 
certain factors specifically apply to the transaction value of 
identical merchandise or similar merchandise. These factors 
concern the exportation date, the level and quantity of sales, 
the meaning, and the order of precedence of identical 
merchandise and of similar merchandise.
    (a) Exportation date.--The identical merchandise, or 
similar merchandise, for which a transaction value is being 
determined must have been sold for export to the United States 
and exported at or about the same time as the merchandise being 
appraised.
    (b) Sales level/quantity.--The transaction value of 
identical merchandise (or similar merchandise) must be based on 
sales of identical merchandise (or similar merchandise) at the 
same commercial level and, in substantially the same quantity, 
as the sales of the merchandise being appraised. If no such 
sale exists, then sales at either a different commercial level 
or in different quantities, or both, can be used, but must be 
adjusted to take account of any such difference. Any adjustment 
must be based on sufficient information, that is, information 
establishing the reasonableness and accuracy of the adjustment.
    (c) Definition.--(1) The term ``identical merchandise'' 
means merchandise that is: identical in all respects to the 
merchandise being appraised; produced in the same country as 
the merchandise being appraised; and produced by the same 
person as the merchandise being appraised.
    If merchandise meeting all three criteria cannot be found, 
then identical merchandise is merchandise satisfying the first 
two criteria but produced by a different person than the 
merchandise being appraised. Merchandise can be identical to 
the merchandise being appraised and still show minor 
differences in appearance. However, identical merchandise does 
not include merchandise that incorporates or reflects 
engineering, development, artwork, design work, and plans and 
sketches provided free or at reduced cost by the buyer and 
undertaken in the United States.
    (2) The term ``similar merchandise'' means merchandise that 
is produced in the same country and by the same person as the 
merchandise being appraised; like the merchandise being 
appraised in characteristics and component materials; and 
commercially interchangeable with the merchandise being 
appraised.
    If merchandise meeting the foregoing criteria cannot be 
found, then similar merchandise is merchandise having the same 
country of production, like characteristics and component 
materials, and commercial interchangeability but produced by a 
different person.
    In determining whether goods are similar, some of the 
factors to be considered are the quality of the goods, their 
reputation, and the existence of a trademark. It is noted, 
however, that similar merchandise does not include merchandise 
that incorporates or reflects engineering, development, 
artwork, design work, and plans and sketches provided free or 
at reduced cost by the buyer and undertaken in the United 
States.
    (d) Order of precedence.--Sometimes more than one 
transaction value will be present, that is, for identical 
merchandise produced by the same person, for identical 
merchandise produced by another person, for similar merchandise 
produced by the same person, and for similar merchandise 
produced by another person. If this occurs, one value must take 
precedence.
    As stated previously, accepted sales at the same level and 
quantity take precedence over sales at different levels and/or 
quantities. The order of precedence can be summarized as:
          (1) Identical merchandise produced by the same 
        person;
          (2) Identical merchandise produced by another person;
          (3) Similar merchandise produced by the same person; 
        and
          (4) Similar merchandise produced by another person.
    It is possible that two or more transaction values for 
identical merchandise (or similar merchandise) will be 
determined. In such a case, the lowest value will be used as 
the appraised value of the imported merchandise.
    Deductive value.--If the transaction value of imported 
merchandise, of identical merchandise, or of similar 
merchandise cannot be determined, then deductive value is 
calculated for the merchandise being appraised. Deductive value 
is the next basis of appraisement to be used, unless the 
importer designated, at entry summary, computed value as the 
preferred method of appraisement. If computed value was chosen 
and subsequently determined not to exist for customs valuation 
purposes, then the basis of appraisement reverts back to 
deductive value.
    If an assist is involved in a sale, that sale cannot be 
used in determining deductive value. So any sale to a person 
who supplies an assist for use in connection with the 
production or sale for export of the merchandise concerned is 
disregarded for deductive value.
    Basically deductive value is the resale price in the United 
States after importation of the goods, with deductions for 
certain items. Generally, the deductive value is calculated by 
starting with a unit price and making certain additions to and 
deductions from that price.
    One of three prices constitutes the unit price in deductive 
value. The price used depends on when and in what condition the 
merchandise concerned is sold in the United States. If the 
merchandise is sold in the condition as imported at or about 
the date of importation of the merchandise being appraised, the 
price used is the unit price at which the greatest aggregate 
quantity of the merchandise concerned is sold at or about such 
date.
    If the merchandise concerned is sold in the condition as 
imported but not sold at or about the date of importation of 
the merchandise being appraised, the price used is the unit 
price at which the greatest aggregate quantity of the 
merchandise concerned is sold after the date of importation of 
the merchandise being appraised but before the close of the 
90th day after the date of such importation.
    Finally, if the merchandise concerned is not sold in the 
condition as imported and not sold before the close of the 90th 
day after the date of importation of the merchandise being 
appraised. The price used is the unit price at which the 
greatest aggregate quantity of the merchandise being appraised, 
after further processing, is sold before the 180th day after 
the date of such importation.
    After determining the appropriate price, packing costs for 
the merchandise concerned must be added to the price used for 
deductive value, provided such costs have not otherwise been 
included. These costs are added, regardless of whether the 
importer or the buyer incurs the cost. Packing costs include 
the cost of all containers and coverings of whatever nature; 
and of packing, whether for labor or materials, used in placing 
the merchandise in condition, packed ready for shipment to the 
United States.
    Certain other items are not a part of deductive value and 
must be deducted from the unit price. The items are:
          (1) Commissions or profit and general expenses.--Any 
        commission usually paid or agreed to be paid, or the 
        addition usually made for profit and general expenses, 
        applicable to sales in the United States of imported 
        merchandise that is of the same class or kind as the 
        merchandise concerned; and regardless of the country of 
        exportation.
          (2) Transportation/insurance costs.--The usual and 
        associated costs of transporting and insuring the 
        merchandise concerned from the country of exportation 
        to the place of importation in the United States; and 
        from the place of importation to the place of delivery 
        in the United States, provided these costs are not 
        included as a general expense under the preceding 
        paragraph.
          (3) Customs duties/federal taxes.--The customs duties 
        and other federal taxes payable on the merchandise 
        concerned because of its importation, plus any federal 
        excise tax on, or measured by the value of, such 
        merchandise for which sellers in the United States are 
        ordinarily liable; and
          (4) Value of further processing.--The value added by 
        the processing of the merchandise after importation, 
        provided sufficient information exists concerning the 
        cost of processing. The price determined for deductive 
        value is reduced by the value of further processing, 
        only if the third unit price is used as deductive value 
        (i.e., the merchandise concerned is not sold in the 
        condition as imported and not sold before the close of 
        the 90th day after the date of importation, but is sold 
        before the 180th day after the date of importation).
    Computed value.--The last basis of appraisement is computed 
value. If customs valuation cannot be based on any of the 
values previously discussed, then computed value is considered. 
This value is also the one the importer can select at entry 
summary to precede deductive value as a basis of appraisement.
    Computed value consists of the sum of the following items:
          (1) materials, fabrication, and other processing used 
        in producing the imported merchandise;
          (2) profit and general expenses;
          (3) any assist, if not included in (a) and (b); and
          (4) packing costs.
    The cost or value of the materials, fabrication, and other 
processing of any kind used in producing the imported 
merchandise is based on information provided by or on behalf of 
the producer and on the commercial accounts of the producer, if 
the accounts are consistent with generally accepted accounting 
principles applied in the country of production of the goods.
    The producer's profit and general expenses are used, 
provided they are consistent with the usual profit and general 
expenses reflected by producers in the country of exportation 
in sales of merchandise of the same class or kind as the 
imported merchandise.
    If the value of an assist used in producing the merchandise 
is not included as part of the producer's materials, 
fabrication, other processing or general expenses, then the 
prorated value of the assist will be included in computed 
value. The value of any engineering, development, artwork, 
design work, and plans and sketches undertaken in the United 
States is included in computed value only to the extent that 
such value has been charged to the producer.
    Finally, the cost of all containers and coverings of 
whatever nature and of packing, whether for labor or material, 
used in placing merchandise in condition, packed ready for 
shipment to the United States is included in computed value.
    As can be seen, computed value relies to a certain extent 
on information that has to be obtained outside the United 
States, that is, from the producer of the merchandise. If a 
foreign producer refuses to or is legally constrained from 
providing the computed value information, or if the importer 
cannot provide such information within a reasonable period of 
time, then computed value cannot be determined.
    Other.--If none of the previous five values can be used to 
appraise the imported merchandise, then the customs value must 
be based on a value derived from one of the five previous 
methods, reasonably adjusted as necessary. The value so 
determined should be based, to the greatest extent possible, on 
previously determined values. Only data available in the United 
States will be used.

                           Customs User Fees
Background

    Prior to the 99th Congress, the U.S. Customs Service did 
not have the legal authority to collect fees for processing 
commercial merchandise, conveyances, and passengers entering 
the United States. Only limited authority existed to charge 
fees for services which were of special benefit to a particular 
individual such as preclearance of passengers and private 
aircraft. Special fees were also authorized on operators of 
bonded warehouses, foreign trade zones, and the entry of 
vessels into ports. Also, Customs was authorized to receive 
reimbursement from carriers for overtime for services provided 
during non-business hours and from local authorities for 
services provided to certain small airports.
    Section 13031 of the Consolidated Omnibus Budget 
Reconciliation Act of 1985 (COBRA) \69\ established a schedule 
of flat-rate fees for processing conveyances and passengers 
entering the United States. The Act imposed fees for Customs' 
costs on a per arrival basis on commercial vessels, trucks, 
railroad cars, private aircraft and boats, and passengers 
arriving on commercial vessels or aircraft from countries other 
than Mexico, Canada, U.S. insular possessions, and other 
adjacent islands. The statute also imposed fees on the 
processing of dutiable mail entries prepared by a customs 
officer, and the issuance of customs broker permits.
---------------------------------------------------------------------------
    \69\ Public Law 99-272, approved April 7, 1986.
---------------------------------------------------------------------------
    Modifications to these fees, in the Tax Reform Act of 
1986,\70\ included the placement of an annual cap on the 
arrival of commercial vessels, the establishment of a lower 
vessel fee for certain barges and bulk carriers, and an 
increase in the fee for rail cars carrying passengers or 
freight from $5 to $7.50, coupled with the elimination of the 
fee on empty railroad cars.
---------------------------------------------------------------------------
    \70\ Public Law 99-514, approved October 22, 1986.
---------------------------------------------------------------------------
    The Omnibus Budget Reconciliation Act of 1986 (OBRA) \71\ 
expanded customs user fee authority to cover Customs' costs of 
processing commercial merchandise entries--the so-called 
Merchandise Processing Fee (MPF). The Act imposed an ad valorem 
fee based on the customs value of all formal entries of 
merchandise imported for consumption, including warehouse 
withdrawals for consumption.
---------------------------------------------------------------------------
    \71\ Public Law 99-509, approved October 21, 1986.
---------------------------------------------------------------------------
    As amended by the Omnibus Budget Reconciliation Act of 1987 
\72\ and the Technical and Miscellaneous Revenue Act of 
1988,\73\ the U.S. portion of the value of articles 
classifiable under items 9802.00.60 and 9802.00.80 of the 
Harmonized Tariff Schedule of the United States (HTS) or to 
products of the least developed developing countries (LDDC's), 
products of eligible countries under the Caribbean Basin 
Initiative (CBI), and products of U.S. insular possessions were 
exempted from the MPF. Further, pursuant to section 203 of the 
United States-Canada Free-Trade Agreement Implementation Act of 
1988,\74\ the merchandise user fees were set to be phased out 
with respect to articles of Canadian origin in accordance with 
article 403 of the bilateral agreement.
---------------------------------------------------------------------------
    \72\ Public Law 100-203, section 9501, December 22, 1987.
    \73\ Public Law 100-647, section 9001, November 10, 1988.
    \74\ Public Law 100-449, approved September 28, 1988.
---------------------------------------------------------------------------
    Receipts from user fees are deposited in a dedicated 
``Customs User Fee Account'' within the general fund of the 
Treasury, with one subaccount of the receipts from the 
merchandise processing fee and a second subaccount of the 
receipts from the conveyance and passenger fees. Subject to 
authorization and appropriations, all funds in the Account are 
available to pay costs incurred by the Customs Service in 
conducting commercial operations and are treated as receipts 
offsetting expenditures of salaries and expenses for these 
purposes, except for that portion of the fees required for the 
direct reimbursement of appropriations for costs incurred by 
the Customs Service in providing inspectional overtime and 
preclearance services. Inspectional overtime and preclearance 
services are reimbursed subject to a permanent indefinite 
appropriation, and are not subject to OMB apportionment.
    For fiscal year 1990, the merchandise processing fee was 
set at 0.17 percent ad valorem. The legislative authority to 
impose customs user fees was set to expire on September 30, 
1990.
    In February 1988 the General Agreement on Tariffs and Trade 
(GATT) Council adopted a panel finding that the ad valorem 
structure of the merchandise processing fee is inconsistent 
with U.S. GATT obligations to the extent the fee exceeds the 
approximate cost of customs processing for the individual 
entry, and includes costs for Customs Service activities that 
are not services to the particular importer (e.g., costs of 
processing imports exempt from the fee).

Revised fee structure

    The Customs and Trade Act of 1990,\75\ as amended by the 
Omnibus Budget Reconciliation Act of 1990,\76\ completely 
revised and reauthorized customs user fees through fiscal year 
1995. The new fee structure was intended to bring the United 
States into conformity with U.S. obligations under the GATT. 
The conference report
(H. Rept. 101-650) sets forth the underlying rationale and 
congressional intent behind the user fee revision:
---------------------------------------------------------------------------
    \75\ Public Law 101-382, title I, subtitle C, approved August 20, 
1990.
    \76\ Public Law 101-508, section 10001, approved November 5, 1990.

          The new fee schedule is structured to respond to this 
        ruling and to bring the United States into conformity 
        with its GATT obligations. As required by the relevant 
        provisions of articles II and VIII of the GATT, the new 
        fee schedule limits the fees charged to the approximate 
        cost of the services rendered. It also limits the fee 
        to customs operations related to merchandise processing 
        and to the processing of imports covered by the fee. 
        Fee revenues also are established so as to approximate 
        the cost of the commercial customs services. As a 
        result, the new fee schedule represents the type of fee 
        permitted under GATT article VIII. It does not 
        represent an indirect protection to domestic products 
        nor does it represent a taxation of imports for 
---------------------------------------------------------------------------
        domestic purposes.

    The MPF for the first time differentiated between entries 
or releases of merchandise that are entered formally and those 
that are entered informally. Section 111 of the Customs and 
Trade Act of 1990 authorized a capped ad valorem fee for each 
formal entry and a three-tiered flat rate fee for each entry of 
merchandise entered informally. The amount of the user fee 
would depend upon whether the fee is filed manually or 
electronically. A special reimbursement rule for air courier 
facilities and other reimbursable facilities was also 
established.
    For formal entries, a fee of 0.17 percent ad valorem was 
applied, subject to a maximum of $400 and a minimum of $21, 
except that an additional $3 was assessed on each entry if 
filed manually.
    For informal entries (under $1,250), the following flat 
rate fee schedule was applied:
          $2--for automated, non-customs-prepared informal 
        entries;
          $5--for manual, non-customs-prepared informal 
        entries;
          $8--for customs-prepared informal entries.
    In lieu of the above, air courier facilities and other 
reimbursable facilities were subject to a reimbursement for 
Customs' processing costs to be collected at a rate of twice 
the assessment currently applied at courier hubs. Also, the 
industry's current 80 percent offset was eliminated.
    The Commissioner of Customs was authorized to use any 
surplus from the schedule of flat-rate fees (the ``COBRA 
fees'') to hire full- and part-time personnel, buy equipment, 
or satisfy other direct expenses necessary to provide services 
directly to the payers of the fee, subject to OMB apportionment 
authority. A $30 million reserve of the surplus was required to 
maintain staffing levels equal to those existing in the prior 
year in the event customs collections were reduced. Other 
provisions included new user fee enforcement authority, 
treatment of railroad cars, and agriculture products processed 
and packed in foreign trade zones.
    The 1990 Budget Reconciliation Act extended customs user 
fee authority through September 30, 1995. In addition, the 
Secretary of the Treasury was provided new authority to adjust 
the 0.17 percent ad valorem merchandise processing fee due to 
changes in trade flows and other conditions, subject to a 
maximum adjustment of 0.02 percent, plus or minus. The 
provision also specified publication, consultation, and 
legislative layover periods before an adjustment can be 
effective.
    The 1990 Budget Reconciliation Act also permitted small 
user fee airports processing fewer than 25,000 informal entries 
annually to collect the entry-by-entry fee, rather than paying 
the new double reimbursement fee.
    The 1993 Omnibus Budget Reconciliation Act extended customs 
user fee authority until September 30, 1998. Section 13813 of 
the Act also changed provisions of the COBRA fee statute as 
part of a major reform of the customs inspector pay system (the 
Customs Overtime Pay Reform Act) to authorize the use of COBRA 
funds for a portion of customs officer premium pay and for 
customs retirement-fund contributions related to customs 
officer overtime pay. In addition, the COBRA account was made 
subject to OMB budget apportionment authority.
    The North American Free Trade Agreement Implementation Act 
implemented U.S. obligations under the NAFTA to eliminate the 
Merchandise Processing Fee immediately for Canadian goods 
(consistent with U.S. obligations under the U.S.-Canada FTA), 
and by June 30, 1999 for imports of Mexican goods. The fee may 
not be increased with respect to Mexican goods after December 
31, 1993.
    The NAFTA Implementation Act provided for a temporary 
increase in the $5 COBRA passenger fee to $6.50 through 
September 30, 1997, when it would revert to $5. It also lifted 
the current fee exemptions for passengers arriving from Mexico, 
Canada, and the Caribbean for the same time period. These 
additional fee receipts were dedicated, subject to 
appropriation, to cover Customs' inspectional costs not covered 
by existing customs user fees. The Act also extended all 
customs user fees through September 30, 2003.
    The Uruguay Round Agreements Act provided for an increase 
in the Merchandise Processing Fee rate for formal entries to 
0.21 percent ad valorem, and increased the maximum and minimum 
fee amounts for formal entries from $400 to $485 and from $21 
to $25, respectively. It also increased the rates from $5 to $6 
for informal electronic entries and $8 to $9 for informal paper 
entries. The revised fee was designed to cover a revenue 
shortfall below Customs' commercial costs, as well as increases 
in Customs' operating expenses. The Uruguay Round Agreements 
Act also corrected a technical error in the Customs Overtime 
Pay Reform Act (COPRA) to provide for reimbursement of customs 
inspector premium pay to the extent it was greater than Federal 
Employee Pay Act (FEPA) premium pay authorized to be paid to 
customs inspectors prior to enactment of COPRA.
    The Miscellaneous Trade and Technical Corrections Act of 
1996 (Public Law 104-295) made three amendments with regard to 
customs user fees and merchandise processing fees. First, the 
Act amended section 13031(b) of the COBRA to clarify that the 
ad valorem MPF in foreign trade zones is to be assessed only on 
the foreign value of merchandise entered from a foreign trade 
zone. In addition, the amendment clarified that the application 
of the MPF to processed agricultural products will apply to all 
entries from foreign trade zones after November 30, 1986, for 
which liquidation has not been finalized. The provision was 
necessary to clarify that the MPF applicable solely to foreign 
merchandise entered from a foreign trade zone, exempting 
domestic value, for agricultural products, also would apply to 
non-agricultural products.
    Second, the Act amended section 13031(b) of the COBRA with 
regard to limitations on the collection of customs passenger 
processing fees. As indicated above, the NAFTA Implementation 
Act increased the COBRA passenger processing fee from $5 to 
$6.50 and temporarily lifted the exemption on passengers 
arriving from Canada, Mexico, and the Caribbean during the 
period from January 1, 1994 through September 30, 1997. The 
statute was also modified to apply the fee to so-called 
``cruises to nowhere,'' that is, cruises which leave U.S. 
customs territory and return, without calling on any port 
outside the United States. The amendment clarified that Customs 
should collect fees only one time in the course of a single 
continuous voyage for a passenger aboard a commercial vessel 
that calls on more than one U.S. port.
    Third, the Act amended section 13031(b) of the COBRA to 
clarify that Customs may provide reimbursable services to air 
couriers operating in express consignment carrier facilities 
and in centralized hub facilities during daytime hours. The 
amendment also clarified that Customs may be reimbursed for all 
services related to the determination to release cargo, and not 
just ``inspectional'' services. These services are now 
reimbursable whether they are performed on site or not.

Current law

    Customs' authority to collect user fees under the 
Consolidated Omnibus Budget Reconciliation Act of 1985 (19 
U.S.C. 58c) for passengers arriving into the United States 
aboard a commercial vessel or aircraft from Canada, Mexico, a 
U.S. territory or possession or the Caribbean expired on 
September 30, 1997. As a result, Customs considered that its 
authority to use the COBRA user fee account for preclearance 
services for such passengers had also expired. Customs 
continued to fund those positions out of its regular budget in 
order to keep those services. However, due to budgetary 
constraints, Customs was unable to fund all of the positions, 
resulting in decreased preclearance services.
    To address this issue, the Miscellaneous Trade and 
Technical Corrections Act of 1999 (Public Law 106-36) (the Act) 
made two amendments to Customs user fees under 13031 of the 
Consolidated Omnibus Budget Reconciliation Act of 1985 (19 
U.S.C. 58c). First, the Act amended section 58c(f)(3)(A)(iii) 
to permit Customs access to the COBRA user fee account to pay 
for the salaries for up to 50 full-time equivalent inspectional 
positions to provide preclearance services. These services 
would be provided only to the extent that funds remain 
available after reimbursements for salaries for full-time and 
part-time inspectional personnel and equipment that enhance 
Customs' services for those persons or entities required to pay 
fees under this section.
    Second, the Act amended section 58c(a) by establishing (i) 
a $5 fee for passengers arriving in the United States aboard a 
commercial vessel or aircraft other than from Canada, Mexico, 
U.S. territory or possession, or the Caribbean, and (ii) a 
$1.75 fee for passengers arriving aboard a commercial vessel 
from Canada, Mexico, U.S. territory or possession, or the 
Caribbean.
    The Act also amended section 58c(f) to authorize Customs 
access to $50 million of the merchandise processing fees for 
the Customs Automated Commercial System for FY 1999. In 
addition, the Act mandated the Commissioner of Customs to 
establish an advisory committee consisting of representatives 
from the airline, cruise ships, and other transportation 
industries subject to these fees. Under this provision, the 
representatives would meet periodically and advise the 
Commissioner on issues relating to these services and fees.
    Finally, the Act authorized the Secretary of the Treasury 
to implement a National Customs Reconciliation Test program 
relating to an alternative mid-point interest accounting 
methodology that may be used by an importer. The test period 
was not to exceed October 1, 2000. Section 1451 of the Tariff 
Suspension and Trade Act of 2000 (Public Law 106-476) made this 
authorization permanent.
    The Tariff Suspension and Trade Act of 2000 also amended 
section 13031(b)(1)(A)(iii) of the Consolidated Omnibus Budget 
Reconciliation Act of 1985 (19 U.S.C. 58c(b)(1)(A)(iii)) to 
allow Customs to collect user fees from passengers arriving 
aboard a ferry operating south of 27 degrees latitude and east 
of 89 degrees longitude, whose operations began on or after 
August 1, 1999. Prior to enactment of this legislation, because 
of the limitations on user fees under the COBRA, Customs was 
prevented from collecting user fees from such ferries, and as a 
result, did not issue landing rights to such ferries.

                           Other Customs Laws

                       Country-of-Origin Marking

    Section 304 of the Tariff Act of 1930, as amended,\77\ 
provides that, with certain exceptions, every imported article 
of foreign origin (or its container in specified circumstances) 
``shall be marked in a conspicuous place as legibly, indelibly, 
and permanently as the nature of the article (or container) 
will permit in such manner as to indicate to an ultimate 
purchaser in the United States the English name of the country 
of origin of the article.'' The purpose of this provision is to 
provide information so that the ``ultimate purchaser'' in the 
United States can choose between domestic and foreign-made 
products, or between the products of different foreign 
countries.
---------------------------------------------------------------------------
    \77\ 19 U.S.C. 1304.
---------------------------------------------------------------------------
    When imported articles ordinarily reach their ultimate 
purchasers in packaged form, the containers or holders must, as 
a general rule, be marked with the country of origin of their 
contents, whether or not the article themselves are required to 
be marked.
    Exceptions.--The statute gives the Secretary of the 
Treasury the authority to allow exceptions to the marking 
requirement under prescribed circumstances. For example, 
certain classes of merchandise are excepted from the country-
of-origin marking requirements because they are not physically 
susceptible to marking or can only be marked at the cost of 
injury to the article.
    Marking requirements may also be waived as to articles 
which arrive at the U.S. border unmarked, provided: the expense 
of marking under Customs supervision would be economically 
prohibitive; and the Customs Service is satisfied that the 
importer or shipper did not fail to mark the merchandise before 
shipment to the United States for the purpose of invoking this 
exception and thereby avoiding the marking requirements.
    Another exception to the marking requirement may be granted 
for articles for which the ultimate purchaser necessarily knows 
the country of origin. An exception is also provided for 
articles to be processed by the importer for resale if the 
processing would necessarily obliterate or conceal any marking. 
If the processing undertaken by the importer is sufficient to 
convert the imported article into a new and different article 
of trade, any subsequent purchaser is not an ``ultimate 
purchaser'' of the imported article.
    Other classes of excepted merchandise include products of 
American fisheries, products of U.S. possessions, products of 
U.S. origin which have been exported and returned, and articles 
entered for immediate transshipment and exportation from the 
United States. In addition, articles qualifying for duty-free 
treatment as being $1 or less in value, or as bona fide gifts 
less than $10 in value each, are relieved of the marking 
requirements, as are articles produced more than 20 years prior 
to importation.
    Finally, under section 1304(a)(3)(J), classes of articles 
named in certain notices published by the Secretary of the 
Treasury in the late 1930's are not subject to the marking 
requirements. The articles named in such notices were those 
which had been imported in substantial quantities during the 5-
year period ending December 31, 1936, and which had not been 
required to bear country-of-origin markings during that period. 
Such excepted articles are now found in the so-called ``J-
List.'' \78\
---------------------------------------------------------------------------
    \78\ 19 CFR 134.33.
---------------------------------------------------------------------------
    The Miscellaneous Trade and Technical Corrections Act of 
1996 (Public Law 104-295) amended section 304 to exempt from 
the country-of-origin marking requirements certain imported 
coffees, teas, and spices. These items are specifically 
identified by their respective Harmonized Tariff Schedule 
numbers.
    Section 334 of the Uruguay Round Agreements Act (URAA) 
(Public Law 103-165) established the country of origin for 
certain fabrics, silk handkerchiefs and scarves as the country 
where the fabrics are made, even if they undergo dyeing, 
printing, cutting, sewing, and other finishing operations in 
another country (``the Breaux-Cardin rule''). Prior to Breaux-
Cardin, the rules or origin permitted the processes of dyeing 
and printing to confer origin when accompanied by two or more 
finishing operations for certain products. As a result of 
Breaux-Cardin, silk scarves dyed, finished, or printed in Italy 
(or other countries) from imported silk fabric that could 
formerly be marked ``Made in Italy'' were now required to be 
marked with the country of the silk fabric as the country of 
origin.
    The European Union brought a World Trade Organization 
dispute against the United States relating to the Breaux-Cardin 
rule. As part of the U.S. settlement of this dispute, Congress 
added a new subsection (h) to section 304 of the Tariff Act of 
1930 in the Miscellaneous Trade and Technical Corrections Act 
of 1999 (Public Law 106-36). This provision exempted silk 
fabric and scarves from the country of origin marking 
requirement so that these articles were no longer required to 
be marked as having the origin of the country where the fabric 
was produced. This provision did not change the rules for 
determining the country of origin. Thus, under the Act, a silk 
scarf dyed and printed in Italy from silk fabric imported from 
China could not be marked ``Made in Italy'' thus indicating 
origin, but could be marked ``Designed in Italy,'' ``Dyed and 
Printed in Italy,'' ``Crafted in Italy,'' or other similar 
marking.
    In August 1999, the United States and the EU settled the 
dispute, and the United States agreed to amend the rule of 
origin requirements under section 334 of the URAA. As a result, 
Congress included in the Trade and Development Act of 2000 
(Public Law 106-200) legislation which reinstated the rules of 
origin that existed prior to the URAA for certain products. 
Specifically, the legislation allows dyeing, printing, and two 
or more finishing operations to confer origin on certain 
fabrics and goods. In particular, the dyeing and printing rule 
applies to fabrics classified under the Harmonized Tariff 
Schedule (HTS) as silk, cotton, man-made, and vegetable fibers. 
The rule also applies to the various products classified in 18 
specific subheading of the HTS listed in the bill, except for 
goods made from cotton, wool, or fiber blends containing 16 
percent or more of cotton.
    Marking of certain pipe and fittings.--An amendment to 
section 304 of the Tariff Act of 1930 contained in section 207 
of the Trade and Tariff Act of 1984 provided that no exceptions 
may be made to the country-of-origin marking requirement for 
imported pipe, pipe fittings, compressed gas cylinders, manhole 
rings or frames, covers and assemblies thereof, and specifies 
the type of marking which is acceptable for those products.
    Marking of containers of imported mushrooms.--Section 
1907(b) of the Omnibus Trade and Competitiveness Act of 1988 
(OTCA) specifies that markings on imported preserved mushrooms 
must indicate in English the countries in which the mushrooms 
were grown.
    Marking of Native-American style jewelry and arts and 
crafts.--Section 1907(c) of the OTCA provided that the 
Secretary of the Treasury prescribe and implement regulations 
which require that all imported Native-American style jewelry 
and Native-American style arts and crafts have the English name 
of the country of origin indelibly and permanently marked in a 
conspicuous place on such products.
    Penalty for failure to mark.--Imported goods that are not 
properly marked are liable for a 10 percent ad valorem duty in 
addition to any other duty that might be applicable. The 
payment of the 10 percent marking duty does not discharge the 
importer's obligation to comply.\79\
---------------------------------------------------------------------------
    \79\ Globemaster, Inc. v. United States, 68 Cust. Ct. C.D. 4340, 
340 F. Supp. 974 (1972).
---------------------------------------------------------------------------
    Imported articles or their containers that are found to be 
improperly marked are generally retained in Customs custody 
until such time as the importer, after notification, arranges 
for their exportation, destruction, or proper marking under 
Customs supervision, or until they are deemed abandoned to the 
government. If such unmarked articles are part of a shipment 
the balance of which has previously been released from Customs 
custody, the importer will be notified and ordered to redeliver 
the released articles to Customs for marking, exportation, or 
destruction under Customs supervision.
    Section 304(h) of the Tariff Act (19 U.S.C. 1304) provided 
for a maximum fine of $5,000, or imprisonment of not more than 
1 year upon conviction for any person who ``with intent to 
conceal'' alters or removes the country-of-origin marking. 
Section 1907(a) of the OTCA increased the maximum fine for 
intentional alteration or removal of country-of-origin markings 
to $100,000 on the first offense and $250,000 for subsequent 
offenses.
    Automobile labeling.--The American Automobile Labeling Act, 
enacted as section 210 of the Motor Vehicle Information and 
Cost Savings Act,\80\ requires manufacturers to affix, and 
dealers to maintain, labels on cars and light-duty trucks 
regarding the country of origin of component parts and the 
location of assembly. For each line of cars, the label will 
include the percentage (by value) of component parts which 
originated in the United States or Canada, and the countries 
and percentages from other manufacturers who contribute 15 
percent or more to the component value of the vehicle. The 
combined United States/Canadian percentage, which is based on 
the longstanding special bilateral relationship in automotive 
trade, must be clearly identified, listing clearly both 
countries. No other countries are to be combined with the 
United States and Canadian combined percentage. For each 
individual vehicle, the label will also include the city, state 
(where appropriate), and country where the vehicle was 
assembled; the country of origin of the engine; and the country 
of origin of the transmission. For the purpose of identifying 
the country of assembly and the country of origin of the engine 
and transmission, the United States will be identified 
separately. All vehicles manufactured on or after October 1, 
1994, for sale in the United States must be labeled.
---------------------------------------------------------------------------
    \80\ As added by Public Law 102-388, section 355 approved October 
6, 1992.
---------------------------------------------------------------------------
    North American Free Trade Agreement.--Sections 207 and 208 
of the North American Free Trade Agreement Implementation Act 
implemented U.S. obligations under NAFTA articles 311, annex 
311, and article 510 regarding country-of-origin marking for 
NAFTA-origin goods, and the review and appeal of customs 
marking decisions. Section 207 amends section 304 of the Tariff 
Act of 1930, as amended, to provide certain limited exemptions 
for the country-of-origin marking requirements for goods of 
NAFTA origin. It exempted goods where the importer ``reasonably 
knows'' that they are NAFTA-origin goods, and specifically 
exempted original works of art, ceramic bricks, semiconductor 
devices, and integrated circuits. Sections 207(a) and 208 
amended sections 304 and 514 of the Tariff Act to provide NAFTA 
exporters and producers with rights to challenge and protest 
adverse NAFTA marking decisions by the Customs Service.

                         NAFTA Rules of Origin

    Originating goods.--Section 202 of the North American Free 
Trade Agreement Implementation Act enacts articles 401 through 
415 of the NAFTA regarding rules of origin. The NAFTA rules 
ensure that NAFTA preferential tariff treatment is granted only 
to the products of the United States, Mexico, and Canada. Goods 
are considered to originate in a NAFTA party if: (1) they are 
wholly obtained or produced in the territory of one or more 
NAFTA parties; (2) each of the non-originating materials used 
in the good undergoes a change in tariff classification as a 
result of production that occurs entirely within one or more of 
the parties; (3) the good is produced entirely in one or more 
of the parties exclusively from NAFTA-origin materials; or (4) 
with certain exceptions, the good is produced entirely in one 
or more of the NAFTA parties but one or more of the non-
originating parts does not undergo a change in tariff 
classification; and the regional value content of the goods 
meets certain thresholds (at least 60 percent of the value of 
the goods or 50 percent of their net cost.)
    Regional value-content.--Section 202(b) of the North 
American Free Trade Agreement Implementation Act sets forth 
methodologies for calculating regional value-content on the 
basis of either ``transaction value'' or ``net cost of the 
good.'' Regional value using the transaction value method is 
computed by taking the difference between the transaction value 
of the good and the value of non-originating materials used in 
the production of the good, divided by the transaction value of 
the good. Regional value using the net-cost method is computed 
by dividing the difference between the net cost of the good and 
the value of non-originating materials used in the production 
of the good by the net cost of the good. A producer of a good 
may use one of three ways to allocate applicable costs when 
using the net-cost method. Under certain circumstances 
delineated in section 202(b), the net-cost method is required 
to be used.
    Automotive goods.--Section 202(c) of the North American 
Free Trade Agreement Implementation Act sets forth the regional 
value-content requirement for motor vehicles. For passenger 
motor vehicles, light trucks, and their engines and 
transmissions, the regional value-content is increased in 
stages from 50 percent for the first 4 years of NAFTA to 56 
percent for the second 4 years and to 62.5 percent thereafter. 
Other motor vehicles and other automotive parts are subject to 
a 50 percent regional content requirement for the first 4 
years, 55 percent for the second 4 years, and 60 percent 
thereafter. A special rule applies to investors who newly 
construct or refit a plant to produce a new vehicle. Section 
202(c) provides that, for passenger vehicles and light trucks 
and their automotive parts, the value of non-originating 
materials must be ``traced'' back through the production 
process for purposes of calculating the regional value-content. 
An auto producer may average its calculation of regional value-
content using a number of different methodologies.
    Certificate of Origin.--Section 205 of the North American 
Free Trade Agreement Implementation Act amends section 508 of 
the Tariff Act to require a NAFTA Certificate of Origin for 
goods for which preferential tariff treatment is claimed, and 
imposes recordkeeping requirements to substantiate the 
Certificates subject to recordkeeping penalties.

                                Drawback

    Under section 313(a) of the Tariff Act of 1930 (19 U.S.C. 
1313(a)), ``drawback'' is payable upon the exportation of an 
article manufactured or produced in the United States with the 
use of duty-paid imported merchandise. To receive benefit of 
drawback, the completed article must have been exported within 
5 years from the date of importation of the pertinent duty-paid 
merchandise. The amount of refund is equal to 99 percent of the 
duties attributable to the foreign, duty-paid content of the 
exported article. The procedural and other requirements 
governing drawbacks are set forth in 19 CFR part 22.
    The purpose of section 313(a) is to permit American-made 
products to compete more effectively in world markets. It 
enables domestic manufacturers and producers to select the most 
advantageous sources for their raw materials and component 
requirements without regard to duties, thereby permitting 
savings in their production costs. It also encourages domestic 
production and, as a result, the utilization of American labor 
and capital.
    An important feature of section 313(a) and a number of 
other drawback provisions is the allowance of drawback on a 
substitution basis. Pursuant to section 313(b), an exported 
article incorporating components entirely of domestic origin 
can nevertheless qualify for drawback, to the extent that duty 
has been paid on the importation of components of the same kind 
and quality as those used in the manufacture or production of 
the exported article.
    Section 202 of the Trade and Tariff Act of 1984 expanded 
the application of current drawback provisions in three 
important respects. First, it allows drawback if the same 
person requesting drawback, subsequent to importation and 
within 3 years of importation of the merchandise, exports from 
the United States or destroys under Customs supervision 
fungible merchandise (whether imported or domestic) which is 
commercially identical to the merchandise imported.
    Second, it allows drawback for all packaging materials 
imported for packaging or repackaging imported merchandise.
    Finally, the Act provides that any domestic merchandise 
acquired in exchange for imported merchandise of the same kind 
and quality shall be treated as the use of such imported 
merchandise for drawback purposes if no certificate of delivery 
is issued for such imported merchandise.
    In addition to section 313(a), there are a variety of other 
specific drawback provisions allowing for the refund of duties 
and/or internal revenue taxes under specified circumstances for 
the exportation of products such as flavoring extracts, 
toiletries, distilled spirits, salts, and cured meats. Further, 
under section 313(c), drawback is allowable when merchandise is 
rejected by the importer because it fails to conform to the 
sample upon which the purchase order was made, or because it 
fails to conform to the importer's specifications, or because 
the merchandise was shipped without the consignee's consent. 
When such rejected merchandise is exported under Customs 
supervision, 99 percent of the duties paid will be refunded 
upon compliance with the pertinent regulations.
    The Customs Modernization Act (section 632 of the North 
American Free Trade Agreement Implementation Act) made a series 
of changes to address questions which have arisen in the 
implementation and administration of the drawback law. Section 
632 made changes including: allowing manufacturing drawback for 
unused articles that are destroyed rather than exported, 
extending the period for drawback claims on rejected 
merchandise to 3 years; with respect to same condition 
drawback, changing the standard for allowing substitution of 
merchandise for the imported merchandise from ``fungible'' to 
``commercially interchangeable''; authorizing the electronic 
filing of drawback claims and setting a period of 3 years from 
the date of exportation or destruction in which to file a 
claim; and simplifying accounting requirements for petroleum. 
Section 622 established penalty provisions for the submission 
of false drawback claims and created a ``Drawback Compliance 
Program.''
    The Miscellaneous Trade and Technical Corrections Act of 
1999 (Public Law 106-36) amended section 313(p) of the Tariff 
Act of 1930 (19 U.S.C. 1313(p)) to expand the scope of 
petroleum products eligible for substitution drawback. The Act 
also amended 313(q) of the Tariff Act of 1930 (19 U.S.C. 
1313(q)) to permit drawback of imported materials used by a 
manufacturer or any other person to manufacture packaging 
materials where the packaging is ``used'' in exportation or is 
destroyed.
    The Tariff Suspension and Trade Act of 2000 (Public Law 
106-476) further amended section 313(p) to broaden the scope of 
petroleum products eligible for substitution drawback. This Act 
also amended section 313 of the Tariff Act of 1930 (19 U.S.C. 
1313) by adding new subsection (x) to permit drawback of 
recycled materials.
    NAFTA drawback.--Section 203 of the North American Free 
Trade Agreement Implementation Act implemented limitations on 
duty drawback included under NAFTA article 303. ``NAFTA 
drawback'' refers to the formula used to compute the amount of 
drawback that will be allowed for dutiable goods traded between 
the NAFTA parties. The formula limits drawback to the lesser 
of: (1) the total amount of customs duties paid or owed on the 
non-NAFTA components initially imported; and (2) the total 
amount of customs duties paid to another party on the goods 
subsequently exported. It generally applies to all goods 
imported into the United States, with certain exceptions. The 
provision applies for exports to Canada on January 1, 1996, and 
for exports to Mexico on January 1, 2001. It has the practical 
effect of essentially eliminating drawback for NAFTA-origin 
goods as NAFTA tariff reductions become effective. While no 
limitations were imposed on same condition drawback, same 
condition substitution drawback was eliminated upon the entry 
into force of the Agreement, with certain exceptions. In no 
case may drawback be paid with respect to countervailing or 
antidumping duties on goods entering the United States. 
Furthermore, section 210 of the Act generally prohibits 
drawback for color television picture tubes.
    Special rule for extending time for filing drawback 
claims.--The Miscellaneous Trade and Technical Corrections Act 
of 1996 (Public Law 104-295) amended section 313(r) of the 
Tariff Act of 1930, as amended, to permit a temporary extension 
of 1 year for filing drawback claims in cases where the 
President has declared a major disaster on or after January 1, 
1994, and the claimant files a request for such extension with 
the Customs Service within 1 year from the date of enactment.

                   Protests and Administrative Review

    Generally, liquidation of an entry represents a final 
determination by Customs regarding an importer's duty liability 
unless a protest is filed, in proper form, within 90 days after 
the date of liquidation. A protest allows the importer to 
secure further administrative review and preserve the right to 
judicial review. Under current law, a protest must be filed in 
the port where the underlying decision was made.
    Sections 514, 515 and 516 of the Tariff Act of 1930,\81\ as 
amended, provide for administrative review of decisions of the 
Customs Service, requirements for filing protests, amendment of 
protests, review and accelerated disposition, and further 
administrative review. These provisions provide a statutory 
means whereby the ``correctness'' of decisions by Customs may 
be administratively reviewed.
---------------------------------------------------------------------------
    \81\ 19. U.S.C. 1514, 1515, and 1516.
---------------------------------------------------------------------------
    Under section 514, an importer is entitled to protest the 
legality of decisions by Customs relating to:
          (1) the appraised value of merchandise;
          (2) the classification and rate and amount of duties 
        chargeable;
          (3) all charges or exactions of whatever character 
        within the jurisdiction of the Secretary of the 
        Treasury;
          (4) the exclusion of merchandise from entry or 
        delivery or a demand for redelivery to customs custody 
        under any provision of the customs laws, except a 
        determination appealable under section 337;
          (5) the liquidation or reliquidation of an entry, or 
        reconciliation as to the issues contained therein, or 
        any modification thereof;
          (6) the refusal to pay a claim for drawback; or
          (7) the refusal to reliquidate an entry under 
        subsection (c) or (d) of section 520 (19 U.S.C. 1520).
    In addition, section 514 provides the requirements for the 
form, number and amendments of protest, and limitations on 
protest or reliquidation.
    Section 515 provides Customs a two-year period to respond 
to a protest unless there is a request for accelerated 
disposition. In a case of a request for accelerated 
disposition, Customs is required to respond within 30 days. 
This section also provides that the protest may be subject to 
further review of the protest by another Customs officer 
(usually Customs Headquarters), upon a timely request. The 
Miscellaneous Trade and Technical Corrections Act of 1999 
(Public Law 106-36) amended this section to require the 
appropriate Customs officer to issue a decision on an 
application for further review within 30 days of the 
application, and if allowed, to forward the protest to the 
Customs Officer who will be conducting the review.
    If a protesting party believes that the application for 
further review was erroneously or improperly denied, such a 
party may file a request to the Commissioner of Customs, within 
60 days after the notice of denial, that the denial be set 
aside. If the Commissioner fails to act within the 60 days, the 
request is deemed denied.
    Section 516 is a unique Customs provision that entitles 
American manufactures, producers, wholesalers, labor unions, 
groups of workers, or trade or business associations the 
statutory right to challenge Customs treatment of an imported 
product of the same class or kind as the product they produce 
or sell. Under this section, an interested domestic party may 
file a petition with the Commissioner of Customs alleging that 
appraised value, classification, or rate of duty is not 
correct. Other interested party may submit comments.
    If Customs agrees with the petition, in whole or in part, 
it will publish a notice of its decision and will appraise, 
classify, or assess duty on merchandise entered after a thirty-
day period in accordance with that decision. If Customs reaches 
a negative decision on the petitioner's claims, it will notify 
the petitioner. The petitioner may file a notice with Customs 
within thirty days that he will contest the negative decision 
in court.
    Once the appropriate administrative procedures in Sections 
514, 515, and 516 have been completed, the importer or domestic 
party may have redress to the Court of International Trade 
based on other statutory provisions.

                  Copyrights and Trademark Enforcement

    Copyrights.--Section 602(a) of the Copyright Revision Act 
of 1976 \82\ provides that the importation into the United 
States of copies of a work acquired outside the United States 
without authorization of the copyright owner is an infringement 
of the copyright and are subject to seizure and forfeiture. 
Forfeited articles are generally destroyed; however, the 
articles may be returned to the country of export whenever 
Customs is satisfied that there was no intentional violation. 
Copyright owners seeking import protection from the U.S. 
Customs Service must register their claim to copyright with the 
U.S. Copyright Office and record their registration with 
Customs in accordance with applicable regulations.\83\
---------------------------------------------------------------------------
    \82\ Public Law 94-553, section 101, approved October 19, 1976, 17 
U.S.C. 602(a).
    \83\ 19 CFR 133, subpart D.
---------------------------------------------------------------------------
    Trademarks and trade names.--Articles bearing counterfeit 
trademarks, or marks which copy or simulate a registered 
trademark registration of a U.S. or foreign corporation are 
prohibited importation, provided a copy of the U.S. trademark 
registration is filed with the Commissioner of Customs and 
recorded in the manner provided by regulations.\84\ The U.S. 
Customs Service also affords similar protection against 
unauthorized shipments bearing trade names which are recorded 
with Customs pursuant to regulations.\85\ It is also unlawful 
to import articles bearing genuine trademarks owned by a U.S. 
citizen or corporation without permission of the U.S. trademark 
owner, if the foreign and domestic trademark owners are not 
parent and subsidiary companies or otherwise under common 
ownership and control, provided the trademark has been recorded 
with Customs and the U.S. trademark owner has not authorized 
the distribution of trademarked articles abroad.
---------------------------------------------------------------------------
    \84\ 19 CFR 133.1-133.7.
    \85\ 19 CFR part 133, subpart B.
---------------------------------------------------------------------------
    The Anticounterfeiting Consumer Protection Act of 1996 
(Public Law 104-153) strengthened the protection afforded 
trademark owners against the importation of articles bearing a 
counterfeit trademark. A ``counterfeit trademark'' is defined 
as a spurious trademark which is identical to, or substantially 
indistinguishable from, a registered trademark. First, the Act 
redefined counterfeiting as a form of racketeering. Second, it 
extended both the copyright and trademark laws, and the seizure 
and forfeiture laws, to computer programs, computer 
documentation, and packaging. Third, the Act amended the law 
such that, upon seizure of counterfeit merchandise, the Customs 
Service must notify the owner of the trademark, and, after 
forfeiture, destroy the merchandise. Alternatively, if the 
merchandise is not unsafe or a hazard to health, and the 
Customs Service has the consent of the trademark owner, the 
forfeited goods may be: (1) given to any federal, state, or 
local government agency which has established a need for the 
article; (2) given to a charitable institution; or (3) sold at 
public auction, if more than 90 days have passed since the date 
of forfeiture, and no eligible organization has established a 
need for the article.
    The Anticounterfeiting Consumer Protection Act of 1996 also 
amended section 431 of the Tariff Act of 1930 to require public 
disclosure of aircraft manifests in addition to vessel 
manifests. Last, the Act amended section 484 of the Tariff Act 
of 1930 to require the Customs Service to prescribe new 
regulations governing the content of entry documentation so as 
to aid in the determination of whether imported merchandise 
bears a counterfeit trademark.

                               Penalties

    Section 592 of the Tariff Act of 1930, as amended,\86\ is 
the basic and most widely used customs penalty provision. It 
prescribes monetary penalties against any person who imports, 
attempts to import, or aids or procures the importation of 
merchandise by means of false or fraudulent documents, 
statements, omissions or practices, concerning any material 
fact. The statute may be applied even though there is no loss 
of revenue involved.
---------------------------------------------------------------------------
    \86\ 19 U.S.C. 1592.
---------------------------------------------------------------------------
    Section 592 infractions are divided into three categories 
of culpability, each giving rise to a different maximum 
penalty, as follows:
          (1) Fraud.--This category involves an act of 
        commission or omission intentionally done for the 
        purpose of defrauding the United States of revenue, or 
        otherwise violating section 592. The maximum civil 
        penalty for a fraudulent violation is the domestic 
        value of the merchandise in the entry or entries 
        concerned.
          (2) Gross negligence.--This category involves an act 
        of commission or omission with actual knowledge of, or 
        wanton disregard for, the relevant facts and a 
        disregard of section 592 obligations, whereby the 
        United States is or may be deprived of revenue, or 
        where section 592 is otherwise violated. The maximum 
        civil penalty for gross negligence is the lesser of the 
        domestic value of the merchandise or four times the 
        loss of revenue (actual or potential). If the 
        infraction does not affect the revenue, the maximum 
        penalty is 40 percent of the dutiable value of the 
        goods.
          (3) Negligence.--This category involves a failure to 
        exercise due care in ascertaining the material facts or 
        in ascertaining the obligations under section 592. The 
        maximum civil penalty for negligence is the lesser of 
        the domestic value of the merchandise or twice the loss 
        of revenue (actual or potential). However, where there 
        is no loss-of-revenue issue, the penalty cannot exceed 
        20 percent of the dutiable value.
    In addition to the civil penalties described above, a 
criminal fraud statute provides for sanctions to those 
presenting false information to customs officers. Title 18, 
United States Code, section 542, provides a maximum of 2 years 
imprisonment, or a $5,000 fine, or both, for each violation 
involving an importation or attempted importation.
    The Secretary of the Treasury is authorized to seize 
merchandise if there is resasonable cause to believe that a 
person has violated these provisions and the alleged violator 
is insolvent; outside the jurisdiction of the United States; is 
otherwise essential to protect the revenue; or to prevent the 
importation of prohibited merchandise into the United States.
    For proceedings commenced by the United States in the Court 
of International Trade for monetary penalties, all issues shall 
be tried de novo. The statute specifies the standard of proof 
required to establish a violation. In fraud cases, the United 
States has the burden to prove the violation by clear and 
convincing evidence; in gross negligence cases, the government 
has the burden to establish all the elements of the alleged 
violation; and for negligence cases, the government has the 
burden to establish the act or omission and the defendant has 
the burden of proof that the act or omission did not occur as a 
result of negligence.
    The Customs Modernization Act (section 621 of the North 
American Free Trade Agreement Implementation Act) amended 
section 592 to apply existing penalties for false information 
to information transmitted electronically; allow Customs to 
recover unpaid taxes and fees resulting from 592 violations; 
clarify that the mere non-intentional repetition of a clerical 
error does not constitute a pattern of negligent conduct; and 
define the commencement of a formal investigation for the 
purposes of prior disclosure of alleged violations. It also 
introduced the requirement that importers use ``reasonable 
care'' in making entry and providing the initial classification 
and appraisement; establishing a ``shared responsibility'' 
between Customs and importers; and allowing Customs to rely on 
the accuracy of the information submitted and streamline entry 
procedures (section 637 of the North American Free Trade 
Agreement Implementation Act). To the extent that an importer 
fails to use reasonable care, Customs may impose a penalty 
under section 592.
    Section 205 of the North American Free Trade Agreement 
Implementation Act amended section 592 to apply identical 
penalty provisions to importers making false declarations and 
certificates of NAFTA origin.
    The Anticounterfeiting Consumer Protection Act of 1996 
(Public Law 104-153) made several amendments to the Tariff Act 
of 1930, as amended. First, the Act extended the application of 
customs civil penalties to include merchandise bearing a 
counterfeit trademark. Second, the Act amended section 526 of 
the Tariff Act of 1930 to require the consent of the trademark 
owner prior to any action by the Secretary of the Treasury 
regarding the disposition of seized merchandise. Third, the Act 
linked the relevant civil penalties to the value that the 
merchandise would have had if it were genuine, according to the 
manufacturer's suggested retail price, in addition to any other 
civil or criminal penalties. Last, the Act amended section 
431(c)(1) of the Tariff Act of 1930 to require the advanced 
public disclosure of aircraft manifests to assist Customs in 
electronically screening passengers for inspection upon 
arrival.
    Recordkeeping.--The Customs Modernization Act (section 615 
of the North American Free Trade Agreement Implementation Act) 
provided new penalties for the failure to comply with a lawful 
demand for records required for the entry of merchandise, and 
established a ``Recordkeeping Compliance Program.'' For willful 
failure to comply, the penalty is the lesser of up to $100,000, 
or 75 percent of the value of the merchandise, and for 
negligence, the lesser of up to $10,000 or 40 percent of the 
value. The new penalties were authorized with the understanding 
that Customs would routinely waive the production of records at 
entry, while retaining the ability to audit those records at a 
later time.
    Import prohibitions/restrictions relating to dog and cat 
fur products.--The Tariff Suspension and Trade Act of 2000 
(Public Law 106-476) amended title III of the Tariff Act of 
1930 by adding Section 308 (19 U.S.C. 1308) to prohibit all 
commercial activities relating to trading with dog or cat fur 
products. Specifically, this legislation prohibits the 
importation or exportation of products made with dog or cat 
fur, as well as domestic activities including the introduction 
into interstate commerce, manufacture for introduction into 
interstate commerce, sale or offer for sale, trade, 
advertisement, transportation or distribution in interstate 
commerce of products made with dog or cat fur. In addition to 
criminal and civil penalties under existing law, a person 
violating this section may be liable for additional civil 
penalties, forfeiture, and debarment from importing, exporting, 
transporting, distributing, manufacturing, or selling any fur 
products in the United States. A person accused of violating 
this section is entitled to an affirmative defense if he shows 
by a preponderance of the evidence that he has exercised 
reasonable care.
    Section 308 authorizes the Secretary of the Treasury to 
enforce the import and export prohibitions while the President 
has enforcement authority relating to domestic activities. The 
designated enforcement authorities are required to publish a 
list of violators at least once a year, to submit an 
enforcement plan to Congress within three months of the date of 
enactment, a report within one year of that same date, and, 
annually thereafter, a report on enforcement efforts and 
adequacy of resources to execute this provision. Finally, the 
legislation amends the Fur Products Labeling Act (15 U.S.C. 
69(d)) to require the labeling of products containing even a de 
minimus amount of dog or cat fur.
    Requirements applicable to cigarette imports.--Title V of 
the Tariff Suspension and Trade Act of 2000 (Public Law 106-
476) made several changes to laws governing the importation of 
cigarettes. In particular, section 4004 of this legislation 
amended the Tariff Act of 1930 to create a new title VIII 
imposing certain requirements on imports of cigarettes. Section 
4004 requires the following:
          (1) the original manufacturer of cigarettes being 
        imported into the United States must certify that it 
        has timely submitted, or will timely submit, to the 
        Secretary of Health and Human Services the lists of 
        ingredients described in section 7 of the Federal 
        Cigarette Labeling and Advertising Act (FCLAA);
          (2) the precise warning statements in the precise 
        format specified in section 4 of the FCLAA must be 
        permanently imprinted on the cigarette packaging. Prior 
        to the legislation, the Federal Trade Commission 
        allowed importers, under certain circumstances, to 
        comply with the requirements of FCLAA by affixing 
        adhesive labels with compliant warning statements;
          (3) the importer must certify that it is in 
        compliance with a rotation plan approved by the Federal 
        Trade Commission pursuant to section 4(c) of the FCLAA, 
        unless the FTC grants a waiver; and
          (4) if the cigarettes bear a United States registered 
        trademark, the owner of such trademark, or such owner's 
        authorized representative, must consent to the 
        importation of such cigarettes into the United States.
    The legislation also requires Customs certification at the 
time of entry that the importer, under the penalty of perjury, 
has complied with the above requirements. Cigarettes imported 
in personal use quantities, as well as those imported for 
analysis, noncommercial use, reexport or repackaging, are 
exempt from the above requirements. In addition to any other 
applicable penalties under law, violators are subject to civil 
penalties as well as forfeiture.

                         Commercial Operations

    Advisory Committee.--Section 9503(c) of the Omnibus Budget 
Reconciliation Act of 1987 (Public Law 100-203) established in 
the Department of Treasury the ``Advisory Committee on 
Commercial Operations of the United States Customs Service.'' 
The Assistant Secretary of Treasury for Enforcement is the 
Committee Chairman, which is composed of 20 members.
    In making appointments, the Secretary is to select 
individuals or firms ``affected by the commercial operations'' 
of the Customs Service. A majority of the members may not 
belong to the same political party. The Advisory Committee is 
required to provide advice to the Secretary on all Customs 
commercial operation matters and to report annually to the 
House Ways and Means and Senate Finance Committees.
    Management improvements.--The Customs and Trade Act of 1990 
made numerous changes to improve Customs commercial operations. 
Section 103 contained a biennial authorization of 
appropriations for the U.S. Customs Service, including a 
statutory funding floor for commercial operations and a ceiling 
on non-commercial (enforcement) operations.
    Section 121 made major amendments to the Customs Forfeiture 
Fund statute (section 613A of the Tariff Act of 1930) and in 
the administrative forfeiture proceedings authority (section 
607 of the Tariff Act of 1930).
    The Act also included several provisions recommended by the 
House Ways and Means Subcommittee on Oversight.\87\ Section 123 
required an annual national trade and customs law violation 
estimate and enforcement strategy report. Section 124 required 
an Administration report on possible expansion of Customs' 
foreign preclearance operations and legislative proposals for 
recovery for imported merchandise damaged during customs 
examination. Finally, the Act required changes to Customs' cost 
accounting systems and new labor distribution surveys.
---------------------------------------------------------------------------
    \87\ ``Report on Abuses and Mismanagement in the U.S. Customs 
Service Commercial Operations''; February 8, 1990; WMCP: 101-22.
---------------------------------------------------------------------------
    In 1992, the annual Treasury appropriations legislation for 
fiscal year 1993 (Public Law 102-393) created a unified 
Treasury Asset Forfeiture Fund to be administered by the 
Treasury Secretary. It succeeded the Customs Forfeiture Fund 
(section 613A of the Tariff Act). The Committee on Ways and 
Means maintains legislative jurisdiction over the Customs 
portion of the Treasury Fund.
    A major reform to the customs inspector pay system was 
included in the Omnibus Budget Reconciliation Act of 1993. 
Section 5 of the Act of February 13, 1911 (the ``1911'' Act) 
was amended to address the existing inspector overtime pay 
system (WMCP:102-17). It also authorized foreign language 
bonuses and additional retirement benefits linked to a portion 
of overtime hours worked.
    Notification requirements.--Section 9501(c) of the Omnibus 
Budget Reconciliation Act prohibited the establishment of any 
new Centralized Examination Station (CES) unless Customs 
provides written notice to both the House Ways and Means and 
Senate Finance Committees not less than 90 days prior to the 
proposed establishment.
    The Omnibus Budget Reconciliation Act of 1987 required the 
Commissioner of Customs to notify the House Ways and Means and 
Senate Finance Committees at least 180 days prior to taking any 
action which would: (a) result in any significant reduction in 
force of employees by means of attrition; (b) result in any 
reduction in hours of operation or services rendered at any 
customs office; (c) eliminate or relocate any customs office; 
(d) eliminate any port, or significantly reduce the number of 
employees assigned to any customs office or any port of entry.
    Customs modernization.--The Customs Modernization Act 
(title VI of the North American Free Trade Agreement 
Implementation Act) represented the most extensive set of 
changes to the customs laws since the Customs Procedural Reform 
Act of 1978. The major provisions of the Act removed archaic 
statutory provisions requiring paper documentation, and 
provided authority for full electronic processing of all 
customs-related transactions under the National Customs 
Automation Program (NCAP) (section 631). In return for waiving 
paperwork requirements, importers were required to maintain and 
produce information after the fact. Section 631 further sets 
forth the NCAP goals of ensuring uniform importer treatment, 
facilitating business activity, while improving compliance with 
the customs laws. It authorized new automation initiatives for 
remote-entry filing and periodic entry and duty payment, and 
required adequate planning, testing, and evaluation of all new 
automated systems before implementation.
    The Act provided for accreditation of independent 
laboratories and public access to all Customs rulings and 
decisions. It also provided additional projections for 
importers by reforming Customs' seizure authority under section 
596(c) of the Tariff Act of 1930 (19 U.S.C. 1595a(c)); 
established a new statute of limitations on duty violations, 
provided procedural safeguards for regulatory audits; allowed 
judicial review of detentions; clarified the conditions under 
which duty drawback claims may be made; and authorized payment 
for damaged merchandise for non-commercial shipments.
    In the on-going effort to fully implement the Mod Act, the 
Miscellaneous Trade and Technical Corrections Act of 1999 
(Public Law 106-36) (the Act) amended section 411 of the Tariff 
Act of 1930 (19 U.S.C. 1411) to require Customs, pursuant to 
the NCAP, to establish a program for the automation of 
electronic filing of commercial importation data from foreign-
trade zones no later than January 1, 2000.
    The Tariff Suspension and Trade Act of 2000 (Public Law 
106-476) also made needed changes to facilitate trade relating 
to large shipments that could not be shipped as an entirety. 
Prior to this legislation, large articles, including machinery, 
which could not fit on a single conveyance, particularly a 
truck or plane, were required to be classified as parts or in 
their condition upon arrival in the customs territory of the 
United States, causing classification or entry problems for 
both Customs and the importer. This legislation amended section 
1484 of title 19 to provide Customs the authority to treat 
goods purchased and invoiced as a single entity and shipped 
unassembled or disassembled in separate shipments over a period 
of time as a single transaction for customs entry purposes. The 
legislation requires importers to request such treatment in 
advance of entry and also requires the Secretary of the 
Treasury to issue regulations setting forth the information 
required for this type of entry.
    The Act also requires the Secretary of the Treasury to 
review, in consultation with U.S. importers and other 
interested parties, Customs procedures, related laws, and 
regulations in order to determine the minimum data required for 
determining admissibility of goods entering the United States. 
The legislation requires that the Secretary submit a report to 
Congress and make recommendations for changes in law, 
regulations, or procedures. The purpose of this report is to 
improve the efficiency of the entry process while meeting 
timely administrative needs for statistics and data collection.
    Reorganization.--Pursuant to section 301 of the Customs 
Procedural Reform and Implementation Act of 1978 (19 U.S.C. 
2075), on September 30, 1994, the Commissioner of Customs 
notified the House Ways and Means and Senate Finance Committees 
of his intention to implement a major reorganization of Customs 
commercial operations, including concentrating services at 
existing port facilities, reducing Headquarters staff, 
eliminating regional and district offices, and establishing 
Customs Management and Strategic Trade Centers.
    Antiterrorism.--The Comprehensive Antiterrorism Act of 1995 
(Public Law 104-132), designed to prevent and punish acts of 
terrorism, makes it unlawful to import plastic explosives which 
do not contain detection devices. The Act amends the Tariff Act 
of 1930 to facilitate Customs interdiction of these plastic 
explosives under its seizure and forfeiture authority.

                          Foreign Trade Zones

    The Foreign Trade Zones Act of 1934,\89\ as amended, 
authorizes the establishment of foreign trade zones. A foreign 
trade zone (FTZ) is a special enclosed area within or adjacent 
to ports of entry, usually located at industrial parks or in 
terminal warehouse facilities. Although operated under the 
supervision and enforcement of the Customs Service, they are 
considered outside the customs territory of the United States. 
With certain exceptions, any foreign or domestic merchandise 
may be brought into a foreign trade zone for storage, sale, 
exhibition, break-of-bulk, repacking, distribution, mixing with 
foreign or domestic merchandise, assembly, manufacturing, or 
other processing. Foreign merchandise imported into an FTZ is 
not subject to duty, formal entry procedures or quotas unless 
and until it is subsequently imported into U.S. customs 
territory.
---------------------------------------------------------------------------
    \89\ Act of June 18, 1934, ch. 590, 48 Stat. 998, 19 U.S.C. 81a-
81u.
---------------------------------------------------------------------------
    The framework that governs the establishment and operation 
of FTZs has three principal components. First, the Foreign 
Trade Zones Act of 1934 (the Act) authorizes the establishment 
of FTZs and, as amended in 1950, allows manufacturing in 
FTZs.\90\ Second, regulations, promulgated by both the Customs 
Service \91\ and the Department of Commerce,\92\ expand on the 
Act. A 1952 amendment to the regulations provided for the 
establishment of ``subzones'' in addition to general purpose 
zones. Third, the decision in Armco Steel Corp. v. Stans in 
1970 validated the use of zone manufacturing to avoid customs 
duties and interpreted several key provisions of the Act.\93\
---------------------------------------------------------------------------
    \90\ Boggs amendment of 1959, ch. 296, 64 Stat. 246, 19 U.S.C. 81c.
    \91\ 19 CFR 146.0-48 (1980).
    \92\ 15 CFR 400.100-1406 (1980).
    \93\ 431 F.2d 779 (2d Cir. 1970), aff'g 303 F. Supp. 262 (S.D.N.Y. 
1969).
---------------------------------------------------------------------------
    The original purpose of the Foreign Trade Zones Act of 1934 
was to expedite and encourage foreign commerce. Initially, FTZs 
were little more than transshipment or consignment centers for 
the storage, repackaging, or light processing of foreign goods 
pending re-exportation. The 1934 Act prohibited the manufacture 
and exhibition of goods in FTZs. In 1950, however, Congress 
removed this prohibition and added manufacturing to the list of 
activities permitted, and authorized exhibition in zones.
    The amendment to the FTZ regulations in 1952 that provided 
for the establishment of subzones is important to manufacturing 
and assembly operations in zones. The essential distinction 
between the two types of zones is that individual subzones are 
generally used by only one firm, whereas there is no limitation 
on the number of firms that can operate in a general-purpose 
zone. Subzones were established to assist companies which were 
unable to relocate to or take advantage of an existing general-
purpose zone.\94\ Under the regulations, only a grantee of a 
previously approved general zone may apply to establish a 
subzone.
---------------------------------------------------------------------------
    \94\ 15 CFR 400.304 (1983).
---------------------------------------------------------------------------
    Authority for establishing these facilities is granted to 
qualified corporations, or political subdivisions, who must 
submit applications to the Department of Commerce's Foreign 
Trade Zones Board, comprised of the Secretary of Commerce 
(Chair), and the Secretary of the Treasury.\95\ Public Law 104-
201, authorizing appropriations for fiscal year 1997 for the 
military activities of the Department of Defense, amended the 
Foreign Trade Zones Act to remove the Secretary of Army from 
membership on the Board. The Board's regulations set forth the 
basic requirements for applying and qualifying for an FTZ. The 
statute provides that every officially designated port of entry 
is entitled to at least one FTZ. Public hearings are often held 
by the Board staff in the locale involved. While most 
applications are non-controversial, occasionally domestic 
industries or labor that are sensitive to imports will oppose a 
subzone application. The sharp growth of manufacturing in 
subzones, particularly by the automobile industry, has led to 
increased criticism of the practice by U.S. parts producers, 
who are concerned that the practice may reduce their effective 
tariff protection.
---------------------------------------------------------------------------
    \95\ 19 U.S.C. 81a(b) (1976). The jurisdiction and authority of the 
Board are set forth in 15 CFR 400.200-203 (1980).
---------------------------------------------------------------------------
    Section 3, which contains the basic substantive provisions 
of the Act, allows merchandise to be imported into FTZs without 
being subject to U.S. customs laws. The section regulates the 
tariff treatment of FTZ merchandise according to its status as 
foreign or domestic, and as privileged or non-privileged.
    One may apply for privileged status for foreign merchandise 
in an FTZ, provided the merchandise has not yet been 
manipulated or manufactured so as to effect a change in its 
tariff classification. Foreign merchandise that is not 
privileged, recovered waste, and merchandise that was 
originally domestic but can no longer be identified as such, 
are deemed to be non-privileged foreign merchandise. Domestic 
merchandise that would otherwise have been eligible for 
privileged status but for which no application was made is 
considered non-privileged merchandise.
    The status of merchandise becomes significant when it 
enters U.S. customs territory. Customs appraises and classifies 
privileged foreign merchandise to determine the taxes and 
duties owed according to the condition of the merchandise when 
it enters an FTZ. The importer pays the previously determined 
taxes and duties when bringing the merchandise into U.S. 
customs territory regardless of any manufacturing or 
manipulation of the goods with other foreign or domestic 
privileged merchandise.
    In contrast, merchandise that is composed entirely of, or 
derived entirely from, non-privileged merchandise, either 
foreign or domestic, or of a combination of privileged and non-
privileged merchandise, is appraised and classified according 
to its condition when constructively transferred out of an FTZ 
and into U.S. customs territory. Thus, the duty and taxes 
payable on non-privileged or combined merchandise are those 
applicable to its classification and value when it enters U.S. 
customs territory and not when it enters the zone. This 
distinction is an important potential advantage of zone-based 
operations.
    The United States-Canada Free-Trade Agreement 
Implementation Act \96\ amended section 3(a) of the Foreign 
Zones Act to provide that, with the exception of ``drawback 
eligible goods,'' goods withdrawn from a foreign trade zone 
will be treated as if they are withdrawn for consumption in the 
United States, thus subject to applicable customs duties. The 
North American Free Trade Agreement Implementation Act \97\ 
further amended section 3(a) to provide that ``goods subject to 
NAFTA drawback'' and withdrawn from a foreign trade zone will 
be treated as if they are withdrawn for consumption in the 
United States, and are thus subject to the applicable customs 
duties. The customs duties may be reduced or waived in an 
amount that is the lesser of the customs duties paid to the 
other NAFTA country upon import of the manufactured goods. The 
amendment also provides for the same treatment should Canada 
cease to be a NAFTA country and the suspension of the United 
States-Canada Free-Trade Agreement is terminated.
---------------------------------------------------------------------------
    \96\ Public Law 100-449, approved September 28, 1988.
    \97\ Public Law 100-182, approved December 8, 1993.
---------------------------------------------------------------------------
    In addition, an amendment to section 3 with respect to the 
calculation of relative values in the operations of petroleum 
refineries in a foreign trade zone was enacted in section 9002 
of the Technical and Miscellaneous Revenue Act of 1988.\98\
---------------------------------------------------------------------------
    \98\ Public Law 100-647, approved November 10, 1988.
---------------------------------------------------------------------------
    Final revised regulations--the first changes to those 
regulations since 1980--were issued by the FTZ Board on October 
8, 1991 (15 CFR Part 400) clarifying criteria for the 
establishment and review of FTZ (including subzone) operations. 
Among other provisions, the revised regulations authorize the 
review of zone and subzone operations to determine whether 
those operations provide a net economic benefit to the United 
States.
    Use of weekly entry filing.--Section 484 of the Tariff Act 
of 1930 (19 U.S.C. 1484) sets forth the procedures for the 
entry of merchandise imported into the United States. Under 
section 484, the Customs Service has permitted limited weekly 
entry filing for foreign trade zones (FTZ) since May 12, 1986, 
for merchandise which is manufactured or changed into its final 
form just prior to its transfer from the zone (manufacturing 
operations). Customs regulations governing entry into and 
removal from an FTZ are contained in Part 146 of the Customs 
Regulations (19 C.F.R. Part 146). The regulations permit zone 
users to make a weekly entry filing for all entries removed for 
an entire weekly period, allowing them to pay a single 
merchandise processing fee (MPF) for the entire weekly entry 
filing instead of an MPF for each entry removed from the zone.
    On March 14, 1997, in a Federal Register Notice (62 FR 
12129), Customs proposed a rulemaking that would have expanded 
the weekly entry filing to include merchandise involved in 
activities other than manufacturing operations (non-
manufacturing operations). The expanded weekly entry filing 
required electronic filing, which was expected to reduce the 
number of paper entries, facilitate entry processing, and 
reduce paper work and associated costs form the zones. Customs 
tested the expanded weekly entry procedure in a pilot program 
authorized in September 1994 for a selected number of zones.
    In a Federal Register Notice dated March 17, 1999, Customs 
withdrew the proposed amendment to the Customs regulations, 
reasoning that the proposed expanded weekly entry program would 
significantly reduce the collection of merchandise processing 
fees. As a result, weekly entry filing from a zone could only 
be used for entries involving manufacturing operations.
    Section 410 of the Trade and Development Act of 2000 
(Public Law 106-200) amended section 484 of the Tariff Act of 
1930 to establish a new section 19 U.S.C. 1484(a)(3). This 
legislation allows merchandise withdrawn from a foreign-trade 
zone during a week (i.e., any 7 calendar day period) to be the 
subject of a single entry filing, at the option of the zone 
operator or user. This statutory change allows zone users the 
option of making weekly entry filing for both manufacturing and 
non-manufacturing operations, and the merchandise processing 
fee would be collected as if all entries during one week were 
made as a single entry.
    Deferral of duty on certain production equipment.--The 
Miscellaneous Trade and Technical Corrections Act of 1996 
(Public Law 104-295) amended section 3 of the Foreign Trade 
Zones Act to permit the deferral of payment of duty on certain 
production equipment admitted into FTZs. The provision allows 
for duty on imported production equipment and components 
installed in a U.S. FTZ to be deferred until the equipment is 
ready to be placed into use for production. By allowing a 
manufacturer to assemble, install, and test the equipment 
before duties would be levied, this change is meant to 
encourage production in FTZs.


                      Chapter 2: TRADE REMEDY LAWS

              The Antidumping and Countervailing Duty Laws

    Two important trade remedy laws are the antidumping (AD) 
and countervailing duty (CVD) laws. Although these laws are 
aimed at different forms of unfair trade, they have many 
procedural and substantive similarities.

                     CVD Law: Subsidy Determination

    The purpose of the CVD law is to offset any unfair 
competitive advantage that foreign manufacturers or exporters 
might enjoy over U.S. producers as a result of foreign 
countervailable subsidies. Countervailing duties equal to the 
net amount of the countervailable subsidies are imposed upon 
importation of the subsidized goods into the United States.
    Subtitle A of title VII of the Tariff Act of 1930, as added 
by the Trade Agreements Act of 1979 and amended by the Trade 
and Tariff Act of 1984, the Omnibus Trade and Competitiveness 
Act of 1988, and the Uruguay Round Agreements Act of 1994,\1\ 
provides that a countervailing duty shall be imposed, in 
addition to any other duty, equal to the amount of net 
countervailable subsidy, if two conditions are met. First, the 
Department of Commerce (DOC) must determine that a 
countervailable subsidy is being provided, directly or 
indirectly, ``with respect to the manufacture, production, or 
export of a class or kind of merchandise imported, or sold (or 
likely to be sold) into the United States'' and must determine 
the amount of the net countervailable subsidy. Second, the U.S. 
International Trade Commission (ITC) must determine that ``an 
industry in the United States is materially injured, or is 
threatened with material injury, or the establishment of an 
industry in the United States is materially retarded, by reason 
of imports of that merchandise or by reason of sales (or the 
likelihood of sales) of that merchandise for importation.'' The 
law applies to imports from World Trade Organization (WTO) 
member countries, which have assumed obligations equivalent to 
those of the Agreement on Subsidies and Countervailing 
Measures, commonly referred to as the Subsidies Agreement, or 
countries with whom the United States has a treaty requiring 
unconditional most-favored-nation treatment with respect to 
articles imported into the United States. A countervailing duty 
may not be imposed on imports from these countries unless it is 
established that a countervailable benefit has been imposed and 
a determination has been made that such subsidized imports 
injure or threaten to injure domestic producers of that 
merchandise (i.e., the injury test). However, imports from 
countries which do not fall into one of these three categories 
are generally not afforded an injury test in CVD cases.
---------------------------------------------------------------------------
    \1\ 19 U.S.C. 1671.
---------------------------------------------------------------------------
Historical background: prior to the General Agreement on Tariffs and 
        Trade (GATT) rules

    The first U.S. statute dealing with foreign unfair trade 
practices was a CVD law passed in 1897. The provisions of the 
1897 statute remained substantially the same until 1979, when 
the U.S. CVD law was changed to conform with the agreement 
reached in the Tokyo Round of multilateral trade negotiations.
    The law prior to 1979 required the Secretary of the 
Treasury to assess countervailing duties on imported dutiable 
merchandise benefiting from the payment or bestowal of a 
``bounty or grant.'' The 1897 law authorized countervailing 
duties against any bounty or grant on the export of foreign 
articles. In 1922, Congress amended the provision to cover 
bounties or grants on the manufacture or production of 
merchandise as well as on its export. The amount of the 
countervailing duty was to equal the net amount of the ``bounty 
or grant.'' Prior to the amendments made by the Trade Act of 
1974, the CVD law applied only to dutiable merchandise and 
afforded no injury test.
    The Trade Act of 1974 made two important changes to the CVD 
law, although the substantive requirements of the CVD law 
remained virtually the same. First, it extended the application 
of the CVD law for the first time to duty-free imports, subject 
to a finding of injury as required by the international 
obligations of the United States (i.e., duty-free imports from 
GATT members).
    Second, the Trade Act of 1974 made extensive changes in 
many procedural aspects of the law, which had the effect of 
limiting executive branch discretion in administering the CVD 
statute. The responsibilities for CVD investigations were also 
split, with the Department of Treasury being responsible for 
subsidy determinations and the ITC being responsible for injury 
determinations. In 1979, under President Carter's 
Reorganization Plan No. 3, the responsibility for administering 
the subsidy portions of the CVD statute was transferred from 
the Department of the Treasury to the DOC.\2\
---------------------------------------------------------------------------
    \2\ Exec. Order No. 12188, January 4, 1980, 44 Fed. Reg. 69273.
---------------------------------------------------------------------------
Tokyo Round Subsidies Code

    During the Tokyo Round of trade negotiations in the 1970's, 
a multilateral agreement governing the use of subsidies and 
countervailing measures was concluded and signed by the United 
States. In order to enforce obligations with regard to the use 
of subsidies, the Agreement provided for improved international 
procedure for notification, consultation and dispute settlement 
and, where a breach of an obligation concerning the use of 
subsidies is found to exist, or a right to relief exists 
countermeasures are contemplated. In addition to the 
availability of either remedial measures or countermeasures 
through the dispute settlement process, countries could also 
take traditional countervailing duty action to offset subsidies 
upon a showing of material injury to a domestic industry by 
reason of subsidized imports. The agreement set out criteria 
for material injury determinations.
    The key provisions of the Agreement were as follows: (1) 
prohibition of export subsidies on non-primary products as well 
as primary mineral products; (2) description of export 
subsidies which superseded the requirement that an export 
subsidy must result in export prices lower than prices for 
domestic sales, and inclusion of an updated illustrative list 
of subsidy practices; (3) recognition of the harmful trade 
effects of domestic subsidies and therefore, the permissibility 
of relief (including countermeasures) where such subsidies 
injure domestic producers and nullify or impair benefits of 
concessions under the GATT (including tariff bindings); or 
cause serious prejudice to the other signatories; (4) 
commitment by signatories to ``take into account'' conditions 
of world trade and production (e.g., prices, capacity, etc.) in 
fashioning their subsidy practices; (5) improved discipline on 
the use of export subsidies for agriculture; (6) provisions 
governing the use and phase-out of export subsidies by 
developing countries; (7) tight dispute settlement process; (8) 
greater transparency regarding subsidy practices including 
provisions for GATT notification of practices of other 
countries; (9) an injury and causation test designed to afford 
relief where subsidized imports (whether an export or domestic 
subsidy is involved) impact on U.S. producers either through 
volume or through effect on prices; and (10) greater 
transparency in the administration of CVD laws and regulations.
    Congress approved the GATT Subsidies Code under section 
2(a) of the Trade Agreements Act of 1979. Section 101 of the 
1979 Act added a new title VII to the Tariff Act of 1930, 
containing the new provisions of the CVD law to conform to U.S. 
obligations under the Subsidies Code. One of the most 
fundamental changes made by the 1979 Act was the requirement of 
an injury test in all CVD cases involving imports from 
``countries under the Agreement''--countries which either are 
signatories to the Subsidies Code or have assumed substantially 
equivalent obligations to those under the Code. For countries 
that were not ``countries under the Agreement,'' a special 
section of the CVD statute applied. Specifically, section 303 
of the Tariff Act of 1930, as amended, permitted countervailing 
duties to be imposed without an injury test for such countries. 
In addition, section 303 applied a different definition of 
subsidy. Other changes made by the 1979 Act included the grant 
of provisional relief for the first time, reduction of the time 
periods for investigation, and greater opportunities for 
participation by interested parties.

Uruguay Round Subsidies Agreement

    The Uruguay Round Subsidies Agreement goes beyond the Tokyo 
Round Code by: (1) providing definitions of key terms such as 
``subsidy'' and ``serious prejudice'' for the first time in any 
GATT agreement; (2) prohibiting export subsidies and subsidies 
based on the use of domestic instead of imported goods; (3) 
creating a special presumption of serious prejudice for 
egregious subsidies; (4) defining and significantly 
strengthening the procedures for showing when serious prejudice 
exists in foreign markets; (5) creating a ``green light'' 
category (which lapsed January 1, 2000) of government 
assistance that is non-actionable and non-countervailable; (6) 
requiring most developing countries to phase out export 
subsidies and import substitution subsidies; and (7) applying 
the WTO dispute settlement mechanism, which will end the 
present ability of the subsidizing government to block adoption 
of unfavorable panel reports.
    In 1994, Congress implemented the Agreement on Subsidies 
and Countervailing Measures of the Uruguay Round Multilateral 
Trade Negotiations (Subsidies Agreement) under title II of the 
Uruguay Round Trade Agreements Act. Part 2 of subtitle B under 
title II contains the repeal of section 303 of the Tariff Act 
of 1930 and the new provisions of the CVD law to conform to 
U.S. obligations under the Subsidies Agreement.
    The Act provides for the application of an injury test to 
all members of the WTO. The definition of a subsidy applicable 
to non-WTO members was incorporated in section 701 of the 
Tariff Act of 1930. Accordingly, section 303 was repealed 
because it was no longer necessary. The Uruguay Round 
Agreements Act provides a special procedure for making injury 
determinations for those CVD orders, previously issued under 
section 303, which apply to goods from a country not a 
signatory to the Code but now a member of the WTO.

Highlights of the Uruguay Round Subsidies Agreement and CVD Statute

    Definition of a subsidy.--Section 251 of the Uruguay Round 
Agreements Act provides that a subsidy is determined to exist 
if there is a financial contribution by a government or any 
public body, or any form of income or price support, which 
confers a benefit. Examples of financial contribution include a 
direct transfer of funds (e.g., grants, loans, equity 
infusions), a potential direct transfer (e.g., loan 
guarantees), the foregoing of revenue otherwise due (e.g., tax 
credits), the provision of goods or services, other than 
general infrastructure, or the purchase of goods. This may also 
include cases where a government entrusts or directs a private 
body to carry out these functions. The Uruguay Round Agreements 
Act also provides guidelines for determining when there is a 
``benefit to the recipient'' in the case of an equity infusion, 
a loan, a loan guarantee, or provision of goods or services.
    Specificity.--In determining whether a countervailable 
subsidy exists, the statute provides that a subsidy will be 
deemed to be ``specific'' if it is provided in law or in fact 
to a specific enterprise or industry, or group of enterprises 
or industries. Export subsidies (i.e., those contingent upon 
export performance), import substitution subsidies (i.e., those 
contingent on the use of domestic over imported goods), and 
certain domestic subsidies if provided to a specific enterprise 
or industry, or group of enterprises or industries are 
included. A subsidy limited to certain enterprises within a 
designated geographical region is considered specific.
    Prohibited ``red light'' subsidies.--The Agreement 
identifies two types of subsidies that are prohibited under all 
circumstances: (1) subsidies based on export performance and 
(2) subsidies based on the use of domestic rather than imported 
goods. Article III includes those covered in the illustrative 
list of export subsidies provided in annex I to the Agreement 
such as more favorable transport and freight terms for exports, 
special tax deductions based on export, and export credit 
guarantees or insurance programs providing rates that are 
inadequate to cover long-term operating costs. The Uruguay 
Round Agreements Act establishes procedures for investigating 
prohibited subsidies; if Commerce has reason to believe that 
foreign goods are benefiting from a prohibited subsidy, the 
United States Trade Representative (USTR) will then determine 
whether to initiate a section 301 investigation.
    Non-actionable ``green light'' subsidies.--The Agreement 
identifies three types of non-countervailable or ``green 
light'' subsidies: (1) certain research subsidies (excluding 
those provided to the aircraft industry); (2) subsidies to 
disadvantaged regions; and (3) subsidies for adaptation of 
existing facilities to new environmental requirements. The 
Uruguay Round Agreements Act provides expressly that the 
``green light'' provisions on research and pre-competitive 
development activity do not apply to civil aircraft products.
    The Agreement stipulates that the provisions on non-
actionable subsidies apply for 5 years, unless extended or 
modified. Because the Subsidies Committee of the WTO was unable 
to reach a consensus on extending the application of these 
provisions in their existing or modified form, the ``green 
light'' provisions automatically lapsed as of January 1, 2000. 
Accordingly, with the exception of non-specific subsidies, 
which remain non-actionable and non-countervailable, subsidies 
formerly qualifying as non-actionable ``green light'' subsidies 
now fall within the actionable category.
    Enforcement of U.S. rights.--Sections 281 and 282 of the 
Uruguay Round Agreements Act set forth a mechanism for 
enforcing U.S. rights under the Uruguay Round Subsidies 
Agreement, reviewing the operation of provisions in the 
Agreement relating to green light subsidies, and ensuring 
prompt and effective implementation of successful WTO dispute 
settlement proceedings.
    Section 282 of the Uruguay Round Agreements Act \3\ 
provides for an ongoing review of the Subsidies Agreement and 
establishes objectives for that review. Footnote 25 of the 
Subsidies Agreement required the Subsidies Committee to review 
the operation of the green light category of research subsidies 
within 18 months from the date of entry into force: January 1, 
1995. Under section 282, the Administration was required to 
include all green light subsidies in its review.
---------------------------------------------------------------------------
    \3\ Public Law 103-465, 19 U.S.C. 3572.
---------------------------------------------------------------------------
    Section 282(c) provides that subparagraphs B, C, D, and E 
of section 771 of the Tariff Act of 1930, which established the 
non-countervailable status of ``green light'' subsides under 
U.S. law, expire 66 months after the date of entry into force 
of the WTO unless extended by Congress. USTR is directed to 
consult with the appropriate congressional committees and the 
private sector and then submit legislation to implement an 
extension of the ``green light'' subsidies, if such an 
extension is agreed upon by the WTO. A bill to provide such an 
extension would be considered under ``fast track'' procedures. 
Because the Subsidies Committee of the WTO was unable to reach 
a consensus on extending the ``green light'' subsidies 
provisions by December 31, 1999, subparagraphs B, C, D, and E 
of section 771 of the Tariff act of 1930 expired on July 1, 
2000.
    Rules for developing countries.--The Uruguay Round 
Agreements Act provides different treatment for developing 
country subsidies because the Subsidies Agreement provides an 
8- to 10-year window for developing countries with annual GNP 
per capita at or above $1,000 to phase out all export 
subsidies. For least developed countries and countries with GNP 
per capita below $1,000, the phase-out period for export 
subsidies for competitive products is 8 years. Developing 
countries are allowed a 5-year phase-out period, and the least-
developed countries an 8-year period, to eliminate prohibited 
import substitution subsidies.

Subsidy determinations

    As noted above, section 701 of the Tariff Act of 1930, as 
amended,\4\ provides for the imposition of additional duties 
whenever a countervailable subsidy is bestowed by a foreign 
country upon the manufacture or production for export of any 
article which is subsequently imported into the United States. 
Reference to the sale of merchandise includes the entering into 
of any leasing arrangement regarding the merchandise that is 
equivalent to the sale of the merchandise. The countervailing 
duty will apply whether the merchandise is imported directly or 
from third countries, and whether or not in the same condition 
as when exported.
---------------------------------------------------------------------------
    \4\ 19 U.S.C. 1671.
---------------------------------------------------------------------------
    Again, as noted above, section 701(c) applies to a country 
which is not a ``Subsidies Agreement country.'' Under section 
701(c), a country which is not a ``Subsidies Agreement 
country'' is not entitled to an injury test. In addition, 
certain provisions pertaining to suspension agreements, special 
rules for regional industries, critical circumstances, and the 
5-year review of countervailing duty orders do not apply to 
such a country.
    Countervailing duties are imposed in the amount of the net 
countervailable subsidy as determined by the DOC. To determine 
the amount of net countervailable subsidy on which the CVD will 
be based, the DOC may subtract from gross countervailable 
subsidy the amount of:
          (1) any application fee, deposit, or similar payment 
        paid to qualify for or receive the subsidy;
          (2) any loss in the countervailable subsidy value 
        resulting from deferred receipt mandated by government 
        order; and
          (3) export taxes, duties, or other charges levied on 
        the exports to the United States specifically intended 
        to offset the countervailable subsidy.

Upstream subsidies

    The Trade and Tariff Act of 1984 modified the application 
of the CVD law to ``upstream subsidies''--subsidies bestowed on 
inputs which are then incorporated into the manufacture of a 
final product which is exported to the United States. Section 
268 of Uruguay Round Agreements Act further modified the law by 
establishing criteria for determining the existence of an 
upstream subsidy. Additional criteria were necessary given the 
additions of the statutory definition of subsidy and the new 
category of import substitution subsidies.
    Section 771(A) of the Tariff Act of 1930, as amended, which 
provides for upstream subsidies, is unrelated to the basic 
definition of a subsidy. The potential for an upstream subsidy 
exists only when a sector-specific benefit meeting all the 
other criteria of being a countervailable subsidy is provided 
to the input producer. A determination that the subsidy is also 
bestowing a ``competitive benefit'' on the merchandise is also 
required. The provision is also limited to countervailable 
subsidies paid or bestowed by the country in which the final 
product is manufactured.
    With regard to the ``competitive benefit'' criterion, the 
DOC must decide that a competitive benefit has been bestowed 
when the price for the input used in manufacture or production 
of the merchandise subject to investigation is lower than the 
price the manufacturer or producer would otherwise pay for the 
input from another seller in an arm's length transaction. 
Whenever the DOC has reasonable grounds to believe or suspect 
an upstream subsidy is being paid or bestowed, the DOC must 
investigate whether it is in fact and, if so, include the 
amount of any competitive benefit, not to exceed the amount of 
upstream subsidy, in the amount of any CVD imposed on the 
merchandise under investigation.

Agricultural subsidies

    Section 771(5B) provides a separate, special rule for the 
calculation of countervailable subsidies on certain processed 
agricultural products.

           AD Law: Less-Than-Fair-Value (LTFV) Determination

    Dumping generally refers to a form of international price 
discrimination, whereby goods are sold in one export market 
(such as the United States) at prices lower than the prices at 
which comparable goods are sold in the home market of the 
exporter, or in its other export markets.
    Three provisions of U.S. law address different types of 
dumping practices. The Antidumping Act of 1916 provides for 
criminal and civil penalties for the sale of imported articles 
at a price substantially less than the actual market value or 
wholesale price, with the intent of destroying or injuring an 
industry in the United States. Title VII of the Tariff Act of 
1930, as amended, provides for the assessment and collection of 
AD duties by the U.S. government after an administrative 
determination that foreign merchandise is being sold in the 
U.S. market at less than fair value and that such imports are 
materially injuring the U.S. industry. Finally, section 1317 of 
the Omnibus Trade and Competitiveness Act of 1988 establishes 
procedures for the USTR to request a foreign government to take 
action against third-country dumping that is injuring a U.S. 
industry, and section 232 of the Uruguay Round Agreements Act 
permits a third country to request that an order be issued 
against dumped imports from another country that are materially 
injuring an industry in a third country.

Historical background \5\

    In 1916 the Congress enacted the Antidumping Act of 1916, 
providing a civil cause of action in federal court for private 
damages as well as for criminal penalties against parties who 
dump foreign merchandise in the United States.\6\ The 
requirements under this statute, however, particularly the need 
to show evidence of intent, are difficult to meet, and the need 
for a different type of AD law was subsequently considered by 
Congress. In 1921 the Antidumping Act of 1921 was passed, which 
provided the statutory basis, until 1979, for an administrative 
investigation by the Department of the Treasury of alleged 
dumping practices and for imposition of AD duties.\7\ In 1954, 
the administration of the AD law was split, and the function of 
determining injury was transferred from the Treasury Department 
to the U.S. Tariff Commission (now the ITC). The function of 
determining sales at less than fair value was left with the 
Treasury Department until 1979.
---------------------------------------------------------------------------
    \5\ For another useful discussion of the history of the development 
of U.S. antidumping laws, see Congressional Budget Office, How the GATT 
affects U.S. Antidumping and Countervailing-Duty Policy, Sept. 1994.
    \6\ Act of September 8, 1916, ch. 463, sec. 801, 39 Stat. 798, 15 
U.S.C. 72.
---------------------------------------------------------------------------

          For a description of the challenge to the Antidumping Act of 
        1916 in the WTO brought by the European Union and Japan, see 
        the discussion of WTO Panel Reviews at the end of the AD/CVD 
        section.
---------------------------------------------------------------------------
    \7\ Act of May 27, 1921, ch. 14, 42 Stat. 11, 19 U.S.C. 160 (now 
repealed).
---------------------------------------------------------------------------
    During the post-World War II negotiations to establish an 
International Trade Organization, the United States proposed a 
draft article on dumping, based on the Antidumping Act of 1921. 
This draft became the basis for article VI of the GATT, which 
is the international framework governing national AD laws.
    During the 1960's, AD actions and their potential for 
abuse, rather than the dumping practice itself, became a source 
of great concern to many nations. As a result, during the 
Kennedy Round of multilateral trade negotiations, the GATT 
Antidumping Code of 1967 was established. The 1967 Code had 
three main functions: (1) to clarify and elaborate on the broad 
concepts of article VI of the GATT; (2) to supplement article 
VI by establishing appropriate procedural requirements for AD 
investigations; and (3) to bring all GATT signatory countries 
into conformity with article VI. The GATT Antidumping Code came 
into force on July 1, 1968, and provided for the establishment 
of a GATT Committee on Antidumping Practices, whose function 
was to review annually the operation of national antidumping 
laws.
    During the Tokyo Round of multilateral trade negotiations 
in the 1970's, the GATT Antidumping Code was amended to conform 
to the newly negotiated Agreement Relating to Subsidies and 
Countervailing Measures, also negotiated at that time and 
involving changes in article VI of the GATT. The GATT Agreement 
on Implementation of article VI of the GATT, Relating to 
Antidumping Measures, came into force on January 1, 1980.\8\
---------------------------------------------------------------------------
    \8\ Agreement on Implementation of article VI of the General 
Agreement on Tariffs and Trade, MTN/NTM/W/232, reprinted in House Doc. 
No. 96-153, pt. I at 311.
---------------------------------------------------------------------------
    The Congress approved the revised GATT Antidumping Code 
under section 2(a) of the Trade Agreements Act of 1979.\9\ 
Title I of the 1979 Act repealed the Antidumping Act of 1921 
and added a new title VII to the Tariff Act of 1930 
implementing the provisions of the Agreement in a new U.S. 
antidumping law. In addition to the substantive and procedural 
changes made by the 1979 Act, the responsibility for making 
dumping determinations was transferred from the Department of 
the Treasury to the DOC in 1979.\10\ The AD law was further 
amended by title VI of the Trade and Tariff Act of 1984,\11\ 
and title I, subtitle C, part 2 of the Omnibus Trade and 
Competitiveness Act of 1988.
---------------------------------------------------------------------------
    \9\ Public Law 96-39, approved July 26, 1979.
    \10\ Reorganization Plan No. 3 of 1979, 44 Fed. Reg. 69,273 (Dec. 
3, 1979); and Exec. Order No. 12188, January 2, 1980, 45 Fed. Reg. 989.
    \11\ Public Law 98-573, approved October 30, 1984. Technical 
corrections to the 1984 amendments were included in section 1886 of the 
Tax Reform Act of 1986, Public Law 99-514, approved October 22, 1986.
---------------------------------------------------------------------------
    Finally, during the Uruguay Round negotiations, provisions 
related to antidumping were further amended through the 
Agreement on Implementation of Article VI of the General 
Agreement on Tariffs and Trade 1994 (the Antidumping 
Agreement). Article VI of the original GATT remained unchanged 
in the 1994 GATT Agreement.
    Effective January 1, 1995, the Congress implemented the 
Antidumping Agreement under title II of the Uruguay Round 
Agreements Act. The Act made considerable substantive and 
procedural changes to the U.S. AD statute.

Basic provisions

    Section 731 of the Tariff Act of 1930, as amended,\12\ 
provides that an AD duty shall be imposed, in addition to any 
other duty, if two conditions are met. First, the DOC must 
determine that ``a class or kind of foreign merchandise is 
being, or is likely to be, sold in the United States at less 
than its fair value.'' The determination of whether LTFV sales 
exist, and what is the margin of dumping, is based on a 
comparison of ``normal value'' with the ``export price'' of 
each import sale made during the relevant time period under 
investigation. Second, the ITC must determine that ``an 
industry in the United States is materially injured, or is 
threatened with material injury, or the establishment of an 
industry in the United States is materially retarded, by reason 
of imports of that merchandise.'' If the DOC determines that 
LTFV sales exist and the ITC determines that material injury 
exists, an AD order is issued imposing AD duties equal to the 
amount by which normal value (i.e., the price in the foreign 
market) exceeds the export price (i.e., U.S. price) for the 
merchandise (the dumping margin).
---------------------------------------------------------------------------
    \12\ 19 U.S.C. 1673.
---------------------------------------------------------------------------

Basis of comparison: normal value

    Normal value is determined by one of three methods, in 
order of preference: home market sales, third-country sales, or 
constructed value. If a foreign like product is sold in the 
market of the exporting country for home consumption, then 
normal value is to be based on such sales. If home market sales 
do not exist, or are so few as to form an inadequate basis for 
comparison, then the price at which the foreign like product is 
sold for exportation to countries other than the United States 
becomes the basis for normal value. If neither home market 
sales nor third-country sales form an adequate basis for 
comparison, then normal value is the constructed value of the 
imported merchandise. Constructed value is determined by a 
formula set forth in the statute, which is the sum of costs of 
production, plus the actual amount of profit and for selling, 
general and administrative expenses. If actual data is not 
available, then a surrogate for profit and such expenses may be 
used, as specified in the statute.
    Normal value based on home market or third-country sales is 
a single price, in U.S. dollars, which represents the weighted 
average of prices in the home market or third-country market 
during the period under investigation. Sales made at less than 
the cost of production may be disregarded in the determination 
of normal value under certain circumstances. Adjustments are to 
be made for differences in merchandise, quantities sold, 
circumstances of sale, and differences in level of trade to 
provide for comparability of normal value with export price. 
Section 223(a)(7) of the Uruguay Round Agreements Act and the 
accompanying Statement of Administrative Action (SAA) changed 
the requirements for making level of trade adjustments to 
provide that the DOC is to make a level of trade adjustment 
(i.e., deduct the price difference between the two levels of 
trade) if sales are made at different levels of trade and the 
appropriate adjustment can be established. The level of trade 
adjustment was intended to provide the normal value counterpart 
to the related party profit deduction in constructed export 
price sales (described below) so that the effect is to compare 
a U.S. sale to a sale in the home market at the same point in 
the commercial transaction. Finally, averaging or sampling 
techniques may be used in the determination of normal value 
whenever a significant volume of sales is involved or a 
significant number of price adjustments is required.
    If the exporting country is a non-market economy, the 
normal value is constructed by valuing the non-market economy 
producer's ``factors of production'' in a market economy 
country which is a significant producer of comparable 
merchandise and which is at a level of economic development 
comparable to the non-market economy, and adding amounts for 
general expenses, profits, and packing. The ``factors of 
production'' include labor, raw materials, energy and other 
utilities, and representative capital costs.
    In determining whether a country is a non-market economy, 
the DOC will consider: the convertibility of the country's 
currency, whether wages are determined through free bargaining 
between labor and management, whether foreign investment is 
permitted, the extent of government ownership, and the extent 
of government control over the allocation of resources and the 
pricing and output decisions of enterprises. The DOC's 
determination of whether a country is a non-market economy is 
not subject to judicial review.

Export price

    The margin of dumping, and the amount of antidumping duty 
to be imposed, is determined by comparing the normal value with 
the export price of each entry into the United States of 
foreign merchandise subject to the investigation. Export price 
in general refers to either ``export price'' or the 
``constructed export price'' of the merchandise, whichever is 
appropriate. ``Export price'' is the price at which merchandise 
is purchased or agreed to be purchased prior to date of 
importation to the United States. It is typically used where 
the purchaser is unrelated to the foreign manufacturer and is 
based on the price agreed to before importation into the United 
States. However, it may be used if the purchaser and foreign 
manufacturer are related but the purchaser is merely the 
processor of sales-related documentation and does not set the 
price to the first unrelated customer. ``Constructed export 
price'' is the price at which merchandise is sold or agreed to 
be sold in the United States before or after importation, by or 
for the account of the producer or exporter to the first 
unrelated purchaser. Typically, it is used if the purchaser and 
exporter are related.
    Export price is adjusted to derive an ex-factory price, 
including the subtraction of certain delivery expenses and U.S. 
import duties. Additional subtractions are made from 
constructed export price, including selling commissions, 
indirect selling expenses, and expenses and profit for further 
manufacturing in the United States. In addition, the Uruguay 
Round Agreements Act provides for the deduction of an amount 
for related party profit, if any, earned in a sale through a 
related distributor to an end-user in the United States.

Third country dumping

    Section 1318 of the Omnibus Trade and Competitiveness Act 
of 1988 was enacted in response to concern over the injurious 
effects of foreign dumping in third country markets. Section 
1318 establishes procedures for domestic industries to petition 
the USTR to pursue U.S. rights under article 12 of the GATT 
Antidumping Code. A domestic industry that produces a product 
like or directly competitive with merchandise produced by a 
foreign country may submit a petition to USTR if it has reason 
to believe that such merchandise is being dumped in a third 
country market and such dumping is injuring the U.S. industry.
    If USTR determines there is a reasonable basis for the 
allegations in the petition, USTR shall submit to the 
appropriate authority of the foreign government an application 
requesting that antidumping action be taken on behalf of the 
United States. Article 12 of the GATT Antidumping Code requires 
that such an application ``be supported by price information to 
show that the imports are being dumped and by detailed 
information to show that the alleged dumping is causing injury 
to the domestic industry concerned.'' (paragraph 2, article 
12). Accordingly, at the request of the U.S. Trade 
Representative, the appropriate officers of the DOC and the ITC 
are to assist USTR in preparing any such application.
    After submitting an application to the foreign government, 
USTR must seek consultations with its representatives regarding 
the requested action. If the foreign government refuses to take 
any AD action, USTR must consult with the domestic industry on 
whether action under any other U.S. law is appropriate.
    The Uruguay Round Antidumping Agreement added a provision 
providing authority to issue an order upon the request of a 
third country, under certain circumstances. The Uruguay Round 
Agreements Act provides that the government of a WTO member may 
file with USTR a petition requesting that an investigation be 
conducted to determine if imports from another country are 
being dumped in the United States, causing material injury to 
an industry in the petitioning country. USTR, after 
consultation with the DOC and the ITC, and after obtaining the 
approval of the WTO Council for Trade in Goods, is to determine 
whether to initiate an investigation. If the DOC determines 
that imports are dumped and the ITC determines that an industry 
in the petitioning country is materially injured by such 
imports, the DOC is to issue an AD order.

             AD and CVD Laws: Material Injury Determination

    Prior to issuance of an AD or CVD order, the ITC must 
determine that the domestic industry is being materially 
injured, or threatened with material injury, or the 
establishment of a domestic industry is materially retarded, by 
reason of dumped or subsidized imports. The standard of injury 
under the AD and CVD laws is ``material injury,'' defined by 
section 771(7) of the Tariff Act of 1930 as harm which is not 
inconsequential, immaterial, or unimportant.
    The ITC determination of injury basically involves a two-
prong inquiry: first, with respect to the fact of material 
injury, and second, with respect to the causation of such 
material injury (i.e., that dumping caused the injury, and not 
other factors). The ITC is required to analyze the volume of 
imports, the effect of imports on U.S. prices of like 
merchandise, and the effects that imports have on U.S. 
producers of like products, taking into account many factors, 
including lost sales, market share, profits, productivity, 
return on investment, and utilization of production capacity. 
Also relevant are the effects on employment, inventories, 
wages, the ability to raise capital, and negative effects on 
the development and production activities of the U.S. industry. 
Finally, in AD investigations, the ITC is to consider the 
magnitude of the dumping margin.
    Section 222(b)(2) of the Uruguay Round Agreements Act (19 
U.S.C. 1677(7)(C)(iv)) states that, in determining market share 
and the factors affecting financial performance, the ITC is to 
focus primarily on the merchant market for the domestic like 
product if domestic producers internally transfer significant 
production of the domestic like product for the production of a 
downstream article (i.e., captive production not for sale on 
the merchant market). The SAA accompanying the implementing 
legislation makes clear that captively produced imports are not 
to be included in the import penetration ratio for the merchant 
market if they do not compete with merchant market 
production.\13\
---------------------------------------------------------------------------
    \13\ The Uruguay Round Agreements Act Statement of Administrative 
Action at 853.
---------------------------------------------------------------------------
    Section 771(7) of the Tariff Act of 1930, as amended, 
requires the ITC to cumulatively assess the volume and effect 
of like imports from two or more countries subject to 
investigation if the imports compete with each other and with 
like products of the domestic industry in the U.S. market, as 
long as the relevant petitions were filed on the same day or 
investigations were initiated on the same day (for cases which 
were self-initiated). However, the ITC is to immediately 
terminate an investigation with respect to a country (and, 
hence, may not cumulate imports from that country) if imports 
from that country are ``negligible.'' Section 222(d) of the 
Uruguay Round Agreements Act amended the negligibility standard 
so that imports from a country are to be considered negligible 
if they account for less than 3 percent of the volume of all 
imports of such merchandise and if imports from all countries 
accounting for less than 3 percent do not exceed 7 percent of 
imports. Finally, the ITC has discretion not to cumulate 
imports when the imports subject to investigation are products 
of Israel.

               Issues Common to AD and CVD Investigations

Initiation of investigation

    AD and CVD investigations may be self-initiated by the DOC 
or may be initiated as a result of a petition filed by an 
interested party. Petitions may be filed by any of the 
following, on behalf of the affected industry: (1) a 
manufacturer, producer, or wholesaler in the United States of a 
like product; (2) a certified or recognized union or group of 
workers which is representative of the affected industry; (3) a 
trade or business association with a majority of members 
producing a like product; (4) a coalition of firms, unions, or 
trade associations that have individual standing; or (5) a 
coalition or trade association representative of processors, or 
processor and growers, in cases involving processed 
agricultural products. The DOC is required to provide technical 
assistance to small businesses to enable them to prepare and 
file petitions.
    Petitions are to be filed simultaneously with both the DOC 
and ITC. Within 20 days after the filing of a petition, the DOC 
must decide whether or not the petition is legally sufficient 
to commence an investigation. If so, an investigation is 
initiated with respect to imports of a particular product from 
a particular country.
    Because of new standing provisions in the Uruguay Round 
Agreements, section 212 of the Uruguay Round Agreements Act 
requires DOC to determine, as part of its initiation 
determination, whether the petition has been filed by or on 
behalf of the industry. A petitioner has standing if: (1) the 
domestic producers or workers who support the petition account 
for at least 25 percent of the total production of the like 
product; and (2) the domestic producers or workers who support 
the petition account for more than 50 percent of the production 
of the domestic like product produced by that portion of the 
industry expressing support for or opposition to the petition. 
The SAA accompanying the Act specifies that if the management 
of a firm expresses a position in direct opposition to the 
views of the workers in that firm, DOC will treat the 
production of that firm as representing neither support for nor 
opposition to the petition.\14\ The DOC is to poll the industry 
if the petition does not meet the second test set forth above. 
In such circumstances, the DOC is permitted 40 days in which to 
determine whether it will initiate an investigation. Standing 
of the industry may not be challenged to the agency after an 
investigation is initiated but may be challenged later in 
court.
---------------------------------------------------------------------------
    \14\ Uruguay Round Agreements Act Statement of Administrative 
Action at 862.
---------------------------------------------------------------------------
    Section 609 of the Trade and Tariff Act of 1984 establishes 
a procedure in AD investigations by which the DOC may monitor 
imports from additional supplier countries for up to 1 year in 
order to determine whether persistent dumping exists with 
respect to that product and self-initiation of additional 
dumping cases is warranted.

Preliminary ITC injury determination

    The ITC must determine whether there is a ``reasonable 
indication'' of material injury, based on the information 
available to it at the time. The petitioner bears the burden of 
proof with respect to this issue. If the ITC preliminary 
determination is negative, the investigation is terminated. If 
it is positive, the investigation continues. The ITC is to make 
this determination within 45 days of the date of filing of the 
petition or self-initiation, or within 25 days after the date 
on which the ITC receives notice of initiation if the DOC has 
extended the period for initiation in order to poll the 
industry to determine standing.

Preliminary DOC determination

    If the ITC makes an affirmative preliminary injury 
determination, then the DOC must determine whether dumping or 
subsidization is occurring.
    In AD cases, the DOC must determine whether there is a 
``reasonable basis to believe or suspect that the merchandise 
is being sold, or is likely to be sold, at less than fair 
value,'' within 140 days after initiation. The preliminary 
determination is based on the information available to the DOC 
at the time. If affirmative, the preliminary determination must 
include an estimated average amount by which the normal value 
exceeds the export price. An expedited preliminary 
determination within 90 days of initiation of the investigation 
may be made based on information received during the first 60 
days if such information is sufficient and the parties provide 
a written waiver of verification and an agreement to have an 
expedited preliminary determination. A preliminary 
determination may also be expedited for cases involving short 
life cycle merchandise, if the foreign producer has been 
subject to prior affirmative dumping determinations on similar 
products. On the other hand, the preliminary determination may 
be postponed until 190 days after initiation by the DOC, at the 
petitioner's request or in cases which the DOC determines are 
extraordinarily complicated.
    In subsidy cases, the DOC must determine whether there is a 
``reasonable basis to believe or suspect that a countervailable 
subsidy is being provided,'' within 65 days after initiation of 
the investigation. In cases involving upstream subsidies, the 
time period may be extended to 250 days. If affirmative, the 
preliminary determination must include an estimated amount of 
the net countervailable subsidy. An expedited preliminary 
determination may be made based on information received during 
the first 50 days if such information is sufficient and the 
parties provide a written waiver of verification and agree to 
an expedited preliminary determination. On the other hand, the 
preliminary determination may be postponed until 130 days after 
initiation at the petitioner's request or in cases which the 
DOC determines are extraordinarily complicated.
    The effect of an affirmative preliminary determination is 
twofold: (1) The DOC must order the suspension of liquidation 
of all entries of foreign merchandise subject to the 
determination from the date of publication of the preliminary 
determination. The DOC must also order the posting of a cash 
deposit, bond, or other appropriate security for each 
subsequent entry of the merchandise equal to the estimated 
margin of dumping or the amount of the net countervailable 
subsidy; and (2) the ITC must begin its final injury 
investigation, and the DOC must make all information available 
to the ITC which is relevant to an injury determination. If the 
preliminary determination is negative, no suspension of 
liquidation occurs, and the DOC investigation simply continues 
into the final stage.
    In AD investigations in which the petitioner alleges 
critical circumstances, the DOC must determine, on the basis of 
information available at the time, whether (1) there is a 
history of dumping and material injury in the United States or 
elsewhere of the subject merchandise, or the importer knew or 
should have known that the merchandise was being sold at less 
than fair value and that there was likely to be material injury 
by reason of such sales; and (2) there have been massive 
imports of the merchandise over a relatively short period.
    In CVD investigations involving ``countries under the 
Agreement'' in which the petitioner alleges critical 
circumstances, the DOC must determine, on the basis of 
information available at the time, whether (1) the alleged 
countervailable subsidy is inconsistent with the GATT Subsidies 
Agreement; and (2) there have been massive imports of the 
merchandise over a relatively short period.
    In both AD and CVD investigations, this critical 
circumstances determination may be made beginning prior to a 
preliminary determination of subsidies or sales at less than 
fair value. If the DOC determines critical circumstances exist, 
then any suspension of liquidation ordered is to retroactively 
apply to unliquidated entries of merchandise entered up to 90 
days prior to the date suspension of liquidation was ordered.

Final DOC determination

    In AD investigations, the DOC must issue its final LTFV 
determination within 75 days after the date of its preliminary 
determination, unless a timely request for extension is 
granted, in which case the final determination must be made 
within 135 days. In CVD investigations, the DOC must issue a 
final subsidy determination within 75 days after the date of 
its preliminary determination, unless the investigation 
involves upstream subsidies, in which case special extended 
time limits apply. If there are simultaneous investigations 
under the AD and CVD laws involving imports of the same 
merchandise, the final CVD determination may be postponed until 
the date of the final determination in the AD investigation at 
the request of a petitioner.
    In both LTFV and subsidy investigations, the investigation 
is terminated if the final determination is negative, including 
any suspension of liquidation which may be in effect, and all 
estimated duties are refunded and all appropriate bonds or 
other security are released. If the final determination is 
affirmative, the DOC orders the suspension of liquidation and 
posting of a cash deposit, bond, or other security (if such 
actions have not already been taken as a result of the 
preliminary determination), and awaits notice of the ITC final 
injury determination.

Final ITC injury determination

    Within 120 days of a DOC affirmative preliminary 
determination or 45 days of a DOC affirmative final 
determination, whichever is longer, the ITC must make a final 
determination of material injury. If the DOC preliminary 
determination is negative, and the DOC final determination is 
affirmative, the ITC has until 75 days after the final 
affirmative determination to make its injury determination.

Termination or suspension of investigations

    Either the DOC or ITC may terminate an AD or CVD 
investigation upon withdrawal of the petition by petitioner, or 
by the DOC if the investigation was self-initiated. The DOC may 
not, however, terminate an investigation on the basis of a 
quantitative restriction agreement limiting U.S. imports of the 
merchandise subject to investigation unless the DOC is 
satisfied that termination on the basis of such agreement is in 
the public interest.
    The DOC may suspend a CVD investigation on the basis of one 
of three types of agreements entered into with the foreign 
government or with exporters who account for substantially all 
of the imports under investigation. The three types of 
agreements are: (1) an agreement to eliminate the subsidy 
completely or to offset completely the amount of the net 
countervailable subsidy within 6 months after suspension of the 
investigation; (2) an agreement to cease exports of the 
subsidized merchandise to the United States within 6 months of 
suspension of the investigation; and (3) an agreement to 
eliminate completely the injurious effect of subsidized exports 
to the United States (which, unlike under the AD law, may be 
based on quantitative restrictions).
    The DOC may suspend an AD investigation on the basis of one 
of three types of agreements entered into with exporters who 
account for substantially all of the imports under 
investigation: (1) an agreement to cease exports of the 
merchandise to the United States within 6 months of suspension 
of the investigation; (2) an agreement to revise prices to 
eliminate completely any sales at less than fair value; and (3) 
an agreement to revise prices to eliminate completely the 
injurious effect of exports of such merchandise to the United 
States. Unlike CVD cases, AD investigations cannot generally be 
suspended on the basis of quantitative restriction agreements. 
The one exception is where the AD investigation involves 
imports from a non-market economy country.
    The DOC may not, however, accept any suspension agreement 
in either an AD or CVD investigation unless it is satisfied 
that suspension of the investigation is in the public interest, 
and effective monitoring of the agreement is practicable. If 
the DOC determines not to accept a suspension agreement, it is 
to provide to the exporters who would have been subject to the 
agreement both the reasons for not accepting the agreement and 
an opportunity to submit comments, where practicable.
    Prior to actual suspension of an investigation, the DOC 
must provide notice of its intent to suspend and an opportunity 
for comment by interested parties. When the DOC decides to 
suspend the investigation, it must publish notice of the 
suspension, and issue an affirmative preliminary LTFV or 
subsidy determination (unless previously issued). The ITC also 
suspends its investigation. Any suspension of liquidation 
ordered as a result of the affirmative preliminary LTFV 
determination, however, is to be terminated, and all deposits 
of estimated duties or bonds posted are to be refunded or 
released.
    If, within 20 days after notice of suspension is published, 
the DOC receives a request for continuation of the 
investigation from a domestic interested party or from 
exporters accounting for a significant proportion of exports of 
the merchandise, then both the DOC and ITC must continue their 
investigations.
    The DOC has responsibility for overseeing compliance with 
any suspension agreement. Intentional violations of suspension 
agreements are subject to civil penalties.

AD or CVD order

    An AD or CVD order may be issued only if both the DOC and 
ITC issue affirmative final determinations, in both title VII 
AD and CVD investigations and in section 303 CVD investigations 
requiring an injury test.
    A DOC final LTFV determination must include its 
determinations of normal value and export price, which are the 
basis for assessment of AD duties and for deposit of estimated 
AD duties on future entries. Within 7 days of notice of an 
affirmative final ITC determination, the DOC must issue an AD 
duty order which (1) directs the Customs Service to assess AD 
duties equal to the amount by which normal value exceeds the 
export price, i.e., the dumping margin; (2) describes the 
merchandise to which the AD duty applies; and (3) requires the 
deposit of estimated AD duties pending liquidation of entries, 
at the same time as estimated normal customs duties are 
deposited. The DOC must publish notice of its final 
determination, which shall be the basis for assessment of AD 
duties and for deposit of estimated AD duties on future 
entries.
    For CVD investigations, the DOC must issue a CVD order 
within 7 days of notice of an affirmative final ITC 
determination, which (1) directs the Customs Service to assess 
countervailing duties equal to the amount of the net 
countervailable subsidy; (2) describes the merchandise to which 
the countervailing duty applies; and (3) requires the deposit 
of estimated countervailing duties pending liquidation of 
entries, at the same time as estimated normal customs duties 
are deposited. The DOC must publish notice of its determination 
of net countervailable subsidy which shall be the basis for 
assessment of countervailing duties and for deposit of 
estimated countervailing duties on future entries.

Differences between estimated and final duties

    If a cash deposit or bond collected as security for 
estimated AD or countervailing duties pursuant to an 
affirmative preliminary or final LTFV or CVD determination is 
greater than the amount of duty assessed pursuant to an AD or 
CVD order, then the difference between the deposit and the 
amount of final duty will be refunded for entries prior to 
notice of the final injury determination. Sections 707 and 737 
of the Tariff Act of 1930, as amended, provide that if the cash 
deposit or bond is lower than the final duty under the order, 
then the difference is disregarded. No interest accrues in 
either case.\15\
---------------------------------------------------------------------------
    \15\ With respect to AD determinations, section 40 of the Trade Law 
Technical Corrections and Miscellaneous Amendments Act of 1996 
clarifies that the cap on the amount of the AD duty applies not only to 
cash deposits but to bonds as well, making it consistent with the cap 
applied in CVD determinations.
---------------------------------------------------------------------------
    If estimated AD or countervailing duties deposited for 
entries after notice of the final injury determination are 
greater than the amount of final AD or countervailing duties 
determined under an AD or CVD order, then the difference will 
be refunded, together with interest on the amount of 
overpayment. If estimated duties are less than the amount of 
final duties, then the difference will be collected together 
with interest on the amount of such underpayment.

Administrative review

    The DOC is required, upon request, to conduct an annual 
review of outstanding AD and CVD orders and suspension 
agreements. For all entries of merchandise subject to an AD 
review, the DOC must determine the normal value, export price, 
and the amount of dumping margin. For all entries of 
merchandise subject to a CVD review, the DOC must review and 
determine the amount of any net countervailable subsidy. These 
determinations will provide the basis for assessment of AD and 
countervailing duties on all entries subject to the review, and 
for deposits of estimated duties on entries subsequent to the 
period of review.
    The results of its annual review must be published together 
with a notice of any AD or countervailing duty to be assessed, 
estimated duty to be deposited, or investigation to be resumed. 
Under the Uruguay Round Agreements Act, time limits were added 
to the administrative review process so that final 
determinations are due in 1 year (with extensions up to an 
additional 6 months available).

Changed circumstances review

    Under the statute, a review of a final determination or of 
a suspension agreement is to be conducted by the DOC or ITC 
whenever it receives information or a request showing changed 
circumstances sufficient to warrant such review. Without good 
cause shown, however, no final determination or suspension 
agreement can be reviewed within 24 months of its notice. The 
party seeking revocation of an order has the burden of 
persuasion as to whether there are changed circumstances 
sufficient to warrant revocation.

Sunset review

    The Uruguay Round Agreements provide for the termination, 
or sunset, of AD and CVD orders and suspension agreements after 
5 years unless the authorities determine that such expiry would 
be likely to lead to the continuation or recurrence of dumping, 
subsidization or injury. Accordingly, section 220 of the 
Uruguay Round Agreements Act provides that orders may be 
revoked and suspension agreements terminated after 5 years if 
the terms are met. The DOC publishes a notice of initiation of 
a sunset review not later than 30 days before the fifth 
anniversary of the order. A party interested in maintaining the 
order must respond to the notice by providing information to 
the DOC and ITC concerning the likely effects of revocation. 
The DOC is to conclude its investigation within 240 days of 
initiation, and the ITC within 360 days of initiation. These 
deadlines may be extended if the investigation is 
extraordinarily complicated.
    In AD cases, the DOC is to determine whether revocation of 
an order or termination of a suspension agreement would be 
likely to lead to continuation or recurrence of dumping. In 
making this determination, the DOC is to consider the weighted 
average dumping margins determined in the investigation and 
subsequent reviews and the volume of imports of the subject 
merchandise for the period before and the period after the 
issuance of the order or acceptance of the suspension 
agreement. The DOC may consider other enumerated factors, upon 
good cause shown. In addition, the DOC is to provide to the ITC 
the magnitude of the margin of dumping that is likely to 
prevail if the order is revoked or the suspended investigation 
terminated.
    In CVD cases, the DOC is to determine whether revocation of 
an order or termination of a suspension agreement would be 
likely to lead to continuation or recurrence of a 
countervailable subsidy. In making this determination, the DOC 
is to consider the net countervailable subsidy determined in 
the investigation and subsequent reviews and whether any change 
in the program which gave rise to the net countervailable 
subsidy has occurred that is likely to be of effect. The DOC 
may consider other enumerated factors, upon good cause shown. 
In addition, the DOC is to provide to the ITC the amount of the 
net countervailable subsidy that is likely to prevail if the 
order is revoked or the suspended investigation terminated.
    In both AD and CVD cases, the ITC is to determine whether 
revocation would be likely to lead to the likelihood of 
continuation or recurrence of material injury within a 
reasonably foreseeable period of time. In making this 
determination, the ITC is to consider the likely volume, price 
effect, and impact of subject imports on the industry if the 
order is revoked or the suspension agreement terminated. The 
ITC is to take into account its prior injury determinations, 
whether any improvement in the state of the industry is related 
to the order or the suspension agreement, and whether the 
industry is vulnerable to material injury if the order is 
revoked or the suspension agreement terminated.
    In AD sunset reviews, the ITC may also consider the 
magnitude of the dumping margin. In CVD sunset reviews, the ITC 
may also consider the magnitude of the net countervailable 
subsidy. The nature of the countervailable subsidy as well as 
whether the subsidy is covered by article 3 (export subsidies 
or subsidies contingent on the use of domestic over imported 
goods) or article 6.1 (subsidies causing serious prejudice) of 
the Subsidies Agreement must be considered.
    The ITC may cumulatively assess the volume and effect of 
imports of the subject merchandise from all countries subject 
to sunset reviews if such imports are likely to compete with 
each other and with domestic like products in the U.S. market. 
However, the ITC is not to cumulate imports a country if those 
imports are not likely to have a discernible adverse impact on 
the domestic industry.
    In addition, the new provision specifies that 2 years after 
the issuance of an order in which the subject merchandise is 
sold in the United States by an importer related to the 
exporter, and where the DOC determines that there is a 
reasonable basis to believe or suspect that duty absorption is 
occurring, the DOC is to examine in AD reviews whether duties 
have been absorbed by a foreign producer or exporter subject to 
the order. The ITC is to take such findings into account in its 
sunset injury review. The SAA accompanying the bill provides, 
however, that the provision is not to apply as a duty as cost 
provision, in which AD duties are deducted from export price if 
the related importer is being reimbursed for duties by the 
manufacturer, effectively doubling AD duties.\16\
---------------------------------------------------------------------------
    \16\ Uruguay Round Agreements Act Statement of Administrative 
Action at 885.
---------------------------------------------------------------------------
    Section 220 of the Uruguay Round Agreements Act provides 
that orders already in effect as of the January 1, 1995 date of 
implementation be deemed as issued on that date. Pursuant to 
the schedule laid out in section 220 for the review of 
transition orders, DOC began its review 18 months prior to 
their fifth anniversary date (July 1, 1998). Section 220 
provides that individual reviews shall be completed within 18 
months of initiation, and that the review of all transition 
orders shall be completed not later than 18 months after the 
fifth anniversary of the date such orders were issued (July 1, 
2001).

Expedited reviews with security in lieu of deposits

    In AD cases only, the DOC may permit, for not more than 90 
days after publication of an order, the posting of a bond or 
other security in lieu of the deposit of estimated AD duties if 
certain conditions exist. The DOC must be satisfied that it 
will be able to determine, within such 90-day period, the 
normal value and the export price for all merchandise entered 
on or after an affirmative LTFV determination (either 
preliminary or final, whichever is the first affirmative 
determination) and before publication of an affirmative final 
injury determination. Also, in order for the DOC to undertake 
this expedited review, the preliminary determination in the 
investigation must not have been extended because the case was 
``extraordinarily complicated,'' the final determination must 
not have been extended, the DOC must receive information 
indicating that the revised margin would be significantly less 
than the dumping margin specified in the AD order, and there 
must be adequate sales to the United States since the 
preliminary (or final) determination to form a basis for 
comparison. The determination of such new dumping margin will 
then provide the basis for assessment of AD duties on the 
entries for which the posting of bond or other security has 
been permitted, and will also provide the basis for deposits of 
estimated AD duties on future entries.

Anticircumvention authority

    In 1988, specific authority was added to U.S. law to 
authorize the DOC to take action to prevent or address attempts 
to circumvent an outstanding AD or CVD order. The authority 
addresses four particular types of circumvention: assembly of 
merchandise in the United States, assembly of merchandise in a 
third country, minor alterations of merchandise, and later-
developed merchandise. Under certain circumstances and after 
considering certain specified factors, the DOC may extend the 
scope of the AD or CVD order to include parts and components 
(in cases involving U.S. assembly), third country merchandise 
(in cases involving third country assembly), altered 
merchandise, or later-developed merchandise.
    As part of the Uruguay Round negotiations on AD, the United 
States sought the inclusion of an anticircumvention provision 
in the Antidumping Agreement. The negotiators, however, were 
unable to agree on a text concerning anticircumvention and 
referred the matter to the Committee on Antidumping Practices 
for resolution. Accordingly, the Agreement is silent concerning 
anticircumvention authority.
    The Uruguay Round Agreements Act modified the 
anticircumvention provision of the 1988 Act to focus on the 
nature of the assembly operation in the United States or third 
country as well as on whether the parts and components from the 
country subject to the order are a ``significant portion'' of 
the total value of the merchandise assembled in the United 
States or third country.

Best information available

    In order to promote transparency, the Uruguay Round 
signatories agreed to detailed guidelines concerning the use of 
``best information available'' (BIA). In seeking to implement 
those guidelines, the Uruguay Round Agreements Act preserves 
the ability of the agencies to rely on adverse inferences upon 
a finding that the party has failed to cooperate by not acting 
to the best of its ability to comply with a request. At the 
same time, however, the new law also contains limitations on 
the use of BIA, many of which are designed to assist small 
companies in providing information. For example, the agency is 
to consider the ability of an interested party to provide the 
information in the requested form and manner, and may modify 
the requirements upon a reasoned and timely explanation by that 
party. In addition, if the agency determines that a response 
does not comply with the request, the agency must, to the 
extent practicable, provide an opportunity to remedy the 
deficiency.
    The Agreements provide that the authorities are not 
justified in disregarding less than ideal information if the 
party acted to the best of its ability. Section 231 of the 
Uruguay Round Agreements Act provides that the agencies are not 
to decline to consider information that is timely submitted, 
verifiable, and not so incomplete that it cannot serve as a 
reliable basis for the determination, if the submitting party 
acted to the best of its ability to meet the requirements, and 
if the information can be used without undue difficulties.
    The Act further provides that if an agency relies on 
secondary information rather than on information submitted by a 
respondent, it must, to the extent practicable, corroborate 
that information from independent sources reasonably at its 
disposal.

Continued Dumping and Subsidy Offset Act

    Title X of the Agriculture and Related Agencies 
Appropriations Act for Fiscal Year 2001 contained the Continued 
Dumping and Subsidy Offset Act of 2000,\17\ commonly referred 
to as the Byrd Amendment, which provides for the annual 
distribution of AD and countervailing duties assessed pursuant 
to a CVD order, an AD order, or a finding under the Antidumping 
Act of 1921 to the affected domestic producers for qualifying 
expenditures. The provision amends title VII of the Tariff Act 
of 1930 by inserting a new section 754. The amendments made by 
the new section apply to all AD and CVD assessments made on or 
after October 1, 2000 with respect to orders in effect from 
January 1, 1999.
---------------------------------------------------------------------------
    \17\ Public Law 106-387, approved October 28, 2000, 19 U.S.C. 754.
---------------------------------------------------------------------------
    Under the new section 754, the term ``affected domestic 
producer'' is defined as a manufacturer, producer, farmer, 
rancher, or worker representative (including associations of 
such persons) that: (1) was a petitioner or interested party in 
support of the petition with respect to which an AD order, a 
finding under the Antidumping Act of 1921, or a CVD order has 
been entered; and (2) remains in operation. Companies, 
businesses, or persons that have ceased the production of the 
product covered by the order or finding, or who have been 
acquired by a company or business that is related to a company 
that opposed the investigation, shall not be considered an 
``affected domestic producer.''
    Section 754(d)(1) requires the ITC to forward a list to the 
Commissioner of the U.S. Customs Service of petitioners and 
persons with respect to each order or finding, and a list of 
persons that indicated support of a petition by letter or 
through questionnaire response. The ITC was required to submit 
its list related to orders and findings in effect on January 1, 
1999 within 60 days of the date of enactment of the section 
(i.e., by December 29, 2000). Thereafter, the ITC is to submit 
lists to the Commissioner of Customs within 60 days after the 
date an AD or CVD order or finding is issued. In those cases 
where an injury determination was not required or the ITC's 
records do not permit identification of petition supporters, 
the ITC is to consult with the DOC to determine the identity of 
the petitioner and those domestic parties who have entered 
appearances during administrative reviews.
    The Commissioner of Customs is responsible in section 
754(c) for prescribing procedures for the annual distribution 
of the AD and countervailing duties assessed. Distribution is 
to be made not later than 60 days after the first day of a 
fiscal year from duties assessed during the preceding fiscal 
year. At least 30 days prior to a distribution, the 
Commissioner is required to publish in the Federal Register a 
notice of intention to distribute and the list of affected 
domestic producers potentially eligible for the distribution 
based on the list obtained from the ITC. The Commissioner is to 
request certifications from each potentially eligible affected 
domestic producer indicating: (1) that the producer desires to 
receive a distribution; (2) that the producer is eligible to 
receive the distribution as an affected domestic producer; and 
(3) the qualifying expenditures incurred by the producer since 
the issuance of the order or finding for which distribution has 
not previously been made.
    The Commissioner distributes all funds (including all 
interest earned on the funds) from assessed duties received in 
the preceding fiscal year to affected domestic industries based 
on the certifications received. The distributions are to be 
made on a pro rata basis based on new and remaining qualifying 
expenditures. A ``qualifying expenditure'' is defined as an 
expenditure incurred after the issuance of the AD finding or 
order or CVD order in any of the following categories: (1) 
manufacturing facilities; (2) equipment; (3) research and 
development; (4) personnel training; (5) acquisition of 
technology; (6) health care benefits to employees paid for by 
the employer; (7) pension benefits to employees paid by the 
employer; (8) environmental equipment, training, or technology; 
(9) acquisition of raw materials and other inputs; and (10) 
working capital or other funds needed to maintain production.
    For each order or finding in effect on the date of 
enactment of the section, the Commissioner of Customs was 
required to establish a special account in the U.S. Treasury 
within 14 days. Thereafter, the Commissioner is to establish a 
special account in the U.S. Treasury with respect to each order 
or finding within 14 days after the date of that an AD order or 
finding or CVD order takes effect. The Commissioner is 
responsible for depositing all AD or countervailing duties 
(including interest earned on such duties) that are assessed 
after the effective date of this section into the special 
account appropriate for each AD order or finding or CVD order.
    The Commissioner is to prescribe the time and manner in 
which distribution of the funds in a special account shall be 
made.
    A special account is to terminate after: (1) the order or 
finding with respect to which the account was established has 
terminated; (2) all entries relating to the order or finding 
are liquidated and duties assessed collected; (3) the 
Commissioner has provided notice and a final opportunity to 
obtain distribution; and (4) 90 days has elapsed from the date 
of notice and final opportunity to obtain distribution.
    On December 21, 2000, Australia, Brazil, Chile, the 
European Union (EU), India, Indonesia, Japan, Korea, and 
Thailand requested consultations with the United States in the 
World Trade Organization (WTO) regarding the Continued Dumping 
and Subsidy Offset Act of 2000. Canada and Mexico requested to 
join the WTO consultations previously requested on January 16, 
2001 and January 22, 2001 respectively.

Judicial review

    An interested party dissatisfied with a final AD or CVD 
determination or review may file an action in the U.S. Court of 
International Trade (CIT) for judicial review. To obtain 
judicial review of the administrative action, a summons and 
complaint must be filed concurrently within 30 days of 
publication of the final determination. As set forth in section 
516A of the Tariff Act of 1930, as amended, the standard of 
review used by the Court is whether the determination is 
supported by ``substantial evidence on the record'' or 
``otherwise not in accordance with law.'' Appeal of negative 
preliminary determinations is based on whether the 
determination is ``arbitrary, capricious, an abuse of 
discretion, or [is] otherwise not in accordance with law.''
    Judicial review of interlocutory decisions, previously 
permitted, was eliminated by section 623 of the Trade and 
Tariff Act of 1984. Decisions of the CIT are subject to appeal 
to the U.S. Court of Appeals for the Federal Circuit.
    As a result of provisions in the North American Free Trade 
Agreement (NAFTA) and its implementing legislation, final 
determinations in AD or CVD proceedings involving products of 
Canada and Mexico are reviewed by a NAFTA panel instead of by 
the CIT, if either the United States, Canadian or Mexican 
government so requests. The panel will apply U.S. law and U.S. 
standards of judicial review to decide whether U.S. law was 
applied correctly by the DOC and the ITC.

WTO panel review

    As part of the Uruguay Round Agreements, the parties agreed 
to a strengthened dispute resolution process under the World 
Trade Organization (WTO), in which parties are permitted to 
bring their disputes to a review body for resolution. The 
Uruguay Round Agreements Act contains provisions relating to 
the adoption of panel reports in AD and CVD cases.
    Section 129 of the Uruguay Round Agreements Act provides 
that if a dispute settlement panel or appellate body finds that 
an action by the ITC is not in conformity with U.S. 
obligations, USTR may request that the ITC issue an advisory 
report on whether the statute permits it to take steps that 
would render its determination not inconsistent with those 
findings. If the ITC issues an affirmative report, USTR may 
request that it issue a determination not inconsistent with the 
findings of the panel or appellate body. If, by virtue of that 
determination, an AD or CVD order is no longer supported by an 
affirmative determination, USTR, after consultation with 
Congress, may direct the ITC to revoke the order. However, the 
President may, again after consultation with Congress, reduce, 
modify, or terminate the agency action.
    If a dispute settlement panel or appellate body finds that 
an action by the DOC is not in conformity with U.S. 
obligations, USTR may request that the DOC issue a 
determination that would render its determination not 
inconsistent with those findings, after consultation with 
Congress. USTR may further request that the DOC implement that 
determination.
    Any ITC and DOC action implemented as a result of dispute 
settlement is to apply to liquidated entries of the subject 
merchandise entered on or after the date on which USTR directs 
the ITC to revoke an order or the DOC to implement a 
determination.
WTO panel determinations
    In 1997, the Republic of Korea challenged the DOC's AD 
review of dynamic random access memory (DRAM) semiconductors 
from Korea, alleging that the DOC's decision not to revoke the 
AD order was inconsistent with the Antidumping Agreement and 
GATT 1994. A WTO panel was established on January 16, 1998. The 
panel ruled in favor of Korea on January 29, 1999. While the 
panel rejected almost all of Korea's claims, if found that the 
``not likely'' standard in the DOC's regulations did not meet 
the requirements of Article 11.2 of the Antidumping Agreement. 
Neither side appealed the decision. On April 15, 1999, the 
United States indicated its intention to comply with the panel 
decision. The DOC amended its regulations and made a 
redetermination under the revised regulations to retain the AD 
order on DRAMs from Korea. Korea challenged U.S. compliance 
with the panel decision and on April 6, 2000 requested that the 
panel be reconvened to examine U.S. implementation. The parties 
then reached a mutually satisfactory solution regarding this 
matter, and Korea withdrew its request on October 20, 2000. 
Specifically, the DOC agreed to terminate the AD order on 
January 1, 2000 in exchange for Korea's agreement to collect 
cost and price data on DRAMs of one megabit and above. This 
information will be made available to the DOC within 14 days 
after the filing of a new AD case.
    The Foreign Sales Corporation (FSC) provisions of the U.S. 
tax code (sections 921-927 of the Internal Revenue Code) 
provide exporters with a partial tax exemption on certain 
foreign income of FSCs, which are foreign subsidiaries of U.S. 
companies. The EU challenged these provisions, claiming that 
these rules constituted prohibited export subsidies and import 
substitution subsidies under the Subsidies Agreement, and that 
they violated the export subsidy provisions of the Agreement on 
Agriculture. A WTO panel was established on September 22, 1998. 
The panel found in favor of the EU on October 8, 1999 on U.S. 
violations of the Subsidies Agreement and the Agreement on 
Agriculture. In the panel's view, in the case of a tax measure, 
a subsidy exists if ``but for'' the measure, a firm's tax 
liability would be increased and the existence of the subsidy 
results in revenue foregone to the government. Applying this 
standard to the FSC provisions, the panel concluded that those 
provisions constituted a subsidy. Moreover, the panel found the 
subsidy to be ``contingent on export performance.'' On February 
24, 2000, the Appellate Body upheld the panel's findings on 
U.S. violations of the Subsidies Agreement, but reversed the 
panel's findings regarding the Agreement on Agriculture. The 
panel and Appellate Body reports were adopted on March 20, 
2000, and on April 7, 2000, the United States announced its 
intention to come into compliance with its WTO obligations. The 
United States amended the FSC provisions of the U.S. tax code 
to address the panel report in Public Law 106-519, approved 
November 15, 2000. On December 7, 2000, the EU filed a request 
for establishment of a panel to review the legislation, and the 
panel was established on December 20, 2000.
    Title VII of the Revenue Act of 1916, commonly referred to 
as the Antidumping Act of 1916, establishes a civil cause of 
action in federal court for private damages as well as criminal 
penalties against parties who dump foreign merchandise in the 
United States. The EU challenged this provision of U.S. law, 
claiming that the statute violates U.S. obligations under the 
Antidumping Agreement and GATT 1994. A WTO panel was formed on 
January 29, 1999. The panel ruled in favor of the EU on March 
31, 2000. Separately, Japan sought its own rulings on the same 
matter from the same panelists; that report was circulated on 
May 29, 2000. The panel found that the 1916 Act is inconsistent 
with WTO rules because the specific intent requirement of the 
Act does not satisfy the material injury test required by the 
Antidumping Agreement. The panel also found that the civil and 
criminal penalties in the 1916 Act go beyond the provisions of 
the Antidumping Agreement. The Appellate Body proceedings on 
both cases were consolidated into one, and on August 28, 2000 
the Appellate Body affirmed the panel reports. The United 
States is in arbitration on a compliance schedule and is 
seeking a deadline of 15 months from the Appellate Body 
decision (November 2001).
    The EU challenged the imposition of countervailing duties 
on certain hot-rolled lead and bismuth carbon steel (lead bar) 
from the United Kingdom, contending that the DOC had imposed 
countervailing duties on two private successor companies of 
government-owned British Steel Corporation (BSC) based on a 
methodology that attributed a portion of the massive subsidies 
originally received by BSC to the two successor companies. The 
EU alleged violations of Articles 1.1(b), 10, 14, and 19.4 of 
the Subsidies Agreement. A WTO panel was established on 
February 17, 1999. Brazil and Mexico both intervened as third 
parties. The panel ruled in favor of the EU on December 23, 
1999. In reaching its decision, the panel disagreed with how 
the DOC accounts for the privatization of a government-owned 
company and insisted that an investigating authority (such as 
the DOC) must re-measure the benefit of pre-privatization 
subsidies based on circumstances at the time of the 
privatization. Specifically, in order to impose countervailing 
duties, the investigating authority must demonstrate that the 
producer or exporter of the particular imports continues to 
enjoy the benefit of a subsidy (i.e., as in a competitive 
advantage) at the time of the production or exportation of 
those goods. The panel further explained that the successor 
privatized company should not be considered as having realized 
any benefit from pre-privatization subsidies if fair market 
value was paid for the government-owned company. In the case of 
BSC, the panel found that none of the benefit from the pre-
privatization subsidies would be attributed to the two 
successor, privatized companies. The CVD order in question was 
revoked on January 1, 2000 under the DOC's ``sunset review'' 
procedures. On November 13, 2000, the EU requested 
consultations with the United States on 14 similar CVD cases in 
which the United States imposed duties on privatized European 
companies on the basis that the previous subsidies they had 
received had been passed through to the new owners. 
Consultations were held with the EU on December 7, 2000. On 
December 21, 2000, Brazil requested similar consultations with 
the United States.

   Enforcement of U.S. Rights Under Trade Agreements and Response to 
 Certain Foreign Practices: Sections 301-310 of the Trade Act of 1974, 
                               as amended

    Chapter 1 of title III (sections 301-310) of the Trade Act 
of 1974, as amended,\18\ provides the authority and procedures 
to enforce U.S. rights under international trade agreements and 
to respond to certain unfair foreign practices. The predecessor 
statute, section 252 of the Trade Expansion Act of 1962,\19\ 
was repealed and section 301 established in its place under the 
Trade Act of 1974. Section 301 was amended under title IX of 
the Trade Agreements Act of 1979 \20\ in two principal 
respects: (1) to include specific authority to enforce U.S. 
rights and to respond to actions by foreign countries 
inconsistent with or otherwise denying U.S. benefits under 
trade agreements; and (2) to place specific time limits on the 
procedures for investigating and taking action on petitions. 
Some further amendments were enacted under sections 304 and 
307(b) of the Trade and Tariff Act of 1984 \21\ to clarify 
certain authorities and practices covered by section 301, and 
to authorize certain actions with respect to foreign export 
performance requirements.
---------------------------------------------------------------------------
    \18\ Public Law 93-618, approved January 3, 1975, 19 U.S.C. 2411.
    \19\ Public Law 87-794, section 252, approved October 11, 1962.
    \20\ Public Law 96-39, title IX, approved July 26, 1979.
    \21\ Public Law 98-573, approved October 30, 1984.
---------------------------------------------------------------------------
    The current statute reflects major modifications made by 
sections 1301-1303 of the Omnibus Trade and Competitiveness Act 
of 1988 \22\ to what is commonly called ``section 301,'' as 
well as enactment of additional authorities commonly known as 
``Super 301'' \23\ to deal with priority practices and priority 
countries and ``Special 301'' to deal with priority 
intellectual property rights (IPR) practices. The principal 
amendments in 1988 to strengthen the basic section 301 
authority were: (1) to require the U.S. Trade Representative 
(USTR) to make unfair trade practice determinations in all 
cases, and to transfer authority to determine and implement 
section 301 action from the President to the USTR, subject to 
the specific direction, if any, of the President; (2) to make 
section 301 action mandatory in cases of trade agreement 
violations or other ``unjustifiable'' practices, except in 
certain circumstances; (3) to include additional types of 
practices as specifically actionable under section 301; (4) to 
tighten and specify time limits on all investigations and 
actions; and (5) to require monitoring and enforcement of 
foreign settlement agreements and to provide for modification 
and termination of section 301 actions.
---------------------------------------------------------------------------
    \22\ Public Law 100-418, approved August 23, 1988.
    \23\ The Statutory authority for Super 301 expired in 1990. Since 
then, the President has chosen to renew Super 301 authorities three 
times by Executive Order. On March 31, 1999, the President issued 
Executive Order 13116 (64 Fed. Reg. 16333), which renewed Super 301 
authorities through 2001.
---------------------------------------------------------------------------
    Further modifications were made by the Uruguay Round 
Agreements Act \24\ to sections 301-310 and 182 of the Trade 
Act of 1974 to conform to the time limits under the WTO 
Understanding on Rules and Procedures Governing the Settlement 
of Disputes (Dispute Settlement Understanding) and to clarify 
and strengthen the scope and application of these domestic 
authorities.
---------------------------------------------------------------------------
    \24\ Public Law 103-465, approved December 8, 1993.
---------------------------------------------------------------------------

           International Consultations and Dispute Settlement

    Article XII and XIII of the General Agreement on Tariffs 
and Trade (GATT), as elaborated upon by the Texts Concerning a 
Framework for the Conduct of World Trade concluded in the Tokyo 
Round of multilateral trade negotiations (MTN),\25\ provided 
the general consultation and dispute settlement procedures 
applicable to GATT rights and obligations. In addition, the 
GATT agreements concluded in the MTN on specific non-tariff 
barriers each contained procedures for consultation and 
resolution of disputes among signatories concerning practices 
covered by each agreement.
---------------------------------------------------------------------------
    \25\ MTN/FR/W/20/Rev. 2, reprinted in House Doc. No. 96-153, pt. I 
at 619.
---------------------------------------------------------------------------
    As part of the Uruguay Round, the parties agreed to the 
Understanding on Rules and Procedures Governing the Settlement 
of Disputes which establishes a single, integrated Dispute 
Settlement Body dealing with disputes arising under any of the 
WTO agreements. One of the most marked changes in this new 
dispute resolution mechanism is that all of the key decisions 
in the dispute settlement process, including the establishment 
of panels, adoption of panel and Appellate Body reports, and 
the authorization to retaliate will be automatic unless there 
is a unanimous vote against the action. Accordingly, parties 
may no longer block panel reports adverse to them. In addition, 
timetables are established for each phase of the dispute 
resolution process. Moreover, an Appellate Body is established 
to examine issues of law covered in a panel report and legal 
interpretations developed by the panel. Retaliation, in the 
form of suspended concessions or obligations, is to be limited 
to the sector that is at issue in the proceeding, unless it is 
not practicable or effective. Issues related to the level of 
retaliation may be submitted to binding arbitration.
     In 1998, the European Union (EU) initiated a dispute 
settlement case against the United States challenging the WTO 
consistency of section 301. Specifically, the EU claimed that 
section 301 violated the Dispute Settlement Understanding (DSU) 
because certain statutory deadlines could require the USTR to 
take action before WTO panel proceedings were finished. The EU 
complaint was not based on U.S. actions in a particular section 
301 case.
    On December 22, 1999, a WTO panel rejected the EU's 
complaint. The panel found that section 301 provides the USTR 
with adequate discretion to comply with the DSU rules in all 
cases, and that the USTR had in fact exercised that discretion 
in accordance with U.S. WTO obligations in every section 301 
determination involving an alleged violation of U.S. WTO 
rights. The EU did not appeal the panel decision. The decision 
was adopted by the WTO Dispute Settlement Body on January 27, 
2000.

Carousel Retaliation

    Section 407 of the Trade and Development Act of 2000 (P.L. 
106-200) addresses effective operation of the WTO dispute 
settlement mechanism and lack of compliance with WTO panel 
decisions, particularly in cases brought by the United States 
in disputes with the EU involving bananas and beef. Section 407 
amended sections 301-310 of the Trade Act of 1974 to require 
the USTR to make periodic revisions of retaliation lists 120 
days from the date the retaliation list is made and every 180 
days thereafter. The purpose of this provision is to facilitate 
efforts by the USTR to enforce rights of the United States if 
another WTO member fails to comply with the results of a 
dispute settlement proceeding.

           Enforcement Authority and Procedures (Section 301)

    Sections 301-309 of the Trade Act of 1974, as amended, 
provide the domestic counterpart to the WTO consultation and 
dispute settlement procedures. They contain the authority under 
U.S. domestic law to take retaliatory action, including import 
restrictions if necessary, to enforce U.S. rights against 
violations of trade agreements by foreign countries and 
unjustifiable, unreasonable, or discriminatory foreign trade 
practices which burden or restrict U.S. commerce. Section 301 
authority applies to practices and policies of countries 
whether or not the measures are covered by, or the countries 
are members of, GATT/WTO or other trade agreements. The USTR 
administers the statutory procedures through an interagency 
committee.

Basis and form of authority

    Under section 301, if the USTR determines that a foreign 
act, policy, or practice violates or is inconsistent with a 
trade agreement, or is unjustifiable and burdens or restricts 
U.S. commerce, then action by the USTR to enforce the trade 
agreement rights or to obtain the elimination of the act, 
policy, or practice is mandatory, subject to the specific 
direction, if any, of the President. The USTR is not required 
to act, however, if (1) a WTO/GATT panel has reported, or a 
dispute settlement ruling under a trade agreement finds, that 
U.S. trade agreement rights have not been denied or violated; 
(2) the USTR finds that the foreign country is taking 
satisfactory measures to grant U.S. trade agreement rights, has 
agreed to eliminate or phase out the practice or to an imminent 
solution to the burden or restriction on U.S. commerce, or has 
agreed to provide satisfactory compensatory trade benefits; or 
(3) the USTR finds, in extraordinary cases, that action would 
have an adverse impact on the U.S. economy substantially out of 
proportion to the benefits of action, or finds that action 
would cause serious harm to the U.S. national security. Any 
action taken must affect goods or services of the foreign 
country in an amount equivalent in value to the burden or 
restriction being imposed by that country on U.S. commerce.
    If the USTR determines that the act, policy, or practice is 
unreasonable or discriminatory and burdens or restricts U.S. 
commerce and action by the United States is appropriate, then 
the USTR has discretionary authority to take all appropriate 
and feasible action, subject to the specific direction, if any, 
of the President, to obtain the elimination of the act, policy, 
or practice.
    With respect to the form of action, the USTR is authorized 
to (1) suspend, withdraw, or prevent the application of 
benefits of trade agreement concessions to carry out a trade 
agreement with the foreign country involved; (2) impose duties 
or other import restrictions on the goods of, and 
notwithstanding any other provision of law, fees or 
restrictions on the services of, the foreign country for such 
time as the USTR deems appropriate; (3) withdraw or suspend 
perferential duty treatment under the Generalized System of 
Preferences (GSP), the Carribean Basin Initiative, or the 
Andean Trade Preferences Act; or (4) enter into binding 
agreements that commit the foreign country to (a) eliminate or 
phase out the act, policy, or practice, (b) eliminate any 
burden or restriction on U.S. commerce resulting from the act, 
policy, or practice, or (c) provide the United States with 
compensatory trade benefits that are satisfactory to the USTR. 
The USTR may also take all other appropriate and feasible 
action within the power of the President that the President may 
direct the USTR to take.
    With respect to services, the USTR may also restrict the 
terms and conditions or deny the issuance of any access 
authorization (e.g., license, permit, order) to the U.S. market 
issued under federal law, notwithstanding any other law 
governing the authorization. Such action can apply only 
prospectively to authorizations granted or applications pending 
on or after the date a section 301 petition is filed or the 
USTR initiates an investigation. Before imposing fees or other 
restrictions on services subject to federal or state 
regulation, the USTR must consult as appropriate with the 
federal or state agency concerned.
    Under section 301, action may be taken on a non-
discriminatory basis or solely against the products or services 
of the country involved and with respect to any goods or sector 
regardless of whether they were involved in the particular act, 
policy, or practice. The statute does not require that action 
taken under section 301 be consistent with U.S. obligations 
under international agreements, but the dispute-settlement 
provisions of such agreement could be utilized.
    If the USTR determines that action is to be in the form of 
import restrictions, it must give preference to tariffs over 
other forms of import restrictions and consider substituting on 
an incremental basis an equivalent duty for any other form of 
import restriction imposed. Any action with respect to export 
targeting must reflect, to the extent possible, the full 
benefit level of the targeting over the period during which the 
action taken has an effect.

Coverage of authority

    The term ``unjustifiable'' refers to acts, policies, or 
practices which violate or are inconsistent with U.S. 
international legal rights, such as denial of national or 
normal trade relations (NTR) treatment, right of establishment, 
or protection of intellectual property rights.
    The term ``unreasonable'' refers to acts, policies, or 
practices which are not necessarily in violation of or 
inconsistent with U.S. international legal rights, but are 
otherwise unfair and inequitable. In determining whether an 
act, policy, or practice is unreasonable, reciprocal 
opportunities in the United States for foreign nationals and 
firms must be taken into account, to the extent appropriate. 
Unreasonable measures include, but are not limited to, acts, 
policies, or practices which (1) deny fair and equitable (a) 
opportunities for the establishment of an enterprise, (b) 
provision of adequate and effective IPR protection, 
notwithstanding the fact that the foreign country may be in 
compliance with the specific obligations of the Agreement on 
Trade-Related Aspects of Intellectual Property Rights (TRIPs), 
(c) non-discriminatory market access opportunities for U.S. 
persons that rely upon intellectual property (IP) protection, 
or (d) market opportunities, including foreign government 
toleration of systematic anticompetitive activities by or among 
enterprises in the foreign country that have the effect of 
restricting, on a basis inconsistent with commercial 
considerations, access of U.S. goods or services to a foreign 
market; (2) constitute export targeting; or (3) constitute a 
persistent pattern of conduct denying internationally-
recognized worker rights, unless the USTR determines the 
foreign country has taken or is taking actions that demonstrate 
a significant and tangible overall advancement in providing 
those rights and standards throughout the country or such acts, 
policies, or practices are not inconsistent with the level of 
economic development of the country.
    The term ``export targeting'' refers to any government plan 
or scheme consisting of a combination of coordinated actions 
bestowed on a specific enterprise, industry, or group thereof, 
which has the effect of assisting that entity to become more 
competitive in the export of a class or kind of merchandise.
    The term ``discriminatory'' includes, where appropriate, 
any act, policy, or practice which denies national or NTR 
treatment to U.S. goods, services, or investment.
    The term ``commerce'' includes, but is not limited to, 
services (including transfers of information) associated with 
international trade, whether or not such services are related 
to specific goods, and foreign direct investment by U.S. 
persons with implications for trade in goods or services.

Petitions and investigations

    Any interested person may file a petition under section 302 
with the USTR requesting that action be taken under section 301 
and setting forth the allegations in support of the request. 
The USTR reviews the allegations and must determine within 45 
days after receipt of the petition whether to initiate an 
investigation. The USTR may also self-initiate an investigation 
after consulting with appropriate private sector advisory 
committees. Public notice of determinations is required, and in 
the case of decisions to initiate, publication of a summary of 
the petition and an opportunity for the presentation of views, 
including a public hearing if timely requested by the 
petitioner or any interested person.
    In determining whether to initiate an investigation of any 
act, policy, or practice specifically enumerated as actionable 
under section 301, the USTR has the discretion to determine 
whether action under section 301 would be effective in 
addressing that act, policy, or practice.
    Section 303 requires the use of international procedures 
for resolving the issues to proceed in parallel with the 
domestic investigation. The USTR must, on the same day as the 
determination is made, initiate an investigation and request 
consultations with the foreign country concerned regarding the 
issues involved. The USTR may delay the request for up to 90 
days in order to verify or improve the petition to ensure an 
adequate basis for consultation.
    If the issues are covered by a trade agreement and are not 
resolved during the consultation period, if any, specified in 
the agreement, then the USTR must promptly request formal 
dispute settlement under the agreement before the earlier of 
the close of that consultation period or 150 days after the 
consultations began. The USTR must seek information and advice 
from the petitioner, if any, and from appropriate private 
sector advisory committees in preparing presentations for 
consultations and dispute settlement proceedings.

USTR unfairness and action determinations and implementation

    Section 304 sets forth specific time limits within which 
the USTR must make determinations of whether an act, policy, or 
practice meets the unfairness criteria of section 301 and, if 
affirmative, what action, if any, should be taken. These 
determinations are based on the investigation under section 302 
and, if a trade agreement is involved, on the international 
consultations and, if applicable, on the results of the dispute 
settlement proceedings under the agreement.
    The USTR must make these determinations:
          (1) within 18 months after the date the investigation 
        is initiated or 30 days after the date the dispute 
        settlement procedure is concluded, whichever is 
        earlier, in all cases involving a trade agreement;
          (2) within 12 months after the date the investigation 
        is initiated in cases not involving trade agreements; 
        or
          (3) within 6 months after the date the investigation 
        is initiated in cases involving IPR priority countries 
        if the USTR does not consider that a trade agreement, 
        including TRIPs, is involved, or within 9 months if the 
        USTR determines such cases (1) involve complex or 
        complicated issues that require additional time, (2) 
        the foreign country is making substantial progress on 
        legislative or administrative measures that will 
        provide adequate and effective protection, or (3) the 
        foreign country is undertaking enforcement measures to 
        provide adequate and effective protection.
The applicable deadline is postponed by up to 90 days if 
consultations with the foreign country involved were so 
delayed.
    Before making the determinations, the USTR must provide an 
opportunity for the presentation of views, including a public 
hearing if requested by an interested person, and obtain advice 
from the appropriate private sector advisory committees. If 
expeditious action is required, the USTR must comply with these 
requirements after making the determinations. The USTR may also 
request the views of the International Trade Commission on the 
probable impact on the U.S. economy of taking the action. Any 
determinations must be published in the Federal Register.
    Section 305 requires the USTR to implement any section 301 
actions within 30 days after the date of the determination to 
take action. The USTR may delay implementation by not more than 
180 days if (1) the petitioner or, in the case of a self-
initiated investigation, a majority of the domestic industry, 
requests a delay; or (2) the USTR determines that substantial 
progress is being made, or that a delay is necessary or 
desirable to obtain U.S. rights or a satisfactory solution. In 
cases involving IPR priority countries (see discussion below), 
implementation of actions may be delayed by not more than 90 
days beyond the 30 days and only if extraordinary circumstances 
apply.
    If the USTR determines to take no action in a case 
involving an affirmative determination of export targeting, the 
USTR must take alternative action in the form of establishing 
an advisory panel to recommend measures to promote the 
competitiveness of the affected domestic industry. The panel 
must submit a report on its recommendations to the USTR and the 
Congress within 6 months. On the basis of this report and 
subject to the specific direction, if any, of the President, 
the USTR may take administrative actions authorized under any 
other law and propose legislation to implement any other 
actions that would restore or improve the international 
competitiveness of the domestic industry. USTR must submit a 
report to the Congress within 30 days after the panel report is 
submitted on the actions taken and proposals made.

Monitoring of foreign compliance; modification and termination of 
        actions

    Section 306 requires the USTR to monitor the implementation 
of each measure undertaken or settlement agreement entered into 
by a foreign country under section 301. If the USTR considers 
that a foreign country is not satisfactorily implementing a 
measure or agreement, the USTR must determine what further 
action will be taken under section 301. Such foreign non-
compliance is treated as a violation of a trade agreement 
subject to mandatory section 301 action, subject to the same 
time limits and procedures for implementation as other action 
determinations. If the USTR considers that the foreign country 
has failed to implement a recommendation made pursuant to 
dispute settlement proceedings under the WTO, the USTR must 
make this determination no later than 30 days after the 
expiration of the reasonable period of time provided for such 
implementation in the DSU. Before making the determination on 
further action, the USTR must consult with the petitioner, if 
any, and with representatives of the domestic industry 
concerned, and provide interested persons an opportunity to 
present views.
    Section 307 authorizes the USTR to modify or terminate a 
section 301 action, subject to the specific direction, if any, 
of the President, if (1) any of the exceptions to mandatory 
section 301 action in the case of trade agreement violations or 
unjustifiable acts, policies, or practices applies; (2) the 
burden or restriction on U.S. commerce of the unfair practice 
has increased or decreased; or (3) discretionary section 301 
action is no longer appropriate. Before modifying or 
terminating any section 301 action, the USTR must consult with 
the petitioner, if any, and with representatives of the 
domestic industry concerned, and provide an opportunity for 
other interested persons to present views.
    Any section 301 action terminates automatically if it has 
been in effect for 4 years and neither the petitioner nor any 
representative of the domestic industry which benefits from the 
action has submitted to the USTR in the final 60 days of that 
4-year period a written request for continuation. The USTR must 
give the petitioner and representatives of the domestic 
industry at least 60 days advance notice by mail of 
termination. If a request for continuation is submitted, the 
USTR must conduct a review of the effectiveness of section 301 
or other actions in achieving the objectives and the effects of 
actions on the U.S. economy, including consumers.

Information requests; reporting requirements

    Under section 308, the USTR is to make available 
information (other than confidential) upon receipt of a written 
request by any person concerning (1) the nature and extent of a 
specific trade policy or practice of a foreign country with 
respect to particular goods, services, investment, or IPR to 
the extent such information is available in the federal 
government; (2) U.S. rights under any trade agreement and the 
remedies which may be available under that agreement and U.S. 
laws; and (3) past and present domestic and international 
proceedings or actions with respect to the policy or practice. 
If the information is not available, within 30 days after 
receipt of the request, the USTR must request the information 
from the foreign government or decline to request the 
information and inform the person in writing of the reasons.
    The USTR must submit a semiannual report to the Congress 
describing petitions filed and determinations made, 
developments in and the status of investigations and 
proceedings, actions taken or the reasons for no action under 
section 301, and the commercial effects of section 301 actions 
taken. The USTR must also keep the petitioner regularly 
informed of all determinations and developments regarding 
section 301 investigations.

   Identification of Intellectual Property Rights Priority Countries 
                             (Special 301)

    Section 182 of the Trade Act of 1974, added by section 1303 
of the Omnibus Trade and Competitiveness Act of 1988, requires 
the USTR to identify, within 30 days after submission of the 
annual National Trade Estimates (foreign trade barriers) report 
to the Congress required by section 181 the 1974 Act (i.e., by 
April 30) those foreign countries that (1) deny adequate and 
effective protection of IPR or fair and equitable market access 
to U.S. persons that rely upon IP protection; and (2) those 
countries under paragraph (1) determined by the USTR to be 
``priority foreign countries.'' The USTR is to identify as 
priority countries only those that have the most onerous or 
egregious acts, policies, or practices with the greatest 
adverse impact on the relevant U.S. products, and that are not 
entering into good faith negotiations or making significant 
progress in bilateral or multilateral negotiations to provide 
adequate and effective IPR protection. In identifying foreign 
countries, the USTR is to take into account the history of IP 
laws and practices of the foreign country as well as efforts of 
the United States, and the response of the foreign country, to 
achieve adequate and effective protection and enforcement of 
IPR. A country may be identified notwithstanding the fact that 
it may be in compliance with the specific obligations of the 
TRIPs Agreement. The USTR at any time may revoke or make an 
identification of a priority country, but must include in the 
semiannual section 301 report to the Congress a detailed 
explanation of the reasons for a revocation.
    In addition, as a matter of administrative practice, the 
USTR has established a ``priority watch list'' of countries 
whose acts, policies, and practices meet some, but not all, of 
the criteria for priority foreign country identification. The 
problems of these countries warrant active work for resolution 
and close monitoring to determine whether further Special 301 
action is needed. Also, the USTR maintains a ``watch list'' of 
countries that warrant special attention because they maintain 
IP practices or barriers to market access that are of 
particular concern. Finally, the USTR has added a ``Special 
Mention'' category.
     Section 302(b) requires the USTR to initiate a section 301 
investigation within 30 days after identification of a priority 
country with respect to any act, policy, or practice of that 
country that was the basis of the identification, unless the 
USTR determines initiation of an investigation would be 
detrimental to U.S. economic interests and reports the reasons 
in detail to the Congress. The procedural and other 
requirements of section 301 authority generally apply to these 
cases, except that investigations must be concluded and 
determinations made on whether the measures are actionable and 
an appropriate response within a tighter time limit of 6 
months, which may be extended to 9 months if certain statutory 
criteria are met.

History of Special 301

    On May 26, 1989, after the first annual Special 301 review, 
the USTR announced that because of significant progress made in 
various negotiations, no priority countries had been identified 
under Special 301. Rather, under administrative authority, 25 
countries were singled out whose practices deserved special 
attention, of which 17 countries were placed on a newly created 
watch list and 8 countries were placed on a new priority watch 
list to be reviewed again no later than November 1, 1989.
    On November 1, 1989, the USTR announced that progress had 
been made in negotiations to obtain improved IPR protection and 
enforcement with each of the eight countries on the priority 
watch list. Korea, Taiwan, and Saudi Arabia were moved to the 
watch list because of their significant progress. The other 
five countries (Brazil, India, Mexico, People's Republic of 
China (PRC), and Thailand) remained on the priority watch list. 
No country was designated as a ``priority foreign country'' 
making it subject to section 301 investigation.
    In January 1990, Mexico was removed from all Special 301 
lists after outlining a program for improved IP protection and 
enforcement. On April 27, 1990, the USTR noted that because 
significant progress had been made in negotiations with 
countries previously identified under Special 301, no country 
would be designated as a ``priority foreign country'' in 1990. 
At that time, Portugal also was removed from all lists, due to 
improved protection of IPR in that country.
    On April 26, 1991, the USTR announced the identification of 
the PRC, India, and Thailand as ``priority foreign countries.'' 
All three countries had been on the priority watch list since 
the first annual review in 1989 with no significant progress 
made. Section 301 investigations of the China and India 
protection deficiencies began on May 26; Thailand's practices 
were already the subject of two section 301 investigations. 
Brazil was retained and the European Community (EC) and 
Australia were added to the priority watch list; 23 countries 
were retained or placed on the watch list, and Malaysia was 
removed. On November 26, the USTR announced that negotiations 
with the PRC had not succeeded; a draft list of Chinese 
products that might be subject to retaliatory tariffs was 
published for public comment the following day. On December 16, 
the USTR announced that January 16, 1992 would be the firm 
deadline for concluding any further negotiations with China and 
determining the specific response to inadequate protection. On 
November 26, the deadline for the India investigation was 
extended because of progress made and the complex issues 
involved.
    On January 16, 1992, the USTR announced that the United 
States and China had signed a Memorandum of Understanding that 
committed China to provide improved protection for U.S. IPR and 
ended the Special 301 investigation. On April 29, the USTR 
announced the addition of Taiwan and the retention of India and 
Thailand as ``priority foreign countries.'' Six countries--
Egypt, Hungary, Korea, the Philippines, Poland, and Turkey--
were placed on the priority watch list; Australia, Brazil, and 
the EC were retained on that list. Twenty-two countries were 
placed or retained on the watch list. Duty-free treatment on 
imports of certain eligible products from India under the GSP 
program was suspended on April 29. On October 9, USTR 
reaffirmed the determination in the section 301 investigation 
of Thailand's patent protection made on March 13, but again 
deferred action in order to negotiate with the new Thai 
government. The section 301 case on Thai copyright practices 
was terminated in December 1991; implementation of measures by 
the Thai government to eliminate the unreasonable practices is 
being monitored. Thailand has been denied full benefits under 
the GSP program since 1989.
    On April 30, 1993, the USTR announced the retention of 
Brazil, India, and Thailand as ``priority foreign countries'' 
and placed 10 countries on the priority watch list and 17 
countries on the watch list. The USTR also announced new steps 
to resolve outstanding IPR problems with priority watch list 
countries by initiating ``immediate action plans'' for Hungary 
and Taiwan to be completed by July 31, 1993; conducting ``out-
of-cycle'' reviews during 1993 (including deadlines and 
benchmarks for evaluating performance) for Korea, Argentina, 
Egypt, Poland, and Turkey; and intensifying consultations with 
Australia, the EC, and Saudi Arabia. ``Out-of-cycle'' reviews 
would also be conducted with 5 of the 17 watch list countries: 
Cyprus, Italy, Pakistan, Spain, and Venezuela. Canada, Germany, 
and Paraguay were removed from the watch list. On May 6, the 
USTR announced that a special review would be conducted on July 
31 of Thailand's progress.
    On August 2, 1993, the USTR announced the results of 
reviews conducted in July: a comprehensive agreement with 
Hungary that would result in its removal from the priority 
watch list; reexamination within 30 days of Thailand's status 
based on further progress achieved and comprehensive review in 
early 1994 of further Thai efforts; and that Taiwan's status 
would be reviewed based on progress in completing elements of 
the ``immediate action plan.'' On September 9, the USTR 
announced that, as a result of the July review, Thailand's 
identification as a ``priority foreign country'' would be 
revoked, Thailand would be placed on the priority watch list, 
and another review of its progress would be conducted in early 
1994. On November 30, the USTR announced that the PRC would be 
moved from the watch list to the priority watch list because of 
its failure to enforce IPR laws and regulations.
    On April 30, 1994, the USTR announced that Argentina, 
China, and India would be designated as ``priority foreign 
countries'' if satisfactory progress was not reached by June 
30. Six countries were placed on the priority watch list: the 
EU, Japan, Korea, Saudi Arabia, Thailand, and Turkey. Eighteen 
countries were placed on the watch list, with ``out-of-cycle'' 
reviews to be conducted of Egypt, El Salvador, Greece, and the 
United Arab Emirates. An additional ``special mention'' 
category was also announced of nine countries where there is 
need for greater effort or further improvement or IP problems 
are beginning to become serious: Brazil, Canada, Germany, 
Honduras, Israel, Panama, Paraguay, Russia, and Singapore. The 
USTR also announced that significant progress had been made 
with a number of countries. On June 30, the USTR announced the 
designation of China as a ``priority foreign country'' and the 
immediate initiation of a section 301 investigation. Argentina 
and India were placed on the priority watch list, with India 
also to be subject to an ``out-of-cycle'' review in January 
1995. On August 12, 1994, the USTR initiated a review to 
consider whether Thailand should be restored to full 
beneficiary developing country status under the GSP program 
because of progress on IPR protection.
    On February 7, 1995, the USTR concluded its section 301 
investigation of China and determined that certain acts, 
policies, and practices of the Chinese government with respect 
to the enforcement of IPR and the provision of market access to 
persons who rely on IP protection are unreasonable and 
constitute a burden or restriction on U.S. commerce. The USTR 
determined further that trade action was appropriate in the 
form of increasing duties to 100 percent ad valorem for certain 
products, effective February 26, 1995. However, on February 26, 
1995, based on an agreement with China, the USTR determined not 
to impose sanctions, terminated the investigation, and revoked 
China's identification as a priority foreign country.
    On April 29, 1995, the USTR announced no priority foreign 
country designations. However, USTR stated that the number of 
out-of-cycle reviews would be increased so that progress may be 
reviewed during the course of the year, rather than only at the 
end of April when the annual review occurs. The USTR placed 
Brazil, Greece, Japan, Saudi Arabia, and Turkey on the priority 
watch list and stated that they would be subject to review 
during the course of the year. Other countries on the priority 
watch list included the EU, India, and Korea. The USTR placed 
24 countries on the watch list and stated that it would conduct 
out-of-cycle reviews with 4 of these countries: Argentina, the 
United Arab Emirates, Indonesia, and South Africa. The USTR 
also noted growing concerns about IP property in five countries 
and highlighted developments and expectations for progress in 
six countries.
    On January 19, 1996, the USTR announced the results of 
Special 301 out-of-cycle reviews. Specifically, Turkey and 
Japan would remain on the watch list, and the investigation 
concerning Indonesia would be continued because more 
information was expected concerning Indonesia's enforcement 
activities.
    On April 30, 1996, the USTR announced that it would 
initiate four WTO dispute settlement actions against Portugal, 
Turkey, India, and Pakistan for failure to fulfill certain WTO 
obligations related to IPR. In addition, the USTR identified 35 
trading partners that deny adequate and effective protection of 
IPR or deny fair and equitable market access to U.S. persons 
that rely upon intellectual property protection, as well as 19 
trading partners that would be monitored. Specifically, the 
USTR designated China as a priority foreign country because of 
its failure to implement the 1995 IP agreement. Eight countries 
were placed on the priority watch list: Argentina, Greece, the 
European Union, India, Indonesia, Japan, Korea, and Turkey. The 
USTR announced placement of 26 countries on the watch list, 
with out-of-cycle reviews to be conducted with respect to El 
Salvador, Italy, Paraguay, the Philippines, Russia, Saudi 
Arabia, and Thailand.
    On June 17, 1996, the USTR announced that, based on 
measures that China had taken and would take in the future to 
implement key elements of the 1995 Agreement, it would not 
impose sanctions and would revoke China's status as a priority 
foreign country. On October 21, 1996, the USTR announced the 
termination of the WTO consultations with Portugal based on 
measures that Portugal agreed to take to implement its WTO 
obligations.
    On October 2, 1996, the USTR announced the results of 
certain out-of-cycle reviews. Specifically, the USTR placed 
Bulgaria and Bolivia on the watch list, maintained Paraguay on 
the watch list, deferred the decision on Greece, and determined 
that South Africa would remain unlisted.
    Finally, on December 20, 1996, the USTR announced out-of-
cycle review decisions. It retained Greece, Russia, and Saudi 
Arabia on the priority watch list, maintained reviews for 
Argentina and the Philippines, and determined that Hong Kong 
would not be placed on the watch list but that U.S. government 
monitoring would continue.
    On April 30, 1997, the USTR released its 1997 Special 301 
annual review. In the review, the USTR announced that it would 
initiate WTO dispute settlement actions against four countries 
designated as priority foreign countries: Denmark, Sweden, 
Ireland and Ecuador. In addition, the USTR announced that 
Greece and Luxembourg would be designated priority foreign 
countries, but that dispute settlement proceedings would not be 
initiated if the countries met their TRIPs obligations in the 
coming months. The USTR also placed 10 countries on the 
priority watch list: Argentina, Ecuador, Egypt, the EU, Greece, 
India, Indonesia, Paraguay, Russia, and Turkey. Thirty-six 
countries were placed on the watch list. Of the 36 watch-list 
countries, the USTR announced that it would conduct out-of-
cycle reviews for 7: Bulgaria, Canada, Hong Kong, Luxembourg, 
Panama, Thailand and Italy. Finally, the USTR stated that China 
would continue to be subject to monitoring under section 306.
    On October 27, 1997, the USTR issued certain out-of-cyle 
review decisions. The USTR announced that Luxembourg had made 
progress toward implementing its WTO obligations under the 
TRIPs, and that as a result, the United States would not 
initiate a dispute settlement proceeding at that time. However, 
Luxembourg was placed on the Special 301 watch list. Out-of-
cycle determinations were also made for: Ecuador (remained on 
the priority watch list); Italy (remained on the watch list); 
Thailand (remained on the watch list); and Panama (removed from 
the watch list.) Finally, the USTR cited Australia for actions 
to remove protections for sound recordings.
    On January 16, 1998, the USTR released its next set of out-
of-cycle review determinations. USTR designated Paraguay as a 
priority foreign country, and announced that a special 301 
investigation would be initiated within 30 days. Other results 
of the review include: Bulgaria's elevation to the priority 
watch list; Turkey's retention on the priority watch list; 
Brazil and Hong Kong's continued designation on the watch list; 
and an expression of concern about Ecuador's continued failure 
to implement its TRIPs obligations by the deadline established 
under the terms of its WTO accession.
    On March 30, 1998, the USTR announced that the 
Administration would suspend a portion of Honduras' benefits 
under GSP and the Caribbean Basin Initiative because of IPR 
violations. (Benefits were restored on June 30, 1998.)
    On May 1, 1998, the USTR released its 1998 Special 301 
annual review. In the review, the USTR announced that it would 
initiate WTO dispute settlement actions against Greece and the 
EU. (Greece was designated a priority foreign country in the 
1997 Special 301 annual review.) In addition, the USTR placed 
15 countries on the priority watch list: Israel, Macau, 
Argentina, Ecuador, Egypt, the EU, Greece, India, Indonesia, 
Russia, Turkey, Bulgaria, Italy, the Dominican Republic, and 
Kuwait. An out-of-cycle review would be conducted for Bulgaria. 
The USTR also placed 31 countries on the watch list. Of the 31 
watch list countries, USTR announced that out-of-cycle reviews 
would be conducted for four: Hong Kong, Colombia, Jordan, and 
Vietnam. Finally, USTR indicated that China would continue to 
be subject to monitoring under section 306.
    On November 2, 1998, the USTR announced the results of its 
out-of-cycle review for Bulgaria. USTR moved Bulgaria from the 
priority watch list to the watch list based on Bulgaria's 
improved enforcement of intellectual property rights.
    On February 19, 1999, the USTR announced the results of its 
out-of-cycle reviews of Hong Kong, Ecuador, Colombia and 
Vietnam. USTR removed Hong Kong from the Special 301 watch list 
because of Hong Kong's efforts to combat piracy. Ecuador 
remained on the priority watch list, and Colombia and Vietnam 
remained on the watch list.
    On April 30, 1999, the USTR released its 1999 Special 301 
annual review. In the review, the USTR announced that it would 
initiate WTO dispute settlement actions against Argentina, 
Canada, and the EU. Sixteen countries were placed on the 
priority watch list: Israel, Ukraine, Macau, Argentina, Peru, 
Egypt, the E.U., Greece, India, Indonesia, Russia, Turkey, 
Italy, the Dominican Republic, Guatemala, and Kuwait. The USTR 
also placed 37 countries on the watch list. USTR announced that 
it would conduct out-of-cycle reviews for Malaysia, Hong Kong, 
Israel, Kuwait, South Africa, Colombia, Poland, the Czech 
Republic, and Korea. The USTR also announced that China and 
Paraguay would be subject to monitoring under section 306.
    Finally, USTR reported on the progress of TRIPs cases 
previously filed in the WTO. The U.S. case against Sweden ended 
in December 1998, when the United States and Sweden notified 
the WTO that they had reached a mutually satisfactory 
resolution to the U.S. complaint. The cases against Ireland, 
Greece and Denmark were still pending. The United States 
continued to raise questions about India's compliance with the 
December 1997 dispute settlement decision on patent protection 
for pharmaceuticals and agricultural chemicals.
    On December 10, 1998, the USTR announced the results of its 
out-of-cycle review for Jordan. USTR removed Jordan from the 
watch list.
    On December 19, 1999, the USTR announced the results of its 
out-of-cycle review for Colombia, the Czech Republic, Hong 
Kong, and Malaysia. As a result of the reviews, USTR decided 
not to put Hong Kong and Malaysia on the watch list. Colombia 
and the Czech Republic remained on the list.
    In December 1999, the USTR initiated out-of-cycle reviews 
to examine the progress of developing countries toward 
implementing their TRIPs obligations. The review was prompted 
by concern that many developing countries would not be in 
compliance by the January 1, 2000 deadline for implementation 
of TRIPs obligations. The review revealed that a number of 
countries are still in the process of finalizing implementing 
legislation. The USTR indicated its intent to continue to work 
with such countries bilaterally and through the review process 
in the WTO TRIPS Council meetings. In instances where 
additional progress was not likely in the near term, or where 
the United States was been unable to resolve concerns through 
bilateral consultation, USTR pursued the matter in dispute 
settlement (e.g. the actions initiated against Argentina and 
Brazil pursuant to the 2000 Special 301 annual review).
    On May 1, 2000, the USTR released its 2000 Special 301 
annual review. In the review, the USTR announced initiation of 
WTO dispute settlement proceedings against Argentina and 
Brazil, and the continuation of proceedings against Denmark. 
The USTR also noted continued concern about Ireland's failure 
to fully implement TRIPs obligations.
    Sixteen countries were placed on the priority watch list in 
the 2000 review: Argentina, Dominican Republic, E.U., Egypt, 
Greece, Guatemala, India, Israel, Italy, Korea, Malaysia, Peru, 
Poland, Russia, Turkey and Ukraine. Of the countries placed on 
the priority watch list, the USTR announced that out-of-cycle 
reviews would be conducted for Italy and Korea. Thirty-nine 
countries were placed on the watch list, of which, only one, 
Macay, was designated for an out-of-cycle review. EL Salvador 
and West Bank/Gaza Strip were also scheduled for out-of-cycle 
reviews. Finally, the USTR announced the China and Paraguay 
would continue to be subject to monitoring under section 306.
    The USTR also used the occasion of the annual Special 301 
report to review the Clinton Administration's effort to 
coordinate IPR enforcement with global health policy. On 
December 1, 1999, President Clinton announced that the United 
States was committed to helping developing countries gain 
access to essential medicines, including those for the 
prevention and treatment of HIV/AIDs. The USTR and the 
Secretary of Health and Human Resources implemented the 
President's announcement by developing a cooperative approach 
on health-related IPR matters. Under the new policy, when a 
foreign government expressed concern that a U.S. trade law 
related to IP protection significantly impeded the foreign 
country's ability to address a health crisis in that country, 
the USTR would seek and give full weight to the advice of the 
Secretary of Health and Human Services regarding the health 
considerations involved. The USTR cited on-going consultations 
with Thailand over the compulsory licensing of an HIV/AIDs drug 
as an example of how the new policy had been applied. The USTR 
also indicated that the Special 301 Committee took health and 
development issues into account in making its Special 301 
recommendations. On May 10, 2000, President Clinton issued 
Executive Order 13155 formalizing this policy with respect to 
sub-Saharan African countries and access to HIV/AIDS drugs.
    On November 8, 2000, the USTR announced the results of its 
out-of-cycle reviews for El Salvador, Italy, Poland and 
Ireland. As result of the reviews, Italy, and Poland were moved 
from the priority watch list to the watch list. Ireland was 
removed from the watch list, and El Salvador was not placed on 
the watch list. The USTR also noted that the Bahamas had taken 
steps to bring its copyright laws into compliance with its 
international obligations.
     On January 19, 2001, the USTR announced the results of its 
out-of-cycle reviews for Ukraine, Macau, Korea, the United Arab 
Emirates, Hungary, Slovenia, and the West Bank/Gaza Strip. The 
decision on designation of Ukraine as a priority foreign 
country was deferred until March 1, 2001. Korea remained on the 
priority watch list, while Macau and Hungary remained on the 
watch list. The United Arab Emirates and Slovenia did not 
receive a listing. The review of the West Bank/Gaza was put on 
indefinite hold due to regional unrest.

     Identification of Trade Liberalization Priorities (Super 301)

    Section 310 of the Trade Act of 1974, as amended by section 
1302 of the Omnibus Trade and Competitiveness Act of 1988, 
required the USTR, within 30 days after the National Trade 
Estimates (foreign trade barriers) report to the Congress in 
1989 and 1990, to identify U.S. trade liberalization 
priorities.
    This identification included priority practices as well as 
priority foreign countries and estimates of the amount by which 
U.S. exports would be increased if the barrier did not exist. 
USTR was required to initiate section 301 investigations on all 
priority practices identified for each of the priority 
countries within 21 days after submitting the report to the 
House Ways and Means and Senate Finance Committees. In its 
consultations with the foreign country, USTR was required to 
seek to negotiate an agreement which provided for the 
elimination of, or compensation for, the priority practices 
within 3 years after the initiation of the investigation. This 
authority, however, expired in 1990.
    On March 3, 1994, President Clinton issued Executive Order 
12901 requiring the USTR, within 6 months of the submission of 
the National Trade Estimates report for 1994 and 1995, to 
review U.S. trade expansion priorities and identify priority 
foreign country practices, the elimination of which would 
likely have the most significant potential to increase U.S. 
exports. On September 27, 1995, President Clinton issued 
Executive Order 12973, which extended the terms of Executive 
Order 12901 to 1996 and 1997. The order required the USTR to 
submit to the House Ways and Means and Senate Finance 
Committees and to publish in the Federal Register a report on 
the priority foreign country practices identified. The report 
was not submitted in 1998, because the authority expired in 
1997, and was not renewed until March 31, 1999, pusuant to 
Executive Order 13116.
    Under the terms of the executive order, the USTR must 
initiate section 301 investigations within 21 days of the 
submission of the report with respect to all priority foreign 
country practices identified. The normal section 301 
authorities, procedures, time limits, and other requirements 
generally apply to these investigations. In consultations 
requested with the foreign country under section 303, the USTR 
must seek to negotiate an agreement providing for the 
elimination of the practices as quickly as possible or, if that 
is not feasible, compensatory trade benefits. The USTR will 
monitor any agreements pursuant to section 306. The semiannual 
report under section 309 will include the status of any 
investigation and, where appropriate, the extent to which it 
has led to increased U.S. export opportunities.
    Section 314(f) of the Uruguay Round Agreements Act codified 
the terms of the executive order for the year 1995 as an 
amendment to section 310 of the 1974 Act.

History of Super 301

    On May 26, 1989, the USTR submitted the 1989 report to the 
two committees on trade liberalization priorities, identifying 
six ``priority'' practices from three ``priority countries.'' 
They were:
          (1) Japan.--Ban on government procurement of foreign 
        satellites; exclusionary government procurement of 
        supercomputers; restrictions on imports of wood 
        products.
          (2) Brazil.--Import bans and other licensing 
        restrictions.
          (3) India.--Trade-related investment measures; 
        insurance market barriers.
    Section 301 investigations were initiated on each of the 
six priority practices on June 16, 1989. The Administration 
also launched a separate initiative with Japan in July 1989 to 
address the causes of the slow adjustment of the United States 
and Japanese trade imbalances (the Structural Impediments 
Initiative (SII)).
    In its 1990 report to the committees on April 27, 1990, the 
USTR identified India again as a ``priority country'' with the 
same two practices identified again as ``priority practices'' 
because the issues remained unresolved. The report stated that 
satisfactory solutions had been reached with Japan on its three 
priority practices and that the priority practice of Brazil was 
expected to be resolved. Letters were exchanged between the 
USTR and Japanese Ambassador regarding unilateral actions by 
the Japanese government to improve access for U.S. firms to its 
satellite market and to specify detailed new procurement 
procedures; to improve access for U.S. firms to its 
supercomputer procurement market through open, competitive, and 
transparent purchasing procedures; and to improve market access 
for U.S. wood products. The report identified the successful 
completion of the Uruguay Round of GATT multilateral trade 
negotiations as the top trade liberalization priority.
    On June 14, 1990, the USTR determined that India's priority 
practices were unreasonable and burden or restrict U.S. 
commerce, but that retaliation would be inappropriate given the 
ongoing Uruguay Round negotiations on services and investment. 
If necessary, a post-Uruguay Round review would determine 
whether section 301 action was warranted.
    On June 28, 1990, the U.S.-Japan Working Group on the 
Structural Impediments Initiative issued an SII Joint Report, 
following up on an interim report issued in April. This final 
report contained commitments by both governments on steps to 
address various structural impediments to the adjustment of 
trade and current account imbalances, with followup through 
regular high-level meetings, progress review, and annual 
reports.
    On May 1, 1992, and on April 30, 1993, the USTR reported on 
its monitoring of Japan's implementation of its commitments 
regarding the three practices and on progress made in the 
liberalization of Brazil's import regime. The report also 
reaffirmed the decision in 1990 to review, if necessary, 
India's investment and insurance practices following conclusion 
of the GATT Uruguay Round to determine whether section 301 
action was warranted.
    The USTR announced in the 1993 report that a special review 
would be undertaken, pursuant to section 306, of Japanese 
actions under the U.S.-Japan Supercomputer Agreement because of 
U.S. government concern that Japan might not be adhering to the 
terms of that Agreement. Based upon this review and the conduct 
and outcome of procurements scheduled in coming months, the 
USTR would determine whether Japan was in compliance with the 
Agreement. If the USTR determined Japan was not in compliance, 
the USTR would initiate trade action against Japan under 
section 301.
    On April 30, 1994, the USTR announced that the special 
review of Japanese actions under the 1990 Supercomputer 
Agreement would continue as a result of several major areas of 
concern. Monitoring would continue of the operation of the new 
procedures for Japanese procurement of satellites and of 
implementation of the Wood Products Agreement. Improvements in 
India's investment and insurance regimes would be pursued in 
bilateral discussions.
    Pursuant to Executive Order 12901 of March 3, 1994, the 
USTR reported on October 3, 1994 that it had decided not to 
identify any priority foreign country practices. Japan's market 
access for wood and paper was described as perhaps warranting 
identification in the future, and various foreign practices 
were determined not to be appropriate for identification 
because they were already being otherwise addressed.
    On September 28, 1995, the USTR reported that it again had 
decided not to identify any priority foreign practices. 
However, the USTR found that certain practices may in the 
future warrant identification as priority foreign country 
practices: Japan market access for paper and paper products, 
Japan market access for wood products, and China market access 
for agricultural products. In addition, the USTR listed certain 
practices as not appropriate for identification because they 
were being otherwise addressed.
    On October 1, 1996, the USTR announced that it again had 
decided not to identify any priority foreign country practices. 
However, it initiated new actions in the WTO concerning 
Indonesia's national auto policy, Brazil's auto program, 
Australia's export subsidies, and Argentina's import duties. It 
also announced the adoption of a strategic enforcement strategy 
in the automotive trade sector. The USTR also listed several 
other bilateral priorities that may warrant identification as 
priority foreign country practices in the future: Japan market 
access for insurance, Japan telecommunications, Japan market 
access for paper and paper products, China market access for 
agricultural products, Korea telecommunications, Germany 
electrical equipment, EU Ecolabeling Directive, EU design-
restrictive standards, and Saudi Arabia International 
Conformity Certification Program.
    On October 8, 1997, the USTR submitted its report on trade 
expansion priorities to the Senate Finance Committee and the 
House Ways and Means Committee. The report identified one 
priority foreign country, announced initiation of dispute 
settlement proceedings in four other cases, identified a number 
of practices that might warrant identification as a priority 
foreign country practice in the future, and described the 
progress made in addressing previously identified market access 
barriers.
    The priority foreign country practice was Korean barriers 
to auto imports. The dispute settlement cases were on: (1) 
Japanese market access barriers to fruit; (2) Canadian export 
subsidies and import quotas on dairy products; (3) E.U. 
circumvention of export subsidy commitments on dairy products; 
and (4) Australian export subsidies on automotive leather. 
Practices that warranted further monitoring and could require 
future action included: (1) the E.U. specified risk material 
ban, cosmetic initiative, design standards, the eco-labeling 
directive, and units of measurement directive; (2) French 
restrictions on pet food imports; (3) Australian pest risk 
analysis; (4) Argentinian footwear import restrictions; (4) 
Brazilian import financing measures; and (5) Taiwanese market 
access barriers to pharmaceuticals.
    Finally, the USTR identified three countries in which on-
going negotiations were yielding some success, but that 
required continued monitoring. The countries and practices 
identified were: (1) Japan--market access for flat glass and 
paper and paper products; (2) China--IPR enforcement, sanitary 
and phytosanitary measures, market access for meat products, 
registration of financial information providers, and market 
access for insurance providers; and (3) Korea--impediments to 
entry and distribution of cosmetics, import clearance 
procedures, and steel subsidies.
    On April 30, 1999, pursuant to Executive Order 13116 of 
March 31, 1999, the USTR submitted its report to the Committees 
on trade expansion priorities and priority foreign country 
practices. In the 1999 report, the USTR did not identify any 
priority foreign country practices. The USTR did find that a 
number of practices warranted the initiation of WTO dispute 
settlement proceedings, announced initiation of one section 301 
investigation, and identified a number of practices that might 
warrant identification as a priority foreign country practice 
in the future.
    With respect to initiation of WTO proceedings, the USTR 
indicated that it would request WTO dispute settlement 
consultations with the E.U. on government subsidies for 
avionics equipment and geographical indications, and with India 
on automotive trade and investment measures. The USTR reported 
that it had requested the formation of a WTO dispute settlement 
panel on Korean restrictions on beef imports and their 
distribution, and had initiated dispute settlement procedures 
on Korean measures related to airport construction. The USTR 
also reported that it was working within the Committee on 
Customs Valuation to examine non-compliance with the WTO 
Customs Valuation Agreement with respect to Brazil, India and 
Mexico, and on the general use of reference pricing by a number 
of WTO Members.
    USTR also reported that it had initiated an investigation 
under section 301 of the Trade Act of 1974 on Canadian 
regulations affecting tourism in the U.S.-Canada border region.
    Practices that warranted further monitoring and could 
require future action included: (1) Canadian restrictions on 
agriculture exports and discrimination against U.S. magazines; 
(2) Japanese insurance deregulation, market access restrictions 
on autos, auto parts, and flat glass; (3) Korean treatment of 
pharmaceuticals; (4) Mexico's application of antidumping 
measures on high-fructose corn syrup and telecommunication 
barriers.
    On April 30, 2000, the USTR submitted its report to the 
Committees on trade expansion priorities and priority foreign 
country practices. In the 2000 report, the USTR again did not 
identify any priority foreign country practices. The USTR did 
find that a number of practices warranted the initiation of WTO 
dispute settlement proceedings, and identified a number of 
practices that might warrant identification as a priority 
foreign country practice in the future.
    With respect to initiation of WTO proceedings, the USTR 
indicated that it would request WTO dispute settlement 
consultations in two customs valuation cases: (1) Brazil on 
reference prices for certain textile products; and (2) Romania 
on discriminatory reference prices for products such as 
clothing, poultry, and certain types of distilled spirits. The 
USTR also announced that it would request the establishment of 
a panel on India's automotive trade and investment measures, 
and would request consultations with the Philippines on local 
content requirements for motorcycles, automobiles and certain 
commercial vehicles.
    Practices that warranted further monitoring and could 
require future action included: (1) E.U. subsidization of 
Airbus; (2) Japanese market access restrictions and competition 
problems in the flat glass, auto/auto parts, and public works 
sectors; (3) Korea market access barriers to pharmaceuticals 
and autos; (4) Mexico's use of a minimum price regime for 
certain imported products; (5) Indian tariffs on textiles; and 
(6) Malaysian trade and investment measures on motor vehicles.

                       Foreign Direct Investment

    Section 307(b) of the Trade and Tariff Act of 1984 requires 
the U.S. Trade Representative to seek the reduction and 
elimination of foreign export performance requirements through 
consultations and negotiations with the country concerned if 
the USTR determines, with interagency advice, that U.S. action 
is appropriate to respond to such requirements that adversely 
affect U.S. economic interests. In addition, the USTR may 
impose duties or other import restrictions on the products or 
services of the country involved, including exclusion from 
entry into the United States of products subject to these 
requirements. The USTR may provide compensation for such action 
subject to the provisions of section 123 of the Trade Act of 
1974 if necessary or appropriate to meet U.S. international 
obligations.
    Section 307(b) authority does not apply to any foreign 
direct investment, or to any written commitment relating to 
foreign direct investment that is binding, made directly or 
indirectly by any U.S. person prior to October 30, 1984 (date 
of enactment of the 1984 Act).

                   Foreign Anticompetitive Practices

    Section 311 of the Uruguay Round Agreements Act provides 
for including an identification of foreign anticompetitive 
practices, the toleration of which by foreign governments is 
adversely affecting exports of U.S. goods or services, as part 
of the National Trade Estimate report to be submitted each 
year. The USTR is to consult with the Attorney General in 
preparing this section of the report.

                    Unfair Practices in Import Trade


           Section 337 of the Tariff Act of 1930, as amended

    Section 337 of the Tariff Act of 1930 \26\ declares 
unlawful unfair methods of competition and unfair acts in the 
importation or sale of articles (other than articles relating 
to certain intellectual property rights), the threat or effect 
of which is to (1) destroy or substantially injure an industry 
in the United States; (2) prevent the establishment of such an 
industry; or (3) restrain or monopolize trade and commerce in 
the United States. Section 337 also declares unlawful the 
importation or sale of articles that (1) infringe a valid and 
enforceable U.S. patent or registered copyright; or are made, 
produced, processed, or mined under a process covered by a 
valid and enforceable U.S. patent; (2) infringe a valid and 
enforceable U.S.-registered trademark; (3) infringe a 
registered mask work of a semiconductor chip product; or 
infringe exclusive rights in a protected design. For this 
separate class of intellectual property rights, the importation 
or sale of infringing articles is unlawful only if an industry 
in the United States producing the articles protected by the 
patent, copyright, trademark, mask work, or design exists or is 
in the process of being established. It is not necessary to 
establish that the industry is injured by reason of such 
imports, as is the case with non-intellectual property rights 
violations. A U.S. industry is considered to exist if there is 
(1) significant investment in plant and equipment; (2) 
significant employment of labor or capital; or (3) substantial 
investment in the exploitation of the patent, copyright, 
trademark, mask work, or design, including engineering, 
research and development, or licensing.
---------------------------------------------------------------------------
    \26\ Public Law 71-361, section 337, approved June 17, 1930, 19 
U.S.C. 1337.
---------------------------------------------------------------------------
    The U.S. International Trade Commission (ITC) is 
responsible for investigating alleged violations of section 
337. Upon finding a violation, the ITC may issue an exclusion 
order and/or a cease and desist order, subject to presidential 
disapproval.
    Section 337 is unique among the trade remedy laws in that 
it is the only one subject to the provisions of the 
Administrative Procedure Act (APA).\27\ All ITC investigations 
and determinations under section 337 must be conducted on the 
record after publication of notice and opportunity for hearing 
in conformity with the APA.\28\
---------------------------------------------------------------------------
    \27\ Act of June 11, 1946, ch. 324, sections 1-12, 5 U.S.C. 551 et 
seq.
    \28\ 19 U.S.C. 1337(c).
---------------------------------------------------------------------------
    The language of section 337 closely parallels that of 
section 5 of the Federal Trade Commission Act,\29\ and 
therefore the scope of section 337 has been compared to that of 
the antitrust and unfair competition statutes. The ITC has 
significant discretion in determining what practices are 
``unfair'' under section 337. In practice, however, the 
overwhelming majority of cases dealt with under section 337 has 
been in the area of patent infringement. Among the few non-
patent cases have been cases involving group boycotts, price 
fixing, predatory pricing, false labeling, false advertising, 
and trademark infringement.
---------------------------------------------------------------------------
    \29\ Public Law 63-203, approved September 26, 1914, 38 Stat. 717, 
15 U.S.C. 45.
---------------------------------------------------------------------------
    Whenever, in the course of a section 337 investigation, the 
ITC has reason to believe that the matter before it involves 
dumping or subsidization of imports within the purview of the 
antidumping or countervailing duty laws, it must notify the 
administering authority of those laws for appropriate 
action.\30\ If the alleged violation of section 337 is based 
solely on such dumping or subsidization practices, the ITC must 
terminate (or not initiate) the section 337 investigation. If 
it is based in part on such practices, and in part on other 
alleged practices, then the ITC may continue (or initiate) an 
investigation under section 337. This provision is designed to 
avoid duplication and conflicts in the administration of the 
unfair trade practice laws.
---------------------------------------------------------------------------
    \30\ 19 U.S.C. 1337(b)(3).
---------------------------------------------------------------------------
    The Audio Home Recording Act of 1992 \31\ added alleged 
copyright infringements with respect to which action is 
prohibited by the new 17 U.S.C. 1008, to the practices for 
which the ITC must terminate or not institute an investigation 
under section 337. Section 1008 prohibits action under title 17 
alleging copyright infringement based on the manufacture, 
importation, or distribution of a digital audio technology 
(DAT) recorder and related items.
---------------------------------------------------------------------------
    \31\ Public Law 102-563, approved October 28, 1992.
---------------------------------------------------------------------------

General Agreement on Tariffs and Trade (GATT) panel determination

    In response to a complaint by the European Community (EC) 
about the application of section 337, the GATT Council agreed 
on October 7, 1987 to establish a panel to review the U.S. law. 
On November 23, 1988, the panel found that section 337 is 
inconsistent with the national treatment provision article 
III:4 of the GATT because it afforded less favorable treatment 
to imported products alleged to infringe U.S. patents than that 
given in federal district court to challenged domestically 
manufactured goods. Specifically, the panel pointed to the 
complainants' choice of two fora in which to challenge imported 
products, without a corresponding choice available to challenge 
products of U.S. origin; the potential disadvantage to 
producers or importers of challenged products of foreign origin 
resulting from the tight time-limits that apply to producers of 
challenged products of U.S. origin; and the possibility that 
producers or importers of challenged products of foreign origin 
may have to defend their products both before the ITC and in 
federal district court while no corresponding exposure exists 
with respect to U.S.-made goods. The panel recommended that the 
GATT contracting parties request the United States to bring its 
procedures for patent infringement cases involving imports into 
conformity with the GATT.
    The panel report was adopted at a GATT Council meeting on 
November 9, 1989. The United States amended section 337 to 
address the panel report in the Uruguay Round Agreements 
Act.\32\ At the request of the EC, the United States and the EC 
held WTO consultations on Febraury 28, 2000 to discuss the 
compliance of section 337, as amended, with U.S. obligations on 
national treatment and under the agreement on Trade--Related 
Aspects of Intellectual Property Rights (TRIPS).
---------------------------------------------------------------------------
    \32\ Public Law 103-465.
---------------------------------------------------------------------------

Procedure

    The ITC is required to investigate any alleged violation of 
section 337 on complaint under oath or upon its own initiative. 
The Uruguay Round Agreements Act amended the provision so that 
there are no longer any deadlines for the investigation. 
Instead, the ITC must, within 45 days of initiation, set a 
target date and conclude its investigation at the earliest 
practicable time. Before this amendment, the ITC was required 
to meet strict deadlines for conducting investigations.
    In the course of each investigation, the ITC is required to 
consult with and seek advice and information from the 
Department of Health and Human Services, the Department of 
Justice, the Federal Trade Commission, and other appropriate 
departments and agencies.
    In deciding whether an article has infringed a valid U.S. 
patent, the ITC applies the same statutory and decisional 
domestic patent law as would a district court. U.S. patent 
holders may file parallel actions in federal district court and 
the Commission. Respondents sued in both fora under the same 
underlying cause of action may obtain a stay of district court 
proceedings until the ITC determination becomes final.
    The Uruguay Round Agreements Act added a provision 
permitting respondents to raise counterclaims in section 337 
investigations. Such claims, however, would be immediately 
removed to district court and cannot be litigated at the ITC.
    Although damages are not an available remedy at the ITC as 
they are in district court, the ITC is empowered to issue 
limited exclusion orders, general exclusion orders, and cease 
and desist orders, which provide relief at the border. 
Specifically, if a violation of section 337 is found, the ITC 
must direct that the foreign articles be excluded from entry 
into the United States, unless it determines that such articles 
should not be excluded in consideration of the effect of 
exclusion on:
          (1) the public health and welfare;
          (2) competitive conditions in the U.S. economy;
          (3) the production of like or directly competitive 
        articles in the United States; and
          (4) U.S. consumers.
    The Uruguay Round Agreements Act added a provision 
establishing that the ITC is not permitted to issue a general 
exclusion order (i.e., an exclusion order that affects all 
shipments of the merchandise under investigation, as opposed to 
an order that affects merchandise from only those persons 
determined to be violating section 337) unless such a general 
order is necessary to prevent circumvention of specific orders, 
and there is a pattern of violation and identifying those 
persons responsible for the infringement is difficult.
    In appropriate circumstances, the ITC may issue temporary 
exclusion orders during the course of an investigation if it 
determines that there is reason to believe that there is a 
violation of section 337. In the event of a temporary exclusion 
order, entry is to be permitted only under bond. If petitioned 
by a complainant for issuance of a temporary exclusion order, 
the ITC must determine whether or not to issue such an order 
within 90 days after initiation of an investigation, with a 
possible extension of 60 days in more complicated cases. In 
such circumstances, the ITC may require the complainant to post 
a bond as a prerequisite for issuing an order. If the ITC later 
determines that the respondent has not violated these 
provisions, the bond may be forfeited to the respondent.
    In addition to or in lieu of issuing an exclusion order, 
the ITC may issue an appropriate cease and desist order to be 
served on the violating party or parties, unless it finds that 
such order should not be issued in consideration of the effect 
of such order on the same public interest factors listed above.
    The ITC may at any time, upon such notice and in such 
manner as it deems proper, modify or revoke any cease and 
desist order, and issue an exclusion order in its place. If a 
temporary cease and desist order is issued, the ITC may require 
the complainant to post a bond, which may be forfeited to the 
respondent if the ITC later determines that the respondent has 
not violated these provisions.
    Any person who violates a cease and desist order issued 
under this section shall be subject to a civil penalty of up to 
the greater of $100,000 per day or twice the domestic value of 
the articles entered or sold on such day in violation of the 
order.
    In the event that a person has been served with notice of 
proceedings and fails to appear to answer the complaint in 
cases where the complainant seeks relief limited solely to that 
person, the ITC must presume the facts alleged by the 
complainant to be true. If requested by the complainant, the 
ITC must issue an exclusion order and/or a cease and desist 
order against the person in default, unless it finds that such 
order should not be issued for the same public interest reasons 
listed above. Similarly, if no person appears to contest the 
investigation and violation is established, the ITC may issue a 
general exclusion order.
    The ITC may order seizure and forfeiture of goods subject 
to an exclusion order if an attempt has been made to import the 
goods and the owner or importer has been notified that a 
further attempt to import the goods would lead to seizure and 
forfeiture.

Presidential and judicial review

    Following an ITC determination of a violation of section 
337, the President may, within 60 days after receiving 
notification, disapprove the ITC determination for ``policy 
reasons.'' The statute does not specify what types of policy 
reasons may provide the basis for disapproval. Upon 
presidential disapproval, actions taken by the ITC cease to 
have effect. If the President does not disapprove the ITC 
determination, or if he approves it, then the ITC determination 
becomes final. Any person adversely affected by a final ITC 
determination under section 337 may appeal the determination to 
the U.S. Court of Appeals for the Federal Circuit.

                 Import Relief (Safeguard) Authorities


         Sections 201-204 of the Trade Act of 1974, as amended


Background

    Chapter 1 of title II (sections 201-204) of the Trade Act 
of 1974,\33\ as amended by section 1401 of the Omnibus Trade 
and Competitiveness Act of 1988,\34\ and sections 301-304 of 
the Uruguay Round Agreements Act,\35\ sets forth the authority 
and procedures for the President to take action, including 
import relief, to facilitate efforts by a domestic industry 
which has been seriously injured by imports to make a positive 
adjustment to import competition.
---------------------------------------------------------------------------
    \33\ 19 U.S.C. 2251-2254.
    \34\ Public Law 100-418, approved August 23, 1988. The 1988 
amendments significantly rearranged chapter 1 of title II of the Trade 
Act of 1974 and added a new section 204. Prior to these amendments, the 
subject matter contained in sections 201-204 was found in sections 201-
203 of the Trade Act.
    \35\ Public Law 103-465, approved December 8, 1994. Minor 
amendments were also made by sections 315 and 317 of the North American 
Free Trade Agreement Implementation Act, Public Law 103-182, approved 
December 8, 1993.
---------------------------------------------------------------------------
    From the outset of the trade agreements program in 1934, 
U.S. policy of seeking liberalization of trade barriers has 
been accompanied by recognition that difficult economic 
adjustment problems could result for particular sectors of the 
economy and, if serious injury results from increased 
competition by not necessarily unfairly traded imports, then 
domestic industries should be provided a period of relief to 
allow them to adjust to new conditions of trade. Beginning with 
bilateral trade agreements in the early 1940's, U.S. trade 
agreements, and eventually U.S. domestic law, have provided for 
a so-called ``escape clause'' or ``safeguard'' mechanism for 
import relief. This mechanism, while amended over the years, 
has provided authority for the President to withdraw or modify 
concessions and impose duties or other restrictions for a 
limited period of time on imports of any article which causes 
or threatens serious injury to the domestic industry producing 
a like or directly competitive article, following an 
investigation and determination by the U.S. International Trade 
Commission (ITC) (formerly the U.S. Tariff Commission).
    Under this basic trade agreements authority in section 350 
of the Tariff Act of 1930, the President issued three executive 
orders setting forth procedures and criteria for escape-clause 
relief, which governed from 1947 to 1951. Section 7 of the 
Trade Agreement Extension Act of 1951 contained the first 
statutory procedure and criteria for escape-clause action, 
which governed from 1951 until replaced by sections 301, 351 
and 352 of the Trade Expansion Act of 1962. The 1962 
provisions, which also introduced the concept of trade 
adjustment assistance (see separate section), were repealed and 
replaced by sections 201-203 of the Trade Act of 1974. In 1988, 
the 1974 provisions were rewritten to place a greater emphasis 
on the responsibility of domestic industry to use the relief 
period to undertake positive adjustment.
    Primarily at U.S. insistence, an escape clause (safeguard) 
provision modeled after language in the 1947 executive order 
was included in article XIX of the original General Agreement 
on Tariffs and Trade (GATT 1947). As a result of the GATT 
Uruguay Round of Multilateral Trade Negotiations, which 
resulted in the Agreement Establishing the World Trade 
Organization, GATT 1947 was replaced by GATT 1994. Article XIX 
was not changed in GATT 1994.\36\ In the course of the 
negotiations, GATT members negotiated a new Agreement on 
Safeguards, which provides rules for the application of article 
XIX of GATT 1994. The rules provide for, among other things, 
greater transparency in procedures and limitations on the 
duration of relief measures. However, in a departure from GATT 
1947 article XIX, which authorized retaliation by members 
adversely affected by the measure when appropriate compensation 
was not forthcoming, the Agreement provides that a member 
country may not exercise its right to take retaliatory action 
during the first 3 years that a safeguard measure is in effect, 
provided that the safeguard measure resulted from an absolute 
increase in imports and otherwise conforms to the Agreement.
---------------------------------------------------------------------------
    \36\ The language of GATT article XIX is as follows: ``If, as a 
result of unforeseen developments and of the effect of the obligations 
incurred by a contracting party under this agreement, including tariff 
concessions, any product imported into the territory of that 
contracting party in such increased quantities and under such 
conditions as to cause or threaten serious injury to domestic producers 
in that territory of like or directly competitive products, the 
contracting party shall be free, in respect of such product and to the 
extent and for such time as may be necessary to prevent such injury, to 
suspend the obligation in whole or in part or to withdraw or modify the 
concession.''
---------------------------------------------------------------------------

World Trade Organization (WTO) panel determinations

    By Presidential Proclamation 7103 of May 30, 1998, the 
United States imposed a Safeguard Measure in the form of a 
quantitative limitation on imports of wheat gluten from the 
European Union (EU). The EU challenged the imposition of the 
safeguard measure, claiming that it violated Articles 2.1 and 4 
of the Agreement on Safeguards and Article XIX:1(a) of the GATT 
1994. A WTO panel was formed on July 25, 1999. On July 31, 
2000, the panel issued a ruling in favor of the EU. 
Specifically, the panel found that the causation analysis 
applied by the ITC violated U.S. obligations under Articles 2.1 
and 4 of the safeguards Agreement because it did not ensure 
that injury caused by other factors was not attributed to 
imports. The panel also found the ITC's exclusion of imports 
from Canada (a NAFTA partner) from the application of the 
safeguard measure after imports from all sources were included 
in the investigation for the purposes of determining serious 
injury caused by increased imports to violate U.S. obligations 
under Articles 2.1 and 4 of the Safeguards Agreement. In 
addition, the panel found that the United States violated 
Articles 12.1(b) and 12.3 of the Safeguards Agreement by 
failing to: (1) notify immediately the initiation of the 
investigation and the finding of serious injury; (2) provide 
adequate opportunity for prior consultations on the safeguard 
measure; and (3) endeavor to maintain a substantially 
equivalent level of concessions and other obligations to that 
existing under GATT 1994 between it and the exporting Members 
that would be affected by such a measure. The United States 
filed its notice of appeal on September 26, 2000. On December 
22, 2000, the Appellate Body issued its report, reversing in 
part and affirming in part the panel decision. The Appellate 
Body reversed the panel's interpretation of Article 4.2(b) of 
the Safeguards Agreement that imports ``alone,'' `` in and of 
themselves,'' or ``per se,'' must be capable of causing 
``serious injury,'' as well as the Panel's conclusion on the 
issue of causation. However, the panel found that the United 
States acted inconsistently with its obligations under Article 
4.2(b) of the Safeguards Agreement because the ITC's causation 
analysis did not ensure that injury caused by other factors was 
not attributed to imports. The Appellate Body also reversed the 
panel's finding on immediate notification, finding that the 
United States did not act inconsistently with its obligations 
under Article 12.1(c) of the Safeguards Agreement.
    On July 22, 1999, the United States imposed a safeguard 
measure on imports of lamb meat from Australia and New Zealand. 
A WTO panel was formed on November 18, 1999, at the request of 
Australia and New Zealand, which argued that the safeguard 
measure violated U.S. obligations under GATT 1994 and the 
Agreement on Safeguards. The panel issued its report on 
December 14, 2000, finding certain aspects of the U.S. 
safeguard measure to be inconsistent with WTO rules. 
Specifically, the panel found that the United States acted 
inconsistently with Article XIX:1(a) of GATT 1994 by failing to 
demonstrate as a matter of fact the existence of ``unforeseen 
developments.'' In addition, the panel found that the United 
States acted inconsistently with Article 4.1(c) of the 
Agreement on Safeguards because the ITC defined the domestic 
industry as including input producers (i.e., growers and 
feeders of live lamb) as producers of the like product at issue 
(i.e. lamb meat). The panel found that the United States also 
acted inconsistently with Article 4.1(c) of the Safeguards 
Agreement because the ITC failed to obtain data on producers 
representing a major proportion of the total domestic industry 
as defined by the investigation. The panel further found, 
similar to the panel ruling in the wheat gluten case (described 
above) which was subsequently overturned by the Appellate Body, 
that the causation analysis applied by the ITC violated U.S. 
obligations under Article 4.2(b) of the Agreement on Safeguards 
because it did not ensure that injury caused by other factors 
was not attributed to imports. The United States plans to 
appeal the panel's ruling.

Petitions and investigations

    An entity representative of an industry (including a trade 
association, firm, union or group of workers) may file a 
petition under section 202 of the Trade Act of 1974 with the 
ITC. The petition must include a statement describing the 
specific purposes for which action is being sought, which may 
include facilitating the orderly transfer of resources to more 
productive pursuits, enhancing competitiveness, or other means 
of adjustment to new conditions of competition. Alternatively, 
the President, U.S. Trade Representative, or the House 
Committee on Ways and Means or Senate Committee on Finance may 
request an investigation.
    Upon petition, request, or on its own motion, the ITC 
conducts an investigation ``to determine whether an article is 
being imported into the United States in such increased 
quantities as to be a substantial cause of serious injury, or 
the threat thereof, to the domestic industry producing an 
article like or directly competitive with the imported 
article.'' Substantial cause is defined as ``a cause which is 
important and not less than any other cause.''
    In making its determination, the Commission must take into 
account all relevant economic factors, including certain 
factors specified in the statute,\37\ and must consider the 
condition of the domestic industry over the course of the 
relevant business cycle. The Commission may determine to treat 
as the domestic industry: (1) only the portion or subdivision 
producing the like or directly competitive article of a 
producer of more than one article; and (2) only production 
concentrated in a major geographic area under certain 
circumstances. The Commission is required, to the extent 
information is available, in the case of a domestic producer 
which also imports, to treat as part of the domestic industry 
only the domestic production of such producer.
---------------------------------------------------------------------------
    \37\ These factors include: with respect to serious injury, the 
significant idling of productive facilities in the industry, the 
inability of a significant number of firms to operate at a reasonable 
level of profit, and significant unemployment or underemployment within 
the industry; with respect to threat of serious injury, a decline in 
sales or market share, a higher and growing inventory (whether 
maintained by domestic producers, importers, wholesalers, or 
retailers), and a downward trend in production, profits, wages, 
productivity or employment (or increasing underemployment) in the 
domestic industry concerned; the extent to which firms in the domestic 
industry are unable to generate adequate capital to finance the 
modernization of their domestic plants and equipment, or are unable to 
maintain existing levels of expenditures for research and development, 
the extent to which the U.S. market is the focal point for the 
diversion of exports of the article concerned by reason of restraints 
on exports of such article to, or on imports of such article into, 
third country markets; and with respect to substantial cause, an 
increase in imports (either actual or relative to domestic production) 
and a decline in the proportion of the domestic producers. The presence 
or absence of any factor is not necessarily dispositive.
---------------------------------------------------------------------------
    A public hearing is required during the course of the 
investigation. Whenever during the investigation the Commission 
has reason to believe increased imports are attributable in 
part to unfair trade practices, then it must promptly notify 
the agency administering the appropriate remedial law.
    Normally the ITC must make its injury determination within 
120 days of receipt of the petition or request. However, if the 
ITC determines that the investigation is extraordinarily 
complicated, it may take up to 30 additional days to make an 
injury determination. If the petition alleges that critical 
circumstances exist, the ITC must first determine, within 60 
days of receipt of a petition containing such an allegation, 
whether critical circumstances exist. The ITC begins the injury 
phase of its investigation only after it has made its 
determination with respect to critical circumstances. If the 
ITC makes an affirmative injury finding, then it must recommend 
the action that would address the injury and be the most 
effective in facilitating efforts by the domestic industry to 
make a positive adjustment; such recommended action must be 
either a tariff, tariff-rate quota, quantitative restriction, 
adjustment measures, or a combination thereof.
    The ITC's remedy recommendation and report must be 
submitted to the President within 180 days of the petition 
(within 240 days if critical circumstances are alleged). The 
report must also be made available to the public, and a summary 
of the report must be published in the Federal Register.

Adjustment plans and commitments

    Under title II, as amended, petitioners are encouraged to 
submit, at any time prior to the ITC injury determination, a 
plan to promote positive adjustment to import competition. The 
law provides that positive adjustment occurs when (1) the 
domestic industry is able to compete successfully with imports 
after actions taken under section 204 terminate, or the 
domestic industry experiences an orderly transfer of resources 
to other productive pursuits; and (2) dislocated workers in the 
industry experience an orderly transition to productive 
pursuits.
    The domestic industry may be considered to have made a 
positive adjustment to import competition even though the 
industry is not of the same size and composition as the 
industry at the time the investigation was initiated.
    Before submitting an adjustment plan, the petitioner and 
other members of the domestic industry that wish to participate 
may consult with the U.S. Trade Representative and other 
federal government officials for purposes of evaluating the 
adequacy of the proposals being considered for inclusion in the 
plan.
    In addition, during the ITC investigation, the ITC is 
required to seek information (on a confidential basis to the 
extent appropriate) on actions being taken, or planned to be 
taken, or both, by firms and workers in the industry to make a 
positive adjustment to import competition. Any party may 
individually submit to the ITC commitments regarding actions 
such party intends to take to facilitate positive adjustment to 
import competition.

Provisional relief

    Under section 202(d) of the Trade Act, the President may 
provide provisional relief in the case of imports of a 
perishable agricultural product, provided that the imported 
product has been the subject of ITC monitoring for at least 90 
days prior to the filing of the petition with the ITC and the 
ITC has made an affirmative preliminary determination. The ITC 
has 21 days from the date on which the petition is filed to 
make its determination and report any finding with respect to 
provisional relief, and the President has 7 days after 
receiving an ITC report containing an affirmative determination 
to determine what, if any, action to take.
    The Uruguay Round Agreements Act revised, both 
substantively and procedurally, the critical circumstances 
provision in section 202. Under the revised provisions, if 
critical circumstances are alleged in the petition, the ITC 
must, within 60 days of receipt of a petition containing such 
an allegation, determine whether critical circumstances exist 
and, if so, recommend an appropriate remedy to the President. 
The ITC would find critical circumstances to exist when it 
determines, on the basis of available information, that there 
is ``clear evidence'' that increased imports of an article are 
a substantial cause of serious injury, or the threat thereof, 
to the domestic industry, and ``delay in taking action . . . 
would cause damage to that industry that would be difficult to 
repair.'' After receiving a report containing an affirmative 
ITC determination, the President has 30 days in which to 
determine what, if any, action to take.
    Provisional relief is to take the form of an increase in, 
or imposition of, a duty on imports, if such form of relief is 
feasible and would prevent or remedy the serious injury. Such 
actions generally remain in effect pending completion of the 
full ITC investigation and transmission of the ITC's report. 
However, no provisional relief action may remain in effect for 
more than 200 days.

Presidential action

    Within 60 days of receiving an affirmative ITC 
determination and report, the President shall take all 
appropriate and feasible action within his power which he 
determines will facilitate efforts by the domestic industry to 
make a positive adjustment and will provide greater economic 
and social benefits than costs. Any import relief provided may 
not exceed the amount necessary to prevent or remedy the 
serious injury.
    In determining what action is appropriate, the President is 
required to consider a number of factors, including the 
adjustment plan (if any), individual commitments, probable 
effectiveness of action to promote positive adjustment, other 
factors related to the national economic interest, and the 
national security interest.
    The actions authorized to be taken by the President include 
an increase in or imposition of a duty, imposition of a tariff-
rate quota system, a modification or imposition of a 
quantitative restriction, implementation of one or more 
adjustment measures (including trade adjustment assistance), 
negotiation of agreements with foreign countries limiting the 
export from foreign countries and the import into the United 
States of an article, and any other action within his power.
    The President may take action under this title for an 
initial period of up to 4 years, and may extend such action, at 
a level not to exceed that previously in effect, one or more 
times. However, the total period of relief, including any 
extensions, may not exceed 8 years. As provided in section 311 
of the North American Free Trade Agreement Implementation 
Act,\38\ a relief action is not to apply to imports of an 
article when imported from Canada or Mexico unless imports of 
such article from such country account for a substantial share 
of imports of such article and contribute importantly to the 
serious injury or threat thereof.
---------------------------------------------------------------------------
    \38\ Public Law 103-182, approved December 8, 1993, 19 U.S.C. 3371.
---------------------------------------------------------------------------
    The Trade Policy Committee, chaired by the U.S. Trade 
Representative, is required to make a recommendation to the 
President as to what action the President should take. On the 
day the President takes action under this title, he must submit 
to Congress a document describing the action and the reasons 
for taking the action. If the action taken by the President 
differs from the action recommended by the ITC, the President 
shall state in detail the reasons for the difference. If the 
President decides that there is no appropriate and feasible 
action to take with respect to a domestic industry, the 
President is required to transmit to Congress on the day of 
such decision a document that sets forth in detail the reasons 
for the decision.
    Congress may adopt a joint resolution of disapproval within 
90 legislative days under the expedited procedures of section 
152 of the Trade Act if the President takes action which is 
different from that recommended by the ITC or if the President 
declines to take any action. Under these procedures, 
resolutions are referred to the House Committee on Ways and 
Means and the Senate Committee on Finance, which are subject to 
a motion to discharge if the resolution has not been reported 
within 30 legislative days. No amendments to the motion or to 
the resolution are in order. Within 30 days after enactment of 
such a resolution, the President must proclaim the relief 
recommended by the Commission.

Monitoring, modification, and termination of action

    If presidential action is taken, the ITC is required to 
monitor developments in the industry, including efforts by the 
domestic industry to adjust and, if the initial period or an 
extension of the action exceeds 3 years, submit a report on the 
results of such monitoring at the midpoint of the initial 
period or extension, as appropriate. The Commission is required 
to hold a public hearing in the course of preparing each such 
report.
    After receiving an ITC report on the results of such 
monitoring, the President may reduce, modify, or terminate 
action if either (1) the domestic industry requests it on the 
basis that it has made a positive adjustment, or (2) the 
President determines that changed circumstances warrant such 
reduction, modification, or termination. Upon request of the 
President, the ITC must advise the President as to the probable 
economic effects on the domestic industry of any proposed 
reduction, modification, or termination of action.
    Prior to the termination of relief, the ITC is required, at 
the request of the President or upon petition of the concerned 
industry, to conduct an investigation to determine whether the 
relief action continues to be necessary to prevent or remedy 
serious injury and whether there is evidence that the industry 
is making a positive adjustment to import competition. The ITC 
must hold a public hearing in the course of each such 
investigation and transmit its report to the President no later 
than 60 days before termination of the relief action, unless 
the President specifies a different date.
    After any action taken under this title has terminated, the 
ITC must evaluate the effectiveness of the action in 
facilitating positive adjustment by the domestic industry to 
import competition, and submit a report to the President and to 
the Congress within 180 days of the termination of the action.

Subsequent relief actions

    If relief was provided, no new relief action may be taken 
with respect to the same subject matter for a period of time 
equal to the period of import relief granted, or for 2 years, 
whichever is greater.
    However, in the case of an action that is in effect for 180 
days or less, the President may take a new action with respect 
to the same subject matter if at least 1 year has elapsed since 
the previous action went into effect and an action has not been 
taken more than twice in the 5-year period preceding the 
effective date of the new action.

Section 406 of the Trade Act of 1974: Market Disruption by Imports From 
                          Communist Countries

    Section 406 of the Trade Act of 1974 \39\ was established 
to provide a remedy against market disruption caused by imports 
from Communist countries. The provision applies to imports from 
any Communist country, irrespective of whether it has received 
or currently receives non-discriminatory most-favored-nation 
treatment. Enactment of section 406 resulted from concern that 
traditional remedies for unfair trade practices, such as the 
antidumping and countervailing duty laws, may be insufficient 
to deal with a sudden and rapid influx of substantial imports 
that can result from Communist country control of their pricing 
levels and distribution process.
---------------------------------------------------------------------------
    \39\ Public Law 93-618, approved January 3, 1975, and amended by 
section 1411 of the Omnibus Trade and Competitiveness Act of 1988 
(Public Law 100-418), 19 U.S.C. 2436.
---------------------------------------------------------------------------
    The provisions of section 406 of the Trade Act of 1974, as 
amended by the Omnibus Trade and Competitiveness Act of 1988, 
are in many ways similar to those under sections 201-203 of the 
Trade Act, except that section 406 provides a lower standard of 
injury causation and a faster relief procedure, and the 
investigation focuses on imports from a specific country.
    Under section 406(a), the ITC conducts investigations to 
determine whether imports of an article produced in a Communist 
country (any country dominated or controlled by communism) are 
causing market disruption with respect to a domestically 
produced article. Market disruption exists whenever imports of 
an article, like or directly competitive with an article 
produced by a domestic industry, are increasing rapidly so as 
to be a significant cause of material injury, or threat 
thereof, to such domestic industry. Imports are increasing 
rapidly if there has been a significant increase in imports, 
either actual or relative to domestic production, during a 
recent period of time. In making a determination of market 
disruption, the ITC is required to consider, among other 
factors, the volume of imports, the effect of imports on 
prices, the impact of imports on domestic producers, and 
evidence of disruptive pricing practices or other efforts to 
unfairly manage trade patterns.
    The ITC conducts such investigations at the request of the 
President or the U.S. Trade Representative, upon resolution of 
either the House Committee on Ways and Means or the Senate 
Committee on Finance, on its own motion, or upon the filing of 
a petition by an entity (including a trade association, firm, 
union, or a group of workers) which is representative of an 
industry. The Commission must complete its investigation within 
3 months including a public hearing.
    If the ITC finds that market disruption exists, it must 
also recommend to the President relief in the form of rates of 
duty or quantitative restrictions that will prevent or remedy 
such market disruption. The President then has 60 days to 
advise Congress as to what, if any, relief he will proclaim. 
Any import relief must be proclaimed within 15 days after the 
determination to provide it, except that the President has an 
additional 60 days to negotiate an orderly marketing agreement 
if he decides to provide relief in that form. Relief applies 
only to imports from the subject Communist country. Relief is 
limited to a maximum 5-year period subject to one renewal of up 
to 3 years.
    Section 406(c) authorizes the President, prior to an ITC 
determination, to take temporary emergency action with respect 
to imports from a Communist country whenever he finds that 
there are reasonable grounds to believe there is market 
disruption. When taking such action, the President must also 
request the Commission to conduct an investigation under 
section 406(a). Any emergency relief ceases to apply on the day 
the Commission makes a negative finding or on the effective 
date of action by the President following an affirmative ITC 
finding.

     Sections 421-423 of the Trade Act of 1974, as amended: Market 
       Disruption by Imports from the People's Republic of China

    Section 103 of Public Law 106-286, approved October 10, 
2000, authorizing the extension of permanent normal trade 
relations to the People's Republic of China created a new 
chapter of title IV of the Trade Act of 1974 to implement the 
anti-surge mechanism established under the U.S.-China Bilateral 
Trade Agreement, concluded on November 15, 1999. This provision 
was intended to replace section 406 of the Trade Act of 1974, 
which would no longer apply to China once that country joins 
the WTO.
    Section 421 of the new chapter permits the provision of 
relief to U.S. domestic industries and workers where products 
of Chinese origin are being imported in such increased 
quantities and under such conditions as to cause or threaten to 
cause market disruption to the domestic producers as a whole of 
like or directly competitive products. The relief is to be 
imposed only to the extent and for such period as the President 
considers necessary to prevent or remedy the market disruption. 
Procedures are modeled after Section 406, with certain 
modifications to conform to language of the bilateral trade 
agreement. U.S. industries or workers claiming injury due to 
import surges from China may file a petition with the ITC or 
the ITC can initiate an investigation at the request of the 
President or on motion of the House Ways and Means Committee or 
the Senate Finance Committee. According to the U.S.-China 
Agreement and under the legislation, market disruption occurs 
when subject imports ``are increasing rapidly, either 
absolutely or relatively, so as to be a significant cause of 
material injury or threat of material injury to the domestic 
industry.''
    In determining whether market disruption exists, the ITC 
considers objective factors, including: (1) the volume of 
imports of the product subject to the investigation; (2) the 
effect of imports of such product on prices in the United 
States of like or directly competitive articles, and (3) the 
effect of imports of such product on the domestic industry 
producing like or directly competitive articles. The presence 
or absence of any factor listed above is not necessarily 
dispositive of whether market disruption exists.
    Within 60 days after receipt of the petition, request or 
motion (90 days, where the petitioner alleges critical 
circumstances), the ITC is to make a determination as to 
whether the subject imports are causing or threatening market 
disruption. Not later than 20 days after the ITC makes an 
affirmative determination with respect to market disruption, 
the ITC is to issue a report to the President and to the USTR 
setting forth the reasons for its determination and 
recommendation(s) of actions necessary to prevent or remedy 
market disruption. Within twenty days, the USTR is to publish a 
notice of proposed action in the Federal Register, seeking 
views and evidence on the appropriateness of the proposed 
action and whether it would be in the public interest. The USTR 
is also required to hold a hearing on the proposed action.
    If the ITC's determination is affirmative with respect to 
market disruption, the President is required to request 
consultations with the Chinese to remedy the market disruption. 
If the United States and China are unable to reach agreement 
within the 60 day consultation period established in the 
bilateral agreement and under section 421, then the President 
is required to decide what action, if any, to take within 25 
days after the end of consultations. Any relief proclaimed is 
to become effective in 15 days. If the President determines 
that an agreement with China concluded under this section is 
not preventing or remedying the market disruption at issue, 
then the President is to initiate new consultations and 
proceedings under section 421. However, if China is not 
complying with the terms of the agreement entered into under 
the U.S.-China Bilateral Agreement, then the President is 
required to provide prompt relief consistent with the terms of 
the Bilateral Agreement.
    The entire period from petition to proclamation of relief 
is 150 days, which is identical to the duration under section 
406 of the Trade Act.
    Section 421 also establishes clear standards for the 
application of Presidential discretion in providing relief to 
injured industries and workers. If the ITC makes an affirmative 
determination on market disruption, there is a presumption in 
favor of providing relief. That presumption can be overcome 
only if the President finds that providing relief would have an 
adverse impact on the United States economy clearly greater 
than the benefits of such action, or, in extraordinary cases, 
that such action would cause serious harm to the national 
security of the United States.
    The provision also sets forth authority to the President to 
modify, reduce or terminate relief, as well an opportunity for 
the President to request a report from the ITC on the probable 
effects of such action. In addition, section 421 allows for 
extension of relief under certain circumstances.
    The President is authorized to provide a provisional 
safeguard in cases where ``delay would cause damage which it 
would be difficult to repair,'' as permitted under the U.S.-
China Bilateral Agreement. If such circumstances are alleged, 
the ITC is required to make a determination on critical 
circumstances and a preliminary determination on market 
disruption within 45 days of receipt of the petition, request, 
or motion. If those determinations are affirmative, the 
President is required to determine whether to provide such 
provisional relief within 20 days.
    Finally, section 422 implements a provision in the U.S.-
China Bilateral Agreement concerning trade diversion. That 
provision addresses circumstances in which a safeguard applied 
by a third country with respect to Chinese goods ``causes or 
threatens to cause significant diversions of trade'' into the 
United States. If, on the basis of the monitoring results 
provided by the Customs Service and other reasonably available 
relevant evidence, the ITC determines that an action by another 
WTO Member threatens or causes significant trade diversion, the 
USTR is required to request consultations with China and/or the 
Member imposing the safeguard. If, as provided in the U.S.-
China Bilateral Agreement, consultations fail to lead to an 
agreement to address the trade diversion within 60 days, the 
President is required to determine, within 40 days after 
consultations end, what action, if any, to take to prevent or 
remedy the trade diversion. The total time from petition to 
relief under the trade diversion provision is 150 days. Section 
422 also requires the ITC to examine changes in imports into 
the United States from China since the time that the WTO Member 
commenced the investigation that led to a request for 
consultations.
    The product-specific safeguard is available for 12 years 
after China's accession to the WTO.

  Section 1102 of the Trade Agreements Act of 1979: Public Auction of 
                            Import Licenses

    Section 1102 of the Trade Agreements Act of 1979 authorizes 
the President to sell import licenses by public auction, under 
such terms and conditions as the President deems appropriate. 
Any regulations prescribed under this authority must, to the 
extent practicable and consistent with efficient and fair 
administration, ensure against inequitable sharing of imports 
by a relatively small number of the larger importers.
    Import licenses which are potentially subject to this 
auction authority are identified in section 1102 by the law 
authorizing the import restriction. For example, import 
licenses used to administer a quantitative restriction under 
the escape clause (section 203 of the Trade Act of 1974), the 
market disruption clause (section 406 of the Trade Act of 1974) 
or section 301 of the Trade Act of 1974 may be sold by public 
auction. Any quantitative import restriction imposed under the 
International Emergency Economic Powers Act or the Trading With 
the Enemy Act may also be administered by an auctioned import 
license. Certain agricultural import quotas, however (such as 
certain meat quotas, cheese quotas, and dairy quotas) are 
exempt from the auction authority and therefore may not be 
administered by means of auctioned licenses.

                      Trade Adjustment Assistance


 Chapters 2, 3, and 5 of Title II of the Trade Act of 1974, as amended

    The trade adjustment assistance (TAA) programs were first 
established under the Trade Expansion Act of 1962 for the 
purpose of assisting in the special adjustment problems of 
workers and firms dislocated as a result of a federal policy of 
reducing barriers to foreign trade. As a result of limited 
eligibility and usage of the programs, criteria and benefits 
were expanded under title II of the Trade Act of 1974 (Public 
Law 93-618). The Omnibus Budget Reconciliation Act of 1981 
(OBRA) (Public Law 97-35), reformed the program for workers as 
proposed by the Administration. The amendments, particularly in 
program eligibility and benefits, were intended to reduce 
program cost significantly and to shift the focus of TAA from 
income compensation for temporary layoffs to return-to-work 
through training and other adjustment measures for the long-
term or permanently unemployed. The OBRA also made relatively 
minor modifications in the firm program. Both programs were 
extended at that time for 1 year, to terminate on September 30, 
1983.
    Public Law 98-120, a bill to amend the International Coffee 
Agreement Act of 1980, approved on October 12, 1983, extended 
the worker and firm TAA programs for 2 years, until September 
30, 1985. Sections 2671-2673 of the Deficit Reduction Act of 
1984 (Public Law 98-369) amended the program for workers to 
increase the availability of worker training allowances and the 
level of job search and relocation benefits, and amended the 
program for firms to increase the availability of industrywide 
technical assistance.
    The worker and firm TAA programs were further extended 
under temporary legislation in the 99th Congress until December 
19, 1985. The Consolidated Omnibus Budget Reconciliation Act of 
1985 (COBRA) (Public Law 99-272), approved April 7, 1986, 
reauthorized the TAA programs for workers and firms for 6 years 
retroactively from December 19, 1985, until September 30, 1991, 
with amendments.
    Sections 1421-1430 of the Omnibus Trade and Competitiveness 
Act of 1988 (OTCA) (Public Law 100-418), enacted on August 23, 
1988, made significant amendments in the worker TAA program, 
particularly concerning the eligibility criteria for cash 
benefits, funding, and administration. A training requirement 
as a condition for income support to encourage and enable 
workers to obtain early reemployment became effective as of 
November 21, 1988. This replaced a 1986 amendment that 
instituted a job-search requirement as a condition for 
receiving cash benefits. The amendments also expanded TAA 
eligibility coverage of workers and firms, contingent upon the 
imposition of an import fee to fund program costs. The OTCA 
extended TAA program authorization for an additional 2 years 
until September 30, 1993.
    Section 136 of the Customs and Trade Act of 1990, (Public 
Law 101-382), approved on August 20, 1990, extended the 
completion and reporting period for the supplemental wage 
allowance demonstration projects for workers required by the 
1988 amendments. Section 106 of Public Law 102-318, approved 
July 3, 1992, to extend the emergency unemployment compensation 
program, provided for weeks of active military duty in a 
reserve status (including service during Operation Desert 
Storm) to qualify toward the minimum number of weeks of prior 
employment required for TAA eligibility.
    Section 13803 of the Omnibus Budget Reconciliation Act 
(OBRA 1993) of 1993, Public Law 103-66, approved August 10, 
1993, reauthorized the TAA programs for workers and firms for 
an additional 5 years through fiscal year 1998, with assistance 
to terminate on September 30, 1998. Section 13803 of the OBRA 
1993 also reduced the level of the ``cap'' on training 
entitlement funding from $80 million to $70 million for fiscal 
year 1997 only.
    Sections 501-506 of the North American Free Trade Agreement 
(NAFTA) Implementation Act, Public Law 103-182, approved 
December 8, 1993, set forth the ``NAFTA Worker Security Act,'' 
establishing the NAFTA transitional adjustment assistance 
program, effective January 1, 1994 through September 30, 1998, 
for workers as a new subchapter D (section 250) under chapter 2 
of title II of the Trade Act of 1974.
    Renewal of the TAA programs for workers and firms, as well 
as the NAFTA-related TAA program, through June 30, 1999 was 
contained in section 1012 of the Omnibus Appropriations Act for 
Fiscal Year 1999.\40\ Section 1012 also reduced the level of 
the ``cap'' on NAFTA-related training entitlement funding from 
$30 million per fiscal year to $15 million for the period 
between October 1, 1998 and June 30, 1999.
---------------------------------------------------------------------------
    \40\ Public Law 105-277, approved October 21, 1998.
---------------------------------------------------------------------------
    Section 702 of the Consolidated Appropriations Act for 
Fiscal Year 2000 \41\ reauthorized the TAA programs for workers 
and firms, including the NAFTA-related TAA program, through 
September 30, 2001. Section 702 also restored the ``cap'' on 
NAFTA-related training entitlement funding to $30 million per 
fiscal year.
---------------------------------------------------------------------------
    \41\ Public Law 106-113, approved November 29, 1999.
---------------------------------------------------------------------------

                        TAA Program for Workers

    TAA for workers under sections 221 through 250 of the Trade 
Act of 1974, as amended, consists of trade readjustment 
allowances (TRAs), employment services, training and additional 
TRAs allowances while in training, and job search and 
relocation allowances for certified and otherwise qualified 
workers. The program is administered by the Employment and 
Training Administration (ETA) of the Department of Labor 
through state agencies under cooperative agreements between 
each state and the Secretary of Labor. ETA processes petitions 
and issues certifications or denials of petitions by groups of 
workers for eligibility to apply for TAA. The state agencies 
act as federal agents in providing program information, 
processing applications, determining individual worker 
eligibility for benefits, issuing payments, and providing 
reemployment services and training opportunities.

Certification requirements

    A two-step process is involved in the determination of 
whether an individual worker will receive TAA: (1) 
certification by the Secretary of Labor of a petitioning group 
of workers in a particular firm as eligible to apply; and (2) 
approval by the state agency administering the program of the 
application for benefits of an individual worker covered by a 
certification.
    The process begins by a group of three or more workers, 
their union, or authorized representative filing a petition 
with the ETA for certification of group eligibility. To certify 
a petitioning group of workers as eligible to apply for 
adjustment assistance, the Secretary must determine that three 
conditions are met:
          (1) a significant number or proportion of the workers 
        in the firm or subdivision of the firm have been or are 
        threatened to be totally or partially laid off;
          (2) sales and/or production of the firm or 
        subdivision have decreased absolutely; and
          (3) increased imports of articles like or directly 
        competitive with articles produced by the firm or 
        subdivision of the firm have ``contributed 
        importantly'' to both the layoffs and the decline in 
        sales and/or production.
    The OTCA amendments expanded the potential eligibility 
coverage to include workers in any firm or subdivision of a 
firm that engages in exploration or drilling for oil or natural 
gas.
    The Secretary is required to make the eligibility 
determination within 60 days after a petition is filed. A 
certification of eligibility to apply for TAA covers workers 
who meet the requirements and whose last total or partial 
separation from the firm or subdivision before applying for 
benefits occurred within 1 year prior to the filing of the 
petition.
    State agencies must give written notice by mail to each 
worker to apply for TAA where it is believed the worker is 
covered by a certification of eligibility and also must publish 
notice of each certification in newspapers of general 
circulation in areas where certified workers reside. State 
agencies must also advise each adversely affected worker, at 
the time that worker applies for UI, of TAA program benefits as 
well as the procedures, deadlines, and qualifying requirements 
for applying. State agencies must advise each such worker to 
apply for training before or at the same time the worker 
applies for TRA benefits, and promptly interview each certified 
worker and review suitable training opportunities available.

Qualifying requirements for trade readjustment allowances

    In order to receive entitlement to payment of a TAA for any 
week of unemployment, an individual must be an adversely 
affected worker covered by a certification, file an application 
with the State agency, and meet the following qualifying 
requirements:
          (1) The worker's first qualifying separation from 
        adversely affected employment occurred within the 
        period of the certification applicable to that worker, 
        i.e, on or after the ``impact date'' in the 
        certification (the date on which total or partial 
        layoffs in the firm or subdivision thereof began or 
        threatened to begin, but never more than 1 year prior 
        to the date of the petition), within 2 years after the 
        date the Secretary of Labor issued the certification 
        covering the worker, and before the termination date 
        (if any) of the certification.
          (2) The worker was employed during the 52-week period 
        preceding the week of the first qualifying separation 
        at least 26 weeks at wages of $30 or more per week in 
        adversely affected employment with a single firm or 
        subdivision of a firm. A week of unemployment includes 
        the week in which layoff occurs and up to 7 weeks of 
        employer-authorized vacation, sickness, injury, 
        maternity, or military leave, or service as a full-time 
        union representative. Weeks of disability covered by 
        workmen's compensation and, as amended in 1992, weeks 
        of active duty in a military reserve status may also 
        count toward the 26-week minimum.
          (3) The worker was entitled to unemployment insurance 
        (UI), has exhausted all rights to any UI entitlement, 
        including any extended benefits (EB) or federal 
        supplemental compensation (FSC) (if in existence), and 
        does not have an unexpected waiting period for any UI.
          (4) The worker must not be disqualified with respect 
        to the particular week of unemployment for EB by reason 
        of the work acceptance and job search requirements 
        under section 202(a)(3) of the Federal-State Extended 
        Unemployment Compensation Act of 1970. All TRA 
        claimants in all states are subject to the provisions 
        of the EB ``suitable work'' test under that Act (i.e., 
        must accept any offer of suitable work, actively engage 
        in seeking work, and register for work) after the end 
        of their regular UI benefit period as a precondition 
        for receiving any weeks of TRA payments. The EB work 
        test does not apply to workers enrolled or 
        participating in a TAA-approved training program; the 
        test does apply to workers for whom TAA-approved 
        training is certified as not feasible or appropriate.
          (5) The worker must be enrolled in, or have completed 
        following separation from adversely affected employment 
        within the certification period, a training program 
        approved by the Secretary of Labor in order to receive 
        basic TAA payments, unless the Secretary has determined 
        and submitted a written statement to the individual 
        worker certifying that approval of training is not 
        ``feasible or appropriate'' (e.g., training is not 
        available that meets the criteria for approval, funding 
        is not available to pay the full training costs, there 
        is a reasonable prospect that the worker will be 
        reemployed by the firm from which he was separated). No 
        cash benefits may be paid to a worker who, without 
        justifiable cause, has failed to begin participation or 
        has ceased participation in an approved training 
        program until the worker begins or resumes 
        participation, or to a worker whose waiver of 
        participation in training is revoked in writing by the 
        Secretary.
    This training requirement to encourage and enable workers 
to obtain early reemployment became effective under the OTCA 
amendments as of November 21, 1988; this 1988 amendment 
replaced a 1986 amendment that instituted a job search 
requirement as a condition for receiving cash benefits.

Cash benefit levels and duration

    A worker is entitled to TRA payments for weeks of 
unemployment beginning the later of (a) the first week 
beginning more than 60 days after the filing date of the 
petition that resulted in the certification under which the 
worker is covered (i.e., weeks following the statutory deadline 
for certification), or (b) the first week after the worker's 
first total qualifying separation.
    The TRA cash benefit amount payable to a worker for a week 
of total unemployment is equal to, and a continuation of, the 
most recent weekly benefit amount of UI payable to that worker 
preceding that worker's first exhaustion of UI following the 
worker's first total qualifying separation under the 
certification, reduced by any federal training allowance and 
disqualifying income deductible under UI law.
    The maximum amount of basic TRA benefits payable to a 
worker for the period covered by any certification is 52 times 
the TRA payable for a week of total unemployment minus the 
total amount of UI benefits to which the worker was entitled in 
the benefit period in which the first qualifying separation 
occurred (e.g., a worker receiving 39 weeks of UI regular and 
extended benefits could receive a maximum 13 weeks of basic TRA 
benefits). UI and TRA payments combined are limited to a 
maximum 52 weeks in all cases involving extended compensation 
benefits (i.e., a worker who received 52 or more weeks of 
unemployment benefits would not be entitled to basic TRA). TRA 
benefits are not payable to workers participating in on-the-job 
training.
    The eligibility period for collecting basic TRA is the 104-
week period that immediately follows the week in which a total 
qualifying separation occurs. If the worker has a subsequent 
total qualifying separation under the same certification, the 
eligibility period for basic TRA moves from the prior 
eligibility period to 104 weeks after the week in which the 
subsequent total qualifying separation occurs.
    A worker may receive up to 26 additional weeks of TRA 
benefits after collecting basic benefits (up to a total maximum 
of 78 weeks) if that worker is participating in approved 
training. To receive the additional benefits, the worker must 
apply for the training program within 210 days after 
certification or first qualifying separation, whichever date is 
later. Additional benefits may be paid only during the 26-week 
period that follows the last week of entitlement to basic TRA, 
or that begins with the first week of training if the training 
begins after the exhaustion of basic TRA.
    A worker participating in approved training continues to 
receive basic and additional TRA payments during breaks in such 
training if the break does not exceed 14 days, if the worker 
was participating in the training before the beginning of the 
break, resumes participation in the training after the break 
ends, and the break is provided for in the training schedule. 
Weeks when TRA is not payable because of this break provision 
count against the eligibility periods for both basic and 
additional TRA.

Training and other employment services, job research and relocation 
        allowances

    Training and other employment services and job search and 
relocation allowances are available through state agencies to 
certified workers whether or not they have exhausted UI 
benefits and become eligible for TRA payments.
    Employment services consist of counseling, vocational 
testing, job search and placement, and other supportive 
services, provided for under any other federal law.
    Training, preferably on-the-job, shall be approved for a 
worker if the following six conditions are met:
          (1) there is no suitable employment available;
          (2) the worker would benefit from appropriate 
        training;
          (3) there is a reasonable expectation of employment 
        following training completion;
          (4) approved training is reasonably available from 
        government agencies or private sources;
          (5) the worker is qualified to undertake and complete 
        such training; and
          (6) such training is suitable for the worker and 
        available at a reasonable cost.
    If training is approved, the worker is entitled to payment 
of the costs from the Secretary directly or through a voucher 
system, unless they have been paid or are reimbursable under 
another federal law. On-the-job training costs are payable only 
if such training is not at the expense of currently employed 
workers. The 1988 amendments added remedial education as a 
separate and distinct approvable training program.
    The OTCA amendments converted training from an entitlement 
to the extent appropriated funds were available, to an 
entitlement without regard to the availability of funds to pay 
the training costs. As of the OTCA amendments, approved 
training is an entitlement in any case where the six criteria 
for approval are reasonably met, up to an $80 million statutory 
ceiling on annual fiscal year training costs (including job 
search and relocation allowances and subsistence payments) 
payable from TAA funds. Up to this limit workers are entitled 
to have the costs of approved training paid on their behalf. If 
the Secretary foresees that the $80 million ceiling would be 
exceeded in any fiscal year, the Secretary will decide how 
remaining TAA funds shall be apportioned among the states for 
the balance of that year.
    As a result of the OTCA amendments, costs of approved TAA 
training may be paid solely from TAA funds, solely from other 
federal or state programs or private funds, or from a mix of 
TAA and public or private funds, except if the worker in the 
case of a non-governmental program would be required to 
reimburse any portion of the costs from TAA funds. Duplicate 
payment of training costs is prohibited, and workers are not 
entitled to payment of training costs from TAA funds to the 
extent these costs are paid or shared from other sources. 
Training may still be approved if the fiscal year TAA funding 
entitlement limit is reached, provided the training costs are 
paid from outside sources.
    Supplemental assistance is available to defray reasonable 
transportation and subsistence expenses for separate 
maintenance when training is not within the worker's commuting 
distance, equal to the lesser of actual per diem expenses or 50 
percent of the prevailing federal per diem rate for subsistence 
and prevailing mileage rates under federal regulations for 
travel expenses.
    Job search allowances are available to certified workers 
who cannot obtain suitable employment within their commuting 
area, are totally laid off, and who apply within 1 year after 
certification or last total layoff, whichever is later, or 
within 6 months after concluding training. The allowance for 
reimbursement is equal to 90 percent of necessary job search 
expenses, based on the same increased supplemental assistance 
rates described above, up to a maximum amount of $800. The 
Secretary of Labor is required to reimburse workers for 
necessary expenses incurred to participate in an approved job 
search program.
    Relocation allowances are available to certified workers 
totally laid off at the time of relocation who have been able 
to obtain an offer of or actual suitable employment only 
outside their commuting area, who apply within 14 months after 
certification or last total layoff, whichever is later, or 
within 6 months after concluding training, and whose relocation 
takes place within 6 months after application of completion of 
training. As amended in 1981 and 1984, the allowance is equal 
to 90 percent of reasonable and necessary expenses for 
transporting the worker, family, and household effects, based 
on the same increased supplemental assistance rates described 
above, plus a lump sum payment of three times the worker's 
average weekly wage up to a maximum amount of $800.

Funding

    Federal funds, as an appropriated entitlement from general 
revenues under the Federal Unemployment Benefit Account (FUBA) 
in the Department of Labor, cover the portion of the worker's 
total entitlement represented by the continuation of UI benefit 
levels in the form of TRA payments, as well as payments for 
training and job search and relocation allowances, and state-
related administrative expenses. Funds made available under 
grants to states defray expenses of any employment services and 
other administrative expenses. For fiscal year 2001, $342.4 
million has been appropriated for trade readjustment allowances 
and related administrative expenses. Funding for training, job 
search and relocation allowances, and related expenses is an 
annual appropriated entitlement under the Training and 
Employment Services account of the Department of Labor.
    The states are reimbursed from Treasury general revenues 
for benefit payments and other costs incurred under the 
program. A penalty under section 239 of the Trade Act of 1974 
provides for reduction by 15 percent of the credits for state 
unemployment taxes which employers are allowed against their 
liability for federal unemployment tax if a state has not 
entered into or has not fulfilled its commitments under a 
cooperative agreement.

                       NAFTA Worker Security Act

    Subchapter D of chapter 2 (section 250) of title II of the 
Trade Act of 1974 establishes a NAFTA transitional adjustment 
assistance program for workers who may be adversely impacted by 
the NAFTA. Import-impacted workers may also petition for 
assistance under TAA, but cannot obtain benefits under both 
programs.
    A group of workers (including workers in any agricultural 
firm or subdivision of an agricultural firm) shall be certified 
as eligible to apply for adjustment assistance under subchapter 
D if the Secretary determines that a significant number or 
proportion of the workers in the firm or subdivision of the 
firm have become or are threatened to become totally or 
partially separated, and either:
          (1) Sales and/or production of the firm or 
        subdivision have decreased absolutely, imports from 
        Mexico or Canada of articles like or directly 
        competitive with articles produced by such firm or 
        subdivision have increased, and the increase in imports 
        contributed importantly to the workers' separation or 
        threat of separation and to the decline in the sales or 
        production of the firm or subdivision; or
          (2) There has been a shift in production by the 
        workers' firm or subdivision to Mexico or Canada of 
        articles like or directly competitive with articles 
        produced by the firm or subdivision.
    A group of workers or their union or other duly authorized 
representative may file a petition for certification of 
eligibility to apply for adjustment assistance under subchapter 
D with the governor of the state in which the worker's firm or 
subdivision is located. Upon receipt of the petition, the 
governor must notify the Secretary of Labor. Within 10 days 
thereafter, the governor must make a preliminary finding as to 
whether the petition meets the certification criteria and 
transmit the petition, together with a statement of the finding 
and reasons therefor, to the Secretary for action. If the 
preliminary finding is affirmative, the governor will ensure 
that rapid response and basic readjustment services authorized 
under other federal law are made available to the workers.
    Within 30 days after receiving the petition, the Secretary 
must determine whether the petition meets the certification 
criteria. Upon an affirmative determination, the Secretary will 
issue to workers covered by the petition a certification of 
eligibility to apply for comprehensive assistance. Upon denial 
of certification, the Secretary will review the petition to 
determine if the workers meet the requirements of the TAA 
program for certification.
    Certified workers under the NAFTA program receive 
employment services, training, trade readjustment allowances, 
and job search and relocation allowances in the same manner and 
to the same extent as workers covered under a TAA 
certification, with the following exceptions: (1) the total 
amount of payments for training costs for any fiscal year do 
not exceed $30 million; (2) with respect to TRA benefits, the 
authority of the Secretary of Labor to waive the training 
requirement does not apply with respect to payments under 
subchapter D; and (3) to receive TRA benefits, the worker must 
be enrolled in a training program approved by the Secretary by 
the later of the last day of the 16th week of the worker's 
initial UI benefit period or the last day of the 6th week after 
the week in which the Secretary issues a certification covering 
the worker. In extenuating circumstances, the Secretary may 
extend the time for enrollment for not more than 30 days.
    The NAFTA program took effect on January 1, 1994, the date 
the NAFTA entered into force for the United States. No worker 
can be certified as eligible to receive assistance under 
subchapter D whose last total or partial separation occurred 
before January 1, except for those workers whose last layoff 
occurred after December 8 (the date of enactment of the NAFTA 
Implementation Act) and before January 1 who would otherwise be 
eligible to receive assistance under subchapter D.
    For fiscal year 2001, $64.15 million has been appropriated 
for NAFTA trade adjustment assistance.

                         TAA Program for Firms

    Sections 251 through 264 of the Trade Act of 1974, as 
amended, contain the procedures, eligibility requirements, 
benefits and their terms and conditions, and administrative 
provisions of the TAA program for firms adversely impacted by 
increased import competition. The program is administered by 
the Economic Development Administration within the Department 
of Commerce. Amendments in 1986 under the COBRA eliminated 
financial assistance (direct loan or loan guarantee) benefits, 
increased government participation in technical assistance, and 
expanded the criteria for firm certification.
    Program benefits consist exclusively of technical 
assistance for petitioning firms which qualify under a two-step 
procedure: (1) certification by the Secretary of Commerce that 
the petitioning firm is eligible to apply, and (2) approval by 
the Secretary of Commerce of the application by a certified 
firm for benefits, including the firm's proposal for economic 
adjustment.
    To certify a firm as eligible to apply for adjustment 
assistance, the Secretary must determine that three conditions 
are met:
          (1) a significant number or proportion of the workers 
        in the firm have been or are threatened to be totally 
        or partially laid off;
          (2) sales and/or production of the firm have 
        decreased absolutely, or sales and/or production that 
        accounted for at least 25 percent of total production 
        or sales of the firm during the 12 months preceding the 
        most recent 12-month period for which data are 
        available have decreased absolutely; and
          (3) increased imports of articles like or directly 
        competitive with articles produced by the firm have 
        ``contributed importantly'' to both the layoffs and the 
        decline in sales and/or production.
    The 1988 amendments expanded potential eligibility coverage 
of the program to include firms that engage in exploration or 
drilling for oil or natural gas. Unlike the worker program, 
this extension applies only prospectively after August 23, 
1988.
    A certified firm may file an application with the Secretary 
of Commerce for trade adjustment assistance benefits at any 
time within 2 years after the date of the certification of 
eligibility. The application must include a proposal by the 
firm for its economic adjustment. The Secretary may furnish 
technical assistance to the firm in preparing its petition for 
certification and/or in developing a viable economic adjustment 
proposal.
    The Secretary approves the firm's application for 
assistance only if he determines that its adjustment proposal 
(a) is reasonably calculated to make a material contribution to 
the economic adjustment of the firm; (b) gives adequate 
consideration to the interests of the workers in the firm; and 
(c) demonstrates that the firm will make all reasonable efforts 
to use its own resources for economic development.

Benefits

    Technical assistance may be given to implement the firm's 
economic adjustment proposal in addition to, or in lieu of, 
precertification assistance or assistance in developing the 
proposal. It may be furnished through existing government 
agencies or through private individuals, firms, and 
institutions (including private consulting services), or by 
grants to intermediary organizations, including regional TAA 
Centers. As amended by the COBRA, the federal government may 
bear the full cost of technical assistance to a firm in 
preparing its petition for certification. However, the federal 
share cannot exceed 75 percent of the cost of assistance 
furnished through private individuals, firms, or institutions 
for developing or implementing an economic adjustment proposal. 
Grants may be made to intermediate organizations to defray up 
to 100 percent of their administrative expenses in providing 
technical assistance.
    The Secretary of Commerce also may provide technical 
assistance of up to $10 million annually per industry to 
establish industrywide programs for new product or process 
development, export development, or other uses consistent with 
adjustment assistance objectives. The assistance may be 
furnished through existing agencies, private individuals, 
firms, universities, and institutions, and by grants, 
contracts, or cooperative agreements to associations, unions, 
or other non-profit organizations of industries in which a 
substantial number of firms or workers have been certified.

Funding

    Funds to cover all costs of the program are subject to 
annual appropriations to the EDA of the Department of Commerce 
from general revenues. For fiscal year 2001, $10.5 million was 
appropriated for the program.
                Chapter 3: OTHER LAWS REGULATING IMPORTS

  Authorities To Restrict Imports of Agricultural and Textile Products

        Section 204 of the Agricultural Act of 1956, as amended

    Section 204 of the Agricultural Act of 1956, as amended,\1\ 
authorizes the President to negotiate agreements with foreign 
governments to limit their exports of agricultural or textile 
products to the United States. The President is authorized to 
issue regulations governing the entry of products subject to 
international agreements concluded under this section. 
Furthermore, if a multilateral agreement is concluded among 
countries accounting for a significant part of world trade in 
the articles concerned, the President may also issue 
regulations governing entry of those same articles from 
countries which are not parties to the multilateral agreement, 
or countries to which the United States does not apply the 
Agreement.
---------------------------------------------------------------------------
    \1\ Public Law 84-540, ch. 327, approved May 28, 1956, 70 Stat. 
200, as amended by Public Law 87-488, approved June 19, 1962, 76 Stat. 
104, 7 U.S.C. 1854 and Public Law 103-465, approved Dec. 8, 1994.
---------------------------------------------------------------------------
    The authority provided under section 204 has been used to 
negotiate bilateral agreements restricting the exportation of 
certain meats to the United States,\2\ as well as to implement 
an agreement with the European Communities (EC) restricting 
U.S. importation of certain cheeses from the EC.\3\ Section 204 
also provided the legal basis for the GATT Arrangement 
Regarding International Trade in Textiles, commonly referred to 
as the Multifiber Arrangement (MFA),\4\ for U.S. bilateral 
agreements with 47 \5\ textile-exporting nations, and currently 
provides the basis for U.S. implementation of the Uruguay Round 
Agreement on Textiles and Clothing (ATC), which replaces the 
now expired MFA.
---------------------------------------------------------------------------
    \2\ Exec. Order No. 11539, June 30, 1970, 35 Fed. Reg. 10733, as 
amended by Exec. Order No. 12188, Jan. 2, 1980, 45 Fed. Reg. 989.
    \3\ Exec. Order No. 11851, April 10, 1975, 40 Fed. Reg. 16645.
    \4\ Arrangement Regarding International Trade in Textiles, T.I.A.S. 
7840 (1973) (expired 1994).
    \5\ In force as of January 1, 2001.
---------------------------------------------------------------------------

                      MULTIFIBER ARRANGEMENT (MFA)

    The Multifiber Arrangement was a multilateral agreement 
negotiated under the auspices of the General Agreement on 
Tariffs and Trade. The MFA provided a general framework and 
guiding principles for the negotiation of bilateral agreements 
between textile importing and exporting countries, or for 
unilateral action by an importing country if an agreement 
cannot be reached. In effect since 1974, the MFA was 
established to deal with problems of market disruption in 
textile trade, while permitting developing countries to share 
in expanded export opportunities.

Background

    The first voluntary agreement to limit exports of cotton 
textiles to the United States was negotiated with Japan in 
1957. Through the 1950's cotton textile imports, especially 
from Japan, continued to increase and generate pressure for 
import restraints. In 1956, the Congress passed the 
Agricultural Act of 1956 which, among other things, provided 
negotiating authority for agreements restricting imports of 
textile products. Pursuant to this authority, the United States 
negotiated a 5-year voluntary restraint agreement on cotton 
textile exports from Japan, announced in January 1957.
    As textile and apparel imports from low-wage developing 
countries began to rise, pressure mounted for a more 
comprehensive approach to the import problem. On May 2, 1961, 
President Kennedy announced a Seven Point Textile Program, one 
point of which called for an international conference of 
textile importing and exporting countries to develop an 
international agreement governing textile trade. On July 17, 
1961, a textile conference was convened under the auspices of 
the GATT. The discussions culminated in the promulgation of the 
Short-Term Arrangement on Cotton Textile Trade (STA) on July 
21, 1961.\6\ The STA covered the year October 1, 1961, to 
September 30, 1962, and established a GATT Cotton Textiles 
Committee to negotiate a long-range cotton textile agreement.
---------------------------------------------------------------------------
    \6\ T.I.A.S. 4884 (1961) (expired 1962).
---------------------------------------------------------------------------
    From October 1961 through February 1962, the STA 
signatories met in Geneva and negotiated a Long-Term 
Arrangement for Cotton Textile Trade (LTA), to last for 5 years 
beginning October 1, 1962.\7\ The LTA provided for negotiation 
of bilateral agreements between cotton textile importing and 
exporting countries, and for imposition of quantitative 
restraints on particular categories of cotton textile products 
from particular countries when there was evidence of market 
disruption. In June of 1962, section 204 of the Agricultural 
Act of 1956 was amended to give the President authority to 
control imports from countries which did not sign the LTA.\8\
---------------------------------------------------------------------------
    \7\ T.I.A.S. 5240 (1962) (expired 1973).
    \8\ Public Law 87-488, approved June 19, 1962, 76 Stat. 104.
---------------------------------------------------------------------------
    In the fall of 1965 the LTA was reviewed, and criticism 
within the U.S. textile industry mounted with respect to the 
LTA's failure to cover man-made fiber textiles. In 1967, 
however, the LTA was extended for 3 additional years with no 
additional fiber coverage. In 1970, the LTA was again extended 
for 3 more years.
    Meanwhile, multifiber agreements limiting imports not only 
of cotton but also of wool and man-made fiber textiles were 
negotiated by the Nixon administration on a bilateral basis. On 
October 15, 1971, bilateral multifiber agreements were 
announced with Japan, Hong Kong, South Korea, and Taiwan. A 
multilateral agreement, incorporating the provisions of the 
bilaterals with Hong Kong, South Korea, and Taiwan, was also 
signed to allow the United States the authority, under section 
204 of the Agricultural Act of 1956 as amended in 1962, to 
impose quantitative restrictions unilaterally on non-signatory 
countries.
    The following year, in June 1972, efforts to negotiate a 
multifiber agreement on a broader multilateral basis led to the 
establishment of a GATT working party to conduct a 
comprehensive study of conditions of world trade in textiles. 
The working group submitted its study to the GATT Council early 
in 1973. In the fall of that year, multilateral negotiations 
for a multifiber agreement began after passage of a 3-month 
extension of the LTA. The first Multifiber Arrangement (MFA I) 
was concluded on December 20, 1973, and came into force January 
1, 1974, supplanting the LTA.

MFA provisions

    The MFA was modeled after the LTA and provided for 
bilateral agreements between textile importing and exporting 
nations under which industrial countries have negotiated quotas 
on imports of textiles and clothing primarily from developing 
countries (article 4), and for unilateral actions following a 
finding of market disruption (article 3).\9\ Quantitative 
restrictions were based on past volumes of trade, with the 
right, within certain limits, to transfer the quota amounts 
between products and between years. The MFA also provided 
generally for a minimum annual growth rate of 6 percent.\10\ 
Quotas already in place had to be conformed to the MFA or 
abolished within a year. The products covered by MFA I, II, and 
III included all manufactured products whose chief value is 
represented by cotton, wool, man-made fibers or a blend 
thereof. Also included were products whose chief weight is 
represented by cotton, wool, man-made fibers or a blend 
thereof. MFA IV expanded product coverage to include products 
made of vegetable fibers such as linen and ramie, and silk 
blends as well.
---------------------------------------------------------------------------
    \9\ Market disruption exists when domestic producers are suffering 
``serious damage'' or the threat thereof. Factors to be considered in 
determining whether the domestic producers are seriously damaged 
include: turnover, market share, profit, export performance, 
employment, volume of disruptive and other imports, production, 
utilization of capacity, productivity, and investments. Such damage 
must be caused by a sharp, substantial increase of particular products 
from particular sources which are offered at prices substantially below 
those prevailing in the importing country.
    \10\ The annual growth rate applies to overall levels of imports 
from a particular supplier country. Higher or lower growth rates can 
apply to particular products, as long as the overall growth rate with 
respect to that supplier country is 6 percent.
---------------------------------------------------------------------------
    Overall management of the MFA was undertaken by the GATT 
Textiles Committee, which is made up of representatives of 
countries participating in the MFA and is chaired by the GATT 
Director General. A Textile Surveillance Body (TSB) was 
established to supervise the detailed implementation of the 
MFA.
    MFA I was in effect for 4 years, until the end of 1977. 
During MFA renewal negotiations in July 1977 the EC succeeded 
in putting in the renewal protocol a provision allowing jointly 
agreed ``reasonable departures'' from the MFA requirements in 
negotiating bilateral agreements. The MFA was then renewed for 
4 more years.\11\
---------------------------------------------------------------------------
    \11\ T.I.A.S. 8939 (1977).
---------------------------------------------------------------------------
    MFA II was in effect through December 1981. On December 22, 
1981, a protocol was initialed extending the MFA for an 
additional 4\1/2\ years, and providing a further interpretation 
of MFA requirements in light of 1981 conditions.\12\ MFA III 
expired on July 31, 1986. MFA IV went into effect on August 1, 
1986 for a 5-year period. MFA IV was extended on July 31, 1991 
for 17 months from August 1, 1991 until December 31, 1992, with 
the expectation that the results of the GATT Uruguay Round of 
Multilateral Trade Negotiations would come into force 
immediately thereafter. On December 10, 1992, the MFA was 
extended for a fifth time, until December 31, 1993, and then 
for a final time until December 31, 1994.
---------------------------------------------------------------------------
    \12\ T.I.A.S. 10323 (1981).
---------------------------------------------------------------------------

            URUGUAY ROUND AGREEMENT ON TEXTILES AND CLOTHING

    One aim of the Uruguay Round was to integrate the textiles 
and clothing sector into the GATT. The resulting Agreement on 
Textiles and Clothing (ATC) establishes a 10-year phase-out of 
the quotas established under the MFA. Although the MFA expired 
on December 31, 1994, the bilateral agreements negotiated 
between individual importing and supplier governments remain in 
force. If the signatories to those bilateral arrangements are 
members of the World Trade Organization (WTO), the quota levels 
established under those agreements are now governed by the ATC. 
This means that the quotas must be adjusted in accordance with 
ATC rules.
    As a general matter, the ATC was designed to generate 
increased opportunities for trade in the textiles and apparel 
sector. It liberalizes the current trading rules in two ways: 
by increasing and then removing quotas in three phases over a 
10-year transition period and by requiring all participants to 
provide improved access to their markets.
    Thus, on January 1, 1995, each importing signatory to the 
WTO, including the United States, Canada, and the members of 
the European Union, was required to ``integrate'' into normal 
GATT rules (including GATT 1947's article XIX and the Uruguay 
Round's Agreement on Safeguards) textile and apparel products 
accounting for at least 16 percent of the trade covered by the 
ATC, using 1990 as the base year. Integration means that any 
existing quotas on integrated products under MFA rules 
automatically become void and no new quotas may be imposed upon 
such products unless there has been a determination of serious 
injury under GATT article XIX, the safeguards provision.
    On January 1, 1998, the importing nations were required to 
integrate another 17 percent of trade, and on January 1, 2002, 
an additional 18 percent. Beginning in 2005, all textile and 
apparel trade will fall under normal GATT/WTO rules. Under the 
terms of the ATC, the Agreement cannot be extended beyond 10 
years.
    The U.S. Committee for the Implementation of Textile 
Agreements (CITA) currently is the inter-agency group 
responsible for administering the U.S. quota program and 
implementation of ATC. CITA is composed of representatives from 
the Departments of Commerce, State, Labor, and Treasury, and 
the Office of the U.S. Trade Representative. The Commerce 
Department official is chair of the committee and heads the 
Office of Textiles and Apparel (OTEXA) in the Department of 
Commerce which implements the terms of the agreements and 
decisions made by CITA. A primary function of CITA is to 
monitor imports and to determine when calls for consultations 
are to be made. The CITA announced in October 1994 which 
products it would integrate on January 1, 1995.\13\
---------------------------------------------------------------------------
    \13\ (59 Fed. Reg. 51942)
---------------------------------------------------------------------------
    Under the Uruguay Round Agreements Act (URAA), CITA decided 
by April 30, 1995 which products will be included in each of 
the next two integration ``tranches,'' with the most sensitive 
products to be integrated last.\14\ No changes may be made in 
the integration schedule, unless required by law or in order to 
carry out U.S. international obligations, or to correct 
technical errors or reclassifications.
---------------------------------------------------------------------------
    \14\ (60 Fed. Reg. 5625)
---------------------------------------------------------------------------
    The ATC requires that existing growth rates--the amounts by 
which quota levels are to rise each year--be gradually 
increased. According to the ATC, the increase in growth rates 
is to be applied in three stages, with each stage's growth to 
be applied on top of existing rates. Thus, during stage one, 
the first 3 years of the ATC, the level of annual growth for 
each individual quota is to be increased by 16 percent. During 
stage two, the annual growth rate is to increase another 25 
percent, and during stage three, which covers the last 3 years 
of the phase-out process, the ``growth on growth'' rate is 27 
percent. These increases are intended to replace the 
renegotiation of bilateral textile agreements.
    There is one potential exception to the ATC's growth-on-
growth provision. A country may seek to preclude a supplier 
country from obtaining such benefits if the supplier provides 
inadequate market access for textile products. Any WTO member 
may bring a market access complaint before the WTO's Textile 
Monitoring Board (which replaces the MFA's TSB), which then may 
authorize the importing nation not to increase growth rates for 
the relevant supplier at the next stage of the transition.

Rules of origin

    The URAA also directed the U.S. Treasury Department to 
change by July 1, 1996, the rules of origin for textile and 
apparel products. Rules of origin determine which country's 
quotas should be charged for particular imports when 
manufacturing of the goods occurs in more than one country. The 
U.S. domestic industry sought the rules change on the ground 
that suppliers were purposely splitting their manufacturing 
operations among various countries as a means of avoiding quota 
restrictions.
    For apparel products, the rules change means that the place 
of assembly will generally determine the origin of a product. 
Under Customs Service regulations in effect prior to July 1, 
1996, the origin of apparel depends upon the complexity of the 
assembly operation. For garments requiring only simple 
assembly, such as the sewing together of four or five pieces, 
the country in which those pieces were cut was usually 
considered the country of origin. For more tailored garments, 
the country of assembly was the country of origin under the old 
rule. According to the new rule, textile products manufactured 
in several countries are deemed to originate where the ``most 
important'' assembly process occurred, regardless of where the 
product was cut. Under both the earlier rule and the rule 
established in 1996, the origin of knitted garments is the 
country in which the knit-to-shape pieces were formed.
    For non-apparel products, the country in which the fabric 
is woven or knit generally is the country of origin under the 
new rule. Prior to the URAA changes, the country in which the 
fabric is printed and dyed and subject to additional 
``finishing operations'' or in which it is cut and then sewn 
was often the country of origin for quota purposes.
    Products covered by the United States-Israel Free Trade 
Area Agreement are exempt from the rules change.

                      BILATERAL TEXTILE AGREEMENTS

    Under authority of section 204 of the Agricultural Act of 
1956, as amended, and in conformity with the MFA, the President 
negotiated bilateral agreements restricting textile exports 
from supplier countries. There were 42 such bilateral 
agreements in force as of December 31, 1994, 27 of which were 
with members of the World Trade Organization. Provisions of 
bilateral agreements in effect with WTO members were carried 
over and remain in effect under the new ATC. Quota levels 
established under these agreements provide the base levels for 
the annual growth provisions of the ATC.
    As of January 1, 2001, the United States has bilateral 
agreements governed by the ATC with 39 members of the WTO. The 
United States has agreements (not governed by the ATC) with 
eight non-WTO members
    Bilateral textile agreements apply to textile products, 
fiber and fabric, and apparel. Each agreement contains 
flexible, specific, and/or aggregate limits with respect to the 
type and volume of textile products that the supplier country 
can export to the United States. Limits are usually set in 
terms of square meter equivalents (SME's). They allow, under 
certain conditions, for carryover (from the prior year to 
current year within the same product category), carryforward 
(from the subsequent year to the current year within the same 
product category), and swing (from one product category to 
another product category within the same year) of unused 
portions of quotas. These provisions may be applied only with 
respect to specific import limits set forth in the bilateral 
agreement. Each agreement also provides for adjustment of 
import levels in accordance with specified growth rates. The 
bilateral with Taiwan provides for an export control system to 
be administered by this exporting country to assure compliance 
with the terms of the Agreement.\15\
---------------------------------------------------------------------------
    \15\ Exec. Order 11651, 3 CFR 676 (1971-75 Comp.).
---------------------------------------------------------------------------
    The ATC alters somewhat the process by which new quotas may 
be established during the 10-year phase-out process, compared 
with the system that existed under the MFA. Under the ATC's 
``transitional safeguard'' mechanism, if CITA determines that 
imports of a particular product are causing ``serious damage'' 
or the ``actual threat thereof,'' it will be able to establish 
quotas on unrestrained suppliers of that product.
    Under the MFA, before CITA could request consultations with 
a particular country (or ``issue a call'') for the purpose of 
negotiating a quota, it had to determine that imports of a 
certain category of products from that country were causing--or 
threatening to cause--``market disruption.'' Thus, under the 
MFA, the injury determination was both product and country 
specific. Under the ATC, the injury must only be product 
specific, and once an injury determination is made, a country 
can seek a quota with any supplier whose exports of that 
product are ``increasing sharply and substantially.'' If 
consultations fail to produce an agreement on restrictive 
levels, and a country is able to demonstrate that such imports 
are causing or threatening serious damage, the country may take 
unilateral action to establish a quota at a level based upon 
trade during a recent 12-month period. Such quotas will be 
permitted to remain in place for up to 3 years (although the 
quota must be increased annually), unless the product is 
integrated into normal WTO rules before then. All calls will be 
subject to review by the WTO's Textiles Monitoring Board.

    Textiles and Apparel Trade Under the North American Free Trade 
                               Agreement

    NAFTA created a number of special rules affecting trade in 
textiles among the United States, Canada and Mexico. The NAFTA 
textiles rules of origin determine which goods are 
``originating'' and therefore eligible for preferential 
treatment, i.e., reduced or duty-free entry. Products of Canada 
or Mexico that do not meet the NAFTA origin rules, or one of 
the several exceptions to those rules, are not precluded from 
entering the United States. However, they may be subject to 
normal (non-preferential) duties or, for Mexican goods, to 
quota requirements.
    A ``yarn-forward'' rule of origin applies to most textile 
products, although there are a number of exceptions. Yarn-
forward means that the finished textile or apparel product must 
be made from fabric formed in North America from yarn spun in 
North America.
    NAFTA also includes ``tariff preference levels'' (TPLs) 
that permit a limited number of Canadian and Mexican textile 
and apparel products to enter the United States each year at 
the preferential NAFTA tariff rate even though the products do 
not meet the ``yarn forward'' origin rules, and therefore are 
not ``originating'' goods. These are essentially annual tariff 
rate quotas. Once imports reach the TPL limit, most-favored-
nation (MFN) duties will be applied to any additional non-
originating products entered during the rest of the year.
    Most quotas on Mexican-made textile and apparel products 
were eliminated upon implementation of the NAFTA, but a few 
quotas remain. The remaining quotas apply only to products that 
do not meet the preferential NAFTA origin rules but are 
considered to be products of Mexico for other purposes. The 
remaining U.S. quotas on Mexican goods are scheduled to be 
removed by the year 2004.

         Section 22 of the Agricultural Adjustment Act of 1933

    Section 22 of the Agricultural Adjustment Act of 1933, as 
amended (7 U.S.C. 624), authorizes the President to impose fees 
or quotas on imported products that undermine any U.S. 
Department of Agriculture (USDA) domestic commodity program. 
This authority is designed to prevent imports from interfering 
with USDA efforts to stabilize domestic agricultural commodity 
prices. However, in the Uruguay Round Agreement on Agriculture, 
the United States agreed to convert all quotas and fees on 
imports from any country to which the United States applies the 
WTO Agreement to tariff-rate quotas. Section 22 authority is 
available now only for imports from countries to which the 
United States does not apply the WTO Agreement.

Basic provisions

    Under section 22, the Secretary of Agriculture advises the 
President when the Secretary has reason to believe that--
          (1) imports of an article are rendering, or tending 
        to render ineffective, or materially interfering with, 
        any domestic, agricultural-commodity price-support 
        program, or other agricultural program; or
          (2) imports of an article are reducing substantially 
        the amount of any product processed in the United 
        States from any agricultural commodity or product 
        covered by such programs.
    If the President agrees that there is reason for the 
Secretary's belief, the President must order an ITC 
investigation and report. Using this report as his basis, the 
President must determine whether the statutory conditions 
warranting imposition of a section 22 quota or fee exist.
    If the President makes an affirmative determination, he is 
required to impose, by proclamation, either import fees (which 
may not exceed 50 percent ad valorem) or import quotas (which 
may not exceed 50 percent of the quantity imported during a 
representative period) sufficient to prevent imports of the 
product concerned from harming or interfering with the relevant 
agricultural program.

Application

    Between 1935 and 1985, section 22 was used to impose import 
restrictions on 12 different commodities or food product 
groups: (1) wheat and wheat flour; (2) rye, rye flour, and rye 
meal; (3) barley, hulled or unhulled, including rolled, ground, 
and barley malt; (4) oats, hulled or unhulled, and unhulled 
ground oats; (5) cotton, certain cotton wastes, and cotton 
products; (6) certain dairy products; (7) shelled almonds; (8) 
shelled filberts; (9) peanuts and peanut oil; (10) tung nuts 
and tung oil; (11) flaxseed and linseed oil; and (12) sugars, 
syrups, and sugar-containing products. Section 22 fees and 
quotas have since been terminated for most of these 
commodities. Prior to implementation of the Uruguay Round 
Agreement on agriculture in late 1994, import quotas were in 
place to protect certain cotton, specific dairy products, 
peanuts, and certain sugar-containing products, such as 
sweetened cocoa, pancake flours, and ice-tea mixes. Import fees 
were in place on refined sugar.

    Agriculture Trade Under the North American Free Trade Agreement 
                           Implementation Act


Background

    NAFTA is the first free trade agreement entered into by the 
United States that employs the concept of ``tariffication'' of 
agricultural quantitative restrictions. Under this method, a 
country replaces each of its non-tariff barriers with a 
``tariff-equivalent,'' which is a tariff set at a level that 
will provide protection for a product equivalent to the non-
tariff barrier that the tariff replaces. In the case of several 
agricultural goods listed in the tariff schedules of each NAFTA 
country, the NAFTA countries converted quantitative 
restrictions to tariffs or tariff-rate quotas.
    Pursuant to the NAFTA, U.S. section 22 quotas and fees were 
converted to tariff-rate quotas, under which ``qualifying'' 
Mexican dairy products, cotton, sugar-containing products, and 
peanuts will enter the United States duty free up to a certain 
quantity of imports (the ``in quota'' quantity.) A ``qualifying 
good'' is an agricultural good that meets, based on its Mexican 
content alone, the NAFTA rules of origin contained in section 
202 of the NAFTA Implementation Act.
    To a large extent, the NAFTA agriculture agreement amounts 
to three bilateral agreements rather than a trilateral accord. 
For agriculture goods traded between United States and Canada, 
the NAFTA incorporates the agricultural market access 
provisions of chapter 7 of the United States-Canada Free-Trade 
Agreement (CFTA). The NAFTA sets out separate agricultural 
market access agreements between Mexico and the United States 
and between Mexico and Canada. In addition the NAFTA includes 
several obligations governing agriculture trade common to all 
three countries.

Basic provisions

    Section 321(b) of the North American Free Trade Agreement 
Implementation Act authorizes the President, pursuant to the 
NAFTA, to exempt any ``qualifying good'' from any quantitative 
limitation or fee imposed under section 22 of the Agricultural 
Adjustment Act for as long as Mexico is a NAFTA country.
    As discussed above, the United States agreed to convert its 
import quotas to tariff rate quotas under section 22 of the 
Agricultural Adjustment Act for imports from Mexico of dairy 
products, cotton, sugar-containing products and peanuts. 
Article 302(4) of the NAFTA permits the allocation of the in-
quota quantity under these tariff rate quotas, provided that 
such measures do not have trade restrictive effects on imports 
in addition to those caused by the imposition of the tariff-
rate quotas. Section 321(c) of the NAFTA Act directs the 
President to take such action as may be necessary to ensure 
that imports of goods subject to tariff rate quotas do not 
disrupt the orderly marketing of commodities in the United 
States.
    Section 321(f) of the Act is a free-standing provision that 
establishes an end-use certificate requirement for imports of 
wheat or barley imported into the United States from any 
foreign country or instrumentality that requires end-use 
certificates on wheat or barley produced in the United States.
    Section 308 of the NAFTA Act amends the CFTA Act, which 
implemented the tariff ``snapback'' provided for in article 702 
of the CFTA, to provide that the President may impose a 
temporary duty on imports of a listed Canadian fresh fruit or 
vegetable if a certain import price and other conditions exist.
    Section 309 establishes a price-based snapback for imports 
of frozen concentrated orange juice into the United States from 
Mexico. The tariff on imports of Mexican frozen concentrated 
orange juice in excess of the threshold quantity will 
``snapback'' or revert to the lesser of the prevailing most-
favored-nation rate or the rate of duty on that product in 
effect as of July 1, 1991, if futures prices for frozen 
concentrated orange juice in the United States fall below a 
historical average price for 5 consecutive days. This tariff 
snapback is automatically triggered and removed upon a 
determination by the Secretary of Agriculture.

        Agriculture Trade Under the Uruguay Round Agreements Act


Background

    The Uruguay Round Agreement on Agriculture strengthens 
multilateral rules for trade in agricultural products and 
requires WTO members to reduce export subsidies, trade 
distorting domestic support programs and import protection. The 
Agreement establishes rules and reduction commitments over 6 
years for developed countries and 10 years for developing 
countries on export subsidies, domestic subsidies, and market 
access. The Agreement is intended to be the beginning of a 
reform process for world trade in agriculture and provides for 
the initiation of a second round of negotiations concerning 
agriculture trade beginning in the year 2000.
    Export subsidies must be reduced from 36 percent (budget 
outlays) and 21 percent (volume) from a 1986-1990 base period 
for specific products and categories. Trade distorting domestic 
subsidies must be bound and reduced by 20 percent from a 1986-
1990 base period. non-tariff import barriers are subject to 
comprehensive tariffication, and minimum or current market 
access commitments. The United States thus agreed to convert 
quotas and fees authorized under section 22 of the Agricultural 
Adjustment Act to tariff-rate equivalents in the form of 
tariff-rate quotas. In the Uruguay Round, all U.S. agriculture 
tariffs were bound and subject to specific reduction 
commitments.
    The operation of these rules is linked to particular 
commitments by each WTO member contained in that WTO member's 
schedule annexed to the Marrakesh Protocol to the GATT 1994. 
Each WTO member's schedule sets forth the WTO members' 
commitments regarding the access it will provide to its market 
for imports of agriculture products and the maximum amount of 
domestic support and export subsidies it will provide to 
agricultural products. Under article 3 of the Agreement, the 
domestic support and export subsidy commitments in each WTO 
member's schedule are an integral part of GATT 1994.
    Article 2 and annex 1 of the Agreement define agricultural 
products covered as those products classified in chapters 1-24 
of the Harmonized Tariff Schedule (HTS) (excluding fish and 
fish products) and under 13 headings or subheadings in other 
chapters of the HTS, including cotton, wool, hides and fur 
skins.
    The United States was obligated to implement its 
commitments over a 6-year period beginning in 1995. The rights 
and obligations in the Agriculture Agreement supplement those 
in GATT 1994, including the Agreements on Subsidies and 
Countervailing Measures and Application of Sanitary and 
Phytosanitary Measures.

Basic provisions

    Section 401(a)(1) of the Uruguay Round Trade Agreements Act 
amends section 22 of the Agricultural Adjustment Act of 1933, 
such that no quota or fee shall be imposed under this section 
with respect to any import that is the product of a country or 
separate customs territory to which the United States applies 
the WTO Agreements. Accordingly, when products of WTO members 
only are involved, there would be no need to conduct a section 
22 investigation. Section 22 authority is retained with respect 
to imports from countries and separate customs territories to 
which the United States does not apply the WTO agreements. 
These amendments were effective upon entry into force of the 
WTO Agreement, January 1, 1995.
    The conversion of U.S. quantitative import restrictions to 
tariff-rate quotas and staged tariff reductions was implemented 
by Presidential Proclamation No. 6763 issued on December 13, 
1994. Effective on January 1, 1995, this proclamation amended 
the HTS of the United States under general authority provided 
to the President in the Uruguay Round Agreements Act. The 
President proclaimed tariff-rate quotas for the following 
products subject to tariffication by the United States: dairy 
products, sugar, sugar-containing products, peanuts, cotton and 
beef. In general tariff-rate quotas replaced previously 
applicable restrictions as of January 1, 1995. In some cases, 
however, the United States began implementing its increased 
access commitments after the entry into force of the WTO 
Agreement, if the quota year for those products began at a 
different time of year.
    Section 404(a) of the Uruguay Round Agreements Act 
authorizes the President to take such action as may be 
necessary to implement the tariff-rate quotas set out in the 
U.S. agricultural tariff concessions in schedule XX of the 
Agreement and to ensure that imports of agricultural products 
do not disrupt the orderly marketing of commodities in the 
United States. Section 404(b) authorizes the President, upon 
the advice of the Secretary of Agriculture, to temporarily 
increase the in-quota quantity of an agricultural import that 
is subject to a tariff-rate quota when the President determines 
and proclaims that that the supply of the same, directly 
competitive, or substitutable agricultural product will be 
inadequate because of natural disaster, disease or a major 
national market disruption to meet domestic demand at 
reasonable prices.
    In administering the tariff-rate quota, the President is 
authorized to allocate, among supplying countries or customs 
areas, the in-quota quantity of a tariff-rate quota for any 
agricultural product, and to modify any allocation as he deems 
appropriate.
    Section 404(e) of the Uruguay Round Agreements Act amends 
the Caribbean Basin Economic Recovery Act (CBERA), the Andean 
Trade Preference Act (ATPA), the Generalized System of 
Preferences (GSP) statute, and General Note 3(a) to the HTS 
(relating to insular possessions) to specify that any duty 
preference afforded these laws will be available only for the 
in-quota amount of a tariff-rate quota. Over-quota imports from 
CBERA, ATPA, or GSP countries, or U.S. insular possessions will 
in all cases be subject to the higher rate of duty. Section 
405(b) requires the President, if he determines that it is 
appropriate, to invoke either a volume-based or price-based 
special safeguard for agricultural goods and to determine, 
consistent with article 5, the amount of the additional duty to 
be imposed, the period during which such duty will be imposed, 
and any other terms and conditions applicable to the duty.

                        Meat Import Act of 1979

    The Meat Import Act of 1979, as amended, required the 
President to impose quotas on imports of beef, veal, mutton, 
and goat meat when the aggregate quantity of such imports on an 
annual basis was expected to exceed a prescribed trigger level. 
As a matter of practice, the import-limiting effect of the Meat 
Import Act was achieved, prior to the conclusion of the Uruguay 
Round, through the negotiation of voluntary restraint 
agreements with major supplier countries of the covered 
products. Section 403 of the Uruguay Round Act repealed the 
Meat Import Act of 1979 in order to conform to U.S. commitments 
under the Agreement on Agriculture not to maintain this type of 
quantitative import restriction. The Uruguay Round Act 
substitutes a tariff-rate quota on meat imports for the 
previous import restrictions.

                 Reciprocal Meat Inspection Requirement

    Section 4604 of the Omnibus Trade and Competitiveness Act 
of 1988 \16\ amends section 20 of the Federal Meat Inspection 
Act (21 U.S.C. 620) to authorize strict enforcement of all 
standards which are applicable to meat articles in domestic 
commerce, for meat articles imported into the United States. If 
the Secretary of Agriculture determines that a foreign country 
applies meat inspection standards that are not related to 
public health concerns about end-product quality which are 
substantiated by reliable analytical methods, the Secretary 
must consult with the U.S. Trade Representative and they shall 
make a recommendation to the President as to what action should 
be taken. The President may require that a meat article 
produced in a plant in such foreign country may not be 
permitted entry into the United States unless the Secretary 
determines that the meat article has met the standards 
applicable to meat articles in commerce within the United 
States. The annual report required generally under section 20 
of the Federal Meat Inspection Act shall include the name of 
each foreign country that applies standards for the importation 
of meat articles from the United States that are not based on 
public health concerns.
---------------------------------------------------------------------------
    \16\ Public Law 100-418, approved August 23, 1988, 102 Stat. 1107, 
1408, amending section 20 of Public Law 90-201, 21 U.S.C. 620.
---------------------------------------------------------------------------
    Enactment of this provision resulted from congressional 
concern over the European Community's (EC) hormone ban, which 
since 1989 has effectively banned all meat exports from the 
United States to the EC that were produced from livestock 
treated with hormones, despite scientific evidence establishing 
the safety of U.S. production methods. At the time of 
enactment, bilateral consultations with the EC were underway, 
and Congress wanted to strengthen the Administration's 
authority to respond to the EC action. The authority added by 
section 4604 was intended to be used either in addition to, or 
instead of, other authorities (such as section 301 of the Trade 
Act of 1974).

 Sugar Tariff-Rate Quotas Under Harmonized Tariff Schedule Authorities

    Additional U.S. note 5 to chapter 17 of the Harmonized 
Tariff Schedule of the United States (HTS) authorizes the 
Secretary of Agriculture, in consultation with other agencies, 
to establish, for each fiscal year, the quantity of sugars and 
syrups that may be entered at the lower tariff rates under two 
tariff-rate quotas (TRQ's). The TRQ's cover sugars and syrups 
described in HTS subheadings 1701.11, 1701.12, 1701.91, 
1701.99, 1702.90, and 2106.90. This authority was proclaimed to 
implement the results of the Uruguay Round of multilateral 
trade negotiations as reflected in the provisions of schedule 
XX (United States), annexed to the Agreement Establishing the 
World Trade Organization.\17\
---------------------------------------------------------------------------
    \17\ Pres. Proc. No. 6763, Dec. 23, 1994, 60 Fed. Reg. 1007.
---------------------------------------------------------------------------

Background

    The United States has always been a net importer of sugar, 
at times importing more than half of the nation's sugar 
consumption. However, sugar imports have been restricted almost 
continuously since 1934 in order to maintain and foster the 
domestic sugarcane and sugar beet industries. From the 
enactment of the Jones Costigan Sugar Act of 1934 \18\ through 
the expiration of the Sugar Act of 1948 on December 31, 
1974,\19\ sugar imports were restricted by a statutory quota. 
Historically, this system of import protection has maintained a 
U.S. price for sugar well above the world price.
---------------------------------------------------------------------------
    \18\ Pub. L. No. 73-213, ch. 263, approved May 9, 1934, 48 Stat. 
670.
    \19\ Pub. L. No. 80-388, ch. 519, approved August 8, 1947, 61 Stat. 
922. See also the Sugar Act of 1937, Pub. L. No. 75-414, ch. 898, 
approved September 1, 1937, 50 Stat. 903.
---------------------------------------------------------------------------
    Shortly before the expiration of the Sugar Act of 1948, an 
absolute import quota was proclaimed by President Ford, 
although the quota quantity was so large as to be non-
restrictive.\20\ The quota derived from a note that had been 
negotiated in the Annecy (1949) and Torquay (1951) Rounds of 
multilateral trade negotiations and was proclaimed as a 
headnote to the Tariff Schedule of the United States (TSUS) 
following the conclusion of the Kennedy Round (1963-1967). On 
May 5, 1982, President Reagan modified this headnote quota to: 
(1) make it restrictive; (2) allocate the quota among supplying 
countries in accordance with their shares of the U.S. market 
during the period from 1975 through 1981; and (3) authorize the 
Secretary of Agriculture to establish and modify the quota 
amount in subsequent periods.\21\
---------------------------------------------------------------------------
    \20\ Pres. Proc. No. 4334, November 16, 1974, 39 Fed. Reg. 40739.
    \21\ Pres. Proc. No. 4941, May 5, 1982, 47 Fed. Reg. 19661.
---------------------------------------------------------------------------
    By 1988, the quota had been reduced to the lowest ratio of 
imports to domestic production in the nation's history. The 
government of Australia challenged the legality of the sugar 
import quota under the provisions of the General Agreement on 
Tariffs and Trade (GATT), and in 1989, a GATT dispute 
settlement panel found the quota illegal. In 1990, President 
Bush issued Proclamation No. 6179 \22\ to convert the absolute 
import quota into a tariff-rate quota, thereby bringing it into 
conformity with the GATT TRQ panel decision. During the Uruguay 
Round of multilateral trade negotiations, the quota was 
reconverted into two TRQ's, one for imports of raw cane sugar 
and the other for imports of refined sugar, including syrups. 
The United States agreed to bind its minimum total sugar/syrups 
TRQ at 1,139,195 metric tons (MT). In addition, the United 
States agreed to reduce the second tier (over quota) tariff 
rates by 15 percent over 6 years.\23\
---------------------------------------------------------------------------
    \22\ Pres. Proc. No. 6179, September 13, 1990, 55 Fed. Reg. 38293.
    \23\ See Pres. Proc. No. 6763, December 23, 1994.
---------------------------------------------------------------------------
    Under the tariff-rate quota system, the Secretary of 
Agriculture establishes the quota quantity that can be entered 
at the lower tier of tariff rates, and the USTR allocates this 
quantity among the 40 eligible sugar exporting countries. The 
quantities allocated to beneficiary countries under the GSP, 
the CBI and the ATPA receive duty-free treatment. Certificates 
of Quota Eligibility (CQE) are issued to the exporting 
countries and must be executed and returned with the shipment 
of sugar in order to receive quota treatment.\24\ Imports of 
raw cane sugar are permitted in addition to the quota quantity 
on condition that such sugar is to be refined and used in the 
production of certain polyhydric alcohols or to be re-exported 
in refined form or in sugar-containing products.\25\
---------------------------------------------------------------------------
    \24\ See 15 C.F.R. part 2011.
    \25\ See additional U.S. note 6 to chapter 17 of the HTS and 7 
C.F.R. part 1530.
---------------------------------------------------------------------------
    The quantity of sugar which may be imported duty free from 
Mexico is governed by paragraphs 13-22 of section A of annex 
703.2 of the North American Free Trade Agreement (NAFTA). Since 
1982, Mexico has been included within a basket category known 
as the ``other specified countries and areas'' and has been 
allocated a minimum quota amount, currently set at 7,258 MT raw 
value. The NAFTA guarantees the greater of this access or 
Mexico's net surplus production, but no greater than 25,000 MT 
during the first 6 years or 250,000 MT during the remaining 8 
years of the NAFTA implementation period. Additional sugar may 
enter at a duty rate that is being eliminated in stages through 
2008. During each of the first 14 years of the NAFTA, Mexico 
and the United States will jointly determine whether either has 
been or is projected to be a net surplus producer.\26\ All 
sugar imports from Mexico will enter duty free after the 14-
year transition period.
---------------------------------------------------------------------------
    \26\ For purposes of the NAFTA formulas, high fructose corn syrup 
(HFCS) is included in determining the consumption of sugar.
---------------------------------------------------------------------------

Import Prohibitions on Certain Agricultural Commodities Under Marketing 
                                 Orders


       Section 8e of the Agricultural Adjustment Act, as amended

    Section 8e of the Agricultural Adjustment Act, as 
amended,\27\ restricts the importation of certain specified 
commodities which do not meet relevant grade, size, quality or 
maturity requirements imposed under the marketing order in 
effect for such commodity. The specified commodities include 
tomatoes, raisins, olives (other than Spanish-style green 
olives), prunes, avocados, mangoes, limes, grapefruit, green 
peppers, Irish potatoes, cucumbers, oranges, onions, walnuts, 
dates, filberts, table grapes, eggplants, kiwifruit, 
nectarines, plums, pistachios, and apples.
---------------------------------------------------------------------------
    \27\ 7 U.S.C. 608e-1.
---------------------------------------------------------------------------
    Any restriction under this authority may not be made 
effective until after the Secretary of Agriculture gives 
reasonable notice (of not less than 3 days) and receives the 
concurrence of the U.S. Trade Representative. The Secretary of 
Agriculture may promulgate such rules and regulations as he 
deems necessary, to carry out the provision of this section.
    Whenever the Secretary of Agriculture finds that the 
application of the restrictions under a marketing order to an 
imported commodity is not practicable because of variations in 
characteristics between the domestic and imported commmodity, 
he/she must establish with respect to the imported commodity 
such grade, size, quality, and maturity restrictions by 
varieties, types, or other classification as he/she finds will 
be equivalent or comparable to those imposed upon the domestic 
commodity under such order.
    Section 4603 of the Omnibus Trade and Competitiveness Act 
of 1988 amended section 8e to provide additional authority for 
the Secretary to establish an additional period of time (not to 
exceed 35 days) for restrictions to apply to imported 
commodities, if the Secretary determines that such additional 
period of time is necessary to effectuate the purposes of the 
Act and to prevent the circumvention of the requirement of a 
seasonal marketing order. In making this determination, the 
Secretary must consider: (1) the extent to which imports during 
the previous year were marketed during the period of the 
marketing order and such imports did not meet the requirements 
of the marketing order; (2) if the importation into the United 
States of such commodity did, or was likely to, circumvent the 
grade, size, quality or maturity standards of a seasonal 
marketing order; and (3) the availability and price of 
commodities of the variety covered by the marketing order 
during any additional period the marketing order requirements 
are to be in effect.
    Section 1308 of the Food, Agriculture, Conservation, and 
Trade Act of 1990 (the ``1990 farm bill'') amended section 8e 
to require the Secretary to consult with the USTR prior to any 
import restriction or regulation being made effective. The USTR 
must advise the Secretary within 60 days of being notified, to 
ensure that the proposed grade size, quality, or maturity 
provisions are not inconsistent with U.S. international 
obligations. If the Secretary receives the concurrence of the 
USTR, the proposed prohibition or regulation may proceed.

    Authorities To Restrict Imports Under Certain Environmental Laws


            Marine Mammal Protection Act of 1972, as amended

    The Marine Mammal Protection Act (MMPA), enacted in 1972, 
\28\ places a ban on the importation of marine mammals and 
marine mammal products, except in limited circumstances, such 
as for scientific research. The MMPA also directs the Secretary 
of the Treasury to ban the importation of commercial fish or 
products from fish which have been caught with commercial 
fishing technology which results in the incidental kill or 
incidental serious injury of ocean mammals in excess of U.S. 
standards. In carrying out the ban, the Secretary, in the case 
of yellowfin tuna harvested with purse seine nets in the 
eastern tropical Pacific Ocean, and products therefrom, to be 
exported to the United States, must require that the government 
of the exporting nation provide certain documentary evidence 
relating to that country's marine mammal conservation programs. 
The Secretary must also require the government of any 
intermediary nation from which yellowfin tuna or tuna products 
will be exported to the United States to certify and provide 
reasonable proof that it has acted to prohibit the importation 
of such tuna and tuna products from any nation from which 
direct export to the United States of such tuna and tuna 
products is banned under the Act.
---------------------------------------------------------------------------
    \28\ Public Law 92-522, approved October 21, 1972, 16 U.S.C. 1361 
et seq.
---------------------------------------------------------------------------
    In 1984, the MMPA was amended to require that each nation 
wishing to export tuna to the United States document that it 
has adopted a dolphin conservation program ``comparable'' to 
that of the United States, and that the average rate of 
mortality of its purse seine fleet is comparable to that of the 
U.S. fleet. If these requirements are not met, an embargo on 
the import of yellowfin tuna and tuna products from that nation 
will be invoked. In 1988, the MMPA was further amended with 
respect to these ``comparability'' provisions by requiring that 
the regulatory programs of other nations in the eastern 
tropical Pacific tuna fishery be at least as restrictive as 
those of the United States. The 1988 amendments also require 
that the government of any intermediary nation from which 
yellowfin tuna or tuna products will be exported to the United 
States certify and provide reasonable proof that it has acted 
to prohibit the importation of tuna and tuna products from 
embargoed nations.
    In August 1990, Mexico's yellowfin tuna was embargoed under 
the comparability provision. Mexico challenged the U.S. embargo 
under procedures of the General Agreement on Tariffs and Trade 
(GATT) and in September 1991, a GATT panel found in favor of 
Mexico. Venezuelan exports of yellowfin tuna to the United 
States also were embargoed and Venezuela began a GATT case 
against the United States in May 1992. A third GATT challenge 
was brought by the European Community (EC) in June 1992, after 
a federal district court ruled that the MMPA also required a 
secondary embargo of tuna products from some 20 intermediary 
nations, including those of the EC, that had failed to certify 
and offer reasonable proof that they had acted to prohibit the 
importation of tuna from the primary embargoed nations. On May 
20, 1994, a GATT dispute settlement panel issued a report 
finding that U.S. tuna embargoes were inconsistent with GATT 
rules.

             International Dolphin Conservation Program Act

    The International Dolphin Conservation Program Act (Public 
Law 105-52), approved August 15, 1997, established the 
International Dolphin Conservation Program to implement into 
U.S. law the Declaration on Panama concerning tuna fishing in 
the Eastern Tropical Pacific Ocean.
    In 1992, Eastern Tropical Pacific nations concluded the La 
Jolla Agreement, a non-binding international agreement 
establishing an International Dolphin Conservation Program 
under the auspices of the Inter-American Tropical Tuna 
Commission. The agreement established annual limits on 
incidental dolphin mortality, required observers on tuna 
vessels, established a review panel to monitor fleet 
compliance, and created a scientific research and education 
program and advisory board. The agreement established a dolphin 
mortality limit for each vessel, and when that limit was 
reached, such vessel would be required to discontinue ``setting 
on dolphins'' for the remainder of the year.
    In October 1995, 12 nations signed the Declaration of 
Panama, including the Unites States, Belize, Colombia, Costa 
Rica, Ecuador, France, Honduras, Mexico, Panama, Spain, 
Vanuatu, and Venezuela. The Panama Declaration endorses the 
success of the La Jolla Agreement and adjusts the marketing 
policy of dolphin safe tune in recognition of this success. In 
exchange for modifications to U.S. law, foreign signatories 
agreed to modify and formalize the La Jolla Agreement as a 
binding agreement. Signatories agreed to adopt conservation and 
management measures to ensure long-term sustainability of tuna 
and living marine resources, assess the catch and bycatch of 
tuna and take steps to reduce of eliminate the bycatch, 
implement the binding agreement through enactment of domestic 
legislation, enhance mechanisms for reviewing compliance with 
the International Dolphin Conservation Program, and establish 
annual quotas for dolphin mortality limiting total annual 
dolphin mortality to fewer than 5,000 animals.
    The International Dolphin Conservation Program Act 
implements the Declaration of Panama in U.S. law by changing 
the circumstances under which the import ban on yellowfin tune 
in section 101 of the MMPA would be imposed. Specifically, the 
bill permits importation of yellowfin tuna if the harvesting 
nation complies with international standards, as follows: (1) 
the tuna was harvested by vessels of a nation that participates 
in the International Dolphin Conservation Program, the 
harvesting nation is either a member of has initiated steps to 
become a member of the Inter-American Tropical Tuna Commission, 
and the nation has implemented its obligations under the 
Program and the Commission; and (2) total dolphin mortality 
permitted under the Program is limited.

               Endangered Species Act of 1973, as amended

    The Endangered Species Act \29\ authorizes the Secretary of 
the Interior to create lists of species or subspecies which are 
considered endangered or threatened, and to prohibit the 
importation or interstate sale of these species or subspecies.
---------------------------------------------------------------------------
    \29\ Public Law 93-205, approved December 28, 1973, 16 U.S.C. 1531 
et seq.
---------------------------------------------------------------------------

         Tariff Act of 1930, as Amended: Wild Mammals or Birds

    Section 527 of the Tariff Act of 1930, as amended,\30\ 
prohibits the importation of any wild mammal or bird, alive or 
dead, or any part of product of any wild mammal or bird, if the 
laws or regulations of the country where the wild mammal or 
birdlives restrict its ``talking, killing, possession, or 
exportation to the United States,'' unless the wild mammal or 
bird is accompanied by a certification of the U.S. consul that 
it ``has not be acquired or exported in violation of the laws 
or regulations of such country.  .  .''
---------------------------------------------------------------------------
    \30\ 19 U.S.C. 1527
---------------------------------------------------------------------------
    Any mammal or bird, alive or dead, or any part of product 
thereof, imported into the United States in violation of the 
above is subject to seizure and forfeiture under the customs 
laws. The import prohibition in the Tariff Act of 1930 does not 
apply in the case of (1) articles the importation of which is 
prohibited by any other law; (2) articles imported for 
scientific or educaional purposes, or are migratory; or (3) 
certain migratory game birds.

                   African Elephant Conservation Act

    Title II of the Endangered Species Act Amendments of 1988 
(Public Law 100-478) contained the African Elephant 
Conservation Act,\31\ requiring the Secretary of the Interior 
to establish a moratorium on the importation of raw and worked 
ivory from an ivory producing country that does not meet 
specific criteria, including being a party to the Convention on 
the International Trade in Endangered Species of Wild Fauna and 
Flora (CITES).
---------------------------------------------------------------------------
    \31\ 16 U.S.C. 4201-4245
---------------------------------------------------------------------------

       Rhinoceros and Tiger Conservation Act of 1994, as Amended

    Section 7 of the Rhinoceros and Tiger Conservation Act of 
1994,\32\ as amended by the Rhino and Tiger Product Labeling 
Act,\33\ prohibits selling, importing, or exporting, or 
attempting to sell, import, or export, any product, item or 
substance intended for human consumption containing or 
purporting to contain any substance derived from any species of 
rhinoceros or tiger.
---------------------------------------------------------------------------
    \32\ 15 U.S.C. 5301-5306.
    \33\ Public Law 105-312, approved October 30, 1998.
---------------------------------------------------------------------------

    Section 8 of the Fishermen's Protective Act of 1967, as amended 
                         (``Pelly Amendment'')

    Under section 8 of the Fishermen's Protective Act of 1967, 
as amended (the so-called ``Pelly Amendment''), \34\ the 
President, based on certain findings by the Secretary of 
Commerce or the Secretary of the Interior, has the 
discretionary authority to impose import sanctions on any 
products from any country which conducts fishery practices or 
engages in trade which diminishes the effectiveness of 
international programs for fishery conservation or 
international programs for endangered or threatened species.
---------------------------------------------------------------------------
    \34\ Public Law 93-205, approved December 28, 1973, 22 U.S.C. 1978.
---------------------------------------------------------------------------

              High Seas Driftnet Fisheries Enforcement Act

    The High Seas Driftnet Fisheries Enforcement Act was 
enacted in 1992 \35\ to assist in the international enforcement 
of U.N. Resolution Number 46-215, which prohibits 
large-scale driftnet fishing on the high seas after December 
31, 1992. The Act sets forth certain import sanctions 
applicable to countries whose nationals or vessels engage in 
driftnet fishing on the high seas on or after December 31, 
1992, and lays out the procedures to be followed in applying 
those import sanctions.
---------------------------------------------------------------------------
    \35\ Public Law 102-582, approved November 2, 1992.
---------------------------------------------------------------------------
    Specifically, the Act requires the Secretary of Commerce 
not later than December 31, 1992, and periodically thereafter, 
to identify each country the nationals or vessels of which 
conduct large-scale driftnet fishing beyond the exclusive 
economic zone of any country and to notify the President and 
that country of the identification. The President must enter 
into consultations within 30 days with any country so 
identified to obtain its agreement to effect the immediate 
termination of the large-scale driftnet fishing. If these 
consultations have not been satisfactorily concluded within 90 
days, the President shall direct the Secretary of the Treasury 
to prohibit the importation of shellfish, fish and fish 
products, and sport fishing equipment from the country in 
question. If such country has not terminated its large-scale 
driftnet fishing within 6 months after its identification or 
has retaliated against the United States for any initial import 
sanctions taken against it, such country shall be subject to 
additional import sanctions, at the President's discretion, 
under the Fishermen's Protective Act of 1967, as amended.

                   Wild Bird Conservation Act of 1992

    The Wild Bird Conservation Act of 1992 \36\ establishes 
various bans on the importation of exotic birds. For those 
birds listed on any of the three appendices on the Convention 
on International Trade in Endangered Species of Wild Fauna and 
Flora (CITES), the nature of the ban depends on how threatened 
is the particular species of bird. There is an immediate import 
ban for birds that have been identified under CITES as being 
under immediate threat. For all other birds listed by CITES, an 
import ban goes into effect 1 year after the date of enactment 
of the Act. During this 1 year, the Secretary of the Interior 
is authorized to suspend the importation of such species on an 
emergency basis under certain conditions. None of the import 
bans will apply to species of birds that are included on an 
approved list of species to be maintained by the Secretary. To 
be included on such an approved list, the species must either 
be regularly bred in captivity in a qualified facility or be 
protected under a conservation program in the country of origin 
that meets specifically enumerated criteria.
---------------------------------------------------------------------------
    \36\ Public Law 102-440, approved October 23, 1992.
---------------------------------------------------------------------------
    For exotic birds not listed under the CITES agreement, the 
Secretary is authorized to impose an import ban or quota on 
such species if he finds such action is necessary for the 
conservation of the species.
    The Act also authorizes the Secretary to allow, through the 
issuance of import permits, the importation of any exotic bird 
upon determination that such importation is not detrimental to 
the species' survival and that the bird is being imported for 
certain enumerated purposes, such as scientific research or 
cooperative breeding programs.

                 Atlantic Tunas Convention Act of 1975

    In 1966, the International Convention for the Conservation 
of Atlantic Tunas (ICCAT) was established, and the U.S. Senate 
ratified ICCAT in 1967. The Atlantic Tunas Convention Act 
(ATCA), which authorizes U.S. involvement in ICCAT, was enacted 
in 1975. ATCA authorizes the Secretary of Commerce to 
administer and enforce ICCAT and ATCA, including the 
promulgation of regulations to establish open and closed 
seasons, fish size requirements and catch limitations, 
incidental catch restrictions, and observer coverage. In 
addition, the Secretary is authorized to prohibit the entry 
into the United States of any fish subject to regulations 
recommended by ICCAT and taken in a manner which would diminish 
the effectiveness of ICCAT's conservation efforts.
    The Atlantic Tunas Convention Act of 1995 made certain 
changes to the ATCA concerning the identification and 
notification of countries violating the terms of ICCAT 
recommendation. Specifically, the legislation made no change to 
the ATCA authority to restrict imports of fish if fished in a 
manner that tends to diminish the effectiveness of a 
recommendation by the ICCAT, instead of imposing additional, 
and in some cases mandatory, standards. The Act added 
provisions requiring Commerce to identify, notify, and publish 
a list of countries whose fishing vessels are fishing or have 
fished during the previous year in the Convention area in a 
manner inconsistent with the objectives of an ICCAT 
recommendation. In addition, it provided that the President may 
enter into consultations with identified nations. The purpose 
of the Act was to lead to the development of an international 
consensus concerning multilateral management of Atlantic tunas, 
instead of expanding the circumstances under which unilateral 
sanctions are authorized.

     Section 609 of Public Law 101-162: Conservation of Sea Turtles

    Section 609 of Public Law 101-162, a bill making 
appropriations for the Departments of Commerce, Justice, State, 
the Judiciary, and related agencies for fiscal year 1990,\37\ 
calls upon the Secretary of State, in consultation with the 
Secretary of Commerce, to initiate negotiations for the 
development of bilateral or multilateral agreements for the 
protection and conservation of sea turtles, in particular with 
foreign governments of such countries which are engaged in 
commercial fishing operations likely to affect adversely sea 
turtles. Section 609 further provides that shrimp harvested 
with technology that may adversely affect certain sea turtles 
may not be imported into the United States, unless the 
President certified to Congress by May 1, 1991, and annually 
thereafter, that the harvesting nation has a regulatory program 
and an incidental rate comparable to that of the United States, 
or that the particular fishing environment of the harvesting 
nation does not pose a threat to sea turtles.
---------------------------------------------------------------------------
    \37\ Public Law 101-162, approved November 21, 1989.
---------------------------------------------------------------------------
    In 1991, the State Department issued guidelines for 
assessing the comparability of foreign regulatory programs with 
the U.S. program.\38\ To be found comparable, a foreign 
nation's program had to include a commitment to require all 
shrimp trawl vessels to use turtle excluder devices (TEDs) at 
all times, or alternatively, a commitment to engage in a 
statistically reliable and verifiable scientific program to 
reduce the mortality or sea turtles associated with shrimp 
fishing. The 1991 guidelines also determined that the scope of 
section 609 was limited to the wider Caribbean/western Atlantic 
region and that the import restriction did not apply to 
aquaculture shrimp, the harvesting of which does not adversely 
affect sea turtles.
---------------------------------------------------------------------------
    \38\ 56 Fed. Reg. 1051 (January 10, 1991).
---------------------------------------------------------------------------
    In 1993, the State Department issued revised guidelines 
providing that to receive a certification in 1993 and 
subsequent years, affected nations had to maintain their 
commitment to require TEDs on all commercial Shrimp trawl 
vessels by May 1, 1994.
     In December 1995, the U.S. Court of International Trade 
(CIT) found that the 1991 and 1993 guidelines were contrary to 
law in limiting the geographical scope of section 609 and 
directed the State Department to prohibit the importation of 
shrimp or products of shrimp wherever harvested in the wild 
with commercial fishing technology that may affect adversely 
sea turtles by May 1, 1996.\39\
---------------------------------------------------------------------------
    \39\ Earthe Island Institute v. Warren Christopher, 913 F. Supp. 
559 (CIT 1995).
---------------------------------------------------------------------------
    In April 1996, the State Department published revised 
guidelines \40\ to comply with the CIT order of December 1995. 
The new guidelines extended section 609 to shrimp harvested 
from all foreign nations. The State Department further 
determined that as of May 1, 1996, all shipments of shrimp and 
shrimp products into the United States were to be accompanied 
by a declaration attesting that the shrimp or shrimp product in 
question was harvested ``either under conditions that do not 
adversely affect sea turtles .  .  . or in waters subject to 
the jurisdiction of a nation currently certified pursuant to 
section 609.''
---------------------------------------------------------------------------
    \40\ 61 Fed. Reg. 17342 (April 19, 1996).
---------------------------------------------------------------------------
    In October 1996, the CIT ruled that the embargo on shrimp 
and shrimp products enacted by section 609 applied to all 
``shrimp products harvested in the wild by citizens or vessels 
of nations which have not be certified''.\41\ The Court found 
that the 1996 guidelines were contrary to section 609 when 
allowing, with a Shrimp Exporter's Declaration form, imports of 
shrimp from non-certified countries if the shrimp was harvested 
with commercial fishing technology that did not adversely 
affect sea turtles. The CIT also refused to postpone the 
worldwide enforcement of section 609.\42\
---------------------------------------------------------------------------
    \41\ Earth Island Institute v. Warren Christopher, 942 Fed. Supp. 
597 (CIT 1996).
    \42\ Earth Island Institute v. Warren Christopher, 948 Fed. Supp. 
1062 (CIT 1996).
---------------------------------------------------------------------------
    In 1997, Thailand, Malaysia, Pakistan, and India filed a 
challenge in the World Trade Organization (WTO) to the U.S. 
restrictions on imports of shrimp and shrimp products harvested 
in a manner harmful to endangered species of sea turtles. A 
dispute settlement panel was formed on February 25, 1997. The 
panel ruled in favor of the complainants on April 6, 1998, 
finding that the U.S. import restrictions were inconsistent 
with WTO rules. The United States appealed the decision, and on 
October 12, 1998, the Appellate Body of the WTO reversed the 
panel ruling, confirming that WTO rules allow countries to 
condition access to their markets on compliance with certain 
policies such as environmental conservation, and agreeing that 
the U.S. ``shrimp-turtle law'' was a permissible measure 
adopted for the purpose of sea turtle conservation. The 
Appellate Body, however, found fault with certain aspects of 
the U.S. implementation of the statute. In particular, it found 
that the State Department's procedures for determining whether 
countries meet the requirements of the law did provide adequate 
due process, because exporting nations were not afforded formal 
opportunities to be heard and were not given formal written 
explanations of adverse decisions. The Appellate Body also 
found that the United States had unfairly discriminated between 
the complaining countries and Western Hemisphere nations by not 
exerting as great an effort to negotiate a sea turtle 
conservation agreement with the complaining countries and by 
not providing them the same opportunities to receive technical 
assistance.
    On November 25, 1998, the United States indicated its 
intention not only to comply with the panel rulings but also 
the firm commitment of the United States to protect endangered 
species of sea turtles. In July 1999, the State Department 
revised its procedures, pursuant to the panel decision, to 
provide more due process to countries apply for certification 
under section 609. The United States also provided the 
complaining countries with additional technical assistance in 
the adoption of sea turtle conservation measures. In July 2000, 
the State Department began negotiations on a sea turtle 
conservation agreement with countries of the Indian Ocean 
region, including the complaining countries in the WTO case. 
The next meeting of negotiators is expected to take place 
during the first half of 2001.
    On October 23, 2000, Malaysia requested that the original 
WTO panel examine whether the United States fully implemented 
the panel's recommendations, arguing that it was necessary for 
the United States to repeal its ``shrimp-turtle law'' in order 
to comply. The other complaining countries in the WTO panel 
proceedings did not join Malaysia in the request. A decision on 
U.S. compliance with the panel report, which can be appealed to 
the WTO Appellate Body by either party, is expected in the 
spring of 2001.

                 National Security Import Restrictions


             Section 232 of the Trade Expansion Act of 1962

    Section 232 of the Trade Expansion Act of 1962, as 
amended,\43\ authorizes the President to impose restrictions on 
imports which threaten to impair the national security. This 
authority has been used by the President to impose quotas and 
fees on imports of petroleum and petroleum products from time 
to time and to embargo imports of refined petroleum products 
from Libya. Public Law 96-223 (imposing a windfall profit tax 
on domestic crude oil) amended section 232 to authorize the 
Congress to disapprove by joint resolution an action of the 
President to adjust oil imports. On June 9, 1995, the President 
found, pursuant to section 232, that oil imports threaten to 
impair the national security but determined not to take action 
to adjust imports of petroleum because the costs of such an 
adjustment to the economy outweighed the benefits.\44\
---------------------------------------------------------------------------
    \43\ Public Law 87-794, approved October 11, 1962, 19 U.S.C. 1862, 
amended by section 127 of the Trade Act of 1974, Public Law 93-618, 
approved January 3, 1975, by section 402 of the Crude Oil Windfall 
Profit Tax Act of 1980, Public Law 96-223, approved April 2, 1980, and 
further amended by section 1501 of the Omnibus Trade and 
Competitiveness Act of 1988, Public Law 100-418, approved August 23, 
1988.
    \44\ 60 Fed. Reg. 30,514 (June 9, 1995).
---------------------------------------------------------------------------
    On April 28, 2000, the President pursuant to section 232, 
concurred with the findings of the Secretary of Commence that 
imports of crude oil threaten to impair the national security. 
He also accepted the Secretary's recommendation that trade 
remedies not be imposed but that existing policies to enhance 
conservation and limit the dependence on foreign oil be 
continued.\45\
---------------------------------------------------------------------------
    \45\ 36 Weekly Comp. Pres. Doc. 945.
---------------------------------------------------------------------------
    Section 232 as amended requires the Secretary of Commerce 
to conduct immediately an investigation to determine the 
effects on national security of imports of an article, upon the 
request of any U.S. government department or agency, 
application of an interested party, or upon his own motion. The 
Secretary must report the findings of his investigation and his 
recommendations for action or inaction to the President within 
270 days after beginning the investigation. If the Secretary 
finds the article ``is being imported * * * in such quantities 
or under such circumstances as to threaten to impair the 
national security,'' he must so advise the President. The 
President must decide within 90 days after receiving the 
Secretary's report whether to take action. If the President 
decides to take action, he must implement such action within 15 
days, and take such action for such time as he deems necessary 
to ``adjust'' the imports of the article and its derivatives so 
imports will not threaten to impair the national security. The 
President must submit a written statement to the Congress 
within 30 days explaining action taken and the reasons 
therefor.
    Upon initiation of an investigation, the Secretary of 
Commerce must immediately notify the Secretary of Defense, and 
consult with him on methodological and policy questions. Upon 
request of the Secretary of Commerce, the Secretary of Defense 
must provide an assessment of the defense requirements of any 
article subject to investigation.
    The Secretary of Commerce must hold public hearings or 
otherwise afford interested parties an opportunity to present 
information and advice relevant to the investigation if it is 
appropriate and after reasonable notice. The Secretary must 
also seek information and advice from, and consult with, other 
appropriate agencies. Among the factors which the Secretary and 
the President must consider are domestic production needs for 
projected national defense requirements; domestic industry 
capacity to meet these requirements; existing and anticipated 
availability of resources, supplies, and services essential to 
the national defense; the growth requirements of such 
industries, supplies, services; imports in terms of their 
quantities, availability, character, and use as they affect 
such industries and U.S. capacity to meet national security 
requirements; the impact of foreign competition on the economic 
welfare of domestic industries; and any substantial 
unemployment, revenue declines, loss of skills or investment, 
or other serious effects resulting from displacement of any 
domestic products by excessive imports.

             Section 233 of the Trade Expansion Act of 1962

    Section 233 of the Trade Expansion Act of 1962 \46\ was 
added by section 121 of the Export Administration Amendments of 
1985 (Public Law 99-64) as a means of enforcing national 
security export controls imposed under that Act. The provision 
was amended by section 2447 of the Omnibus Trade and 
Competitiveness Act of 1988, to conform to sanctions authority 
added to the Export Administration Act.
---------------------------------------------------------------------------
    \46\ 19 U.S.C. 1864.
---------------------------------------------------------------------------
    Under section 233 as amended, any person who violates any 
national security export control imposed under section 5 of the 
Export Administration Act of 1979, or any regulation, order, or 
license issued under that section, may be subject to controls 
imposed by the President on imports of goods or technology into 
the United States.
    The provision has never been used.

                     Balance of Payments Authority


                  Section 122 of the Trade Act of 1974

    Section 122 of the Trade Act of 1974 \47\ authorizes the 
President to increase or reduce restrictions on imports into 
the United States to deal with balance of payments problems.
---------------------------------------------------------------------------
    \478\ Public Law 93-618, approved January 3, 1975; 19 U.S.C. 2132.
---------------------------------------------------------------------------
    Tighter restrictions in the form of an import surcharge 
(not to exceed 15 percent ad valorem), import quota, or a 
combination of the two may be imposed for up to 150 days 
(unless extended by act of Congress) whenever fundamental 
international payments problems make such restrictions 
necessary to deal with large and serious U.S. balance of 
payments deficits, to prevent an imminent and significant 
depreciation of the dollar, or to cooperate with other 
countries in correcting an international balance of payments 
disequilibrium.
    Existing imports restrictions may be eased for a period of 
up to 150 days (unless extended by act of Congress) through a 
reduction in the rate of duty on any article (not to exceed 5 
percent ad valorem), an increase in the value or quantity of 
imports subject to any type of import restriction, or a 
suspension of any import restriction. Such restrictions may be 
eased whenever fundamental international payments problems 
require special measures to deal with large and serious balance 
of payments surpluses or to prevent significant appreciation of 
the dollar. Trade liberalizing measures must be broad and 
uniform as to articles covered. The President may not, however, 
liberalize imports of those products for which increased 
imports will cause or contribute to material injury to domestic 
firms or workers, impairment of national security, or otherwise 
be contrary to the national interest.
    Certain conditions also are placed on the President's use 
of import restrictions for balance of payments purposes. Quotas 
may be imposed only if international agreements to which the 
United States is a party permit them as a balance of payments 
measure and only to the extent that the imbalance cannot be 
dealt with through an import surcharge. If the President 
determines that import restrictions are contrary to the 
national interest, he may refrain from imposing them but must 
inform and consult with Congress.
    Section 122(d) requires that import restrictions be applied 
on a non-discriminatory basis; it also requires that quotas aim 
to distribute foreign trade with the United States in a manner 
that reflects existing trade patterns. If the President finds, 
however, that the purposes of the provision would best be 
served by action against one or more countries with large and 
persistent balance of payment surpluses, he may exempt all 
other countries from such action. This section also expresses 
the sense of Congress that the President seek modifications in 
international agreements to allow the use of surcharges instead 
of quotas for balance of payments adjustment purposes. If such 
international reforms are achieved, the President's authority 
to exempt all but one or two surplus countries from import 
restrictions must be applied in a manner consistent with the 
new international rules.
    Section 122(e) provides that import restrictions be of 
broad and uniform application as to produce coverage, unless 
U.S. economic needs dictate otherwise. Exceptions under this 
section are limited to the unavailability of domestic supply at 
reasonable prices, the necessary importation of raw materials 
and similar factors, or if uniform restrictions will be 
unnecessary or ineffective (i.e., if products already are 
subject to import restrictions, are in transit, or are subject 
to binding contracts). The section prohibits the use of balance 
of payments authority or the exceptions authority to protect 
domestic industries from import competition. Any quantitative 
restriction imposed may not be more restrictive than the level 
of imports entered during the most recent representative 
period, and must take into account any increase in domestic 
consumption since the most recent representative period.
    The President is authorized to modify, suspend, or 
terminate any proclamation issued under the section, either 
during the initial 150-day period or during any subsequent 
extension by act of Congress.
    Section 122 authority has never been invoked.

Background

    Anticipating that oil-consuming nations would face large 
balance of payments deficits in an era of rapidly increasing 
oil prices, and believing that neither a reduction in the price 
of oil nor the necessary international monetary cooperation 
were certain to take place, Congress considered it necessary to 
authorize the President to impose surcharges or other import 
restrictions for balance of payments purposes, even though 
Congress assumed that under existing circumstances such 
authority was not likely to be used.\48\ The use of surcharges 
for balance of payments purposes had gained de facto acceptance 
among industrialized GATT member countries during the two 
decades preceding the 1974 Trade Act, but explicit GATT rules 
had never been adopted.
---------------------------------------------------------------------------
    \48\ Senate Report 93-1298 at 87-88.
---------------------------------------------------------------------------
    When it passed the Trade Act of 1974, Congress urged the 
President to seek changes in international agreements allowing 
the use of surcharges as well as (and in preference to) quotas 
for balance-of-payments adjustment purposes and providing rules 
for their use.\49\ The Tokyo Round of GATT multilateral trade 
negotiations in 1979 adopted, as part of the so-called 
Framework Agreement, the Declaration on Trade Measures Taken 
for Balance-of-Payments Purposes,\50\ which elaborated on the 
rules for the use of import restrictions for balance-of-
payments adjustments. While this Declaration noted the wide 
use, for balance-of-payments adjustments, of import 
restrictions other than quotas (which alone are addressed in 
the GATT) and implicitly sanctioned it, it still did not 
fundamentally alter GATT rules in this area by explicitly 
allowing such other restrictions.
---------------------------------------------------------------------------
    \49\ Senate Report 93-1298 at 88.
    \50\ MTN/FR/W/20/Rev. 2, reprinted in House Doc. 96-153, pt. I, at 
626.
---------------------------------------------------------------------------
    The balance-of-payments issue was revisited in the Omnibus 
Trade and Competitiveness Act of 1988, which stated as one of 
the principal negotiating objectives of the United States the 
development of ``rules to address large and persistent global 
current account imbalances of countries.'' \51\
---------------------------------------------------------------------------
    \51\ Public Law 100-418, section 122(d)(4), section 1101(b)(5); 19 
U.S.C. 2901(b)(5).
---------------------------------------------------------------------------
    The Understanding on the Balance-of-Payments Provisions of 
the General Agreements on Tariffs and Trade 1994 specifically 
provides for (and gives preference to) ``price-based measures'' 
for balance-of-payments adjustments, including import 
surcharges and deposit requirements, and limits the imposition 
of new quantitative restrictions. The Understanding also 
provides that preference should be given to those measures 
which have the least disruptive effect on trade, and that 
restrictive import measures taken for balance-of-payments 
purposes may only be applied to control the general level of 
imports, may not exceed what is necessary to address the 
balance-of-payments situation, and must be applied in a 
transparent manner. Finally, the Understanding sets forth 
consultation procedures for the use of all restrictive import 
measures taken for balance-of-payments purposes. Article XII of 
the General Agreement on Trade in Services permits members to 
adopt or maintain restrictions on trade in services in the 
event of serious balance-of-payments and external financial 
difficulties.\52\
---------------------------------------------------------------------------
    \52\ The United States prevailed in a WTO challenge to certain 
import restrictions by India on more than 2,700 tariff items. The WTO 
found that these restrictions were no longer justified under the 
balance-of-payments exceptions. India agreed to remove all restrictions 
by April 2001.
---------------------------------------------------------------------------

                           Product Standards

    U.S. policy regarding the application of standards and 
certification procedures to imported products is based on the 
Uruguay Round Agreement on Technical Barriers to Trade and its 
U.S. implementing legislation as part of the Uruguay Round 
Agreements Act,\53\ chapter 9 of the North American Free Trade 
Agreement and its U.S. implementing legislation as part of the 
North American Free Trade Agreement Implementation Act,\54\ and 
the Agreement on Technical Barriers to Trade under the General 
Agreement on Tariffs and Trade (GATT) and its U.S. implementing 
legislation under title IV of the Trade Agreement Act of 
1979.\55\
---------------------------------------------------------------------------
    \53\ Public Law 103-465, approved December 8, 1994.
    \54\ Public Law 103-182, approved December 8, 1993.
    \55\ Public Law 96-39, approved July 26, 1979, 19 U.S.C. 2531-2573.
---------------------------------------------------------------------------
    Differences in product standards, listing and approval 
procedures, and certification systems often can impede trade 
and can be manipulated to discriminate against imports. Imports 
may be tested to determine whether they conform with domestic 
standards under conditions more onerous than those applicable 
to domestic products. Certification systems, which indicate 
whether products conform to standards, may limit access for 
imports or may discriminate by denying the right of a 
certification mark on imported products. Prior to the 1979 
Agreement, however, there was virtually no multilateral 
cooperation or supervision to promote international 
harmonization and to discourage nationalistic discriminatory 
practices.

                Agreement on Technical Barriers to Trade

    The Agreement on Technical Barriers to Trade,\56\ commonly 
referred to as the Standards Code, was one of the agreements on 
non-tariff measures concluded during the 1973-1979 Tokyo Round 
of GATT multilateral trade negotiations. The Code went into 
force on January 1, 1980. The Code does not attempt to create 
standards for individual products, or to set up specific 
testing and certification systems. Rather, it establishes, for 
the first time, international rules among governments 
regulating the procedures by which standards and certification 
systems are prepared, adopted and applied, and by which 
products are tested for conformity with standards. The Code was 
a major U.S. negotiating objective during the Tokyo Round, 
particularly given the formation of a European regional 
electrical certification system closed to outside suppliers.
---------------------------------------------------------------------------
    \56\ MTN/NTM/W/192 Rev. 5, reprinted in House Doc. No. 96-153, pt. 
I, at 211.
---------------------------------------------------------------------------
    The Standards Code seeks to eliminate national product 
standardization and testing practices and certification 
procedures as barriers to trade among the signatory countries 
and to encourage the use of open procedures in the adoption of 
standards. At the same time, it does not limit the ability of 
countries to reasonably protect the health, safety, security, 
environment, or consumer interests of their citizens. 
Generally, U.S. standards-setting processes have followed these 
basic norms, whereas other countries' standards-related 
activities have generally been closed to participation from 
foreign countries; these signatories are obliged to change 
their practices in order to comply with Code principles.
    The Code's provisions are applicable to all products, both 
agricultural and industrial. They are not applicable to 
standards involving services, technical specifications included 
in government procurement contracts, or standards established 
by individual companies for their own use. The Code addresses 
governmental and non-governmental standards, both voluntary and 
mandatory, developed by central governments, state and local 
governments, and private sector organizations. Only central 
governments, however, are directly bound by Code obligations, 
whereas regional, state, local, and private organizations are 
subject to a second level of obligation whereby signatories 
``shall take such reasonable measures as may be available to 
them'' to ensure compliance.
    The Code is prospective, applying to new and revised 
standards-related activities. If a signatory country believes, 
however, that an existing regulation developed and put into 
effect before the Code came into force conflicts with the basic 
tenets of the Code, then that signatory may use the Code's 
dispute settlement mechanism to help resolve the problem.
    The Standards Code contains the following key provisions 
obligating signatories to follow several general principles 
pertaining to standards-related activities:
          (1) The most important and fundamental principle 
        obligates signatory governments not to develop, 
        intentionally or unintentionally, product standards, 
        technical regulations, or certification systems which 
        create unnecessary obstacles to foreign trade. The Code 
        recognizes nations' sovereign right to formulate 
        standards and certification systems to protect life, 
        health and environment, but such regulations should be 
        as least disruptive as possible to international trade.
          (2) The second fundamental principle is that national 
        or regional certification systems are to grant access 
        to foreign or non-member signatory suppliers under 
        conditions no less favorable than those granted to 
        domestic or member country suppliers, a major change in 
        most signatory policies. Signatories can no longer 
        refuse to give their national certification marks to 
        imported products, provided that the imported products 
        fully meet the technical requirements of the 
        certification system. Also regional certification 
        bodies must be open to suppliers from all Code 
        signatories.
          (3) Signatories must provide foreign imported 
        products the same treatment as domestic goods with 
        respect to standards, technical regulations, and 
        testing and certification procedures, i.e., an 
        extension of the national treatment provision of GATT 
        which prohibits discrimination against imported 
        products.
          (4) When developing new or revising existing product 
        standards or technical regulations, governments are to 
        use existing or proposed international standards as the 
        basis where it is appropriate. Other signatories may 
        request an explanation if a government fails to follow 
        this principle.
          (5) Whenever appropriate, signatories are encouraged 
        to specify technical regulations and standards in terms 
        of performance rather than design or descriptive 
        characteristics.
    If a foreign product must be tested to determine whether it 
meets domestic standards before it can be imported, the Code 
provides a number of criteria that signatories are to follow to 
ensure non-discriminatory treatment. For example, foreign goods 
should not have to undergo costlier or more complex testing 
than domestic products in comparable situations. In addition, 
signatories are obligated to use the same methods and 
administrative procedures on imported as well as domestic 
goods. The Code does not obligate signatories to recognize test 
results or certification marks from another country. It does, 
however, encourage signatories to accept, whenever possible, 
test results, certifications or marks of conformity from 
foreign bodies, or self-certification from foreign producers 
even when the test methods differ from their own, provided that 
the importing country is satisfied that the exporting country's 
products meet the required standards.
    Another important element of the Standards Code is the 
obligation of signatories to open up the process of developing 
or applying standards and certification procedures to each 
other. Governments must make available proposed mandatory or 
voluntary standards and certification procedures for comment 
during the drafting stage by other signatories before they 
become final regulations. Each signatory government must 
establish an inquiry point to respond to all reasonable 
questions from other signatories concerning their central, 
local, and state government standards and certification 
procedures.
    Finally, the Code establishes a Committee of Signatories 
which meets periodically to oversee implementation and 
administration of the Agreement, as well as to discuss any new 
issues or problems which arise. The Committee may set up panels 
of experts or working parties as required to conduct Committee 
business or handle disputes.

         Uruguay Round Agreement on Technical Barriers to Trade

    As part of the Uruguay Round, the signatories built on 
experience gained under the 1979 Standards Code in the 
Agreement on Technical Barriers to Trade (TBT Agreement). Much 
of the new Agreement restates, clarifies, or expands the 1979 
Code.
    The inclusion of the new Agreement as one of the WTO 
agreements means that all WTO members will be automatically 
bound by the Agreement, whereas a number of countries had 
chosen not to join the Standards Code. In addition, the 
Agreement will be enforceable through the WTO Dispute 
Settlement Understanding, unlike the 1979 Code, which contained 
a separate procedure limiting response to Code violations to 
withdrawing concessions under the Code.
    The new Agreement seeks to eliminate barriers in the form 
of national product standardization and testing practices and 
conformity assessment procedures. At the same time, it permits 
signatories to protect the health, safety, security, 
environment, or consumer interests of their citizens. Like the 
1979 Code, the Agreement obligates signatories to take 
reasonable measures to secure compliance by local government 
and non-governmental bodies.
    With respect to technical regulations, the Agreement 
establishes rules covering the preparation, adoption, and 
application of technical regulations. The Agreement specifies 
that technical regulations are not to be more trade-restrictive 
than necessary to fulfill a legitimate objective. A complaining 
member must identify a specific alternative measure that is 
reasonably available. In addition, each government is required 
to review periodically its technical regulations in light of 
the Agreement's requirements. Each government is to use 
relevant international standards as a basis for technical 
regulations, except where they would be an ineffective or 
inappropriate means to fulfill the government's legitimate 
objectives. The Agreement recognizes the concept of equivalency 
between countries' technical regulations. It carries forward 
the procedural requirements of the Code to assure transparency. 
Finally, it reflects an expansion beyond the Code with respect 
to the issuance of technical regulations by local and non-
governmental bodies. WTO members must provide notice of 
technical regulations issued by local bodies at the next level 
below central governments, and must take active measures in 
support of observance by local government and non-governmental 
bodies.
    With respect to standards, central government bodies are 
required to comply with the terms of the Code of Good Practice 
for the Preparation, Adoption and Application of Standards. 
Other standardizing bodies are not bound by the Code of Good 
Practice, but each central government must take reasonable 
measures to ensure their compliance.
    The new Agreement updates and expands disciplines regarding 
conformity assessment procedures. Whereas the 1979 Code applied 
only to testing, the new Agreement applies to all aspects of 
conformity assessment, including laboratory accreditation and 
quality system registration. Central governments are required 
to take reasonable measures to apply these same disciplines to 
local governments and non-governmental bodies.
    The Agreement on the Application of Sanitary and 
Phytosanitary Measures (S&P Agreement) establishes a number of 
general requirements and procedures to ensure that a sanitary 
or phytosanitary measure is in fact to protect human, animal, 
and plant life and health from risks of plant- or animal-borne 
pests or diseases, or additives, contaminants, toxins, or 
disease-causing organisms in foods, beverages, or feedstuffs. 
While the TBT Agreement relies on a non-discrimination test, 
the S&P Agreement relies on whether a measure has a basis in 
science and is based on a risk assessment. Discrimination is 
allowed as long as it is not arbitrary or unjustifiable.

                The North American Free Trade Agreement

    Chapter 9 of the NAFTA establishes rules on standards-
related measures among the United States, Mexico, and Canada. 
The provisions are based on the text of the then-draft Uruguay 
Round Agreement on Technical Barriers to Trade and the United 
States-Canada Free-Trade Agreement. The rules apply only to 
standards-related measures that may directly or indirectly 
affect trade in goods or services between the NAFTA countries 
and to measures taken by NAFTA countries concerning those 
standards-related measures. In addition, chapter 7 of the NAFTA 
covers sanitary and phytosanitary measures.

        Title IV of the Trade Agreements Act of 1979, as amended

    Congress approved the Agreement on Technical Barriers to 
Trade under section 2 of the Trade Agreements Act of 1979. 
Title IV of that Act implements the obligations of the 
Standards Code in U.S. law.\57\ Since U.S. practices were 
already in conformity with the Code, title IV did not amend, 
repeal, or replace any existing law. It does ensure that 
adequate structures exist within the federal government to 
inform the U.S. private sector about the standards-related 
activities of other nations, facilitate the ability of the 
United States to comment on foreign standards-making and 
certifications, and process domestic complaints on foreign 
practices. Title IV was then amended to reflect U.S. 
obligations under the Uruguay Round Agreement on Technical 
Barriers to Trade and the NAFTA.
---------------------------------------------------------------------------
    \57\ 19 U.S.C. 2531-2573.
---------------------------------------------------------------------------
    Section 402 of the 1979 Act requires all federal agencies 
to abide by the above-described principles and provisions of 
the Agreement. In addition, section 403 states the ``sense of 
Congress'' that no State agency and no private person should 
engage in any standards-related activity, i.e., development or 
implementation of product standards or certification system, 
that creates unnecessary obstacles to foreign trade, and 
requires the President to ``take such reasonable measures as 
may be available'' to promote their observance of Agreement 
obligations.
    The U.S. Trade Representative (USTR) is designated to 
coordinate U.S. trade policies related to standards, and 
discussions and negotiations with foreign countries on 
standards issues, and to oversee implementation of the 
Agreement. The Departments of Agriculture and Commerce are 
required to work with the USTR on agricultural and non-
agricultural issues respectively and to establish technical 
offices to fulfill a number of functions, particularly 
supplying notices to interested parties of proposed foreign 
government standards and receiving and transmitting private 
sector comments. The Department of Commerce maintains the 
National Center for Standards and Certification within the 
National Bureau of Standards as the national inquiry point 
required under the Code.
    Title IV contains provisions concerning administrative and 
judicial proceedings regarding standards-related activities. No 
private rights of action are created by title IV; private 
parties can petition the U.S. government to invoke provisions 
of the Agreement against practices of other signatories.
    Subtitle E sets forth governing standards and measures 
under the NAFTA. Subtitle F contains provisions concerning U.S. 
participation in international standardsetting activities.

                         Government Procurement

    U.S. policy on government purchases of foreign goods and 
services is based on the Buy American Act of 1933,\58\ the 
multilateral Agreement on Government Procurement under the 1994 
WTO and General Agreement on Tariffs and Trade (GATT), and its 
implementing legislation under title III of the Trade 
Agreements Act of 1979,\59\ as amended by the Uruguay Round 
Agreements Act. The ``Buy American Act of 1988'' (title VII of 
the Omnibus Trade and Competitiveness Act of 1988) \60\ 
established standards and procedures to prohibit procurement 
from foreign countries whose governments discriminate against 
U.S. products or services in awarding contracts. In addition, 
separate provisions in appropriation acts and other legislation 
apply more restrictive Buy American-type provisions on 
particular types of purchases.
---------------------------------------------------------------------------
    \58\ Act of March 3, 1933, ch. 212, title III, 47 Stat. 1520, 41 
U.S.C. 10a-10d.
    \59\ Public Law 96-39, title III, approved July 26, 1979, 19 U.S.C. 
2511-2518.
    \60\ Public Law 100-418, title VII, approved August 23, 1988, 41 
U.S.C. 10a note.
---------------------------------------------------------------------------
    Governments are among the world's largest purchasers of 
non-strategic goods. Most of this vast market has traditionally 
been closed to foreign producers by means of formal and 
informal administrative systems of national discrimination in 
favor of domestic producers. Although U.S. preferences for 
domestic suppliers are clearly set out by law and regulation, 
other countries usually have achieved their discrimination by 
highly invisible administrative practices and procedures.

                            Buy American Act

    The Buy American Act of 1933, as implemented by Executive 
Orders 10582 and 11051, requires the U.S. government to 
purchase domestic goods and services unless the head of the 
agency or department involved determines the prices of the 
domestic supplies are ``unreasonable'' or their purchase would 
be inconsistent with the U.S. public interest. Executive Order 
10582, issued in 1954, states that if the domestic price of a 
good or service is 6 percent or more above the foreign price, 
then it is to be considered unreasonable and the foreign 
product may be purchased. The order also permits agencies to 
use a differential above 6 percent if it would serve the 
national interest. The Department of Defense has been using a 
50 percent differential since 1962 for its procurement, except 
this differential is waived on military purchases under 
reciprocal Memoranda of Understanding (MOUs) with NATO 
countries. The order also indicated that a differential could 
be applied in cases where a domestic bid generated employment 
in a labor surplus area as designated by the Secretary of 
Labor. No specific percentage was stated, but generally a 12 
percent differential has been allowed for bids which benefit 
economically distressed areas. These price differentials may be 
waived under section 301(a) of the Trade Agreements Act of 1979 
for articles covered by the GATT Agreement on Government 
Procurement from signatory countries.
    U.S.-made products are defined by law as those manufactured 
in the United States substantially all from articles, 
materials, or supplies mined, produced, or manufactured in the 
United States. By regulations, ``substantially all'' has been 
defined to mean that more than 50 percent of the component 
costs of a product has been incurred in the United States.

             1979 GATT Agreement on Government Procurement

    The first Agreement on Government Procurement, also known 
as the Government Procurement Code,\61\ was concluded as one of 
the agreements on non-tariff measures during the 1975-1979 
Tokyo Round of GATT multilateral trade negotiations. The Code 
went into effect on January 1, 1981 and remained in force until 
the 1994 WTO Agreement on Government Procurement went into 
effect on January 1, 1996.
---------------------------------------------------------------------------
    \61\ MTN/NTM/W/211/Rev. 2, reprinted in House Doc. No. 96-153, pt. 
I, at 69.
---------------------------------------------------------------------------
    Because not all objectives were achieved in the original 
Code and revisions might be necessary in light of actual 
experience, the signatories agreed to renegotiations beginning 
at the end of 1984 to broaden the coverage and improve the 
operation of the Code. The GATT Committee on Government 
Procurement completed the first phase of these renegotiations 
in November 1986 with agreement (1) on a Protocol of Amendments 
to improve the functioning of the Code, effective January 1, 
1988; (2) to continue negotiations on increasing the number of 
entities (government agencies) and procurements covered by the 
Code, particularly in the sectors of telecommunications, heavy 
electrical and transportation equipment; and (3) to continue to 
work towards the coverage of service contracts under the Code. 
The second phase of Code renegotiations began in February 1987 
and continued in the context of the Uruguay Round of GATT 
multilateral trade negotiations.
    The 1979 Code is designed to discourage discrimination 
against foreign suppliers at all stages of the procurement 
process, from the determination of the characteristic of the 
product to be purchased to tendering procedures, to contract 
performance. The Code prescribes specific rules on the drafting 
of the specifications for goods to be purchased, advertising of 
prospective purchases, time allocated for the submission of the 
bids, qualification of suppliers, opening and evaluation of 
bids, awards of contracts, and on hearing and reviewing 
protests.
    Signatories must publish their procurement laws and 
regulations and make them consistent with the Code rules. 
Purchasing entities have discretion in their choice of 
purchasing procedures, provided they extend equitable treatment 
to all suppliers and allow the maximum degree of competition 
possible.
    Each government agency covered by the Code is required to 
publish a notice of each proposed purchase in an appropriate 
publication available to the public, and to provide all 
suppliers with enough information to permit them to submit 
responsive tenders. Losing bidders must be informed of all 
awards and be provided upon request with pertinent information 
concerning the reasons they were not selected and the name and 
relative advantages of the winning bidder. Signatories must 
also provide data on their procurements on an annual basis.
    The adoption or use of technical specifications which act 
to create unnecessary obstacles to international trade is 
prohibited. The Code mandates the use, where appropriate, of 
technical specifications based on performance rather than 
design, and of specifications based on recognized national or 
international standards.
    While the Code does not prohibit the granting of an offset 
or the requirement that technology be licensed as a condition 
of award, signatories recognize that offsets and requirements 
for licensing of technology should be limited and used in a 
non-discriminatory way.
    The Code is largely self-policing. Rules and procedures are 
structured to help provide solutions to problems between 
potential suppliers and procuring agencies. As a next step, the 
Code provides for bilateral consultations between the procuring 
government and the government of the aggrieved supplier. As a 
last resort, the Code dispute settlement mechanism under the 
Committee of Signatories provides for conciliation or 
establishment of a fact-finding panel.

Coverage of the agreement

    The Code applies solely to those agencies listed by each 
signatory in an annex on contracts valued above a specific 
minimum contract value expressed in terms of Special Drawing 
Rights (SDR). The original Code established a threshold value 
of 150,000 SDR; the 1988 Protocol of Amendments to the Code 
lowered the minimum contract value to SDR 130,000.
    The benefits of the Code apply to purchases of goods 
originating in the territory of signatory countries. As a 
result of the 1988 amendments, leasing contracts are also 
subject to the Code. It does not apply to government services 
except those incidental to the purchase of goods, construction 
contracts, purchases by Ministries of Agriculture for farm 
support programs or human feeding programs such as the U.S. 
school lunch program. Procurements by state and local 
governments, including those with federal funds such as under 
the Surface Transportation Act, are not subject to the Code.
    For the United States, the Code does not apply to the 
Department of Transportation, the Department of Energy, the 
Tennessee Valley Authority, the Corps of Engineers of the 
Department of Defense, the Bureau of Reclamation of the 
Department of the Interior, and the Automated Data and 
Telecommunications Service of the General Services 
Administration (GSA). In addition, government chartered 
corporations which are not bound by the Buy American Act, such 
as the U.S. Postal Service, COMSAT, AMTRAK, and CONRAIL, are 
not covered.
    United States Code coverage also does not apply to set-
aside programs reserving purchases for small and minority 
businesses, prison and blind-made goods, or to the requirements 
contained in Department of Defense and GSA Appropriations Acts 
that certain products (i.e., textiles, clothing, shoes, food, 
stainless steel flatware, certain specialty metals, buses, hand 
tools, ships, and major ship components) be purchased only from 
domestic sources.
    On April 13, 1993, the United States and European Union 
reached an agreement in Marrakesh under the GATT Government 
Procurement Code to nearly double to $200 billion the bidding 
opportunities available on a bilateral basis.

              1994 WTO Agreement on Government Procurement

    The 1994 Government Procurement Agreement negotiated in the 
Uruguay Round makes important improvements in the Tokyo Round 
Code, which required central government agencies in member 
countries to observe non-discriminatory, fair, and transparent 
procedures in the purchase of certain goods. The new Agreement 
covers the procurement of both goods and services, including 
construction services, and applies to purchases by subcentral 
governments and government-owned enterprises, as well as 
central governments.
    In addition to improvements in coverage, the Agreement also 
requires members to follow significantly improved procurement 
procedures. It prohibits the use of offsets unless a country 
specifically negotiates an exception to the Agreement in its 
schedule. The Agreement requires the establishment of a 
domestic bid challenge system and introduces added flexibility 
to accommodate advances in procurement techniques.
    The Agreement allows each signatory to negotiate coverage 
on a reciprocal, bilateral basis with the other signatories. 
The United States concluded comprehensive coverage packages 
with several countries. The United States will apply the new 
Agreement to specified U.S. subcentral governments and 
government-owned entities only for those countries that opened 
their government procurement markets in sectors of high 
priority to the United States, although it may expand coverage 
with other signatories in the future.
    The Agreement applies to purchases by government entities 
above certain special drawing right (SDR) thresholds:
          Central government purchases
                  Goods and services: 130,000 SDRs ($182,000)
                  Construction services: 5 million SDRs ($7 
                million)
          Subcentral government purchases
                  Goods and services, U.S. and Canada: 355,000 
                SDRs ($500,000)
                  Goods and services, other: 200,000 SDRs 
                ($280,000)
                  Construction services, Japan and Korea: 15 
                million SDRs ($21 million)
                  Construction services, other: 5 million SDRs 
                ($7 million)
          Government-owned enterprise purchases
                  Goods and services, U.S. federally-funded 
                utilities: $250,000
                  Goods and services, other: 400,000 SDRs 
                ($560,000)
                  Construction services, Japan and Korea: 15 
                million SDRs ($21 million)
                  Construction services, other: 5 million SDRs 
                ($7 million)
    During the negotiations, each signatory negotiated the 
exclusion of certain procurement from the obligations imposed 
by the new Agreement. In the case of the United States, these 
exclusions carry forward those in the U.S. schedule to the 1979 
Code. In addition, certain states excluded specified 
procurement, and set-asides on behalf of small and minority 
businesses are also excluded. The 1994 Agreement applies to all 
U.S. executive branch agencies with certain exceptions, 
including the Federal Aviation Administration.
    Signatories to the 1996 Code include the following members 
of the 1979 Code--Austria, Belgium, Canada, Denmark, European 
Communities, Finland, France, Germany, Greece, Hong Kong, 
Iceland, Ireland, Israel, Italy, Japan, Korea, Liechtenstein, 
Luxembourg, Netherlands, Netherlans with respect to Aruba, 
Norway, Portugal, Singapore, Spain, Sweden, Switzerland, United 
Kingdom, and the United States. The United States terminated 
its participation in the 1979 Code on the entry into force of 
the 1996 Code.

                The North American Free Trade Agreement

    The NAFTA signatories agreed to eliminate buy national 
restrictions on the majority of non-defense related purchases 
by their federal governments of goods and services provided by 
firms in North America. The Agreement marked the first time 
that Mexico had committed to eliminate discriminatory 
government procurement practices.
    The Agreement applies only to purchases above a specified 
threshold:
          (1) Purchases of goods over $25,000 by U.S. federal 
        agencies from Canadian suppliers and vice versa;
          (2) For other federal government procurement in the 
        three countries, purchases of goods and services over 
        $50,000 and purchases of construction services over 
        $6.5 million; and
          (3) For federal government-owned enterprises, 
        purchases of goods and services over $250,000 and 
        purchases of construction services over $8 million.
    The Agreement does not apply to certain kinds of purchases 
by the U.S. government including purchases under small or 
minority business set-aside programs, certain national 
security, agriculture, and Agency for International Development 
procurements, and procurements by state and local governments.

       Title III of the Trade Agreements Act of 1979, as amended

    Congress approved the first Agreement on Government 
Procurement under section 2 of the Trade Agreements Act of 1979 
and amended that statute in the Uruguay Round and NAFTA 
implementing bills to reflect U.S. obligations under those 
agreements. Title III of that Act implements the obligations of 
the Code in U.S. law with respect to purchases by covered 
government entities.\62\
---------------------------------------------------------------------------
    \62\ 19 U.S.C. 2511-2518.
---------------------------------------------------------------------------
    Executive Order 12260, issued on December 31, 1980, 
requires all U.S. government agencies covered by the Code to 
observe its provisions. Section 301 of the 1979 Act authorizes 
the President to waive the application of discriminatory 
government procurement law, such as the Buy American Act, and 
labor surplus set-asides that are not for a small business. The 
waiver authority applies only to purchases covered by the Code 
and only to foreign countries designated by the President that 
meet one of four statutory conditions basically requiring the 
country to provide appropriate reciprocal, competitive 
government procurement opportunities to U.S. products and 
suppliers, unless the country is a least developed country.
    Buy American Act preferences still apply to contracts below 
the SDR threshold, purchases by non-covered entities, and 
procurement from countries not eligible for a waiver regardless 
of contract size. Special Buy American-type restrictions under 
other laws (e.g., small business set asides, required domestic 
sourcing of particular goods) are also not affected.
    Section 302 of the 1979 Act, as amended, is designed to 
encourage other countries to participate in the Code and 
provide appropriate reciprocal competitive opportunities. For 
this purpose, the President is required, after the date on 
which any waiver first takes effect, to prohibit the 
procurement of products otherwise covered by the Code from non-
designated countries. The President may, however, (1) waive the 
prohibition on procurement of products by a foreign country or 
instrumentality that has not yet become a party to the 
Agreement but has agreed to apply transparent and competitive 
procedures to its government procurement equivalent to those in 
the Agreement and to maintain and enforce effective 
prohibitions on bribery and other corrupt practices in 
connection with government procurement; (2) authorize agency 
heads to waive prohibitions on a case-by-case basis when in the 
national interest; and (3) authorize the Secretary of Defense 
to waive the prohibition for products of any country which 
enters into a reciprocal procurement agreement with the 
Department of Defense. All such waivers are subject to 
interagency review and general policy guidance.
    Section 303 authorizes the President to waive as of January 
1, 1980 the application of the Buy American Act for purchases 
by any government entity of civil aircraft and related articles 
irrespective of value from countries party to the GATT 
Agreement on Trade in Civil Aircraft.
    Section 304 sets forth negotiating objectives in 
conjunction with the renegotiation of the Code within 3 years 
to improve its operation and broaden the coverage. This 
negotiation is ongoing. The President is directed to seek more 
open and equitable foreign market access and the harmonization, 
reduction, or elimination of devices distorting government 
procurement trade. The President must also seek equivalent 
competitive opportunities in developed countries for U.S. 
exports in appropriate product sectors as the United States 
affords their products, such as in the heavy electrical, 
telecommunications, and transport equipment sectors. The 
President must report to the committees of jurisdiction during 
the renegotiations if he determines they are not progressing 
satisfactorily and are not likely to result within 12 months in 
expanded agreement coverage of principal developed country 
purchasers in appropriate product sectors. The President is 
also directed to indicate appropriate actions to seek sector 
reciprocity with such countries in government procurement, and 
may recommend legislation to prohibit procurement by entities 
not covered by the Code from such countries.
    Title III of the 1979 Act, as amended, also contains a 
number of reporting requirements to the Congress on various 
aspects of the Code and its economic impact and implementation.

  Title VII of the Omnibus Trade and Competitiveness Act of 1988, as 
                                amended


Background

    Title VII of the Omnibus Trade and Competitiveness Act of 
1988 (``Buy American Act of 1988'') \63\ as amended by the 
Uruguay Round Agreements Act, amended both the Buy American Act 
of 1933 and title III of the Trade Agreements Act of 1979 to 
address discrimination by foreign governments in the 
procurement of U.S. products or services. Title VII statutory 
authority ceased to be effective on April 30, 1996. On March 
31, 1999, President Clinton issued Executive Order 13116, which 
reinstituted Title VII procedures.
---------------------------------------------------------------------------
    \63\ 41 U.S.C. 10a note.
---------------------------------------------------------------------------
    Title VII prohibits U.S. government procurement of products 
and services from certain parties, including (1) signatories 
``not in good standing'' to the Agreement; (2) signatories in 
good standing that discriminate against U.S. firms in their 
government procurement of products or services not covered by 
the Agreement; and (3) non-signatories to the Agreement whose 
governments discriminate against U.S. products or services in 
their procurement.
    In the case of countries that discriminate on procurement 
not covered by the Agreement, prohibitions are to be imposed 
when a foreign government maintains a significant and 
persistent pattern or practice of discrimination against 
procurement of U.S. products or services that results in 
identifiable harm to U.S. business. In cases of signatories to 
the Agreement, federal agencies would be prohibited from 
procuring only non-Agreement covered products from these 
countries unless that country has also been designated as a 
country ``not in good standing.''
    Least developed countries are exempt from the procurement 
prohibition, as are products and services procured and used by 
the federal government outside the United States and its 
territories. A prohibition may also be waived, on a contract-
by-contract or class of contracts basis, when in the public 
interest or to avoid the creation of a monopoly situation. The 
President or head of a federal agency may also authorize the 
award of a contract or class of contracts, notwithstanding a 
prohibition, if insufficient competition exists to assure the 
procurement of products or services of requisite quality at 
competitive prices. Normally the Congress must be notified at 
least 30 days before the prohibition is waived on a contract or 
class of contract.
    The President must submit to appropriate congressional 
committees, by April 30 each year, a report on the extent to 
which countries discriminate against U.S. products or services 
in making government procurements. The report must identify (1) 
signatories to the Agreement that are not in compliance with 
its requirements; (2) signatories to the Agreement whose 
products and services are acquired in significant amounts by 
the U.S. government, who are in compliance with the Agreement, 
but maintain a significant and persistent pattern or practice 
of discrimination in the government procurement of products and 
services not covered by the Agreement which results in 
identifiable harm to U.S. businesses; (3) non-signatories to 
the Agreement whose products or services are acquired in 
significant amounts by the U.S. government and who maintain in 
their government procurement a significant and persistent 
pattern or practice of discrimination which results in 
identifiable harm to U.S. businesses; (4) non-signatories to 
the Agreement, which fail to apply transparent and competitive 
procedures equivalent to those in the Agreement, and whose 
products and services are required in significant amounts by 
the U.S. government; and (5) non-signatories to the Agreement 
which fail to maintain and enforce effective prohibitions on 
bribery and other corrupt practices in connection with 
government procurement, and whose products and services are 
required in significant amounts by the U.S. government. The law 
requires the President to take into account a number of 
specific factors in identifying countries and to describe the 
practices and their impact in the annual report.
    By the date the annual report is submitted, the U.S. Trade 
Representative (USTR) must request consultations with any 
identified country, unless that country was also identified in 
the preceding annual report. If the country is a signatory 
identified as not in compliance with the Agreement and does not 
comply within 60 days after the annual report is issued, the 
USTR must request formal dispute settlement proceedings under 
the Agreement, unless they are already underway pursuant to a 
previous identification. If dispute settlement is not concluded 
within 18 months or has concluded and the country has not taken 
action required as a result of the procedures to the 
satisfaction of the President, the country is considered ``not 
in good standing'' and the President is required to revoke the 
waiver of Buy American restrictions granted under the Trade 
Agreements Act of 1979, as amended. The President will not 
limit procurement from the foreign country if, before the end 
of 18 months following initiation of dispute settlement, the 
country has complied with the Agreement, has taken action 
recommended as a result of the procedures to the satisfaction 
of the President, or the procedures result in a determination 
requiring no action by the country. The President may also 
terminate the sanctions and reinstate a waiver at any time 
under such circumstances.
    Within 60 days after the annual report is issued, the 
President must impose the procurement prohibition on any 
country identified as discriminating on procurements not 
covered by the Agreement and which has not eliminated its 
discriminatory procurement practices. The President may 
terminate the sanctions at such time as he determines the 
country has eliminated the discrimination.
    With respect to either category of countries, if the 
President determines that imposing or continuing the sanctions 
would harm the U.S. public interest, the President may modify 
or restrict the application of the sanctions to the extent 
necessary to impose appropriate limitations that are equivalent 
in their effect to the discrimination against U.S. products or 
services in government procurement by that country. The 
President also cannot impose sanctions if it would (1) limit 
U.S. government procurement to, or create a preference for, 
products or services of a single supplier; or (2) create a 
situation where there could be or are an insufficient number of 
actual or potential bidders to assure U.S. government 
procurement of goods or services of requisite quality at 
competitive prices.
    By April 30 of each year, the President must submit to the 
Congress a general report on actions taken under title VII, 
including an evaluation of the adequacy and effectiveness of 
such actions as a means toward eliminating foreign 
discriminatory government procurement practices against U.S. 
businesses and, if appropriate, legislative recommendations for 
enhancing the usefulness of title VII or any other measures to 
eliminate or respond to foreign discriminatory foreign 
procurement practices.

History of actions under title VII

    In its first report on April 27, 1990, the U.S. Trade 
Representative determined that no country met the statutory 
criteria under title VII. Seven procurement markets of 
particular significance to U.S. suppliers were identified for 
close review over the following year before the 1991 report: 
the European Community (EC), the Federal Republic of Germany, 
France, Italy, Greece, Japan, and Australia.
    In its second annual report on April 26, 1991, the USTR 
identified Norway as meeting the statutory requirements for 
identification as a country in violation of its obligations 
under the GATT Government Procurement Agreement when it awarded 
a sole source contract for an electronic toll booth collection 
system for the city of Trondheim. The report also announced 
that while some progress was made with the EC on non-Code-
covered government procurement in the telecommunications 
equipment and heavy electrical equipment sectors, an early 
review would be conducted of the practices of the EC, Germany, 
France, and Italy in these areas in January 1992 if U.S. 
concerns had not been addressed. Procurement practices of 
Greece, Australia, and Japan were also identified for further 
monitoring.
    In its February 21, 1992 report on the ``early review,'' 
the USTR found that the EC met the requirements for 
identification under title VII with respect to discriminatory 
procurement practices of government-owned telecommunications 
and electrical utilities in certain of its member states. 
Specifically, the report cited the EC's September 1990 
``Utilities Directive,'' scheduled to go into effect by January 
1, 1993, establishing procurement rules for all EC 
telecommunications and heavy electrical utilities requiring 
them to favor EC goods and services over those of the United 
States and other foreign countries, subject to waiver if a 
negotiated market access agreement, such as a new GATT 
Government Procurement Code, were reached with other countries. 
The report stated the President's intention to implement 
appropriate sanctions by January 1993 if ongoing negotiations 
with the EC were not successful in resolving U.S. concerns, 
subject to EC implementation of the discriminatory provisions 
of its Utilities Directive. On April 22, at the conclusion of 
the consultation period provided under title VII, the President 
reaffirmed the identification of the EC, but announced that the 
statutory sanctions would be modified.
    The third annual report on April 29, 1993 continued the 
identification of Norway for the same practice and stated that 
dispute settlement proceedings were expected to conclude in the 
near future. The report also reaffirmed the President's 
intention with respect to the EC and cited certain procurement 
markets in Australia, Japan, and China for further monitoring.
    The fourth annual report on April 30, 1993, identified 
Japan for discrimination in procurement of construction, 
architectural and engineering services. The report continued 
the identification of the EC pending EC Council of Ministers 
approval of an agreement on heavy electrical equipment and 
because the EC did not agree to waive the Utilities Directive 
for telecommunications equipment. Since no agreement had been 
reached on telecommunications discrimination, the United States 
would proceed to impose title VII sanctions. Actions of other 
countries which have agreements with the EC that may require 
implementation of the discriminatory provisions of the EC 
Utilities Directive would also be monitored. Procurement 
practices falling short of statutory requirements for 
identification were noted of continuing concern in Australia, 
China, and Japan. On May 28, 1993, the United States imposed 
sanctions. Effective March 10, 1994, USTR terminated those 
sanctions with respect to the Federal Republic of Germany on 
the basis of assurances that it would not apply the 
discriminatory provisions of the Utilities Directive to 
procurement of U.S. goods by its telecommunications utilities.
    On January 19, 1994, USTR announced the termination of 
sanctions, scheduled to go into effect on January 20, on the 
basis of an announcement by Japan of an action plan to reform 
its public sector construction market.
    On April 30, 1994, USTR annunced that sanctions imposed 
against the European Union (EU) on May 28, 1993 for 
discrimination in the telecommunications sector would remain in 
force since the United States and EU could not reach agreement 
as part of the overall U.S.-EU agreement reached on April 13 
under the GATT Government Procurement Code.
    As a result of some progress towards resuming negotiations 
on telecommunications and medical technology government 
procurement, Japan was not identified in the fifth annual 
report, subject to review within 60 days on the basis of 
Japanese actions in the interim. The report also described 
concerns with procurement practices of Australia, China, and 
Brazil, and in the Japanese supercomputer and computer sectors.
    On June 30, 1994, the USTR announced the postponement until 
not later than July 31 of the decision on whether to identify 
Japan for its discriminatory procurement practices in the 
telecommunications and medical technology sectors because of 
intensive negotiations underway on these priority sectors 
identified under the July 1993 U.S.-Japan Framework Agreement. 
On July 31, the USTR announced the identification of Japan and 
commencement of the title VII 60-day consultation and 
negotiation period as a result of Japan's failure to address 
sufficiently discrimination in the two sectors. On October 4, 
1994, the USTR determined that sanctions scheduled to go into 
effect on Japanese goods and services should be terminated as 
the result of an agreement between the United States and Japan.
    On April 29, 1995, the USTR announced no new 
identifications with respect to title VII but highlighted 
several areas as deserving special attention. First, the USTR 
pointed to the issue of corruption in foreign procurement and 
lack of transparency in procurement procedures. Second, the 
USTR intends to monitor German implementation of the 1993 U.S.-
EU Memorandum of Understanding (MOU) on Government Procurement. 
Third, the United States will monitor Japanese compliance with 
the agreements on telecommunications and medical technology to 
assure tangible progress. Moreover, the USTR announced that the 
report will include information on the procurement practices of 
Australia, Brazil, and China, in addition to Japanese 
procurement practices in the supercomputers and computers 
sectors. Finally, the USTR noted that the sanctions first 
applied in 1993 against the EU for discrimination in the 
telecommunications sector continue and are being extended to 
the three new member states--Austria, Finland, and Sweden.
    On April 30, 1996, the USTR identified Germany for 
discrimination in the heavy electrical equipment sector and its 
failure to adequately implement its obligations under the U.S.-
EU MOU on Government Procurement. Effective January 1, 1996, 
the U.S.-EU commitments under the 1993 MOU were incorporated 
into the World Trade Organization Government Procurement 
Agreement (WTO GPA) and the MOU expired. The Administration 
expressed concern that the inadequacies of Germany's 
implementation of the MOU might carry over into its 
implementation of the WTO GPA. At the end of a 90-day 
consultation period, the USTR announced on October 1, 1996, 
that Germany had agreed to take steps that would effectively 
ensure open competition in the German heavy electrical 
equipment market. Title VII action was not terminated but the 
imposition of sanctions was further delayed pending passage of 
a satisfactory legislative reform package expected within one 
year.
    USTR also noted in the 1996 report that the Administration 
received no comments on specific cases or practices of bribery 
and corruption for the second year since amendments under the 
1994 Uruguay Round Agreement Act added bribery and corruption 
as a category for identification. Noting that many U.S. firms 
do not come forward publicly with cases of bribery and 
corruption influencing contract awards for fear of commercial 
backlash in future contracts, the Administration stated its 
intention to continue working toward the establishment of 
multilateral mechanisms for eliminating bribery and corruption 
in government procurement.\64\ Finally, the report describes 
the Administration's concerns with the procurement practices of 
Australia, Brazil and China, as well as its concern with 
Japan's procurement practices in the areas of public works 
building, supercomputers and computers.
---------------------------------------------------------------------------
    \64\ On May 1, 1998, President Clinton transmitted to Congress the 
Convention on Combating Bribery of Foreign Public Officials in 
International Business Transactions, adopted on November 21, 1997, 
under the auspices of the Organization for Economic Cooperation and 
Development. The Senate ratified the Convention on July 31, 1998.
---------------------------------------------------------------------------
    On March 31, 1999, President Clinton issued Executive Order 
13116, which reinstituted the procedures of Title VII after 
their lapse on April 30, 1996. On May 12, 1999, USTR issued its 
Title VII report, determining not to identify any new countries 
under Title VII because the practices of concern were either 
being addressed under another trade dispute mechanism, did not 
meet the criteria for identification, or were already under 
scrutiny as a result of previous identifications. The 
Administration also noted that the United States would move 
forward with WTO dispute settlement proceedings to challenge 
Korea's government procurement practices in the construction of 
Inchon International Airport. Two Title VII determinations 
remained outstanding from prior reviews: the 1992 
identification of the EU for discriminatory procurement 
practices of government-owned telecommunications entities in 
certain member states; and 1996 identification of Germany for 
discrimination in the heavy electrical sector.\65\
---------------------------------------------------------------------------
    \65\ 64 FR 25525 (May 12, 1999).
---------------------------------------------------------------------------
    On May 8, 2000, USTR issued its annual report, determining 
again that no new practices met the criteria for Title VII 
identification. USTR noted, however, that as in previous years, 
there remain a number of foreign government procurement 
practices of concern which the Administration is pursuing in 
bilateral and multilateral fora, including WTO dispute 
settlement when appropriate, or that require continued 
monitoring and study. USTR also determined to terminate the 
1996 identification of Germany for discrimination in the heavy 
electrical sector, based on Germany's implementation of new 
legislation that appears to effectively address U.S. concerns. 
However, USTR's identification of the EU for discriminatory 
procurement practices of government-owned telecommunications 
entities in certain member states remains outstanding.\66\
---------------------------------------------------------------------------
    \66\ 65 FR 26652 (May 8, 2000).


              Chapter 4: LAWS REGULATING EXPORT ACTIVITIES

                            Export Controls

                               Background

    Through statute, Congress has authorized the President to 
control the export of various commodities. The three most 
significant programs for controlling different types of exports 
deal with nuclear materials and technology, defense articles 
and services, and non-military dual-use goods and technology. 
Under each program, licenses of various types are required 
before an export can be undertaken. The Nuclear Regulatory 
Commission is responsible for the licensing of nuclear 
materials and technology under the Atomic Energy Act. The 
Department of State is responsible for the licensing of exports 
of defense articles and services and maintains the Munitions 
Control List under the Arms Export Control Act.
    Export licensing requirements for most commercial goods and 
technical data are authorized by the Export Administration Act 
under the jurisdiction of the Bureau of Export Administration 
in the Department of Commerce. The three basic purposes of 
export controls are to protect the national security, to 
further U.S. foreign policy interests, and to protect 
commodities in short supply. The Secretary of Defense is 
authorized to review certain applications for national security 
purposes while the Secretary of State reviews specified license 
applications for foreign policy purposes.
    The export of goods or technical data subject to the 
commodity control list (CCL) must be authorized by licenses 
(either individual validated licenses or bulk licenses 
authorizing multiple shipments) which are granted on the basis 
of such factors as intended end-use and the probability and 
likely effect of diversion to military use. Exports and 
reexports from a foreign country of U.S.-origin commodities and 
technical data or of foreign products containing U.S.-origin 
components or technology are also regulated. There are seven 
countries for which shipment of almost all commodities requires 
a license for export: Iran, Iraq, Libya, Serbia, Sudan, North 
Korea, and Cuba.
    The foreign policy export control authority was used by 
President Carter to embargo the export of grain to the Soviet 
Union after the 1979 Soviet invasion of Afghanistan. President 
Reagan used it again in 1981 until late 1983, following the 
imposition of martial law in Poland, to embargo sales by U.S. 
firms and their foreign subsidiaries of oil and gas 
transmission and refining commodities and technology for use by 
the Soviet Union on its natural gas pipeline to Western Europe. 
Crime control and detection instruments and equipment are 
subject to control for foreign policy reasons to countries 
which may engage in persistent gross violations of human 
rights. Certain other goods and technology are controlled to 
five countries (Libya, Iran, Syria, South Yemen, and Cuba) due 
to their repeated support of international terrorism.
    Sanctions against international terrorism were enacted as 
amendments to the Export Administration Act of 1979 under the 
Anti-Terrorism and Arms Export Amendments Act of 1989 \1\ and 
the National Defense Authorization Act for Fiscal Year 1991.\2\
---------------------------------------------------------------------------
    \1\ Public Law 101-222, section 4, approved December 12, 1989.
    \2\ Public Law 101-510, section 1702, approved November 5, 1990.
---------------------------------------------------------------------------
    The short supply control authority was used to help control 
raw materials prices during the Korean conflict. In 1973 
President Nixon prohibited soybean exports as a response to 
rapidly increasing prices. The export of crude oil carried on 
the Trans-Alaska Pipeline is prohibited. Exports of crude oil 
and refined and unprocessed western red cedar harvested from 
federal or state lands are subject to validated licensing 
requirements.
    The U.S. government has employed export controls 
continuously since 1940. The first controls were imposed to 
avoid or mitigate the scarcity of various critical commodities 
during World War II and to assure their equitable distribution 
within the U.S. economy and to U.S. allies. Export controls 
were expected to terminate after shortages created by World War 
II were substantially eliminated. However, the cold war led to 
enactment of the Export Control Act of 1949, designed to 
control all U.S. exports to Communist countries.
    The Export Control Act of 1949 provided for the control of 
items in short supply, for controls to further U.S. foreign 
policy goals, and for the examination of exports to Communist 
countries which might have military application. The 1949 Act, 
amended and extended as appropriate, remained in effect for 20 
years. The 1949 Act was then replaced by the Export 
Administration Act of 1969, which was in turn replaced by the 
Export Administration Act of 1979.
    The 1969 Act maintained the basic export control system set 
up by the Export Control Act, but called for a removal of 
controls on goods and technologies that were freely available 
from foreign sources and that were only marginally of military 
value. The 1969 Act was amended in 1972, 1974, and 1977.
    A significant expansion of controls was brought about in 
1977 when Congress amended the 1969 Act to authorize the 
control of goods and technology exported by any person subject 
to the jurisdiction of the United States, thus permitting the 
Department of Commerce to exercise control over foreign-origin 
goods and technical data reexported by U.S.-owned or U.S.-
controlled companies abroad. Anti-boycott policies (originally 
established by Congress in 1965) were also substantially 
strengthened in 1977.

                   Export Administration Act of 1979

    The Export Administration Act of 1979 \3\ as reauthorized 
and amended in 1985 and 1988 replaced the 1969 Act as amended, 
which expired on September 30, 1979. The 1979 Act provides the 
broad and primary authority for controlling the export from the 
United States to potential adversary nations of civilian goods 
and technology which could contribute significantly to the 
military capability of controlled countries (consisting of 
Communist countries, as defined in section 620(f) of the 
Foreign Assistance Act of 1961) if diverted to military 
application (national security controls under section 5). Like 
the previous law, the 1979 Act also authorized the President to 
impose export controls for foreign policy reasons or to fulfill 
international obligations (foreign policy controls under 
section 6) and to protect the domestic economy from an 
excessive drain of scarce materials and to reduce the 
inflationary impact of foreign demand (short supply controls 
under section 7). The Act also continues the 1977 anti-boycott 
program (section 8) which prohibits U.S. persons from taking 
action with the intent to comply with, further, or support any 
foreign country boycott against any country friendly to the 
United States (primarily Arab states against Israel).
---------------------------------------------------------------------------
    \3\ Public Law 96-72, as amended by P.L. 96-533, P.L. 97-145, P.L. 
98-108, P.L. 98-207, P.L. 98-222, P.L. 99-64, P.L. 99-399, P.L. 99-441, 
P.L. 99-633, P.L. 100-180, P.L. 100-418, P.L. 100-449, P.L. 101-222, 
and P.L. 101-510, 50 U.S.C. App. 2401.
---------------------------------------------------------------------------
    In its 1979 review of the Export Administration Act of 
1969, the Congress made substantial changes in the statute. 
Separate and distinct procedures and criteria were established 
for imposing national security and foreign policy controls. 
Precise time deadlines were set for the processing of export 
license applications. Development of a ``militarily critical 
technologies list'' (MCTL) was mandated, both as a means of 
reviewing the adequacy and focus of the existing commodity 
control list of categories of goods and technologies subject to 
Commerce export controls, and as a possible means of arriving 
at a more limited control list containing only the most 
militarily significant technologies. Foreign availability of 
goods controlled by the United States was, for the first time, 
made a factor in decisions to license such items for export.
    The Act also formally authorized U.S. participation in the 
informal multilateral export control body known as COCOM 
(Coordinating Committee on Multilateral Export Controls) in 
which the NATO countries (with the exception of Iceland) and 
Japan also participate. Since 1950, COCOM has attempted to 
coordinate the export control policies of the Western allies 
with respect to Communist countries. Representatives of the 
participating governments meet periodically to set guidelines 
for controls on exports to Communist countries. The 1979 Act 
directed the President to negotiate with other COCOM 
governments in an effort to reach agreement on reducing the 
scope of export controls, holding periodic high-level meetings 
on COCOM policy, publishing the list of items controlled by 
COCOM, and introducing more effective procedures for enforcing 
COCOM export controls.
    The 1979 Act authorized the administration of export 
controls until September 30, 1983. The Act was extended 
temporarily three times during the 98th Congress, through 
October 15, 1983, subsequently through February 28, 1984, and 
finally until March 30, 1984,\4\ while the Congress considered 
proposals for major changes in the law. During the lapses in 
authority in 1983 and after the 1979 Act terminated on March 
30, 1984, and House-Senate differences could not be resolved 
prior to congressional adjournment on October 12, 1985, the 
President administered export controls under the authority of 
the International Emergency Economic Powers Act and Executive 
Order 12470 of March 30, 1984, as an interim method of control 
until new authority could be passed by Congress. The Export 
Administration Amendments Act of 1985 \5\ which reauthorized 
the 1979 Act for 4 years until September 30, 1989, with 
comprehensive amendments, was enacted on July 12, 1985.
---------------------------------------------------------------------------
    \4\ Public Law 98-108, approved October 1, 1983; Public Law 98-207, 
approved December 5, 1983; Public Law 98-222, approved February 29, 
1984.
    \5\ Public Law 99-64.
---------------------------------------------------------------------------

              Export Administration Amendments Act of 1985

    The 1985 Act left intact the basic structure of U.S. 
national security, foreign policy, and short-supply export 
controls. The main goals of the 1985 Act were to improve U.S. 
export competitiveness and to promote national security 
interests through stricter controls and better enforcement.
    Increased U.S. competitiveness was to be achieved by easing 
the total licensing burden on U.S. businesses. Export licensing 
requirements were eliminated in the case of certain relatively 
low-technology items, and the Secretary of Commerce was 
directed to review and revise the commodity control list at 
least once a year. The approval process for license 
applications was to be streamlined as well. The 1985 amendments 
also addressed the issue of foreign availability by specifying 
a process to provide for the review and decontrol of goods 
found to be widely available and unable to be brought under 
control.
    The promotion of national security interests was to be 
achieved by providing stricter controls for the export of 
critical items and strengthening the enforcement of U.S. export 
controls. The 1985 Act required the United States to undertake 
negotiations with COCOM countries to achieve greater 
coordination and compliance with multilateral controls, fewer 
exceptions to the control list, and strengthened and uniform 
enforcement. It created new criminal offenses against illegal 
diversions and added to the broad range of sanctions against 
violators of U.S. export controls.
    The Act also restrained the President's authority to impose 
new foreign policy export controls, particularly to embargo 
agricultural exports. Additional requirements for consultations 
with industry and Congress prior to the imposition of foreign 
policy controls and greater attention to specified criteria, 
including the foreign availability of competing products, are 
to be considered prior to decisons to extend, expand, or impose 
export controls.
    The 1985 Act also imposed limitations on, but did not 
entirely eliminate, the discretion of the President to impose 
foreign policy controls on exports subject to existing 
contracts. The Act prohibits controls on exports of goods or 
technology under existing contracts except where the President 
determines and certifies to the Congress that a breach of the 
peace poses a serious and direct threat to U.S. strategic 
interests and the prohibition or curtailment of such contracts 
would be instrumental in remedying the situation posing the 
direct threat.
    The Act set forth stiffer penalties for violators and 
granted new powers for enforcement to the Department of 
Commerce and the U.S. Customs Service and clarified the 
respective roles of these agencies. Commerce retained the 
primary responsibility for licensing and domestic enforcement 
whereas Customs was given primary responsibility for 
enforcement at all U.S. ports of exit and entry as well as all 
enforcement responsibility overseas. The legislation itself was 
silent on the controversial issue of the role and authority of 
the Department of Defense in reviewing export license 
applications for U.S. shipments to Western nations.
    The Act created a new Under Secretary of Export 
Administration and two Assistant Secretaries in the Department 
of Commerce and a new National Security Council Office in the 
Department of Defense. Congress also directed that an Office of 
Foreign Availability be established in the Department of 
Commerce.

             Omnibus Trade and Competitiveness Act of 1988

    Congressional dissatisfaction with the implementation of 
the Export Administration Amendments Act of 1985 led to the 
introduction of new legislation during both the 99th and 100th 
Congresses. The Omnibus Trade and Competitiveness Act of 1988 
\6\ contained major revisions of the Export Administration Act 
of 1979. Like the 1985 amendments, the 1988 Act emphasized the 
reduction of export disincentives and the strengthening of 
export enforcement. A clarification of the dispute resolution 
process was also a part of the Act. The authorization date for 
the Export Administration Act was extended by 1 year to 
September 30, 1990.
---------------------------------------------------------------------------
    \6\ Public Law 100-418, title II, subtitle D, approved August 23, 
1988.
---------------------------------------------------------------------------
    The 1988 Act provided for the reduction of export 
disincentives through a streamlining of licensing requirements, 
control list reduction, and improved procedures for making 
foreign availability determinations. The 1988 Act also provided 
for the use of distribution licenses for multiple exports to 
the People's Republic of China.
    The 1988 Act provided for stronger enforcement of U.S. and 
multilateral export controls.
    In the case of persons convicted of violations of the 
Export Administration Act of 1979 or the International 
Emergency Economic Powers Act,\7\ the Department of Commerce 
was authorized to bar such persons from applying for or using 
export licenses. Such authority was also extended to parties 
related through affiliation, ownership, control, or position of 
responsibility to any person convicted of violations.
---------------------------------------------------------------------------
    \7\ Public Law 95-223, approved December 28, 1977.
---------------------------------------------------------------------------
    In response to the sale by Toshiba Machine Company of Japan 
and Kongsberg Trading Company of Norway of advanced milling 
machinery to the Soviet Union, the Congress passed the 
Multilateral Export Control Enhancement Amendments Act.\8\ 
Section 2443 of that Act requires the President to impose, for 
a period of 3 years, a ban on U.S. government contracting with 
and procurement from the two cited companies and their parent 
companies. That section also required the President to prohibit 
the importation of all products produced by Toshiba Machine 
Company and Kongsberg Trading Company for a period of 3 years. 
The sanctions required by section 2443 were imposed by 
President Reagan on December 27, 1988 \9\ and remained in 
effect until December 28, 1991.
---------------------------------------------------------------------------
    \8\ Public Law 100-418, sections 2441-2447, approved August 23, 
1988.
    \9\ Executive Order 12661, dated December 27, 1988; ``Implementing 
the Omnibus Trade and Competitiveness Act of 1988 and Related 
International Trade Matters.''
---------------------------------------------------------------------------
    The Export Administration Act of 1979 expired on September 
30, 1990. The 101st Congress passed legislation (H.R. 4653) to 
reauthorize the Act, but the President exercised a pocket-veto 
in November 1990. During the 102d Congress, the House and 
Senate passed bills and produced a conference report 
reauthorizing the Export Administration Act of 1979. The 
conference report failed to be considered before the 102d 
Congress adjourned sine die. Since September 30, 1990, the 
President exercised the authorities provided in the 
International Emergency Economic Powers Act to continue in 
effect the existing system of export controls.
    During the 103d Congress, the Export Administration Act was 
extended twice. On March 27, 1994, Public Law 103-10, the 
Export Administration Fiscal Year 1994 Authorization bill, 
extended the Act through June 30, 1994.\10\ Public Law 103-277 
provided for an additional extension until August 20, 1994 as 
discussions between the Administration and the Congress 
continued on revisions to the Act.\11\ Because the Congress did 
not take final action on a revised Export Administration Act 
before the close of the session, the President once again used 
the International Emergency Economic Powers Act authorities to 
continue the existing export control system. On August 19, 
1994, President Clinton issued an executive order continuing 
the export control regulations provided under the Act.\12\ The 
President announced a continuation of the emergency on August 
15, 1995 (60 Fed. Reg. 42,767) and again on August 14, 1996 (61 
Fed. Reg. 42,527).
---------------------------------------------------------------------------
    \10\ Public Law 103-10, approved March 27, 1994.
    \11\ Public Law 103-277, approved July 5, 1994.
    \12\ Executive Order 12924, dated August 19, 1994; ``Continuation 
of Export Control Regulations.''
---------------------------------------------------------------------------
    The President continued the national emergency on August 
13, 1997 (62 Fed. Reg. 43,629), August 13, 1998 (63 Fed. Reg. 
44,121), August 10, 1999 (64 Fed. Reg. 44,101), and August 3, 
2000 (65 Fed. Reg. 48,347). On November 13, the President 
signed into law an extension of the Export Administration Act 
of 1979 until August 20, 2001.\13\
---------------------------------------------------------------------------
    \13\ Public Law 106-508.
---------------------------------------------------------------------------

                 Export Promotion of Goods and Services


                     Export Enhancement Act of 1988

    The Export Enhancement Act, enacted under title XXIII of 
the Omnibus Trade and Competitiveness Act of 1988,\14\ includes 
provisions which establish in statute the United States and 
Foreign Commercial Service in the International Trade 
Administration of the Department of Commerce. The basic purpose 
of the Service is to promote the export of U.S. goods and 
services, particularly by small- and medium-sized businesses, 
and to promote and protect U.S. business interests abroad. 
Section 2306 requires the Service to make a special effort to 
encourage U.S. exports of goods and services to Japan, South 
Korea, and Taiwan.
---------------------------------------------------------------------------
    \14\ Public Law 100-418, approved August 23, 1988, 15 U.S.C. 4721 
et seq.
---------------------------------------------------------------------------
    Section 2303 authorizes the Secretary of Commerce to 
establish a market development cooperator program in the 
International Trade Administration to develop, maintain, and 
expand foreign markets for U.S. non-agricultural goods and 
services. The program is implemented through contracts with 
non-profit industry organizations, trade associations, state 
departments of trade and their regional associations, and 
private industry firms or groups of firms (all referred to as 
``cooperators''). The Secretary was also directed to establish, 
as part of the program, a partnership program with cooperators 
under which cooperators may detail individuals to the Service 
for 1 to 2 years. This program is modeled after a similar 
program established by the Foreign Agricultural Service in the 
late 1950's to develop overseas commercial market opportunities 
for American agricultural exports.
    In order to facilitate exporting by U.S. businesses, 
section 2304 requires the Secretary to provide assistance for 
trade shows in the United States which bring together 
representatives of U.S. businesses seeking to export goods or 
services, particularly participation by small businesses, and 
representatives of foreign companies or governments seeking to 
buy such U.S. goods or services. Sections 2312 and 2313 added 
to the Act made by title II of the Export Enhancement Act of 
1992 \15\ expanded export promotion efforts. Section 2312 
establishes in statute the Trade Promotion Coordinating 
Committee (TPCC) and directs it to coordinate the export 
promotion and export financing activities of the federal 
government and to develop a governmentwide strategic plan for 
carrying out federal export promotion and financing programs, 
including establishment of priorities. The Chair of the TPCC 
must submit an annual report to the Congress on the strategic 
plan developed. Section 2313 states the U.S. policy to foster 
the export of U.S. environmental technologies, goods, and 
services, and establishes the Environmental Trade Promotion 
Working Group within the TPCC for this purpose.
---------------------------------------------------------------------------
    \15\ Public Law 102-429, approved October 21, 1992.
---------------------------------------------------------------------------
    The Jobs Through Export Expansion Act of 1994 amended 
section 2313 to provide for the establishment of an 
environmental technologies trade advisory committee, including 
representatives of the private sector and the states, to advise 
the TPCC working group. The amendment also requires the working 
group to develop export plans for five priority countries and 
the placement of environmental technology specialists in each 
of the priority countries.\16\
---------------------------------------------------------------------------
    \16\ Public Law 103-392, approved October 22, 1994, 15 U.S.C. 4701 
note.
---------------------------------------------------------------------------

                  Fair Trade in Auto Parts Act of 1988

    The Fair Trade in Auto Parts Act of 1988, sections 2121-
2125 of the Omnibus Trade and Competitiveness Act of 1988,\17\ 
required the Secretary of Commerce to establish an initiative 
to increase the sale of U.S.-made auto parts and accessories to 
Japanese markets, including to U.S. subsidiaries of Japanese 
firms. The Secretary also was required to establish a Special 
Advisory Committee to advise and assist the Secretary in 
carrying out the initiative to increase U.S. auto parts sales 
in Japanese markets. The authorities granted under sections 
2121-2125 expired on December 31, 1998.
---------------------------------------------------------------------------
    \17\ Public Law 100-418, approved August 23, 1988, 15 U.S.C. 4701.
---------------------------------------------------------------------------
    In response to low sales of U.S. auto parts and accessories 
to Japanese auto firms based both in Japan and in the United 
States, Congress adopted the Fair Trade in Auto Parts Act of 
1988. This action followed negotiations in 1986-87 between the 
U.S. and Japanese governments aimed at improving U.S. access to 
the Japanese auto parts markets. The provision was intended to 
provide for a longer-term effort to increase data collection, 
information exchange, and generally improved U.S. market access 
in the Japanese auto parts sector.\18\ The U.S.-Japan 
Automotive Agreement expired on December 31, 2000.
---------------------------------------------------------------------------
    \18\ Market Oriented Sector Specific Talks on Transportation 
Machinery, initiated on August 26, 1986 and concluded on August 18, 
1987.
---------------------------------------------------------------------------

                Agricultural Export Sales and Promotion

    To help finance sales of U.S. farm commodities abroad, the 
U.S. Department of Agriculture (USDA) administers several sales 
and credit programs. These include the concessional sales 
program under the authority of the Agricultural Trade 
Development and Assistance Act of 1954, as amended, commonly 
known as Public Law 480,\19\ and the commercial programs of the 
Commodity Credit Corporation (CCC).
---------------------------------------------------------------------------
    \19\ Public Law 83-480, approved July 10, 1954, 7 U.S.C. 1701-
1736d.
---------------------------------------------------------------------------

                             Public Law 480

    Public Law 480 was reauthorized through the end of 2002 by 
the Federal Agriculture Improvement and Reform Act of 1996.\20\ 
Title I of Public Law 480 authorizes sales of U.S. agricultural 
commodities to developing countries or private entities for 
dollars on credit terms or for local currencies. Credit is 
provided at concessional interest rates for repayment periods 
up to 30 years. The Secretary of Agriculture may allow a grace 
period of up to 5 years before repayment must begin. Title II 
authorizes donations of U.S. agricultural commodities for 
emergency humanitarian relief and for development projects. 
Title II is implemented primarily through U.S. private 
voluntary organizations or cooperatives and the United Nations 
world food program. Title III authorizes donations to 
governments of least developed countries for direct feeding 
programs, emergency food reserves, and recipient government 
sales which are used to finance economic development 
activities. As a result of reforms made by Public Law 104-127, 
USDA is responsible for administering title I, while the U.S. 
Agency for International Development (USAID) is responsible for 
administering titles II and III.
---------------------------------------------------------------------------
    \20\ Public Law 104-127, approved April 4, 1996.
---------------------------------------------------------------------------

         Export Credit Guarantee and Export Promotion Programs

    USDA, using the resources of the Commodity Credit 
Corporation (CCC), offers both commercial credit and export 
promotion programs designed to maintain and expand overseas 
markets for U.S. farm products.
    In operating two export credit guarantee programs, the CCC 
guarantees U.S. banks against defaults on payments due from 
foreign banks on the agricultural export sales they finance. 
Guarantees are made against political risks such as warfare, 
expropriation, exchange controls, and other foreign government 
actions, and against economic risks such as a foreign bank 
failure or a country's debt repayment problems. The U.S. banks 
deal directly with foreign purchasers to set loan repayment 
terms and interest rates, but must meet certain requirements to 
qualify for CCC guarantees.
    The GSM-102 program guarantees credits for up to 3 years 
for commercial export sales of U.S. agricultural commodities 
from privately owned stocks. The GSM-103 program guarantees 
credits for longer periods of 3 to 10 years. The Federal 
Agriculture Improvement and Reform Act of 1996 (the ``farm 
bill'') authorized the CCC to make available for each fiscal 
year 1996 through 2002, $5.5 billion in credit guarantees. The 
Secretary of Agriculture is given flexibility to allocate these 
funds between short-term (up to 3 years) and intermediate-term 
(3 to 10 years) guarantees. In addition, the farm bill 
authorizes another $1 billion of export credit guarantees or 
direct credits for fiscal years 1996 through 2002 for countries 
that are classified as ``emerging markets.'' Emerging markets 
are countries taking steps toward a market-oriented economy and 
have potential to become viable commercial markets for U.S. 
agricultural exports.\21\
---------------------------------------------------------------------------
    \21\ Public Law 104-127, approved April 4, 1996.
---------------------------------------------------------------------------
    Title III of the Agricultural Trade Act of 1978, as amended 
by the Uruguay Round Trade Agreements Act of 1994 \22\ and the 
1996 farm bill,\23\ authorizes the export enhancement program 
(EEP).
---------------------------------------------------------------------------
    \22\ Public Law 103-465, approved December 8, 1994, 19 U.S.C. 3501 
note.
    \23\ Public Law 104-127, approved April 4, 1996.
---------------------------------------------------------------------------
    The EEP was first established by the Congress in the Food 
Security Act of 1985 \24\ (the 1985 farm bill) to counter 
foreign exporters' use of subsidies as a means of increasing 
their agricultural exports. The Uruguay Round Agreements Act 
revised the definition of the EEP ``to encourage the commercial 
sale of U.S. agricultural commodities in world markets at 
competitive prices.'' The Uruguay Round Agreements Act also 
provided that EEP would be ``carried out in a market sensitive 
manner'' and ``not limited to responses to unfair trade 
practices.'' \25\ Under EEP, the CCC makes cash bonuses 
available to private U.S. exporters on a bid basis to 
compensate them for making competitively-priced sales in 
overseas markets. The 1996 farm bill reauthorized EEP for 
fiscal years 1996 through 2002 and set annual maximum spending 
levels: $350 million in fiscal year 1996; $250 million in 
fiscal year 1997; $500 million in fiscal year 1998; $550 
million in fiscal year 1999; $579 million in fiscal year 2000; 
and $478 million annually in fiscal years 2001 and 2002.
---------------------------------------------------------------------------
    \24\ Public Law 99-198, approved December 23, 1985.
    \25\ Public Law 103-465, approved December 8, 1994, 7 U.S.C. 5601 
note.
---------------------------------------------------------------------------
    The CCC also administers the market access program (MAP) in 
order to ``encourage the development, maintenance, and 
expansion of commercial export markets for agricultural 
commodities through cost-share assistance to eligible trade 
organizations that implement a foreign market development 
program.'' The MAP was established under the 1996 farm bill as 
the successor to the market promotion program (MPP) authorized 
by the 1990 farm bill. MPP had replaced the targeted export 
assistance program (TEA) of the Food Security Act of 1985. 
Unlike the TEA, priority is no longer accorded to exports which 
encounter unfair trade practices or barriers in foreign 
markets.


   Chapter 5: AUTHORITIES RELATING TO POLITICAL OR ECONOMIC SECURITY

              International Emergency Economic Powers Act

    In 1977, Congress passed the International Emergency 
Economic Powers Act (IEEPA).\1\ The Act grants the President 
authority to regulate a comprehensive range of financial and 
commercial transactions in which foreign parties are involved 
but allows the President to exercise this authority only in 
order ``to deal with an unusual and extraordinary threat, which 
has its source in whole or in part outside the United States, 
to the national security, foreign policy, or economy of the 
United States, if the President declares a national emergency . 
. . with respect to such threat.''
---------------------------------------------------------------------------
    \1\ Public Law 95-223, title II, approved December 28, 1977, 91 
Stat. 1626, 50 U.S.C. 1701-1706.
---------------------------------------------------------------------------
Background

    Public Law 95-223, of which IEEPA constitutes title II, 
redefined the President's authorities to regulate international 
economic transactions in times of national emergency as well as 
war, until then provided by section 5(b) of the Trading With 
the Enemy Act (TWEA) (50 App. U.S.C. 5(b)), by eliminating 
TWEA's applicability to national emergencies \2\ and instead 
providing such authorities in a separate statute of somewhat 
narrower scope and subject to congressional review.
---------------------------------------------------------------------------
    \2\ Title I of Public Law 95-223 also provides for the continuation 
in force, through annual presidential extensions, of certain measures 
implemented on the basis of national emergencies declared under the 
TWEA. For further detail, see section on the Trading With the Enemy 
Act.
---------------------------------------------------------------------------
    The authorities granted to the President under IEEPA 
broadly parallel those contained in section 5(b) of the TWEA 
but are somewhat fewer and more circumscribed. While under the 
TWEA the existence of any declared national emergency, whether 
or not connected with the circumstances requiring emergency 
action, was used as the basis for such action, the IEEPA allows 
emergency measures against an external threat only if a 
national emergency has been declared with respect to the same 
threat. Furthermore, certain authorities contained in the TWEA 
and still applicable in times of war are not included in the 
IEEPA, such as the powers to vest foreign property, to regulate 
purely domestic transactions, to regulate gold or bullion, or 
to seize records. Nevertheless, the President's authorities 
under the IEEPA still remain extensive. The President may ``by 
means of instructions, licenses, or otherwise . . . 
investigate, regulate, prevent, or prohibit'' virtually any 
foreign economic transaction, from import or export of goods 
and currency to transfer of exchange or credit. The only 
international transactions exempted from this authority are 
personal communications not involving a transfer of anything of 
value, charitable donations of necessities of life to relieve 
human suffering (except in certain circumstances), transactions 
in publications or various other informational materials not 
otherwise controlled by export control law or prohibited by 
espionage law, or personal transactions ordinarily incident to 
travel.
    IEEPA requires the President to consult with Congress, 
whenever possible before declaring a national emergency, and 
while it remains in force. Once a national emergency goes into 
effect, the President must submit to Congress a detailed report 
explaining and justifying his actions and listing the countries 
against which such actions are to be taken, and why.

Application

    Since its enactment, the authority conferred by the IEEPA 
has been exercised on several occasions and for different 
purposes: to impose a variety of economic sanctions on foreign 
countries and to continue in force the authority of the Export 
Administration Act during several periods when statutory 
authority has lapsed.
    In response to the seizure of the American Embassy and 
hostages in Teheran, President Carter, using the IEEPA 
authority, on November 14, 1979, declared a national emergency 
and ordered the blocking of all property of the government of 
Iran and of the Central Bank of Iran within the jurisdiction of 
the United States.\3\ The measure and its later amendments were 
implemented through Iranian Assets Control Regulations (31 CFR 
535). Sanctions against Iran were broadened on April 7, 
1980,\4\ and April 17, 1980,\5\ to constitute eventually an 
embargo on all commercial, financial, and transportation 
transactions with Iran, with minimal exceptions. The trade 
embargo was revoked by President Carter on January 19, 1981, 
after the release of the Teheran hostages, but the national 
emergency has remained in effect and has been extended every 
year since.\6\
---------------------------------------------------------------------------
    \3\ Executive Order 12170, November 14, 1979, 44 Fed. Reg. 65,729.
    \4\ Executive Order 12205, April 7, 1980, 45 Fed. Reg. 24,099.
    \5\ Executive Order 12211, April 27, 1980, 45 Fed. Reg. 26,685.
    \6\ Following Iranian attacks on U.S. flag ships in the Iran-Iraq 
war, an embargo was reimposed on October 29, 1987 (Executive Order 
12613, 52 Fed. Reg. 41,940), on imports of goods and services from Iran 
under the authority of section 505 of the International Security and 
Development Cooperation Act of 1985 (22 U.S.C. 2349aa-9) and 
implemented through Iranian Transactions Regulations (31 CFR part 560). 
The embargo is still in force.
---------------------------------------------------------------------------
    President Clinton invoked his authority under IEEPA and 
other statutes on March 15, 1995 to prohibit the entry of any 
U.S. person or any entity controlled by a U.S. person into a 
contract involving the financing or overall supervision and 
management of the development of the petroleum resources 
located in Iran.\7\ The President imposed additional sanctions 
on May 8, 1995.\8\ The sanctions were than amended in 1997.\9\
---------------------------------------------------------------------------
    \7\ Executive Order 12957, March 15, 1995, 60 Fed. Reg. 14,615.
    \8\ Executive Order 12959, May 6, 1995, 60 Fed. Reg. 24,757. See 
also discussion on the Iran and Libya Sanctions Act of 1996.
    \9\ Executive Order 13059 (62 Fed. Reg. 44,531); 34 Weekly Comp. 
Pres. doc. 2324 (Nov. 16, 1998); 31 C.F.R. Part 560.
---------------------------------------------------------------------------
    On May 1, 1985, President Reagan, under his IEEPA powers, 
declared a national emergency because of the ``Nicaraguan 
government's aggressive activities in Central America'' and 
prohibited all imports of Nicaraguan goods and services, all 
exports to Nicaragua (other than those destined for the 
organized democratic resistance) and transactions related 
thereto, and all activities of Nicaraguan ships and aircraft at 
U.S. sea- and airports.\10\ The declaration of emergency and 
the imposed sanctions were terminated on March 13, 1990.\11\
---------------------------------------------------------------------------
    \10\ Executive Order 12513, May 1, 1985, 50 Fed. Reg. 18,629. The 
embargo is implemented by Nicaraguan Trade Control Regulations (31 CFR 
part 540).
    \11\ Executive Order 12707, March 13, 1990, 55 Fed. Reg. 9,707.
---------------------------------------------------------------------------
    IEEPA was also used by President Reagan to declare a 
national emergency with respect to South Africa because of its 
``policy and practice of apartheid'' and impose, using also 
several other authorities, effective on October 11, 1985, an 
embargo on certain trade (including specifically the 
importation of krugerrands) and financial transactions with the 
government of South Africa.\12\ The embargo, implemented 
through South African Transactions Regulations (31 CFR 545), 
was later greatly expanded, and additional economic sanctions 
were imposed by the Comprehensive Anti-Apartheid Act of 
1986,\13\ upon the enactment of which the President allowed the 
declaration of the South African emergency to expire.\14\
---------------------------------------------------------------------------
    \12\ Executive Order 12532, September 9, 1985, 50 Fed. Reg. 36,861; 
Executive Order 12535, October 1, 1985, 50 Fed. Reg. 40,325.
    \13\ Public Law 99-440, approved October 2, 1986, 100 Stat. 1086, 
22 U.S.C. 5001 et seq.
    \14\ Weekly Compilation of Presidential Documents, v. 23, no. 36, 
September 14, 1987, p. 997.
---------------------------------------------------------------------------
    Under the South African Democratic Transition Support Act 
of 1993, Congress repealed certain sections of the 
Comprehensive Anti-Apartheid Act and provided for the total 
repeal of the Act upon certification by the President that an 
interim government, elected on a non-racial basis through free 
and fair elections, had taken office in South Africa.\15\ 
President Clinton sent such certification to Congress on June 
8, 1994.\16\
---------------------------------------------------------------------------
    \15\ Public Law 103-149, approved November 23, 1993, 22 U.S.C. 5001 
note.
    \16\ Message to the Congress on Elections in South Africa, 30 
Weekly Compilation of Documents 1258 (June 8, 1994).
---------------------------------------------------------------------------
    President Reagan similarly used the IEEPA authority, among 
several others, to impose economic sanctions on Libya because 
of Libyan-supported terrorist attacks on the Rome and Vienna 
airports. On January 7, 1986, he declared a national emergency 
and prohibited all trade (with minimal exceptions) and 
transportation transactions with Libya, extension of credit to 
the Libyan government, and personal travel to or within 
Libya.\17\ On the following day, he ordered the blocking of all 
property and interests of the Libyan government and its 
instrumentalities in the United States.\18\ These measures are 
implemented by Libyan Sanctions Regulations (31 CFR 550). The 
emergency with respect to Libya and the sanctions were extended 
annually.\19\
---------------------------------------------------------------------------
    \17\ Executive Order 12543, January 7, 1986, 51 Fed. Reg. 875.
    \18\ Executive Order 12544, January 8, 1986, 51 Fed. Reg. 1,235.
    \19\ 35 Weekly Comp. Pres. Doc. 1415 (July 19, 1999). See also the 
discussion concerning the Iran and Libya Sanctions Act of 1996.
---------------------------------------------------------------------------
    Again, on April 8, 1988, under the IEEPA authority, 
President Reagan declared a national emergency with respect to 
Panama and ordered the imposition of economic sanctions on that 
country \20\ because of ``the actions of Manuel Antonio Noriega 
and Manuel Solis Palma, to challenge the duly constituted 
authorities of the government of Panama.'' The order involved 
the blocking of all property and interests of the government of 
Panama, including all its agencies and instrumentalities and 
controlled entities, that are or may come within the United 
States. The blocking applies specifically to payments of 
transfers of any kind or financial transactions for the benefit 
of the Noriega-Solis regime from the United States or by any 
physical or legal U.S. person located in Panama. The order, 
implemented through Panamanian Transactions Regulations (31 CFR 
565), was revoked on April 5, 1990.\21\
---------------------------------------------------------------------------
    \20\ Executive Order 12635, April 8, 1988, 53 Fed. Reg. 12,134.
    \21\ Executive Order 12710, April 5, 1990, 55 Fed. Reg. 13,099.
---------------------------------------------------------------------------
    On August 2, 1990, in response to the Iraqi invasion of 
Kuwait, President Bush, under section 204(b) of the IEEPA, 
declared a national emergency, blocked Iraqi and Kuwaiti 
government property and prohibited all transactions with Iraq, 
except exports and imports of informational materials and 
donations to relieve human suffering.\22\ Additional 
restrictions, including a prohibition of all transactions with 
Kuwait, were imposed a week later. Regulations implementing the 
restrictions were promulgated with respect to Kuwait on 
November 30, 1990, and with respect to Iraq on January 18, 
1991.\23\ While Kuwaiti sanctions were revoked after the 
liberation of Kuwait,\24\ the Iraqi national emergency and 
Iraqi sanctions remain in force.
---------------------------------------------------------------------------
    \22\ Executive Order 12722 and 12723, August 2, 1990, 55 Fed. Reg. 
31,803 and 31,805.
    \23\ Kuwaiti Assets Control Regulations, 55 Fed. Reg. 49,856, 31 
CFR 570; Iraqi Sanctions Regulations, 56 Fed. Reg. 2,112, 31 CFR 575.
    \24\ Executive Order 12771, July 25, 1991, 56 Fed. Reg. 35,993.
---------------------------------------------------------------------------
    President Bush also used his authority under the IEEPA and 
other acts to declare a national emergency on November 16, 1990 
with respect to the threat posed to the national security and 
foreign policy of the United States by the proliferation of 
chemical and biological weapons.\25\ Under this declaration, 
the President ordered that trade sanctions be imposed against 
foreign persons determined by the Secretary of State as having 
used or made substantial preparations to use chemical or 
biological weapons in violation of international law. This 
order was implemented under the Export Administration 
Regulations on Proliferation Controls.\26\ The national 
emergency was expanded by President Clinton to include the 
proliferation of nuclear weapons on November 14, 1994 \27\ and 
on July 28, 1998.\28\
---------------------------------------------------------------------------
    \25\ Executive Order 12735, November 16, 1990, 55 Fed. Reg. 48,587.
    \26\ 15 CFR part 778.
    \27\ Executive Order 12938, November 14, 1994, 59 Fed. Reg. 59,099.
    \28\ Executive Order 13094 (63 Fed. Reg. 40,803); 31 C.F.R. Part 
539.
---------------------------------------------------------------------------
    President Bush used his authority under IEEPA and other 
acts on October 4, 1991 to declare a national emergency with 
respect to the illegal seizure of power from the democratically 
elected government of Haiti.\29\ Under this declaration, all 
property and interests of the de facto regime in Haiti were 
blocked. The order was expanded by the President on October 28, 
1991 to prohibit trade and other transactions with Haiti.\30\ 
These measures were subsequently implemented by the Haitian 
Transactions Regulations.\31\ After the signing of the 
Governors Island Agreement on July 3, 1993, U.S. trade 
restrictions against Haiti were suspended, and new financial 
and other transactions with the government of Haiti were 
authorized consistent with U.N. Security Council Resolution 
861. The rule, however, did not unblock property of the 
government of Haiti that was blocked before August 30, 1993. 
Due to the failure of the de facto regime in Haiti to fulfill 
its obligations under the Governors Island Agreement, the 
restrictions against trade, as well as financial and other 
transactions, with Haiti were reimposed on October 19, 
1993.\32\ In response to the restoration of the democratically 
elected government of Haiti, President Clinton terminated the 
national emergency on October 14, 1994.\33\
---------------------------------------------------------------------------
    \29\ Executive Order 12775, October 4, 1991, 56 Fed. Reg. 50,641.
    \30\ Executive Order 12779, October 28, 1991, 56 Fed. Reg. 55,975.
    \31\ 31 CFR part 580.
    \32\ Presidential Notice of September 30, 1993 (58 Fed. Reg. 
51,563); Haitian Transactions Regulations, 31 CFR part 580.
    \33\ Executive Order 12932, October 14, 1994, 59 Fed. Reg. 52,403.
---------------------------------------------------------------------------
    In response to the involvement of Serbia and Montenegro 
with groups attempting to seize territory in Croatia and 
Bosnia-Hercegovina, President Bush declared a national 
emergency under the IEEPA and other authorities on May 30, 
1992, blocking all property and interests of the governments of 
Serbia and Montenegro in the United States.\34\ Additional 
orders were later issued by the President to prohibit trade and 
other transactions with Serbia and Montenegro.\35\ The orders 
were implemented in the Federal Republic of Yugoslavia (Serbia 
and Montenegro) Sanctions Regulations (31 CFR 585). The 
emergency with respect to Serbia and Montenegro was most 
recently extended by the President on May 25, 1994, and was 
expended in scope on October 25, 1994 to include the Bosnian 
Serb military and the areas of the Republic of Bosnia and 
Herzegovina under the control of those forces.\36\ In response 
to this situation and the crisis in Kosovo, President Clinton 
issued additional Executive orders, most recently on January 
17, 2001.\37\
---------------------------------------------------------------------------
    \34\ Executive Order 12808, May 30, 1992, 57 Fed. Reg. 23,299.
    \35\ Executive Order 12810, June 5, 1992, 57 Fed. Reg. 24,347; 
Executive Order 12831, January 15, 1993, 58 Fed. Reg. 5,253; Executive 
Order 13121.
    \36\ Presidential Notice of May 25, 1994 (59 Fed. Reg. 27,429); 
Executive Order 12934, October 25, 1994, 59 Fed. Reg. 54,119.
    \37\ Executive Order 13192 (66 Fed. Reg. 7379).
---------------------------------------------------------------------------
    On September 26, 1993, President Clinton declared a 
national emergency under the IEEPA and other acts with respect 
to the actions and policies of the National Union for the Total 
Independence of Angola (UNITA).\38\ As a result of this 
emergency, the President's order prohibited the sale or supply 
of arms and related material or petroleum and petroleum 
products to Angola, except through designated points of entry. 
These restrictions, implemented by the UNITA (Angola) Sanctions 
Regulations, were most recently extended by the President on 
August 18, 1998.\39\
---------------------------------------------------------------------------
    \38\ Executive Order 12865, September 26, 1993, 58 Fed. Reg. 
51,005.
    \39\ UNITA (Angola) Sanctions Regulations, 58 Fed. Reg. 64,904, 31 
CFR part 590; Executive Order 13098 (63 Fed. Reg. 44,771).
---------------------------------------------------------------------------
    President Clinton also invoked his authority under the 
IEEPA and other acts to declare a national emergency on January 
23, 1995 with respect to the disruption of the Middle East 
peace process by foreign terrorists.\40\ In this declaration, 
the President prohibited all transactions with persons 
designated by the Secretary of State, in coordination with the 
Secretary of the Treasury and the Attorney General, as having 
committed or posing a significant risk of committing acts of 
violence to disrupt the Middle East peace process.
---------------------------------------------------------------------------
    \40\ Executive Order 12947, January 23, 1995, 60 Fed. Reg. 5,079.
---------------------------------------------------------------------------
    On July 4, 1999, President Clinton used his IEEPA authority 
against the Taliban in Afghanistan.\41\
---------------------------------------------------------------------------
    \41\ Executive Order 13129 (64 Fed. Reg. 36,750). The President 
continued the emergency on July 5, 2000 (65 Fed. Reg. 41,549).
---------------------------------------------------------------------------
    President Clinton also issued IEEPA declarations with 
respect to Burma's repression of democratic oppression 
(Executive Order 13047 (62Fed. Reg. 28,301)) and the 
accumulation of weapons-usable fissile material by the Russian 
Federation (Executive Order 13159 (65 Fed. Reg. 39,279). On 
November 3, 1997, the President declared a national emergency 
under IEEPA with respect to Sudan because of its support for 
international terrorism, ongoing efforts to destablize 
neighboring governments, and the prevalence of human rights 
violations.\42\ That determination was continued.\43\
---------------------------------------------------------------------------
    \42\ Executive Order 13067 (62 Fed. Reg. 59,989).
    \43\ 65 Fed. Reg. 66,163 (November 2, 2000).
---------------------------------------------------------------------------
    Just as with the TWEA, the IEEPA authority also has been 
used on several occasions to continue in force the 
administration of export controls when extensions of the Export 
Administration Act of 1979 (EAA) have not been enacted in time 
to continue the export control authority in force by statutory 
extension. Upon the expiration of the EAA on October 15, 1983, 
President Reagan used the IEEPA authority to declare a national 
emergency and to continue in force the existing regulations for 
the administration of export controls.\44\ After the EAA was 
temporarily extended by law \45\ retroactively to October 15, 
1983, and through February 29, 1984, the President revoked its 
extension under the IEEPA and rescinded the declaration of 
economic emergency.\46\ On February 29, 1984, the EAA was again 
extended by law \47\ through March 30, 1984, when the authority 
for administering the export control provisions again had to be 
extended by the President under the IEEPA authority upon the 
declaration of a national economic emergency.\48\ The extension 
and the declared emergency remained in force during the 
protracted, if unsuccessful, House-Senate attempts at resolving 
the disagreements on the reauthorization of the EAA during the 
98th Congress and in the 99th Congress until July 12, 1985, 
when the EAA was again extended by law,\49\ the executive 
extension of export controls was revoked and the emergency 
rescinded.\50\ The President invoked the IEEPA authority on 
September 30, 1990 to maintain existing export controls upon 
expiration of the EAA on that date, pending enactment of 
further reauthorizing legislation.
---------------------------------------------------------------------------
    \44\ Executive Order 12444, October 14, 1983, 48 Fed. Reg. 48,215.
    \45\ Public Law 98-207, approved December 5, 1983, 97 Stat. 1391.
    \46\ Executive Order 12451, December 20, 1983, 48 Fed. Reg. 56,563.
    \47\ Public Law 98-222, approved February 29, 1984, 98 Stat. 36.
    \48\ Executive Order 12470, March 30, 1984, 49 Fed. Reg. 13,099.
    \49\ Export Administration Act of 1979, Reauthorization; Public Law 
99-64, approved July 12, 1985, 99 Stat. 120.
    \50\ Executive Order 12525, July 12, 1985, 50 Fed. Reg. 28,757.
---------------------------------------------------------------------------
    The 1990 extension of the export control authority under 
the IEEPA was maintained in force by means of annual 
continuations of the export control emergency until legislation 
was passed in the 106th Congress.\51\
---------------------------------------------------------------------------
    \51\ Most recently by Presidential Notice of August 15, 1996 (61 
Fed. Reg. 42,527).
---------------------------------------------------------------------------
    Congress has passed legislation that would apply IEEPA 
authority in the case of trafficking in persons.\52\
---------------------------------------------------------------------------
    \52\ Section 111 of Public Law 106-386, approved October 28, 2000.
---------------------------------------------------------------------------

                       Trading With the Enemy Act

    The Trading With the Enemy Act \53\ (TWEA) prohibits trade 
with any enemy or ally of an enemy during time of war. From 
enactment in 1917 until 1977, the scope of the authority 
granted to the President under this Act was expanded to provide 
the statutory basis for control of domestic as well as 
international financial transactions and was not restricted to 
trading with ``the enemy.'' In response to the use of the Act's 
authority under section 5(b) during peacetime for domestic 
purposes that were often unrelated to a preexisting declared 
state of emergency, Congress amended the Act in 1977. In 1977 
Congress removed from the TWEA the authority of the President 
to control economic transactions during peacetime 
emergencies.\54\ Similar authorities, though more limited in 
scope and subject to the accountability and reporting 
requirements of the National Emergencies Act,\55\ were 
conferred upon the President by the International Emergency 
Economic Powers Act, enacted in 1977 as title II of Public Law 
95-223.\56\ Presidential authority during wartime to regulate 
and control foreign transactions and property interests were 
retained under the Trading With the Enemy Act. In addition, the 
1977 legislation authorized the continuation of various foreign 
policy controls implemented under the Trading With the Enemy 
Act, such as trade embargoes and foreign assets controls. The 
retention of such existing controls, however, was made subject 
to 1-year extensions conditioned upon a presidential 
determination that the extension is in the national interest.
---------------------------------------------------------------------------
    \53\ Public Law 65-91, approved October 6, 1917, ch. 106, 40 Stat. 
411, 50 App. U.S.C. 1-44.
    \54\ Public Law 95-223, title I, approved December 28, 1977.
    \55\ The National Emergencies Act provided a statutory role for 
Congress in the declaration and termination of national emergencies. 
Public Law 94-412, approved September 14, 1976, 90 Stat. 1255, 50 
U.S.C. 1601 et seq.
    \56\ See discussion of International Emergency Economic Powers Act, 
supra.
---------------------------------------------------------------------------

Background

    The Trading With the Enemy Act was passed in 1917 ``to 
define, regulate, and punish trading with the enemy.'' The Act 
was designed to provide a set of authorities for use by the 
President in time of war declared by Congress. In its original 
19 sections, the TWEA provided general prohibitions against 
trading with the enemy; authorized the President to regulate 
and prohibit international economic transactions by means of 
license or otherwise; established an office to administer U.S.-
held foreign property; and set up procedures for claims to such 
property by non-enemy persons, among other provisions. The 
original 1917 Act appeared not to authorize the control of 
domestic transactions and limited its use to wartime 
exigencies.
    Over the years, through use and amendment of section 5(b), 
the basic authorizing provision, the scope of presidential 
actions under the TWEA was greatly expanded. First, the Act was 
expanded to control domestic as well as international 
transactions. Second, the authorities of the Act were used to 
apply to presidentially declared periods of ``national 
emergency'' as well as war declared by Congress. From 1933, 
when Congress retroactively approved President Roosevelt's 
declaration of a national banking emergency by expanding the 
use of section 5(b) to include national emergencies, until 
1977, when Congress amended section 5(b) by passage of title I 
of Public Law 95-223, the President was authorized in time of 
war or national emergency to:
          (1) regulate or prohibit any transaction in foreign 
        exchange, any banking transfer, and the importing or 
        exporting of money or securities;
          (2) prohibit the withdrawal from the United States of 
        any property in which any foreign country or national 
        has an interest;
          (3) vest, or take title to, any such property; and
          (4) use such property in the interest and for the 
        benefit of the United States.
    The Trading With the Enemy Act did not provide a statement 
of findings and standards to guide the administration of 
section 5(b). There was no provision in the Act for 
congressional participation or review or for presidential 
reporting at specified periods for actions undertaken under 
section 5(b). There was no fixed time period for terminating a 
state of emergency. Nor was there any practical constraint on 
limiting actions taken under emergency authority to measures 
related to the emergency.

Application

    By 1977 a state of national emergency had been declared by 
the President on four occasions and left unrescinded. In 1933 
President Roosevelt declared a national emergency to close the 
banks temporarily and to issue emergency banking regulations. 
In 1950 President Truman declared a national emergency in 
connection with the Korean conflict. President Nixon declared a 
national emergency in 1970 to deal with the Post Office strike 
and another in 1971 based on the balance-of-payment crisis. As 
one measure to remedy this crisis, President Nixon at the same 
time imposed an import surcharge without specifically referring 
to section 5(b), but later did take recourse to it as an 
additional authority when the action was challenged in 
court.\57\
---------------------------------------------------------------------------
    \57\ In mid-1974, the U.S. Customs Court found the President's 
action unconstitutional with respect to all invoked authorities, but 
this decision was later reversed on appeal with respect to section 
5(b). U.S. v. Yoshida International, 526, F.2d 560 (C.C.P.A. 1975). The 
surcharge was terminated after having been in force for somewhat over 4 
months, long before the lower court's decision.
---------------------------------------------------------------------------
    Based on these states of emergency, Presidents have used 
the powers of section 5(b) to deal with a number of varied 
events. In 1940 and 1941, President Roosevelt used section 5(b) 
to freeze the U.S.-held assets of the Axis powers and countries 
occupied by them to prevent their falling into the hands of the 
enemy powers. In August 1941, President Roosevelt, under 
section 5(b) authority, ordered the imposition of consumer 
credit controls by the Federal Reserve Board as an anti-
inflationary measure. These executive uses by President 
Roosevelt were retroactively ratified by Congress.
    The 1950 Korean emergency has been used in conjunction with 
section 5(b) powers for a wide range of controls among them the 
imposition of a total embargo on transactions with China and 
North Korea in December 1950 which was extended to North 
Vietnam in May 1964 and to Cambodia and South Vietnam in April 
1975.\58\ In 1968, President Johnson, citing the authority of 
section 5(b) and the continued existence of the 1950 emergency, 
imposed foreign direct investment controls on U.S. investors. 
These controls remained in effect until they were eliminated by 
legislation in 1974. During the period 1969 through 1976, 
Presidents have invoked the 1950 and 1971 emergencies to extend 
temporarily export control regulations.
---------------------------------------------------------------------------
    \58\ In mid-1971, trade embargo on China was in practice lifted, 
and on January 31, 1980, the applicability of any restrictive measures 
imposed under section 5(b) was terminated with respect to China (45 
Fed. Reg. 7,224).
---------------------------------------------------------------------------
    Four sets of regulations controlling international 
transactions with specific countries, imposed under the former 
national emergency authority of section 5(b) and during the 
Korean national emergency, were promulgated pursuant to the 1-
year extension authority of title I of Public Law 95-223. 
First, under the Foreign Assets Control Regulations, virtually 
all transactions between the United States and North Korea, 
Vietnam, and Cambodia were prohibited unless licensed by the 
Department of the Treasury. The regulations also blocked all 
assets of those countries held in the United States.
    Recently, however, the embargo with respect to Cambodia and 
Vietnam was lifted and the property of these countries in the 
United States was unblocked.\59\ Also, on October 21, 1994, the 
United States and North Korea agreed, in the context of broader 
negotiations, to begin reducing barriers to trade and 
investment. Based on these mutual commitments, a limited number 
of restrictions under the embargo against North Korea were 
lifted.\60\
---------------------------------------------------------------------------
    \59\ Foreign Assets Control Regulations; Unblocking of Cambodian 
Assets, 59 Fed. Reg. 60,558, 31 CFR part 500; Foreign Assets Control 
Regulations, Unblocking of Vietnamese Assets, 60 Fed. Reg. 12,885, 31 
CFR part 500.
    \60\ Foreign Assets Control Regulations, North Korean Travel and 
Financial Transactions; Information and Informational Materials, 60 
Fed. Reg. 8,933, 31 CFR part 500.
---------------------------------------------------------------------------
    Second, the Cuban Assets Control Regulations,\61\ based on 
section 5(b) as well as on foreign assistance legislation, (see 
also section on Embargo on transactions with Cuba) impose a 
similar ban on virtually all transactions with Cuba.
---------------------------------------------------------------------------
    \61\ 31 CFR part 515.
---------------------------------------------------------------------------
    Third, Transaction Control Regulations,\62\ prohibiting any 
person within the United States \63\ from engaging in any trade 
or trade-financing transaction involving transfer of strategic 
commodities from a foreign country to a Communist country 
(still including formerly Communist countries), are also based 
on section 5(b) of the Trading With the Enemy Act.
---------------------------------------------------------------------------
    \62\ 31 CFR part 505.
    \63\ Any ``person within the United States'' includes foreign 
subsidiaries of U.S. firms.
---------------------------------------------------------------------------
    Fourth, the wartime anti-Axis Foreign Funds Control 
Regulations,\64\ issued under the authority of section 5(b), 
are still in effect. The regulations continue to block the 
assets of Estonia, Latvia, and Lithuania pending the settlement 
of claims by U.S. citizens for compensation of property 
confiscated after the war by the Soviet governments.
---------------------------------------------------------------------------
    \64\ 31 CFR part 520.
---------------------------------------------------------------------------

                      Narcotics Control Trade Act

    The Drug Enforcement, Education, and Control Act of 1986 
\65\ contains a number of measures to respond to the serious 
problem of illegal drug smuggling into the United States and 
the growing threat of foreign sourced drug production. Among 
these measures are revisions to many basic customs laws to 
deter illegal drug imports and to increase enforcement 
capabilities of the U.S. Customs Service against drug traffic.
---------------------------------------------------------------------------
    \65\ Public Law 99-570, approved October 27, 1986.
---------------------------------------------------------------------------
    Title IX of the Act amended the Trade Act of 1974 by adding 
title VIII, entitled the ``Narcotics Control Trade Act,'' to 
create new authority for the President to take appropriate 
trade actions as of March 1 of each year against uncooperative 
major drug-producing or drug-transit countries. Section 806 of 
the Foreign Relations Authorization Act, Fiscal Years 1988 and 
1989,\66\ and section 4408 of the Anti-Drug Abuse Act of 1988 
\67\ expanded the sanctions available and the critieria for 
determining and certifying that a country has cooperated fully 
with the United States. Similar criteria apply under the 
Foreign Assistance Act of 1961 for denying foreign aid to 
uncooperative countries.
---------------------------------------------------------------------------
    \66\ Public Law 100-204, approved December 22, 1987, 19 U.S.C. 
2492.
    \67\ Public Law 100-690, approved November 18, 1988.
---------------------------------------------------------------------------
    For every major drug-producing or drug-transit country, the 
President is required to deny to any or all of its products 
preferential tariff treatment under the Generalized System of 
Preferences (GSP), the Caribbean Basin Initiative (CBI), or any 
other law; to raise or impose duties of up to 50 percent ad 
valorem on any or all of its products; to suspend air carrier 
transportation to or from the United States and the country and 
to terminate any air service agreement with the country; to 
withdraw U.S. personnel and resources from participating in any 
arrangement with the country for customs preclearance; or to 
take any combination of these actions considered necessary to 
achieve the objectives of the Act.
    Such sanctions do not apply if the President determines and 
certifies to the Congress, at the time the annual report 
required by section 481(e) of the Foreign Assistance Act of 
1961 or section 489A after September 30, 1994 is submitted, 
that during the previous year the country has cooperated fully 
with the United States or has taken adequate steps on its own: 
(1) in satisfying goals agreed to in a bilateral or 
multilateral narcotics agreement with the United States; (2) in 
preventing illegal drugs from being sold illegally to U.S. 
government personnel or their dependents or from being 
transported into the United States; (3) in preventing and 
punishing the laundering of drug-related profits or monies; and 
(4) in preventing and punishing bribery and other public 
corruption which facilitate production, processing, or shipment 
of illegal drugs.
    A country that would not otherwise qualify for 
certification may be exempted from sanctions if the President 
determines and certifies to the Congress that the vital 
national interests of the United States require that sanctions 
not be applied. A country designated as a major drug-producing 
or drug-transit country in the previous year may not be 
determined to be cooperating fully unless it has in place a 
bilateral or multilateral narcotics agreement.
    The Congress may disapprove the President's determination 
and require the application of sanctions through enactment of a 
joint resolution within 45 legislative days. Actions remain in 
effect until the President submits a certification of 
cooperation and Congress does not enact a joint resolution of 
disapproval within 45 legislative days.
    In addition, section 803 prohibits the President from 
allocating any quota for imports of sugar to any country which 
has a government involved in illegal drug trade or which is 
failing to cooperate with the United States in narcotics 
enforcement activities.
    The Urgent Assistance for Democracy in Panama Act of 1990 
\68\ deemed the conditions under the Narcotics Control Trade 
Act to have been satisfied by Panama, because of U.S. vital 
national interests and because the Endara government had 
indicated its willingness and was taking steps to cooperate 
fully with the United States to control narcotics production, 
trafficking, and money laundering. Consequently, GSP and CBI 
trade benefits removed under the Noriega regime by presidential 
proclamation on March 23, 1988 were restored to the new 
government of Panama.
---------------------------------------------------------------------------
    \68\ Public Law 101-243, approved February 14, 1990, section 103.
---------------------------------------------------------------------------

   The International Security and Development Cooperation Act of 1985

    Section 505 of the International Security and Development 
Act of 1985 \69\ gives the President discretionary authority to 
restrict or ban imports from any country which the United 
States determines ``supports terrorism or terrorist 
organizations or harbors terrorists or terrorist 
organizations.'' The section requires advance consultations 
with Congress before invoking the authority and a semi-annual 
report to Congress with respect to actions taken since the last 
report and any changes which may have occurred since the last 
report. Section 504 of the Act gives the President specific 
authority to prohibit all imports to the United States from 
Libya or the export to Libya of any goods or technologies 
subject to U.S. jurisdiction.
---------------------------------------------------------------------------
    \69\ Public Law 99-83, approved August 8, 1985, 22 U.S.C. 2349 aa-
8, aa-9.
---------------------------------------------------------------------------

                The Iran and Libya Sanctions Act of 1996

    U.S. imports of goods and services of Iran have been 
prohibited since 1987. In May 1993 President Clinton 
articulated a policy of ``dual containment'' of Iran and Iraq. 
Administration officials said that Iran needed to be isolated 
because of its: (1) support for international terrorism; (2) 
efforts to undermine the Arab-Israeli peace process; (3) 
attempts to subvert other governments in the Middle East; (4) 
programs to develop weapons of mass destruction; and (5) poor 
human rights record. On March 15, 1995, the President declared 
a national emergency to respond to Iran's actions and policies 
and issued an executive order prohibiting U.S. persons from 
entering contracts to finance or manage Iran's petroleum 
resources.
    On April 30, 1995, after an internal policy review found 
that continued trade with Iran was undermining U.S. efforts to 
isolate Iran, President Clinton announced that he would impose 
significant new economic sanctions on Iran. Executive Order 
12959, issued May 8, prohibits trade in goods, services, or 
technology with Iran, re-export to Iran of U.S. goods or 
technology from third countries controlled for export, as well 
as any financing, loans, or related services for trade with 
Iran. New investment is also prohibited in Iran. The 
prohibitions also apply to foreign branches of U.S. companies. 
However, the ban provides for the licensing of crude oil swap 
arrangements with Iran in the Caspian Sea and Central Asia, and 
does not prohibit the importation to the United States of 
Iranian oil that is refined outside Iran.
     Out of a concern that the trade ban did not succeed in 
shifting international attitudes toward Iran, the President 
signed the Iran and Libya Sanctions Act \70\ on August 5, 1996, 
which mandates sanctions against foreign investment in the 
petroleum sectors of Iran and Libya as well as exports of 
weapons, oil equipment, and aviation equipment to Libya in 
violation of U.N. Resolutions 748 and 883. Congressional 
findings in this legislation state that the efforts of the 
government of Iran to acquire weapons of mass destruction and 
the means to deliver them, as well as its support for 
international terrorism, endanger the interests of the United 
States. In the case of Libya, Congress found that Libya's 
failure to comply with U.N. Resolutions 731, 748, and 883, its 
support of international terrorism, and its efforts to acquire 
weapons of mass destruction constitute a threat to 
international peace and security that endangers the national 
security of the United States.
---------------------------------------------------------------------------
    \70\ Public Law 104-172, approved August 5, 1996, 50 U.S.C. 1701.
---------------------------------------------------------------------------
    Under the Iran and Libya Sanctions Act, the President must 
impose, on any foreign person (individual, firm or government 
enterprise) that invests more than $40 million in any one year 
in the petroleum resources of Iran or Libya, or violates the 
U.N. prohibited transactions with Libya, at least two of the 
following six sanctions: (1) denial of Export-Import Bank loans 
for U.S. exports to the sanctioned entity; (2) denial of 
specific U.S. licenses for exports to the sanctioned entity 
(assuming the exports require a license to be exported); (3) 
denial of U.S. bank loans of over $10 million in one year to 
the sanctioned entity; (4) disallowing a sanctioned entity, if 
it is a financial institution, to serve as a primary dealer in 
U.S. government bonds or as a repository of U.S. government 
funds; (5) import sanctions taken by the President in 
accordance with the International Emergency Economic Powers Act 
(IEEPA); and (6) prohibition on U.S. government procurement 
from or contracting with the sanctioned person.
     The law provides for the waiving of sanctions for firms of 
countries that join a multilateral sanctions regime against 
Iran and lowers the threshold of permissible investment from 
$40 million to $20 million for firms of countries that do not 
join such a regime. The Act ``sunsets'' in 5 years.

                   Embargo on Transactions With Cuba

    While almost totally restrictive controls had been placed 
on U.S. exports to Cuba even earlier \71\ under the general 
authority of the Export Control Act of 1949, specific authority 
for a total trade embargo on Cuba was contained in section 
620(a) of the Foreign Assistance Act of 1961.\72\ Based on this 
authority ``to establish and maintain a total embargo upon all 
trade between the United States and Cuba,'' President Kennedy 
proclaimed the embargo and directed the Secretaries of the 
Treasury (for imports) and of Commerce (for exports) to 
implement it. Both Secretaries were also given the authority to 
modify the embargo in the national interest.\73\
---------------------------------------------------------------------------
    \71\ 25 Fed. Reg. 1006, October 20, 1960.
    \72\ Public Law 87-195, approved September 4, 1961, 22 U.S.C. 
2370(a)(1).
    \73\ Proclamation 6447, 27 Fed. Reg. 1,085, February 7, 1962.
---------------------------------------------------------------------------
    The export embargo already being in force, the added ban on 
imports from Cuba was implemented through Cuban Import 
Regulations,\74\ to which were subsequently added, in general 
terms, all transactions falling within the authority of the 
Trading With the Enemy Act (TWEA), based on the specific 
addition of TWEA to the statutory authority for the 
regulations.\75\ Under this broader authority, Cuban Assets 
Control Regulations applicable to imports from Cuba as well as, 
in great detail, to non-trade transactions with Cuba were 
promulgated.\76\ After several changes, these regulations still 
remain in force. The embargo on transactions with Cuba is 
implemented at present for exports by the Export Administration 
Regulations (15 U.S.C. 768-799.2), particularly sections 770, 
785.1, and 799.1, and for imports and other transactions by the 
Cuban Assets Control Regulations (15 CFR 515). (These 
regulations were later codified by the Cuban Liberty and 
Democratic Solidarity Act, discussed below. A ban on imports 
from Cuba and a tightening of the regulations on non-tourist 
travel to Cuba was included in the Trade Sanctions Reform and 
Export Enhancement Act of 2000, discussed below.)
---------------------------------------------------------------------------
    \74\ 31 CFR 515, 27 Fed. Reg. 1,116, February 7, 1962.
    \75\ 27 Fed. Reg. 2,765, March 24, 1962.
    \76\ 28 Fed. Reg. 6,974, July 9, 1963.
---------------------------------------------------------------------------
    The provisions of section 620(a) of the Foreign Assistance 
Act of 1961 and the regulatory exercise with respect to Cuba of 
authorities under the TWEA, the International Emergency 
Economic Powers Act, and the Export Administration Act of 1979, 
however, were preempted by the Cuban Democracy Act of 1992 
(title XVII of the National Defense Authorization Act of 1992) 
\77\ to the extent that they have been either restated or 
modified by provisions of that Act. Section 1705 of the Act 
specifically permits donations of food to Cuban non-
governmental organizations and individuals; with some 
exceptions and subject to specific licenses and end-use 
verification, exports of medicines and medical supplies and 
equipment; providing telecommunications services and 
appropriate facilities, and issuing licenses for related 
payments; direct mail service between the United States and 
Cuba; and assistance for promoting non-violent democratic 
change in Cuba.
---------------------------------------------------------------------------
    \77\ Public Law 102-484, approved October 23, 1992; 22 U.S.C. 6001 
et seq.
---------------------------------------------------------------------------
    On the other hand, section 1706 enacts specific 
restrictions: it prohibits the issuance of licenses for any 
transactions of American-owned firms in foreign countries with 
Cuba, previously permitted by the relevant regulation; \78\ 
requires specific license for a ship to load or unload any 
freight in a U.S. port if it has traded, within the past 180 
days, with a Cuban port; or to enter a U.S. port or obtain ship 
stores if it is carrying goods or passengers to or from Cuba, 
or Cuban goods. These restrictions do not apply to activities 
allowed by sections 1705 or 1707 of the Act, or to transactions 
in informational materials unless subject to national security 
or espionage controls. The President is required to set strict 
controls on remittances to Cubans for the purpose of financing 
their travel to the United States.
---------------------------------------------------------------------------
    \78\ 31 CFR 515 and 559.
---------------------------------------------------------------------------
    The law authorizes a relaxation of the embargo by 
permitting humanitarian aid to Cuba under foreign assistance 
and Food-for-Peace legislation if the President determines that 
the Cuban government has made and is implementing commitments 
to hold free elections and respect internationally recognized 
worker rights and basic democratic freedoms, and is not 
materially supporting groups in other countries seeking violent 
overthrow of the government. The President also is authorized 
to waive the restrictions of section 1706 if he determines that 
the Cuban government has taken steps that provide various 
political, human rights, and economic freedoms, and is directed 
to take various actions (including steps to end the trade 
embargo) to assist a freely and democratically elected Cuban 
government. The Act empowers the Secretary of the Treasury to 
enforce its provisions under the authority of the TWEA, to 
which provisions for civil penalties, forfeitures, and judicial 
review are added.

            The Cuban Liberty and Democratic Solidarity Act

     In 1996, the Cuban Liberty and Democratic Solidarity Act 
was enacted to further strengthen U.S. sanctions against 
Cuba.\79\ The legislation, which is commonly referred to as 
``Helms-Burton'' or the ``Libertad Act,'' contains a number of 
new sanction provisions. Title I of the Act codifies all Cuban 
embargo executive orders and regulations in force on March 12, 
1996. No authority is granted to the President under the law to 
waive any of the codified embargo provisions.
---------------------------------------------------------------------------
    \79\ Public Law 104-114, approved March 12, 1996.
---------------------------------------------------------------------------
     In title III, the Helms-Burton legislation allows U.S. 
nationals, including Cuban-Americans who became US. citizens 
after their properties were confiscated, to sue for money 
damages in U.S. federal court those persons who traffic in 
their confiscated property. The President has the authority to 
delay implementation of title III provisions for a period of up 
to 6 months at a time if he determines that such a delay would 
be in the national interest and would expedite a transition to 
democracy in Cuba. On July 16, 1996, the President announced 
that he would allow title III to go into effect, but would 
suspend for 6 months the right of individuals to file lawsuits. 
In making his announcement, the President indicated that the 
liability of foreign companies under Helms-Burton would be 
established during the suspension period and that legal action 
could be taken against them immediately upon the lifting of the 
suspension. Since then, the implementation of title III 
provisions has been suspended by the President at 6 month 
intervals, most recently on January 16, 2001.
    Under the provisions in title IV of the Helms-Burton 
legislation, certain aliens involved in the confiscation or 
trafficking of U.S. property in Cuba are denied admission to 
the United States. The ban applies to corporate officers, 
principals, or shareholders with a controlling interest of an 
entity involved in this activity. It also applies to the 
spouses, minor children, and agents of aliens who are excluded 
under the provision. This provision of the Act is mandatory and 
is waiveable on a case-by-case basis for travel to the United 
States only for humanitarian medical reasons or to participate 
in legal actions regarding confiscated property. On June 17, 
1996, the guidelines for implementing title IV provisions were 
published in the Federal Register. \80\ This notice stipulated 
that the admission sanction would not apply to persons having 
business dealings solely with persons excluded under the 
title's provisions. To date, the State Department has banned 
from the United States a number of executives and their 
families from three companies because of their investment in 
confiscated U.S. property in Cuba: Crupos Domos, a Mexican 
telecommunications company; Sherritt International, a Canadian 
mining company; and BM Group, an Israeli citrus company. In 
1997. Grupos Domos disinvested from U.S.-claimed property, and 
as a result its executives are again eligible to enter the 
United States. Action against executives from STET, an Italian 
telecommunications company was averted by a July 1997 agreement 
in which the company agreed to pay the U.S.-based ITT 
Corporation $25 million for the use of ITT-claimed property in 
Cuba for 10 years. Currently, the State Department is 
investigating a Spanish hotel company, Sol Melia, for allegedly 
investing in property that was confiscated from U.S. citizens 
in Cuba's Holguin province in 1961.
---------------------------------------------------------------------------
    \80\ 61 Fed. Reg. 30655.
---------------------------------------------------------------------------
    In addition to these major provisions, section 103 of the 
Helms-Burton legislation prohibits loans, credits, or other 
financing by any U.S. national, U.S. agency, or permanent 
resident alien for financing transactions involving any 
property confiscated by the Cuban government, the claim to 
which is owned by a U.S. national. Section 106(d) of the Act 
requires that U.S. assistance for Russia be withheld by an 
amount equal to the sum of assistance and credits provided (on 
or after March 12, 1996) in support of the Russian intelligence 
facility at Lourdes, Cuba. The President, however, may waive 
this provision if such assistance is in the U.S. national 
security interest, and if he certifies that Russia is not 
sharing intelligence data collected at Lourdes with officials 
or agents of the Cuban government.
    Section 104 of the Act requires the United States to vote 
against Cuba's admission to the international financial 
institutions (IFIs) until a democratic government is in power. 
The provision also requires the reduction of U.S. payment to 
any IFI if it approves a loan or other assistance to Cuba over 
the opposition of the United States. Finally, title II of the 
law contains numerous conditions for determining when a 
``transition'' government and a ``democratic'' government is in 
power in Cuba, conditions which would qualify Cuba for various 
types of U.S. assistance and would lead to suspension of U.S. 
trade sanctions against Cuba.

                       Iraq Sanctions Act of 1990

    The Iraq Sanctions Act of 1990 was enacted as part of the 
Foreign Assistance and Related Program Appropriations Act for 
fiscal year 1991,\81\ in response to Iraq's invasion of Kuwait 
on August 2, 1990. The Act makes a number of declarations 
concerning Iraq's invasion of Kuwait and requires the President 
to consult with the Congress on U.S. actions taken in response.
---------------------------------------------------------------------------
    \81\ Public Law 101-513, approved November 5, 1990; sections 586 
through 586J.
---------------------------------------------------------------------------
    Section 586C enacts into law the trade embargo and other 
economic sanctions imposed on Iraq by presidential executive 
order under authority of the International Emergency Economic 
Powers Act and the National Emergencies Act.\82\ Those 
sanctions entailed a near-total prohibition on transactions 
between the United States and Iraq, including a ban on: imports 
and exports; most travel and fulfillment of contracts; and 
credits and loans. The executive orders also froze all assets 
of the governments of Iraq and Kuwait. Section 586C requires 
the President to notify Congress at least 15 days before the 
termination of any of the above sanctions. Section 586E imposes 
civil and criminal penalties on persons violating the executive 
orders.
---------------------------------------------------------------------------
    \82\ Executive Orders 12724 and 12725 (August 9, 1990), and, to the 
extent that they were still in effect on the date of enactment, 
Executive Orders 12722 and 12723 (August 2, 1990).
---------------------------------------------------------------------------
    The Iraq Sanctions Act also imposes sanctions on Iraq 
beyond those imposed by executive order. Section 586G imposes a 
wide range of sanctions, including a ban on the following 
transactions: arms sales; exports of certain goods and 
technology, including nuclear technology and equipment; U.S. 
government credits and credit guarantees; and other forms of 
assistance. Those sanctions may be waived by the President if 
he makes a certification of fundamental changes in Iraqi 
leadership, policies, or actions, under criteria set forth in 
section 586H.
    The Act contains provisions aimed at increasing compliance 
by third countries with U.N. Security Council sanctions against 
Iraq. Section 586D denies assistance under the Foreign 
Assistance Act of 1961 or the Arms Export Control Act to any 
country not in compliance with the U.N. sanctions, subject to 
certain exceptions. It also authorizes the President to ban 
imports into the United States from any country that has not 
imposed a ban on trade with Iraq, if he considers that such 
action would promote the effectiveness of the U.N. and U.S. 
sanctions against Iraq. Section 586I denies export licenses for 
super-computer exports to any country the President determines 
is assisting Iraq to improve its capabilities in rocket 
technology or chemical, biological, or nuclear weapons.
    Finally, the Iraq Sanctions Act mandates a number of 
studies and reports to Congress concerning international 
exports to Iraq of nuclear, biological, chemical and ballistic 
missile technology; Iraq's offensive military capability; and 
third country sanctions against Iraq.

 Exemptions for Food and Medicine from U.S. Unilateral Trade Sanctions

    On April 28, 1999, President Clinton announced that 
existing unilateral economic sanctions programs would be 
amended to modify licensing policies to permit case-by-case 
review of specific proposals for the commercial sale of 
agriculture commodities and products, as well as medicine and 
medical equipment, where the United States has the discretion 
to do so.\83\ Licenses are issued by the Treasury's Office of 
Foreign Assets Control.
---------------------------------------------------------------------------
    \83\ 64 Fed. Reg. 41,784; 31 C.F.R. Parts 538, 550, and 560.
---------------------------------------------------------------------------

Trade Sanctions Reform and Export Enhancement Act of 2000

    The ``Trade Sanctions Reform and Export Enhancement Act of 
2000'' was enacted as title IX of Public Law 106-387, the FY 
2001 agriculture appropriations bill.\84\ The Act made two 
principal changes to existing U.S. unilateral trade sanctions 
on Cuba and other countries against which the United States has 
imposed unilateral economic sanctions for foreign policy 
purposes. First, the Act prohibits 120 days after enactment 
(February 25, 2001), subject to certain exceptions, the use of 
unilateral agricultural or medical sanctions with respect to 
Cuba and other countries against which the United States has 
imposed economic sanctions for foreign policy reasons. 
Unilateral agricultural or medical sanctions are defined by the 
Act not to include any multilateral regime where the other 
members of that regime have agreed to impose substantially 
equivalent measures or a mandatory decision of the United 
Nations Security Council. The Act contains certain other 
exceptions with respect to circumstances related to war, 
biological and chemical weapons and items controlled under the 
Arms Export Control Act, the Export Administration Act.
---------------------------------------------------------------------------
    \84\ P.L. 106-387, approved October 28, 2000.
---------------------------------------------------------------------------
    The Act prohibits the availability of any U.S. governmental 
assistance, or financing by the U.S. government or a private 
person, of commercial exports to Iran, Libya, North Korea or 
Sudan, or exports to Cuba. In these cases, sales must be paid 
for by cash in advance or through third country financing. In 
the case of Iran, Libya, North Korea and the Sudan, the 
legislation authorizes the President to waive this prohibition 
for national security or foreign policy reasons.
    Second, the Act codifies existing embargo regulations by 
prohibiting both the importation of merchandise from Cuba and 
travel for tourism to Cuba. In particular, licensed travel to 
Cuba may not include travel for tourist activities. In 
addition, the Act imposes tighter restrictions on non-tourist 
travel that was previously allowed by regulations of the 
Treasury Department, listed in 31 Code of Federal Regulations 
515.560, paragraph (c), by restricting such travel to that 
expressly authorized in those regulations.
    With respect to new unilateral sanctions, the Act prohibits 
the imposition of unilateral agricultural sanctions or medical 
sanctions unless; (1) no later than 60 days before the proposed 
sanction is imposed the President submits a reports to Congress 
that describes the activity proposed to be prohibited, 
restricted, or conditioned, and describes the actions by the 
foreign country or foreign entity that justify the sanction; 
and (2) a joint resolution is enacted stating the approval of 
the Congress for the President's report. The Act sunsets any 
unilateral agricultural or medical sanction that is imposed not 
later than 2 years after the effective date of the sanction 
unless the President submits another report to Congress and 
another joint resolution is enacted.

                        The Hong Kong Policy Act

    On July 1, 1997, China assumed sovereignty over Hong Kong 
according to the terms of the Sino-British Joint Declaration of 
1994. The question of how Hong Kong will fare under Chinese 
rule is important to U.S. interests because of: (1) the large 
U.S. economic presence in Hong Kong and; (2) any adverse 
developments in Hong Kong will affect U.S.-China relations. 
Under the Sino-British Joint Declaration, China committed to 
preserving a high degree of autonomy under the so-called ``one-
China, two-systems'' policy.
    The Hong Kong Policy Act which was passed by Congress in 
1992 sets forth declarations and conditions for how the United 
States should conduct bilateral relations with Hong Kong after 
July 1, 1997.\85\ This legislation: (1) declares that support 
for democratization is a fundamental principle of the United 
States that should apply to U.S. policy toward Hong Kong after 
1997; (2) declares U.S. support for the Sino-British Joint 
Declaration and makes a number of findings of what is provided 
for under this agreement; (3) requires that the United States 
apply the same laws toward Hong Kong after 1997 as were in 
force before then, but permits the President to suspend the 
application of any law beginning in July 1, 1997, if he 
determines that China is not giving Hong Kong sufficient 
autonomy, and; (4) requires the Secretary of State to report to 
Congress every 18 months on the situation in Hong Kong, 
including the development of its democratic institutions.
---------------------------------------------------------------------------
    \85\ Public Law 102-383, approved October 5, 1992.
---------------------------------------------------------------------------
    As part of legislation granting China unconditional normal 
trade relations upon its accession to the WTO, Congress 
included a provision which states the sense of Congress that 
immediately upon approval of China's accession by the WTO 
General Council, the United States should request that the 
Council consider Taiwan's accession as the next order of 
business during the same Council session. Furthermore, the 
legislation provides that the United States should be prepared 
to aggressively counter any effort by any WTO Member to block 
Taiwan's accession after approval of the PRC's accession.\86\
---------------------------------------------------------------------------
    \86\ Title VI of Public Law 106-286, approved October 10, 2000.
---------------------------------------------------------------------------

        Section 27 of the Merchant Marine Act, 1920 (Jones Act)

    The Jones Act is a cabotage law that restricts the 
transportation of property by water between points in the 
United States, its possessions and territories (with very few 
exceptions) to vessels built and (if applicable) substantially 
repaired in U.S. shipyards, owned by U.S. citizens, manned by 
U.S. citizen crews, and registered in the United States. The 
first act passed by the First Congress was a cabotage measure 
that made it extremely expensive for foreign-flag, foreign-
built vessels to operate in our coasting trades. Early cabotage 
laws (1789, 1790, 1817) were, it is claimed, in response to 
similar laws enforced by England, France, and other European 
countries.
    During World War I, U.S. cabotage prohibitions were relaxed 
temporarily, but reinstated in 1920 by section 27 of the 
Merchant Marine Act, 1920, now usually referred to as the Jones 
Act. The penalty for violation is forfeiture of the cargo.

 Section 721 of the Defense Production Act of 1950, as amended (``Exon/
                               Florio'')

    The proposed purchase in 1988 of an 80 percent share of 
Fairchild Semiconductor Corporation by Fujitsu, Ltd. sparked 
congressional interest concerning takeovers of American firms 
by foreign companies which raise national security 
considerations. Section 5021 of the Omnibus Trade and 
Competitiveness Act of 1988 amended title VII of the Defense 
Production Act of 1950 \87\ to add provisions (commonly known 
as ``Exon/Florio,'' the chief congressional sponsors) because 
of concerns that the federal government lacked specific 
authority to prevent such acquisitions.
---------------------------------------------------------------------------
    \87\ 50 U.S.C. App. 2170, as added by Public Law 100-418, section 
5021, approved August 23, 1988.
---------------------------------------------------------------------------
    The provisions authorize the President, after he makes 
certain findings, to take actions for such time as he considers 
appropriate to suspend or prohibit any acquisition, merger, or 
takeover of a person engaged in interstate commerce in the 
United States by or with foreign persons so that such control 
will not threaten to impair the national security. To activate 
this authority, the President has to find that there is 
credible evidence that leads him to believe the foreign 
interest exercising control might take action that threatens to 
impair the national security and that other laws do not provide 
adequate and appropriate authority to protect the national 
security in the matter. The President has to report the 
findings to the Congress with a detailed explanation.
    In making any decision to exercise the authority under this 
provision, the President may consider such factors as: (1) 
domestic production needed for projected national defense 
requirements; (2) the capability and capacity of domestic 
industries to meet national defense requirements; and (3) the 
control of domestic industries and commercial activities by 
foreign citizens as it affects the capability and capacity of 
the United States to meet the requirements of national 
security. The standard of review is ``national security''; the 
provision affects only overseas investment flowing into the 
United States and is not intended to authorize investigations 
of investments that could not result in foreign control of 
persons engaged in interstate commerce nor to have any effects 
on transactions which are outside the realm of national 
security.
    Among the actions available to the President is the ability 
to suspend a transaction. The President may also seek 
appropriate relief in the district courts of the United States 
in order to implement and enforce the provisions, including 
broad injunctive and equitable relief including, but not 
limited to divestment relief.


                 Chapter 6: RECIPROCAL TRADE AGREEMENTS

         Reciprocal Trade Agreement Objectives and Authorities

    Section 1102 of the Omnibus Trade and Competitiveness Act 
of 1988 \1\ provided authorities for the President to enter 
into reciprocal bilateral and multilateral trade agreements 
with foreign countries to reduce or eliminate tariff or 
nontariff barriers and other trade-distorting measures. Section 
1102 replaced similar authorities under section 102 of the 
Trade Act of 1974 \2\ that expired on January 3, 1988. Except 
for the authority to proclaim modifications in U.S. tariffs 
under multilateral agreements, trade agreements entered into 
under section 1102 were subject to congressional approval of 
implementing legislation under special expedited, so-called 
``fast track'' procedures. The basic purpose of the section 
1102 authorities was to provide the means to achieve U.S. 
negotiating objectives set forth under section 1101 of the 1988 
Act and to enable U.S. participation in the Uruguay Round of 
multilateral trade negotiations under the auspices of the 
General Agreement on Tariffs and Trade (GATT) launched in 
September 1986. The authorities were also used for the North 
American Free Trade Agreement (NAFTA). The authorities expired 
on June 1, 1993, except that on July 2, 1993, section 1102 was 
amended to extend the fast track procedures to April 16, 1994 
for the sole purpose of concluding the Uruguay Round 
negotiations.\3\
---------------------------------------------------------------------------
    \1\ Public Law 100-418, approved August 23, 1988, 19 U.S.C. 2902.
    \2\ Public Law 93-618, approved January 3, 1975, 19 U.S.C. 2112.
    \3\ Public Law 103-49, approved July 2, 1993, 19 U.S.C. 2902(e).
---------------------------------------------------------------------------
    Although the fast track procedures have now expired with 
respect to new agreements, certain limited, residual authority 
remains with respect to tariffs.\4\ In addition, there are 
special trade agreement authorities that apply in limited 
circumstances or to deal with specific situations: (1) trade 
agreements entered into under section 123 of the Trade Act of 
1974,\5\ as amended by the 1988 Act, to grant new concessions 
as compensation for import relief actions or any judicial or 
administrative tariff reclassification; (2) withdrawal, 
suspension, or modification of trade agreement obligations 
under section 125 of the Trade Act of 1974; \6\ (3) agreements 
with major state trading regimes acceding to the World Trade 
Organization (WTO); (4) trade agreements and remedies under 
sections 1371-1382 of the Omnibus Trade and Competitiveness Act 
of 1988 \7\ to obtain more open foreign market access in 
telecommunications trade; and (5) bilateral trade agreements 
with certain Communist countries providing for 
nondiscriminatory (most-favored-nation) treatment under certain 
conditions.
---------------------------------------------------------------------------
    \4\ See discussion on specific trade agreement authorities which 
follows.
    \5\ Public Law 93-618, 19 U.S.C. 2133.
    \6\ Public Law 93-618, 19 U.S.C. 2135.
    \7\ Public Law 100-418, 19 U.S.C. 3101.
---------------------------------------------------------------------------

                      Trade Negotiating Objectives

    Section 1101 of the Omnibus Trade and Competitiveness Act 
of 1988 \8\ set forth overall and principal trade negotiating 
objectives of the United States. Any multilateral or bilateral 
trade agreement entered into under the authorities of the 
expired section 1102 of the 1988 Act was required to make 
progress in meeting the applicable objectives described in 
section 1101.
---------------------------------------------------------------------------
    \8\ Public Law 100-418, 19 U.S.C. 2901.
---------------------------------------------------------------------------
    Section 1124 of the 1988 Act \9\ requires the Secretary of 
the Treasury to take action to initiate bilateral currency 
negotiations on an expedited basis with a foreign party to 
trade agreement negotiations if the Secretary advises the 
President during the course of those negotiations that the 
country satisfies the criteria under section 3004(b) of the 
1988 Act relating to exchange rate manipulation.
---------------------------------------------------------------------------
    \9\ Public Law 100-418, 22 U.S.C. 5304 note.
---------------------------------------------------------------------------
    Sections 131, 135 and 315 of the Uruguay Round Agreements 
Act \10\ provide U.S. objectives for seeking a WTO working 
party on worker rights; extended negotiations in financial 
services, telecommunications, and civil aircraft; and 
intellectual property right protection. More specifically, 
section 131 requires the President to seek the establishment of 
a WTO working party to examine the relationship of 
international trade and worker rights. Section 135 sets forth 
principal U.S. negotiating objectives for the extended 
negotiations in the WTO on financial services, basic 
telecommunications, and on trade in civil aircraft. Section 315 
sets forth objectives for the Administration to pursue in the 
field of intellectual property, which include accelerating the 
implementation of the TRIPs agreement, seeking the enactment of 
effective intellectual property rights laws abroad, and 
securing fair, equitable and nondiscriminatory market access 
opportunities for U.S. intellectual property based industries.
---------------------------------------------------------------------------
    \10\ Public Law 103-465, approved December 8, 1994, 19 U.S.C. 3551, 
3555, 3581.
---------------------------------------------------------------------------
    The NAFTA Implementation Act includes a provision regarding 
congressional intent for future free trade agreements. In this 
regard, section 108 of the Act \11\ sets forth considerations 
and preliminary procedures for possible future free trade area 
agreements and accession by foreign countries to NAFTA. Article 
2204 of the NAFTA sets forth the basis for the accession of any 
country or group of countries. In the United States, accession 
would require congressional approval and implementing 
legislation. Section 108 stipulates that congressional approval 
of NAFTA with respect to Canada or Mexico does not constitute 
approval of its extension to other countries. Section 108 also 
requires the President to report to Congress on his 
recommendations for future trade agreement countries and sets 
forth general U.S. negotiating objectives for accession.
---------------------------------------------------------------------------
    \11\ Public Law 103-182, approved December 8, 1993, 19 U.S.C. 3317.
---------------------------------------------------------------------------
    Section 409 of the Trade and Development Act of 2000 
(Public Law 106-200) contains specific agricultural negotiating 
objectives of the United States for the World Trade 
Organization's negotiations on agriculture mandated by the 
Uruguay Round Trade Agreements. Section 409 also mandates 
consultations with Congress at Specific points during the 
negotiations.

                        General Tariff Authority

    Since enactment of the Reciprocal Trade Agreements Act of 
1934, the Congress periodically has delegated authority to the 
President to negotiate and to proclaim reductions in tariffs 
under reciprocal trade agreements, subject to specific 
conditions and limitations, without requiring further 
congressional action. The most recent grant of such authority 
was contained in section 1102(a) of the Omnibus Trade and 
Competitiveness Act of 1988.
    Prior to its expiration, section 1102(a) granted the 
President authority to enter into multilateral tariff 
agreements with foreign countries and to proclaim reductions in 
U.S. rates of duty required or appropriate to carry out such 
agreements, subject to the following limitations:
          (1) Reductions of existing U.S. duties cannot exceed 
        50 percent of existing rates of duty, except that 
        duties of 5 percent ad valorem or below may be reduced 
        to zero.
          (2) Staging authority requires that duty reductions 
        on any article cannot exceed 3 percent ad valorem per 
        year, or one-tenth of the total reduction, whichever is 
        greater, except that staging is not required if the 
        U.S. International Trade Commission determines there is 
        no U.S. production of the article.
          (3) Under rounding authority, annual duty reductions 
        may exceed the limits by the lesser of the difference 
        between the limit and the next lower whole number or 
        one-half of 1 percent ad valorem in order to simplify 
        computations.
Any duty reductions negotiated in a trade agreement that exceed 
50 percent of an existing duty higher than 5 percent ad valorem 
or any tariff increases would have to be approved by the 
Congress under the special fast track legislative procedures 
that apply to nontariff agreements.\12\
---------------------------------------------------------------------------
    \12\ See also the discussion on specific trade agreement 
authorities, which follows.
---------------------------------------------------------------------------
    The Uruguay Round Agreements Act provides certain limited, 
residual proclamation authority to the President with respect 
to tariffs. Specifically, section 111(a) provides very limited 
authority to the President to modify duties, change duty 
staging, and increase duties ``as the President determines to 
be necessary or appropriate to carry out schedule XX.'' In 
addition, section 111(b)(1) provides that, subject to 
consultation and layover requirements, the President may 
proclaim tariff modification or staged rate reduction if the 
United States so agrees in a WTO negotiation and if it applies 
to the duty on an article in a tariff category that ``was the 
subject of reciprocal duty elimination'' (so-called ``zero-for-
zero elimination'') ``or harmonization negotiations'' during 
the Uruguay Round.\13\ Acceleration of staging on other 
categories of tariffs would not be permitted under this 
authority. Finally, section 111(b)(2) provides that the 
President may make modifications necessary to correct 
``technical errors'' in schedule XX.
---------------------------------------------------------------------------
    \13\ This authority was used by the President in implementing U.S. 
obligations under the Information Technology Agreement concluded in 
December 1996. Pres. Proc. No. 7011, June 30, 1997, 62 Fed. Reg. 35909.
---------------------------------------------------------------------------
    The North American Free Trade Agreement Implementation Act 
of 1993 also provides some limited proclamation authority with 
respect to tariffs. Specifically, section 201(a) provides the 
President with the very limited authority to modify duties, 
change duty staging, and increase duties as he ``determines to 
be necessary or appropriate to carry out or apply'' the 
Agreement. In addition, section 201(b) provides that, subject 
to consultation and layover requirements, the President may 
proclaim: tariff modifications or continuations, or staged rate 
modifications if the United States, Canada, and Mexico agree; 
continuation of duty-free treatment; and increased duties ``as 
the President determines to be necessary or appropriate to 
maintain the general level of reciprocity and mutually 
advantageous concessions with respect to Canada and Mexico 
provided for by the Agreement.''
    The Uruguay Round Agreements Act also provides authority 
for the President to increase duties on articles from countries 
which are not WTO members. Section 111(c) of the Act \14\ 
authorizes the President, after congressional consultation, to 
increase duties on imports from countries that are not members 
of the WTO, or to which the United States does not apply the 
WTO, if he determines that the country is not according 
adequate trade benefits to the United States, including 
substantially equivalent competitive opportunities. The maximum 
rate of duty that may be proclaimed is the higher of the pre-
Uruguay Round most-favored-nation (MFN) rate or the MFN rate of 
duty that will apply under the Uruguay Round schedule XX.
---------------------------------------------------------------------------
    \14\ Public Law 103-465, 19 U.S.C. 3521.
---------------------------------------------------------------------------

                 Multilateral Trade Agreement Authority

    Trade negotiations prior to the Tokyo Round concentrated 
primarily on reducing or eliminating tariffs. Relatively little 
effort and progress was made to reduce nontariff barriers or 
other trade-distorting measures such as subsidies. Section 102 
of the Trade Act of 1974 resulted from considerable concern 
about the growing importance and proliferation of such 
practices to the detriment of U.S. export trade and the need to 
develop new or more adequate international trading rules and 
mechanisms for their discipline. The purpose of section 102 
was: (1) to make clear the importance of reducing, eliminating, 
or harmonizing nontariff barriers and other trade-distorting 
measures through a congressional policy mandate and specific 
authority for the President to negotiate and enter into 
reciprocal nontariff barrier trade agreements as the major 
focus of the Tokyo Round of GATT multilateral trade 
negotiations; (2) to expedite and reduce the uncertainties of 
the legislative process for approval and implementation of such 
trade agreements, thereby encouraging and facilitating 
negotiations with foreign governments; and (3) to increase and 
formalize the role of the Congress during the negotiating 
process and in the development of implementing legislation. The 
authority applied to U.S. foreign direct investment as well as 
to trade in both goods and services.
    Section 102 of the Trade Act of 1974 authorized the 
President to enter into reciprocal trade agreements for 5 
years, until January 3, 1980, subject to congressional 
consultation requirements and approval of the agreements in 
implementing legislation considered under special expedited 
fast track procedures. Section 102 authority was used 
successfully to approve the agreements negotiated in the Tokyo 
Round and to make the changes in U.S. laws necessary for their 
domestic implementation under the Trade Agreements Act of 1979. 
That law extended the section 102 authority for an additional 8 
years, until January 3, 1988, to enable the President to 
negotiate improvements or adjustments in existing agreements 
and to negotiate and enter into new agreements on non-tariff 
measures not dealt with in the Tokyo Round.
    Section 102 authority was replaced by similar authority 
under section 1102(b) of the Omnibus Trade and Competitiveness 
Act of 1988. A trade agreement could be entered into under this 
authority only if it made progress in meeting the applicable 
objectives set forth in section 1101 of the 1988 Act.
    Section 1102(b) authorized the President to enter into 
trade agreements with foreign countries providing for the 
reduction or elimination of any nontariff barriers or other 
distortions to trade, or for the prohibition of or limitations 
on the imposition of such barriers or distortions, before June 
1, 1993, subject to implementation under the special fast track 
congressional approval procedures. The President was to provide 
the Congress at least 90 calendar days advance notice, i.e., no 
later than March 2, 1993, of his intention to enter into a 
trade agreement no later than May 31.
    On July 2, 1993, section 1102 was amended to extend the 
fast track approval procedures to April 16, 1994 for the 
Uruguay Round negotiations, provided the President notified the 
Congress of his intent to enter into an agreement at least 120 
days in advance (i.e., by December 15, 1993). The amendments 
also granted the private sector advisory committees an 
additional 30 days (but before January 15, 1994) to submit 
their reports on the proposed agreement.

                  Bilateral Trade Agreement Authority

    The expired section 1102(c) of the Omnibus Trade and 
Competitiveness Act of 1988 authorized the President to enter 
into bilateral tariff and nontariff agreements with foreign 
countries, subject to the same congressional consultation 
requirements and special fast track procedures for approval of 
implementing legislation as apply to multilateral agreements. 
The authority to enter into bilateral trade agreements applied 
to trade agreements entered into before June 1, 1993, and was 
subject to the same minimum 90-day advance notice requirement 
as the multilateral authority.
    Section 1102(c) authorized the elimination or reduction of 
any U.S. duty or for the elimination or reduction of nontariff 
barriers or other trade distorting measures. No trade benefit 
under the Agreement could be extended to a third country. The 
authority was similar to that which was used for the bilateral 
free trade agreements between the United States and Israel and 
the United States and Canada. The provision set forth three 
requirements for the negotiation of a bilateral agreement:
          (1) The foreign country must request the negotiation 
        of a bilateral trade agreement;
          (2) The agreement must make progress in meeting 
        applicable U.S. trade negotiating objectives; and
          (3) The President must provide written notice of the 
        negotiations to the House Committee on Ways and Means 
        and the Senate Committee on Finance and consult with 
        these committees regarding the negotiation of an 
        agreement. The negotiations may proceed unless either 
        Committee disapproves the negotiations within 60 
        legislative days prior to the 90 calendar day advance 
        notice required of entry into an agreement.
    These multilateral and bilateral trade agreement 
authorities, which were originally due to expire as of June 1, 
1991, were extended for an additional 2 years under procedures 
provided under section 1103(b) of the 1988 Act. On March 1, 
1991, President Bush submitted a report to the Congress 
requesting extension of the fast track trade agreement 
authorities as essential in particular for (1) completing the 
Uruguay Round of GATT multilateral trade negotiations, (2) 
proposed negotiations of NAFTA with Mexico and Canada, and (3) 
pursuit of free trade agreements with Latin American countries 
under the Enterprise for the Americas Initiative announced by 
the President on June 27, 1990.\15\ In a subsequent letter on 
May 1, 1991, the President made commitments to the Congress in 
response to concerns raised about the proposed NAFTA 
negotiations. Neither House of Congress disapproved extension 
of the trade agreement authority for an additional 2-year 
period prior to the June 1, 1991 expiration date for 
disapproval.
---------------------------------------------------------------------------
    \15\ ``The Extension of Fast Track Procedures,'' Message from the 
President of the United States, House Document 102-51, March 4, 1991.
---------------------------------------------------------------------------

                  Reciprocal Competitive Opportunities

    Prior to its expiration, section 1105(b) of the Omnibus 
Trade and Competitiveness Act of 1988 \16\ required the 
President to determine before June 1, 1993 (the final 
expiration date of trade agreement authority) whether any major 
industrial country had failed to make trade agreement 
concessions which provide competitive opportunities for the 
United States substantially equivalent to such concessions 
provided by the United States. If the determination was 
affirmative with respect to any country, the President was to 
recommend to the Congress legislation to terminate or deny 
trade agreement concessions in order to restore equivalence.
---------------------------------------------------------------------------
    \16\ Public Law 100-418, 19 U.S.C. 2904.
---------------------------------------------------------------------------

                  Specific Trade Agreement Authorities

    Sections 123 and 125 of the Trade Act of 1974, as amended 
by the Trade and Tariff Act of 1984 and the Omnibus Trade and 
Competitiveness Act of 1988, as well as section 111 of the 
Uruguay Round Agreements Act and section 201 of the North 
American Free Trade Agreement Implementation Act, contain 
authorities to enter into and/or to proclaim changes in U.S. 
duties under trade agreements in certain specific limited 
circumstances.

Compensation agreements

    Section 123 of the Trade Act authorizes the President to 
enter into trade agreements granting new concessions and to 
proclaim modifications or continuation of existing duties or 
duty-free treatment as he determines required or appropriate as 
compensation to foreign countries for restrictions imposed as 
import relief under section 203 of the Trade Act or for any 
judicial or administrative tariff reclassification. No duty 
reduction can exceed 30 percent of its existing level. The 
purpose of such concessions is to meet international 
obligations under the WTO to maintain the general level of 
reciprocal and mutually advantageous concessions with countries 
whose trade is adversely affected by import relief measures or 
certain tariff reclassifications, and provide an alternative to 
the right of such countries under the WTO to take retaliatory 
action.

Termination and withdrawal authority

    Section 125 of the Trade Act contains the traditional 
requirement that every trade agreement entered into is subject 
to termination or withdrawal within 3 years after its effective 
date, or upon 6 months advance notice thereafter. The President 
may terminate any proclamation at any time.
    Section 125(c) provides the President explicit domestic 
legal authority to proclaim increased duties or other import 
restrictions as he deems necessary or appropriate to implement 
U.S. international trade agreement rights or obligations to 
withdraw, suspend, or modify any trade agreement concessions.
    Section 125(d) authorizes the President to withdraw, 
suspend, or modify substantially equivalent trade agreement 
obligations and proclaim increased duties or other import 
restrictions in response to withdrawal suspension, or 
modification by foreign countries of trade obligations 
benefitting the United States without granting adequate 
compensation (i.e., ``self-compensation'' authority). This 
authority was used in November 1982 by President Reagan to 
suspend most-favored-nation status for Poland indefinitely, 
based upon Poland's nonfulfillment of trade obligations 
undertaken in its accession to the GATT, and in view of 
increased repression of the Polish people by the martial law 
government.
    No duty increase imposed under section 125(d) can exceed 
the higher of 50 percent or 20 percent ad valorem above the 
rate existing on January 1, 1975. Public hearings are required 
prior to taking any action, or promptly thereafter if 
expeditious action is necessary.
    Section 125(e) requires duties or other import restrictions 
to remain in effect at negotiated levels for 1 year after U.S. 
termination of, or withdrawal from, a trade agreement, unless 
the President proclaims restoration of the previous level. The 
President must submit his recommendations to the Congress 
within 60 days as to the appropriate rates of duty on all 
affected articles. This provision prevents automatic, sudden 
``snapbacks'' to higher preagreement duties that could create 
serious economic impact.

Accession of major state trading regimes to the WTO

    Section 1106 of the Omnibus Trade and Competitiveness Act 
of 1988,\17\ as amended, requires the President to determine, 
before any major foreign country accedes to the WTO, whether 
state trading enterprises (1) account for a significant share 
of that country's exports or of its goods subject to import 
competition, and (2) whether those enterprises unduly burden or 
restrict or adversely affect U.S. trade or the U.S. economy or 
are likely to have such results. If both determinations are 
affirmative, the WTO cannot apply between the United States and 
that country until either (1) the country enters into an 
agreement with the United States for its state trading 
enterprises to operate in accordance with commercial 
considerations, or (2) Congress approves fast track legislation 
submitted by the President extending application of the WTO to 
the country.
---------------------------------------------------------------------------
    \17\ Public Law 100-418, 19 U.S.C. 2905.
---------------------------------------------------------------------------

               Trade Negotiation Procedural Requirements

    Sections 131-135 of the Trade Act of 1974,\18\ as amended 
by the Omnibus Trade and Competitiveness Act of 1988, require 
that certain procedures be followed in connection with any 
proposed trade agreement under section 123 of the 1974 Act or 
expired section 1102 of the 1988 Act. These prenegotiation 
procedures require advice from the International Trade 
Commission on the probable economic effect of duty 
modifications on U.S. industries (section 131), advice from 
executive branch agencies and other sources (section 132), 
public hearings (section 133), and advice from private sector 
advisory committees (section 135). In addition, executive 
liaison with the Congress is required through congressional 
designated official advisers to negotiations (section 161), 
transmittal of trade agreements (section 162), and annual 
reports on the trade agreements program and related matters 
(section 163). (See also discussion of Congress in chapter 7, 
infra.)
---------------------------------------------------------------------------
    \18\ Public Law 93-618, 19 U.S.C. 2151.
---------------------------------------------------------------------------
    Section 127 of the Trade Act of 1974 \19\ requires the 
reservation from any negotiations involving reduction or 
elimination of duties or other import restrictions of any 
article while it is subject to an import relief action under 
section 203 of that Act or to a national security action under 
section 232 of the Trade Expansion Act of 1962, or if the 
President determines that the national security would be 
impaired.
---------------------------------------------------------------------------
    \19\ Public Law 93-618, 19 U.S.C. 2137.
---------------------------------------------------------------------------

            Congressional Fast Track Implementing Procedures

    In contrast to traditional tariff proclamation authority, 
nontariff barrier agreements entered into under section 102 of 
the Trade Act of 1974, or the expired section 1102(b) of the 
Omnibus Trade and Competitiveness Act of 1988, and bilateral 
trade agreements entered into under expired section 1102(c) 
authority under the 1988 Act could not enter into force for the 
United States and become binding as a matter of domestic law 
unless and until the President complied with specific 
requirements for consultation with the Congress and 
implementing legislation approving the Agreement and any 
changes in U.S. law was enacted into law.
    The purpose of the approval process is to preserve the 
constitutional role and fulfill the legislative responsibility 
of the Congress with respect to agreements which often involve 
substantial changes in domestic laws. The consultation and 
notification requirements prior to entry into an agreement and 
introduction of an implementing bill ensure that congressional 
views and recommendations with respect to provisions of the 
proposed agreement and possible changes in U.S. law or 
administrative practice are fully taken into account and any 
problems resolved in advance of formal congressional action. At 
the same time, the procedure ensures certain and expeditious 
action on the results of the negotiation and on the 
implementing bill with no amendments. Sections 102 of the 1974 
Act, and 1102(d) and 1103 of the 1988 Act set forth the 
consultation and documentation requirements,\20\ and 151-154 of 
the 1974 Act \21\ prescribed the following procedures for 
congressional fast track approval, as follows:
---------------------------------------------------------------------------
    \20\ Public Law 100-418, 19 U.S.C. 2903.
    \21\ Public Law 93-618, 19 U.S.C. 2191.
---------------------------------------------------------------------------
          (1) Before entering into any trade agreement, the 
        President is required to consult with the House 
        Committee on Ways and Means, the Senate Committee on 
        Finance, and with each other committee in the House and 
        Senate with jurisdiction over legislation involving 
        subject matter affected by the Agreement. The 
        consultation includes (a) the nature of the Agreement; 
        (b) how and to what extent the Agreement will achieve 
        applicable purposes, policies, and objectives; and (c) 
        all matters relating to agreement implementation.
          (2) The President is required to give the Congress at 
        least 90 calendar days (120 calendar days for the 
        Uruguay Round Agreements) advance notice of his 
        intention to enter into a trade agreement, and promptly 
        publish the intention in the Federal Register. The 
        purpose of this notice period is to provide the 
        congressional committees of jurisdiction an opportunity 
        to review the proposed agreement before it was signed, 
        to determine the changes in U.S. laws that would be 
        necessary or appropriate to implement the obligations 
        under the Agreement, and to meet with Administration 
        officials to develop the text of an acceptable 
        implementing bill.
          (3) After entering into the Agreement, the President 
        is required to submit a copy of the final legal text to 
        the Congress, together with a draft implementing bill, 
        a statement of any administrative action proposed to 
        implement the Agreement, and supporting information 
        ((a) an explanation of how the bill and proposed 
        administrative action would change or affect existing 
        law; and (b) a statement asserting that the Agreement 
        made progress in achieving applicable purposes, 
        policies, and objectives; the reasons the Agreement 
        made such progress and why and to what extent it did 
        not achieve other purposes, policies, and objectives; 
        how the Agreement served the interests of U.S. 
        commerce; why the implementing bill and proposed 
        administrative action were required or appropriate to 
        carry out the Agreement; efforts made by the President 
        to obtain international exchange rate equilibrium and 
        any effect the Agreement may have regarding increased 
        monetary stability; and the extent, if any, to which 
        each foreign party to the Agreement maintained non-
        commercial state trading enterprises that may adversely 
        affect, nullify, or impair the benefits to the United 
        States under the Agreement and how the Agreement 
        applied to or affected purchases and sales by such 
        enterprises).
          There is no statutory time limit for submission of 
        the Agreement and draft bill after entry into the 
        Agreement. The timetable is worked out between the 
        congressional leadership and the Administration to 
        accommodate the need for committees of jurisdiction to 
        have adequate opportunity to develop an acceptable 
        draft bill text while also ensuring expeditious formal 
        action on the actual implementing legislation.
          (4) The implementing bill is introduced by the 
        leadership in both Houses of Congress on the same day 
        it is submitted by the President and referred to the 
        committees of jurisdiction. The committees have 45 
        legislative days in which to report the bill; they are 
        discharged automatically from further consideration 
        after that period.
          (5) Each House votes on the bill within 15 
        legislative days after the measure has been received 
        reported or discharged from the committees. A motion in 
        the House to proceed to consideration of the 
        implementing bill is highly privileged and not 
        debatable. Motions to recommit or reconsider the vote 
        are not in order. Amendments are not in order.
    No amendments to the implementing bill are in order in 
either the House or the Senate once the bill had been 
introduced; the committee and floor actions in the House and 
Senate consist of ``up or down'' votes on the bill as 
introduced. The total maximum period for congressional 
consideration from date of introduction is 60 legislative days 
if the bill was not a revenue measure. Since the Senate must 
act on a House-passed revenue bill, the maximum period for 
congressional consideration of a revenue implementing bill from 
date of introduction is 90 legislative days (15 additional days 
for Senate committee action on the House-passed measure and 15 
additional days for Senate floor action). After the legislation 
is signed by the President, the Agreement goes into effect 
under the terms of the Agreement and the implementing bill.
    Section 1103(c) of the 1988 Act instituted a ``reverse fast 
track'' procedure that terminated the application of that 
special procedure for the approval of trade agreements if both 
the Committee on Ways and Means and the Committee on Rules in 
the House and the Committee on Finance in the Senate reported, 
and both the House and Senate separately passed, resolutions of 
disapproval within any 60 legislative day period. The basis for 
the disapproval was failure or refusal of the U.S. Trade 
Representative (USTR) to consult with the Congress on trade 
negotiations and trade agreements as set forth in the 
consultation requirements. The fast track procedure applied to 
floor consideration of the resolution, which was nonamendable.
    In addition, the 1974 and 1988 Acts provided for 
congressional advisers and consultations with committees of 
jurisdiction throughout the course of trade agreement 
negotiations (section 161 of the 1974 Act) and an advisory 
committee structure for private sector input during 
negotiations and reports on the results (section 135 of the 
1974 Act). The congressional consultation requirements and fast 
track procedures applied to the implementing legislation for 
the Tokyo Round of GATT multilateral trade negotiations in 
1979, the United States-Israel Free Trade Agreement and the 
United States-Canada Free-Trade Agreement, the North American 
Free Trade Agreement, and the Uruguay Round of GATT 
multilateral trade negotiations, including the Agreement 
Establishing the World Trade Organization.
    Special fast track procedures under section 3(c) of the 
Trade Agreements Act of 1979 also applied to implementation of 
changes in the Tokyo Round Agreements and to the United States-
Canada Free-Trade Agreement for an initial 30-month period. 
Section 3(c), which currently applies to implementation of 
changes in the United States-Israel Free Trade Agreement and 
the GATT Agreement on Civil Aircraft,\22\ requires the 
President to submit a draft bill and statement of any 
administrative action to the Congress whenever he determines it 
is necessary or appropriate to amend, repeal, or enact a 
statute to implement any requirement, amendment, or 
recommendation concerning an agreement. The President is 
required to consult at least 30 days in advance with the House 
Committee on Ways and Means and the Senate Committee on Finance 
and any other committees of jurisdiction on the subject matter 
and implementation.
---------------------------------------------------------------------------
    \22\ Public Law 96-39, approved July 26, 1979, 19 U.S.C. 2504.
---------------------------------------------------------------------------
    While the authorities to enter into new trade agreements 
for congressional approval under fast track implementing 
procedures expired upon conclusion of the Uruguay Round 
negotiations, the fast track legislative procedures under 
sections 151-154 of the 1974 Act continue to apply to (1) 
resolutions approving bilateral commercial agreements extending 
normal trade relations (NTR) treatment to countries which are 
subject to the provisions of title IV of the Trade Act of 1974; 
(2) joint resolutions disapproving annual presidential 
determinations to extend authority to waive freedom of 
emigration requirements under title IV; (3) joint resolutions 
disapproving presidential reports of country compliance with 
freedom of emigration requirements under title IV; (4) joint 
resolutions disapproving presidential import relief actions 
under section 203 of the Trade Act of 1974 which differ from 
recommendations of the International Trade Commission; and (5) 
joint resolutions withdrawing congressional approval of the WTO 
Agreement after 5 years and every 5 years thereafter. While the 
procedures applicable to implementing bills and resolutions and 
to joint disapproval resolutions are similar, the time periods 
for committee and House and Senate consideration differ 
(shorter periods for disapproval resolutions), and the overall 
time periods for congressional consideration is generally 
subject to the terms of the statute involved.
    Although statutory, the fast track legislative procedures 
were enacted as an exercise of the rulemaking powers of each 
House of Congress, and are part of each House's rules. The 
procedures may be changed in the same manner as any other 
rules.

                        Uruguay Round Agreements

    The Uruguay Round Agreements represented the culmination of 
negotiations among 125 countries over an 8-year period launched 
in Punta del Este, Uruguay in September 1986 under the auspices 
of the GATT and concluded in Geneva, Switzerland on December 
15, 1993. On that date President Clinton provided the Congress 
the required 120-day advance notice of his intention to enter 
into the Agreements. The Agreements were signed in Marrakesh, 
Morocco on April 15, 1994 by 111 countries, including the 
United States, thereby undertaking the commitment to bring the 
results before their respective legislatures for approval.
    Sections 1101-1103 of the Omnibus Trade and Competitiveness 
Act of 1988, as extended by Public Law 103-49, set forth U.S. 
negotiating objectives and authority and implementing 
procedures necessary for U.S. participation. As required by 
Public Law 103-49, the private sector advisory committees 
established under section 135 of the Trade Act of 1974 
submitted their reports assessing the Agreements to the 
President, the USTR and the Congress on January 14, 1994.
    On September 27, 1994, President Clinton sent a letter of 
transmittal to the House and Senate covering: (1) transmittal 
of the final texts of the Uruguay Round agreements, including 
the Agreement establishing the World Trade Organization; (2) 
the draft implementing bill and Statement of Administrative 
Action; and (3) supporting documents, as required by section 
1103 of the 1988 Act.\23\
---------------------------------------------------------------------------
    \23\ Public Law 100-418, 19 U.S.C. 2903.
---------------------------------------------------------------------------
    As provided under section 151 of the Trade Act of 1974,\24\ 
as amended, the implementing legislation was introduced in the 
House on September 27 as H.R. 5110 by Majority Leader Gephardt, 
for himself and Minority Leader Michel by request, and jointly 
referred to eight committees of jurisdiction for a period 
ending October 3, 1994. On November 29, 1994, H.R. 5110 passed 
the House and was sent to the Senate for consideration, where 
it passed on December 1. On December 8, 1994, the bill was 
signed into law by the President.
---------------------------------------------------------------------------
    \24\ Public Law 93-618, 19 U.S.C. 2191.
---------------------------------------------------------------------------
    The Uruguay Round Agreements are the broadest, most 
comprehensive trade agreements in history. The Agreements cut 
global tariffs by more than one-third, and reduce or eliminate 
numerous nontariff measures, such as quotas, restrictive 
licensing systems, and discriminatory product standards.
    The agreements also contain multilateral rules covering 
such matters as technical barriers to trade, trade-related 
investment measures (TRIMs), rules of origin, import licensing 
procedures, safeguards, trade-related aspects of intellectual 
property rights (TRIPs), antidumping/countervailing duties, 
agriculture trade, and government procurement. In addition, the 
General Agreement on Trade in Services (GATS) establishes a 
framework of rules for trade and investment in services 
sectors, including most-favored-nation (MFN) and national 
treatment, market access, transparency, and the free flow of 
payments and transfers. Many of these agreements are addressed 
in detail in other chapters of this book.
    The Agreement Establishing the World Trade Organization 
establishes an international organization which encompasses the 
existing GATT institutional structure and extends it to the new 
Uruguay Round disciplines on services, intellectual property, 
and investment.
    The Understanding on Rules and Procedures Governing the 
Settlement of Disputes creates new procedures for settlement of 
disputes arising under any of the Uruguay Round agreements and 
provides time limits for each step in the process. The 
Understanding creates a more automatic process, including the 
right to a panel, adoption of panel reports unless there is a 
consensus to reject the report, appellate legal review on 
request, time limits for country conformity with panel rulings 
and recommendations, and authorization of retaliation if such 
limits are not met.

                      Uruguay Round Agreements Act

    The Uruguay Round Agreements Act approves the trade 
agreements resulting from the Uruguay Round of multilateral 
trade negotiations under the auspices of the General Agreement 
on Tariffs and Trade (GATT) entered into by the President on 
April 15, 1994. The legislation and the Statement of 
Administrative Action (SAA) proposed to implement the 
Agreements were submitted to the Congress on September 27, 
1994. The legislation includes provisions that are necessary or 
appropriate to implement the Uruguay Round Agreements in U.S. 
domestic law. Also included are provisions to offset the 
projected cost of the implementing legislation in order to 
comply with the ``pay-as-you-go'' requirements of the Budget 
Enforcement Act.
    The legislation contains general provisions on: (1) 
approval and entry into force of the Uruguay Round Agreements, 
and the relationship of the Agreements to U.S. laws (section 
101 of the Act \25\); (2) authorities to implement the results 
of tariff negotiations (section 111 of the Act \26\); (3) 
procedures regarding implementation of dispute settlement 
proceedings affecting the United States and oversight of 
activities of the World Trade Organization (WTO) (sections 121-
130 of the Act \27\); and (4) objectives regarding extended 
Uruguay Round negotiations and other related provisions 
(sections 131, 135 and 315 of the Act \28\).
---------------------------------------------------------------------------
    \25\ Public Law 103-465, 19 U.S.C. 3511.
    \26\ Public Law 103-465, 19 U.S.C. 3521.
    \27\ Public Law 103-465, 19 U.S.C. 3531-3538.
    \28\ Public Law 103-465, 19 U.S.C. 3551, 3555, and 3581.
---------------------------------------------------------------------------
    Specifically, sections 121-130 of the Act \29\ contain 
procedural requirements for notice, consultation, and reporting 
to ensure access to, and advice by, congressional committees, 
private sector advisory committees, and the public regarding 
the dispute settlement mechanism under the WTO. In order to 
ensure that the WTO continues the practice followed by the GATT 
of decisionmaking by consensus, USTR must consult with Congress 
before any vote is taken in the WTO that would substantially 
affect U.S. rights or obligations under the Agreement or 
another multilateral trade agreement, or potentially entails a 
change in federal or state law. Within 30 days after the end of 
any year in which the WTO takes such a vote, USTR will submit a 
report to the appropriate congressional committees describing 
the decision, U.S. efforts to achieve consensus, country 
voting, how the decision affects the United States, and the 
President's response. The dispute settlement procedures set 
forth in the Act also include a provision requiring USTR to 
inform, consult, and report to Congress, private sector 
advisory committees, and the public during each stage of the 
process. Promptly after the establishment of a panel, USTR will 
publish a notice in the Federal Register identifying the 
parties to the dispute, setting forth the major issues raised 
and the legal basis of the complaint, identifying the specific 
measures cited in the request for the panel, and seeking 
written comments from the public on the issues raised. The USTR 
will take into account any advice received from Congress and 
the advisory committees and the written comments in preparing 
U.S. submissions to the panel or Appellate Body. In addition, 
USTR is required to submit an annual report to the Congress on 
the structure, budget and activities of the WTO, and details of 
dispute settlement actions.
---------------------------------------------------------------------------
    \29\ Public Law 103-465, 19 U.S.C. 3531-3538.
---------------------------------------------------------------------------
    The legislation contains a number of other provisions which 
affect the administration of U.S. trade laws. Included in the 
legislation are provisions amending the U.S. antidumping and 
countervailing duty laws in response to the Uruguay Round 
Antidumping and Subsidies/Countervailing Measures Agreements. 
The legislation implement in U.S. domestic law various 
provisions of the Uruguay Round Agreements relating to import 
safeguard measures; foreign trade barriers and unfair trade 
practices in import trade (section 337 of the Tariff Act of 
1930); textiles and apparel trade; government procurement; and 
technical barriers to trade (product standards). Also included 
are provisions implementing the Agreement on Agriculture and 
the Agreement on Trade-Related Aspects of Intellectual Property 
Rights. The legislation also contains provisions extending 
expiring programs and amendments to certain customs laws 
related to the Uruguay Round Agreements, conforming amendments 
to various laws to reflect the implementation of the 
Agreements, as well as a number of revenue and other non-trade 
provisions to meet budgetary offset requirements. These 
provisions are discussed in greater detail in other chapters of 
this book.

Post Uruguay Round Negotiations

    The GATS was the first multilateral, legally enforceable 
agreement covering trade and investment in services. The GATS 
was designed to reduce or eliminate governmental measures that 
prevent services from being freely provided across national 
borders or that discriminate against locally-established 
service firms with foreign ownership. After the WTO went into 
effect, negotiations continued on certain services under the 
auspices of the WTO: information technology, basic 
telecommunications services, financial services, and maritime 
services.

Information Technology Agreement

    During the December 1996 WTO Ministerial Meeting in 
Singapore, trade ministers from 28 WTO-member countries 
endorsed an agreement liberalizing market access in the 
information technology industry. This Information Technology 
Agreement (ITA) eliminated tariffs on information technology 
products by the year 2000 on a wide range of technology 
products. The ITA was finalized on March 26, 1997, and entered 
into force on July 1, 1997. As of this writing, the ITA has 55 
participants representing over 95 percent of global trade in 
this sector.
    ITA product coverage includes computers and computer 
equipment, semiconductors and integrated circuits, computer 
software products, telecommunications equipment, semiconductor 
manufacturing equipment and computer-based analytical 
instruments. Some limited staging up to 2005 was granted on a 
country-by-country basis for individual products. The ITA, thus 
far, is the only global sectoral agreement in which 
participating governments have agreed on a uniform list of 
products on which all duties will be eliminated. The products 
subject to the ITA were covered by the residual proclamation 
authority provided by section 111(b) of the Uruguay Round 
Agreements Act and, thus, no additional implementing authority 
was necessary.\30\
---------------------------------------------------------------------------
    \30\ Pres. Proc. No. 7011, June 30, 62 Fed. Reg. 35,909.
---------------------------------------------------------------------------
    Work to review possibilities for product coverage expansion 
(also as ITA-II continued in 2000), as did efforts to address 
non-tariff measures affecting trade in ITA-covered products.

WTO Basic Telecommunication Services Agreement

    As part of the GATS, WTO members have made both basic and 
value-added telecommunications commitments. Specifically, the 
Fourth Protocol to the GATS--generally referred to as the WTO 
Basic Telecommunications Services Agreement--is the legal 
instrument embodying basic telecommunications services 
commitments of seventy WTO members under the GATS. The 
agreement entered into force on February 6, 1998, and since 
that time, an additional ten WTO members have made 
telecommunications services commitments, some upon their 
accession to the WTO. Due in large part to this agreement, 
mutually advantageous market opportunities for U.S. 
telecommunications equipment and service suppliers expanded 
greatly.
    The WTO basic telecommunications services agreement built 
upon the Annex on telecommunications, part of the General 
Agreement on Trade in Services (GATS), itself a component of 
the Uruguay Round Final Act. The Annex requires WTO members to 
ensure that all service suppliers seeking to take advantage of 
scheduled commitments have reasonable and non-discriminatory 
access to, and the use of, public basic telecommunications 
networks and services. The agreement covers basic 
telecommunications services only. Participants agreed at the 
start of the talks to disregard differences in how countries 
might define ``basic'' telecommunications, and to negotiate on 
all public and private information (voice or data) from sender 
to receiver. Whereas the Annex on telecommunications addresses 
access to existing services and networks by users, the WTO 
basic telecommunications agreement addresses the ability to 
enter telecommunications markets and sell services. Examples of 
the services covered by this agreement include voice telephony, 
data transmission, telex, telegraph, facsimile, private leased 
circuit services (i.e., the sale or lease of transmission 
capacity), fixed and mobile satellite systems and services, 
cellular telephony, mobile data services, paging, and personal 
communications systems.
    As of January 2001, the basic telecommunications services 
agreement encompasses 80 countries. Other countries in the 
process of acceding to the WTO are also expected to make 
commitments in the telecommunications sector. In December 2000, 
the United States put forward a new proposal on 
telecommunications and related services as part of a package of 
U.S. sectoral proposals.

1997 Financial Services Agreement

    With respect to extended negotiations on financial 
services, the United States, because of insufficient market-
opening commitments from many of its trading partners, 
committed in July 1995 to protect the existing investments of 
foreign financial service providers in the United States but 
reserved the right to provide differing levels of treatment 
with respect to any new activities by such providers, or with 
respect to new entrants to the U.S. financial services market. 
The interim agreement expired at the end of 1997. Negotiations 
were renewed in April 1997 and ended December 1997 with a new 
agreement that covered 95 percent of the global financial 
services market as measured in revenue. Of the seventy WTO 
Members that made improved commitments in financial services 
during these negotiations, 53 countries met the original 
deadline of January 29, 1999, for completing domestic 
ratification procedures and notifying their acceptance of the 
1997 Agreement--the Fifth Protocol to the GATS. Another ten 
Members have completed these procedures since then, meaning 
that the number of countries whose 1997 commitments have 
entered into force stands at 63.
    The 1997 Financial Services Agreement opened would 
financial services markets to an unprecedented degree. Fifty-
two countries guaranteed broad market access terms across all 
insurance sectors-encompassing life, non-life, reinsurance, 
brokerage and auxiliary services. Another fourteen countries 
committed to open critical sub-sectors of their insurance 
markets of particular interest to U.S. industry. Fifty-nine 
countries committed to permit 100 percent foreign ownership of 
subsidiaries or branches in banking. And forty-four countries 
guaranteed to allow 100 percent foreign ownership of 
subsidiaries or branches in the securities sector.
    The United States has efforts underway as part of the 
current round of WTO/GATS negotiations to build upon the 
results of the 1997 negotiations. In December 2000, the United 
States submitted an initial financial services sectoral 
proposal to the GATS Council in Special Session as part of a 
package of U.S. sectoral proposals. Discussion of this and 
other proposals will continue in 2001.

Maritime Services

    With respect to maritime services, the United States (and 
most other countries) did not table an offer. The negotiations 
were suspended on June 28, 1996, without an agreement, and must 
be resumed in the context of the next GATS round. The United 
States continues to suspend its NTR obligations in this sector.

WTO ``Build-in-Agenda'' on Agriculture and Services

    The so-called built-in-agenda was an integral part of the 
Uruguay Round Agreements and constituted an important element 
in the balance of rights and obligations of the commitments of 
WTO members. The built-in agenda called for the resumption of 
negotiations by the year 2000 to further liberalize trade in 
agriculture and services, as well as the examination of 
government procurement practices and enforcement of 
intellectual property rights. The WTO Ministerial conference 
that was hosted by the United States in Seattle, Washington, 
from November 30 through December 4, 1999, was to have formally 
launched these negotiations.
    At the Seattle ministerial meeting, the key issue for 
member countries to consider was a frame work for a new round 
of multilateral trade negotiations. Representatives of the 135-
member countries of the WTO considered the procedures and 
substance of the built-in agenda, as well as other issues 
inducing transparency, possible reforms to the dispute 
settlement system, treatment of electronic commerce, and the 
accelerated Tariff Liberalization effort for industrial 
tariffs. Following four days of meetings, a decision was 
announced to suspend negotiations, with direction for member 
countries to engage in further consultations on how to proceed 
with a new round.
    New GATS negotiations began at the start of 2000 and aim to 
reduce or eliminate the adverse effects on trade in services of 
measures as a means of providing effective market access. The 
deadline for submission of negotiating and other proposals for 
new GATS discussions was set for December 2000 and in July 
2000, the United States presented a broad proposal. Services 
work is currently focused on addressing technical questions 
that in some cases are controversial, such as a review of 
possible disciplines in services for safeguard, subsidies, and 
government procurement. The procedural phase of the GATS talks 
is tentatively scheduled to conclude in March 2001, and this 
work on rules could eventually proceed in tandem with market 
access negotiations.
    Global agricultural talks were launched in March 2000. 
Central to these negotiations is whether and how to further 
reduce trade barriers and limit export and domestic subsidies. 
New issues such as the operations of state trading enterprises 
and trade in biotechnology products also seem likely to be 
brought to the negotiating table. A timetable for completing 
agricultural negotiations has not been set, and difficult 
issues which contributed to the failure of the Seattle 
ministerial will have to be addressed once again in these 
sectoral negotiations.

                    Specific Foreign Trade Barriers


       Sections 181 and 182 of the Trade Act of 1974, as amended

    Section 181 of the Trade Act of 1974,\31\ added by section 
303 of the Trade and Tariff Act of 1984 and amended by the 
Omnibus Trade and Competitiveness Act of 1988 and the Uruguay 
Round Agreements Act, requires an annual report on foreign 
trade barriers and their impact, known as the National Trade 
Estimates report. The USTR, through the interagency trade 
mechanism, must identify, analyze, and estimate the impact on 
U.S. commerce of foreign acts, policies, and practices which 
constitute significant barriers to or distortions of U.S. 
exports of goods or services and U.S. foreign direct 
investment. The report must also include information on any 
action taken (or reasons for no action taken) to eliminate any 
measure identified, as well as information with respect to 
section 301, negotiations or consultations with foreign 
governments, and foreign anticompetitive practices that 
adversely affect U.S. exports. The report is submitted to the 
appropriate committees of the House and to the Senate Committee 
on Finance. After submission of the report, the USTR must 
consult and take into account the views of these congressional 
committees.
---------------------------------------------------------------------------
    \31\ Public Law 93-618, 19 U.S.C. 2241.
---------------------------------------------------------------------------
    Section 182 of the Trade Act of 1974,\32\ as added by 
section 1303(b) of the 1988 Act and amended by the North 
American Free Trade Agreement Implementation Act and the 
Uruguay Round Agreements Act, requires the USTR to identify 
priority foreign countries that deny adequate and effective 
protection or fair and equitable market access for U.S. 
intellectual property rights, for purposes of action under 
section 301 (see further description under chapter 2).
---------------------------------------------------------------------------
    \32\ Public Law 93-618, 19 U.S.C. 2242.
---------------------------------------------------------------------------

                  Telecommunications Trade Act of 1988

    The Telecommunications Trade Act of 1988, under sections 
1371-1382 of the Omnibus Trade and Competitiveness Act of 1988 
and as amended by the Uruguay Round Agreements Act, provides 
specific trade negotiating authority and remedies to address 
the lack of foreign market openness in telecommunications 
trade. The Telecommunications Act requires the U.S. Trade 
Representative to investigate and designate foreign priority 
countries, taking into account acts, policies, and practices 
that deny mutually advantageous market opportunities to U.S. 
telecommunications exporters and their subsidiaries. Countries 
may be added or deleted from the list of designated countries 
at any time.
    The President is required to negotiate with the priority 
countries, drawing from a list of general and specific 
negotiating objectives, for the purpose of entering into 
bilateral or multilateral agreements that provide mutually 
advantageous market opportunities. If no agreement is reached, 
the Act requires the President to take whatever authorized 
actions are appropriate and most likely to achieve the general 
negotiating objectives, as defined by the specific objectives 
established by the President. The actions authorized are 
broadly similar to authorities available to the USTR under 
section 301 of the Trade Act of 1974, as amended.
    The Telecommunications Trade Act requires the USTR to 
conduct annual reviews to determine if a country has violated a 
telecommunications trade agreement or otherwise denies mutually 
advantageous market opportunities. In the case of an 
affirmative determination, it shall be treated as a trade 
agreement violation under section 301 of the Trade Act of 1974, 
as amended. In general, that section requires that in cases 
involving foreign violations of trade agreements or other 
``unjustifiable'' practices, the USTR must take retaliatory 
action in an amount equivalent in value to the foreign burden 
or restriction on U.S. commerce. Certain waivers are available 
to the USTR, under which no retaliation is required.
    Negotiating authority was provided concomitant with the 
general trade agreement authority provided in the Omnibus Trade 
and Competitiveness Act of 1988 (i.e., until its expiration in 
1993). Compensation authority also is provided, in the event 
that action is taken that violates U.S. obligations under the 
WTO.

Background and current status

    The Telecommunications Trade Act was intended to address 
the imbalance in market access for telecommunications goods and 
services between the United States and other countries that 
arose from increased deregulation of the U.S. market and court-
ordered divestiture by American Telephone and Telegraph (AT&T) 
of its local operating companies on January 1, 1984. These 
actions resulted in a U.S. market virtually devoid of barriers 
to the entry of foreign competitors. At the same time, however, 
major foreign markets were characterized by strict government 
regulations, procurement policies, standards, and other 
practices that resulted in limited competitive opportunities 
for U.S. and other foreign firms in those markets. Although the 
period authorized for telecommunications trade negotiations is 
coterminus with multilateral trade negotiating authority in the 
1988 Act, the separate negotiating authority is designed to 
permit increased flexibility in negotiating agreements in 
telecommunications trade. It permits the USTR to focus on 
priority countries whose barriers or practices pose the 
greatest impediment to market access by U.S. telecommunications 
firms and to tailor the negotiating priorities to address the 
specific circumstances in each country.
    In February 1989, the USTR (acting on behalf of the 
President) identified the European Community (EC) and Korea as 
priority foreign countries ``that deny U.S. telecommunications 
goods and services firms'' mutually advantageous market 
opportunites, based on information received during a 6-month 
consultation period with the private sector and Congress and 
initiated negotiations. The initial term for those negotiations 
was 18 months from the date of enactment (August 1988). At the 
end of the 18-month period in February 1990, the USTR extended 
the negotiations for an additional 1-year term, based on a 
finding that substantial progress had been made and that 
further progress was likely if the negotiations were continued. 
In February 1991, the USTR once again used the discretion 
provided in the Act to extend the negotiations with the EC and 
Korea for an additional year, on the basis of past and expected 
progress in the talks.
    The 1-year extension in 1991 was the last authorized under 
the Telecommunications Trade Act. The Act provides that if an 
agreement with each priority country which achieves the U.S. 
negotiating objectives was not reached by the end of that 1-
year period, the President must take ``whatever actions 
authorized . . . that are appropriate and most likely to 
achieve'' the negotiating objectives. In taking such action, 
the President is directed first to take those actions which 
most directly affect trade in telecommunications products and 
services of the priority foreign country, unless he determines 
that action against other economic sectors would be more 
effective in achieving the negotiating objectives.
    On February 21, 1992, the USTR announced that the United 
States and Korea had concluded the last of a series of 
agreements that would open access for competitive U.S. 
telecommunications goods and services providers in the Korean 
market on a fair and equitable basis. As a result, the 
President determined that Korea met the negotiating objectives 
set forth in section 1374 of the Omnibus Trade and 
Competitiveness Act of 1988 and no further action would be 
necessary. The annual review in 1993 of these agreements 
brought into question Korean compliance. After negotiations, 
Korea undertook in a clarifying letter to the United States a 
number of additional steps to ensure proper implementation of 
these agreements. On August 1, 1996, the USTR announced that 
changes in the Korean telecommunications market since 1992 have 
resulted in new barriers and identified Korea as a priority 
foreign country. The USTR stated that it would seek to 
negotiate an agreement with Korea to achieve U.S. objectives.
    While progress had been made with respect to the EC, 
several issues remained unresolved; in particular, the 
objective of securing nondiscriminatory access to EC 
government-owned telecommunications utilities for U.S. goods 
and services has not been met. Since the President specified 
action to address this issue under title VII of the 1988 Act 
(see description under Government Procurement), further action 
under section 1374 was not considered to be appropriate, 
thereby concluding this proceeding.
    In 1989, as part of the section 1377 review, USTR found 
Japan to be in violation of the Market-Oriented Sector-Specific 
(MOSS) Agreements in Telecommunications negotiated with Japan 
during the latter half of the 1980's. The MOSS Agreements 
consist of a series of commitments made by Japan concerning the 
regulation of and trade in telecommunications goods and 
services. As a result of the USTR finding and the ensuing 
initiation of retaliatory proceedings under section 1377(c), 
the United States and Japan reached the Third-Party Radio and 
Cellular Telephone Agreement in June 1989. The annual review of 
this agreement identified a potentially serious enforcement 
problem with cellular telephone provisions. U.S. meetings with 
Japan in the fall of 1993 failed to resolve this problem, and 
as a result, on February 15, 1994, the United States determined 
that Japan was not in compliance with the Agreement. Ensuring 
negotiations led to an agreement concluded on March 12, 1994 
which resolved U.S. concerns. On April 11, 1994, the government 
of Japan forwarded to USTR a deployment plan called for under 
the March 12 agreement. As a result, USTR terminated its 
affirmative determination under section 1377 on April 12.
    During the 1990 section 1377 review, the United States 
identified two MOSS Agreements compliance problems: provision 
of international value-added network services (IVANS) and 
foreign access to Japan's network channel terminating equipment 
(NCTE). Under the MOSS Agreements, the United States and Japan 
agreed in November 1988 on steps Japan would take to further 
liberalize its market for IVANS, resulting in the conclusion of 
an agreement on August 1, 1990. Subsequent agreements in 1991 
addressed technical concerns. Negotiations on NCTE issues 
resulted in the July 25, 1990 agreement that committed Japan to 
liberalize its NCTE market. The agreement provides for the non-
discriminatory treatment of foreign manufacturers in Japan and 
provides terms governing NCTE use with current and future 
services.
    As part of the United States-Japan Framework for a New 
Economic Partnership initiated July 10, 1993, the United States 
and Japan identified government procurement of 
telecommunications products and services as a priority area for 
negotiation. These negotiations and subsequent agreements are 
discussed in greater detail in the Government Procurement 
chapter of this book.
    Under the WTO basic telecommunications services agreement, 
interventions by U.S. officials on behalf of U.S. industry 
abroad, in instances where trading partners' WTO obligations 
are implicated, have increased and led in several instances to 
resolution of complaints without resort to investigations under 
section 1377. Notwithstanding this favorable trend, monitoring 
and enforcement activities under section 1377 have increased 
substantially given that, pursuant to the WTO basic 
telecommunications agreement, the number of trading partners 
subject to annual review under section 1377 includes the entire 
WTO membership.
    The 1998 section 1377 review focused on implementation of 
bilateral and WTO commitments by Taiwan, Canada, Japan, and 
Mexico. In each case, the U.S. earned new agreements or 
important satisfaction of U.S. industry concerns. With respect 
to Taiwan, U.S. carriers requested a review of Taiwan's 
compliance with a 1996 agreement on wireless U.S. carriers 
requested a review of Taiwan's compliance with a 1996 agreement 
on wireless services. They noted that interconnection rates 
charged by the dominant carrier Chunghwa Telecommunications Co. 
(CHT) were significantly above cost and posed a major 
competitive impediment in the wireless services market. These 
rates appeared inconsistent with the terms of the 1996 
agreement, which mandated cost-based interconnection rates. 
Based on this complaint, USTR negotiated an agreement, 
concluded on February 20, 1998, which required CHT to reduce 
its interconnection rates by almost 30 percent in 1998, and to 
ensure that these rates are completely cost-based by 2001.
    Canada and Mexico were also identified in 1998 as countries 
that appeared to be in violation of their commitments under the 
WTO. A Canadian regulatory proceeding has since eliminated the 
international bypass restriction that was the focus of U.S. 
industry's complaint. Despite bilateral discussions with Mexico 
in 1998 and 1999, several important issues regarding Mexico's 
implementation of its WTO telecom commitments remain under 
investigation, including Mexico's failure to produce lower net 
domestic interconnection costs for new entrants, and the 
question whether Telmex (the dominant Mexican carrier and 
former monopoly operator) is engaging in anti-competitive 
cross-subsidization of different telecom services. As a result, 
the out-of-cycle review on Mexico was extended for decision and 
in November 2000, the U.S. requested consultations as a first 
step toward the establishment of a WTO dispute settlement panel 
to examine Mexico's compliance of its telecommunications 
commitments.
    The 1999 section 1377 review focused on implementation of 
bilateral and WTO commitments by the European Community and 
Member States, Mexico, Germany and Japan. In each case, 
substantial progress was made in meeting the concerns of the 
U.S. industry. USTR's 1999 review of the European Community and 
Member States focused on the ``third generation'' (3G) mobile 
systems. Private sector and government representatives of the 
United States, Europe and other regions concluded in the 
International Telecommunications Union (ITU) in late-1999 a 
five-mode international recommendation for future 3G systems, 
which will allow all 3G systems to offer global roaming, high-
speed data and Internet access, full-motion video and other 
sophisticated multimedia services. However, certain decisions 
in Europe suggest a strategy to promote pan-European and global 
adoption of a system using only two of the five modes, which 
could disadvantage U.S. users as well as manufactures and 
service suppliers in the United States, European and third 
country markets. European Commission officials, in bilateral 
discussions and in responses to a series of U.S. letters 
expressing concern, have pledged repeatedly that EU Member 
States will not excluded the possibility of licensing use of 
the other three modes of the ITU recommendation. Most, if not 
all, EU Member States that have already instituted 
authorization systems for 3G services have hewed to this 
pledge.
    Japan came under close scrutiny in the 1377 review for 
over-priced interconnection rates that effectively prevent 
competition in Japan's local market, as well as for prohibiting 
the routing of both domestic and international traffic via 
combinations of owned and leased network facilities. Japan 
committed to address these issues in the context of the Second 
Joint Status Report under the Enhanced Initiative on 
Deregulation and Competition Policy released in May 1999.
    In 2000, out-of-cycle reviews were initiated under section 
1377 regarding compliance by Germany, Mexico, the United 
Kingdom, and South Africa. The review on Germany focused on 
continued excessive delays by Deutsche Telekom (``DT'') in 
providing interconnection to competing carriers; excessive 
license fees charged by the German government; and a refusal by 
DT to perform billing and collection services for new entrants 
absent a regulatory mandate. With respect to South Africa, the 
review focused on whether South Africa is failing to ensure 
that its dominant telecommunications supplier (``Telkom'') 
provide access to and use of the private lines needed for the 
competitive supply of value-added network services (``VANS'').

   Normal Trade Relations or Most-Favored-Nation (Nondiscriminatory) 
                               Treatment

    Nondiscriminatory treatment of trading partners has been a 
basic element of international trade for several centuries, 
although its scope, application, and terminology in U.S. law 
have changed as the complexity of trade among the nations has 
increased. Nondiscriminatory treatment and the principle 
underlying it are often referred to as the ``most-favored-
nation'' (MFN) treatment or principle. While the MFN principle 
remains firmly in place as a fundamental concept governing U.S. 
trade relations, the term ``most-favored-nation'' was recently 
replaced with the term ``normal trade relations'' in all U.S. 
trade laws and regulations.\33\ This was done to clear up 
confusion and more clearly reflect the principles of U.S. trade 
policy. In the following summary, the term ``MFN'' is retained 
to describe the international obligation, while ``NTR'' is used 
to describe U.S. law since 1998.
---------------------------------------------------------------------------
    \33\ Public Law 105-206, approved July 22, 1998.
---------------------------------------------------------------------------
    MFN had its orgins in international commercial agrements, 
whereby the signatories extend to each other treatment in trade 
matters which is no less favorable than that accorded to a 
nation which is the ``most favored'' in this respect. The 
effect of such treatment is that all countries to which it 
applies are ``the most favored'' ones; hence, all are treated 
equally. In the context of U.S. tariff legislation, NTR means 
that the products of a country given such treatment are subject 
to lower rates of duty (found in column 1 of the Harmonized 
Tariff Schedule (HTS) of the United States), which have 
resulted from various rounds of reciprocal tariff negotiations. 
Products from countries not eligible for NTR under U.S. law are 
subject to higher rates of duty (found in column 2 of the HTS), 
which are essentially the rates of duty enacted by the Tariff 
Act of 1930.
    Prior to 1934, the United States accorded MFN treatment to 
its trading partners reciprocally only within the scope of 
commercial agreements containing an MFN clause. Section 350 of 
the Tariff Act of 1930, as added by the Trade Agreements Act of 
1934, in effect required the nondiscriminatory application to 
all countries of tariff and trade concessions granted in 
bilateral agreements, whether or not those countries had 
agreements with the United States containing the MFN clause.
    By becoming a signatory of the General Agreement on Tariffs 
and Trade, the United States, as of January 1, 1948, also 
accepted the basic obligation of GATT Article I to accord 
unconditional MFN status to all other signatories. Thus, MFN or 
NTR status is extended by the United States to foreign 
countries as a matter not only of U.S. domestic law but also as 
an international obligation.
    The unconditional and unlimited MFN policy was changed 
after the enactment of section 5 of the Trade Agreements 
Extension Act of 1951,\34\ which directed the President to 
withdraw or suspend MFN status from the Soviet Union and all 
countries under the control of international communism. This 
action was prompted by the outbreak of the Korean War and the 
support that these countries were giving to North Korea and 
China. As implemented, this directive was applied to all then-
existing Communist countries except Yugoslavia.
---------------------------------------------------------------------------
    \34\ Public Law 49-50, ch. 141, approved June 16, 1951.
---------------------------------------------------------------------------
    In December 1960, President Eisenhower revoked the 
suspension of MFN status with respect to Poland. President 
Kennedy suspended MFN status with respect to Cuba in May 1962, 
pursuant to a new legislative requirement contained in section 
401 of the Tariff Classification Act of 1962.\35\ The Tariff 
Classification Act also enacted the new Tariff Schedules of the 
United States, which for the first time, included in a general 
headnote a current list of countries without MFN status. 
Section 231 of the Trade Expansion Act of 1962,\36\ as amended 
by section 402 of the Foreign Assistance Act of 1963, expanded 
the scope of the suspension of MFN status by applying it to 
``any country or area dominated by Communism,'' unless the 
President determined that the continued application of MFN 
status to Communist countries to which it was being applied at 
the time of the enactment of the Trade Expansion Act (i.e., to 
Poland and Yugoslavia) was in the national interest. The 
President made such a determination for both countries in March 
1964.
---------------------------------------------------------------------------
    \35\ Public Law 87-566, approved May 24, 1962.
    \36\ Public Law 87-794, approved October 11, 1962, 19 U.S.C. 1351.
---------------------------------------------------------------------------
    The statutory provisions affecting the U.S. MFN policy and 
its practical implementation remained unchanged thereafter 
until enactment of the Trade Act of 1974. Subsequent amendments 
to U.S. MFN policy were made in the Customs and Trade Act of 
1990.\37\ As discussed above, ``MFN'' terminology was changed 
to ``NTR'' in all trade laws and regulations in the Internal 
Revenue Service Restructuring and Reform Act of 1997.\38\
---------------------------------------------------------------------------
    \37\ Public Law 101-382, approved August 20, 1990.
    \38\ Public Law 105-206, approved July 22, 1998.
---------------------------------------------------------------------------

The Normal Trade Relation or MFN principle under present law

    The basic statute currently in force with respect to the 
NTR treatment of U.S. trading partners is section 126 of the 
Trade Act of 1974.\39\ Section 126 contains the general 
requirement that any duty or other import restriction 
proclaimed to carry out any trade agreement applies on an MFN 
basis to products of all foreign countries, except as otherwise 
provided by law. The key provision embodying such exceptions 
with respect to tariff treatment is General Note 3(b) of the 
HTS, which contains the list of countries denied NTR tariff 
status with respect to their exports to the United States. (See 
list under chapter 1.) Section 1105(a) of the Omnibus Trade and 
Competitiveness Act of 1988 \40\ applies section 126(a) to 
trade agreements entered into under section 1102 of that Act, 
which includes the North American Free Trade Agreement and the 
Uruguay Round Agreements.
---------------------------------------------------------------------------
    \39\ Public Law 93-618, 19 U.S.C. 2136.
    \40\ Public Law 100-418, 19 U.S.C. 2904.
---------------------------------------------------------------------------
    Other measures, most notably the Generalized System of 
Preferences, the Caribbean Basin Initiative, the African Growth 
and Opportunity Act, the Andean Initiative, the United States-
Israel Free Trade Area, the North American Free Trade 
Agreement, and tariff treatment of least developed developing 
countries, provide specifically for application of preferential 
duty treatment for eligible countries and products under 
certain circumstances. This preferential tariff status grants 
terms that are more favorable than those granted to other 
countries which otherwise receive NTR treatment from the United 
States. (See separate sections and chapter 1.)
    With respect to nontariff measures, section 1103(a) of the 
Omnibus Trade and Tariff Act of 1988 requires the President to 
recommend to the Congress that benefits and obligations of a 
particular agreement apply solely to the parties to that 
agreement or not apply uniformly to all parties, if such 
application is consistent with the Agreement. The Agreement on 
Subsidies and Countervailing Duties and the Agreement on 
Government Procurement, negotiated during the Tokyo Round of 
GATT multilateral trade negotiations, were implemented by the 
United States on a non-MFN basis. The Uruguay Round Agreement 
on Subsidies and Countervailing Measures now applies to all 
countries that become members of the World Trade Organization. 
The renegotiated GATT Government Procurement Agreement will 
continue to be implemented on a non-MFN basis.

Nonmarket economy countries

    The Trade Act of 1974 repealed section 231 of the Trade 
Expansion Act of 1962. Title IV of the Trade Act of 1974,\41\ 
as amended, presently regulates the extension of NTR tariff 
treatment to nonmarket economy countries. Section 401 directs 
the President to continue to deny NTR treatment to any country 
to which it was denied on the date of the enactment of the 
Trade Act (i.e., all Communist countries as of January 3, 1975, 
except Poland and Yugoslavia). Section 402 also denies NTR 
treatment (as well as access to U.S. government credits, or 
credit or investment guarantees) to any nonmarket economy 
country ineligible for NTR treatment on the date of enactment 
of the Trade Act and which the President determines denies or 
seriously restricts or burdens its citizen's right to emigrate.
---------------------------------------------------------------------------
    \41\ Public Law 93-618, as amended by P.L. 96-39, P.L. 100-418, and 
P.L. 101-382, 19 U.S.C. 2431.
---------------------------------------------------------------------------
    A country subject to the ban imposed by section 401 may 
gain NTR status only by fulfilling two basic conditions: (1) 
compliance with the requirements of the freedom of emigration 
provisions under section 402 of the Trade Act; and (2) 
conclusion of a bilateral commercial agreement with the United 
States under section 405 of the Trade Act providing reciprocal 
nondiscriminatory treatment.
    The provisions of section 402, commonly referred to as the 
Jackson-Vanik amendment, allow a non-NTR, nonmarket economy 
country to receive NTR status (and access to U.S. financial 
facilities) only if the President determines that it permits 
free and unrestricted emigration of its citizens. If the 
President determines that a country is in full compliance with 
the Jackson-Vanik freedom of emigration requirements, he must 
submit a report to the Congress by June 30 and December 31 of 
each year that such country receives NTR treatment, describing 
the nature of the country's emigration laws and policies. The 
country's NTR status may be revoked if a joint resolution 
disapproving the December 31 compliance report is enacted into 
law within 90 legislative days of the delivery of the report to 
Congress. If such a resolution is enacted, the country's NTR 
status is rescinded, effective 60 calendar days after 
enactment.
    Section 402 also authorizes the President to waive the 
requirements for full compliance of the particular country with 
the Jackson-Vanik requirements, if he determines that such 
waiver will substantially promote the objectives of the freedom 
of emigration provisions and if he has received assurances that 
the emigration practices of the country will lead substantially 
to the achievement of those objectives. The President may, at 
any time, terminate by executive order any waiver granted under 
authority of section 402.
    The President's waiver authority is subject to annual 
renewal. The renewal procedure under section 402(d)(1) requires 
the President, if he determines that waiver authority extension 
will substantially promote freedom of emigration objectives, to 
submit to the Congress a recommendation for a 12-month 
extension of the waiver authority within 30 days prior to its 
expiration (i.e., by June 3 each year), together with his 
reasons for the recommendation and a determination with respect 
to each country for which a waiver is in effect that the 
continuation of the waiver will substantially promote the 
freedom of emigration objectives.
    Under the terms of the 1974 Act, as amended, the extension 
of the waiver authority for an additional 12-month period is 
automatic unless a joint resolution disapproving such extension 
either generally or with respect to a specific country is 
enacted into law within 60 days after the expiration of the 
previous waiver authority. The enactment of such resolution 
would rescind the waiver authority (and with it the grant of 
the NTR status) with respect to countries covered by the 
resolution, effective 60 days after its enactment.
    Presidential authority to extend NTR status to a country 
excluded under section 401 may be utilized only as long as a 
bilateral commercial agreement between the United States and 
the country involved remains in force. Sections 404 and 405 of 
the Trade Act of 1974 as amended authorize the President to 
conclude such agreements, which must contain various 
provisions, including safeguards against disruptive imports, 
intellectual property rights, trade promotion, and 
consultations. Agreements and implementing proclamations can 
take effect only if a joint resolution of approval is enacted 
into law under the fast track procedures of section 151 of the 
Trade Act. Agreements may remain in force for no more than 3 
years, renewable for additional 3-year periods (without any 
congressional approval) if past operation has been found 
satisfactory.
    Current provisions providing for the use of joint 
resolutions to approve trade agreements with nonmarket economy 
countries and to disapprove presidential waivers and compliance 
reports were adopted as part of the Customs and Trade Act of 
1990. The amendments were made in response to a 1983 Supreme 
Court ruling in Immigration and Naturalization Service v. 
Chadha et al., which raised serious questions about the 
constitutionality of the use of concurrent or one-house 
resolutions for congressional approval and disapproval actions, 
as previously provided for in the Jackson-Vanik amendment. The 
court ruled that any action of a legislative nature must be 
taken by both houses of Congress and presented to the President 
for signature or veto.

Application of MFN/NTR treatment

    Presidential authority to waive the emigration requirements 
for extension of NTR treatment under title IV of the Trade Act 
of 1974 has been extended annually since 1976. Between 1976 and 
1989, the waiver authority and the authority to conclude 
bilateral trade agreements and grant MFN status was used only 
three times. MFN treatment was extended to Romania effective 
August 3, 1975; to Hungary effective July 7, 1978; and to the 
People's Republic of China effective February 1, 1980. Waivers 
were continued annually for all three countries and all three 
underlying bilateral agreements were extended, when 
appropriate, for additional 3-year periods by presidential 
determinations of their satisfactory operation.
    Although disapproval resolutions and alternative 
conditional NTR legislation were considered by the Congress, 
NTR treatment has continued uninterrupted for the People's 
Republic of China under annual renewals of the waiver 
authority.

People's Republic of China

    On June 3, 1999, the President announced his decision to 
waive for another year the freedom of emigration requirements 
in Title IV of the Trade Act of 1974 with respect to People's 
Republic of China, thereby granting normal trade relations 
(NTR) treatment China between July 1, 1999, and June 30, 2000. 
On May 15, 2000, Chairman Archer introduced H.R. 4444, to 
authorize extension of nondiscriminatory treatment (normal 
trade relations treatment) to the People's Republic of China. 
As introduced, the bill would grant the President the authority 
to determine that Title IV of the Trade Act should no longer 
apply to the People's Republic of China upon its accession to 
the WTO if he transmits a report to Congress certifying that 
the terms and conditions for accession of China to the WTO are 
at least equivalent to those agreed to in the November 15, 
1999, bilateral agreement between the United States and China.
    As amended by the Ways and Means Committee, H.R. 4444 
included a provision codifying the import surge mechanism 
negotiated as part of the 1999 U.S.-China bilateral agreement. 
Procedures for this new ``import surge mechanism'' are modeled 
after Section 406 of the Trade Act of 1974, as amended, with 
certain changes to conform to the requirements of the bilateral 
trade agreement. The legislation also: (1) establishes clear 
standards for the application of Presidential discretion in 
providing relief to injured industries and workers; (2) 
authorizes the President to provide a provisional safeguard in 
cases where ``delay would cause damage which it would be 
difficult to repair,'' as permitted under the United States-
China Agreement; and (3) implements a provision in the 
Agreement concerning trade diversion.
    When H.R. 4444 was considered in the House, the House 
adopted H. Res. 510, which provided for an amendment in the 
nature of a substitute to H.R. 4444. The amendment included the 
text of H.R. 4444, as reported from the Committee, and 
additional language establishing a Congressional-Executive 
Commission on China to focus on monitoring human rights, 
including internationally recognized core labor standards and 
religious freedom. The legislation also included provisions 
that: (1) require USTR to submit an annual report on China's 
compliance with WTO obligations; (2) provide that the United 
States will seek an annual review of China's compliance with 
its WTO obligations in the WTO as part of China's Protocol of 
Accession; (3) establish a task force on the prohibition on the 
importation of products of forced or prison labor; and (4) 
authorize additional resources for monitoring and enforcing 
China's compliance with trade agreements. The legislation also 
contains a sense of Congress that the accession of Taiwan and 
the People's Republic of China to the WTO should be considered 
at the same WTO General Council meeting. Finally, the 
legislation contains a number of other provisions not in the 
jurisdiction of the Committee, such as the authorization of 
funds to assist the development of rule of law and democracy in 
China. H.R. 4444, as amended, passed the House on June 24, 
2000, by a vote of 237-197. The bill was signed into law by the 
President on October 10, 2000 (Public Law 106-286). The Ways 
and Means Committee continues to monitor the progress China is 
making in negotiations to join the WTO, which have not 
concluded as of this printing.
    On June 2, 2000, the President announced his decision to 
waive for another year the freedom of emigration requirements 
in Title IV of the Trade Act of 1974 with respect to China, 
thereby granting China NTR status between July 1, 2000 and June 
30, 2001.

Romania

    In 1988, the President did not exercise the annual waiver 
authority with respect to Romania, issuing a proclamation on 
June 28, announcing his decision to allow the waiver to expire 
and to withdraw MFN treatment in response to the decision by 
the government of Romania to renounce the renewal of MFN 
subject to the terms of Jackson-Vanik. Romania's MFN status and 
its eligibility for U.S. government-supported export credits 
expired on July 3, 1988. On March 11, 1992, the Department of 
State issued a statement announcing that it had informed the 
Romanian government that the United States was prepared to sign 
a new bilateral trade agreement in light of Romania's progress 
toward democratic pluralism and a market economy and its desire 
for closer bilateral relations. The President issued a waiver 
from the freedom of emigration requirements for Romania on 
August 17, 1991, and signed a new bilateral trade agreement on 
April 3, 1992. However, in view of the concerns raised about 
the Romanian government's continued commitment to democratic 
reform, House consideration of H.J. Res. 512, approving the 
extension of MFN treatment to Romania, was defeated on 
September 30. H.J. Res. 228, approving the extension of MFN, 
was reintroduced on July 13, 1993. In recommending approval, 
the House Ways and Means Committee report noted that there had 
been substantial progress on democratization and human rights, 
and additional significant improvements had been made since 
1992. The resolution was subsequently passed by the House on 
October 12, and the Senate on October 21. H.J. Res. 228 was 
approved by the President and signed into law on November 2, 
1993.\42\
---------------------------------------------------------------------------
    \42\ Public Law 103-133, approved November 2, 1993.
---------------------------------------------------------------------------
    Romania continued receiving MFN treatment under a 
presidential waiver from the Jackson-Vanik freedom of 
emigration criteria until the President found Romania to be in 
full compliance with those requirements on May 19, 1995. On 
March 26, 1996, H.R. 3161 was introduced to provide the 
President with the authority to determine that title IV should 
no longer apply with respect to Romania and to extend 
unconditional MFN status to that country. Upon recommending 
approval of the bill, the Committee noted that Romania is a 
member of the World Trade Organization (WTO) and that an 
extension of unconditional MFN is necessary in order for the 
United States to avail itself of all rights under the WTO with 
respect to Romania. H.R. 3161 passed the House on July 17, 1996 
and the Senate on July 19. The bill was signed into law by the 
President on August 3.\43\ On November 7, the President issued 
a proclamation removing the application of title IV from 
Romania and extending unconditional MFN treatment to the 
products of that country.
---------------------------------------------------------------------------
    \43\ Public Law 104-171, approved August 3, 1996.
---------------------------------------------------------------------------

Hungary and the Czech Republic

    Since 1989, presidential authority under title IV has been 
used frequently, in response to the collapse of Communist 
domination in Eastern and Central Europe. On October 25, 1989, 
Hungary became the first country ever found in full compliance 
with the title IV freedom of emigration requirements, thereby 
becoming eligible for open-ended NTR status, as long as the 
trade agreement remained in force and Hungary remained in full 
compliance.
    On February 20, 1990, the President issued a waiver for 
Czechoslovakia, making that country eligible to receive U.S. 
government credits and credit and investment guarantees. 
Following congressional approval of a trade agreement, MFN 
treatment was extended to Czechoslovakia on November 17, 1990. 
The President continued the waiver on June 3, 1991, and then 
issued a determination on October 16 that Czechoslovakia's 
emigration policies met the Jackson-Vanik freedom of emigration 
requirements.
    Sections 1 and 2 of Public Law 102-182, signed on December 
4, 1991, provided for full normalization of MFN trading 
relations with both Hungary and Czechoslovakia, based on 
findings of their respect for fundamental human rights, 
policies of free emigration, and the political and economic 
reforms undertaken by both countries. Section 2 of that law 
authorized the President to terminate the application of title 
IV of the Trade Act of 1974 and extend MFN status to either or 
both Hungary and Czechoslovakia. Unconditional MFN treatment 
was granted to both countries in April 1992. Following the 
dissolution of Czechoslovakia in 1993, the independent 
countries of the Czech Republic and Slovakia retained their MFN 
status, having assumed the rights and obligations of the 
earlier agreement between the United States and Czechoslovakia.

German Democratic Republic (East Germany)

    Section 142 of the Customs and Trade Act of 1990 authorized 
the President to extend MFN treatment to the German Democratic 
Republic (East Germany), thus superseding the requirements of 
title IV, in light of the rapid progress then being made toward 
German reunification. However, the Congress expressed the 
strong view that such action should not be taken before MFN 
status was granted to Czechoslovakia under authority of title 
IV, since Czechoslovakia had followed all the procedures 
required by that title. The authority of section 142 was never 
used, however. The President issued a waiver for East Germany 
on August 15, 1990; that formerly independent country received 
MFN status on October 3, 1990 as part of a reunified Germany.

Former Soviet Union

    The Bush Administration entered into negotiations for a new 
bilateral trade agreement with the Soviet Union in response to 
the advent of ``perestroika'' and ``glasnost'' under the 
leadership of Soviet President Gorbachev, the subsequent 
collapse of communist regimes in Eastern and Central Europe, 
substantial increases in emigration rates, and to encourage 
further reforms. That agreement with its side letters was 
signed by Presidents Bush and Gorbachev on June 1, 1990. The 
President issued a waiver from the freedom of emigration 
requirements for the Soviet Union on December 29, 1990 and 
again on June 3, 1991. However, Soviet violence and economic 
sanctions against the independence movements in the Baltic 
states and Soviet republics resulted in delay of the submission 
of the Agreement to the Congress until August 2, 1991. 
Following independence of the Baltic states in September, the 
President resubmitted the trade agreement and presidential 
proclamation on October 9 and a new joint resolution was 
introduced omitting references to Estonia, Latvia, and 
Lithuania. The joint resolution approving the extension of MFN 
treatment to the products of the Soviet Union was passed by the 
Congress in November and signed into law on December 9, 
1991.\44\ Subsequently, bilateral trade agreements granting 
reciprocal MFN treatment have been signed with governments of 
the newly-independent republics of the former Soviet Union.\45\ 
No further congressional action is required as long as these 
agreements ratified by the republics reflect only technical 
changes in the previously approved original agreement signed by 
the former Soviet Union.
---------------------------------------------------------------------------
    \44\ Public Law 102-197.
    \45\ As of this writing, bilateral trade agreements have been 
signed and ratified and conditional NTR treatment granted to the 12 
republics of Russia, Ukraine, Kyrgyzstan, Moldova, Armenia, Belarus, 
Georgia, Kazakhstan, Tajikistan, Turkmenistan, and Uzbekistan, and 
Azerbaijan.
---------------------------------------------------------------------------
    Title IV of the Trade Act of 1974 applied to the Baltic 
states of Estonia, Latvia, and Lithuania by virtue of their 
forcible incorporation into the former Soviet Union. Following 
restoration of their independence from the Soviet Union on 
September 6, 1991, legislation \46\ extended MFN treatment to 
the products of the three Baltic states, notwithstanding title 
IV or any other provision of law and terminated the application 
of title IV to these countries.
---------------------------------------------------------------------------
    \46\ Public Law 102-182, title I, approved December 4, 1991.
---------------------------------------------------------------------------

Georgia

    Georgia first received conditional normal trade relations 
from the United States in 1992 under a Presidential waiver from 
the freedom of emigration requirements in the Jackson-Vanik 
amendment. In 1997, Georgia was found to be in full compliance 
with the Jackson-Vanik requirements, but its trade status 
remained subject to annual compliance reviews. On December 28, 
1998, the President submitted a report to Congress, as required 
by law, on the continued compliance of Georgia with the freedom 
of emigration requirements if the Jackson-Vanik amendment 
(House Document 106-5). The House received similar reports on 
July 2, 1999 (No House Document Number), on January 7, 2000 
(House Document 106-164), and on June 30, 2000 (House Document 
106-265).
    Public Law 106-476, signed into law on November 9, 2000, 
authorized the President to extend normal trade relations to 
Georgia.

Kyrgyzstan

    Kyrgyzstan first received conditional normal trade 
relations from the United States in 1992 under a Presidential 
waiver from the freedom of emigration requirements in the 
Jackson-Vanik amendment to the Trade Act of 1974. In 1997, 
Kyrgyzstan was found to be in full compliance with the Jackson-
Vanik requirements, but its trade status remained subject to 
annual complaiance reviews. On December 28, 1998, the President 
submitted a report to Congress, as required by law, on the 
continued compliance of Kyrgyzstan with the freedom of 
emigration requirements in the Jackson-Vanik amendment (House 
Document 106-5). Similar reports were submitted on July 2, 1999 
(No House Document Number) and on January 7, 2000 (House 
Document 106-104). Public Law 106-200, signed into law on May 
18, 2000, authorized the President to extend unconditional 
normal trade relations to Kyrgyzstan.

Moldova

    Moldova first received conditional normal trade relations 
from the United States in 1992 under a Presidential waiver from 
the freedom of emigration requirements in the Jackson-Vanik 
amendment to the Trade Act of 1974. In 1997, Moldova was found 
to be in full compliance with the Jackson-Vanik requirements, 
but its trade status remained subject to annual compliance 
reviews. On December 28, 1998, the President submitted a report 
to Congress, as required by law, on the continued compliance of 
Moldova with the freedom of emigration requirements in the 
Jackson-Vanik amendment (House Document 106-5). On July 2, 
1999, the President submitted a report to Congress, as required 
by law, on the continued compliance of Moldova with the freedom 
of emigration requirements in the Jackson-Vanik amendment (No 
House Document Number). On January 7 and June 30, 2000, the 
President submitted similar reports (House Documents) 106-164 
and 106-265).

Bulgaria and Mongolia

    The President issued a waiver from the freedom of 
emigration requirements for Bulgaria on January 22, 1991, and 
for Mongolia on January 23, 1991; the waivers were continued 
for both countries on June 3, 1991. Bilateral trade agreements 
providing MFN treatment for products of each of these two 
countries were submitted to the Congress on June 25, 1991. 
Joint resolutions approving the extension of MFN treatment to 
Bulgaria and Mongolia were passed by the Congress in October 
and signed by the President on November 13, 1991.\47\
---------------------------------------------------------------------------
    \47\ Public Law 102-157 and Public Law 102-158.
---------------------------------------------------------------------------
    Bulgaria continued to receive MFN treatment under a 
presidential waiver from the Jackson-Vanik freedom of 
emigration criteria until the President found the country to be 
in full compliance with the statutory requirements in June 
1993. On January 5, 1996, H.R. 2853 was introduced to provide 
the President with the authority to determine that title IV 
should no longer apply with respect to Bulgaria and to extend 
unconditional MFN status to the products of that country. In 
recommending approval of the bill, the Committee noted that 
Bulgaria was in the process of acceding to the WTO and that an 
extension of unconditional MFN would be necessary in order for 
the United States to avail itself of all rights under the WTO 
at the time of Bulgaria's accession. H.R. 2853 passed the House 
on March 5, 1996 and the Senate on June 28. The bill was signed 
into law by the President on July 18.\48\ On September 27, the 
President issued a proclamation effective October 1 removing 
the application of title IV from Bulgaria and extending 
unconditional MFN treatment to the products of that country.
---------------------------------------------------------------------------
    \48\ Public Law 104-162, approved July 18, 1996.
---------------------------------------------------------------------------

Mongolia

    In 1996, Mongolia was found to be in full compliance with 
the Jackson-Vanik requirements, but its trade status remained 
subject to annual compliance reviews. On February 11, 1999, the 
President submitted a report to Congress, as required by law, 
on the continued compliance of Mongolia with the freedom of 
emigration requirements in the Jackson-Vanik amendment (House 
Document 106-19). Public Law 106-36, signed into law on June 
25, 1999, authorized the President to determine that title IV 
of the Trade Act of 1974 (the Jackson-Vanik amendment) should 
no longer apply to Mongolia and to proclaim the extension of 
nondiscriminatory treatment (normal trade relations treatment) 
to that country.
    Prusuant to the provisions of Public Law 106-36, the 
President issued Proclamation 7207 on July 1, 1999, determining 
that title IV of the Trade Act of 1974 should no longer apply 
to Mongolia and declaring the extension of nondiscriminatory 
treatment to the products of that country.

Albania

    On May 14, 1992, a bilateral trade agreement was signed 
with Albania and a Presidential waiver was issued on May 20. A 
joint resolution approving the granting of MFN treatment to the 
products of Albania was enacted on August 26, 1992\49\ In 1997, 
Albania was found to be in full complaince with the Jackson-
Vanik requirements, but its trade status remained submject to 
annual compliance reviews for several years. On February 2, 
1999, the President submitted a report to Congress, as required 
by law, on the continued compliance of Albania with the freedom 
of emigration requirements in the Jackson-Vankik amendment 
(House Doucment 106-16). The President submitted a similar 
report on February 9, 2000 (House Document 106-195). Public Law 
106-200, signed into law on May 19, 2000, authroized the 
President to determine that the Jackson-Vanik amendment should 
no longer apply to Albania and to extend non-discriminatory 
(normal trade relations treatment) to Albania. Pursuant to the 
Provisions of Public Law 106-200, the President issued 
Proclamation 7326 on June 29, 2000 determining that title IV of 
the Trade Act of 1974 should no longer apply to Albania and 
declaring the extension of nondiscriminatory NTR treatment to 
the products of that country.
---------------------------------------------------------------------------
    \49\ Public Law 102-363.
---------------------------------------------------------------------------

Armenia

     Armenia first received conditional normal trade relations 
from the United States in 1992 under a Presidential waiver from 
the freedom of emigration requirements in Title IV of the Trade 
Act of 1974 (the Jackson-Vanik amendment). In 1997, Armenia was 
found to be in full compliance with the Jackson-Vanik 
requirements, but its trade status remained subject to annual 
compliance reviews. On December 28, 1998, the President 
submitted a report to Congress, as required by law, on the 
continued compliance of Armenia with the freedom of emigration 
requirements in the Jackson-Vanik amendment (House Document 
106-5). On July 2, 1999, the President submitted similar 
report. (No House Document Number). On January 7, and June 30, 
2000, the President submitted additional reports to Congress, 
as required by law, on the continued compliance of Armenia with 
the freedom of emigration requirements in the Jackson-Vanik 
amendment (House Documents 106-164 and 106-265).

Poland

    Poland is exempt from denial of MFN under title IV of the 
Trade Act, but its unconditional MFN status was suspended by 
presidential proclamation effective November 1, 1982, under the 
authority of section 125(d) of the Trade Act. On February 23, 
1987, President Reagan restored MFN status to Poland by 
presidential proclamation as part of the last stage of removing 
sanctions imposed on Poland in 1982 in response to its action 
against Solidarity. MFN status for Afghanistan was suspended by 
presidential proclamation effective February 14, 1986, under 
the authority provided by section 118 of the Continuing 
Appropriations Act for fiscal year 1986.\50\
---------------------------------------------------------------------------
    \50\ Public Law 99-190, approved December 19, 1985.
---------------------------------------------------------------------------

The former Yugoslavia

    The former Yugoslavia is also not subject to the provisions 
of title IV. In response to the armed conflict and atrocities 
in the former Yugoslavia, legislation was initiated and passed 
late in the 102nd Congress withdrawing MFN treatment from 
Serbia and Montenegro; the other four newly-independent 
republics of Bosnia-Hercegovina, Croatia, Macedonia, and 
Slovenia retain MFN status. The legislation authorizes the 
President to restore MFN status to these two republics if he 
certifies to the Congress that certain conditions are 
fulfilled.\51\
---------------------------------------------------------------------------
    \51\ Public Law 102-420, approved October 16, 1992.
---------------------------------------------------------------------------

Cambodia, Laos, and Vietnam

    Because of a peculiarity in the wording of the initial MFN 
status-suspending provision and its mandatory continuation by 
section 401, Cambodia's MFN status was not subject to the terms 
and conditions of the Jackson-Vanik amendment. Specifically, 
the original administrative suspension in 1951 and its 
enactment as part of the Trade Expansion Act of 1962 applied to 
``any part of Cambodia, Laos, or Vietnam which may be under 
Communist domination or control.'' This qualified application 
of the suspension, based on the actual situation in each 
country involved, was in effect at the time of enactment of 
section 401, which predated the compete Communist takeover of 
Cambodia in May 1975. The language of the provision was not 
changed until enactment of the Harmonized Tariff Schedule (HTS) 
in the Omnibus Trade and Competitiveness Act of 1988, which 
listed ``Kampuchea'' in General Note 3(b) among those countries 
whose products were denied MFN treatment. Upon the formation of 
the freely elected Royal Cambodian government in 1993, the 
United States and Cambodia negotiated an agreement on bilateral 
trade relations and intellectual property rights protection, 
calling for a reciprocal extension of MFN status. On May 16, 
1995, H.R. 1642 was introduced to amend the HTS by striking 
``Kampuchea'' to allow for an extension of unconditional MFN 
treatment to Cambodia upon the effective date of a Federal 
Register notice that a trade agreement obligating reciprocal 
MFN treatment had entered into force. The bill also required 
the President to report to Congress, no later than 18 months 
after the date of enactment, on trade relations between the 
United States and Cambodia under the bilateral agreement. H.R. 
1642 passed the House on July 11, 1996 and the Senate on July 
25. The bill was signed into law by the President on September 
25.\52\ As of October 25, the products of Cambodia were 
extended unconditional MFN treatment pursuant to a Federal 
Register notice published by the U.S. Trade Representative that 
a bilateral trade agreement between the United States and 
Cambodia was signed on October 4.
---------------------------------------------------------------------------
    \52\ Public Law 104-203, approved September 25, 1996.
---------------------------------------------------------------------------

Vietnam

    Vietnam first received a Presidential waiver in 1998 from 
the freedom of emigration requirements in the Jackson-Vanik 
amendment to the Trade Act of 1974. However, because the 
bilateral trade agreement between the United States has not 
been transmitted to and approved by Congress, Vietnam is 
ineligible under Title IV of the Trade Act of 1974 to receive 
normal trade relations from the United States. The practical 
effect of the Jackson-Vanik waiver is to make Vietnam eligible 
for certain U.S. government credits, or investment or credit 
guarantee programs, provided that Vietnam meets the relevant 
program criteria. These programs, which lie outside the 
jurisdiction of the Committee on Ways and Means, include the 
Oversease Private Investment Corporation, the Export-Import 
Bank, and agricultural credit programs administered by the U.S. 
Depertment of Agriculture.
    On June 3, 1999, the President transmitted a letter and 
report to Congress on the continuation of Vietnam's Jackson-
Vanik waiver for the next 12-month period (House Document 106-
78). The President issued the waiver on the basis that it would 
substantially promote achievement of the objectives in the 
statute.
    On June 2, 2000, the President transmitted another letter 
and report to Congress on the continuation of Vietnam's 
Jackson-Vanik waiver for an additional 12 month period (House 
Document 106-252). During the 106th Congress the House defeated 
two resolutions which would have disapproved Presidential 
waiver determinations for Vietnam.
    In July 2000, the United States and Vietnam signed a 
bilateral commercial agreement. Upon approval of the agreement 
by Congress, Vietnam would be eligible for conditional normal 
trade relations, subject to a yearly determination by the 
President.

                     North American Trade Relations

    Section 1102 of the Omnibus Trade and Competitiveness Act 
of 1988 \53\ authorized the President to enter into 
multilateral or bilateral trade agreements, before June 1, 1993 
(extended until April 15, 1994, only for the GATT Uruguay Round 
of Multilateral Trade Negotiations) to reduce or eliminate 
tariff or nontariff barriers and other trade-distorting 
measures, subject to congressional consultation requirements 
under sections 1102 and 1103 and approval of implementing 
legislation under special fast track procedural rules of the 
House and Senate under section 151 of the Trade Act of 1974. 
The authorities provided the means to achieve the negotiating 
objectives set forth under section 1101 of the 1988 Act.
---------------------------------------------------------------------------
    \53\ Public Law 100-418, approved August 23, 1988, 19 U.S.C. 2901 
note.
---------------------------------------------------------------------------
    On August 12, 1992, President Bush announced the completion 
of negotiations of a comprehensive North American Free Trade 
Agreement (NAFTA). On September 18, the President officially 
notified Congress of his intention to enter into the Agreement, 
accompanied by reports of 38 private sector advisory committees 
on the draft Agreement as required by section 135 of the Trade 
Act of 1974, as amended. This notice was followed on October 7 
by the initialling of the draft legal text by the trade 
ministers of the three participating countries in San Antonio, 
Texas. The Agreement was signed on December 17, the expiration 
of the 90-day minimum notice period.
    Also on December 17, President-elect Clinton stated that he 
could not support the NAFTA as negotiated without additional 
side agreements covering the environment, workers, and import 
surges. On August 13, 1993, U.S. Trade Representative Michael 
Kantor announced completion of these supplemental agreements. 
He also announced a basic agreement on a new institutional 
structure for funding environmental infrastructure projects in 
the U.S.-Mexico border region. The NAFTA side agreements were 
signed in a White House ceremony on September 14, 1993.
    On November 4, 1993, President Clinton sent two letters of 
transmittal to the Congress covering: (1) the NAFTA text, 
together with the draft implementing bill, Statement of 
Administrative Action and supporting documents as required 
under section 1103(a) of the 1988 Act for congressional 
approval; and (2) the NAFTA supplemental agreements.
    As provided under section 151 of the Trade Act of 1974, the 
implementing legislation was introduced as H.R. 3450 in the 
House and S. 1627 in the Senate on November 4. On November 17, 
the House passed H.R. 3450. On November 20, the Senate passed 
the bill. The bill was then signed by the President and became 
public law on December 8, 1993. On December 15, 1993, President 
Clinton issued Presidential Proclamation 6641 to implement as 
of January 1, 1994 the tariff modification provisions under the 
North American Free Trade Agreement as provided for under 
section 1102(a) of the 1988 Act.\54\
---------------------------------------------------------------------------
    \54\ Proclamation No. 6641, 58 Fed. Reg. 68,191 (1993).
---------------------------------------------------------------------------

                  North American Free Trade Agreement

    The North American Free Trade Agreement is the most 
comprehensive trade agreement ever negotiated and creates the 
world's largest market for goods and services.
    The cornerstone of the Agreement is the phased-out 
elimination of all tariffs on trade between the United States, 
Canada, and Mexico. With respect to United States-Canada 
bilateral trade, all tariffs will be eliminated by 1999, as was 
agreed in the United States-Canada Free-Trade Agreement. As for 
United States-Mexico bilateral trade, most tariffs will be 
eliminated by 2004, although a few U.S. tariffs on potentially 
import-sensitive items will not be completely eliminated until 
2009. The NAFTA also reduces or eliminates a number of 
nontariff barriers to trade, liberalizes restrictions on 
investment and services, sets forth strong and comprehensive 
rules on intellectual property, and extends to the three 
countries the international system established under the United 
States-Canada Free-Trade Agreement for review of national 
determinations of dumping and subsidy practices.

     North American Free Trade Agreement Implementation Act of 1993

    The North American Free Trade Agreement Implementation Act 
of 1993 \55\ approved the Agreement (but not the supplemental 
agreements) and Statement of Administrative Action submitted to 
the Congress on November 4, 1993 and includes provisions which 
are necessary or appropriate to implement the Agreement in U.S. 
domestic law. U.S. law prevails over the Agreement if there is 
a conflict. The Agreement establishes a federal-state 
consultation process concerning NAFTA obligations affecting 
state laws. The Act establishes a federal-state consultation 
process to achieve conformity of state laws with the Agreement. 
No person other than the United States has a cause of action or 
defense under the Agreement.
---------------------------------------------------------------------------
    \55\ Public Law 103-182, approved December 8, 1993, 19 U.S.C. 3301 
note.
---------------------------------------------------------------------------
    The President is authorized to proclaim the modifications 
in U.S. duties to implement the scheduled phaseout and 
elimination of all tariffs required under various provisions of 
the NAFTA and to maintain the general level of concessions. The 
rules of origin in the Act, which are to ensure application of 
NAFTA preferential tariff treatment only to goods originating 
in Mexico or Canada, are enacted in the statute. The 
legislation implements U.S. obligations under the NAFTA to 
eliminate customs merchandising processing fees, restrict duty 
drawback, and revise country-of-origin marking requirements; 
amends penalties and recordkeeping requirements to enforce 
NAFTA rules of origin and other customs requirements; and 
requires monitoring of television and color picture tube 
imports.
    The legislation also includes procedures and criteria for 
applying bilateral and global import relief measures on 
Canadian and Mexican articles; implements NAFTA obligations 
that apply to certain agricultural commodities, intellectual 
property rights protection, temporary entry of business 
persons, standards and sanitary and phytosanitary measures, and 
corporate average fuel economy; and authorizes the waiver of 
discriminatory government purchasing restrictions on NAFTA-
covered procurement.
    The legislation implements into U.S. domestic law the 
institutional provisions of the NAFTA establishing binational 
panel and extraordinary challenge committee review of final 
antidumping and countervailing duty determinations, in lieu of 
domestic judicial review, including procedures and criteria for 
the selection of panelists appointed by the United States, and 
special procedures for the selection of federal judges for 
panels and committees. Objectives for future negotiations with 
NAFTA countries on subsidies and special procedures for 
industries facing subsidized competition pending development of 
subsidy rules are also included.
    Institutional provisions include authorization of a U.S. 
section of the NAFTA Secretariat, requirements relating to 
selection of dispute settlement panelists, and a preliminary 
process for considering possible future country accession to 
NAFTA, subject to congressional approval.
    Other provisions include the establishment of a NAFTA 
transitional adjustment assistance program of comprehensive 
benefits, including training and income support, for workers 
who may be laid off due to increased U.S. imports from Mexico 
or Canada or a shift in production to Mexico or Canada, and 
authorizes state self-employment assistance programs. Also 
included are a comprehensive report by the President on the 
operation and economic impact of the NAFTA after 3 years, a 
response to actions affecting U.S. cultural industries, a 
report on the impact of the NAFTA on motor vehicle exports to 
Mexico, a response to discriminatory tax measures, and 
authorization of a Center for the Study of Western Hemisphere 
Trade.
    With respect to the supplemental agreements, the 
legislation authorized U.S. participation in, and 
appropriations for, the Commissions on Labor Cooperation, 
Environmental Cooperation, and Border Environment Cooperation. 
It also includes provisions relating to U.S. membership in the 
North American Development Bank.

                  United States-Israel Trade Relations

    Title IV of the Trade and Tariff Act of 1984 \56\ amended 
section 102(b) of the Trade Act of 1974 to authorize the 
President to enter into a bilateral reciprocal trade agreement 
with Israel specifically providing for elimination or reduction 
of U.S. duties on products of that country as well as nontariff 
barriers, subject to congressional consultations and approval 
of implementing legislation under the expedited procedures of 
sections 102 and 151-154 of the Trade Act. As amended by 
section 401, the requirements for advance consultations and 90-
day advance notice to Congress of intent to enter into a trade 
agreement did not apply to a bilateral agreement with Israel. 
Title IV also contains basic provisions of U.S. laws required 
to be applied to the administration of the Agreement.
---------------------------------------------------------------------------
    \56\ Public Law 98-573, title IV, approved October 30, 1984.
---------------------------------------------------------------------------
    On November 29, 1983, President Reagan and Israeli Prime 
Minister Shamir agreed to proceed with bilateral negotiations 
on a United States-Israel free trade area, which the Israeli 
government originally proposed in 1981. Negotiations by the 
U.S. Trade Representative began in mid-January 1984 on the 
elements of an agreement to eliminate tariffs and other trade-
distorting practices between the two countries. The Agreement 
on the Establishment of a Free Trade Area Between the 
government of the United States of America and the government 
of Israel was signed on April 22, 1985. The President 
transmitted to the Congress on April 29 the text of the 
Agreement, a draft implementing bill, a statement of 
administrative action, and an explanation of the effects on 
existing law. The United States-Israel Free Trade Area 
Implementation Act of 1985 \57\ approved the free trade area 
agreement with changes in U.S. laws necessary and appropriate 
for its domestic implementation. The implementing bill was 
passed by both Houses of Congress in May and signed into law on 
June 11, 1985.
---------------------------------------------------------------------------
    \57\ Public Law 99-47, approved June 11, 1985, 19 U.S.C. 2112.
---------------------------------------------------------------------------

              Title IV of the Trade and Tariff Act of 1984

    In addition to providing the basic authority for a 
bilateral free trade area agreement with Israel, title IV of 
the Trade and Tariff Act of 1984, as amended, sets forth the 
rule-of-origin requirements that would apply to such an 
agreement as well as the application of import relief laws.
    Section 402 requires that any trade agreement entered into 
under section 102(b) with Israel provide for the reduction or 
elimination of duties only on articles that meet rule-of-origin 
requirements similar to those under the Caribbean Basin 
Initiative (CBI):
          (1) The article must be the growth, product or 
        manufacture of Israel or foreign materials or 
        components must be substantially transformed into a new 
        or different article grown, produced, or manufactured 
        in Israel. Related provisions are designed to prevent 
        qualification of minor pass-through operations and 
        transshipments;
          (2) The article must be imported directly from Israel 
        into the U.S. customs territory; and
          (3) At least 35 percent of the total value of the 
        article must consist of materials produced in Israel 
        plus direct cost of processing operations performed in 
        Israel, of which 15 percent may be U.S. content.
    Sections 403 and 406 of the 1984 Act make clear that 
existing trade laws available to domestic industries for relief 
from injurious import competition or unfair trade practices 
continue to apply to imports under the trade agreement with 
Israel. As under the CBI legislation, the President may suspend 
the reduction or elimination of any duty under the trade 
agreement with Israel and proclaim a duty as import relief 
under section 203 of the Trade Act of 1974 or as a national 
security measure under section 232 of the Trade Expansion Act 
of 1962. Alternatively the President may establish a margin of 
preference or maintain the duty reduction or elimination on 
Israeli articles while imposing relief on imports from other 
sources. The U.S. International Trade Commission must state in 
its report to the President on import relief investigations 
involving Israeli articles covered in a trade agreement whether 
and to what extent its injury findings and recommended relief 
apply to imports from Israel.
    Section 404 of the Trade and Tariff Act of 1984 applies a 
special procedure similar to that established under the CBI 
whereby petitions may be filed with the Secretary of 
Agriculture for emergency relief on perishable products from 
Israel pending action on a petition filed for normal import 
relief action. The Secretary must determine and report to the 
President within 14 days a recommendation for emergency action 
if he has reason to believe an agricultural perishable product 
from Israel is being imported in such increased quantities as 
to be a substantial cause or threat of serious injury to the 
U.S. industry. The President must determine within 7 days 
whether to take emergency action, which consists of withdrawing 
the reduction or elimination of duty and restoring the original 
rate pending final action on the import relief petition.

             United States-Israel Free Trade Area Agreement

    The free trade area with Israel was the first such 
arrangement negotiated by the United States with any foreign 
country aside from the bilateral free trade arrangement with 
Canada in the automotive sector only. The Agreement is an 
adjunct to existing multilateral obligations of both parties 
under the GATT/WTO; existing rights and obligations between the 
countries under the GATT or other agreements continue to apply 
unless specifically modified by the terms of the Agreement.
    The main element of the Agreement is the reciprocal 
elimination of tariffs on all products traded between the two 
countries by January 1, 1995 and the elimination of other 
restrictive regulations of commerce on bilateral trade as 
provided under Article XXIV of the GATT 1994 for free trade 
areas. Duties were eliminated by both countries over 10 years 
in four staging categories depending on the relative import 
sensitivity of articles for domestic producers. Duties on 
certain products were eliminated immediately as of September 1, 
1985.
    The Agreement also prohibits the introduction of new duties 
or quantitative restrictions in bilateral trade unless they are 
permitted by the Agreement or by the GATT. The government of 
Israel undertook specific commitments concerning the reduction 
and elimination of its export subsidy programs and limited its 
GATT right as a developing country to apply duties to protect 
infant industries. Both parties must review their veterinary 
and plant health rules to insure nondiscrimination and not 
undue trade obstruction, undertook limitations on the duration 
of temporary restrictions that might be imposed in serious 
balance-of-payments situations, and reaffirmed existing 
bilateral obligations on intellectual property rights. The 
Agreement prohibits the imposition of import licensing 
requirements except in certain circumstances and of export or 
domestic purchase performance requirements on investment. The 
Agreement requires both countries to waive their Buy National 
restrictions on government procurement contracts valued $50,000 
or more for articles or services covered by the 1979 GATT 
Agreement on Government Procurement.
    The Agreement contains various safeguard provisions 
consistent with title IV of the Trade and Tariff Act of 1984 to 
permit import relief measures under certain circumstances, and 
rule-of-origin requirements to ensure that free trade area 
benefits accrue only to the two parties. Import restrictions 
other than customs duties may also be maintained based on 
agricultural policy considerations. A Joint Committee reviews 
and administers the Agreement and provides for dispute 
settlement.
    In 1996, the United States and Israel entered into the 
Agreement on Trade in Agricultural Products (ATAP), an adjunct 
to the 1985 FTA Agreement. The ATAP expires on December 31, 
2001.

    United States-Israel Free Trade Area Implementation Act of 1985

    The United States-Israel Free Trade Area Implementation Act 
of 1985 approved the United States-Israel Free Trade Area 
Agreement and statement of administrative action submitted to 
the Congress on April 29, 1985 and made necessary and 
appropriate changes in U.S. laws for its domestic 
implementation.\58\ U.S. statutes prevail if a provision of the 
Agreement is in conflict. No private rights of action or 
remedies are created. Expedited legislative approval procedures 
apply to subsequent changes in U.S. statutes to implement 
requirements, amendments, or recommendations under the 
Agreement.
---------------------------------------------------------------------------
    \58\ Public Law 99-47, approved June 11, 1985, 19 U.S.C. 2112 note.
---------------------------------------------------------------------------
    The President is authorized to proclaim the modifications 
or continuance of existing duties or duty-free treatment to 
implement the schedule for U.S. duty elimination under the 
Agreement. Tariff elimination was completed as of January 1, 
1995. The President may withdraw, suspend, or modify any duty 
or duty-free treatment or proclaim additional duties necessary 
to maintain the general level of concessions under the 
Agreement.
    The implementing legislation also amended title III of the 
Trade Agreements Act of 1979 to lower the threshold contract 
value to $50,000 or more on which the President may waive Buy 
American restrictions on eligible products or services from 
Israel covered by the GATT Agreement on Government Procurement. 
As amended by the Uruguay Round Agreements Act, the $50,000 
threshold may be applied to the broader central government 
entity coverage of goods and services under the 1994 GATT 
Agreement if there is a reciprocal agreement from Israel.

              West Bank and Gaza Strip Free Trade Benefits

    In an exchange of letters on October 17, 1995, among the 
United States, the government of Israel, and the Palestinian 
Authority, the U.S. Trade Representative agreed to seek 
statutory authority to proclaim elimination of existing duties 
on articles of the West Bank and Gaza Strip. The Palestinian 
Authority agreed to accord U.S. products duty-free access to 
the West Bank and Gaza Strip, to prevent illegal transshipment 
of goods not qualifying for duty-free access, and to support 
all efforts to end the Arab economic boycott of Israel. Because 
the authority given to the President to proclaim reductions in 
tariffs without congressional action contained in section 
1102(a) of the Omnibus Trade and Competitiveness Act of 1988 
had expired, new proclamation authority was required to 
implement the terms of the exchange of letters.
    Accordingly, Congress passed legislation amending the 
United States-Israel Free Trade Area Implementation Act of 
1985, adding a new section to provide the President 
proclamation authority to modify tariffs on products from the 
West Bank, Gaza Strip and qualifying industrial zones. \59\ The 
provision applies to areas designated as industrial parks 
between the Gaza Strip and Israel and between the West Bank and 
Israel. The effect of the provision is to offer to goods from 
the West Bank, Gaza Strip, and qualifying industrial zones 
(located between Israel and Jordan or Israel and Egypt) the 
same tariff treatment as is offered to Israel under the United 
States-Israel Free Trade Agreement. The provision applies the 
same rule-of-origin requirements as to products from the West 
Bank, Gaza Strip, and qualifying industrial zones as are 
already applicable to products from Israel.
---------------------------------------------------------------------------
    \59\ Public Law 104-234, approved October 2, 1996.
---------------------------------------------------------------------------

                  United States-Canada Trade Relations

    Section 102(b) of the Trade Act of 1974, as amended by 
section 401 of the Trade and Tariff Act of 1984, authorized the 
President to enter into bilateral reciprocal trade agreements 
with foreign countries to eliminate or reduce tariffs on 
bilateral trade as well as nontariff barriers if the following 
procedural requirements were met:
          (1) The foreign country requested the negotiation of 
        a bilateral trade agreement;
          (2) The President gave at least 60 days advance 
        notice of negotiations to the House Committee on Ways 
        and Means and the Senate Committee on Finance and 
        consulted with these committees regarding negotiation 
        of such an agreement; and
          (3) Neither Committee disapproved of the negotiation 
        of such an agreement before the end of that 60-day 
        period.
Agreements entered into under this authority were subject to 
further congressional consultation requirements and approval of 
implementing legislation under the expedited procedures of 
sections 102 and 151-154 of the Trade Act. This bilateral trade 
agreement authority expired on January 3, 1988.
    In March 1985, President Reagan and Prime Minister Mulroney 
directed their negotiators to explore ways to liberalize 
between the two countries. On September 26, Canadian Prime 
Minister Mulroney proposed bilateral trade negotiations on the 
``broadest possible package of mutually beneficial reductions 
in barriers to trade in goods and services.'' On December 10, 
President Reagan notified the House Committee on Ways and Means 
and the Senate Committee on Finance of the Administration's 
desire to enter into bilateral trade negotiations with Canada 
under the section 102 authority. On October 3, 1987, President 
Reagan submitted the 90-day advance notice to the Congress of 
his intention to enter into a trade agreement with Canada on 
January 2, 1988, the day before expiration of the authority, 
``contingent upon successful completion of the negotiations.'' 
On January 2, 1988, President Reagan and Prime Minister 
Mulroney signed the United States-Canada Free-Trade Agreement 
on behalf of their respective governments.
    On July 25, 1988, the President transmitted to the Congress 
a copy of the Agreement, a statement of administrative action, 
proposed implementing legislation, and a statement of how the 
Agreement serves the interests of U.S. commerce. The 
implementing legislation passed the House on August 9 and the 
Senate on September 19, and was signed into law by the 
President on September 28, 1988. The Agreement entered into 
force on January 1, 1989.
    On January 1, 1994, the North American Free Trade Agreement 
entered into force, covering trade among the United States, 
Canada, and Mexico. The Agreement contains provisions 
suspending the overlapping provisions of the two agreements 
until such time as Canada may terminate its participation in 
the NAFTA.

               United States-Canada Free-Trade Agreement

    The United States-Canada Free-Trade Agreement is one of the 
most comprehensive bilateral trade agreements ever negotiated 
and creates one of the world's largest internal markets for 
goods and services. The two federal governments agreed to 
ensure that state, provincial, and local governments take 
necessary actions in areas under their jurisdiction to 
implement the Agreement. Each party agreed to accord national 
interest treatment to the goods, services, and investment of 
the other party to the extent provided in the Agreement.
    The central provision of the Agreement is the phased out 
elimination of tariffs on all goods traded between the two 
countries within 10 years, by January 1, 1998, in three staging 
categories. Tariff elimination on particular products can be 
implemented faster than scheduled by mutual agreement. The 
Agreement contains rules of origin based primarily on changes 
in tariff classifications to determine that only products with 
sufficient content originating in either or both countries 
receive the benefits of preferential tariff treatment. Customs 
user fees and duty drawback programs must be phased out by 1994 
for bilateral trade; duty waivers linked to performance 
requirements, except certain waivers affecting automotive 
trade, and duty remission programs for autos must be terminated 
by 1988.
    The Agreement eliminates and prohibits import and export 
quotas or other restrictions, unless specifically permitted by 
the Agreement or by the General Agreement on Tariffs and Trade 
(GATT), and liberalizes or harmonizes laws and regulations 
relating to technical standards. Other Agreement provisions 
liberalize barriers affecting agriculture, automotive products, 
wine and distilled spirits, energy, government procurement, 
services, investment, temporary entry for business persons, and 
financial services. Certain ``cultural industries'' are exempt 
from the Agreement. Temporary import relief actions may be 
taken on a bilateral or global basis under certain 
circumstances to safeguard domestic industries from import-
related injury.
    Institutional provisions are included for the avoidance or 
settlement of disputes between the two parties concerning the 
interpretation or application of the Agreement. A major element 
of the Agreement is establishment of a mechanism for review by 
binational panels and extraordinary challenge committees of 
final antidumping and countervailing duty determinations on 
products of the two countries in lieu of judicial review by 
courts of either party using the request of either party.

  United States-Canada Free-Trade Agreement Implementation Act of 1988

    The United States-Canada Free-Trade Agreement 
Implementation Act of 1988 \60\ approved the Agreement and 
statement of administrative action submitted to the Congress on 
July 25, 1988 and sets forth the relationship between 
obligations under the Agreement and U.S. laws. The legislation 
also makes changes in U.S. laws necessary or appropriate to 
implement obligations under the Agreement, sets forth 
negotiating objectives and authorities for further U.S.-Canada 
trade liberalization, and specifies procedures for domestic 
implementation of future changes in the Agreement. Technical 
amendments to various provisions were included in the Customs 
and Trade Act of 1990.\61\
---------------------------------------------------------------------------
    \60\ Public Law 100-449, approved September 28, 1988, 19 U.S.C. 
2112 note.
    \61\ Public Law 101-382, approved August 20, 1990.
---------------------------------------------------------------------------
    U.S. laws prevail over the Agreement if there is a 
conflict. No person other than the United States has a cause of 
action or defense under the Agreement. Changes in U.S. law 
necessary or appropriate to implement an amendment to the 
Agreement could be approved under the fast track congressional 
procedures during the 30-month period after the Agreement 
entered into force. Certain actions may be implemented by 
presidential proclamation subject to prior consultation and 60 
calendar day congressional layover requirements.
    The President is authorized to proclaim the modifications 
in U.S. rates of duty necessary to implement the scheduled 
phaseout and elimination of all tariffs on trade with Canada 
within 10 years. The rules of origin set forth in the Agreement 
to ensure application of preferential tariff treatment only to 
goods originating in Canada are enacted in the statute. The 
legislation implements U.S. obligations under the Agreement to 
phase out customs user fees on Canadian goods, to eliminate 
drawback with certain exceptions, and to exempt Canada from the 
lottery ticket embargo; provides penalties and recordkeeping 
requirements to enforce the rules of origin; and includes a 
reporting and monitoring requirement on the consistency of 
Canadian production-based duty remission programs with the GATT 
and the Agreement.
    The legislation also implements in U.S. domestic law 
various provisions of the Agreement concerning particular 
economic sectors, including agricultural products (authority to 
impose temporary duties on imports of fresh fruits and 
vegetables, exemption of Canadian meat from any import 
limitations under the Meat Import Act (now repealed), authority 
to exempt grain and grain products and sugar-containing 
products from Canada from section 22 import quotas); exports to 
Canada of Alaskan oil; exemption of Canadian uranium from U.S. 
enrichment restrictions; a lower contract threshold ($25,000) 
for exemption from Buy American restrictions on government 
procurement of articles from Canada covered by the GATT 
Agreement on Government Procurement; temporary entry of 
business persons; and extension of financial services. The 
legislation also includes procedures and criteria for the 
application of bilateral or global safeguard measures on 
Canadian articles as temporary relief from import-related 
injury.
    The implementing legislation sets forth various U.S. 
negotiating objectives to expand the Agreement with respect to 
services, investment, intellectual property rights, automotive 
products, procurement, Canadian agricultural transportation 
subsidies, potato trade, and enforcement of U.S. rights against 
Canadian controls on fish. Objectives and authority to 
negotiate an agreement on subsidies and special procedures for 
industries facing subsidized competition pending development of 
subsidy rules are also included.
    The legislation also contains revisions to U.S. law to 
implement the institutional provisions of the Agreement 
establishing binational panel and extraordinary challenge 
committee review, upon request, of final antidumping and 
countervailing duty determinations, in lieu of judicial review. 
The statute includes procedures and criteria for the selection 
of the panelists appointed by the United States, establishes 
the U.S. Secretariat, and authorizes appropriations for 
administrative expenses.
    The NAFTA incorporates or otherwise carries forward most 
provisions of the United States-Canada FTA or supercedes the 
bilateral agreement in certain areas, such as rules of origin. 
The United States and Canada suspended the operation of the 
bilateral agreement upon entry into force of the NAFTA for the 
two countries for such time as the two governments remain 
parties to the NAFTA. As provided in section 107 of the NAFTA 
Implementation Act, certain provisions of the United States-
Canada FTA Implementation Act are suspended; other provisions 
of that Act which carry out U.S. obligations under the United 
States-Canada FTA that are in effect under the NAFTA remain in 
place or are amended by the NAFTA Implementation Act.


           Chapter 7: ORGANIZATION OF TRADE POLICY FUNCTIONS

                                Congress

    The role of the Congress in trade derives from its powers 
under the Constitution to regulate foreign commerce and to lay 
and collect duties (see preface). Consequently, the trade 
agreements program and application of duties or other import 
restrictions are based upon and limited to specific legislation 
or authorities delegated by the Congress. In order to ensure 
proper implementation of these laws and authorities, in 
accordance with legislative intent, Congress has included 
various statutory requirements in the trade laws to limit their 
application, to ensure congressional oversight of their 
implementation, and to fulfill its responsibility for 
legislating any necessary or appropriate changes in U.S. laws.
    More specifically, for example, periodic delegations of 
authority by the Congress to the President to proclaim changes 
in U.S. tariff treatment in the context of trade agreements has 
been limited in scope and periods of time, and use of the 
authority subject to certain prenegotiation procedures to 
protect domestic interests. On the other hand, Congress has 
granted federal agencies permanent authorities to administer 
certain laws and programs, such as trade remedy laws or trade 
adjustment assistance, under certain specific guidelines and 
subject to congressional oversight, including appropriations.
    Specific statutory roles of the Congress became formalized 
under the Trade Act of 1974 \1\ with the grant of authority to 
the President under section 102 to enter into reciprocal trade 
agreements affecting U.S. laws other than traditional changes 
in tariff treatment. In authorizing implementation through an 
expedited, no amendment procedure, Congress ensured its role 
through statutory consultation and notification procedures 
prior to submission of a draft implementing bill by the 
executive. This relationship continued under authorities 
granted by the Omnibus Trade and Competitiveness Act of 1988, 
but has now expired with respect to new agreements (see chapter 
6).
---------------------------------------------------------------------------
    \1\ Public Law 93-618, approved January 3, 1975, 19 U.S.C. 2101.
---------------------------------------------------------------------------
    Section 161 of the Trade Act of 1974 provides for 
appointment at the beginning of each session of Congress of 
five official congressional advisers by the Speaker of the 
House from the Committee on Ways and Means and five official 
advisers by the President of the Senate from the Committee on 
Finance, and additional advisers where appropriate for specific 
policy matters or negotiations, to U.S. delegations to 
international negotiating sessions on trade agreements. The 
U.S. Trade Representative (USTR) must keep each adviser and 
designated committee staff members informed of U.S. objectives 
and the status of negotiations and of any changes which may be 
recommended in U.S. laws. Section 162 requires transmission of 
any trade agreements to the Congress.
    Section 163 requires annual reports from the President and 
from the U.S. International Trade Commission (ITC) to keep the 
Congress informed regarding actions taken under the various 
trade laws and programs. Additional reports are required on 
specific aspects of various authorities (e.g., from the ITC on 
the domestic economic impact of the Caribbean Basin 
Initiative).
    Finally, Congress had maintained its institutional role 
with the executive by requiring the USTR to advise the Congress 
as well as the President on trade policy developments, through 
requests to the ITC for studies and analyses under section 332 
of the Tariff Act of 1930 of various current trade issues, and 
through its power to authorize and appropriate funds for the 
functions of major trade agencies.

                            Executive Branch


                       Interagency Trade Process

    Trade policy is a major element of U.S. economic and 
foreign policy. A decision to raise or lower tariffs, to impose 
import quotas, or to take other trade policy actions affects 
both domestic and foreign interests. In light of the far-
reaching effects of trade policy decisions, a large number of 
U.S. government agencies have a role to play in the development 
of policy. Various interagency coordinating mechanisms have 
been used for bringing together conflicting views and interests 
and resolving them so that there can be a consistent and 
balanced national trade policy.
    Until the late 1950s, the Department of State was the major 
initiator and coordinator of international trade policy. The 
Secretary of State chaired the interagency Trade Agreements 
Committee which originally included eight agencies: the 
Departments of State, Agriculture, Commerce, and Treasury, the 
Tariff Commission, the Agricultural Adjustment Administration, 
the National Recovery Administration, and the Office of the 
Special Advisor to the President on Foreign Trade.
    Congress authorized the President under section 242 of the 
Trade Expansion Act of 1962 \2\ to establish a new interagency 
trade organization to carry out specified trade policy 
functions. The Trade Agreements Committee was replaced by the 
Trade Policy Committee (TPC) in 1975.\3\ The TPC performs the 
same functions authorized by section 242 of the 1962 Trade Act. 
Two subordinate coordinating groups, the Trade Policy Review 
Group (TPRG) and the Trade Policy Staff Committee (TPSC), were 
subsequently created by the authority of the Special 
Representative.\4\
---------------------------------------------------------------------------
    \2\ 19 U.S.C. 1801.
    \3\ 40 Fed. Reg. 18419, April 28, 1975.
    \4\ Exec. Order 11846, March 27, 1975, 40 Fed. Reg. 14291.
---------------------------------------------------------------------------
    Section 1621 of the Omnibus Trade and Competitiveness Act 
of 1988 \5\ amended section 242 of the 1962 Act to provide that 
this interagency organization will include the USTR as chair, 
the Secretaries of Commerce, State, Treasury, Agriculture, and 
Labor, and authorizes the USTR to invite other agencies to 
attend meetings as appropriate. The functions of the 
organization are: to assist and make recommendations to the 
President in carrying out his functions under the trade laws 
and to advise the USTR in carrying out its functions; to assist 
the President and advise the USTR on the development and 
implementation of U.S. international trade policy objectives; 
and to advise the President and the USTR on the relationship 
between U.S. international trade policy objectives and other 
major policy areas.
---------------------------------------------------------------------------
    \5\ Public Law 100-418, section 1621, approved August 23, 1988.
---------------------------------------------------------------------------
    The TPSC is the working level interagency group, with 
members drawn from the office-director level of member 
agencies. Over 30 subcommittees and task forces support the 
work of the TPSC. In the absence of consensus at the TPSC level 
or in the case of particularly significant policy matters, 
issues are referred to the Assistant Secretary-level TPRG. 
Disagreements at the Assistant Secretary-level are referred to 
the TPC for Cabinet-level review. When presidential trade 
policy decisions are needed, the Chairman (USTR) submits the 
recommendations and advice of the Committee to the President.
    In 1993, President Clinton established the National 
Economic Council as the final tier of the interagency trade 
mechanism. Chaired by the President, the NEC is composed of the 
Vice President, the Secretaries of State, Treasury, 
Agriculture, Commerce, Labor, Housing and Urban Development, 
Transportation, and Energy, the Administrator of the 
Environmental Protection Agency, the Director of the Office of 
Management and Budget, the USTR, the Chairman of the Council of 
Economic Advisors, the National Security Advisor, and the 
Assistants to the President for Economic Policy, Domestic 
Policy and Science and Technology Policy.

                Office of the U.S. Trade Representative

    Section 241 of the Trade Expansion Act of 1962 established 
the Office of the Special Representative for Trade 
Negotiations.\6\ Congress' stated purpose for creating the 
position was to provide better balance between competing 
domestic and international interests in the formulation of U.S. 
trade policy and negotiations. The Special Trade Representative 
(STR), whose rank was ambassador extraordinary and 
plenipotentiary, was to serve as the chief U.S. representative 
for negotiations conducted under authority of the Act and for 
other trade negotiations authorized by the President.
---------------------------------------------------------------------------
    \6\ Public Law 87-794, approved October 11, 1962, 19 U.S.C. 1801.
---------------------------------------------------------------------------
    Various executive orders issued by President Kennedy in 
1963 established an Office of the Special Trade Representative 
and provided for the appointment of two Deputy Special 
Representatives for Trade Negotiations. These deputies, one 
based in Washington, D.C., and the other in Geneva, Switzerland 
(headquarters of the GATT Secretariat), were assigned major 
responsibilities for the conduct of the 1963-67 multilateral 
trade negotiations under the GATT, commonly known as the 
Kennedy Round.\7\
---------------------------------------------------------------------------
    \7\ Public Law 97-456, approved January 12, 1983, added a third 
deputy trade representative.
---------------------------------------------------------------------------
    Section 141 of the Trade Act of 1974 \8\ established the 
office as an agency within the executive office of the 
President and expanded the STR's duties to include 
responsibility for the trade agreements program under the 
Tariff Act of 1930, the Trade Expansion Act of 1962 and the 
Trade Act of 1974. Other duties and responsibilities also were 
assigned by the 1974 Trade Act and by Executive Order 11846 of 
March 27, 1975, as amended. Section 141 indicated Congressional 
intent to elevate the STR to Cabinet level by adding it to the 
list of positions at level I of the executive schedule of 
salaries, with the rank of ambassador. The STR was also made 
directly responsible to the President and the Congress.
---------------------------------------------------------------------------
    \8\ Public Law 93-618, approved January 3, 1975, 19 U.S.C. 2171.
---------------------------------------------------------------------------
    Reorganization Plan No. 3 of 1979, implemented by Executive 
Order 12188 of January 4, 1980,\9\ authorized certain changes 
in the trade responsibilities of the STR. Plan No. 3 
redesignated the Office of the Special Representative for Trade 
Negotiations as the Office of the United States Trade 
Representative (USTR). The new name reflected the plan's intent 
for the Trade Representative to have overall responsibility, on 
a permanent basis, for developing and coordinating the 
implementation of U.S. trade policy.
---------------------------------------------------------------------------
    \9\ 44 Fed. Reg. 69273.
---------------------------------------------------------------------------
    The 1979 Reorganization Plan specified that the USTR is the 
President's principal adviser and chief spokesman on trade, 
including advice on the impact of international trade on other 
U.S. government policies. The USTR also became Vice Chairman of 
the Overseas Private Investment Corporation (OPIC), a nonvoting 
member of the Export-Import Bank, and a member of the National 
Advisory Committee on International Monetary and Financial 
Policies. In addition to these responsibilities, section 306(c) 
of the Trade and Tariff Act of 1984 \10\ specified that the 
USTR, through the interagency organization, is responsible for 
developing and coordinating U.S. policies on trade in services.
---------------------------------------------------------------------------
    \10\ Public Law 98-573, approved October 30, 1984.
---------------------------------------------------------------------------
    Section 1601 of the Omnibus Trade and Competitiveness Act 
of 1988 \1\\1\ amended section 141 of the 1974 Act to the 
responsibilities of the USTR first enumerated under 
Reorganization Plan No. 3 and other statutes, as the following:
---------------------------------------------------------------------------
    \1\\1\ Public Law 100-418, section 1601, approved August 23, 1988.
---------------------------------------------------------------------------
          (1) to have primary responsibility for developing and 
        coordinating the implementation of U.S. international 
        trade policy;
          (2) to serve as the principal adviser to the 
        President on international trade policy and advise the 
        President on the impact of other U.S. government 
        policies on international trade;
          (3) to have lead responsibility for the conduct of, 
        and be chief U.S. representative for, international 
        trade negotiations, including commodity and direct 
        investment negotiations;
          (4) to coordinate trade policy with other agencies;
          (5) to act as the principal international trade 
        spokesman of the President;
          (6) to report to the President and the Congress on, 
        and be responsible to the President and the Congress 
        for, the administration of the trade agreements 
        program, including advising on nontariff barriers, 
        international commodity agreements, and other matters 
        relating to the trade agreements program; and
          (7) to be chairman of the Trade Policy Committee.
    In addition, the Omnibus Trade and Competitiveness Act also 
included the sense of Congress that the USTR be the senior 
representative on any body the President establishes to advise 
him on overall economic policies in which international trade 
matters predominate and that the USTR be included in all 
economic summits and other international meetings at which 
international trade is a major topic. The USTR was made 
responsible for identifying and coordinating agency resources 
on unfair trade practices cases that may be actionable under 
U.S. antidumping and countervailing duty statutes, section 337, 
or section 301. The Act established an unfair trade practices 
committee to advise the USTR.
    Under the Omnibus Trade and Competitiveness Act of 1988, 
the Congress further sought to elevate the importance of the 
USTR in trade matters by shifting to the USTR from the 
President responsibility for implementing actions under section 
301 of that Act, subject to the specific direction, if any, of 
the President.
    The Uruguay Round Agreements Act specifies that the USTR is 
to have lead responsibility for all negotiations on any matter 
considered under the auspices of the World Trade Organization.
    The Lobbying Disclosure Act of 1995 amended section 141 to 
prohibit the appointment of a person who has directly 
represented, aided, or advised a foreign entity (as defined by 
section 207(f)(3) of title 18, U.S. Code) in any trade 
negotiations, or trade dispute, with the United States as U.S. 
Trade Representative or Deputy U.S. Trade Representative.\12\
---------------------------------------------------------------------------
    \12\ Public Law 104-65, approved December 19, 1995.
---------------------------------------------------------------------------
    Section 406 of the Trade and Development Act of 2000 
(Public Law 106-200) amended the Trade Act of 1974 to establish 
the position of Chief Agriculture Negotiator within USTR, with 
the rank of Ambassador, to conduct trade negotiations and 
enforce trade agreements relating to U.S. agriculture products 
and services. Section 117 of that Act also established the 
position of Assistant USTR for African Affairs to direct and 
coordinate interagency activities on U.S.-Africa trade policy 
and investment matters.
    Section 141(g) of the Trade Act of 1974 provides for a 2-
year saauthorization of appropriations for USTR.

                         Department of Commerce

    The Department of Commerce was established in 1903 as the 
Department of Commerce and Labor.\13\ A 1913 act of Congress 
split the Department of Commerce and Labor into two separate 
departments.\14\ The mandate of the Commerce Department 
originally was to promote the foreign and domestic commerce of 
the United States. In subsequent years, its authority was 
extended to other areas bearing on the economic and 
technological development of the country. The titles of the 
component units of the Department indicate the diversity of the 
agency's current programs and services: Bureau of the Census; 
Bureau of Economic Analysis; Economic Development 
Administration; Bureau of Export Administration; International 
Trade Administration; Minority Business Development Agency; 
National Institute of Standards and Technology; National 
Oceanic and Atmospheric Administration; National Technical 
Information Service; National Telecommunications and 
Information Administration; Patent and Trademark Office; and 
U.S. Travel and Tourism Administration.
---------------------------------------------------------------------------
    \13\ 32 Stat. 827, 5 U.S.C. 591.
    \14\ 37 Stat. 736, 15 U.S.C. 1501.
---------------------------------------------------------------------------
    While most of these agencies have some responsibilities 
that affect U.S. trade, the U.S. Department of Commerce's major 
trade responsibilities are centered in the International Trade 
Administration and the Bureau of Export Administration.
    The International Trade Administration (ITA), which was 
established by the Secretary of Commerce on January 2, 
1980,\15\ administers many of the Department's international 
trade responsibilities and activities as prescribed by 
Reorganization Plan No. 3 of 1979. The plan provides that the 
Commerce Department has ``general operational responsibility 
for major nonagricultural international trade functions,'' as 
well as for any other functions assigned by law. Those include 
export development, commercial representation abroad, the 
administration of the antidumping and countervailing duty laws, 
export controls, trade adjustment assistance to firms, research 
and analysis, and compliance with international trade 
agreements to which the United States is a party.
---------------------------------------------------------------------------
    \15\ 45 Fed. Reg. 11862, as amended by 46 Fed. Reg. 13537.
---------------------------------------------------------------------------
    The Bureau of Export Administration (BXA) controls exports 
of commodities and technology for reasons of national security, 
foreign policy, and short supply. BXA issues export licenses in 
accordance with the export control regulations. Export control 
regulations are developed in consultation with other agencies, 
and some export license applications require interagency 
review.

                          U.S. Customs Service

    The second act of Congress, dated July 4, 1789, authorized 
the collection of duties on imported goods, wares and 
merchandise. The fifth act of Congress, passed in July 31, 
1789, established customs districts and authorized customs 
officers to collect import duties. On March 3, 1927, the Bureau 
of Customs was established as a separate agency under the 
Treasury Department.\16\ The Bureau was redesignated the United 
States Customs Service on August 1, 1973.\17\
---------------------------------------------------------------------------
    \16\ 44 Stat. 1381.
    \17\ Treasury Department Order 165-23, of April 4, 1973.
---------------------------------------------------------------------------
    The Customs Service collects import duties and enforces 
more than 400 laws or regulations relating to international 
trade. Among the many responsibilities falling to Customs are 
assessing and collecting duties, excise taxes, penalties and 
other fees due on imported goods; interdicting and seizing 
illegally entered merchandise; processing persons, carriers, 
cargo and mail into and out of the United States; helping 
enforce U.S. laws against the transfer of certain technologies 
to certain countries under export control authorities, laws on 
copyright, patent and trademark rights; and administering 
quotas and other import restrictions. The U.S. Customs Service 
maintains close ties with private business associations, 
international organizations, and foreign customs services.
    The Commissioner of Customs is appointed by the President 
and subject to confirmation by the Senate.
    The Customs Procedural Reform and Simplification Act of 
1978 provides for a 2-year authorization of appropriations for 
Customs.

                  U.S. International Trade Commission

    The U.S. International Trade Commission (ITC) is an 
independent and quasi-judicial agency that conducts studies, 
reports, and investigations, and makes recommendations to the 
President and the Congress on a wide range of international 
trade issues. The agency was established on September 8, 1916 
\18\ as the U.S. Tariff Commission. In 1974 the name was 
changed to the United States International Trade Commission by 
section 171 of the Trade Act of 1974.\19\
---------------------------------------------------------------------------
    \18\ 39 Stat. 795.
    \19\ 19 U.S.C. 2231.
---------------------------------------------------------------------------
    Commissioners are appointed by the President for 9-year 
terms, unless they are appointed to fill an unexpired term. Any 
Commissioner who has served for more than 5 years may not be 
reappointed. Of the six commissioners, not more than three may 
be of the same political party. The Chairman and Vice Chairman 
are designated by the President for 2-year terms, and 
successive Chairmen may not be of the same political party. 
After June 17, 1996, a Commissioner with less than 1 year of 
continuous service as a Commissioner may not be designated as 
Chairman.
    The Commission has numerous responsibilities for advice, 
investigations, studies, and data collection and analysis which 
may be grouped into the following general areas: advice on 
trade negotiations; Generalized System of Preferences; import 
relief for domestic industries; East-West trade; investigations 
of injury caused by subsidized or dumped goods; import 
interference with agricultural programs; unfair practices in 
import trade; development of uniform statistical data; matters 
related to the U.S. tariff schedules; international trade 
studies; trade and tariff summaries.
    Statutory authority for the Commission's responsibilities 
is provided primarily by the Tariff Act of 1930, the 
Agricultural Adjustment Act, the Trade Expansion Act of 1962, 
the Trade Act of 1974, the Trade Agreements Act of 1979, the 
Trade and Tariff Act of 1984, the Omnibus Trade and 
Competitiveness Act of 1988, and the Uruguay Round Agreements 
Act.
    The Tariff Act of 1930 gives the Commission broad authority 
to conduct studies and investigations relating to the impact of 
international trade on U.S. industries. Various sections under 
title VII of the Tariff Act authorize the Commission to 
determine whether U.S. industries are materially injured by 
imports which benefit from subsidies or are priced below fair 
value.\20\ If the Secretary of Commerce decides to suspend an 
antidumping or countervailing duty investigation upon reaching 
an agreement to eliminate the injury caused by the subsidized 
or dumped imports, the Commission is authorized to study 
whether or not the injury in fact is being eliminated. Section 
337 of the Tariff Act authorizes the ITC to investigate whether 
unfair methods of competition or unfair acts are being 
committed in the importation of goods into the United 
States.\21\ The Commission is authorized to order actions to 
remedy any such violations, subject to presidential 
disapproval.
---------------------------------------------------------------------------
    \20\ Sections 704, 734, and 751; 19 U.S.C. 1671c, 1673c, and 1675c.
    \21\ 19 U.S.C. 1337.
---------------------------------------------------------------------------
    Upon the request of the President, the House Committee on 
Ways and Means, the Senate Committee on Finance, or on its own 
motion, the ITC conducts studies and investigations under 
section 332 of the Tariff Act of 1930 on a wide range of trade-
related issues.\22\ Public reports generally are issued 
following such studies and investigations. The ITC also 
publishes summaries outlining the types of products entering 
the United States, their importance in U.S. consumption, 
production, and trade, and other relevant information. The ITC 
also is required to establish and maintain statistics on U.S. 
trade and to review the international commodity code for 
classifying products and reporting trade statistics among 
countries.\23\
---------------------------------------------------------------------------
    \22\ 19 U.S.C. 1332.
    \23\ 19 U.S.C. 1484(e).
---------------------------------------------------------------------------
    The Trade Expansion Act of 1962 and the Trade Act of 1974 
expanded the duties of the ITC. Both laws require the 
Commission to review developments within an industry receiving 
import protection and to advise the President on the probable 
impact of reducing or eliminating the protection.\24\
---------------------------------------------------------------------------
    \24\ 19 U.S.C. 1981, 2253.
---------------------------------------------------------------------------
    The Trade Act of 1974 gives the Commission a presidential 
advisory role on the probable domestic economic effects of 
trade concessions proposed during trade negotiations.\25\ The 
ITC performs a similar advisory role in relation to duty-free 
treatment under the Generalized System of Preferences.\26\ 
Under section 201 of the 1974 Trade Act,\27\ the Commission 
conducts investigations to determine whether increased imports 
are causing or threatening serious injury to the competing 
domestic industry and reports its findings and recommendations 
for relief to the President.
---------------------------------------------------------------------------
    \25\ 19 U.S.C. 2151.
    \26\ 19 U.S.C. 2151, 2163.
    \27\ 19 U.S.C. 2251.
---------------------------------------------------------------------------
    Sections 406 and 410 \28\ of the 1974 Trade Act provide for 
ITC monitoring and investigation of various aspects of trade 
with nonmarket economics.
---------------------------------------------------------------------------
    \28\ 19 U.S.C. 2240, 2436.
---------------------------------------------------------------------------
    Section 221 of the Trade and Tariff Act of 1984, amended by 
section 1614 of the Omnibus Trade and Competitiveness Act of 
1988, established a separate Trade Remedy Assistance Office 
within the ITC to provide information to the public on remedies 
and benefits available under U.S. trade laws and on the 
procedures and filing dates for relief petitions.
    Section 330(e)(2) of the Tariff Act of 1930 contains a 2-
year authorization of appropriations for the ITC.

              Private or Public Sector Advisory Committees

    The first formal mechanism providing for ongoing advice 
from the private sector on international trade matters was 
authorized by section 135 of the Trade Act of 1974.\29\ In view 
of the positive contribution of the advisory committees to the 
Tokyo Round of multilateral trade negotiations and to passage 
of the implementing legislation--the Trade Agreements Act of 
1979--Congress provided for continuation of the advisory 
committee structure in section 1631 of the Omnibus Trade and 
Competitiveness Act of 1988. Congress also expanded the 
committees' responsibilities by authorizing them to provide 
advice on the priorities and direction of U.S. trade policy, in 
addition to their previous responsibilities.
---------------------------------------------------------------------------
    \29\ 19 U.S.C. 2155.
---------------------------------------------------------------------------
    The U.S. Trade Representative manages the advisory 
committees in cooperation with the Departments of Agriculture, 
Commerce, Labor, and other departments. The committee structure 
is three-tiered, with the most senior level represented by the 
Advisory Committee for Trade Policy and Negotiations (ACTPN). 
The ACTPN is a 45-member body composed of presidential-
appointed representatives of government, labor, industry, 
agriculture, small business, service industries, retailers, 
consumer interests, and the general public. The group provides 
overall guidance on trade policy matters, including trade 
agreements and negotiations, and is chaired by a chairman 
elected by the committee. The group convenes at the call of the 
U.S. Trade Representative.
    The second tier is made up of policy advisory committees 
representing overall sectors of the economy (e.g., industry, 
agriculture, labor, services) whose role is to advise the 
government of the impact of various trade measures on their 
respective sectors.
    The third tier is composed of sector advisory committees 
consisting of experts from various fields. Their role is to 
provide specific, technical information and advice on trade 
issues involving their particular sector. Members of the second 
and third tier are appointed by the U.S. Trade Representative 
and the Secretary of the relevant department or agency.


              PART II: COMPILATION OF U.S. TRADE STATUTES

                              ----------                              


                   Chapter 8: TARIFF AND CUSTOMS LAWS

   A. IMPLEMENTATION OF THE HARMONIZED TARIFF SCHEDULE OF THE UNITED 
                                 STATES

   Title I, Subtitle B (Sections 1201-1217) of the Omnibus Trade and 
                      Competitiveness Act of 1988

   [19 U.S.C. 3001 et seq.; P.L. 100-418, as amended by P.L. 100-647]

SEC. 1201. PURPOSES.

  The purposes of this subtitle are--
          (1) to approve the International Convention on the 
        Harmonized Commodity Description and Coding System;
          (2) to implement in United States law the 
        nomenclature established internationally by the 
        Convention; and
          (3) to provide that the Convention shall be treated 
        as a trade agreement obligation of the United States.

SEC. 1202. DEFINITIONS.

  As used in this subtitle:
          (1) The term ``Commission'' means the United States 
        International Trade Commission.
          (2) The term ``Convention'' means the International 
        Convention on the Harmonized Commodity Description and 
        Coding System, done at Brussels on June 14, 1983, and 
        the Protocol thereto, done at Brussels on June 24, 
        1986, submitted to the Congress on June 15, 1987.
          (3) The term ``entered'' means entered, or withdrawn 
        from warehouse for consumption, in the customs 
        territory of the United States.
          (4) The term ``Federal agency'' means any 
        establishment in the executive branch of the United 
        States Government.
          (5) The term ``old Schedules'' means title I of the 
        Tariff Act of 1930 (19 U.S.C. 1202) as in effect on the 
        day before the effective date of the amendment to such 
        title under section 1204(a).
          (6) The term ``technical rectifications'' means 
        rectifications of an editorial character or minor 
        technical or clerical changes which do not affect the 
        substance or meaning of the text, such as--
                  (A) errors in spelling, numbering, or 
                punctuation;
                  (B) errors in indentation;
                  (C) errors (including inadvertent omissions) 
                in cross-references to headings or subheadings 
                or notes; and
                  (D) other clerical or typographical errors.

SEC. 1203. CONGRESSIONAL APPROVAL OF UNITED STATES ACCESSION TO THE 
                    CONVENTION.

  (a) Congressional Approval.--The Congress approves the 
accession by the United States of America to the Convention.
  (b) Acceptance of the Final Legal Text of the Convention by 
the President.--The President may accept for the United States 
the final legal instruments embodying the Convention. The 
President shall submit a copy of each final instrument to the 
Congress on the date it becomes available.
  (c) Unspecified Private Remedies Not Created.--Neither the 
entry into force with respect to the United States of the 
Convention nor the enactment of this subtitle may be construed 
as creating any private right of action or remedy for which 
provision is not explicitly made under this subtitle or under 
other laws of the United States.
  (d) Termination.--The provisions of section 125(a) of the 
Trade Act of 1974 (19 U.S.C. 2135(a)) do not apply to the 
Convention.

SEC. 1204. ENACTMENT OF THE HARMONIZED TARIFF SCHEDULE.

  (a) In General.--The Tariff Act of 1930 is amended by 
striking out title I and inserting a new title I entitled 
``Title I--Harmonized Tariff Schedule of the United States'' 
(hereinafter in this subtitle referred to as the ``Harmonized 
Tariff Schedule'') which--
          (1) consists of--
                  (A) the General Notes;
                  (B) the General Rules of Interpretation;
                  (C) the Additional U.S. Rules of 
                Interpretation;
                  (D) sections I to XXII, inclusive 
                (encompassing chapters 1 to 99, and including 
                all section and chapter notes, article 
                provisions, and tariff and other treatment 
                accorded thereto); and
                  (E) the Chemical Appendix to the Harmonized 
                Tariff Schedule;
        all conforming to the nomenclature of the Convention 
        and as set forth in Publication No. 2030 of the 
        Commission entitled ``Harmonized Tariff Schedule of the 
        United States Annotated for Statistical Reporting 
        Purposes'' and Supplement No. 1, thereto; but
          (2) does not include the statistical annotations, 
        notes, annexes, suffixes, check digits, units of 
        quantity, and other matters formulated under section 
        484(e) of the Tariff Act of 1930 (19 U.S.C. 1484(e)), 
        nor the table of contents, footnotes, index, and other 
        matters inserted for ease of reference, that are 
        included in such Publication No. 2030 or Supplement No. 
        1, thereto.
  (b) Modifications to the Harmonized Tariff Schedule.--At the 
earliest practicable date after the date of the enactment of 
the Omnibus Trade and Competitiveness Act of 1988, the 
President shall--
          (1) proclaim such modifications to the Harmonized 
        Tariff Schedule as are consistent with the standards 
        applied in converting the old Schedules into the format 
        of the Convention, as reflected in such Publication No. 
        2030 and Supplement No. 1, thereto, and as are 
        necessary or appropriate to implement--
                  (A) the future outstanding staged rate 
                reductions authorized by the Congress in--
                          (i) the Trade Act of 1974 (19 U.S.C. 
                        2101 et seq.) and the Trade Agreements 
                        Act of 1979 (19 U.S.C. 2501 et seq.) to 
                        reflect the tariff reductions that 
                        resulted from the Tokyo Round of 
                        multilateral trade negotiations, and
                          (ii) the United States-Israel Free 
                        Trade Area Implementation Act of 1985 
                        (19 U.S.C. 1202 note) to reflect the 
                        tariff reduction resulting from the 
                        United States-Israel Free Trade Area 
                        Agreement,
                  (B) the applicable provisions of--
                          (i) statutes enacted,
                          (ii) executive actions taken, and
                          (iii) final judicial decisions 
                        rendered,
                after January 1, 1988, and before the effective 
                date of the Harmonized Tariff Schedule, and
                  (C) such technical rectifications as the 
                President considers necessary; and
          (2) take such action as the President considers 
        necessary to bring trade agreements to which the United 
        States is a party into conformity with the Harmonized 
        Tariff Schedule.
  (c) Status of the Harmonized Tariff Schedule.--
          (1) The following shall be considered to be statutory 
        provisions of law for all purposes:
                  (A) The provisions of the Harmonized Tariff 
                Schedule as enacted by this subtitle.
                  (B) Each statutory amendment to the 
                Harmonized Tariff Schedule.
                  (C) Each modification or change made to the 
                Harmonized Tariff Schedule by the President 
                under authority of law (including section 604 
                of the Trade Act of 1974).
          (2) Neither the enactment of this subtitle nor the 
        subsequent enactment of any amendment to the Harmonized 
        Tariff Schedule, unless such subsequent enactment 
        otherwise provides, may be construed as limiting the 
        authority of the President--
                  (A) to effect the import treatment necessary 
                or appropriate to carry out, modify, withdraw, 
                suspend, or terminate, in whole or in part, 
                trade agreements; or
                  (B) to take such other actions through the 
                modification, continuance, or imposition of any 
                rate of duty or other import restriction as may 
                be necessary or appropriate under the authority 
                of the President.
          (3) If a rate of duty established in column 1 by the 
        President by proclamation or Executive order is higher 
        than the existing rate of duty in column 2, the 
        President may by proclamation or Executive order 
        increase such existing rate to the higher rate.
          (4) If a rate of duty is suspended or terminated by 
        the President by proclamation or Executive order and 
        the proclamation or Executive order does not specify 
        the rate that is to apply in lieu of the suspended or 
        terminated rate, the last rate of duty that applied 
        prior to the suspended or terminated rate shall be the 
        effective rate of duty.
  (d) Interim Informational Use of Harmonized Tariff Schedule 
Classifications.--Each--
          (1) proclamation issued by the President;
          (2) public notice issued by the Commission or other 
        Federal agency; and
          (3) finding, determination, order, recommendation, or 
        other decision made by the Commission or other Federal 
        agency;
during the period between the date of the enactment of the 
Omnibus Trade and Competitiveness Act of 1988 and the effective 
date of the Harmonized Tariff Schedule shall, if the 
proclamation, notice, or decision contains a reference to the 
tariff classification of any article, include, for 
informational purposes, a reference to the classification of 
that article under the Harmonized Tariff Schedule.

SEC. 1205. COMMISSION REVIEW OF, AND RECOMMENDATIONS REGARDING, THE 
                    HARMONIZED TARIFF SCHEDULE.

  (a) In General.--The Commission shall keep the Harmonized 
Tariff Schedule under continuous review and periodically, at 
such time as amendments to the Convention are recommended by 
the Customs Cooperation Council for adoption, and as other 
circumstances warrant, shall recommend to the President such 
modifications in the Harmonized Tariff Schedule as the 
Commission considers necessary or appropriate--
          (1) to conform the Harmonized Tariff Schedule with 
        amendments made to the Convention;
          (2) to promote the uniform application of the 
        Convention and particularly the Annex thereto;
          (3) to ensure that the Harmonized Tariff Schedule is 
        kept up-to-date in light of changes in technology or in 
        patterns of international trade;
          (4) to alleviate unnecessary administrative burdens; 
        and
          (5) to make technical rectifications.
  (b) Agency and Public Views Regarding Recommendations.--In 
formulating recommendations under subsection (a), the 
Commission shall solicit, and give consideration to, the views 
of interested Federal agencies and the public. For purposes of 
obtaining public views, the Commission--
          (1) shall give notice of the proposed recommendations 
        and afford reasonable opportunity for interested 
        parties to present their views in writing; and
          (2) may provide for a public hearing.
  (c) Submission of Recommendations.--The Commission shall 
submit recommendations under this section to the President in 
the form of a report that shall include a summary of the 
information on which the recommendations were based, together 
with a statement of the probable economic effect of each 
recommended change on any industry in the United States. The 
report also shall include a copy of all written views submitted 
by interested Federal agencies and a copy or summary, prepared 
by the Commission, of the views of all other interested 
parties.
  (d) Requirements Regarding Recommendations.--The Commission 
may not recommend any modification to the Harmonized Tariff 
Schedule unless the modification meets the following 
requirements:
          (1) The modification must--
                  (A) be consistent with the Convention or any 
                amendment thereto recommended for adoption;
                  (B) be consistent with sound nomenclature 
                principles; and
                  (C) ensure substantial rate neutrality.
          (2) Any change to a rate of duty must be consequent 
        to, or necessitated by, nomenclature modifications that 
        are recommended under this section.
          (3) The modification must not alter existing 
        conditions of competition for the affected United 
        States industry, labor, or trade.

SEC. 1206. PRESIDENTIAL ACTION ON COMMISSION RECOMMENDATIONS.

  (a) In General.--The President may proclaim modifications, 
based on the recommendations by the Commission under section 
1205, to the Harmonized Tariff Schedule if the President 
determines that the modifications--
          (1) are in conformity with United States obligations 
        under the Convention; and
          (2) do not run counter to the national economic 
        interest of the United States.
  (b) Lay-Over Period.--
          (1) The President may proclaim a modification under 
        subsection (a) only after the expiration of the 60-day 
        period beginning on the date on which the President 
        submits a report to the Committee on Ways and Means of 
        the House of Representatives and the Committee on 
        Finance of the Senate that sets forth the proposed 
        modification and the reasons therefor.
          (2) The 60-day period referred to in paragraph (1) 
        shall be computed by excluding--
                  (A) the days on which either House is not in 
                session because of an adjournment of more than 
                3 days to a day certain or an adjournment of 
                the Congress sine die; and
                  (B) any Saturday and Sunday, not excluded 
                under subparagraph (A), when either House is 
                not in session.
  (c) Effective Date of Modifications.--Modifications 
proclaimed by the President under subsection (a) may not take 
effect before the 15th day after the date on which the text of 
the proclamation is published in the Federal Register.

SEC. 1207. PUBLICATION OF THE HARMONIZED TARIFF SCHEDULE.

  (a) In General.--The Commission shall compile and publish, at 
appropriate intervals, and keep up to date the Harmonized 
Tariff Schedule and related information in the form of printed 
copy; and, if, in its judgment, such format would serve the 
public interest and convenience--
          (1) in the form of microfilm images; or
          (2) in the form of electronic media.
  (b) Content.--Publications under subsection (a), in whatever 
format, shall contain--
          (1) the then current Harmonized Tariff Schedule;
          (2) statistical annotations and related statistical 
        information formulated under section 484(e) of the 
        Tariff Act of 1930 (19 U.S.C. 1484(e)); and
          (3) such other matters as the Commission considers to 
        be necessary or appropriate to carry out the purposes 
        enumerated in the Preamble to the Convention.

SEC. 1208. IMPORT AND EXPORT STATISTICS.

  The Secretary of Commerce shall compile, and make publicly 
available, the import and export trade statistics of the United 
States. Such statistics shall be conformed to the nomenclature 
of the Convention.

SEC. 1209. COORDINATION OF TRADE POLICY AND THE CONVENTION.

  The United States Trade Representative is responsible for 
coordination of United States trade policy in relation to the 
Convention. Before formulating any United States position with 
respect to the Convention, including any proposed amendments 
thereto, the United States Trade Representative shall seek, and 
consider, information and advice from interested parties in the 
private sector (including a functional advisory committee) and 
from interested Federal agencies.

SEC. 1210. UNITED STATES PARTICIPATION ON THE CUSTOMS COOPERATION 
                    COUNCIL REGARDING THE CONVENTION.

  (a) Principal United States Agencies.--
          (1) Subject to the policy direction of the Office of 
        the United States Trade Representative under section 
        1209, the Department of the Treasury, the Department of 
        Commerce, and the Commission shall, with respect to the 
        activities of the Customs Cooperation Council relating 
        to the Convention--
                  (A) be primarily responsible for formulating 
                United States Government positions on technical 
                and procedural issues; and
                  (B) represent the United States Government.
          (2) The Department of Agriculture and other 
        interested Federal agencies shall provide to the 
        Department of the Treasury, the Department of Commerce, 
        and the Commission technical advice and assistance 
        relating to the functions referred to in paragraph (1).
  (b) Development of Technical Proposals.--
          (1) In connection with responsibilities arising from 
        the implementation of the Convention and under section 
        484(e) of the Tariff Act of 1930 (19 U.S.C. 1484(e)) 
        regarding United States programs for the development of 
        adequate and comparable statistical information on 
        merchandise trade, the Secretary of the Treasury, the 
        Secretary of Commerce, and the Commission shall prepare 
        technical proposals that are appropriate or required to 
        assure that the United States contribution to the 
        development of the Convention recognizes the needs of 
        the United States business community for a Convention 
        which reflects sound principles of commodity 
        identification, modern producing methods, and current 
        trading patterns and practices.
          (2) In carrying out this subsection, the Secretary of 
        the Treasury, the Secretary of Commerce, and the 
        Commission shall--
                  (A) solicit and consider the views of 
                interested parties in the private sector 
                (including a functional advisory committee) and 
                of interested Federal agencies;
                  (B) establish procedures for reviewing, and 
                developing appropriate responses to, inquiries 
                and complaints from interested parties 
                concerning articles produced in and exported 
                from the United States; and
                  (C) where appropriate, establish procedures 
                for--
                          (i) ensuring that the dispute 
                        settlement provisions and other 
                        relevant procedures available under the 
                        Convention are utilized to promote 
                        United States export interests, and
                          (ii) submitting classification 
                        questions to the Harmonized System 
                        Committee of the Customs Cooperation 
                        Council.
  (c) Availability of Customs Cooperation Council 
Publications.--As soon as practicable after the date of the 
enactment of the Omnibus Trade and Competitiveness Act of 1988, 
and periodically thereafter as appropriate, the Commission 
shall see to the publication of--
          (1) summary records of the Harmonized System 
        Committee of the Customs Cooperation Council; and
          (2) subject to applicable copyright laws, the 
        Explanatory Notes, Classification Opinions, and other 
        instruments of the Customs Cooperation Council relating 
        to the Convention.

SEC. 1211. TRANSITION TO THE HARMONIZED TARIFF SCHEDULE.

  (a) Existing Executive Actions.--
          (1) The appropriate officers of the United States 
        Government shall take whatever actions are necessary to 
        conform, to the fullest extent practicable, with the 
        tariff classification system of the Harmonized Tariff 
        Schedule all proclamations, regulations, rulings, 
        notices, findings, determinations, orders, 
        recommendations, and other written actions that--
                  (A) are in effect on the day before the 
                effective date of the Harmonized Tariff 
                Schedule; and
                  (B) contain references to the tariff 
                classification of articles under the old 
                Schedules.
          (2) Neither the repeal of the old Schedules, nor the 
        failure of any officer of the United States Government 
        to make the conforming changes required under paragraph 
        (1), shall affect to any extent the validity or effect 
        of the proclamation, regulation, ruling, notice, 
        finding, determination, order, recommendation, or other 
        action referred to in paragraph (1).
  (b) Generalized System of Preferences Conversion.--
          (1) The review of the proposed conversion of the 
        Generalized System of Preferences program to the 
        Convention tariff nomenclature, initiated by the Office 
        of the United States Trade Representative by notice 
        published in the Federal Register on December 8, 1986 
        (at page 44,163 of volume 51 thereof), shall be treated 
        as satisfying the requirements of sections 503(a) and 
        504(c)(3) of the Trade Act of 1974 (19 U.S.C. 2463(a), 
        2464(c)(3)).
          (2) In applying section 504(c)(1) of the Trade Act of 
        1974 (19 U.S.C. 2464(c)(1)) for calendar year 1989, the 
        reference in such section to July 1 shall be treated as 
        a reference to September 1.
  (c) Import Restrictions Under the Agricultural Adjustment 
Act.--
          (1) Whenever the President determines that the 
        conversion of an import restriction proclaimed under 
        section 22 of the Agricultural Adjustment Act (7 U.S.C. 
        624) from part 3 of the Appendix to the old Schedules 
        to subchapter IV of chapter 99 of the Harmonized Tariff 
        Schedule results in--
                  (A) an article that was previously subject to 
                the restriction being excluded from the 
                restriction; or
                  (B) an article not previously subject to the 
                restriction being included within the 
                restriction;
        the President may proclaim changes in subchapter IV of 
        chapter 99 of the Harmonized Tariff Schedule to conform 
        that subchapter to the fullest extent possible to part 
        3 of the Appendix to the old Schedules.
          (2) Whenever the President determines that the 
        conversion from headnote 2 of subpart A of part 10 of 
        schedule 1 of the old Schedules to Additional U.S. Note 
        2, chapter 17, of the Harmonized Tariff Schedule 
        results in--
                  (A) an article that was previously covered by 
                such headnote being excluded from coverage; or
                  (B) an article not previously covered by such 
                headnote being included in coverage;
        the President may proclaim changes in Additional U.S. 
        Note 2, chapter 17 of the Harmonized Tariff Schedule to 
        conform that note to the fullest extent possible to 
        headnote 2 of subpart A of part 10 of schedule 1 of the 
        old Schedules.
          (3) No change to the Harmonized Tariff Schedule may 
        be proclaimed under paragraph (1) or (2) after June 30, 
        1990.
  (d) Certain Protests and Petitions Under the Customs Law.--
          (1)(A) This subtitle may not be considered to divest 
        the courts of jurisdiction over--
                  (i) any protest filed under section 514 of 
                the Tariff Act of 1930 (19 U.S.C. 1514); or
                  (ii) any petition by an American 
                manufacturer, producer, or wholesaler under 
                section 516 of such Act (19 U.S.C. 1516);
        covering articles entered before the effective date of 
        the Harmonized Tariff Schedule.
          (B) Nothing in this subtitle shall affect the 
        jurisdiction of the courts with respect to articles 
        entered after the effective date of the Harmonized 
        Tariff Schedule.
          (2)(A) If any protest or petition referred to in 
        paragraph (1)(A) is sustained in whole or in part by a 
        final judicial decision, the entries subject to that 
        protest or petition and made before the effective date 
        of the Harmonized Tariff Schedule shall be liquidated 
        or reliquidated, as appropriate, in accordance with 
        such final judicial decision under the old Schedules.
          (B) At the earliest practicable date after the 
        effective date of the Harmonized Tariff Schedule, the 
        Commission shall initiate an investigation under 
        section 332 of the Tariff Act of 1930 (19 U.S.C. 1332) 
        of those final judicial decisions referred to in 
        subparagraph (A) that--
                  (i) are published during the 2-year period 
                beginning on February 1, 1988; and
                  (ii) would have affected tariff treatment if 
                they had been published during the period of 
                the conversion of the old Schedules into the 
                format of the Convention.
        No later than September 1, 1990, the Commission shall 
        report the results of the investigation to the 
        President, the Committee on Ways and Means, and the 
        Committee on Finance, and shall recommend those changes 
        to the Harmonized Tariff Schedule that the Commission 
        would have recommended if the final decisions concerned 
        had been made before the conversion into the format of 
        the Convention occurred.
          (3) The President shall review all changes 
        recommended by the Commission under paragraph (2)(B) 
        and shall, as soon as practicable, proclaim such of 
        those changes, if any, which he decides are necessary 
        or appropriate to conform such Schedule to the final 
        judicial decisions. Any such change shall be effective 
        with respect to--
                  (A) entries made on or after the date of such 
                proclamation; and
                  (B) entries made on or after the effective 
                date of the Harmonized Tariff Schedule if, 
                notwithstanding section 514 of the Tariff Act 
                of 1930 (19 U.S.C. 1514), application for 
                liquidation or reliquidation thereof is made by 
                the importer to the customs officer concerned 
                within 180 days after the effective date of 
                such proclamation.
          (4) If any protest or petition referred to in 
        paragraph (1)(A) is not sustained in whole or in part 
        by a final judicial decision, the entries subject to 
        that petition or protest and made before the effective 
        date of the Harmonized Tariff Schedule shall be 
        liquidated or reliquidated, as appropriate, in 
        accordance with the final judicial decision under the 
        old Schedules.

SEC. 1212. REFERENCE TO THE HARMONIZED TARIFF SCHEDULE.

  Any reference in any law to the ``Tariff Schedules of the 
United States'', ``the Tariff Schedules'', ``such Schedules'', 
and any other general reference that clearly refers to the old 
Schedules shall be treated as a reference to the Harmonized 
Tariff Schedule.

[SEC. 1213. TECHNICAL AMENDMENTS.]

[SEC. 1214. CONFORMING AMENDMENTS.

Amendments to codified titles, the Tobacco Adjustment Act of 
1983, the Federal Hazardous Substances Act, the Consumer 
Product Safety Act, the Toxic Substances Control Act, the 
Emergency Wetlands Resources Act of 1986, COBRA of 1985, the 
Tariff Act of 1930, the Automotive Products Trade Act of 1965, 
the Trade Act of 1974, the Trade Agreements Act of 1979, the 
Act of March 2, 1897, the Controlled Substances Import and 
Export Act, the Comprehensive Anti-Apartheid Act of 1986, the 
Strategic and Critical Materials Stock Piling Act, the Internal 
Revenue Code of 1986, the Caribbean Basin Economic Recovery 
Act, the Act Relating to Reforestation Trust Fund, the Trade 
and Tariff Act of 1984, the Meat Import Act of 1979, the 
National Wool Act of 1954, and the Agricultural Act of 1949.]

[SEC. 1215. NEGOTIATING AUTHORITY FOR CERTAIN ADP EQUIPMENT.

  Amendments to section 128(b) of the Trade Act of 1974 (19 
U.S.C. 2138(b))]

SEC. 1216. COMMISSION REPORT ON OPERATION OF SUBTITLE.

  The Commission, in consultation with other appropriate 
Federal agencies, shall prepare, and submit to the Congress and 
to the President, a report regarding the operation of this 
subtitle during the 12-month period commencing on the effective 
date of the Harmonized Tariff Schedule. The report shall be 
submitted to the Congress and to the President before the close 
of the 6-month period beginning on the day after the last day 
of such 12-month period.

SEC. 1217. EFFECTIVE DATES.

  (a) Accession to Convention and Provisions Other Than the 
Implementation of the Harmonized Tariff Schedule.--Except as 
provided in subsection (b), the provisions of this subtitle 
take effect on the date of the enactment of the Omnibus Trade 
and Competitiveness Act of 1988.
  (b) Implementation of the Harmonized Tariff Schedule.--The 
effective date of the Harmonized Tariff Schedule is January 1, 
1989. On such date--
          (1) the amendments made by sections 1204(a), 1213, 
        1214, and 1215 take effect and apply with respect to 
        articles entered on or after such date; and
          (2) sections 1204(c), 1211, and 1212 take effect.

          Section 484(e) of the Tariff Act of 1930, as amended

[19 U.S.C. 1484(e); P.L. 71-361, as amended by P.L. 93-618 and P.L. 95-
                                  106]

SEC. 484. ENTRY OF MERCHANDISE.

           *       *       *       *       *       *       *


    (e) Statistical Enumeration.--The Secretary of the 
Treasury, the Secretary of Commerce, and the United States 
International Trade Commission are authorized and directed to 
establish from time to time for statistical purposes an 
enumeration of articles in such detail as in their judgment may 
be necessary, comprehending all merchandise imported into the 
United States and exported from the United States, and shall 
seek, in conjunction with statistical programs for domestic 
production, and programs for achieving international 
harmonization of trade statistics, to establish the 
comparability thereof with such enumeration of articles. All 
import entries and export declarations shall include or have 
attached thereto an accurate statement specifying, in terms of 
such detailed enumeration, the kinds and quantities of all 
merchandise imported and exported and the value of the total 
quantity of each kind of 
article.

 B. EXCERPTS FROM THE HARMONIZED TARIFF SCHEDULE OF THE UNITED STATES 
                (HTS) RELATING TO SPECIAL DUTY TREATMENT

            1. American Goods Returned (HTS Item 9801.00.10)

            HARMONIZED TARIFF SCHEDULE OF THE UNITED STATES

                              SUBCHAPTER I

ARTICLES EXPORTED AND RETURNED, NOT ADVANCED OR IMPROVED IN CONDITION; 
                     ANIMALS EXPORTED AND RETURNED

U.S. Notes
    1. The provisions in this subchapter (except subheadings 
9801.00.70 and 9801.00.80) shall not apply to any article:
          (a) Exported with benefit of drawback;
          (b) Of a kind with respect to the importation of 
        which an internal-revenue tax is imposed at the time 
        such article is entered, unless such article was 
        subject to an internal-revenue tax imposed upon 
        production or importation at the time of its 
        exportation from the United States and it shall be 
        proved that such tax was paid before exportation and 
        was not refunded; or
          (c) Manufactured or produced in the United States in 
        a customs bonded warehouse or under subheading 
        9813.00.05 and exported under any provision of law.

           *       *       *       *       *       *       *


--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                         Rates of duty
                                                                      ----------------------------------------------------------------------------------
    Heading/       Stat.       Article description        Units of                                1
   subheading      suffix                                 quantity    --------------------------------------------------------             2
                                                                                 General                     Special
--------------------------------------------------------------------------------------------------------------------------------------------------------
9801.00.10                 Products of the United      ..............  Free                        ..........................  .........................
                            States when returned
                            after having been
                            exported, without having
                            been advanced in value or
                            improved in condition by
                            any process of
                            manufacture or other
                            means while abroad.......
--------------------------------------------------------------------------------------------------------------------------------------------------------

  2. American Goods Repaired or Altered Abroad (HTS Items 9802.00.40, 
                                  .50)


     American Metal Articles Processed Abroad (HTS Item 9802.00.60)


       American Components Assembled Abroad (HTS Item 9802.00.80)


            HARMONIZED TARIFF SCHEDULE OF THE UNITED STATES


                             SUBCHAPTER II

      ARTICLES EXPORTED AND RETURNED, ADVANCED OR IMPROVED ABROAD

U.S. Notes

    1. Except for goods subject to NAFTA drawback, this 
subchapter shall not apply to any article exported:
          (a) From continuous customs custody with remission, 
        abatement or refund of duty;
          (b) With benefit of drawback;
          (c) To comply with any law of the United States or 
        regulation of any Federal agency requiring exportation; 
        or
          (d) After manufacture or production in the United 
        States under heading 9813.00.05.
    2. (a) Except as provided in paragraph (b), any product of 
the United States which is returned after having been advanced 
in value or improved in condition abroad by any process of 
manufacture or other means, or any imported article which has 
been assembled abroad in whole or in part of products of the 
United States, shall be treated for the purposes of this Act as 
a foreign article, and, if subject to a duty which is wholly or 
partly ad valorem, shall be dutiable, except as otherwise 
prescribed in this part, on its full value determined in 
accordance with section 402 of the Tariff Act of 1930, as 
amended. If such product or such article is dutiable at a rate 
dependent upon its value, the value for the purpose of 
determining the rate shall be its full value under the said 
section 402.
    (b) No article (except a textile article, apparel article, 
or petroleum, or any product derived from petroleum, provided 
for in heading 2709 or 2710) may be treated as a foreign 
article, or as subject to duty, if--
          (i) the article is--
                  (A) assembled or processed in whole of 
                fabricated components that are a product of the 
                United States, or
                  (B) processed in whole of ingredients (other 
                than water) that are a product of the United 
                States,
        in a beneficiary country; and
          (ii) neither the fabricated components, materials or 
        ingredients, after exportation from the United States, 
        nor the article itself, before importation into the 
        United States, enters the commerce of any foreign 
        country other than a beneficiary country.
As used in this paragraph, the term ``beneficiary country'' 
means a country listed in general note 7(a).
    3. Articles repaired, altered, processed or otherwise 
changed in condition abroad.--The following provisions apply 
only to subheadings 9802.00.40 through 9802.00.60, inclusive:
          (a) The value of repairs, alterations, processing or 
        other change in condition outside the United States 
        shall be:
                  (i) The cost to the importer of such change; 
                or
                  (ii) If no charge is made, the value of such 
                change,
        as set out in the invoice and entry papers; except 
        that, if the appraiser concludes that the amount so set 
        out does not represent a reasonable cost or value, then 
        the value of the change shall be determined in 
        accordance with section 402 of the Tariff Act of 1930, 
        as amended.
          (b) No appraisement of the imported article in its 
        changed condition shall be required unless necessary to 
        a determination of the rate or rates of duty applicable 
        to such article.
          (c) The duty, if any, upon the value of the change in 
        condition shall be at the rate which would apply to the 
        article itself, as an entirety without constructive 
        separation of its components, in its condition as 
        imported if it were not within the purview of this 
        subchapter. If the article, as returned to the United 
        States, is subject to a specific or compound rate of 
        duty, such rate shall be converted to the ad valorem 
        rate which when applied to the full value of such 
        article determined in accordance with said section 402 
        would provide the same amount of duties as the specific 
        or compound rate. In order to compute the duties due, 
        the ad valorem rate so obtained shall be applied to the 
        value of the change in condition made outside the 
        United States.
          (d) For purposes of subheading 9802.00.60, the term 
        ``metal'' covers (1) the base metals enumerated in 
        additional U.S. note 1 to section XV; (2) arsenic, 
        barium, boron, calcium, mercury, selenium, silicon, 
        strontium, tellurium, thorium, uranium and the rare-
        earth elements; and (3) alloys of any of the foregoing.
    4. Articles assembled abroad with components produced in 
the United States.--The following provisions apply only to 
subheading 9802.00.80 and 9802.00.90:
          (a) The value of the products of the United States 
        assembled into the imported article shall be:
                  (i) The cost of such products at the time of 
                the last purchase; or
                  (ii) If no charge is made, the value of such 
                products at the time of the shipment for 
                exportation,
        as set out in the invoice and entry papers; except 
        that, if the appraiser concludes that the amount so set 
        out does not represent a reasonable cost or value, then 
        the value of such products shall be determined in 
        accordance with section 402 of the Tariff Act of 1930, 
        as amended.
          (b) The duty, if any, on the imported article shall 
        be at the rate which would apply to the imported 
        article itself, as an entirety without constructive 
        separation of its components, in its condition as 
        imported if it were not within the purview of this 
        subchapter. If the imported article is subject to a 
        specific or compound rate of duty, the total duties 
        shall be reduced in such proportion as the cost or 
        value of such products of the United States bears to 
        the full value of the imported article.
    5. No imported article shall be accorded partial exemption 
from duty under more than one provision in this subchapter.
    6. Notwithstanding the partial exemption from ordinary 
customs duties on the value of the metal product exported from 
the United States provided under subheading 9802.00.60, 
articles imported under subheading 9802.00.60 are subject to 
all other duties, and any other restrictions or limitations, 
imposed pursuant to title VII of the Tariff Act of 1930 (19 
U.S.C. 1671 et seq.), or chapter 1 of title II or chapter 1 of 
title III of the Trade Act of 1974 (19 U.S.C. 2251 et seq., 19 
U.S.C. 2411 et seq.).

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                         Rates of duty
                                                                      ----------------------------------------------------------------------------------
    Heading/       Stat.       Article description        Units of                                1
   subheading      suffix                                 quantity    --------------------------------------------------------             2
                                                                                 General                     Special
--------------------------------------------------------------------------------------------------------------------------------------------------------
                           Articles returned to the                    ..........................  ..........................  .........................
                            United States after
                            having been exported to
                            be advanced in value or
                            improved in condition by
                            any process of
                            manufacture or other
                            means:
                             Articles exported for                     ..........................  ..........................  .........................
                              repairs or alterations:
9802.00.40                    Repairs or alterations   ..............  A duty upon the value of    Free (B, C, CA, IL, MX)     A duty upon the value of
                               made pursuant to a                       the repairs or                                          the repairs or
                               warranty..............                   alterations (see U.S.                                   alterations (see U.S.
                                                                        note 3 of this                                          note 3 of this
                                                                        subchapter)                                             subchapter).
                   20 \1\      Internal combustion     (\1\).........  ..........................  ..........................  .........................
                                engines . . .
                                dutiable value.
                   40 \1\      Other . . . dutiable    (\1\).........  ..........................  ..........................  .........................
                                value.
9802.00.50                    Other..................  ..............  A duty upon the value of    Free (IL, MX).              A duty upon the value of
                                                                        the repairs or             A duty upon the value of     the repairs or
                                                                        alterations (see U.S.       the repairs or              alterations (see U.S.
                                                                        note 3 of this              alterations (see U.S.       note 3 of this
                                                                        subchapter)                 note 3 of this              subchapter).
                                                                                                    subchapter) (B, C, CA)
9802.00.60         00 \1\    Any article of metal (as  (\1\ \3\).....  A duty upon the value of    Free (IL).                  A duty upon the value of
                              defined in U.S. note                      such processing outside    A duty upon the value of     such processing outside
                              3(d) of this                              the United States (see      such processing outside     the United States (see
                              subchapter)                               U.S. note 3 of this         the United States (see      U.S. note 3 of this
                              manufactured in the                       subchapter)                 U.S. note 3 of this         subchapter).
                              United States or                                                      subchapter) (B, C, CA,
                              subjected to a process                                                MX)
                              of manufacture in the
                              United States, if
                              exported for further
                              processing, and if the
                              exported article as
                              processed outside the
                              United States, or the
                              article which results
                              from the processing
                              outside the United
                              States, is returned to
                              the United States for
                              further processing.....
9802.00.80                 Articles, except goods of   ..............  A duty upon the full value  Free (IL).                  A duty upon the full
                            heading 9802.00.90,                         of the imported article,   A duty upon the full value   value of the imported
                            assembled abroad in whole                   less the cost or value of   of the imported article,    article, less the cost
                            or in part of fabricated                    such products of the        less the cost or value of   or value of such
                            components, the product                     United States (see U.S.     such products of the        products of the United
                            of the United States,                       note 4 of this              United States (see U.S.     States (see U.S. note 4
                            which (a) were exported                     subchapter)                 note 4 of this              of this subchapter).
                            in condition ready for                                                  subchapter) (B, C, CA,
                            assembly without further                                                MX)
                            fabrication, (b) have not
                            lost their physical
                            identity in such articles
                            by change in form, shape
                            or otherwise, and (c)
                            have not been advanced in
                            value or improved in
                            condition abroad except
                            by being assembled and
                            except by operations
                            incidental to the
                            assembly process such as
                            cleaning, lubricating and
                            painting.................
--------------------------------------------------------------------------------------------------------------------------------------------------------

   3. Personal (Tourist) Exemptions (HTS Items 9804.00.65,   .70, .72)


            HARMONIZED TARIFF SCHEDULE OF THE UNITED STATES


                             SUBCHAPTER IV

       PERSONAL EXEMPTIONS EXTENDED TO RESIDENTS AND NONRESIDENTS

U.S. Notes

           *       *       *       *       *       *       *


    2. In the case of persons arriving from a contiguous 
country which maintains a free zone or free port, if the 
Secretary of the Treasury deems it necessary in the public 
interest and to facilitate enforcement of the requirement that 
the exemption in subheading 9804.00.70 shall apply only to 
articles acquired as an incident of the foreign journey, he 
shall prescribe by regulation or instruction, the application 
of which may be restricted to one or more ports of entry, that 
such exemption shall be allowed only to residents who have 
remained beyond the territorial limits of the United States for 
not less than a specified period, not to exceed 24 hours, and, 
after the expiration of 90 days after the date of such 
regulation or instruction, allowance of the said exemption 
shall be subject to the limitations so prescribed.
    3. A person arriving in the United States:
          (a) On duty as an employee of a vessel, vehicle or 
        aircraft, engaged in international traffic, or
          (b) From a trip during which he was so employed,
shall not be entitled to the exemptions provided for in this 
subchapter (other than those in heading 9804.00.80), unless he 
is permanently leaving such employment without the intention of 
resuming it on the same or another carrier.
    4. As used in subheadings 9804.00.70 and 9804.00.72, the 
term ``beneficiary country'' means a country listed in general 
notes 7(a) or 11(a).

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                         Rates of duty
                                                                      ----------------------------------------------------------------------------------
    Heading/       Stat.       Article description        Units of                                1
   subheading      suffix                                 quantity    --------------------------------------------------------             2
                                                                                 General                     Special
--------------------------------------------------------------------------------------------------------------------------------------------------------
                           Articles imported by or                     ..........................  ..........................  .........................
                            for the account of any
                            person arriving in the
                            United States who is a
                            returning resident
                            thereof (including
                            American citizens who are
                            residents of American
                            Samoa, Guam or the Virgin
                            Islands of the United
                            States) (con.):
                             Other articles acquired                   ..........................  ..........................  .........................
                              abroad as an incident
                              of the journey from
                              which the person is
                              returning if such
                              person arrives from the
                              Virgin Islands of the
                              United States or from a
                              contiguous country
                              which maintains a free
                              zone or free port, or
                              arrives from any other
                              country after having
                              remained beyond the
                              United States for a
                              period of not less than
                              48 hours, for his
                              personal or household
                              use, but not imported
                              for the account of any
                              other person nor
                              intended for sale, if
                              declared in accordance
                              with regulations of the
                              Secretary of the
                              Treasury and if such
                              person has not claimed
                              an exemption under
                              subheadings 9804.00.65,
                              9804.00.70, and
                              9804.00.72 within 30
                              days preceding his
                              arrival, and claims
                              exemption under only
                              one of such items on
                              his arrival:
9804.00.65          (\1\)     Articles, accompanying   ..............  Free                                                    Free
                               a person, not over
                               $400, in aggregate
                               fair retail value in
                               the country of
                               acquisition, including
                               (but only in the case
                               of an individual who
                               has attained the age
                               of 21) not more than 1
                               liter of alcoholic
                               beverages and
                               including not more
                               than 200 cigarettes
                               and 100 cigars........
9804.00.70          (\1\)     Articles whether or not                  Free                                                    Free
                               accompanying a person,
                               not over $1,200 in
                               aggregate fair market
                               value in the country
                               of acquisition,
                               including:
                               (a) but only in the
                                case of an individual
                                who has attained the
                                age of 21, not more
                                than 5 liters of
                                alcoholic beverages,
                                not more than 1 liter
                                of which shall have
                                been acquired
                                elsewhere than in
                                American Samoa, Guam
                                or the Virgin Islands
                                of the United States,
                                and not more than 4
                                liters of which shall
                                have been produced
                                elsewhere than in
                                such insular
                                possessions, and
                               (b) not more than
                                1,000 cigarettes, not
                                more than 200 of
                                which shall have been
                                acquired elsewhere
                                than in such insular
                                possessions, and not
                                more than 100 cigars,
                              if such person arrives
                               directly or indirectly
                               from such insular
                               possessions, not more
                               than $400 of which
                               shall have been
                               acquired elsewhere
                               than in such insular
                               possessions or up to
                               $600 of which have
                               been acquired in one
                               or more beneficiary
                               countries (but this
                               subheading does not
                               permit the entry of
                               articles not
                               accompanying a person
                               which were acquired
                               elsewhere than in such
                               insular possessions)..
9804.00.72          (\1\)     Articles whether or not                  Free                                                    Free
                               accompanying a person,
                               not over $600 in
                               aggregate fair market
                               value in the country
                               of acquisition,
                               including--
                               (a) but only in the
                                case of an individual
                                who has attained the
                                age of 21, not more
                                than 1 liter of
                                alcoholic beverages
                                or not more than 2
                                liters if at least 1
                                liter is the product
                                of one or more
                                beneficiary
                                countries, and
                               (b) not more than 200
                                cigarettes, and not
                                more than 100 cigars,
                              if such person arrives
                               directly from a
                               beneficiary country,
                               not more than $400 of
                               which shall have been
                               acquired elsewhere
                               than in beneficiary
                               countries (but this
                               item does not permit
                               the entry of articles
                               not accompanying a
                               person which were
                               acquired elsewhere
                               than in beneficiary
                               countries)............
-----