I 111th CONGRESS 1st Session H. R. 3039 IN THE HOUSE OF REPRESENTATIVES June 25, 2009 Mr. McDermott (for himself and Mr. Bilbray) introduced the following bill; which was referred to the Committee on Ways and Means A BILL To provide for preferential duty treatment to certain apparel articles of the Philippines.

1.

Short title

This Act may be cited as the Save Our Industries Act of 2009 or the SAVE Act.

2.

Findings; purposes

(a)

Findings

Congress finds the following: (1)The United States and the Republic of the Philippines (in this Act referred to as the Philippines), a former colony, share deep historical and cultural connections. The United States has developed preferential trading relations with former colonies such as the Marshall Islands, the Federated States of Micronesia and the Republic of Palau. (2)The Philippines represents a tremendous economic potential and enduring political and security significance to the United States. (3)The United States and the Philippines maintain a fair trading relationship that should be expanded to the mutual benefit of both countries. In 2008, United States exports to the Philippines were valued at $8,300,000,000, and United States imports from the Philippines were valued at $8,700,000,000. (4)United States textile exports to the Philippines were valued at nearly $20,000,000 in 2008, consisting mostly of broadwoven, industrial or specialty, and nonwoven fabrics. The potential for export growth in this area can sustain and create thousands of jobs. (5)The Philippines’ textile and apparel industries, like that of their counterparts in the United States, share the same challenges and risks stemming from the end of the United States quota system and from the end of safeguards that continued to control apparel imports from the People’s Republic of China until January 1, 2009. (6)The United States apparel fabrics industry is heavily dependent on sewing outside the United States, and, for the first time, United States textile manufacturers would have a program that utilizes sewing done in an Asian country. In contrast, most sewing of United States fabric occurs in the Western Hemisphere, with about 75 percent of United States fabric exports presently going to countries that are parties to the North American Free Trade Agreement and the Dominican Republic-Central America-United States Free Trade Agreement. Increased demand for United States fabric in Asia will increase opportunities for the United States industry. (7)Apparel producers in the Western Hemisphere are excellent at making basic garments such as T-shirts and standard 5-pocket jeans. However, the needle capability does not exist to make high-fashion, more sophisticated garments such as embroidered T-shirts and fashion jeans with embellishments. Such apparel manufacturing is done almost exclusively in Asia. (8)A program that provides preferential duty treatment for certain apparel articles of the Philippines will provide a strong incentive for Philippine apparel manufacturers to use United States fabrics, which will open new opportunities for the United States textile industry and increase opportunities for United States yarn manufactures. At the same time, the United States would be provided a more diverse range of sourcing opportunities. (b)

Purposes

The purposes of this Act are— (1)to encourage higher levels of trade in textiles and apparel between the United States and the Philippines and enhance the commercial well-being of their respective industries in times of global economic hardship; (2)to enhance and broaden the economic, security, and political ties between the United States and the Philippines; (3)to stimulate economic activity and development throughout the Philippines, including regions such as Manila and Mindanao; and (4)to provide a stepping stone to an eventual free trade agreement between the United States and the Philippines, either bilaterally or as part of a regional agreement.

3.

Definitions

In this Act: (1)

Classification under the HTS

The term classification under the HTS means, with respect to an article, the 10-digit subheading under which the article is classified in the HTS. (2)

HTS

The term HTS means the Harmonized Tariff Schedule of the United States. (3)

Entered

The term entered means entered, or withdrawn from warehouse for consumption, in the customs territory of the United States. (4)

Knit-to-shape

An article is knit-to-shape if 50 percent or more of the exterior surface area of the article is formed by major parts that have been knitted or crocheted directly to the shape used in the article, with no consideration being given to patch pockets, appliqués, or the like. Minor cutting, trimming, or sewing of those major parts shall not affect the determination of whether an article is knit-to-shape. (5)

Wholly assembled

An article is wholly assembled in the Philippines or the United States if— (A)all components of the article pre-existed in essentially the same condition as found in the finished article and were combined to form the finished article in the Philippines or the United States; and (B)the article is comprised of at least 2 components. (6)

Wholly formed

A yarn is wholly formed in the United States if all of the production processes and finishing operations, starting with the extrusion of filaments, strips, film, or sheet, and including slitting a film or sheet into strip, or the spinning of all fibers into yarn, or both, and ending with a finished yarn or plied yarn, takes place in the United States.

4.

Trade benefits

(a)

Articles covered

For purposes of this section, an eligible apparel article is any of the following: (1)Men’s and boys’ cotton knit shirts. (2)Women’s and girls’ cotton knit shirts and blouses. (3)Men’s and boys’ cotton trousers, breeches, and shorts. (4)Women’s and girls’ cotton trousers, slacks, and shorts. (5)Men’s and boys’ cotton underwear. (6)Men’s and boys’ manmade fiber underwear. (7)Men’s and boys’ manmade fiber knit shirts. (8)Women’s and girls’ manmade fiber knit shirts and blouses. (9)Men’s and boys’ manmade fiber trousers, breeches, and shorts. (10)Women’s and girls’ manmade fiber slacks, breeches, and shorts. (11)Men’s and boys’ non-knit manmade fiber shirts. (12)Brassieres and other body support garments. (13)Manmade fiber brassieres and other body support garments. (14)Manmade fiber swimwear. (15)Cotton swimwear. (b)

Duty-free treatment for certain eligible apparel articles

(1)

Duty-free treatment

Subject to paragraphs (2) and (3), an eligible apparel article shall enter the United States free of duty if the article is wholly assembled in the United States or the Philippines, or both, and if the component determining the article’s classification under the HTS consists entirely of— (A)fabric components cut in the United States or the Philippines, or both, from fabric wholly formed in the United States from yarns wholly formed in the United States; (B)components knit-to-shape in the United States from yarns wholly formed in the United States; or (C)any combination of the fabric components or components knit-to-shape described in subparagraphs (A) and (B). (2)

Dyeing, printing, or finishing

An apparel article described in paragraph (1) shall be ineligible for duty-free treatment under such paragraph if the component determining the article’s classification under the HTS comprises any fabric, fabric component, or component knit-to-shape in the United States that was dyed, printed, or finished at any place other than in the United States. (3)

Other processes

An apparel article described in paragraph (1) shall not be disqualified from eligibility for duty-free treatment under such paragraph because it undergoes stone-washing, enzyme-washing, acid-washing, permapressing, oven-baking, bleaching, garment-dyeing, screen printing, or other similar processes in either the United States or the Philippines. (c)

Duty reduction for certain eligible apparel articles

(1)

Duty reduction

An eligible apparel article shall enter the United States at a reduced rate of duty specified in paragraph (2) if it is wholly assembled in the United States or the Philippines, or both, and if the component determining the article’s classification under the HTS consists entirely of— (A)fabric components cut in the United States or the Philippines, or both, from fabric wholly formed in the United States or the Philippines, or both, from yarns wholly formed in the United States; (B)components knit-to-shape in the United States or the Philippines, or both, from yarns wholly formed in the United States; or (C)any combination of fabric components or components knit-to-shape that are described in subparagraphs (A) and (B). (2)

Reduced tariff rate

An eligible apparel article described in paragraph (1) shall be dutiable at the lesser of— (A)50 percent of the column 1 rate of duty that applies to the apparel article under its classification under the HTS; or (B)the column 1 rate of duty under the HTS that applies to the article, assessed upon the value of the article, less the cost or value of yarns in the article that are wholly formed in the United States. (d)

Articles eligible under both categories

An eligible apparel article that meets the requirements of both subsections (b) and (c) shall be eligible for duty-free treatment under subsection (b). (e)

De minimis

(1)

In general

An otherwise eligible apparel article shall not be ineligible for preferential treatment because fibers or yarns used in the production of the component that determines the article’s classification under the HTS do not meet the requirements of subsection (b) or (c), if the total weight of all such fibers or yarns in the component that determines the article’s classification under the HTS is not more than 10 percent of the total weight of that component. (2)

Elastomeric yarns

Notwithstanding paragraph (1), an article described in subsection (b) or (c) that contains elastomeric yarns in the component of the article that determines the article’s classification under the HTS shall be eligible for duty-free treatment under this section only if such elastomeric yarns are wholly formed in the United States or the Philippines. (3)

Direct shipment

Any apparel article described in subsection (b) or (c) is an eligible article only if it is imported directly into the United States from the Philippines. (f)

Single transformation rules

Any of the following apparel articles that are wholly assembled, or knit-to-shape, in the Philippines from any combination of fabrics, fabric components, components knit-to-shape, or yarns and are imported directly into the United States from the Philippines shall enter the United States free of duty, without regard to the source of the fabric, fabric components, components knit-to-shape, or yarns from which the articles are made: (1)Any apparel article that is of a type listed in chapter rule 3, 4, or 5 for chapter 61 of the HTS (as such chapter rules are contained in paragraph 1 of section A of the Annex to Proclamation 8213 of the President of December 20, 2007) as being excluded from the scope of such chapter rule, when such chapter rule is applied to determine whether an apparel article is an originating good for purposes of general note 29(n) to the HTS, except that, for purposes of this paragraph, reference in such chapter rule to 6104.12.00 shall be deemed to be reference to 6104.19.60. (2)Any apparel article that is of a type listed in chapter rule 3(a), 4(a), or 5(a) for chapter 62 of HTS, as such chapter rules are contained in paragraph 9 of section A of the Annex to Proclamation 8213 of the President of December 20, 2007. (3)Any article not described in paragraph (1) or (2) that is any of the following: (A)Playsuits and sunsuits. (B)Babies’ garments and clothing accessories. (C)Women’s and girls’ cotton coats. (D)Cotton dresses. (E)Manmade fiber dresses. (F)Men’s and boys’ cotton, non-knit, shirts. (G)Cotton nightwear and pajamas. (H)Manmade fiber nightwear and pajamas. (I)Women’s and girls’ wool coats. (J)Wool dresses. (K)Wool skirts. (L)Women’s and girls’ wool suits. (M)Women’s and girls’ wool slacks, breeches, and shorts. (N)Women’s and girls’ cotton, non-knit, shirts and blouses. (O)Women’s and girls’ non-knit, manmade fiber shirts and blouses. (P)Women’s and girls’ manmade fiber suits. (Q)Men’s and boys’ wool coats. (R)Cotton dressing gowns and robes. (S)Manmade fiber robes and dressing gowns. (T)Women’s and girls’ manmade fiber coats. (U)Cotton skirts. (V)Manmade fiber skirts. (W)Men’s and boys’ manmade fiber coats. (X)Women’s and girls’ cotton underwear. (Y)Women’s and girls’ manmade fiber underwear. (Z)Women’s and girls’ coats of silk and vegetable blends. (AA)Skirts made of silk and vegetable blends. (g)

Review and report

The Comptroller General shall, at the end of the 2-year period beginning on the effective date under section 5, review the program established under this section for the purpose of evaluating the effectiveness of, and making recommendations to Congress for improvements in, the program. (h)

Enforcement

(1)

Presidential certification of conditions

No apparel article shall be afforded the preferential treatment under this section unless the President certifies to Congress that the Philippines is meeting the following conditions: (A)The Philippines reestablishes the Electronic Visa Information System (ELVIS) to further assist with prevention of transshipment of apparel articles and the use of counterfeit documents relating to the importation of apparel articles into the United States. (B)The Philippines continues to enforce the Memorandum of Understanding between the United States of America and the Republic of the Philippines Concerning Cooperation in Trade in Textile and Apparel Goods, signed on August 23, 2006. (C)The Philippines agrees to provide, on a timely basis at the request of U.S. Customs and Border Protection, and consistently with the manner in which the records are kept in the Philippines, a report on exports from the Philippines of apparel articles eligible for preferential treatment under this section, and on imports into the Philippines of yarns, fabrics, fabric components, or components knit-to-shape that are wholly formed in the United States. (D)The Philippines agrees to cooperate fully with the United States to address and take action necessary to prevent circumvention as provided in Article 5 of the Agreement on Textiles and Clothing referred to in section 101(d)(4) of the Uruguay Round Agreements Act (19 U.S.C. 3511(d)(4)). (E)The Philippines agrees to require its producers and exporters of articles eligible for preferential treatment under this section to maintain, for at least 3 years after export, complete records of the production and the export of such articles, including records of yarns, fabrics, fabric components, and components knit-to-shape and used in the production of such articles. (F)The Philippines agrees to report, on a timely basis, at the request of U.S. Customs and Border Protection, documentation establishing the country of origin of articles eligible for preferential treatment under this section, as used by that country in reimplementing an effective visa system. (G)The Philippines is to establish, within 60 days after the date of the President’s certification under this paragraph, procedures that allow the Office of Textiles and Apparel of the Department of Commerce (OTEXA) to obtain information when fabric wholly formed in the United States is exported to the Philippines to allow for monitoring and verification before the imports of apparel articles containing the fabric for which preferential treatment is sought under this section reach the United States. The information provided upon export of the fabrics shall include, among other things, the name of the importer of the fabric in the Philippines, the 10-digit HTS subheading of the apparel articles to be made from the fabric, and the quantity of the apparel articles to be made from the fabric for importation into the United States. (2)

Definition of transhipment

As used in paragraph (1), transshipment has occurred when preferential treatment for an apparel article under this section has been claimed on the basis of material false information concerning the country of origin, manufacture, processing, or assembly of the article or of any fabric, fabric component, or component knit-to-shape from which the apparel article was assembled. For purposes of this paragraph, false information is material if disclosure of the true information would have meant that the article is or was ineligible for preferential treatment under this section. (i)

Proclamation authority

The President shall issue a proclamation to carry out this section not later than 60 days after the date of the enactment of this Act. The President shall consult with the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate in preparing such proclamation.

5.

Effective date

This Act shall apply to articles entered, or withdrawn from warehouse for consumption, on or after the 15th day after the date on which the President issues the proclamation under section 4(i).

6.

Termination

(a)

In general

The preferential duty treatment provided under this Act shall remain in effect for a period of 10 years beginning on the effective date provided in section 5. (b)

GSP eligibility

The preferential duty treatment provided under this Act shall terminate if and when the Philippines becomes ineligible for designation as a beneficiary developing country under title V of the Trade Act of 1974 (19 U.S.C. 2461 et seq.).