[Senate Report 104-270]
[From the U.S. Government Publishing Office]
Calendar No. 404
104th Congress Report
SENATE
2d Session 104-270
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EXTENSION OF FREE TRADE BENEFITS TO THE WEST BANK AND GAZA STRIP; OECD
SHIPBUILDING AGREEMENT ACT; AND REAUTHORIZATION OF THE GENERALIZED
SYSTEM OF PREFERENCES PROGRAM
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May 13, 1996.--Ordered to be printed
_______________________________________________________________________
Mr. Roth, from the Committee on Finance, submitted the following
R E P O R T
[To accompany H.R. 3074]
[Including cost estimate of the Congressional Budget Office]
The Committee on Finance, to which was referred the bill
(H.R. 3074) to amend the United States-Israel Free Trade Area
Implementation Act of 1985 to provide the President with
additional proclamation authority with respect to articles of
the West Bank or Gaza Strip or a qualifying industrial zone,
having considered the same, reports favorably thereon with an
amendment in the nature of a substitute and recommends that the
bill, as amended, do pass.
I. Summary of H.R. 3074, as Amended
H.R. 3074, as amended, contains four titles. Title I
includes the original House bill language to amend the United
States-Israel Free Trade Area Implementation Act of 1985 to
provide the President with additional proclamation authority
with respect to articles of the West Bank or Gaza Strip or a
qualifying industrial zone, encompassing portions of the
territory of Israel and Jordan or Israel and Egypt. Title II
approves and implements the Agreement Respecting Normal
Competitive Conditions in the Commercial Shipbuilding and
Repair Industry, resulting from negotiations conducted under
the auspices of the Organization for Economic Cooperation and
Development, which was signed on December 21, 1994. Title III
reauthorizes the Generalized System of Preferences program for
a period of one year, nine months, and 12 days, retroactive to
August 1, 1995, with an effective date for the renewal of
October 1, 1996. Finally, title IV contains revenue offsets for
the bill, which include provisions relating to the tax
treatment of foreign trusts and the imposition of penalties for
failure to meet foreign shipping income tax reporting
requirements. H.R. 3074, as amended, modifies the title of the
original House bill to reflect these changes.
II. Title I--Extension of Free Trade to West Bank and Gaza
a. background
Section 3 of the United States-Israel Free Trade Area
Implementation Act approved a free trade area between the
United States and Israel. Products of the West Bank and the
Gaza Strip that were marked as products of Israel were accorded
preferential tariff treatment as provided for under the United
States-Israel Free Trade Area Implementation Act. Following
implementation of the 1994 Declaration of Principles by Israel
and the Palestine Liberation Organization (PLO), on behalf of
the Palestinian people, products of the West Bank and the Gaza
Strip were marked as such and no longer qualified for
preferential tariff treatment as products of Israel. Instead,
such products currently enter the United States under normal
most-favored-nation (MFN) tariff rates.
In connection with the Blair House Communique of February
12, 1995, the United States proposed to extend duty free
treatment to products from the West Bank, the Gaza Strip, and
industrial zones along the border of Israel and Egypt and
Israel and Jordan. In a letter of October 17, 1995, the
Palestinian Authority agreed to accord U.S. products duty free
access to the West Bank and the 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.
b. summary of title i
Title I, section 1 of H.R. 3074, as amended, would amend
the United States-Israel Free Trade Area Implementation Act
(the ``Act'') by adding a new section 9 to the Act. This new
section would provide the President authority to proclaim the
modification or elimination of any existing duty on articles
that are produced in and imported from the West Bank, the Gaza
Strip, or a qualifying industrial zone. The new section 9 of
the Act also applies the same rule of origin requirements to
products from the West Bank, the Gaza Strip, and qualifying
industrial zones as are already applicable to products from
Israel.
Finally, the new section 9 of the Act defines ``qualifying
industrial zone'' as any area designated as such by the
President, which encompasses portions of the territory of
Israel and Jordan or Israel and Egypt and which local
authorities designate as an enclave where merchandise may enter
without payment of duty or excise tax.
c. general explanation
1. Congressional Action
On December 12, 1995, Senators Brown and Feinstein
introduced S. 1469, which was referred to the Committee on
Finance. This bill would give the President authority to
provide imports from the West Bank, the Gaza Strip, and
qualifying industrial zones (encompassing portions of the
territory of Israel and Jordan or Israel and Egypt) the same
tariff treatment as articles from Israel under the U.S.-Israel
Free Trade Agreement (U.S.-Israel FTA). On April 16, 1996, the
House of Representatives passed H.R. 3074, which is
substantially similar legislation to S. 1469. H.R. 3074 was
referred to the Committee on Finance on April 17, 1996.
2. Trade with the West Bank and Gaza Strip
There is a lack of reliable data on the volume and value of
trade between the United States and the West Bank/Gaza Strip,
in part, because exports to and imports from the West Bank and
Gaza Strip are transshipped through Israel. Nonetheless, it is
clear that the amount of trade is comparatively insignificant
in terms of total U.S. trade with the Middle East. According to
U.S. Department of Commerce data, leading U.S. exports to the
West Bank and Gaza Strip include machinery, mechanical
appliances, and rice. Principal imports from the West Bank and
Gaza Strip include textiles and vegetable products.
3. Committee Views
It is the view of the Committee that products from the West
Bank and the Gaza Strip should not be subjected to less
favorable treatment now than those products received before the
signing of the Declaration of Principles by the Government of
Israel and the PLO. Accordingly, title I of H.R. 3074 is
intended to offer to products from the West Bank, the Gaza
Strip, and qualifying industrial zones (located between Israel
and Jordan or Israel and Egypt) the same tariff treatment as is
currently offered to products from Israel under the U.S.-Israel
FTA. The legislation also applies the same rule of origin
requirements to products from the West Bank, the Gaza Strip,
and qualifying industrial zones, as are already applicable to
products from Israel.
It is the Committee's understanding that the Administration
intends to apply the proclamation authority granted under this
legislation to all eligible products from these areas. The
President may, however, terminate the grant of duty free
treatment if changed circumstances should warrant such action
in the future.
The Committee believes that providing duty free treatment
to imports from the West Bank, the Gaza Strip, and qualifying
industrial zones is important to promoting the peace process in
the Middle East, increasing employment and stimulating the
region's economy, and ending the Arab economic boycott of
Israel.
Therefore, the Committee strongly supports the extension of
duty free tariff treatment to products from the West Bank, the
Gaza Strip, and qualifying industrial zones.
III. Approval and Implementation of OECD Shipbuilding Agreement
a. background
On June 8, 1989, the Shipbuilders Council of America (SCA),
representing the U.S. shipbuilding industry, filed a petition
under section 301 of the Trade Act of 1974, which alleged that
foreign government subsidies to the shipbuilding industry
constituted an unjustifiable, unreasonable, or discriminatory
trade practice that burdens or restricts U.S. commerce. The SCA
withdrew the petition on July 21, 1989, following a commitment
by the U.S. Government to initiate negotiations on an agreement
to discipline government support to the shipbuilding and repair
industry within the framework of the Working Party on
Shipbuilding of the Council of the Organization for Economic
Cooperation and Development (``OECD''). These negotiations
commenced on October 24, 1989, when the United States notified
the Executive Committee of the OECD of its intention to
negotiate such an agreement.
After more than five years of negotiation, the Agreement
Respecting the Normal Competitive Conditions in the Commercial
Shipbuilding and Repair Industry (the ``Shipbuilding
Agreement'') was signed on December 21, 1994, by the Commission
of the European Communities, and the Governments of Finland,
Japan, the Republic of Korea, Norway, Sweden, and the United
States. Together, the signatories account for approximately 80
percent of global shipbuilding capacity.
The Shipbuilding Agreement applies only to the construction
and repair of self-propelled, seagoing commercial vessels of
100 gross tons and above (including certain specialized
vessels) and tugs of 365 kilowatts or more. It does not cover
the construction of naval vessels or the outfit and repair of
vessels for military purposes.
The Shipbuilding Agreement has four general sections.
First, with some limited exceptions, the Shipbuilding Agreement
requires the elimination of virtually all subsidies to the
shipbuilding industry granted either directly to shipbuilders
or indirectly through ship operators or other entities. Second,
to avoid trade-distorting financing programs, the Shipbuilding
Agreement also establishes common rules to discipline
government financing for export and domestic ship sales. Third,
the Shipbuilding Agreement includes an ``injurious-pricing
code,'' modeled on the antidumping rules of the World Trade
Organization (WTO), which would allow signatories to assess an
offsetting injurious-pricing charge against foreign
shipbuilders who sell ships at unfairly low (i.e., dumped
prices) that injure domestic shipbuilders. The injurious-
pricing code also permits signatories to impose specified
countermeasures against a foreign shipbuilder that is subject
to an affirmative injurious-pricing determination, if the
shipbuilder does not pay the injurious-pricing charge. Finally,
the Shipbuilding Agreement includes binding rules for dispute
settlement in the OECD, which are patterned after the WTO's
dispute-settlement regime.
The Shipbuilding Agreement is scheduled to enter into force
30 days after all signatories deposit instruments of
ratification, acceptance, or approval with the OECD
Secretariat. In order for the United States to complete its
ratification, legislation must be enacted by Congress to bring
U.S. law into compliance with the Shipbuilding Agreement.
The Shipbuilding Agreement had an initial target date for
entry into force of January 1, 1996. At the meeting of the OECD
Council Working Party on Shipbuilding on December 11, 1995,
representatives of Korea, Norway, and the European Union (which
now includes Finland and Sweden) deposited their respective
instruments of ratification with the OECD Secretariat. At the
same time, participants acknowledged that it would not be
possible for either the United States or Japan to complete
their ratification procedures in time to meet the original
target effective date of January 1, 1996. Accordingly,
representatives of the signatories agreed to extend the
deadline and set a new target date of June 15, 1996, for
depositing instruments of ratification, thereby permitting the
Shipbuilding Agreement to enter into force by July 15, 1996.
b. summary of title ii
The Shipbuilding Agreement establishes a mechanism for the
determination of injurious pricing in the construction and sale
of seagoing vessels, in a manner analogous to the provisions in
the Agreement on Implementation of Article VI of the General
Agreement on Tariffs and Trade 1994 (``WTO Antidumping
Agreement''). In addition, the Shipbuilding Agreement provides
for the assessment of an injurious-pricing charge and
countermeasures where appropriate--remedies that are different
from the antidumping provisions under Title VII of the Tariff
Act of 1930, as amended (``Title VII''), which implements the
WTO Antidumping Agreement into U.S. law. Because ocean-going
vessels engaged in international trade are technically not
imported or entered for consumption in the United States, it is
virtually impossible to use the antidumping remedies of Title
VII to cover the sale of vessels at less than fair value.
Accordingly, separate statutory authority is required to
implement the Shipbuilding Agreement.
1. Injurious Pricing and Countermeasures
Section 203 of Title II, would establish a new Title VIII
of the Tariff Act of 1930, as amended, in order to create an
injurious-pricing mechanism applicable to shipbuilding. This
mechanism would permit the collection of an injurious-pricing
charge against ocean-going vessels sold to U.S. buyers at a
price below normal value when that sale injures a U.S.
shipbuilding industry. This mechanism also allows for the
imposition of countermeasures against a shipyard that fails to
pay the injurious-pricing charge.
The new Title VIII would be analogous to the current
antidumping provisions of Title VII, which sets forth
procedures under U.S. law for assessment of antidumping duties.
The specific injurious-pricing provisions differ from the
antidumping provisions in Title VII only where necessary to
take into account differences between the Shipbuilding
Agreement and the WTO Antidumping Agreement due to the unique
characteristics of the construction and sale of ocean-going
vessels.
The new Title VIII would also provide for judicial review
of injurious pricing and countermeasures determinations in the
U.S. Court of International Trade, with subsequent appellate
review in the U.S. Court of Appeals for the Federal Circuit.
2. Other Provisions
Title II also includes the following changes or additions
to current law:
Repairs made in a signatory to the Shipbuilding
Agreement on U.S.-flagged vessels of a type covered by
the Shipbuilding Agreement would be exempt from the 50
percent duty imposed under section 466 of the Tariff
Act of 1930 on the cost of repairs made outside the
United States on a U.S.-flagged vessel.
The requirements of certain tax and subsidy programs
available under the Merchant Marine Act of 1936 to
vessels constructed in the United States as well as
government guarantees available under Title XI of the
Merchant Marine Act for financing the construction,
reconstruction or reconditioning of U.S. built vessels,
are changed to conform to the requirements of the
Shipbuilding Agreement and the related OECD
Understanding on Export Credits for Ships.
Private persons other than the U.S. Government are
prohibited from asserting any cause of action or
defense under the Shipbuilding Agreement in U.S.
courts.
C. General Description of Title II
1. Subtitle A--General Provisions.
Short Title
(Section 201)
Section 201 provides that the title may be cited as the
``OECD Shipbuilding Agreement Act.''
Approval of the Shipbuilding Agreement
(Section 202)
Section 202 provides that the Congress approves the
Shipbuilding Agreement, which resulted from negotiations
conducted under the auspices of the OECD and which was entered
into on December 21, 1994.
Injurious Pricing and Countermeasures Relating to Shipbuilding
(Section 203)
Section 203 adds a new Title VIII to the Tariff Act of
1930. Title VIII contains four subtitles, described section-by-
section below. Because Title VIII is modeled on the antidumping
statute in Title VII, this description outlines only those
differences between the two titles.
SUBTITLE A--INJURIOUS PRICING CHARGE AND COUNTERMEASURES
Section 801: Injurious Pricing Charge
Section 801 would require the imposition of a one-time
injurious-pricing charge against a foreign shipbuilder if the
Department of Commerce (Commerce) determines that a vessel
produced by that shipbuilder has been sold directly or
indirectly to a U.S. buyer at less than its fair value and the
International Trade Commission (ITC) determines that an
industry in the United States is or has been materially injured
or threatened with material injury, or the establishment of an
industry in the United States is or has been materially
retarded by reason of the sale of that vessel. The amount of
the injurious-pricing charge would be the amount by which
normal value exceeds the export price. The injurious-pricing
charge would be assessed once for the sale in question. After
the charge is paid, there would be no continuing liability on
future sales or scrutiny of sales of other vessels produced by
the foreign shipbuilder unless a separate investigation is
conducted with respect to each of those sales.
Section 801 is modeled on and analogous to section 731 of
Title VII. However, Title VIII contains several changes, which
are required to take into account the unique characteristics of
the shipbuilding industry and the requirements of the
Shipbuilding Agreement. Specifically, because ocean-going
vessels engaged in international trade are technically not
imported or entered for consumption in the United States, the
Shipbuilding Agreement and Title VIII would permit
investigations to be commenced when a vessel is sold directly
or indirectly to a U.S. buyer, regardless of whether the vessel
is imported or entered for consumption in the United States.
Thus, the traditional antidumping mechanism of imposing an
antidumping duty on future entries of imported merchandise
would not provide a domestic shipbuilding industry with
effective relief. Accordingly, the Shipbuilding Agreement and
Title VIII would establish a one-time charge to be assessed
against the shipyard producing the injuriously-priced vessel.
Finally, the Shipbuilding Agreement provides that there
must be a demonstration that there is or has been material
injury by reason of the sale of the vessel or vessels in
question. In contrast, the WTO Antidumping Agreement provides
that there must be a demonstration that there is material
injury by reason of imports. Accordingly, section 801 reflects
the difference by requiring the ITC to determine whether there
is or has been material injury by reason of the sale of the
injuriously-priced vessel.
Accordingly, the Committee intends that the material injury
standards of Title VII and Title VIII be interpreted
differently consistent with the particular nature of the
material-injury inquiry under the two titles.
Section 802: Procedures For Instituting An Injurious-Pricing
Investigation
Section 802 sets forth the procedures for conducting an
injurious-pricing investigation. Section 802(a) describes
procedures for initiation by Commerce and provides that an
investigation may be self-initiated only within six months
after the time that Commerce first knew or should have known of
the sale of the vessel. Section 802(b) describes the procedures
for initiation by petition. These procedures require that a
petition be filed within either six or nine months (depending
upon the circumstances) from the time the petitioner knew or
should have known of the sale of the vessel, but no later than
six months after the delivery of the vessel. If these deadlines
are not met, an investigation may not be commenced.
Section 802(b)(1)(B)(iii) provides that if a petitioner is
a producer, it must show that it had the capability to produce
the subject vessel. In addition, if the sale of the subject
vessel was made through a bidding process that was either a
broad multiple bid or on which the producer was invited to bid,
the petitioner must show that it made a timely effort to obtain
the sale through a proposal that met bid specifications. If the
sale was not made through a broad multiple bid and the
petitioner was not invited to bid, but knew or should have
known of the proposed purchase of the vessel in question, the
petitioner must show it made timely efforts to conclude a sale
consistent with the buyer's requirements.
Section 802(d)(1) provides a 45-day deadline, with no
extension, for initiating an investigation after the filing of
a petition, assuming that the petition meets the requirements
set forth. Among these requirements, section 802(d)(4) sets
forth certain requirements for petitioners, including the
requirement that a petitioner must file ``on behalf of'' a
domestic industry. Under this requirement, there must be
sufficient industry support for the petition. Support is deemed
to be sufficient when the following criteria are met:
domestic producers or workers who support the
petition must account for at least 25 percent of the
total capacity of domestic producers capable of
producing the like vessel; and
domestic producers or workers who support the
petition must account for more than 50 percent of the
total capacity to produce the like vessel of that
portion of the industry expressing a view on the
petition.
Section 802(d)(6) provides that Commerce may not initiate
an injurious-pricing investigation if a third country that is a
WTO member, but not a party to the Shipbuilding Agreement, has
initiated an antidumping proceeding against the same vessel
that has been pending for not more than a year, or that has
been completed and resulted in the imposition of antidumping
measures or a negative determination.
The procedures for initiating an injurious-pricing
investigation under Title VIII differ in a number of respects
from procedures to initiate an antidumping investigation under
Title VII. Because most injurious-pricing investigations will
involve only one ship, it was deemed appropriate to establish
deadlines in the Shipbuilding Agreement for the filing of
petitions and for self-initiation of an investigation with
respect to that ship. Such deadlines are not needed in an
antidumping investigation under Title VII, in which all entries
of the subject imports during the period recent to the
investigation are examined.
In addition, because vessels are generally unique and often
made to individual specifications, a domestic producer may not
have produced a vessel actually identical to the subject
vessel. Nonetheless, the domestic producer could still be
injured as a result of the sale because that producer was
capable of producing the subject vessel. By contrast, Title VII
investigations require that the petitioner, if a producer,
actually produce or manufacture the like product (except in the
context of a determination whether the establishment of a
domestic industry is materially retarded by reason of dumped
imports). Moreover, the petitioner under Title VII is not
required to show that it made an effort to sell like
merchandise to the purchaser.
Title VIII provides for a 45-day period for determining
whether to initiate an injurious-pricing investigation, as
opposed to 20 days with a possible extension to 40 days in an
antidumping case under section 732(c)(1) of Title VII, because
of the Administration's concern that the new representation
requirements and deadlines for filing petitions under Title
VIII may create additional complexities requiring more time to
determine the sufficiency of the petition.
Finally, Title VII does not provide for the delay or
termination of an antidumping investigation if another WTO
member undertakes antidumping or other measures against like
merchandise from the subject country. Under Title VIII,
however, a U.S. producer could seek to bring an injurious-
pricing action against a vessel that is also subject to an
antidumping action in a WTO member country that is not a party
to the Shipbuilding Agreement. In this situation, the
Shipbuilding Agreement and Title VIII would require that the
injurious-pricing action not be initiated in certain
circumstances.
Section 803: Preliminary Investigations
Section 803(a) would require the ITC to make its
preliminary determination within 90 days after the filing of
the injurious-pricing petition.
Section 803(b) states that Commerce is to make its
preliminary determination within 160 days after initiating its
investigation or 160 days after the date of delivery of the
vessel in a cost or constructed-value investigation. An
extension is permitted in extraordinarily complicated cases or
for good cause until not later than 190 days after initiation
or date of delivery, as the case may be.
These time periods for preliminary determinations in Title
VIII cases are generally longer than in antidumping
investigations under Title VII. This difference is related to
the different nature of the investigations under the two
titles. Due to the unique nature of the construction of
vessels, a Title VIII cost investigation must be delayed until
construction is completed to allow Commerce to obtain actual
cost information. Tying Commerce's investigation to the date of
the vessel's delivery may result in a delay of the
investigation for several years due to the length of time
necessary to construct a vessel.
Because the remedies established under Title VII and Title
VIII are completely different, the effect of a preliminary
affirmative Commerce determination would be different as well.
Title VII provides for provisional relief in the form of the
posting of a bond or cash deposit by the importer in the amount
of the preliminary dumping margin and the collection of duties
on entries of the subject merchandise after an affirmative
preliminary determination has been rendered. Under Title VIII,
however, no provisional relief after the preliminary
investigation is necessary because the remedy consists entirely
of a one-time charge, imposed on the shipbuilder after a final
determination has been made.
Section 804: Termination or Suspension of Investigation
Section 804(d) provides for the suspension of an injurious-
pricing investigation if a third country that is a WTO member,
but not a party to the Shipbuilding Agreement, initiates an
antidumping proceeding with respect to the same vessel. The
investigation would be terminated if the third country
proceeding results in the imposition of antidumping measures or
a negative determination. If the third-country proceeding ends
without the imposition of antidumping measures or a negative
determination, or if it is not concluded within one year
(unless antidumping measures are subsequently imposed), the
suspension would end and the Title VIII investigation would
proceed.
This rule under 804(d) contrasts with Title VII, which does
not allow for the suspension or termination of an investigation
based on action by a third country. However, the Shipbuilding
Agreement contemplates the situation where, for example, a U.S.
producer seeks to bring a Title VIII action against a vessel
that has been sold to a buyer in the United States and is also
subject to an antidumping investigation by a WTO Member country
that is not a party to the Shipbuilding Agreement. The rule in
the Shipbuilding Agreement and Title VIII would require that
the injurious-pricing investigation be terminated or suspended
in such situations to avoid multiple investigations of the
subject vessel.
Section 805: Final Determinations
Section 805(a) provides that Commerce would be required to
make its final determination in an injurious-pricing
investigation under Title VIII not later than 75 days after its
preliminary determination. This period may be extended under
certain circumstances to 290 days after initiation of the
investigation in ordinary cases or after delivery of the vessel
in cost or constructed-value investigations.
Section 805(b) provides that the ITC would be required to
make its final determination before the later of the l20th day
on which Commerce makes an affirmative preliminary
determination or the 45th day after the day on which Commerce
makes an affirmative final determination.
The extension for completion of Commerce's injurious-
pricing investigation is longer under Title VIII than is
provided for under Title VII, section 735 in an antidumping
investigation. This difference between the two titles is
related to the different nature of the investigations and the
substantial delays that may be caused by use of actual cost
data with respect to the construction of ships.
Section 806: Imposition And Collection Of Injurious Pricing Charge
In the event of final affirmative determinations by
Commerce and the ITC under Title VIII, Commerce would be
required to publish an order imposing a one-time injurious-
pricing charge on the foreign shipbuilder in an amount equal to
the injurious pricing margin for the vessel subject to
investigation. The shipbuilder must pay the charge within 180
days. However, the payment period may be extended under
extraordinary circumstances, subject to interest charges. Once
the injurious-pricing charge is paid, the shipbuilder would not
be subject to any continuing liability on future sales or
scrutiny of sales of other vessels constructed by that
shipbuilder unless a new investigation under Title VIII is
conducted with respect to each of those sales.
This injurious-pricing remedy under the Shipbuilding
Agreement and Title VIII is different than the antidumping
remedy under Title VII because of the differences between the
sale of imported merchandise and the nature of sales
transactions involving ships. Because vessels engaged in
international trade do not enter the United States for
consumption, the traditional antidumping mechanism of imposing
an antidumping duty on future entries would not provide the
domestic industry with effective relief. Accordingly, the
Shipbuilding Agreement and Title VIII would establish a one-
time charge to be assessed against the shipyard producing the
injuriously-priced vessel. Because the remedy would be a one-
time charge, there is no need for an administrative or sunset
review of the order as provided for under section 751 with
respect to antidumping orders under Title VII.
Section 807: Imposition of Countermeasures
Section 807 provides that failure to pay the injurious-
pricing charge imposed against a foreign shipbuilder subjects
that shipbuilder to the imposition of countermeasures. The
countermeasures would take the form of a temporary denial (for
a period of up to four years after delivery of the vessel
subject to countermeasures) of privileges to load or unload
cargo or passengers in the United States to vessels contracted
to be built by the offending shipbuilder within a period of up
to four years after the effective date of the countermeasures.
Sections 807 (b) and (c) set forth the procedures for
establishing countermeasures. Specifically, section 807(b)
would require Commerce to publish a notice of an intent to
impose countermeasures not later than 30 days before the
expiration of the time for payment of the injurious-pricing
charge. Under section 807(c), Commerce would be required to
issue a determination and order imposing countermeasures within
90 days after the notice of intent is published. In issuing
this order, Commerce would be required to determine whether an
interested party has demonstrated that the scope or duration of
the countermeasures should be narrower or shorter than that set
forth in the notice of intent.
Section 807(d) provides that if countermeasures are
imposed, they may be reviewed annually as to scope and
duration.
Section 807(e) provides that countermeasures may be
extended in scope and duration beyond four years only if a
panel established under the Shipbuilding Agreement agrees that
such extension is appropriate.
Finally, section 807(f) would require Commerce to publish
each year a list of all vessels subject to countermeasures and
to provide notice of the imposition of countermeasures to
certain interested parties.
The countermeasures procedure under Title VIII is
essentially an enforcement mechanism. Neither Title VII nor the
WTO Antidumping Agreement provide for the imposition of
countermeasures. However, an injurious-pricing order under
Title VIII would not apply to future vessels delivered by the
shipyard in question. Therefore, the United States would have
no recourse in enforcing the order if the shipyard refused to
pay the injurious-pricing charge. Accordingly, it is necessary
to establish a mechanism to ensure that a shipyard is unable to
avoid the remedial effect of an order simply by not paying the
injurious-pricing charge, and Title VIII and the Shipbuilding
Agreement establish the countermeasures procedure as the
enforcement mechanism.
The Committee notes that under section 861(17)(G) of Title
VIII, purchasers of vessels potentially subject to
countermeasures have standing to participate fully in
proceedings concerning the imposition of countermeasures. The
Committee expects that the interests of such purchasers, as
well as other entities such as domestic producers and
respondents, be taken into account in making countermeasure
determinations.
The Committee also notes that the countermeasures would
apply to vessels contracted to be built by the offending
foreign producer after the date of the order imposing
countermeasures. Specifically, a vessel would be covered if the
material terms of sale for that vessel are established within a
period of four consecutive years beginning 30 days after the
notice of intent is published. The Committee expects that
purchasers will be given ample notice as to vessels that may be
potentially covered by the countermeasure order and wishes to
avoid situations in which purchasers would not have sufficient
notice that changes in contract terms could subject the vessel
to countermeasures.
Accordingly, the Committee intends that only significant
changes in the material terms of a legitimate contract entered
into before the effective date of the countermeasures order
should push the sale into the period covered by countermeasures
if those changes were made after the order's effective date.
Such significant changes amount to more than, for example,
merely changing the delivery date because of construction
delays, changing vessel specifications in a manner that does
not affect the overall nature of the vessel subject to the
contract, or other minor changes in price or terms. Of course,
the Committee also intends that a vessel would be included in
the countermeasure order if a sham contract were established
covering the vessel before the effective countermeasure date
simply to avoid imposition of countermeasures.
Section 808: Injurious Pricing Petitions By Third Countries
Section 808 provides that the government of a party to the
Shipbuilding Agreement may file a petition with the U.S. Trade
Representative (USTR) that requests an investigation to
determine whether a vessel from another Shipbuilding Agreement
party has been sold directly or indirectly to one or more U.S.
buyers at less than its normal value and that an industry in
the petitioning country is materially injured by reason of the
sale. After consulting with Commerce and the ITC, USTR would be
required to determine whether to initiate an investigation.
However, USTR would be able to proceed to initiate the
investigation only after obtaining the approval of the Parties
Group under the Shipbuilding Agreement.
The procedure in section 808 to allow third countries to
file injurious-pricing petitions is in accordance with the
requirements of the Shipbuilding Agreement and is intended to
provide an opportunity to conduct an investigation to determine
whether injury by reason of an injuriously-priced sale is
experienced in another Shipbuilding Agreement party. Section
808 is comparable to the procedure under Title VII, section
783, which allows the government of a WTO party to file a
petition with USTR requesting the initiation of an antidumping
investigation to determine whether there is material injury to
an industry in the petitioning country by reason of dumped
imports entered for consumption in the United States.
SUBTITLE B--SPECIAL RULES
Section 821: Export Price
Section 821 sets forth the rules for determining the export
price to be used in injurious-pricing investigations. ``Export
price'' is defined as the price at which the subject vessel is
first sold (or agreed to be sold) by or for the account of the
foreign producer of the subject vessel to an unaffiliated U.S.
buyer. Such a sale would include any transfer in ownership
interest, including by lease or long-term bareboat charter, in
conjunction with the original transfer from the producer,
either directly or indirectly, to a U.S. buyer. Section 821(b)
sets forth the adjustments to be made to export price.
The definition of export price under section 821 is similar
to the definition in Title VII (section 772). However, Title
VII also contains a definition of the concept ``constructed
export price.'' Because of the unique manner in which vessels
are sold, there is no need for a constructed export price
concept in the context of an injurious-pricing determination
under Title VIII.
Section 822: Normal Value
Section 822(a)(1) provides that the normal value of the
subject vessel is the price of a like vessel in the home
market, as adjusted, if sold at a time reasonably corresponding
to the time of the sale under investigation. Section
822(a)(1)(D) defines such contemporaneous sales as being within
three months before or after the sale of the subject vessel or,
in the absence of such sales, such longer period as Commerce
determines would be appropriate. If home-market sales are not
available, Commerce would be required to determine normal value
based on the price of a like vessel in third-country sales.
Only if such sales are inappropriate could Commerce use
constructed value to determine normal value.
Section 822(e) provides that in constructed-value
situations, normal value would be derived on the basis of a
statutory formula, which is the sum of the costs of production,
plus the actual amount of profit and selling, administrative,
and general expenses (where actual data are available). If
constructed value is used, section 803(b)(1)(C) provides that
the investigation may be delayed until the construction of the
ship in question has been completed, even though the petition
was filed at the time of contract.
Section 822(b) states that if Commerce determines that a
home-market sale was made at less than the cost of production
and was at a price that does not permit recovery of all costs
within five years, that sale may be disregarded in determining
normal value. If a sale is disregarded, normal value would be
based on another sale of a foreign like vessel in the ordinary
course of trade. If no such sale is available, then Commerce
must use constructed value to determine the normal value of the
subject vessel.
Section 822(f)(1)(C) provides for adjusting costs if they
have been affected by startup operations. Section 822(f)(1)(D)
would require that costs due to ``extraordinary circumstances''
such as labor disputes, fire, and natural disaster, be
excluded.
The rules applicable to normal value in Title VIII are
similar to those of Title VII (section 773), altered only where
necessary to account for the lengthy periods required to
construct ships and the fact that, due to the unique nature of
the shipbuilding industry, there often are few, if any, vessels
constructed by the foreign shipbuilder that may be used as an
appropriate comparison. Title VII contains no special provision
for adjusting costs due to ``extraordinary circumstances'' such
as labor disputes, fire, or natural disaster.
The Committee understands that Commerce expects to use
constructed value in most investigations because of lack of
actual comparable sales. Nonetheless, the Committee expects
that Commerce will make every effort to base normal value on
home market or third-country sales when available within a
reasonably coincident period.
Section 823: Currency Conversion
Under section 823(a), Commerce would be required to convert
foreign currencies into U.S. dollars using the exchange rate in
effect on the date of sale of the subject vessel, except that
if it is established that a currency transaction on forward
markets is directly linked to a sale under consideration, the
rate specified in the forward-sale agreement shall be used.
Section 823(b) would define the date of sale as the date of
the contract of sale. If the material terms of sale are
significantly changed after that date, the date of sale would
be the date of the change, and Commerce would be required to
adjust for any unreasonable effect on the injurious-pricing
margin due only to fluctuations in the exchange rate between
the original and the new date of sale.
The provisions of section 823 are essentially the same as
under Title VII, section 773A. Unlike the WTO Antidumping
Agreement, however, the Shipbuilding Agreement does not require
that, in converting currencies, fluctuations in exchange rates
are to be ignored. This difference between the two agreements,
which is reflected in Title VIII, accounts for differences in
the respective investigations under the two titles, as well as
the particular characteristics of the shipbuilding industry. In
an antidumping investigation under Title VII, Commerce
generally investigates multiple transactions during the 12
months prior to the filing of the petition. During that period
of time, the exchange rate may fluctuate or change.
Accordingly, under Title VII, Commerce is required to allow
exporters time to adjust their export prices in response to
sustained changes in the exchange rate. However, most Title
VIII injurious-pricing investigations would involve only a
single sales transaction.
Furthermore, two years or more may elapse between the time
a ship contract is signed and ship construction is completed.
Because of the long lead-time, during which numerous contract
modifications may occur that could change the date of sale,
there is much greater potential for movements in exchange rates
to unreasonably distort the margin calculation for that sale.
Therefore, section 823 requires adjustments to eliminate such
distortions.
SUBTITLE C--PROCEDURES
Sections 841 Through 845: Procedures
Sections 841 through 845 set forth procedural requirements
concerning the injurious-pricing mechanism. Specifically,
section 841 provides that, upon request, Commerce and the ITC
are each to hold hearings during their investigations.
Section 842 provides for determinations on the basis of the
facts available. As in section 776 of Title VII, the option to
use adverse inferences would be limited to those cases in which
the agency finds that an interested party has failed to
cooperate by not acting to the best of its ability to comply
with a request for information. Moreover, whenever the agency
relies on secondary information rather than information
obtained during the course of the investigation, the agency, to
the extent practicable, would be required to corroborate that
information from independent sources that are reasonably at its
disposal.
Section 843 sets forth the requirements for making
information concerning the investigation available to the
public, treating information as proprietary, disclosing
proprietary information under protective order, serving
submissions on other parties, handling violations of protective
orders and sanctions, providing opportunity for comment by
vessel buyers, and publishing determinations.
Section 844 sets forth procedures for conducting
investigations, including certification of submissions, the
manner for handling difficulties by the parties in meeting
requirements of the investigation, treatment of deficient
submissions, use of information submitted by the parties, non-
acceptance of submissions, public comment on information, and
verification of information submitted. The provision would
require that the agencies not decline to consider information
submitted by an interested party that is necessary to the
determination but does not meet all of the requirements of the
agency, if the information is submitted by the established
deadline, it can be verified (where appropriate), it is not so
incomplete that it cannot serve as a reliable basis for
reaching a determination, the interested party has demonstrated
that it has acted to the best of its ability to provide the
information and meet the requirements, and that the information
can be used without undue difficulty.
All of these procedural requirements under Title VIII are
the same as the procedures set up under Title VII in sections
774, 776, 777, and 782 with respect to antidumping
investigations. In addition, because the Shipbuilding Agreement
provides that injurious-pricing determinations are subject to
dispute resolution before the OECD, section 845 sets forth
requirements for administrative action following OECD panel
reports issued under the dispute-settlement rules of the
Shipbuilding Agreement, which are virtually identical to the
requirements in section 129 of the Uruguay Round Agreements Act
with respect to administrative action following WTO dispute-
settlement panel reports on antidumping and injury
determinations.
The Committee intends that the procedural requirements of
current law with respect to antidumping apply to shipbuilding
investigations as well. Accordingly, antidumping procedural
requirements under Title VII have been repeated in Title VIII,
making only those changes necessitated by the differences
between the WTO Antidumping Code and the Shipbuilding
Agreement.
SUBTITLE D--DEFINITIONS
Section 861: Definitions
Industry; Producer
Section 861(4) defines ``industry'' as the producers as a
whole of a domestic like vessel, or those producers whose
collective capability to produce a domestic like vessel
constitutes a major proportion of the total domestic capability
to produce a like vessel. A ``producer'' is defined as
including an entity that is producing the domestic like vessel
and an entity with the capability to produce the domestic like
vessel. ``Capability to produce'' is further defined as the
capability of a producer to produce a domestic like vessel with
its present facilities or ability to adapt its facilities in a
timely manner.
By contrast, under Title VII, section 771(4) defines
``industry'' as the producers as a whole of a domestic like
product, or those producers whose collective output of a
domestic like product constitutes a major proportion of the
total domestic production of the product.
As discussed above with respect to section 802 of Title
VIII, vessels are generally unique and made to individual
specifications. Therefore, a domestic producer may not have
produced a vessel like the subject vessel but could,
nonetheless, still be injured by the sale because that producer
was capable of producing such a vessel. Accordingly, the
definition of ``industry'' and ``producer'' in Title VIII would
not require that the party actually produce a like vessel in
order to be considered a producer or part of the industry. This
definition under Title VIII differs from Title VII, which
requires that the petitioner, if a producer, actually produce
or manufacture the like product (except in the context of a
determination whether the establishment of a domestic industry
is materially retarded by reason of dumped imports).
Buyer; United States buyer
Section 801(a)(1) requires that a vessel be sold directly
or indirectly to a U.S. buyer in order for an injurious-pricing
investigation under Title VIII to be commenced. Section 861(5)
defines a ``buyer'' as any person who acquires an ownership
interest in a vessel, including by lease or long-term bareboat
charter, in conjunction with the original transfer from the
producer, either directly or indirectly.
Section 861(6) defines ``United States buyer'' as a buyer
that is a U.S. citizen, a juridical entity organized under the
laws of the United States (or a political subdivision thereof),
or another juridical entity owned or controlled by such a
juridical entity or U.S. citizen. The term ``own'' is defined
as having more than a 50 percent interest. The term ``control''
is defined as the actual ability to have substantial influence
on corporate behavior, which is presumed to exist where there
is at least a 25 percent interest.
Title VII does not contain a definition of buyer or
purchaser because Title VII does not require that a sale of the
subject merchandise be made to a U.S. entity for an antidumping
investigation to be commenced. Instead, Title VII requires that
the subject merchandise enter the United States for
consumption.
Because ocean-going vessels are technically not imported or
entered for consumption in the United States, however, the
Shipbuilding Agreement and Title VIII would permit
investigations to be commenced only when a vessel is sold
directly or indirectly to a U.S. buyer.
Ownership interest
With respect to the definition of a ``buyer'' in section
861(5), section 861(7) defines the term ``ownership interest''
as including any contractual or proprietary interest allowing
the beneficiary to take advantage of the operation of a vessel
in a manner substantially comparable to an owner. Section
861(5) automatically includes leases or bareboat charters as
being ownership interests.
In an antidumping investigation under Title VII, Commerce
may determine that a lease is equivalent to a sale under
section 771(19) after considering the terms of the lease,
commercial practice within the industry, the circumstances of
the transaction, whether the product subject to the lease is
integrated into the operations of the lessee or importer,
whether in practice there is a likelihood that the lease will
be continued or renewed for a significant period of time, and
other relevant factors, including whether the lease transaction
would permit avoidance of antidumping or countervailing duties.
Vessel; Respondents subject to investigation
Section 861(8) defines ``vessel'' as a self-propelled
seagoing vessel of 100 gross tons or more used for
transportation of goods or persons or for performance of a
specialized service (including icebreakers and dredgers) and a
tug of 365 kilowatts or more, as long as it is produced in a
Shipbuilding Agreement Party or in a country that is neither a
Shipbuilding Agreement Party nor a member of the WTO.
Accordingly, respondents in injurious-pricing investigations
must be from countries that are parties to the Shipbuilding
Agreement or from countries that are neither parties to the
Shipbuilding Agreement nor members of the WTO. Thus, if a
producer is from a country that is a member of the WTO but is
not a party to the Shipbuilding Agreement, the Title VIII
remedy may not be utilized.
By contrast, Title VII (section 771(16)) provides that a
respondent may be from any country, even if it is not a member
of the WTO, as long as the product is imported or sold for
importation into the United States. This distinction between
Title VII and Title VIII arises out of concern that an
injurious-pricing action against a WTO member that agreed to be
bound only by the rules of the WTO but not the provisions of
the Shipbuilding Agreement may be subject to challenge as being
inconsistent with United States' obligations under the WTO.
Like vessel
Section 861(9) defines a ``like vessel'' as a vessel of the
same type, purpose, and approximate size as the subject vessel
and possessing characteristics closely resembling those of the
subject vessel. This definition of ``like vessel'' in Title
VIII is analogous to the definition of ``like product'' in
Title VII.
Under Title VII, section 771(10) defines a ``domestic like
product'' as a product which is like, or in the absence of
like, most similar in characteristics and uses with, the
article subject to investigation.
The Committee recognizes that ocean-going vessels are
frequently built to unique specifications. Accordingly, the
Committee intends that, under the appropriate circumstances,
there may be some minor variation in size and equipment between
like vessels.
Material injury
Section 861(16) defines ``material injury'' as harm that is
not inconsequential, immaterial, or unimportant. In making its
determination whether an industry in the United States is or
has been materially injured by reason of the sale of the
subject vessel, section 861(16)(B) would require the ITC to
consider the sale of the subject vessel, the effect of the sale
of the subject vessel on prices in the United States for a
domestic like vessel, and the impact of the sale of the subject
vessel on domestic producers of a domestic like vessel, but
only in the context of production operations in the United
States. In addition, the ITC may consider such other economic
factors as are relevant to the material-injury determination.
In considering the sale of the subject vessel for purposes
of determining material injury, section 861(16)(C)(i) would
require the ITC to ascertain whether the sale, either in
absolute terms or relative to production or demand in the
United States, in terms of either volume or value, is or has
been significant.
In evaluating the effect of the sale of the subject vessel
on prices, section 861(16)(C)(ii) specifies that the ITC
consider whether there has been significant underselling of the
subject vessel as compared with the price of a domestic like
vessel and whether the effect of the sale otherwise depresses
or has depressed prices to a significant degree or prevents or
has prevented price increases, which otherwise would have
occurred, to a significant degree.
Finally, in evaluating the impact on the domestic industry,
section 861(16)(C)(iii) requires evaluation of all relevant
economic factors having a bearing on the state of the U.S.
industry, including actual and potential decline in output,
sales (or offers for sale), market share, profits,
productivity, return on investments, and utilization of
capacity; factors affecting domestic prices; actual and
potential negative effects on cash flow, employment, wages,
growth, ability to raise capital, and investment; actual and
potential negative effects on the existing development and
production efforts of the domestic industry; and the magnitude
of the injurious-pricing margin. All factors are to be
evaluated within the context of the business cycle and
conditions of competition that are distinctive to the domestic
industry.
Section 771(7)(B) of Title VII requires the ITC to consider
the volume of subject imports in determining whether a domestic
industry is materially injured by reason of such imports. The
definitions of ``material injury'' and the requirements for
determining material injury under Title VIII are analogous.
Differences between the two titles are merely intended to
account for the particular characteristics of the shipbuilding
industry and the requirements of the Shipbuilding Agreement.
Nonetheless, with respect to the consideration of volume in
determining material injury under Title VIII, the Committee
recognizes that, unlike antidumping cases, injurious-pricing
proceedings will normally involve the sale of only one vessel.
Therefore, it is the Committee's view that, depending upon the
circumstances of a particular investigation, the sale of one
vessel at an injurious price may be sufficient to satisfy the
volume criterion under Title VIII, whereas, it would be an
unusual case in which a single sale would be considered a
significant volume under Title VII. In addition, the Committee
intends consideration of the ``sale'' under Title VIII to
include the number of sales, tonnage, and value represented by
that sale or sales, as appropriate.
Moreover, as discussed above concerning section 801, Title
VIII provides that there must be a demonstration that there is
or has been material injury by reason of the sale of the vessel
or vessels in question. Accordingly, the material-injury
provision under Title VIII is drafted to permit consideration
of whether the sale of the subject vessel has caused price
depression or suppression.
Threat
Section 861(16)(E) specifies that in determining whether a
U.S. industry is threatened with material injury by reason of
the sale of the subject vessel, the ITC is to consider, among
other relevant economic factors, any existing unused production
capacity or imminent, substantial increase in production
capacity in the exporting country indicating the likelihood of
substantially increased sales of a foreign like vessel to U.S.
buyers, taking into account the availability of other export
markets to absorb any additional exports; whether the sale of a
foreign like vessel or other factors indicate the likelihood of
significant additional sales to U.S. buyers; whether the sale
of the subject vessel or sale of a foreign like vessel by the
foreign producer are at prices that are likely to have a
significant depressing or suppressing effect on domestic
prices, and are likely to increase demand for further sales;
the potential for product shifting; the actual and potential
negative effects on the existing development and production
efforts of the domestic industry; and any other demonstrable
adverse trends that indicate the probability that there is
likely to be material injury by reason of the sale of the
subject vessel.
These criteria under Title VIII for determining threat of
material injury in an injurious-pricing investigation are
analogous to the criteria under section 771(7)(F) in Title VII
that the ITC is to consider in determining threat of material
injury by reason of dumped imports. The only differences in the
threat criteria between the two titles are intended to account
for the particular characteristics of the shipbuilding industry
and the requirements of the Shipbuilding Agreement. Therefore,
except when necessary to account for these differences, the ITC
should apply the threat criteria in Title VIII in the same
manner as under Title VII.
The Committee notes, however, that although both Title VII
and Title VIII make reference to ``substantially increased
sales'' in the threat section, the increase in sales of a
foreign like vessel or the increase in production capacity may,
in appropriate circumstances, satisfy the Title VIII criterion
even though such increase may not be sufficient in most cases
in the context of a threat determination under Title VII. The
ITC's consideration of ``sale'' in determining threat of
material injury under Title VIII includes the number of sales,
tonnage, and value represented by that sale or sales. Because
there may be no more than one sale in most instances, the ITC
need not focus on evidence of increased past sales in
determining the likelihood of future sales.
Cumulation
Under section 861(16)(F), the ITC would be required,
subject to certain exceptions, to assess cumulatively the
effects of sales of foreign like vessels from all foreign
producers. Section 861(16)(F) provides that the ITC must
conduct a cumulative analysis with respect to petitions filed
on the same day, investigations self-initiated on the same day,
or petitions filed and investigations self-initiated on the
same day, if the foreign producers of the subject vessels
compete with each other and with producers of a domestic like
vessel in the U.S. market.
These requirements regarding cumulative analysis by the ITC
under Title VIII are analogous to the provisions in section
771(7)(G) of Title VII with respect to a cumulative assessment
by the ITC of the volume and effects of imports of subject
merchandise from all foreign countries. Therefore, the rules
regarding the types of investigations that must be cumulated
under Title VII and Title VIII are intended to be the same.
The only difference between the two titles in final
determinations in which the ITC performs a cumulative analysis,
concerns the use of the record compiled in the first
investigation in which the ITC makes a final determination. In
antidumping cases under Title VII, the ITC is generally
required to use such a record. However, in injurious-pricing
investigations under Title VIII, the ITC may, but would not be
required to use this record. The reason for the difference is
that some Title VIII investigations may be delayed for long
periods of time in order to obtain cost-of-production
information, and use of the record in the first investigation
may, therefore, not be appropriate for purposes of conducting a
cumulative analysis.
Interested party
Section 861(17) defines ``interested party'' as the foreign
producer, seller (other than the foreign producer), and the
U.S. buyer of the subject vessel, or a trade or business
association a majority of whose members are the foreign
producer, seller, or U.S. buyer of the subject vessel; the
government of the country in which the subject vessel is
produced or manufactured; a producer that is a member of an
industry; a certified union or recognized union or group of
workers which is representative of an industry; a trade or
business association a majority of whose members are producers
in an industry; and an association a majority of whose members
is composed of interested parties listed above.
Except to account for the particular characteristics of the
shipbuilding industry, these definitions of ``interested
party'' are analogous to the definitions of ``interested
party'' under section 771(9) in Title VII. However, 861(17)(G)
would also permit a purchaser to be an interested party in
countermeasure proceedings if, after the effective date of an
order imposing countermeasures under section 807, the purchaser
entered into a contract of sale with the foreign producer that
is subject to the order. Giving such parties interested party
status would permit them to participate in proceedings before
Commerce to determine the scope and duration of
countermeasures.
Enforcement of Countermeasures
(Section 204)
Section 204 would amend Part II of Title IV of the Tariff
Act of 1930 to provide the U.S. Customs Service with the
authority to deny any request for a permit to lade or unlade
passengers, merchandise, or baggage from or onto vessels listed
by Commerce as being subject to countermeasures. Section 204(b)
provides for certain limited exceptions to this rule.
Unlike the WTO Antidumping Agreement, the Shipbuilding
Agreement, as reflected in section 204, specifically provides
for the imposition of countermeasures if the foreign shipyard
in question does not pay the injurious-pricing charge assessed
against it. Because the antidumping law permits the assessment
of an antidumping duty on future entries of merchandise subject
to an antidumping order, U.S. law does not permit the
imposition of countermeasures in the dumping context.
Judicial Review in Injurious Pricing and Countermeasure Proceedings
(Section 205)
Section 205 amends the Tariff Act of 1930 to add section
516B, which provides that interested parties may challenge
Commerce and ITC final determinations before the Court of
International Trade, with subsequent appeal to the U.S. Court
of Appeals for the Federal Circuit. In such cases, the
applicable standard of review is whether the determination is
``unsupported by substantial evidence on the record, or
otherwise not in accordance with law.'' In addition, certain
preliminary determinations and countermeasure determinations
may be challenged. In these cases, the standard of review is
whether determination is ``arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law.''
Section 516B is analogous to the judicial review procedures
and standards of review provided for in section 516A of the
Tariff Act of 1930 in antidumping and countervailing duty
investigations under Title VII. Therefore, the Committee
intends that section 516B provide essentially analogous
opportunities for judicial review as under section 516A. The
differences are intended to take into account the differences
in the two types of investigations, especially the imposition
of countermeasures and the absence of comparable administrative
reviews and sunset reviews under Title VIII.
2. Subtitle B--Other Provisions
Equipment and Repair of Vessels
(Section 211)
Section 211 amends section 466 of the Tariff Act of 1930,
by adding a new subsection (i). The new subsection provides
that the equipment and repair made in a signatory to the
Shipbuilding Agreement on U.S.-flagged vessels of a type
covered under the Shipbuilding Agreement are not subject to the
50 percent ad valorem duty imposed under subsection 466(a) of
the Tariff Act of 1930 on the cost of such equipment and repair
made in a foreign country on a U.S.-flagged vessel.
Section 211 implements the provision in the Shipbuilding
Agreement that prohibits the collection of duties on vessel
repairs made in a signatory to the Shipbuilding Agreement.
Accordingly, U.S. law must be changed to eliminate the duty if
the repairs to a U.S.-flagged vessel are made in a Shipbuilding
Agreement signatory. However, the duty would remain in place if
the repairs are made in a country that is not a signatory to
the Shipbuilding Agreement.
Effect of Agreement with Respect to Private Remedies
(Section 212)
Section 212 clarifies that no person other than the United
States may assert any cause of action or defense under the
Shipbuilding Agreement, or may challenge any action or inaction
by the United States, the District of Columbia, any State, U.S.
territory, or U.S. possession on the grounds that it is
inconsistent with the Agreement. The implementing legislation
of other trade agreements, such as section 102(c) of the
Uruguay Round Agreements Act (Public Law 103-465) and section
102(c) of the North American Free Trade Agreement
Implementation Act (Public Law 103-182), have essentially
identical provisions to limit private remedies under those
trade agreements. The Committee intends that section 212
provide the same limitations with respect to private remedies,
as in the Uruguay Round Agreements Act and the North American
Free Trade Agreement Implementation Act.
Implementing Regulations
(Section 213)
Section 213 authorizes relevant agencies to issue
regulations, as may be necessary to ensure that the amendments
made by the OECD Shipbuilding Agreement Act are appropriately
implemented on the date that the Shipbuilding Agreement enters
into force with respect to the United States.
The Committee intends that the relevant agencies take steps
to ensure through regulation that the amendments made by the
OECD Shipbuilding Act are appropriately implemented upon entry
into force. With respect to injurious pricing, the Committee
expects that regulations would be modeled after regulations
implementing Title VII of the Tariff Act of 1930 wherever
possible, making only those changes necessitated by the
differences between existing law and the amendments made by the
OECD Shipbuilding Agreement Act.
Amendments to the Merchant Marine Act, 1936
(Section 214)
Section 214 makes several changes to the Merchant Marine
Act, 1936. The Merchant Marine Act contains tax and subsidy
programs that provide benefits limited to vessels constructed
in the United States. These programs are: (1) construction
reserve funds (CRF); (2) operating differential subsidies
(ODS); and (3) capital construction funds (CCF). In addition,
under the Merchant Marine Act, vessels built or rebuilt outside
the United States must wait three years after being flagged as
a U.S. vessel before being permitted to carry government-
impelled cargoes under the government cargo preference
provisions.
In addition, Title XI of the Merchant Marine Act authorizes
the Secretary of Transportation to provide a U.S. Government
guarantee for certain types of financing for the construction,
reconstruction, or reconditioning of U.S.-built vessels.
Guarantees with respect to vessels intended for domestic use
may apply to financing of up to 87\1/2\ percent of the vessel
cost (over 25 years), at an interest rate determined by the
Secretary to be reasonable. The Secretary is authorized to
accord more favorable terms for exported vessels than is
accorded to vessels for domestic use.
Section 214 amends the Merchant Marine Act to provide the
same treatment as is currently accorded U.S.-built vessels to
vessels covered by the Shipbuilding Agreement that are
constructed (and, where applicable, reconstructed) in a
Shipbuilding Agreement signatory and flagged as a U.S. vessel.
The changes to the CRF and the CCF would apply only with
respect to monies deposited on or after the date on which the
Shipbuilding Agreement enters into force with respect to the
United States.
Section 214 also provides that, with respect to vessels
covered by the Shipbuilding Agreement and the related OECD
Understanding on Export Credits for Ships (the
``Understanding''), the Secretary of Transportation shall
extend guarantees on terms consistent with the Agreement and
the Understanding. Among other things, the Agreement and the
Understanding limit guaranteed financing to 80 percent of the
vessel's cost (over twelve years) and provide, with certain
exceptions in the first two years, that the interest rate not
be lower than the Commercial Interest Reference Rate (CIRR) of
the currency of credit.
3. Subtitle C--Effective Date.
(Section 221)
Section 221 provides that the amendments made by the OECD
Shipbuilding Act take effect on the date that the Shipbuilding
Agreement enters into force with respect to the United States.
D. Congressional Action
On October 23, 1995, Senator Breaux introduced legislation
(S. 1354) to implement the Shipbuilding Agreement. On December
11, 1995, similar legislation (H.R. 2754) was introduced in the
House.
The Committee on Finance held a hearing on the Shipbuilding
Agreement on December 5, 1995. During this hearing, the
Committee heard testimony from the Administration in support of
the Shipbuilding Agreement and other testimony from supporters
and opponents of the Shipbuilding Agreement.
PART III: TITLE III--GENERALIZED SYSTEM OF PREFERENCES
I. Background
A. U.S. Generalized System of Preferences (GSP) Basic Authority
Statutory authority for the GSP program is set forth in
Title V of the Trade Act of 1974, as amended. 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 and section 1111 of the Trade Agreements
Act of 1979. Title V of the Trade and Tariff Act of 1984
renewed the GSP program for 8\1/2\ years until January 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.
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. The program was
again extended without amendment for 10 months, until July 31,
1995, by section 601 of the Uruguay Round Agreements Act.
Authority for the GSP program expired on July 31, 1995.
The GSP program provides unilateral, nonreciprocal duty-
free treatment to approximately 4,500 articles from 148
beneficiary developing countries and territories to promote
their economic development and increase diversification of
their economies through preferential market access. Title V
specifies criteria for determining GSP country and product
eligibility and limitations on the extension of GSP treatment.
In 1994, the program provided duty-free treatment on imports
valued at approximately $18.4 billion from BDCs.
B. GSP in the International Trading System
The concept of the GSP program was first proposed in 1964
at the United Nations Conference on Trade and Development
(UNCTAD). At the conference, developing countries maintained
that one of the major obstacles to their 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,
developing countries claimed they could increase exports and
foreign exchange earnings needed to diversify their economies
and reduce dependence on foreign aid. In 1968, the United
States joined other industrialized countries in supporting the
concept of GSP and, as noted above, authorized a GSP program in
1974. In the early 1970s, 19 other members of the Organization
for Economic Cooperation and Development (OECD) also instituted
and have since renewed GSP programs.
Because GSP is a unilateral grant of duty-free treatment,
developing countries are not required to extend reciprocal
tariff reductions. The statute implementing the U.S. GSP
program, however, does set forth certain conditions for
designation of beneficiary status.
The preferential and unilateral aspects of GSP are an
exception to the most-favored-nation (MFN) and
nondiscrimination principles of the General Agreement on
Tariffs and Trade (GATT) and the World Trade Organization
(WTO). To implement their GSP programs, the developed countries
had to obtain a waiver of these trade principles. The GATT
contracting parties granted a 10-year MFN waiver in June 1971
which provided that GSP schemes must be generalized,
nondiscriminatory and nonreciprocal. This waiver was extended
on a permanent basis in the 1979 GATT Tokyo Round Agreements.
C. Senate Action
On August 1, 1995, the Finance Committee's Subcommittee on
International Trade held a public hearing on the GSP program.
The Subcommittee received testimony in support of extending GSP
from the Administration, AFL-CIO, and from U.S. companies. A
proposal to reauthorize the GSP program was included as
Subtitle L of the Revenue Title (Title XI) in the Balanced
Budget Act of 1995 (H.R. 2491), which passed the Congress on
November 20, 1995 but was vetoed by the President on December
6, 1995.
II. Summary of the Bill
Title I--Reauthorization of the GSP Program
The Committee bill would reauthorize the GSP program
through May 12, 1997. The effective date of the extension of
the GSP program is October 1, 1996. So that there will be no
gap in duty-free treatment provided under the GSP program, the
bill would provide for refunds upon request of any duty paid
between July 31, 1995, and the effective date of the Committee
bill. Although importers would be able to request such refunds
after the date of enactment of this bill, reimbursement of
duties would occur only after the beginning of fiscal year 1997
(October 1, 1996).
In general, the Committee bill would make modest reforms
and technical changes to Title V of the Trade Act of 1974,
which are intended to simplify and improve the administration
of the GSP program. For example, the bill would codify a
``three-year rule'' that would prohibit consideration of a
specific article for designation of GSP eligibility for three
years following formal consideration and denial of that
article. The Committee bill also would exclude ``high-income''
countries (as designated by the World Bank) from the GSP
program. This change would have the effect of reducing the per
capita Gross National Product (GNP) threshold for graduation of
a BDC from the GSP program from $11,800 (in 1994) to $8,600.
BDCs that exceed the per capita GNP limit must be removed from
the GSP program.
The Committee bill would clarify that the President has the
authority to designate any article from a least developed
developing country (LDDC) as an eligible article under the GSP
program, if the President determines that the article is not
import-sensitive in the context of imports from LDDCs. This
authority does not apply to certain statutorily exempt
articles, namely textiles, footwear, and watches.
The Committee bill would reduce the annual competitive need
limit (CNL) in the expired law from approximately $122 million
(in 1995) to $75 million, beginning January 1, 1996. The bill
substitutes an annual increase in the CNL of $5 million for the
indexing formula in current law, but would retain the
competitive need waiver authority. It would also retain the de
minimis import provision, but substitutes a de minimis
threshold of $13 million in 1996 and a standard annual increase
of $500,000, beginning January 1, 1997 for the indexing formula
in current law.
In addition to the foregoing modifications of the GSP
program, the Committee bill also contains several technical
amendments which harmonize the text of the GSP statute with
recent developments in world trade and politics. For example,
the bill would amend the GSP so that it refers to the WTO
instead of the GATT. Similarly, the Committee bill changes the
GSP statute to reflect the fact that Austria, Sweden, and
Finland recently have joined the European Union (EU).
The Committee believes that reauthorization of the GSP
program, with the modest reforms provided for in the Committee
bill, will further three policy goals: (1) foster economic
development in developing countries through increased trade
rather than foreign aid; (2) promote U.S. trade interests by
encouraging beneficiaries to open their markets and comply more
fully with international trading rules; and (3) help maintain
U.S. international competitiveness by lowering costs for U.S.
business, as well as lowering prices for American consumers.
III. General Description of the Bill
Short Title
(Section ----)
Explanation of provision.--Section ------ of the Committee
bill provides that the bill may be cited as the ``Generalized
System of Preferences Renewal Act of 1996.''
Generalized System of Preferences
(Section ----)
A. Authority to Extend Preferences
Present law
Section 501 of the Trade Act of 1974 authorizes the
President to proclaim duty-free treatment for any eligible
articles from any beneficiary country in accordance with the
provisions of Title V.
Explanation of provision
The Committee bill makes no change to this section of Title
V.
B. Designation of BDCs
1. Definition of Country
Present law
Section 502 of the Trade Act of 1974 currently sets forth
both the procedures for designating countries as BDCs and the
conditions for such designation. It establishes conditions for
designation which are mandatory and others which are
discretionary. With regard to the mandatory conditions, the
President is prohibited from designating any country for GSP
benefits which is a developed country listed in section 502(b).
Further, the term ``country'' is defined as any foreign
country, any overseas dependent territory or possession of a
foreign country, or the Trust Territory of the Pacific Islands.
Explanation of provision
The Committee bill amends the definition of ``country'' to
include any territory.
Reason for change
This change makes clear that the President has the
authority to designate territories such as the territory of the
West Bank and the Gaza Strip as eligible for GSP benefits.
2. Ineligible Countries
Present law
Under section 502(b), the President is prohibited from
designating specific developed countries as BDCs: Australia,
Austria, Canada, EU member states, Finland, Iceland, Japan,
Monaco, New Zealand, Norway, Sweden, and Switzerland.
Explanation of provision
The Committee bill would delete the reference to Austria,
Finland, and Sweden.
Reason for change
Austria, Finland, and Sweden are now EU member states as a
result of enlargement of the EU on January 1, 1995.
3. Mandatory Conditions
Present law
Under section 502(c) the President is prohibited from
designating as a BDC a country which:
(a) is a Communist country, unless (i) its products
receive nondiscriminatory (MFN) treatment; (ii) it is a
GATT contracting party and a member of the
International Monetary Fund (IMF); and (iii) it is not
dominated or controlled by international communism;
(b) is an OPEC member, or a party to another
arrangement and participates in action the effect of
which is to withhold supplies of vital commodity
resources from international trade or raise their price
to an unreasonable level and to cause disruption of the
world economy, subject to trade agreement exemptions
consistent with objectives under the Trade Act of 1974;
(c) affords reverse preferences having or likely to
have a significant adverse effect on U.S. commerce,
unless the President receives satisfactory assurances
of elimination before January 1, 1976;
(d) has nationalized or expropriated U.S. property,
or taken similar actions, unless compensation is made,
being negotiated, or in arbitration;
(e) fails to recognize as binding or to enforce
arbitral awards in favor of U.S. citizens;
(f) aids or abets, by granting sanctuary from
prosecution to, any individual or group which has
committed an act of international terrorism; and
(g) has not taken or is not taking steps to afford
internationally recognized worker rights to its
workers.
Explanation of provision
The Committee bill retains present law, except, with
respect to mandatory conditions:
In (a)(ii), replaces ``is a GATT contracting party''
with ``is a member of the World Trade Organization'';
In (b), deletes the reference to OPEC member and the
exemption authority; and
In (c), deletes the satisfactory assurances exemption
for reverse preferences.
Reason for change
These changes revise the statute to reflect the
establishment of the WTO and to delete an unnecessary reference
to OPEC and an outdated reference to January 1, 1976 regarding
reverse preferences.
4. Discretionary Criteria
Present law
Under section 502(c) the President must take into account a
list of factors in determining whether to designate a country
as a BDC, including whether or not other major developed
countries are granting GSP to the country, whether or not the
country has taken or is taking steps to afford its workers
internationally recognized worker rights, and the extent to
which the country is providing adequate and effective
intellectual property protection.
Explanation of provision
The Committee bill makes no substantive changes to this
provision, but makes a technical change to the intellectual
property rights criterion.
Reason for change
The change simplifies the reference to the intellectual
property rights criterion.
5. Graduation of BDCs
Present law
Countries are graduated from GSP eligibility if the per
capita GNP of any BDC for any year exceeds a dollar limit
($11,800 in 1994) indexed annually under a formula starting
with the base figure of $8,500 in 1984. When the BDC's income
level reaches this amount, such country is subject to a 25,
rather than 50, percent competitive need import share limit on
all eligible articles for the following two years. After that
time, the country is no longer treated as a BDC.
Explanation of provision
The Committee bill substitutes ``high income'' country as
designated by the World Bank in any calendar year ($8,600 per
capita GNP in 1994), for the per capita GNP indexing formula in
current law. Thus, if the President determines that a BDC has
become a ``high income'' country as designated by the World
Bank, the President would be required to remove the country
from eligibility under the program. Although the bill would
retain a transition period of up to two years for country
graduation from the GSP program, it would eliminate application
of the 25 percent CNL during this period.
Reason for change
In 1994, the top 10 BDCs accounted for over 80 percent of
U.S. GSP imports. In light of the Committee's concern that a
large share of GSP imports come from a small number of the more
advanced developing countries, the Committee believes it is
advisable to lower the per capita income threshold from
approximately $11,800 to $8,600. Although statistics indicate
that few countries would be affected immediately by this
change, in the longer term the result will be to graduate
countries earlier from GSP than would be the case under current
law. Using a readily available definition of high income
country also will make the administration of the program more
transparent and predictable for users of the GSP program.
Although the President retains discretionary authority to
impose a lower CNL for countries that have reached the per
capita GNP limit, the Committee bill simplifies the law by
eliminating this as a statutory requirement.
C. Designation of Eligible Articles
1. Exempted Products
Present law
Under section 503, the President may not designate any
article as GSP eligible within the following categories of
import-sensitive articles:
(a) textile and apparel articles which are subject to
textile agreements;
(b) watches, except watches entered after June 30, 1989,
that the President determines 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;
(c) import-sensitive electronic articles;
(d) import-sensitive steel articles;
(e) footwear, handbags, luggage, flat goods, work gloves,
and leather wearing apparel which were not GSP eligible
articles on April 1, 1984;
(f) import-sensitive semi-manufactured and manufactured
glass products; and
(g) any other articles the President determines to be
import sensitive in the context of GSP.
Explanation of provision
The Committee bill retains all provisions of present law,
except, with respect to statutory exemptions:
In (a), replaces the present provision with exemption of
textile and apparel articles which were not GSP eligible on
January 1, 1994; and
In (e), applies exemption to footwear and related
articles which were not GSP eligible on January 1, 1995.
Reason for change
These changes update the statutory exemptions and ensure
that all products which are currently excluded from GSP
eligibility remain excluded.
2. Three-Year Rule
Present law
Each year the U.S. Trade Representative (USTR) conducts an
interagency review process in which products can be added to or
removed from the GSP program, or in which a country's
compliance with eligibility requirements can be reviewed. The
reviews are normally based on petitions filed by interested
parties, but may also be self-initiated by the USTR.
Explanation of provision
The Committee bill would prohibit reconsideration of an
article for designation of eligibility for three years
following formal consideration and denial of that article.
Reason for change
The Committee wants to ensure that the reviews of petitions
and the self-initiation of investigations to add the same item
to the list of eligible articles occur no more than once every
three years. However, petitions to remove products from the
list of eligible articles shall continue to be entertained
annually. This statutory provision will prevent a situation
whereby a U.S. industry is faced with the burden of responding
annually to a petition to add the same item to the list of
eligible articles, even though such petitions may have little
merit.
3. Least Developed Developing Countries (LDDCs)
Present law
No provision.
Explanation of provision
The Committee's bill clarifies that the President has the
authority to designate any article that is the growth, product,
or manufacture of an LDDC as an eligible article with respect
to imports from LDDCs, if, after receiving advice from the
International Trade Commission (ITC), the President determines
such article is not import-sensitive in the context of imports
from LDDCs. This authority does not apply to certain
statutorily exempt articles--textiles, footwear, and watches.
The President shall notify Congress at least 60 days in advance
of LDDC designations. LDDC designations will be based on
overall economic and discretionary criteria for country
designation under the GSP program.
Reason for change
The Committee believes that clarification of this authority
will promote the goal of expanding the share of GSP benefits
that can be granted to the poorest countries in the world. A
product may be import-sensitive in the context of all GSP
imports. If imports from only LDDCs are considered, however,
import sensitivity may not be a problem. This authority should
provide LDDCs with an additional competitive opportunity and
thereby increase the share of GSP imports from LDDCs.
4. Limits on Preferential Treatment
a. General Authority
Present law
Under section 504, the President may withdraw, suspend, or
limit GSP duty-free treatment with respect to any article or
any country, except that no rate of duty may be established
other than the rate which would otherwise apply (the MFN rate),
after considering both the policy objectives and the
discretionary BDC designation factors of the GSP program. The
President shall withdraw or suspend the BDC designation of any
country if he determines that, as a result of changed
circumstances, the country would be barred from designation.
Explanation of provision
The Committee bill retains present law.
b. Reporting Requirement
Present law
The President shall, as necessary, advise the Congress, and
by no later than January 4, 1988, submit to the Congress a
report on the application of the overall GSP and discretionary
country designation factors, and the actions the President has
taken to withdraw, suspend, or limit the GSP treatment with
respect to any country which has failed to adequately meet the
discretionary designation factors.
Explanation of provision
The Committee bill deletes this reporting requirement.
Reason for change
The statutory reporting requirement has been satisfied.
c. Competitive Need Limits
Present law
Whenever the President determines that annual exports by
any BDC to the United States of a GSP eligible article during
any year:
(i) Exceed a dollar limit ($122 million in 1995)
based on $25 million adjusted annually relative to
changes in the U.S. GNP since 1974; or
(ii) Equal or exceed a 50-percent share of the total
value of U.S. imports of the article, then, not later
than July 1 of the next year, the country is not
treated as a BDC with respect to such article.
Explanation of provision
The Committee bill reduces the basic CNL to $75 million for
any year beginning January 1, 1996, and substitutes a standard
annual increase of $5 million for the indexing formula in
current law. The bill preserves the 50 percent import share
CNL.
Reason for change
Reducing the basic CNL will have the effect of increasing
the opportunities for BDCs other than the top beneficiaries to
obtain a larger share of GSP benefits. The standard annual
increase of $5 million a year is a simplification of current
law that will make the implementation of CNLs more predictable
for users of the GSP program.
d. General Review
Present law
Not later than January 4, 1987, and periodically
thereafter, the President must conduct a general review of
eligible articles and, if he determines that a BDC has
demonstrated a sufficient degree of competitiveness relative to
other BDCs on any eligible article, then a lower competitive
need dollar limit ($41.9 million in 1993, indexed annually from
a 1984 base) and 25 percent total import share limit shall
apply.
Explanation of provision
The Committee bill deletes the general review requirement
and the lower CNLs.
Reason for change
Although the Administration would retain authority to
conduct reviews of the program it considers appropriate, the
Committee believes this should be a matter left to the judgment
of the Administration.
The Committee believes that resources used to conduct a
general review of all products on GSP may be better used
elsewhere in administration of the program. Deleting the lower
CNLs is another change which simplifies the administration of
the program.
D. Waiver Authority
1. General Authority
Present law
The President may waive the dollar and import share CNLs on
any eligible article of any BDC if he (1) receives advice from
the ITC on whether any U.S. industry is likely to be adversely
affected by the waiver; (2) determines, based on the overall
GSP and discretionary country designation considerations and
the ITC advice, that the waiver is in the U.S. national
economic interest; and (3) publishes the determination in the
Federal Register.
Explanation of provision
The Committee bill retains the present waiver authority.
2. Historical Preferences
Present law
Except where sufficient competitiveness has been
demonstrated, the President may waive CNLs if: (1) there has
been a historical preferential trade relationship between the
United States and the country; (2) there is a treaty or trade
agreement in force covering such bilateral economic relations;
and (3) the country does not maintain unfair trade barriers on
U.S. commerce.
Explanation of provision
The Committee bill retains present law.
3. No Domestic Production
Present law
The import share CNL does not apply to an eligible article
if a like or directly competitive article is not produced in
the United States as of January 3, 1985.
Explanation of provision
Under the Committee bill, the import share CNL does not
apply if the article is not produced in the United States as of
January 1, 1995.
Reason for change
This change updates the provision.
4. De Minimis Imports
Present law
The import share CNL may be disregarded if total U.S.
imports of the eligible article during the preceding year do
not exceed a de minimis amount of $5 million adjusted annually
($13.4 million in 1994) according to changes in U.S. GNP since
1979.
Explanation of provision
The Committee bill retains the de minimis import provision,
but substitutes $13 million in 1996 and a standard annual
increase of $500,000 beginning January 1, 1997 for the indexing
formula in current law.
Reason for change
This change is intended to simplify and make more
predictable the calculation of the level of imports deemed to
be de minimis.
5. Waiver Trade Limits
Present law
The President may not exercise the waiver authority in any
year on imports of eligible articles exceeding: (1) 30 percent
of total GSP duty-free imports during the preceding year, or
(2) 15 percent of total GSP duty-free imports during the
preceding year from BDCs which had (a) a per capita GNP of
$5,000 or more, or (b) exported to the United States more than
10 percent of total GSP duty-free imports during that year.
Explanation of provision
The Committee bill retains the waiver trade limits.
E. Provisions Regarding Termination, Reports, and Agriculture Exports
1. Termination
Present law
No duty-free treatment shall remain in effect after July
31, 1995.
Explanation of provision
The Committee bill would reauthorize the program for one
year, nine months, and twelve days, to terminate on May 12,
1997. The effective date of the extension of the GSP program is
October 1, 1996. However, the Committee bill also provides
that, notwithstanding section 514 of the Tariff Act of 1930 or
any other provision of law, the entry (1) of any article to
which duty-free treatment under Title V of the Trade Act of
1974 would have applied if the entry had been made on July 31,
1995, and (2) that was made after July 31, 1995, and before
January 1, 1996, shall be liquidated or reliquidated as free of
duty and the Secretary of the Treasury shall refund any duty
paid, upon proper request filed with the appropriate customs
officer, within 180 days after the date of enactment. Further,
the Committee bill provides that notwithstanding section 514 of
the Tariff Act of 1930 or any other provision of law, the entry
(1) of any article to which duty-free treatment under Title V
of the Trade Act of 1974 (as amended by this Title) would have
applied if the entry had been made on or after October 1, 1996,
and (2) that was made after December 31, 1995, and before
October 1, 1996, shall be liquidated or reliquidated as free of
duty and the Secretary of the Treasury shall refund any duty
paid, upon proper request filed with the appropriate customs
officer, within 180 days after the date of enactment. Although
importers would be entitled to request such refunds after the
date of enactment of the Committee bill, reimbursement of
duties would occur only after the beginning of fiscal year 1997
(October 1, 1996).
Reason for change
The Committee believes that recent short-term extensions of
the program have been highly disruptive to U.S. companies which
rely on the GSP program, and to the economic development of
BDCs. The budgetary effects of the program, however, continue
to preclude an extension of the program beyond May 12, 1997. So
that there will be no gap in duty-free treatment of eligible
articles under the program, the Committee bill provides for a
retroactive extension of the program.
2. Report on Workers Rights
Present law
The President must submit an annual report to the Congress
on the status of internationally recognized workers' rights
within each BDC.
Explanation of provision
The Committee bill retains present law.
3. Agriculture Exports
Present law
Section 506 requires that appropriate U.S. agencies assist
BDCs in developing and implementing measures designed to ensure
that the production of agricultural sectors of their economies
is not directed to export markets, to the detriment of the
foodstuff production for their citizens.
Explanation of provision
The Committee bill retains present law.
PART IV: TITLE IV--REVENUE OFFSETS
I. Summary
A. Treatment of Foreign Trusts
The bill modifies the tax treatment of trusts in several
respects. First, the grantor trust rules generally apply only
to the extent that they result, directly or indirectly, in
income or other amounts (if any) being currently taken into
account in computing the income of a U.S. person. Second,
beginning on January 1, 1996, the interest rate applicable to
accumulation distributions from foreign nongrantor trusts is
the rate imposed on underpayments of tax under section
6621(a)(2), with compounding. The full amount of certain loans
of cash or marketable securities by a foreign nongrantor trust
to a U.S. grantor or a U.S. beneficiary (or a U.S. person
related to such a grantor or beneficiary) generally is treated
as a distribution to the grantor or beneficiary. Third, a
nonresident alien who transfers property to a foreign trust and
then becomes a U.S. resident within 5 years after the transfer
is treated as making a transfer to the foreign trust on his
residency starting date. In determining whether a foreign trust
paid fair market value to the transferor for property
transferred to the trust, certain obligations issued by the
trust, by any grantor or beneficiary of the trust, or by any
person related to any grantor or beneficiary generally are not
taken into account. Fourth, a two-part objective test is
established for determining whether a trust is foreign or
domestic for tax purposes. Further, the bill expands the
reporting requirements with respect to foreign trusts if there
is a U.S. grantor of the foreign trust or a distribution from
the foreign trust to a U.S. person. A failure to comply with
the reporting requirements results in increased monetary
penalties. Special sanctions apply unless a U.S. owner of any
portion of a foreign trust appoints a limited agent to accept
service of process with respect to requests and summons by the
Treasury Department in connection with the tax treatment of
items relating to the trust. In addition, any U.S. person
(other than certain tax-exempt organizations) that receives
purported gifts or bequests from foreign sources totaling more
than $10,000 during the year is required to report the gift to
the Treasury Department. Monetary penalties and other sanctions
apply to a failure to comply with the reporting requirement.
B. Penalty for Failure to File Disclosure of Exemption for Shipping
Income of Foreign Persons
The bill imposes penalties for a failure to satisfy the
filing requirements for claiming the exemption from U.S. tax
that is available to certain foreign persons with respect to
income from the international operation of ships.
II. General Explanation
A. Modify Treatment of Foreign Trusts (secs. 401-407 of the bill and
secs. 643, 665, 668(a), 672, 679, 1491, 1494, 6038, 6039G, 6677,
7701(a) and 7872(f) of the Code)
Present Law
a. Inbound grantor trusts with foreign grantors.
Under the grantor trust rules (secs. 671-679), a grantor
that retains certain rights or powers generally is treated as
the owner of the trust's assets without regard to whether the
grantor is a domestic or foreign person. Under these rules,
U.S. trust beneficiaries are not subject to U.S. tax on
distributions from a trust where a foreign grantor is treated
as owner of the trust, even though no tax may be imposed on the
trust income by any jurisdiction. In addition, a special rule
provides that if a U.S. beneficiary of an inbound grantor trust
transfers property to the foreign grantor by gift, that U.S.
beneficiary is treated as the grantor of the trust to the
extent of the transfer.
b. Foreign trusts that are not grantor trusts.
Under the accumulation distribution rules (which generally
apply to distributions from a trust in excess of the trust's
distributable net income for the taxable year), a distribution
by a foreign nongrantor trust of previously accumulated income
generally is taxed at the U.S. beneficiary's average marginal
rate for the prior 5 years, plus interest (secs. 666 and 667).
Interest is computed at a fixed annual rate of 6 percent, with
no compounding (sec. 668). If adequate records of the trust are
not available to determine the proper application of the rules
relating to accumulation distributions to any distribution from
a trust, the distribution is treated as an accumulation
distribution out of income earned during the first year of the
trust (sec. 666(d)).
If a foreign nongrantor trust makes a loan to one of its
beneficiaries, the principal of such a loan generally is not
taxable as income to the beneficiary.
c. Outbound foreign grantor trusts with U.S. grantors.
Under the grantor trust rules, a U.S. person that transfers
property to a foreign trust generally is treated as the owner
of the portion of the trust comprising that property for any
taxable year in which there is a U.S. beneficiary of any
portion of the trust (sec. 679(a)). This treatment generally
does not apply, however, to transfers by reason of death, to
transfers made before the transferor became a U.S. person, or
to transfers that represent sales or exchanges of property at
fair market value where gain is recognized to the transferor.
d. Residence of trusts.
A trust is treated as foreign if it is not subject to U.S.
income taxation on its income that is neither derived from U.S.
sources nor effectively connected with the conduct of a U.S.
trade or business. Thus, if a trust is taxed in a manner
similar to a nonresident alien individual, it is considered to
be a foreign trust. Any other trust is treated as domestic.
Section 1491 generally imposes a 35-percent excise tax on a
U.S. person that transfers appreciated property to certain
foreign entities, including a foreign trust. In the case of a
domestic trust that changes its situs and becomes a foreign
trust, it is unclear whether property has been transferred from
a U.S. person to a foreign entity and, thus, whether the
transfer is subject to the excise tax.
e. Information reporting and penalties related to foreign trusts.
Any U.S. person that creates a foreign trust or transfers
money or property to a foreign trust is required to report that
event to the Treasury Department without regard to whether the
trust is a grantor trust or a nongrantor trust. Similarly, any
U.S. person that transfers property to a foreign trust that has
one or more U.S. beneficiaries is required to report annually
to the Treasury Department. In addition, any U.S. person that
makes a transfer described in section 1491 is required to
report the transfer to the Treasury Department.
Any person that fails to file a required report with
respect to the creation of, or a transfer to, a foreign trust
may be subject to a penalty of 5 percent of the amount
transferred to the foreign trust. Similarly, any person that
fails to file a required annual report with respect to a
foreign trust with U.S. beneficiaries may be subject to a
penalty of 5 percent of the value of the corpus of the trust at
the close of the taxable year. The maximum amount of the
penalty imposed under either case may not exceed $1,000. A
reasonable cause exception is available.
f. Reporting of foreign gifts.
There is no requirement to report gifts or bequests from
foreign sources.
Reasons for Change
a. Grantor trust rules.--
(i) Inbound grantor trusts.
The Committee has learned that the U.S. grantor trust
provisions are being used as a vehicle to avoid U.S. tax. If a
trust is treated as a grantor trust, only the owner of the
trust is taxable on the trust's income and not the trust's
beneficiaries. Thus, if a foreign person creates a trust with
U.S. beneficiaries that is treated as a grantor trust for U.S.
tax purposes and if the foreign person's home country does not
tax the income, the income of the trust would not be subject to
tax by either the United States or the foreign country. The
Committee believes that the income derived through these types
of arrangements should be subject to tax by at least one
jurisdiction.
(ii) Outbound grantor trusts.
The Committee understands that taxpayers have avoided the
application of the outbound grantor trust rules of section 679.
For example, a transfer of property to a foreign trust may be
structured as a sale in exchange for a note issued by the trust
or a person related to the trust where the note will not be
repaid. The Committee believes that it is appropriate to
disregard notes that do not reflect arm's-length terms in
determining whether the transferor received fair market value
for the property transferred.
b. Foreign nongrantor trust rules.
The 6-percent simple interest charge applicable to
accumulation distributions has not been updated since 1976. The
Committee believes that it is appropriate to charge a current
rate of interest on accumulation distributions, with
compounding. In light of the change in the interest rate, the
Committee also believes that it is appropriate, in computing
this interest charge, to allocate the accumulation distribution
proportionately to prior trust years in which the trust has
undistributed net income, rather than to the earliest of such
years.
Under current law, a U.S. beneficiary of a foreign trust
may avoid U.S. tax on the income accumulated through the trust
by obtaining a ``loan'' of cash or marketable securities from
the trust in lieu of an actual distribution. The Committee
believes that it is appropriate to treat loans that do not
reflect arm's-length terms as distributions to the borrower.
c. Residence of trusts.
Because the U.S. tax treatment of a trust (and the
beneficiaries of a trust) depends on the residence of the
trust, the Committee believes that it is appropriate to provide
objective criteria for determining the residence of trusts.
d. Information reporting requirements and associated penalties.
The Committee has learned that certain U.S. settlors have
established foreign trusts, including grantor trusts, in tax
haven jurisdictions. Income from such foreign grantor trusts is
taxable currently to the U.S. grantor, but the Committee
understands that there is noncompliance in this regard. The
Committee is concerned that the present-law civil penalties for
failure to comply with the reporting requirements applicable to
foreign trusts established by U.S. persons have proven to be
ineffective. In order to deter noncompliance, the Committee
believes that it is appropriate to expand the reporting
requirements relating to activities of foreign trusts with U.S.
grantors or U.S. beneficiaries and to increase the civil
penalties applicable to a failure to comply with such reporting
requirements.
The Committee understands that some of the jurisdictions in
which U.S. settlors have established foreign trusts have strict
secrecy laws. The Committee is concerned that the secrecy laws
may effectively preclude the Treasury Department from obtaining
information necessary to determine the tax liabilities of the
U.S. grantors or U.S. beneficiaries with respect to items
related to such foreign trusts. The Committee believes that it
is useful in the case of a foreign trust with a U.S. grantor,
to provide an incentive for the trust to have a limited U.S.
agent to accept service of process in order to improve the
administrability of the tax law applicable to taxation of
income derived from foreign trusts.
Explanation of Provisions
Overview
The bill modifies the tax treatment of trusts as follows:
The grantor trust rules generally apply only to the
extent that they result, directly or indirectly, in
income or other amounts (if any) being currently taken
into account in computing the income of a U.S. person.
Beginning on January 1, 1996, the interest rate
applicable to accumulation distributions from foreign
nongrantor trusts is the rate imposed on underpayment
of tax under section 6621(a)(2), with compounding. The
accumulation distribution generally is allocated
proportionately to prior trust years in which the trust
had undistributed net income. The full amount of a loan
of cash or marketable securities by a foreign
nongrantor trust to a U.S. grantor or a U.S.
beneficiary (or a U.S. person related to such a grantor
or beneficiary) generally is treated as a distribution
to the grantor or beneficiary.
A nonresident alien who transfers property to a
foreign trust and then becomes a U.S. resident within 5
years after the transfer is treated as making a
transfer to the foreign trust on his residency starting
date. In determining whether a foreign trust paid fair
market value to the transferor for property transferred
to the trust, obligations issued by the trust, by any
grantor or beneficiary of the trust, or by any person
related to any grantor or beneficiary generally are not
taken into account.
The bill authorizes the Secretary of the Treasury to
issue regulations to prevent abusive transactions to
avoid the purposes of these rules.
A two-part objective test is established for
determining whether a trust is foreign or domestic for
tax purposes.
The bill expands the reporting requirements with
respect to foreign trusts if there is a U.S. grantor of
the foreign trust or a distribution from the foreign
trust to a U.S. person. The bill requires the
responsible parties to file information returns with
the Treasury Department upon the occurrence of certain
events. A failure to comply with the reporting
requirements results in increased monetary penalties.
Special sanctions apply unless a U.S. owner of any
portion of a foreign trust appoints a limited agent to
accept service of process with respect to requests and
summons by the Treasury Department in connection with
the tax treatment of items relating to the trust.
Any U.S. person (other than certain tax-exempt
organizations) that receives purported gifts or
bequests from foreign sources totaling more than
$10,000 during the year is required to report the gift
to the Treasury Department. Monetary penalties and
other sanctions apply to a failure to comply with the
reporting requirement.
The provisions are described in more detail below.
a. Inbound grantor trusts with foreign grantors
(i) Foreign grantors not treated as owners.
Under the bill, the grantor trust rules generally apply
only to the extent that they result, directly or indirectly, in
income or other amounts (if any) being currently taken into
account in computing the income of a U.S. citizen or resident
or a domestic corporation. Thus, the grantor trust rules
generally do not apply to any portion of a trust where their
effect is to treat a foreign person as owner of that portion.
The bill provides certain exceptions to the rule described
above. Under one exception, the grantor trust rules continue to
apply to the portion of a trust where that portion of the trust
is revocable by the grantor either without approval of another
person or with the consent of a related or subordinate party
who is subservient to the grantor (as defined in sec. 672(c)).
Under another exception, the grantor trust rules continue to
apply to the portion of a trust where the only amounts
distributable from that portion during the lifetime of the
grantor are to the grantor or the grantor's spouse. The general
rule denying grantor trust status does not apply to trusts
established to pay compensation, and certain trusts in
existence as of September 19, 1995, provided that such trust is
treated as owned by the grantor under section 676 or 677 (other
than sec. 677(a)(3)). 1 In addition, the grantor trust
rules generally apply where the grantor is a controlled foreign
corporation (as defined in sec. 957). Finally, the grantor
trust rules continue to apply in determining whether a foreign
corporation is characterized as a passive foreign investment
company (``PFIC''). Thus, a foreign corporation cannot avoid
PFIC status by transferring its assets to a grantor trust.
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\1\ The exception does not apply to the portion of any such trust
attributable to any transfers made after September 19, 1995.
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If a U.S. beneficiary, or a family member of such a
beneficiary, 2 of an inbound grantor trust transfers
property to the foreign grantor, such beneficiary generally is
treated as a grantor of a portion of the trust to the extent of
the transfer. This rule applies without regard to whether the
foreign grantor is otherwise treated as the owner of any
portion of such trust. However, this rule does not apply if the
transfer is a sale of the property for full and adequate
consideration or if the transfer is a gift that qualifies for
the annual exclusion described in section 2503(b).
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\2\ For this purpose, a family member is generally defined as a
brother, sister, spouse, ancestor or lineal descendant.
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The bill provides a special rule that allows the Secretary
of the Treasury to recharacterize a transfer, directly or
indirectly, from a partnership or foreign corporation which the
transferee treats as a gift or bequest, to prevent the
avoidance of the purpose of section 672(f). 3
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\3\ See discussion below for reporting requirements under the bill
with respect to certain foreign gifts and bequests received by a U.S.
person.
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In a case where a foreign person (that would be treated as
the owner of a trust but for the above rule) actually pays tax
on the income of the trust to a foreign country, the Committee
anticipates that Treasury regulations will provide that, for
foreign tax credit purposes, U.S. beneficiaries that are
subject to U.S. income tax on the same income will be treated
as having paid the foreign taxes which are paid by the foreign
grantor. Any resulting foreign tax credits would be subject to
applicable foreign tax credit limitations.
The bill provides a transition rule for any domestic trust
that has a foreign grantor that is treated as the owner of the
trust under present law, but becomes a nongrantor trust under
the bill. If such a trust becomes a foreign trust before
January 1, 1997, or if the assets of such a trust are
transferred to a foreign trust before that date, such trust is
exempt from the excise tax on transfers to a foreign trust
otherwise imposed by section 1491. However, the bill's new
reporting requirements and penalties are applicable to such a
trust and its beneficiaries. In addition, the assets of such a
trust will be treated as if they were recontributed to a
nongrantor trust by the foreign grantor, with no recognition of
gain or loss, on the date the trust ceases to be treated as a
grantor trust. The nongrantor trust will have the same basis in
such assets as did the grantor on the date the trust ceases to
be treated as a grantor trust.
(ii) Distributions by foreign trusts through nominees
The bill generally treats any amount paid to a U.S. person,
where the amount was derived (directly or indirectly) from a
foreign trust, as if paid by the foreign trust directly to the
U.S. person. This rule disregards the role of an intermediary
or nominee that may be interposed between a foreign trust and a
U.S. beneficiary. Unlike present law, however, the rule applies
whether or not the trust was created by a U.S. person. The rule
does not apply to a withdrawal from a foreign trust by its
grantor, with a subsequent gift or other payment to a U.S.
person.
(iii) Effective date
The provisions discussed in this part are effective on the
date of enactment.
b. Foreign trusts that are not grantor trusts
(i) Interest charge on accumulation distributions
The bill changes the interest rate applicable to
accumulation distributions from foreign trusts from simple
interest at a fixed rate of 6 percent to compound interest
determined in the same manner as interest imposed on
underpayments of tax under section 6621(a)(2). Simple interest
is accrued at the rate of 6 percent through 1995. Beginning on
January 1, 1996, however, compound interest based on the
underpayment rate is imposed not only on tax amounts determined
under the accumulation distribution rules but also on the total
simple interest for pre-1996 periods, if any. For purposes of
computing the interest charge, the accumulation distribution is
allocated proportionately to prior trust years in which the
trust has undistributed net income (and the beneficiary
receiving the distribution was a U.S. citizen or resident),
rather than to the earliest of such years. An accumulation
distribution is treated as reducing proportionately the
undistributed net income from prior years.
The bill includes a formula to determine the period for
which interest is charged using the underpayment rates under
section 6621(a)(2). Under the formula, for example, if a
foreign nongrantor trust had $100 of undistributed net income
each year in years 1 through 3 and the trust distributes $100
of accumulated income to its U.S. beneficiary in year 4, the
taxpayer has to pay interest using the section 6621(a)(2)
interest rates as if the income accrued for 2 years. 4 In
addition, the $100 accumulation distribution reduces the
trust's undistributed net income by $33 each year for years 1
through 3. 5
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\4\ The number of years is determined as a weighted average as
follows:
($1003 years)+($1002 years)+($1001
year)/$300=2
\5\ That is, one-third of the $100 of distribution reduces the $100
of undistributed net income for each of years 1, 2 and 3.
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(ii) Loans to grantors or beneficiaries
In the case of a loan of cash or marketable securities by
the foreign trust to a U.S. grantor or a U.S. beneficiary (or a
U.S. person related to such grantor or beneficiary 6),
except to the extent provided by Treasury regulations, the bill
treats the full amount of the loan as distributed to the
grantor or beneficiary. The Committee expects that the Treasury
regulations will provide an exception from this treatment for
loans with arm's-length terms. In applying this exception, the
Committee further expects consideration to be given to whether
there is a reasonable expectation that a loan will be repaid.
In addition, any subsequent transaction between the trust and
the original borrower regarding the principal of the loan
(e.g., repayment) is disregarded for all purposes of the Code.
This provision does not apply to loans made to persons that are
exempt from U.S. income tax.
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\6\ For this purpose, a person generally would be treated as
related to the grantor or beneficiary if the relationship between such
person and the grantor or beneficiary would result in a disallowance of
losses under section 267 or 707(b), except that in applying section
267(c)(4) an individual's family includes the spouses of the members of
the family.
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(iii) Effective date
The provision to modify the interest charge on accumulation
distributions applies to distributions after the date of
enactment. The provision with respect to loans to U.S.
grantors, U.S. beneficiaries or a related U.S. person related
to such a grantor or beneficiary applies to loans made after
September 19, 1995.
c. Outbound foreign grantor trusts with U.S. grantors
The bill makes several modifications to the general rule of
section 679(a)(1) under which a U.S. person who transfers
property to a foreign trust generally is treated as the owner
of the portion of the trust comprising that property for any
taxable year in which there is a U.S. beneficiary of the trust.
The bill also contains an amendment to conform the definition
of certain foreign corporations the income of which is deemed
to be accumulated for the benefit of a U.S. beneficiary to the
definition of controlled foreign corporations (as defined in
sec. 957(a)).
(i) Sale or exchange at market value
Present law contains several exceptions to grantor trust
treatment under section 679(a)(1) described above. Under one of
the exceptions, grantor trust treatment does not result from a
transfer of property by a U.S. person to a foreign trust in the
form of a sale or exchange at fair market value where gain is
recognized to the transferor. In determining whether the trust
paid fair market value to the transferor, the bill provides
that obligations issued (or, to the extent provided by
regulations, guaranteed) by the trust, by any grantor or
beneficiary of the trust, or by any person related to any
grantor or beneficiary 7 (referred to as ``trust
obligations'') generally are not taken into account except as
provided in Treasury regulations. The Committee expects that
the Treasury regulations will provide an exception from this
treatment for loans with arm's-length terms. In applying this
exception, the Committee further expects consideration to be
given to whether there is a reasonable expectation that a loan
will be repaid. Principal payments by the trust on any such
trust obligations generally will reduce the portion of the
trust attributable to the property transferred (i.e., the
portion of which the transferor is treated as the grantor).
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\7\ For this purpose, a person is treated as related to the grantor
or beneficiary if the relationship between such person and the grantor
or beneficiary would result in a disallowance of losses under section
267 or 707(b), except that in applying section 267(c)(4) an
individual's family includes the spouses of the members of the family.
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(ii) Other transfers
The bill adds a new exception to the general rule of
section 679(a)(1) described above. Under the bill, a transfer
of property to certain charitable trusts is exempt from the
application of the rules treating foreign trusts with U.S.
grantors and U.S. beneficiaries as grantor trusts.
(iii) Transferors or beneficiaries who become U.S. persons
The bill applies the rule of section 679(a)(1) to certain
foreign persons who transfer property to a foreign trust and
subsequently become U.S. persons. A nonresident alien
individual who transfers property, directly or indirectly, to a
foreign trust and then becomes a resident of the United States
within 5 years after the transfer generally is treated as
making a transfer to the foreign trust on the individual's U.S.
residency starting date (as defined in sec. 7701(b)(2)(A)). The
amount of the deemed transfer is the portion of the trust
(including undistributed earnings) attributable to the property
previously transferred. Consequently, the individual generally
is treated under section 679(a)(1) as the owner of that portion
of the trust in any taxable year in which the trust has U.S.
beneficiaries. The bill's reporting requirements and penalties
(discussed below) also are applicable.
Under the bill, a beneficiary is not treated as a U.S.
person for purposes of determining whether the transferor of
property to a foreign trust is taxed as a grantor with respect
to any portion of a foreign trust if such beneficiary first
became a U.S. person more than 5 years after the transfer.
(iv) Outbound trust migrations
The bill applies the rules of section 679(a)(1) to a U.S.
person that transferred property to a domestic trust if the
trust subsequently becomes a foreign trust while the transferor
is still alive. Such a person is deemed to make a transfer to
the foreign trust on the date of the migration. The amount of
the deemed transfer is the portion of the trust (including
undistributed earnings) attributable to the property previously
transferred. Consequently, the individual generally is treated
under the rules of section 679(a)(1) as the owner of that
portion of the trust in any taxable year in which the trust has
U.S. beneficiaries. The bill's reporting requirements and
penalties (discussed below) also are applicable.
(v) Effective date
The provisions to amend section 679 apply to transfers of
property after February 6, 1995.
d. Anti-abuse regulatory authority
(i) In general
The bill includes an anti-abuse rule which authorizes the
Secretary of the Treasury to issue regulations, on or after the
date of enactment, that may be necessary or appropriate to
carry out the purposes of the rules applicable to estates,
trusts and beneficiaries, including regulations to prevent the
avoidance of those purposes.
(ii) Effective date
The provision is effective on the date of enactment.
e. Residence of trusts
(i) Treatment as U.S. person
The bill establishes a two-part objective test for
determining for tax purposes whether a trust is foreign or
domestic. If both parts of the test are satisfied, the trust is
treated as domestic.
Under the first part of the proposed test, in order for a
trust to be treated as domestic, a U.S. court (i.e., Federal,
State, or local) must be able to exercise primary supervision
over the administration of the trust. The Committee expects
that this test generally will be satisfied by any trust
instrument that specifies that the trust is to be governed by
the laws of any State.
Under the second part of the proposed test, in order for a
trust to be treated as domestic, one or more U.S. fiduciaries
must have the authority to control all substantial decisions of
the trust. The Committee expects that this test will be
satisfied in any case where fiduciaries that are U.S. persons
hold a majority of the fiduciary power (whether by vote or
otherwise), and where no foreign fiduciary, such as a ``trust
protector'' or other trust advisor, has the power to veto
important decisions of the U.S. fiduciaries. The Committee
further expects that, in applying this test, a reasonable
period of time will be allowed for a trust to replace a U.S.
fiduciary that resigns or dies before the trust is treated as
foreign.
Under the bill, a foreign trust is defined as a trust other
than a trust that is determined to be domestic under both the
court-supervision test and the U.S. fiduciary test.
(ii) Outbound migration of domestic trusts
Under the bill, if a domestic trust changes its situs and
becomes a foreign trust, the trust is treated as having made a
transfer of its assets to a foreign trust and is subject to the
35-percent excise tax imposed by present-law section 1491
unless one of the exceptions to this excise tax is applicable.
The U.S. grantor also is required to report the transfer under
the reporting requirements described below. Failure to report
such a transfer would result in penalties (discussed below).
(iii) Effective date
The provision to modify the treatment of a trust as a U.S.
person applies to taxable years beginning after December 31,
1996. In addition, if the trustee of a trust so elects, the
provision would apply to taxable years ending after the date of
enactment. The amendment to section 1491 is effective on the
date of enactment.
f. Information reporting and penalties relating to foreign trusts
The bill expands the reporting requirements with respect to
foreign trusts if there is a U.S. grantor of the foreign trust
or a distribution from the foreign trust to a U.S. person. The
bill requires the responsible parties to file information
returns with the Treasury Department upon the occurrence of
certain events. A failure to comply with the reporting
requirements will result in increased monetary penalties.
(i) Information reporting requirements
First, the bill requires the grantor, transferor or
executor (i.e., the ``responsible party'') to notify the
Treasury Department upon the occurrence of certain reportable
events. The term ``reportable event'' means the creation of any
foreign trust by a U.S. person, the direct and indirect
transfer of any money or property to a foreign trust, including
a transfer by reason of death, and the death of a U.S. citizen
or resident if any portion of a foreign trust was included in
the gross estate of the decedent. A reportable event does not
include any transfer of property to a foreign trust in exchange
for consideration of at least the fair market value of the
property.8 Also excluded are transfers to certain pension
trusts, nonexempt employees' trusts described in section
402(b), and charitable trusts. The required return provides
information regarding the amount of money or other property
transferred to the trust, the identities of the trustee and
beneficiaries of the foreign trust, and other items as
prescribed by the Secretary of the Treasury.
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\8\ For this purpose, consideration other than cash is taken into
account at its fair market value and the rules of section 679(a)(3), as
modified by the bill, apply (see discussion above).
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Second, a U.S. person that is treated as the owner of any
portion of a foreign trust is required to ensure that the trust
files an annual return to provide full accounting of all the
trust activities for the taxable year, the name of the U.S.
agent for the trust, and other information as prescribed by the
Secretary of the Treasury.9 In addition, unless a U.S.
person is authorized to accept service of process as the
trust's limited agent with respect to any request by the
Treasury Department to examine records or to take testimony,
and any summons for such records or testimony, in connection
with the tax treatment of any items related to the trust, the
Secretary is entitled to determine the tax consequences of
amounts to be taken into account under the grantor trust rules
(secs. 671 through 679). This limited agency relationship does
not constitute an agency relationship for any other purpose
under Federal or State law. The Committee intends that the
Secretary's exercise of its authority to make such a
determination will be subject to judicial review under an
arbitrary or capricious standard, which provides a high degree
of deference to such determination. For this purpose, rules
similar to the rules of sections 6038A(e)(2) and (4) with
respect to enforcement of requests for certain records apply.
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\9\ The Committee intends that the Treasury regulations would
require the trust to furnish information to U.S. grantors and
beneficiaries concerning income reportable by such persons in a manner
similar to that used to report the items on schedule K-1 of Form 1041.
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Third, any U.S. person that receives (directly or
indirectly) any distribution from a foreign trust is required
to file a return to report the name of the trust, the aggregate
amount of the distributions received, and other information
that the Secretary of the Treasury may prescribe. In cases
where adequate records are not provided to the Secretary to
determine the proper treatment of any distributions from a
foreign trust, the distribution is includible in the gross
income of the U.S. distributee and is treated as an
accumulation distribution from the middle year of a foreign
trust (i.e., computed by taking the number of years that the
trust has been in existence divided by 2) for purposes of
computing the interest charge applicable to such distribution,
unless the foreign trust elects to have a U.S. agent for the
limited purpose of accepting service of process (as described
above).
(ii) Monetary penalties for failure to report
Under the bill, a person that fails to provide the required
notice or return in cases involving the transfer of property to
a new or existing foreign trust, or a distribution by a foreign
trust to a U.S. person, is subject to an initial penalty equal
to 35 percent of the gross reportable amount. A failure to
provide an annual reporting of trust activities will result in
an initial penalty equal to 5 percent of the gross reportable
amount.
In cases involving a transfer of property to a foreign
trust, the gross reportable amount is the gross value of the
property transferred. In cases involving the death of a U.S.
citizen or resident whose estate includes any portion of a
foreign trust, the gross amount is the greater of: (a) the
amount the decedent is treated as owning under the grantor
trust rules or (b) the value of the property includible in the
gross estate of the decedent. In cases where annual reporting
of trust activities is required, the gross reportable amount is
the gross value of the portion of the foreign trust's assets
treated as owned by the U.S. grantor at the close of the year,
and in cases involving a distribution to a U.S. beneficiary of
a foreign trust, the gross reportable amount is the amount of
the distribution to the beneficiary. An additional $10,000
penalty is imposed for continued failure for each 30-day period
(or fraction thereof) beginning 90 days after the Treasury
Department notifies the responsible party of such failure. The
same penalties are applicable to a failure to report (as
required by present law) certain transfers to other foreign
entities. Such penalties are subject to a reasonable cause
exception. The Committee intends that the reasonable cause
standard will be satisfied upon the showing of reasonable
efforts to comply with the reporting requirements. In no event
will the total amount of penalties exceed the gross reportable
amount.
(iii) Effective date
The reporting requirements and applicable penalties
generally apply to reportable events occurring or distributions
received after the date of enactment. The annual reporting
requirement and penalties applicable to U.S. grantors apply to
taxable years of such persons beginning after December 31,
1995.
g. Reporting of foreign gifts
The bill generally requires any U.S. person (other than
certain tax-exempt organizations) that receives purported gifts
or bequests from foreign sources total more than $10,000 during
the taxable year to report them to the Treasury Department. The
threshold for this reporting requirement is indexed for
inflation. The definition of a gift to a U.S. person for this
purpose excludes amounts that are qualified tuition or medical
payments made on behalf of the U.S. person, as defined for gift
tax purposes (sec. 2503(e)(2)), and amounts that are
distributions to a U.S. beneficiary of a foreign trust if such
amounts are properly disclosed under the reporting requirements
of the bill. If the U.S. person fails, without reasonable
cause, to report foreign gifts as required, the Secretary of
the Treasury is authorized to determine the tax treatment of
the unreported gifts. The Committee intends that the
Secretary's exercise of its authority to make such a
determination will be subject to judicial review under an
arbitrary or capricious standard, which provides a high degree
of deference to such determination. In addition, the U.S.
person is subject to a penalty equal to 5 percent of the amount
of the gift for each month that the failure continues, with the
total penalty not to exceed 25 percent of such amount.
Effective date
The provision applies to amounts received after the date of
enactment.
B. Penalty for Failure to File Disclosure of Exemption for Shipping
Income of Foreign Persons (sec. 411 of the bill and secs. 872 and 883
of the Code)
Present Law
The United States imposes a 4-percent tax on the U.S.-
source gross transportation income of foreign persons \10\
(sec. 887). This tax does not apply to income that is
effectively connected with the foreign person's conduct of a
U.S. trade or business. Foreign persons are subject to U.S. tax
at regular graduated rates on net income that is effectively
connected with a U.S. trade or business (secs. 871(b) and 882).
The U.S. taxation of a foreign person may be altered by the
provisions of an applicable tax treaty.
---------------------------------------------------------------------------
\10\ For this purpose, foreign persons refers to nonresident alien
individuals and foreign corporations.
---------------------------------------------------------------------------
Transportation income is any income derived from, or in
connection with, the use (or hiring or leasing for use) of a
vessel or aircraft (or a container used in connection
therewith) or the performance of services directly related to
such use (sec. 863(c)(3)). Transportation income attributable
to transportation that begins and ends in the United States is
treated as derived from sources in the United States (sec.
863(c)(1)). In the case of transportation income attributable
to transportation that begins in, and ends outside, the United
States or that begins outside, and ends in, the United States,
generally 50 percent is treated as U.S. source and 50 percent
is treated as foreign source (sec. 863(c)(2)). U.S.-source
transportation income is treated as effectively connected with
a foreign person's conduct of a U.S. trade or business only if
the foreign person has a fixed place of business in the United
States that is involved in the earning of such income and
substantially all of such income of the foreign person is
attributable to regularly scheduled transportation (sec.
887(b)(4)).
An exemption from U.S. tax is provided for gross income
derived by a nonresident alien individual from the
international operation of a ship, provided that the foreign
country in which such individual is resident grants an
equivalent exemption to individual residents of the United
States (sec. 872(b)(1)). A similar exemption from U.S. tax is
provided for gross income derived by a foreign corporation from
the international operation of a ship, provided that the
foreign country in which the corporation is organized grants an
equivalent exemption to corporations organized in the United
States (sec. 883(a)(1)).
Pursuant to guidance published by the Internal Revenue
Service, a foreign person that is entitled to an exemption from
U.S. tax for its income from the international operation of a
ship must file a U.S. income tax return and must attach to such
return a statement claiming the exemption (Rev. Proc. 91-12,
1991-1 C.B. 473). If the foreign person is claiming an
exemption based on an applicable income tax treaty, the foreign
person must disclose that fact as required by the Secretary of
the Treasury (sec. 6114). The penalty for failure to make
disclosure of a treaty-based position as required under section
6114 is $1,000 for an individual and $10,000 for a corporation
(sec. 6712).
At the time the 4-percent tax on U.S.-source gross
transportation income was enacted, concern was expressed about
whether compliance with the tax, which is collected by return,
would be adequate. It was intended that the tax-writing
committees of Congress and the Secretary of the Treasury would
study the issue of compliance and that the Secretary would make
recommendations if compliance did not prove adequate. Joint
Committee on Taxation, General Explanation of the Tax Reform
Act of 1986 (JCS-10-87), May 4, 1987, at 930.
Reasons for Change
The Committee understands that there is a very high level
of noncompliance by foreign persons that have U.S.-source
shipping income. The Committee believes that, in order to
address this noncompliance problem, it is appropriate to impose
significant penalties for a failure to satisfy the filing
requirements for claiming the exemption from U.S. tax that is
available to certain foreign persons with respect to income
from the international operation of ships.
Explanation of Provision
Under the provision, a foreign person that claims exemption
from U.S. tax for income from the international operation of
ships and otherwise qualifies for such exemption, but does not
satisfy the filing requirements for claiming such exemption, is
subject to the penalty of the denial of such exemption and any
deductions or credits otherwise allowable in determining the
U.S. tax liability with respect to such income. In addition,
under the provision, if a foreign person that has a fixed place
of business in the United States fails to satisfy the filing
requirements for claiming an exemption from U.S. tax for its
income from the international operation of ships, such person
is subject to the additional penalty that foreign source income
from the international operation of ships is treated as
effectively connected with the conduct of a U.S. trade or
business, but only to the extent that such income is
attributable to such fixed place of business in the United
States. Income so treated as effectively connected with a U.S.
business is subject to U.S. tax at graduated rates (and is
subject to the disallowance of deductions and credits described
above). The Secretary of the Treasury may waive all or part of
these penalties upon a showing by the foreign person that there
was reasonable cause for the failure and the person acted in
good faith. In particular, the Committee intends that the
Secretary of the Treasury liberally construe the reasonable
cause exception such that the latter penalty will be applied
only in egregious cases (e.g., intentional disregard of these
rules). The provision does not apply to the extent the
application would be contrary to any treaty obligation of the
United States.
Under the provision, the U.S. Customs Service will provide
to the Secretary of the Treasury the information specified by
the Secretary to enable the Secretary to identify foreign-flag
ships engaged in shipping to or from the United States.
Effective Date
The provision is effective for taxable years beginning
after the later of the date the Shipbuilding Agreement takes
effect or December 31, 1996.
VI. Votes of the Committee
A. Amendments
An amendment offered by Mr. Graham regarding a change in
section 202 of the Trade Act of 1974 to clarify the definitions
of domestic industry and like articles in certain
investigations involving perishable agricultural products, was
defeated in a roll-call vote (9 yeas and 11 nays). The roll-
call vote on the amendment was as follows:
YEAS NAYS
Mr. Baucus Mr. Breaux
Mr. Bradley Mr. Chafee
Mr. Conrad Mr. Gramm
Mr. Dole Mr. Grassley
Mr. D'Amato Ms. Moseley-Braun
Mr. Graham Mr. Moynihan
Mr. Hatch Mr. Murkowski
Mr. Pryor Mr. Nickles
Mr. Rockefeller Mr. Pressler
Mr. Roth
Mr. Simpson
An amendment offered by Mr. Conrad, as modified by Mr.
Roth, to remove the proposal to repeal advance refunds of the
diesel fuel tax for diesel automobiles, vans, and light trucks,
which was in the revenue offset provisions of the Committee
substitute, and to shorten the extension of the Generalized
System of Preferences program so that its termination date will
be May 12, 1997, was approved by voice vote.
B. Motion to Report the Bill
In compliance with section 133 of the Legislative
Reorganization Act of 1946, the Committee states that H.R.
3074, as amended, was ordered favorably reported unanimously by
voice vote on May 8, 1996.
VII. Budgetary Impact
In compliance with sections 308 and 403 of the
Congressional Budget Act of 1974, and paragraph 11(a) of Rule
XXVI of the Standing Rules of the Senate, the following letter
has been received from the Congressional Budget Office on the
budgetary impact of the legislation:
U.S. Congress,
Congressional Budget Office,
Washington, DC, May 9, 1996.
Hon. William V. Roth, Jr.,
Chairman, Committee on Finance, U.S. Senate,
Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
reviewed H.R. 3074, as amended and ordered reported by the
Senate Committee on Finance, on May 8, 1996. CBO and JCT
estimate that the bill would increase governmental receipts by
$50 million in fiscal year 1996, by $1 million over fiscal
years 1996-2000, and by $1.111 billion over fiscal years 1996-
2005, net of payroll and income tax offsets. Because enacting
H.R. 3074 would affect receipts, pay-as-you-go procedures would
apply to the bill.
Bill Purpose
H.R. 3074 includes a number of provisions that would affect
governmental receipts. The trade and tax provisions of the bill
would:
Provide the President with the authority to eliminate
or modify the existing duty on articles imported from
the West Bank, Gaza Strip, and qualifying industrial
zones (designated territory of Israel and Jordan or
Israel and Egypt).
Implement the OECD Shipbuilding Trade Agreement which
was signed on December 21, 1994, by the following
countries: The Commission of the European Communities,
Japan, South Korea, Norway, and the United States. As
mandated by the OECD agreement, the proposed
legislation would exempt repairs to U.S. flag vessels
done in OECD signatory countries from the existing 50
percent ad valorem vessel repair duty.
Renew the Generalized System of Preferences (GSP),
which affords nonreciprocal tariff preferences to
approximately 145 developing countries to aid their
economic development and to diversify and expand their
production and exports.
Modify certain aspects of the tax treatment of
foreign trusts.
Expand penalties for the failure to satisfy the
filing requirements for claiming the exemption from
U.S. tax that is available to certain foreign persons
with respect to income from international operation of
ships. Under the proposal, foreign source income from
the international operation of ships that is
attributable to a fixed place of business would be
subject to U.S. tax at graduated rates.
Estimated Effect on Governmental Receipts
The revenue effects of H.R. 3074 are summarized in the
table below. Please refer to the attached table for a more
detailed estimate of the bill.
REVENUE EFFECTS OF H.R. 3074
[By fiscal year, in billions of dollars]
----------------------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001-2005
----------------------------------------------------------------------------------------------------------------
Projected revenues: Under current
law \1\.......................... 1,417.583 1,475.172 1,546.085 1,617.979 1,697.166 9,914.671
Proposed changes.................. 0.050 -0.598 0.165 0.185 0.199 1.110
Projected revenues: Under H.R.
3074............................. 1,417.633 1,474.574 1,546.250 1,618.164 1,697.365 9,915.781
----------------------------------------------------------------------------------------------------------------
\1\ Includes the revenue effects of P.L. 104-7 (H.R. 831), P.L. 104-117 (H.R. 2778), P.L. 104-121 (H.R. 3136),
P.L. 104-132 (S. 735), and P.L. 104-134 (H.R. 3019).
Basis of the Estimate
West Bank and Gaza Strip.--CBO believes that the
Administration intends to utilize the proclamation authority
established in the bill to extend the U.S.-Israel free trade
agreement to the Palestinian territories without further
legislation. Currently, the U.S. Customs Service collects less
than $1,000 annually from the West Bank, Gaza Strip, and the
qualified industrial zones. Therefore, the elimination or
modification of such duties by Presidential proclamation would
lead to a negligible reduction in revenues.
OECD Shipbuilding Trade Agreement.--CBO estimates that the
vessel repair provisions of the bill would decrease
governmental receipts by $2 million in fiscal year 1996 and by
$74 million over the fiscal years 1996-2005, net of income and
payroll tax offsets. Aside from this provision, the
implementation of the agreement would have no significant
budgetary effects.-
The estimate of revenue loss is based on historical
collections of the vessel repair duty. Over the past several
years, collections have been between $15 million and $25
million annually. According to the US Maritime Administration
(MARAD), in December 1995 there were 141 vessels in the US flag
fleet. However, MARAD predicts a steady decline in the size of
the US fleet due to the impending expiration and expected
termination of the operating-differential subsidy program,
through which payments are made to US vessels on specified
trade routes. This estimate assumes that future collections of
the vessel repair duty would decline as a result of this
reduction in the size of the fleet. CBO also assumes that
additional US vessel repairs would be diverted to ports in OECD
countries to take advantage of the duty-free repair treatment.
This estimate assumes that the bill will be effective on July
15, 1996. The revenue effects of the provision are detailed in
the table below.
Extend GSP through 5/12/97.--CBO estimates that the
proposal to renew GSP would reduce revenues by $734 million in
fiscal year 1997, net of income and payroll tax offsets.
The United States GSP expired on July 31, 1995. The
proposed legislation would retroactively apply GSP from July
31, 1995, and extend the program through May 12, 1997. The
estimate of revenue loss is based on 1993 trade data and
accounts for the graduation of Malaysia from GSP on January 1,
1997, as recommended by the USTR on August 15, 1995. Malaysia
has been a top beneficiary of GSP accounting for about a
quarter of total GSP imports. Because the proposal would not
permit the Customs Service to refund eligible duties until
October 1, 1996, the entire revenue loss would occur in fiscal
year 1997.
Modify Treatment of foreign trusts.--JCT estimates that
this proposal would increase governmental receipts by $52
million in fiscal year 1996, and by $1.819 billion over fiscal
years 1996-2005, net of income and payroll tax offsets. CBO
concurs with this estimate.
Reporting requirement for shippers claiming exemption
(includes force-of-attraction rule).--JCT estimates that this
proposal would raise governmental receipts by $3 million in
1997, and by $101 million over fiscal years 1996-2005, net of
income and payroll tax offsets. CBO concurs with this estimate.
Pay-As-You-Go Considerations
Section 252 of the Balanced Budget and Emergency Deficit
Control Act of 1985 sets up pay-as-you-go procedures for
legislation affecting receipts or direct spending through 1998.
Because this bill would affect receipts, pay-as-you-go
procedures would apply. These effects are summarized in the
table below.
PAY-AS-YOU-GO CONSIDERATIONS
[By fiscal year, in millions of dollars]
------------------------------------------------------------------------
1996 1997 1998
------------------------------------------------------------------------
Changes in receipts.................... 50 -598 165
Changes in outlays..................... (\1\) (\1\) (\1\)
------------------------------------------------------------------------
\1\ Not applicable.
intergovernmental and private sector mandates
H.R. 3074 contains no intergovernmental mandates as defined
in Public Law 104-4 and would impose no direct costs on state,
local, or tribal governments.
JCT has determined that one revenue provision of the bill,
the provision to modify foreign trusts, would contain Federal
private sector mandates above the threshold as defined by
Public Law 104-4. The aggregate amounts that the private sector
will be required to spend to comply with the Federal private
sector mandates are estimated to be no greater than the amounts
reflected in the table below. CBO concurs with this estimate.
FEDERAL PRIVATE SECTOR MANDATES
[By fiscal year, in millions of dollars]
----------------------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000
----------------------------------------------------------------------------------------------------------------
Modify treatment of foreign trusts................................. 52 143 171 180 188
----------------------------------------------------------------------------------------------------------------
If you would like further details, please feel free to
contact me or your staff may wish to contact Stephanie Weiner.
Sincerely,
James L. Blum
(For June E. O'Neill, Director).
ESTIMATED BUDGET EFFECTS OF H.R. 3074 AS PASSED BY THE SENATE FINANCE COMMITTEE ON MAY 8, 1996; FISCAL YEAR 1996-2005
[In millions of dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Provision Effective 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 1996-00 1996-05
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1. Tariff treatment of imports from the West Bank and the
Gaza Strip (\1\)........................................... ..........
(11) Negligible Loss
2. The OECD Shipbuilding Agreement (\1\).................... (\2\) -2 -10 -12 -7 -4 -9 -6 -7 -11 -7 -35 -75
3. Extend GSP through 5/12/97 (\1\) (\3\)................... .......... ........ -734 ........ ........ ........ ........ ........ ........ ........ ........ -734 -734
4. Modify treatment of foreign trusts....................... (\4\) 52 143 171 180 188 197 206 214 223 245 737 1,819
5. Shipping income reporting, with potential exemption
denial and resourcing...................................... (\5\) ........ 3 6 12 15 15 14 13 12 11 36 101
vvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvv
Net totals............................................ .......... 50 -598 165 185 199 203 214 220 224 249 1 1,111
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Estimate provided by the Congressional Budget Office.
\2\ Assumed to be effective 7/15/96.
\3\ Amounts are payable after 9/30/96.
\4\ Various effective dates depending on provisions.
\5\ Effective beginning after the later of the date H.R. 2754 takes effect or 12/31/96.
Note: Details may not add to totals due to rounding.
VIII. Regulatory Impact and Other Matters
a. regulatory impact
1. Titles I through III
In compliance with paragraph 11(b) of rule XXVI of the
Standing Rules of the Senate, the Committee states that the
legislation will not significantly regulate any individuals or
businesses, will not impact on the personal privacy of
individuals, and will result in no significant additional
paperwork.
2. Title IV
a. Impact on Individuals and Businesses
Title IV of the bill as reported provides two revenue-
offset provisions to pay for the other provisions of the bill:
(1) modification of the tax treatment of foreign trusts, and
(2) penalty for failure to file disclosure of exemption for
shipping income of foreign persons.
The foreign trust provisions will increase the tax
liabilities of certain taxpayers and will also impose costs on
affected taxpayers related to the new recordkeeping and
reporting requirements. These rules are designed to limit the
avoidance of U.S. taxes through the use of trusts.
The penalty provision imposes penalties on certain foreign
persons that do not satisfy the filing requirements for
claiming an available exemption from U.S. tax for income from
the international operation of ships.
b. Impact on Personal Privacy and Paperwork
Title IV of the bill will have little impact on personal
privacy of taxpayers. Title IV will result in increased
recordkeeping and reporting requirements for taxpayers involved
with foreign trusts.
b. information relating to unfunded mandates
This information is provided in accordance with section 423
of the Unfunded Mandates Act of 1995 (P.L. 104-4).
The Committee has determined that one revenue provision of
the bill contains Federal mandates on the private sector; this
is the provision to modify the treatment of foreign trusts. The
provision changes the tax treatment applicable to trusts and
modifies the information reporting requirements and penalties
applicable to foreign trusts. This provision will increase the
Federal tax liabilities of certain taxpayers and will also
impose costs related to the new recordkeeping and reporting
requirements imposed by the bill.
The cost required to comply with the Federal private sector
mandate generally is no greater than the revenue estimate for
the provision. Benefits from the provision include improved
administration of the Federal income tax laws and a more
accurate measurement of gross income for Federal income tax
purposes. The Committee believes the benefits of the bill are
greater than the costs required to comply with the Federal
private sector mandates contained in the bill.
The provisions contain Federal private sector mandates to
the extent the provisions impose new reporting requirements and
recharacterize the income of trusts to ensure that U.S. Federal
income tax is paid. In general, these rules are designed to
limit the avoidance of U.S. taxes through the use of trusts.
The revenue provisions of the bill do not contain any
intergovernmental mandates.
The revenue provisions of the bill affect activities that
are only engaged in by the private sector and, thus, do not
affect the competitive balance between State, local, or tribal
governments and the private sector.
IX. Changes in Existing Law
In compliance with paragraph 12 of Rule XXVI of the
Standing Rules of the Senate, changes in existing law made by
the legislation are shown as follows (new matter is printed in
italics):
INTERNAL REVENUE CODE OF 1986
Subtitle A--Income Taxes
* * * * * * *
CHAPTER 1--NORMAL TAXES AND SURTAXES
* * * * * * *
Subchapter J--Estates, Trusts, Beneficiaries, and Decedents
PART I--ESTATES, TRUSTS, AND BENEFICIARIES
Subpart A--General Rules for Taxation of Estates and Trusts
* * * * * * *
SEC. 643. DEFINITIONS APPLICABLE TO SUBPARTS A, B, C, AND D.
(a) Distributable net income.--For purposes of this part,
the term ``distributable net income'' means, with respect to
any taxable year, the taxable income of the estate or trust
computed with the following modifications--
* * * * * * *
(7) Abusive transactions.--The Secretary shall
prescribe such regulations as may be necessary or
appropriate to carry out the purposes of this part,
including regulations to prevent avoidance of such
purposes.
* * * * * * *
(h) Distributions by Certain Foreign Trusts Through
Nominees.--For purposes of this part, any amount paid to a
United States person which is derived directly or indirectly
from a foreign trust of which the payor is not the grantor
shall be deemed in the year of payment to have been directly
paid by the foreign trust to such United States person.
(i) Loans From Foreign Trusts.--For purposes of subparts B,
C, and D--
(1) General rule.--Except as provided in regulations,
if a foreign trust makes a loan of cash or marketable
securities directly or indirectly to--
(A) any grantor or beneficiary of such trust
who is a United States person, or
(B) any United States person not described in
subparagraph (A) who is related to such grantor
or beneficiary,
the amount of such loan shall be treated as a
distribution by such trust to such grantor or
beneficiary (as the case may be).
(2) Definitions and special rules.--For purposes of
this subsection--
(A) Cash.--The term ``cash'' includes foreign
currencies and cash equivalents.
(B) Related person.--
(i) In general.--A person is related
to another person if the relationship
between such persons would result in a
disallowance of losses under section
267 or 707(b). In applying section 267
for purposes of the preceding sentence,
section 267(c)(4) shall be applied as
if the family of an individual includes
the spouses of the members of the
family.
(ii) Allocation.--If any person
described in paragraph (1)(B) is
related to more than one person, the
grantor or beneficiary to whom the
treatment under this subsection applies
shall be determined under regulations
prescribed by the Secretary.
(C) Exclusion of tax-exempts.--The term
``United States person'' does not include any
entity exempt from tax under this chapter.
(D) Trust not treated as simple trust.--Any
trust which is treated under this subsection as
making a distribution shall be treated as not
described in section 651.
(3) Subsequent transactions regarding loan
principal.--If any loan is taken into account under
paragraph (1), any subsequent transaction between the
trust and the original borrower regarding the principal
of the loan (by way of complete or partial repayment,
satisfaction, cancellation, discharge, or otherwise)
shall be disregarded for purposes of this title.
* * * * * * *
Subpart D--Treatment of excess distribution by trusts
SEC. 665. DEFINITIONS APPLICABLE TO SUBPART D.
* * * * * * *
[(c) Special Rule Applicable to Distributions by Certain
Foreign Trusts.--
[For purposes of this subpart, any amount paid to a United
States person which is from a payor who is not a United States
person and which is derived directly or indirectly from a
foreign trust created by a United States person shall be deemed
in the year of payment to have been directly paid by the
foreign trust.]
(d) Taxes Imposed on the Trust.--
For purposes of this subpart--
(1) In general.--The term ``taxes imposed on the
trust'' means the amount of the taxes which are imposed
for any taxable year of the trust under this chapter
(without regard to this subpart or part IV of
subchapter A) and which, under regulations prescribed
by the Secretary, are properly allocable to the
undistributed portions of distributable net income and
gains in excess of losses from sales or exchanges of
capital assets. The amount determined in the preceding
sentence shall be reduced by any amount of such taxes
deemed distributed under section 666(b) and (c) or
669(d) and (e) to any beneficiary.
(2) Foreign trusts.--In the case of any foreign
trust, the term ``taxes imposed on the trust'' includes
the amount, reduced as provided in the last sentence of
paragraph (1), of any income, war profits, and excess
profits taxes imposed by any foreign country or
possession of the United States on such foreign trust
which, as determined under paragraph (1), are so
properly allocable. Under rules or regulations
prescribed by the Secretary, in the case of any foreign
trust of which the settlor or another person could be
treated as owner of any portion of the trust under
subpart E but for section 672(f), the term ``taxes
imposed on the trust'' includes the allocable amount of
any income, war profits, and excess profits taxes
imposed by any foreign country or possession of the
United States on the settlor or such other person in
respect of trust income.
* * * * * * *
SEC. 668. INTEREST CHARGE ON ACCUMULATION DISTRIBUTIONS FROM FOREIGN
TRUSTS.
[(a) General Rule.--For purposes of the tax determined
under section 667(a), the interest charge is an amount equal to
6 percent of the partial tax computed under section 667(b)
multiplied by a fraction--
[(1) the numerator of which is the sum of the number
of taxable years between each taxable year to which the
distribution is allocated under section 666(a) and the
taxable year of the distribution (counting in each case
the taxable year to which the distribution is allocated
but not counting the taxable year of the distribution),
and
[(2) the denominator of which is the number of
taxable years to which the distribution is allocated
under section 666(a).]
(a) General Rule.--For purposes of the tax determined under
section 667(a)--
(1) Interest determined using underpayment rates.--
The interest charge determined under this section with
respect to any distribution is the amount of interest
which would be determined on the partial tax computed
under section 667(b) for the period described in
paragraph (2) using the rates and the method under
section 6621 applicable to underpayments of tax.
(2) Period.--For purposes of paragraph (1), the
period described in this paragraph is the period which
begins on the date which is the applicable number of
years before the date of the distribution and which
ends on the date of the distribution.
(3) Applicable number of years.--For purposes of
paragraph (2)--
(A) In general.--The applicable number of
years with respect to a distribution is the
number determined by dividing--
(i) the sum of the products described
in subparagraph (B) with respect to
each undistributed income year, by
(ii) the aggregate undistributed net
income.
The quotient determined under the preceding
sentence shall be rounded under procedures
prescribed by the Secretary.
(B) Product described.--For purposes of
subparagraph (A), the product described in this
subparagraph with respect to any undistributed
income year is the product of--
(i) the undistributed net income for
such year, and
(ii) the sum of the number of taxable
years between such year and the taxable
year of the distribution (counting in
each case the undistributed income year
but not counting the taxable year of
the distribution).
(4) Undistributed income year.--For purposes of this
subsection, the term `undistributed income year' means
any prior taxable year of the trust for which there is
undistributed net income, other than a taxable year
during all of which the beneficiary receiving the
distribution was not a citizen or resident of the
United States.
(5) Determination of undistributed net income.--
Notwithstanding section 666, for purposes of this
subsection, an accumulation distribution from the trust
shall be treated as reducing proportionately the
undistributed net income for undistributed income
years.
(6) Periods before 1996.--Interest for the portion of
the period described in paragraph (2) which occurs
before January 1, 1996, shall be determined--
(A) by using an interest rate of 6 percent,
and
(B) without compounding until January 1,
1996.
(b) Limitation.--The total amount of the interest charge
shall not, when added to the total partial tax computed under
section 667(b), exceed the amount of the accumulation
distribution (other than the amount of tax deemed distributed
by section 666 (b) or (c)) in respect of which such partial tax
was determined.
(c) Interest Charge Not Deductible.--The interest charge
determined under this section shall not be allowed as a
deduction for purposes of any tax imposed by this title.
* * * * * * *
SUBPART E--GRANTORS AND OTHERS TREATED AS SUBSTANTIAL OWNERS
* * * * * * *
SEC. 672. DEFINITIONS AND RULES.
* * * * * * *
(c) Related or Subordinate Party.--For purposes of this
subpart, the term ``related or subordinate party'' means any
nonadverse party who is--
(1) the grantor's spouse if living with the grantor;
(2) any one of the following: The grantor's father,
mother, issue, brother or sister, an employee of the
grantor, a corporation or any employee of a corporation
in which the stock holdings of the grantor and the
trust are significant from the viewpoint of voting
control; a subordinate employee of a corporation in
which the grantor is an executive.
For purposes of subsection (f) and sections 674 and 675, a
realted or subordinate party shall be presumed to be
subservient to the grantor in respect of the exercise or
nonexercise of the powers conferred on him unless such party is
shown not to be subservient by a preponderance of the evidence.
* * * * * * *
[(f) Special Rule Where Grantor Is Foreign Person.--
[(1) In general.--If--
[(A) but for this subsection, a foreign
person would be treated as the owner of any
portion of a trust, and
[(B) such trust has a beneficiary who is a
United States person.
[such beneficiary shall be treated as the grantor of
such portion to the extent such beneficiary has made
transfers of property by gift (directly or indirectly)
to such foreign person. For purposes of the preceding
sentence, any gift shall not be taken into account to
the extent such gift would be excluded from taxable
gifts under section 2503(b).
[(2) Regulations.--The Secretary shall prescribe such
regulations as may be necessary to carry out the
purposes of this subsection.]
(f) Subpart Not To Result in Foreign Ownership.--
(1) In general.--Notwithstanding any other provision
of this subpart, this subpart shall apply only to the
extent such application results in an amount (if any)
being currently taken into account (directly or through
1 or more entities) under this chapter in computing the
income of a citizen or resident of the United States or
a domestic corporation.
(2) Exceptions.--
(A) Certain revocable and irrevocable
trusts.--Paragraph (1) shall not apply to any
portion of a trust if--
(i) the power to revest absolutely in
the grantor title to the trust property
to which such portion is attributable
is exercisable solely by the grantor
without the approval or consent of any
other person or with the consent of a
related or subordinate party who is
subservient to the grantor, or
(ii) the only amounts distributable
from such portion (whether income or
corpus) during the lifetime of the
grantor are amounts distributable to
the grantor or the spouse of the
grantor.
(B) Compensatory trusts.--Except as provided
in regulations, paragraph (1) shall not apply
to any portion of a trust distributions from
which are taxable as compensation for services
rendered.
(3) Special rules.--Except as otherwise provided in
regulations prescribed by the Secretary--
(A) a controlled foreign corporation (as
defined in section 957) shall be treated as a
domestic corporation for purposes of paragraph
(1), and
(B) paragraph (1) shall not apply for
purposes of applying section 1296.
(4) Recharacterization of purported gifts.--In the
case of any transfer directly or indirectly from a
partnership or foreign corporation which the transferee
treats as a gift or bequest, the Secretary may
recharacterize such transfer in such circumstances as
the Secretary determines to be appropriate to prevent
the avoidance of the purposes of this subsection.
(5) Special rule where grantor is foreign person.--
If--
(A) but for this subsection, a foreign person
would be treated as the owner of any portion of
a trust, and
(B) such trust has a beneficiary who is a
United States person,
such beneficiary shall be treated as the grantor of
such portion to the extent such beneficiary or any
member of such beneficiary's family (within the meaning
of section 267(c)(4)) has made (directly or indirectly)
transfers of property (other than in a sale for full
and adequate consideration) to such foreign person. For
purposes of the preceding sentence, any gift shall not
be taken into account to the extent such gift would be
excluded from taxable gifts under section 2503(b).
(6) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry
out the purposes of this subsection, including
regulations providing that paragraph (1) shall not
apply in appropriate cases.
* * * * * * *
SEC. 679. FOREIGN TRUSTS HAVING ONE OR MORE UNITED STATES
BENEFICIARIES.
(a) Transferor Treated as Owner.--
(1) In general.--A United States person who directly
or indirectly transfers property to a foreign trust
(other than a trust described in [section 404(a)(4) or
section 404A] section 6048(a)(3)(B)(ii) shall be
treated as the owner for his taxable year of the
portion of such trust attributable to such property if
for such year there is a United States beneficiary of
any portion of such trust.
(2) Exceptions. Paragraph (1) shall not apply--
(A) Transfers by reason of death. To any
transfer by reason of death of the transferror.
[(B) Transfers where gain is recognized to
transferor. To any sale or exchange of the
property at its fair market value in a
transaction in which all of the gain to the
transferor is realized at the time of the
transfer and is recognized either at such time
or is returned as provided in section 453.]
(B) Transfers at fair market value.--To any
transfer of property to a trust in exchange for
consideration of at least the fair market value
of the transferred property. For purposes of
the preceding sentence, consideration other
than cash shall be taken into account at its
fair market value.
(3) Certain obligations not taken into account under
fair market value exception.--
(A) In general.--In determining whether
paragraph (2)(B) applies to any transfer by a
person described in clause (ii) or (iii) of
subparagraph (C), there shall not be taken into
account--
(i) except as provided in
regulations, any obligation of a person
described in subparagraph (C), and
(ii) to the extent provided in
regulations, any obligation which is
guaranteed by a person described in
subparagraph (C).
(B) Treatment of principal payments on
obligation.--Principal payments by the trust on
any obligation referred to in subparagraph (A)
shall be taken into account on and after the
date of the payment in determining the portion
of the trust attributable to the property
transferred.
(C) Persons described.--The persons described
in this subparagraph are--
(i) the trust,
(ii) any grantor or beneficiary of
the trust, and
(iii) any person who is related
(within the meaning of section
643(i)(2)(B)) to any grantor or
beneficiary of the trust.
(4) Special rules applicable to foreign grantor who
later becomes a united states person.--
(A) In general.--If a nonresident alien
individual has a residency starting date within
5 years after directly or indirectly
transferring property to a foreign trust, this
section and section 6048 shall be applied as if
such individual transferred to such trust on
the residency starting date an amount equal to
the portion of such trust attributable to the
property transferred by such individual to such
trust in such transfer.
(B) Treatment of undistributed income.--For
purposes of this section, undistributed net
income for periods before such individual's
residency starting date shall be taken into
account in determining the portion of the trust
which is attributable to property transferred
by such individual to such trust but shall not
otherwise be taken into account.
(C) Residency starting date.--For purposes of
this paragraph, an individual's residency
starting date is the residency starting date
determined under section 7701(b)(2)(A).
(5) Outbound trust migrations.--If--
(A) an individual who is a citizen or
resident of the United States transferred
property to a trust which was not a foreign
trust, and
(B) such trust becomes a foreign trust while
such individual is alive,
then this section and section 6048 shall be applied as
if such individual transferred to such trust on the
date such trust becomes a foreign trust an amount equal
to the portion of such trust attributable to the
property previously transferred by such individual to
such trust. A rule similar to the rule of paragraph
(4)(B) shall apply for purposes of this paragraph.
(b) Trusts Acquiring United States Beneficiaries.--If--
(1) subsection (a) applies to a trust for the
transferor's taxable year, and
(2) subsection (a) would have applied to the trust
for his immediately preceding taxable year but for the
fact that for such preceding taxable year there was no
United States beneficiary for any portion of the trust,
then, for purposes of this subtitle, the transferor
shall be treated as having income for the taxable year
(in addition to his other income for such year) equal
to the undistributed net income (at the close of such
immediately preceding taxable year) attributable to the
portion of the trust referred to in subsection (a).
(c) Trusts Treated as Having a United States Beneficiary.--
(1) In general. For purposes of this section, a trust
shall be treated as having a United States beneficiary
for the taxable year unless--
(A) under the terms of the trust, no part of
the income or corpus of the trust may be paid
or accumulated during the taxable year to or
for the benefit of a United States person, and
(B) if the trust were terminated at any time
during the taxable year, no part of the income
or corpus of such trust could be paid to or for
the benefit of a United States person.
(2) Attribution of ownership.--For purposes of
paragraph (1), an amount shall be treated as paid or
accumulated to or for the benefit of a United States
person if such amount is paid to or accumulated for a
foreign corporation, foreign partnership, or foreign
trust or estate, and--
[(A) in the case of a foreign corporation,
more than 50 percent of the total combined
voting power of all classes of stock entitled
to vote of such corporation is owned (within
the meaning of section 958(a)) or is considered
to be owned (within the meaning of section
958(b)) by United States shareholders (as
defined in section 951(b)),]
(A) in the case of a foreign corporation,
such corporation is a controlled foreign
corporation (as defined in section 957(a)),
(B) in the case of foreign partnership, a
United States person is a partner of such
partnership, or
(C) in the case of a foreign trust or estate,
such trust or estate has a United States
beneficiary (within the meaning of paragraph
(1)).
(3) Certain united states beneficiaries
disregarded.--A beneficiary shall not be treated as a
United States person in applying this section with
respect to any transfer of property to foreign trust if
such beneficiary first became a United States person
more than 5 years after the date of such transfer.
(d) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out the
purposes of this section.
* * * * * * *
Subchapter N--Tax Based on Income From Sources Within or Without the
United States
* * * * * * *
PART II--NONRESIDENT ALIENS AND FOREIGN CORPORATION
Subpart A--Nonresident alien individuals
SEC. 871. TAX ON NONRESIDENT ALIEN INDIVIDUALS.
(a) * * *
* * * * * * *
(f) Certain Annuities Received Under Qualified Plans.
* * * * * * *
(2) Exclusion.--Income received during the taxable
year which would be excluded from gross income under
this subsection but for the requirement of paragraph
(1)(B) shall not be included in gross income if--
(A) the recipient's country of residence
grants a substantially equivalent exclusion to
residents and citizens of the United States; or
(B) the recipient's country of residence is a
beneficiary developing country [within the
meaning of section 502] of the Trade Act of
1974 (19 U.S.C. 2462).
* * * * * * *
SEC. 872. GROSS INCOME.
(a) General Rule.--In the case of a nonresident alien
individual, except where the context clearly indicates
otherwise gross income includes only--
(1) gross income which is derived from sources within
the United States and which is not effectively
connected with the conduct of a trade or business
within the United States, and
(2) gross income which is effectively connected with
the conduct of a trade or business within the United
States.
(b) Exclusions.--The following items shall not be included
in gross income of a nonresident alien individual, and shall be
exempt from taxation under this subtitle:
(1) Ships operated by certain nonresidents. [Gross
income] Except as provided in section 883(d), gross
income derived by an individual resident of a foreign
country from the international operation of a ship or
ships if such foreign country grants an equivalent
exemption to individual residents of the United States.
* * * * * * *
SUBPART B--FOREIGN CORPORATIONS
* * * * * * *
SEC. 883. EXCLUSIONS FROM GROSS INCOME.
(a) Income of Foreign Corporations From Ships and
Aircraft.--The following items shall not be included in gross
income of a foreign corporation, and shall be exempt from
taxation under this subtitle:
(1) Ships operated by certain foreign corporations.
[Gross income] Except as provided in subsection (d),
gross income derived by a corporation organized in a
foreign country from the international operation of a
ship or ships if such foreign country grants an
equivalent exemption to corporations organized in the
United States.
* * * * * * *
(d) Penalties for Failure To Disclose Position That Certain
International Shipping Income Is Not Includible in Gross
Income.--
(1) In general.--A taxpayer who, with respect to any
tax imposed by this title, takes the position that any
of its gross income derived from the international
operation of a ship or ships is not includible in gross
income by reason of subsection (a)(1) or section
872(b)(1) (or by reason of any applicable treaty) shall
be entitled to such treatment only if such position is
disclosed (in such manner as the Secretary may
prescribe) on the return of tax for such tax (or any
statement attached to such return).
(2) Additional penalties for failing to disclose
position.--If a taxpayer fails to meet the requirement
of paragraph (1) with respect to any taxable year--
(A) the amount of the income from the
international operation of a ship or ships--
(i) which is from sources without the
United States, and
(ii) which is attributable to a fixed
place of business in the United States,
shall be treated for purposes of this title as
effectively connected with the conduct of a
trade or business within the United States, and
(B) no deductions or credits shall be allowed
which are attributable to income from the
international operation of a ship or ships.
(3) Reasonable cause exception.--This subsection
shall not apply to a failure to disclose a position if
it is shown that such failure is due to reasonable
cause and not due to willful neglect.
* * * * * * *
PART III--INCOME FROM SOURCES WITHOUT THE UNITED STATES
Subpart A--Foreign Tax Credit
SEC. 901. TAXES OF FOREIGN COUNTRIES AND OF POSSESSIONS OF UNITED
STATES.
(a) Allowance of credit.--If the taxpayer chooses to have
the benefits of this subpart, the tax imposed by this chapter
shall, subject to limitation of section 904, be credited with
the amounts provided in the applicable paragraph of subsection
(b) plus, in the case of a corporation, the taxes deemed to
have been paid under sections 902 and 960. Such choice for any
taxable year may be made or changed at any time before the
expiration of the period prescribed for making a claim for
credit or refund of the tax imposed by this chapter for such
taxable year. The credit shall not be allowed against any tax
treated as a tax not imposed by this chapter under section
26(b).
(b) Amount Allowed.--Subject to the limitation of section
904, the following amounts shall be allowed as the credit under
subsection (a): Under rules or regulations prescribed by the
Secretary, in the case of any foreign trust of which the
settlor or another person would be treated as owner of any
portion of the trust under subpart E but for section 672(f),
the allocable amount of any income, war profits, and excess
profits taxes imposed by any foreign country or possession of
the United States on the settlor or such other person in
respect of trust income.
* * * * * * *
CHAPTER 5--TAX ON TRANSFERS TO AVOID INCOME TAX
SEC. 1491. IMPOSITION OF TAX.
There is hereby imposed on the transfer of property by a
citizen or resident of the United States, or by a domestic
corporation or partnership, or by an estate or trust which is
not a foreign estate or trust, to a foreign corporation as paid
in surplus or as a contribution to capital, or to a foreign
estate or trust, or to a foreign partnership, an excise tax
equal to 35 percent of the excess of--
(1) the fair market value of the property so
transferred, over
(2) the sum of--
(A) the adjusted basis (for determining gain)
of such property in the hands of the
transferor, plus
(B) the amount of the gain recognized to the
transferor at the time of the transfer.
If a trust which is not a foreign trust becomes a foreign
trust, such trust shall be treated for purposes of this section
as having transferred, immediately before becoming a foreign
trust, all of its assets to a foreign trust.
* * * * * * *
SEC. 1494. PAYMENT AND COLLECTION.
(a) Time for Payment.--The tax imposed by section 1491
shall, without assessment or notice and demand, be due and
payable by the transferor at the time of the transfer, and
shall be assessed, collected, and paid under regulations
prescribed by the Secretary.
(b) Abatement or Refund.--Under regulations prescribed by
the Secetary, the tax may be abated, remitted, or refunded if
the taxpayer, after the transfer, elects the application of
principles similar to the principles of section 367.
(c) Penalty.--In the case of any failure to file a return
required by the Secretary with respect to any transfer
described in section 1491, the person required to file such
return shall be liable for the penalties provided in section
6677 in the same manner as if such failure were a failure to
file a notice under section 6048(a).
* * * * * * *
Subtitle F--Procedure and Administration
CHAPTER 61--INFORMATION AND RETURNS
Subchapter A--Returns and Records
* * * * * * *
PART III--INFORMATION RETURNS
Subpart A--Information Concerning Persons Subject to Special Provisions
* * * * * * *
SEC. 6031. RETURN OF PARTNERSHIP INCOME.
* * * * * * *
SEC. 6039F. NOTICE OF LARGE GIFTS RECEIVED FROM FOREIGN PERSONS.
(a) In General.--If the value of the aggregate foreign gifts
received by a United States person (other than an organization
described in section 501(c) and exempt from tax under section
501(a)) during any taxable year exceeds $10,000, such United
States person shall furnish (at such time and in such manner as
the Secretary shall prescribe) such information as the
Secretary may prescribe regarding each foreign gift received
during such year.
(b) Foreign Gift.--For purposes of this section, the term
``foreign gift'' means any amount received from a person other
than a United States person which the recipient treats as a
gift or bequest. Such term shall not include any qualified
transfer (within the meaning of section 2503(e)(2)) or any
distribution properly disclosed in a return under section
6048(c).
(c) Penalty for Failure To File Information.--
(1) In general.--If a United States person fails to
furnish the information required by subsection (a) with
respect to any foreign gift within the time prescribed
therefor (including extensions)--
(A) the tax consequences of the receipt of
such gift shall be determined by the Secretary,
and
(B) such United States person shall pay (upon
notice and demand by the Secretary and in the
same manner as tax) an amount equal to 5
percent of the amount of such foreign gift for
each month for which the failure continues (not
to exceed 25 percent of such amount in the
aggregate).
* * * * * * *
(2) Reasonable cause exception.--Paragraph (1) shall
not apply to any failure to report a foreign gift if
the United States person shows that the failure is due
to reasonable cause and not due to willful neglect.
(d) Cost-of-Living Adjustment.--In the case of any taxable
year beginning after December 31, 1996, the $10,000 amount
under subsection (a) shall be increased by an amount equal to
the product of such amount and the cost-of-living adjustment
for such taxable year under section 1(f)(3), except that
subparagraph (B) thereof shall be applied by substituting
``1995'' for ``1992''.
(e) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out the
purposes of this section.
Subpart B--Information Concerning Transactions With Other Persons
* * * * * * *
SEC. 6041. INFORMATION AT SOURCE.
* * * * * * *
[SEC. 6048. RETURNS AS TO CERTAIN FOREIGN TRUSTS.]
SEC. 6048. INFORMATION WITH RESPECT TO CERTAIN FOREIGN TRUSTS.
* * * * * * *
[(a) General Rule.--On or before the 90th day (or on or
before such later day as the Secretary may by regulations
prescribe) after--
[(1) the creation of any foreign trust by a United
States person, or
[(2) the transfer of any money or property to a
foreign trust by a United States person,
[the grantor in the case of an inter vivos trust, the
fiduciary of an estate in the case of a testamentary
trust, or the transferor, as the case may be, shall
make a return in compliance with the provisions of
subsection (b).
[(b) Form and Contents of Returns.--The returns required by
subsection (a) shall be in such form and shall set forth, in
respect of the foreign trust, such information as the Secretary
prescribes by regulation as necessary for carrying out the
provisions of the income tax laws.
[(c) Annual Returns for foreign Trusts Having One or More
United States Beneficiaries.--Each taxpayer subject to tax
under section 679 (relating to foreign trusts having one or
more United States beneficaries) for his taxable year with
respect to any trust shall make a return with respect to such
trust for such year at such time and in such manner, and
setting forth such information, as the Secretary may by
regulations prescribed.
[(d) Cross Reference.--For provisions relating to penalties
for violation of this section, see sections 6677 and 7203.]
(a) Notice of Certain Events.--
(1) General rule.--On or before the 90th day (or such
later day as the Secretary may prescribe) after any
reportable event, the responsible party shall provide
written notice of such event to the Secretary in
accordance with paragraph (2).
(2) Contents of notice.--The notice required by
paragraph (1) shall contain such information as the
Secretary may prescribe, including--
(A) the amount of money or other property (if
any) transferred to the trust in connection
with the reportable event, and
(B) the identity of the trust and of each
trustee and beneficiary (or class of
beneficiaries) of the trust.
(3) Reportable event.--For purposes of this
subsection--
(A) In general.--The term `reportable event'
means--
(i) the creation of any foreign trust
by a United States person,
(ii) the transfer of any money or
property (directly or indirectly) to a
foreign trust by a United States
person, including a transfer by reason
of death, and
(iii) the death of a citizen or
resident of the United States if--
(I) the decedent was treated
as the owner of any portion of
a foreign trust under the rules
of subpart E of part I of
subchapter J of chapter 1, or
(II) any portion of a foreign
trust was included in the gross
estate of the decedent.
(B) Exceptions.--
(i) Fair market value sales.--
Subparagraph (A)(ii) shall not apply to
any transfer of property to a trust in
exchange for consideration of at least
the fair market value of the
transferred property. For purposes of
the preceding sentence, consideration
other than cash shall be taken into
account at its fair market value and
the rules of section 679(a)(3) shall
apply.
(ii) Deferred compensation and
charitable trusts.--Subparagraph (A)
shall not apply with respect to a trust
which is--
(I) described in section
402(b), 404(a)(4), or 404A, or
(II) determined by the
Secretary to be described in
section 501(c)(3).
(4) Responsible party.--For purposes of this
subsection, the term ``responsible party'' means--
(A) the grantor in the case of the creation
of an inter vivos trust,
(B) the transferor in the case of a
reportable event described in paragraph
(3)(A)(ii) other than a transfer by reason of
death, and
(C) the executor of the decedent's estate in
any other case.
(b) United States Grantor of Foreign Trust.--
(1) In general.--If, at any time during any taxable
year of a United States person, such person is treated
as the owner of any portion of a foreign trust under
the rules of subpart E of part I of subchapter J of
chapter 1, such person shall be responsible to ensure
that--
(A) such trust makes a return for such year
which sets forth a full and complete accounting
of all trust activities and operations for the
year, the name of the United States agent for
such trust, and such other information as the
Secretary may prescribe, and
(B) such trust furnishes such information as
the Secretary may prescribe to each United
States person (i) who is treated as the owner
of any portion of such trust or (ii) who
receives (directly or indirectly) any
distribution from the trust.
(2) Trusts not having united states agent.--
(A) In general.--If the rules of this
paragraph apply to any foreign trust, the
determination of amounts required to be taken
into account with respect to such trust by a
United States person under the rules of subpart
E of part I of subchapter J of chapter 1 shall
be determined by the Secretary.
(B) United states agent required.--The rules
of this paragraph shall apply to any foreign
trust to which paragraph (1) applies unless
such trust agrees (in such manner, subject to
such conditions, and at such time as the
Secretary shall prescribe) to authorize a
United States person to act as such trust's
limited agent solely for purposes of applying
sections 7602, 7603, and 7604 with respect to--
(i) any request by the Secretary to
examine records or produce testimony
related to the proper treatment of
amounts required to be taken into
account under the rules referred to in
subparagraph (A), or
(ii) any summons by the Secretary for
such records or testimony.
The appearance of persons or production of
records by reason of a United States person
being such an agent shall not subject such
persons or records to legal process for any
purpose other than determining the correct
treatment under this title of the amounts
required to be taken into account under the
rules referred to in subparagraph (A). A
foreign trust which appoints an agent described
in this subparagraph shall not be considered to
have an office or a permanent establishment in
the United States, or to be engaged in a trade
or business in the United States, solely
because of the activities of such agent
pursuant to this subsection.
(C) Other rules to apply.--Rules similar to
the rules of paragraphs (2) and (4) of section
6038A(e) shall apply for purposes of this
paragraph.
(c) Reporting by United States Beneficiaries of Foreign
Trusts.--
(1) In general.--If any United States person receives
(directly or indirectly) during any taxable year of
such person any distribution from a foreign trust, such
person shall make a return with respect to such trust
for such year which includes--
(A) the name of such trust,
(B) the aggregate amount of the distributions
so received from such trust during such taxable
year, and
(C) such other information as the Secretary
may prescribe.
(2) Inclusion in income if records not provided.--
(A) In general.--If adequate records are not
provided to the Secretary to determine the
proper treatment of any distribution from a
foreign trust, such distribution shall be
treated as an accumulation distribution
includible in the gross income of the
distributee under chapter 1. To the extent
provided in regulations, the preceding sentence
shall not apply if the foreign trust elects to
be subject to rules similar to the rules of
subsection (b)(2)(B).
(B) Application of accumulation distribution
rules.--For purposes of applying section 668 in
a case to which subparagraph (A) applies, the
applicable number of years for purposes of
section 668(a) shall be \1/2\ of the number of
years the trust has been in existence.
(d) Special Rules.--
(1) Determination of whether united states person
makes transfer or receives distribution.--For purposes
of this section, in determining whether a United States
person makes a transfer to, or receives a distribution
from, a foreign trust, the fact that a portion of such
trust is treated as owned by another person under the
rules of subpart E of part I of subchapter J of chapter
1 shall be disregarded.
(2) Domestic trusts with foreign activities.--To the
extent provided in regulations, a trust which is a
United States person shall be treated as a foreign
trust for purposes of this section and section 6677 if
such trust has substantial activities, or holds
substantial property, outside the United States.
(3) Time and manner of filing information.--Any
notice or return required under this section shall be
made at such time and in such manner as the Secretary
shall prescribe.
(4) Modification of return requirements.--The
Secretary is authorized to suspend or modify any
requirement of this section if the Secretary determines
that the United States has no significant tax interest
in obtaining the required information.
* * * * * * *
CHAPTER 68--ADDITIONS TO THE TAX, ADDITIONAL AMOUNTS, AND ASSESSABLE
PENALTIES
* * * * * * *
Subchapter B--Assessable Penalties
PART I--GENERAL PROVISIONS
* * * * * * *
SEC. 6671. RULES FOR APPLICATION OF ASSESSABLE PENALTIES.
* * * * * * *
[SEC. 6677. FAILURE TO FILE INFORMATION RETURNS WITH RESPECT TO CERTAIN
FOREIGN TRUSTS.]
SEC. 6677. FAILURE TO FILE INFORMATION WITH RESPECT TO CERTAIN FOREIGN
TRUSTS.
* * * * * * *
[SEC. 6677. FAILURE TO FILE INFORMATION RETURNS WITH RESPECT TO CERTAIN
FOREIGN TRUSTS.
[(a) Civil Penalty.--In addition to any criminal penalty
provided by law, any person required to file a return under
section 6048 who fails to file such return at the time provided
in such section, or who files a return which does not show the
information required pursuant to such section, shall pay a
penalty equal to 5 percent of the amount transferred to a trust
(or, in the case of a failure with respect to section 6048(c),
equal to 5 percent of the value of the corpus of the trust at
the close of the taxable year), but not more than $1,000,
unless it is shown that such failure is due to reasonable
cause.
[(b) Deficiency Procedures Not To Apply.--Subchapter B of
chapter 63 (relating to deficiency procedures for income,
estate, gift, and certain excise taxes) shall not apply in
respect of the assessment or collection of any penalty imposed
by subsection (a).]
SEC. 6677. FAILURE TO FILE INFORMATION WITH RESPECT TO CERTAIN FOREIGN
TRUSTS.
(a) Civil Penalty.--In addition to any criminal penalty
provided by law, if any notice or return required to be filed
by section 6048--
(1) is not filed on or before the time provided in
such section, or
(2) does not include all the information required
pursuant to such section or includes incorrect
information,
the person required to file such notice or return shall pay a
penalty equal to 35 percent of the gross reportable amount. If
any failure described in the preceding sentence continues for
more than 90 days after the day on which the Secretary mails
notice of such failure to the person required to pay such
penalty, such person shall pay a penalty (in addition to the
amount determined under the preceding sentence) of $10,000 for
each 30-day period (or fraction thereof) during which such
failure continues after the expiration of such 90-day period.
In no event shall the penalty under this subsection with
respect to any failure exceed the gross reportable amount.
(b) Special Rules for Returns Under Section 6048(b).--In the
case of a return required under section 6048(b)--
(1) the United States person referred to in such
section shall be liable for the penalty imposed by
subsection (a), and
(2) subsection (a) shall be applied by substituting
``5 percent'' for ``35 percent''.
(c) Gross Reportable Amount.--For purposes of subsection (a),
the term ``gross reportable amount'' means--
(1) the gross value of the property involved in the
event (determined as of the date of the event) in the
case of a failure relating to section 6048(a),
(2) the gross value of the portion of the trust's
assets at the close of the year treated as owned by the
United States person in the case of a failure relating
to section 6048(b)(1), and
(3) the gross amount of the distributions in the case
of a failure relating to section 6048(c).
(d) Reasonable Cause Exception.--No penalty shall be imposed
by this section on any failure which is shown to be due to
reasonable cause and not due to willful neglect. The fact that
a foreign jurisdiction would impose a civil or criminal penalty
on the taxpayer (or any other person) for disclosing the
required information is not reasonable cause.
(e) Deficiency Procedures Not To Apply.--Subchapter B of
chapter 63 (relating to deficiency procedures for income,
estate, gift, and certain excise taxes) shall not apply in
respect of the assessment or collection of any penalty imposed
by subsection (a).
* * * * * * *
PART II--FAILURE TO FILE CERTAIN INFORMATION RETURNS OF STATEMENTS
* * * * * * *
SEC. 6724. WAIVER; DEFINITIONS AND SPECIAL RULES.
* * * * * * *
(d) Definitions.--For purposes of this part--
* * * * * * *
(2) Payee statement.--The term ``payee statement''
means any statement required to be furnished under--
* * * * * * *
(S) section 6053(b) or (c) (relating to
reports of tips), [or]
(T) section 4093(c)(4)(B) (relating to
certain purchasers of diesel and aviation
fuels)[.] , or
(U) section 6048(b)(1)(B) (relating to
foreign trust reporting requirements).
* * * * * * *
SUBTITLE F--PROCEDURE AND ADMINISTRATION
CHAPTER 79--DEFINITIONS
SEC. 7701. DEFINITIONS.
(a) When used in this title, where not otherwise distinctly
expressed or manifestly incompatible with the intent thereof--
* * * * * * *
(30) United states person.--The term ``United States
person'' means--
(A) a citizen or resident of the United
States,
(B) a domestic partnership,
(C) a domestic corporation, [and]
[(D) any estate or trust (other than a
foreign estate or foreign trust, within the
meaning of section 7701(a)(31)).]
(D) any estate (other than a foreign estate,
within the meaning of paragraph (31)), and
(E) any trust if--
(i) a court within the United States
is able to exercise primary supervision
over the administration of the trust,
and
(ii) one or more United States
fiduciaries have the authority to
control all substantial decisions of
the trust.
[(31) Foreign estate or trust.--The terms ``foreign
estate'' and ``foreign trust'' mean an estate or trust,
as the case may be, the income of which, from sources
without the United States which is not effectively
connected with the conduct of a trade or business
within the United States, is not includible in gross
income under subtitle A.]
(31) Foreign estate or trust.--
(A) Foreign estate.--The term ``foreign
estate'' means an estate the income of which,
from sources without the United States which is
not effectively connected with the conduct of a
trade or business within the United States, is
not includible in gross income under subtitle
A.
(B) Foreign trust.--The term ``foreign
trust'' means any trust other than a trust
described in subparagraph (E) of paragraph
(30).
* * * * * * *
CHAPTER 80--GENERAL RULES
* * * * * * *
Subchapter C--Provisions Affecting More Than One Subtitle
SEC. 7872. TREATMENT OF LOANS WITH BELOW-MARKET INTEREST RATES.
* * * * * * *
(f) Other Definitions and Special Rules.--For purposes of
this section--
* * * * * * *
(8) Loans to which section 483, 643(i), or 1274
applies. This section shall not apply to any loan to
which section 483, 643(i), or 1274 applies.
* * * * * * *
TARIFF ACT OF 1930
* * * * * * *
TITLE IV--ADMINISTRATIVE PROVISIONS
* * * * * * *
PART II--REPORT, ENTRY, AND UNLADING OF VESSELS AND VEHICLES
* * * * * * *
SEC. 466. EQUIPMENT AND REPAIRS OF VESSELS.
* * * * * * *
(i) The duty imposed by subsection (a) shall not apply with
respect to activities occurring in a Shipbuilding Agreement
Party, as defined in section 861(22), with respect to--
(1) self-propelled seagoing vessels of 100 gross tons
or more that are used for transportation of goods or
persons or for performance of a specialized service
(including, but not limited to, ice breakers and
dredges), and
(2) tugs of 365 kilowatts or more.
A vessel shall be considered ``self-propelled seagoing'' if its
permanent propulsion and steering provide it all the
characteristics of self-navigability in the high seas.
* * * * * * *
SEC. 468. SHIPBUILDING AGREEMENT COUNTERMEASURES.
(a) In General.--Notwithstanding any other provision of law,
upon receiving from the Secretary of Commerce a list of vessels
subject to countermeasures under section 807, the Customs
Service shall deny any request for a permit to lade or unlade
passengers, merchandise, or baggage from or onto those vessels
so listed.
(b) Exceptions.--Subsection (a) shall not be applied to deny
a permit for the following:
(1) To unlade any United States citizen or permanent
legal resident alien from a vessel included in the list
described in subsection (a), or to unlade any refugee
or any alien who would otherwise be eligible to apply
for asylum and withholding of deportation under the
Immigration and Nationality Act.
(2) To lade or unlade any crewmember of such vessel.
(3) To lade or unlade coal and other fuel supplies
(for the operation of the listed vessel), ships'
stores, sea stores, and the legitimate equipment of
such vessel.
(4) To lade or unlade supplies for the use or sale on
such vessel.
(5) To lade or unlade such other merchandise,
baggage, or passenger as the Customs Service shall
determine necessary to protect the immediate health,
safety, or welfare of a human being.
(c) Correction of Ministerial or Clerical Errors.--
(1) Petition for correction.--If the master of any
vessel whose application for a permit to lade or unlade
has been denied under this section believes that such
denial resulted from a ministerial or clerical error,
not amounting to a mistake of law, committed by any
Customs officer, the master may petition the Customs
Service for correction of such error, as provided by
regulation.
(2) Inapplicability of sections 514 and 520.--
Notwithstanding paragraph (1), imposition of
countermeasures under this section shall not be deemed
an exclusion or other protestable decision under
section 514, and shall not be subject to correction
under section 520.
(3) Petitions seeking administrative review.--Any
petition seeking administrative review of any matter
regarding the Secretary of Commerce's decision to list
a vessel under section 807 must be brought under that
section.
(d) Penalties.--In addition to any other provision of law,
the Customs Service may impose a civil penalty of not to exceed
$10,000 against the master of any vessel--
(1) who submits false information in requesting any
permit to lade or unlade; or
(2) who attempts to, or actually does, lade or unlade
in violation of any denial of such permit under this
section.
* * * * * * *
PART III--ASCERTAINMENT, COLLECTION, AND RECOVERY OF DUTIES
* * * * * * *
SEC. 516A. JUDICIAL REVIEW IN COUNTERVAILING DUTY AND ANTIDUMPING DUTY
PROCEEDINGS.
* * * * * * *
SEC. 516B. JUDICIAL REVIEW IN INJURIOUS PRICING AND COUNTERMEASURE
PROCEEDINGS.
(a) Review of Determination.--
(1) In general.--Within 30 days after the date of
publication in the Federal Register of--
(A)(i) a determination by the administering
authority under section 802(c) not to initiate
an investigation,
(ii) a negative determination by the
Commission under section 803(a) as to whether
there is or has been reasonable indication of
material injury, threat of material injury, or
material retardation,
(iii) a determination by the administering
authority to suspend or revoke an injurious
pricing order under section 806 (d) or (e),
(iv) a determination by the administering
authority under section 807(c),
(v) a determination by the administering
authority in a review under section 807(d),
(vi) a determination by the administering
authority concerning whether to extend the
scope or duration of a countermeasure order
under section 807(e)(3)(B)(ii),
(vii) a determination by the administering
authority to amend a countermeasure order under
section 807(e)(6),
(viii) a determination by the administering
authority in a review under section 807(g),
(ix) a determination by the administering
authority under section 807(i) to terminate
proceedings, or to amend or revoke a
countermeasure order,
(x) a determination by the administering
authority under section 845(b), with respect to
a matter described in paragraph (1)(D) of that
section, or
(B)(i) an injurious pricing order based on a
determination described in subparagraph (A) of
paragraph (2),
(ii) notice of a determination described in
subparagraph (B) of paragraph (2),
(iii) notice of implementation of a
determination described in subparagraph (C) of
paragraph (2), or
(iv) notice of revocation of an injurious
pricing order based on a determination
described in subparagraph (D) of paragraph (2),
an interested party who is a party to the proceeding in
connection with which the matter arises may commence an
action in the United States Court of International
Trade by filing concurrently a summons and complaint,
each with the content and in the form, manner, and
style prescribed by the rules of that court, contesting
any factual findings or legal conclusions upon which
the determination is based.
(2) Reviewable determinations.--The determinations
referred to in paragraph (1)(B) are--
(A) a final affirmative determination by the
administering authority or by the Commission
under section 805, including any negative part
of such a determination (other than a part
referred to in subparagraph (B)),
(B) a final negative determination by the
administering authority or the Commission under
section 805,
(C) a determination by the administering
authority under section 845(b), with respect to
a matter described in paragraph (1)(A) of that
section, and
(D) a determination by the Commission under
section 845(a) that results in the revocation
of an injurious pricing order.
(3) Exception.--Notwithstanding the 30-day limitation
imposed by paragraph (1) with regard to an order
described in paragraph (1)(B)(i), a final affirmative
determination by the administering authority under
section 805 may be contested by commencing an action,
in accordance with the provisions of paragraph (1),
within 30 days after the date of publication in the
Federal Register of a final negative determination by
the Commission under section 805.
(4) Procedures and fees.--The procedures and fees set
forth in chapter 169 of title 28, United States Code,
apply to an action under this section.
(b) Standards of Review.--
(1) Remedy.--The court shall hold unlawful any
determination, finding, or conclusion found--
(A) in an action brought under subparagraph
(A) of subsection (a)(1), to be arbitrary,
capricious, an abuse of discretion, or
otherwise not in accordance with law, or
(B) in an action brought under subparagraph
(B) of subsection (a)(1), to be unsupported by
substantial evidence on the record, or
otherwise not in accordance with law.
(2) Record for review.--
(A) In general.--For purposes of this
subsection, the record, unless otherwise
stipulated by the parties, shall consist of--
(i) a copy of all information
presented to or obtained by the
administering authority or the
Commission during the course of the
administrative proceeding, including
all governmental memoranda pertaining
to the case and the record of ex parte
meetings required to be kept by section
843(a)(2); and
(ii) a copy of the determination, all
transcripts or records of conferences
or hearings, and all notices published
in the Federal Register.
(B) Confidential or privileged material.--The
confidential or privileged status accorded to
any documents, comments, or information shall
be preserved in any action under this section.
Notwithstanding the preceding sentence, the
court may examine, in camera, the confidential
or privileged material, and may disclose such
material under such terms and conditions as it
may order.
(c) Standing.--Any interested party who was a party to the
proceeding under title VIII shall have the right to appear and
be heard as a party in interest before the United States Court
of International Trade in an action under this section. The
party filing the action shall notify all such interested
parties of the filing of an action under this section, in the
form, manner, and within the time prescribed by rules of the
court.
(d) Definitions.--For purposes of this section:
(1) Administering authority.--The term
``administering authority'' has the meaning given that
term in section 861(1).
(2) Commission.--The term ``Commission'' means the
United States International Trade Commission.
(3) Interested party.--The term ``interested party''
means any person described in section 861(17).
* * * * * * *
TITLE VIII--INJURIOUS PRICING AND COUNTERMEASURES RELATING TO
SHIPBUILDING
Subtitle A--Imposition of Injurious Pricing Charge and Countermeasures
Sec. 801. Injurious pricing charge.
Sec. 802. Procedures for initiating an injurious pricing investigation.
Sec. 803. Preliminary determinations.
Sec. 804. Termination or suspension of investigation.
Sec. 805. Final determinations.
Sec. 806. Imposition and collection of injurious pricing charge.
Sec. 807. Imposition of countermeasures.
Sec. 808. Injurious pricing petitions by third countries.
Subtitle B--Special Rules
Sec. 821. Export price.
Sec. 822. Normal value.
Sec. 823. Currency conversion.
Subtitle C--Procedures
Sec. 841. Hearings.
Sec. 842. Determinations on the basis of the facts available.
Sec. 843. Access to information.
Sec. 844. Conduct of investigations.
Sec. 845. Administrative action following shipbuilding agreement panel
reports.
Subtitle D--Definitions
Sec. 861. Definitions.
Subtitle A--Imposition of Injurious Pricing Charge and Countermeasures
SEC. 801. INJURIOUS PRICING CHARGE.
(a) Basis for Charge.--If--
(1) the administering authority determines that a
foreign vessel has been sold directly or indirectly to
one or more United States buyers at less than its fair
value, and
(2) the Commission determines that--
(A) an industry in the United States--
(i) is or has been materially
injured, or
(ii) is threatened with material
injury, or
(B) the establishment of an industry in the
United States is or has been materially
retarded,
by reason of the sale of such vessel, then there shall
be imposed upon the foreign producer of the subject
vessel an injurious pricing charge, in an amount equal
to the amount by which the normal value exceeds the
export price for the vessel. For purposes of this
subsection and section 805(b)(1), a reference to the
sale of a foreign vessel includes the creation or
transfer of an ownership interest in the vessel, except
for an ownership interest created or acquired solely
for the purpose of providing security for a normal
commercial loan.
(b) Foreign Vessels Not Merchandise.--No foreign vessel may
be considered to be, or to be part of, a class or kind of
merchandise for purposes of subtitle B of title VII.
SEC. 802. PROCEDURES FOR INITIATING AN INJURIOUS PRICING INVESTIGATION.
(a) Initiation by Administering Authority.--
(1) General rule.--Except in the case in which
subsection (d)(6) applies, an injurious pricing
investigation shall be initiated whenever the
administering authority determines, from information
available to it, that a formal investigation is
warranted into the question of whether the elements
necessary for the imposition of a charge under section
801(a) exist, and whether a producer described in
section 861(17)(C) would meet the criteria of
subsection (b)(1)(B) for a petitioner.
(2) Time for initiation by administering authority.--
An investigation may only be initiated under paragraph
(1) within 6 months after the time the administering
authority first knew or should have known of the sale
of the vessel. Any period during which an investigation
is initiated and pending as described in subsection
(d)(6)(A) shall not be included in calculating that 6-
month period.
(b) Initiation by Petition.--
(1) Petition requirements.--
(A) In general.--Except in a case in which
subsection (d)(6) applies, an injurious pricing
proceeding shall be initiated whenever an
interested party, as defined in subparagraph
(C), (D), (E), or (F) of section 861(17), files
a petition with the administering authority, on
behalf of an industry, which alleges the
elements necessary for the imposition of an
injurious pricing charge under section 801(a)
and the elements required under subparagraph
(B), (C), (D), or (E) of this paragraph, and
which is accompanied by information reasonably
available to the petitioner supporting those
allegations and identifying the transaction
concerned.
(B) Petitioners described in section
861(17)(c).--
(i) In general.--If the petitioner is
a producer described in section
861(17)(C), and--
(I) if the vessel was sold
through a broad multiple bid,
the petition shall include
information indicating that the
petitioner was invited to
tender a bid on the contract at
issue, the petitioner actually
did so, and the bid of the
petitioner substantially met
the delivery date and technical
requirements of the bid,
(II) if the vessel was sold
through any bidding process
other than a broad multiple bid
and the petitioner was invited
to tender a bid on the contract
at issue, the petition shall
include information indicating
that the petitioner actually
did so and the bid of the
petitioner substantially met
the delivery date and technical
requirements of the bid, or
(III) except in a case in
which the vessel was sold
through a broad multiple bid,
if there is no invitation to
tender a bid, the petition
shall include information
indicating that the petitioner
was capable of building the
vessel concerned and, if the
petitioner knew or should have
known of the proposed purchase,
it made demonstrable efforts to
conclude a sale with the United
States buyer consistent with
the delivery date and technical
requirements of the buyer.
(ii) Rebuttable presumption regarding
knowledge of proposed purchase.--For
purposes of clause (i)(III), there is a
rebuttable presumption that the
petitioner knew or should have known of
the proposed purchase if it is
demonstrated that--
(I) the majority of the
producers in the industry have
made efforts with the United
States buyer to conclude a sale
of the subject vessel, or
(II) general information on
the sale was available from
brokers, financiers,
classification societies,
charterers, trade associations,
or other entities normally
involved in shipbuilding
transactions with whom the
petitioner had regular contacts
or dealings.
(C) Petitioners described in section
861(17)(d).--If the petitioner is an interested
party described in section 861(17)(D), the
petition shall include information indicating
that members of the union or group of workers
described in that section are employed by a
producer that meets the requirements of
subparagraph (B) of this paragraph.
(D) Petitioners described in section
861(17)(e).--If the petitioner is an interested
party described in section 861(17)(E), the
petition shall include information indicating
that a member of the association described in
that section is a producer that meets the
requirements of subparagraph (B) of this
paragraph.
(E) Petitioners described in section
861(17)(f).--If the petitioner is an interested
party described in section 861(17)(F), the
petition shall include information indicating
that a member of the association described in
that section meets the requirements of
subparagraph (C) or (D) of this paragraph.
(F) Amendments.--The petition may be amended
at such time, and upon such conditions, as the
administering authority and the Commission may
permit.
(2) Simultaneous filing with commission.--The
petitioner shall file a copy of the petition with the
Commission on the same day as it is filed with the
administering authority.
(3) Deadline for filing petition.--
(A) Deadline.--(i) A petitioner to which
paragraph (1)(B) (i) (I) or (II) applies shall
file the petition no later than the earlier
of--
(I) 6 months after the time that the
petitioner first knew or should have
known of the sale of the subject
vessel, or
(II) 6 months after delivery of the
subject vessel.
(ii) A petitioner to which paragraph
(1)(B)(i)(III) applies shall--
(I) file the petition no later than
the earlier of 9 months after the time
that the petitioner first knew or
should have known of the sale of the
subject vessel, or 6 months after
delivery of the subject vessel, and
(II) submit to the administering
authority a notice of intent to file a
petition no later than 6 months after
the time that the petitioner first knew
or should have known of the sale
(unless the petition itself is filed
within that 6-month period).
(B) Presumption of knowledge.--For purposes
of this paragraph, if the existence of the
sale, together with general information
concerning the vessel, is published in the
international trade press, there is a
rebuttable presumption that the petitioner knew
or should have known of the sale of the vessel
from the date of that publication.
(c) Actions Before Initiating Investigations.--
(1) Notification of governments.--Before initiating
an investigation under either subsection (a) or (b),
the administering authority shall notify the government
of the exporting country of the investigation. In the
case of the initiation of an investigation under
subsection (b), such notification shall include a
public version of the petition.
(2) Acceptance of communications.--The administering
authority shall not accept any unsolicited oral or
written communication from any person other than an
interested party described in section 861(17) (C), (D),
(E), or (F) before the administering authority makes
its decision whether to initiate an investigation
pursuant to a petition, except for inquiries regarding
the status of the administering authority's
consideration of the petition or a request for
consultation by the government of the exporting
country.
(3) Nondisclosure of certain information.--The
administering authority and the Commission shall not
disclose information with regard to any draft petition
submitted for review and comment before it is filed
under subsection (b)(1).
(d) Petition Determination.--
(1) Time for initial determination.--
(A) In general.--Within 45 days after the
date on which a petition is filed under
subsection (b), the administering authority
shall, after examining, on the basis of sources
readily available to the administering
authority, the accuracy and adequacy of the
evidence provided in the petition, determine
whether the petition--
(i) alleges the elements necessary
for the imposition of an injurious
pricing charge under section 801(a) and
the elements required under subsection
(b)(1)(B), (C), (D), or (E), and
contains information reasonably
available to the petitioner supporting
the allegations; and
(ii) determine if the petition has
been filed by or on behalf of the
industry.
(B) Calculation of 45-day period.--Any period
in which paragraph (6)(A) applies shall not be
included in calculating the 45-day period
described in subparagraph (A).
(2) Affirmative determinations.--If the
determinations under clauses (i) and (ii) of paragraph
(1)(A) are affirmative, the administering authority
shall initiate an investigation to determine whether
the vessel was sold at less than fair value, unless
paragraph (6) applies.
(3) Negative determinations.--If--
(A) the determination under clause (i) or
(ii) of paragraph (1)(A) is negative, or
(B) paragraph (6)(B) applies,
the administering authority shall dismiss the petition,
terminate the proceeding, and notify the petitioner in
writing of the reasons for the determination.
(4) Determination of industry support.--
(A) General rule.--For purposes of this
subsection, the administering authority shall
determine that the petition has been filed by
or on behalf of the domestic industry, if--
(i) the domestic producers or workers
who support the petition collectively
account for at least 25 percent of the
total capacity of domestic producers
capable of producing a like vessel, and
(ii) the domestic producers or
workers who support the petition
collectively account for more than 50
percent of the total capacity to
produce a like vessel of that portion
of the domestic industry expressing
support for or opposition to the
petition.
(B) Certain positions disregarded.--In
determining industry support under subparagraph
(A), the administering authority shall
disregard the position of domestic producers
who oppose the petition, if such producers are
related to the foreign producer or United
States buyer of the subject vessel, or the
domestic producer is itself the United States
buyer, unless such domestic producers
demonstrate that their interests as domestic
producers would be adversely affected by the
imposition of an injurious pricing charge.
(C) Polling the industry.--If the petition
does not establish support of domestic
producers or workers accounting for more than
50 percent of the total capacity to produce a
like vessel--
(i) the administering authority shall
poll the industry or rely on other
information in order to determine if
there is support for the petition as
required by subparagraph (A), or
(ii) if there is a large number of
producers in the industry, the
administering authority may determine
industry support for the petition by
using any statistically valid sampling
method to poll the industry.
(D) Comments by interested parties.--Before
the administering authority makes a
determination with respect to initiating an
investigation, any person who would qualify as
an interested party under section 861(17) if an
investigation were initiated, may submit
comments or information on the issue of
industry support. After the administering
authority makes a determination with respect to
initiating an investigation, the determination
regarding industry support shall not be
reconsidered.
(5) Definition of domestic producers or workers.--For
purposes of this subsection, the term `domestic
producers or workers' means interested parties as
defined in section 861(17)(C), (D), (E), or (F).
(6) Proceedings by wto members.--The administering
authority shall not initiate an investigation under
this section if, with respect to the vessel sale at
issue, an antidumping proceeding conducted by a WTO
member who is not a Shipbuilding Agreement Party--
(A) has been initiated and has been pending
for not more than one year, or
(B) has been completed and resulted in the
imposition of antidumping measures or a
negative determination with respect to whether
the sale was at less than fair value or with
respect to injury.
(e) Notification to Commission of Determination.--The
administering authority shall--
(1) notify the Commission immediately of any
determination it makes under subsection (a) or (d), and
(2) if the determination is affirmative, make
available to the Commission such information as it may
have relating to the matter under investigation, under
such procedures as the administering authority and the
Commission may establish to prevent disclosure, other
than with the consent of the party providing it or
under protective order, of any information to which
confidential treatment has been given by the
administering authority.
SEC. 803. PRELIMINARY DETERMINATIONS.
(a) Determination by Commission of Reasonable Indication of
Injury.--
(1) General rule.--Except in the case of a petition
dismissed by the administering authority under section
802(d)(3), the Commission, within the time specified in
paragraph (2), shall determine, based on the
information available to it at the time of the
determination, whether there is a reasonable indication
that--
(A) an industry in the United States--
(i) is or has been materially
injured, or
(ii) is threatened with material
injury, or
(B) the establishment of an industry in the
United States is or has been materially
retarded,
by reason of the sale of the subject vessel. If the
Commission makes a negative determination under this
paragraph, the investigation shall be terminated.
(2) Time for commission determination.--The
Commission shall make the determination described in
paragraph (1) within 90 days after the date on which
the petition is filed or, in the case of an
investigation initiated under section 802(a), within 90
days after the date on which the Commission receives
notice from the administering authority that the
investigation has been initiated under such section.
(b) Preliminary Determination by Administering Authority.--
(1) Period of injurious pricing investigation.--
(A) In general.--The administering authority
shall make a determination, based upon the
information available to it at the time of the
determination, of whether there is a reasonable
basis to believe or suspect that the subject
vessel was sold at less than fair value.
(B) Cost data used for normal value.--If cost
data is required to determine normal value on
the basis of a sale of a foreign like vessel
that has not been delivered on or before the
date on which the administering authority
initiates the investigation, the administering
authority shall make its determination within
160 days after the date of delivery of the
foreign like vessel.
(C) Normal value based on constructed
value.--If normal value is to be determined on
the basis of constructed value, the
administering authority shall make its
determination within 160 days after the date of
delivery of the subject vessel.
(D) Other cases.--In cases in which
subparagraph (B) or (C) does not apply, the
administering authority shall make its
determination within 160 days after the date on
which the administering authority initiates the
investigation under section 802.
(E) Affirmative determination by commission
required.--In no event shall the administering
authority make its determination before an
affirmative determination is made by the
Commission under subsection (a).
(2) De minimis injurious pricing margin.--In making a
determination under this subsection, the administering
authority shall disregard any injurious pricing margin
that is de minimis. For purposes of the preceding
sentence, an injurious pricing margin is de minimis if
the administering authority determines that the
injurious pricing margin is less than 2 percent of the
export price.
(c) Extension of Period in Extraordinarily Complicated Cases
or for Good Cause.--
(1) In general.--If--
(A) the administering authority concludes
that the parties concerned are cooperating and
determines that--
(i) the case is extraordinarily
complicated by reason of--
(I) the novelty of the issues
presented, or
(II) the nature and extent of
the information required, and
(ii) additional time is necessary to
make the preliminary determination, or
(B) a party to the investigation requests an
extension and demonstrates good cause for the
extension,
then the administering authority may postpone the time
for making its preliminary determination.
(2) Length of postponement.--The preliminary
determination may be postponed under paragraph (1)(A)
or (B) until not later than the 190th day after--
(A) the date of delivery of the foreign like
vessel, if subsection (b)(1)(B) applies,
(B) the date of delivery of the subject
vessel, if subsection (b)(1)(C) applies, or
(C) the date on which the administering
authority initiates an investigation under
section 802, in a case in which subsection
(b)(1)(D) applies.
(3) Notice of postponement.--The administering
authority shall notify the parties to the
investigation, not later than 20 days before the date
on which the preliminary determination would otherwise
be required under subsection (b)(1), if it intends to
postpone making the preliminary determination under
paragraph (1). The notification shall include an
explanation of the reasons for the postponement, and
notice of the postponement shall be published in the
Federal Register.
(d) Effect of Determination by the Administering Authority.--
If the preliminary determination of the administering authority
under subsection (b) is affirmative, the administering
authority shall--
(1) determine an estimated injurious pricing margin,
and
(2) make available to the Commission all information
upon which its determination was based and which the
Commission considers relevant to its injury
determination, under such procedures as the
administering authority and the Commission may
establish to prevent disclosure, other than with the
consent of the party providing it or under protective
order, of any information to which confidential
treatment has been given by the administering
authority.
(e) Notice of Determination.--Whenever the Commission or the
administering authority makes a determination under this
section, the Commission or the administering authority, as the
case may be, shall notify the petitioner, and other parties to
the investigation, and the Commission or the administering
authority (whichever is appropriate) of its determination. The
administering authority shall include with such notification
the facts and conclusions on which its determination is based.
Not later than 5 days after the date on which the determination
is required to be made under subsection (a)(2), the Commission
shall transmit to the administering authority the facts and
conclusions on which its determination is based.
SEC. 804. TERMINATION OR SUSPENSION OF INVESTIGATION.
(a) Termination of Investigation Upon Withdrawal of
Petition.--
(1) In general.--Except as provided in paragraph (2),
an investigation under this subtitle may be terminated
by either the administering authority or the
Commission, after notice to all parties to the
investigation, upon withdrawal of the petition by the
petitioner.
(2) Limitation on termination by commission.--The
Commission may not terminate an investigation under
paragraph (1) before a preliminary determination is
made by the administering authority under section
803(b).
(b) Termination of Investigations Initiated by Administering
Authority.--The administering authority may terminate any
investigation initiated by the administering authority under
section 802(a) after providing notice of such termination to
all parties to the investigation.
(c) Alternate Equivalent Remedy.--The criteria set forth in
subparagraphs (A) through (D) of section 806(e)(1) shall apply
to any agreement that forms the basis for termination of an
investigation under subsection (a) or (b).
(d) Proceedings by WTO Members.--
(1) Suspension of investigation.--The administering
authority and the Commission shall suspend an
investigation under this section if a WTO member that
is not a Shipbuilding Agreement Party initiates an
antidumping proceeding described in section 861(30)(A)
with respect to the sale of the subject vessel.
(2) Termination of investigation.--If an antidumping
proceeding described in paragraph (1) is concluded by--
(A) the imposition of antidumping measures,
or
(B) a negative determination with respect to
whether the sale is at less than fair value or
with respect to injury,
the administering authority and the Commission shall
terminate the investigation under this section.
(3) Continuation of investigation.--(A) If such a
proceeding--
(i) is concluded by a result other than a
result described in paragraph (2), or
(ii) is not concluded within one year from
the date of the initiation of the proceeding,
then the administering authority and the Commission
shall terminate the suspension and continue the
investigation. The period in which the investigation
was suspended shall not be included in calculating
deadlines applicable with respect to the investigation.
(B) Notwithstanding subparagraph (A)(ii), if the
proceeding is concluded by a result described in
paragraph (2)(A), the administering authority and the
Commission shall terminate the investigation under this
section.
SEC. 805. FINAL DETERMINATIONS.
(a) Determinations by Administering Authority.--
(1) In general.--Within 75 days after the date of its
preliminary determination under section 803(b), the
administering authority shall make a final
determination of whether the vessel which is the
subject of the investigation has been sold in the
United States at less than its fair value.
(2) Extension of period for determination.--
(A) General rule.--The administering
authority may postpone making the final
determination under paragraph (1) until not
later than 290 days after--
(i) the date of delivery of the
foreign like vessel, in an
investigation to which section
803(b)(1)(B) applies,
(ii) the date of delivery of the
subject vessel, in an investigation to
which section 803(b)(1)(C) applies, or
(iii) the date on which the
administering authority initiates the
investigation under section 802, in an
investigation to which section
803(b)(1)(D) applies.
(B) Request required.--The administering
authority may apply subparagraph (A) if a
request in writing is made by--
(i) the producer of the subject
vessel, in a proceeding in which the
preliminary determination by the
administering authority under section
803(b) was affirmative, or
(ii) the petitioner, in a proceeding
in which the preliminary determination
by the administering authority under
section 803(b) was negative.
(3) De minimis injurious pricing margin.--In making a
determination under this subsection, the administering
authority shall disregard any injurious pricing margin
that is de minimis as defined in section 803(b)(2).
(b) Final Determination by Commission.--
(1) In general.--The Commission shall make a final
determination of whether--
(A) an industry in the United States--
(i) is or has been materially
injured, or
(ii) is threatened with material
injury, or
(B) the establishment of an industry in the
United States is or has been materially
retarded,
by reason of the sale of the vessel with respect to
which the administering authority has made an
affirmative determination under subsection (a)(1).
(2) Period for injury determination following
affirmative preliminary determination by administering
authority.--If the preliminary determination by the
administering authority under section 803(b) is
affirmative, then the Commission shall make the
determination required by paragraph (1) before the
later of--
(A) the 120th day after the day on which the
administering authority makes its affirmative
preliminary determination under section 803(b),
or
(B) the 45th day after the day on which the
administering authority makes its affirmative
final determination under subsection (a).
(3) Period for injury determination following
negative preliminary determination by administering
authority.--If the preliminary determination by the
administering authority under section 803(b) is
negative, and its final determination under subsection
(a) is affirmative, then the final determination by the
Commission under this subsection shall be made within
75 days after the date of that affirmative final
determination.
(c) Effect of Final Determinations.--
(1) Effect of affirmative determination by the
administering authority.--If the determination of the
administering authority under subsection (a) is
affirmative, then the administering authority shall--
(A) make available to the Commission all
information upon which such determination was
based and which the Commission considers
relevant to its determination, under such
procedures as the administering authority and
the Commission may establish to prevent
disclosure, other than with the consent of the
party providing it or under protective order,
of any information as to which confidential
treatment has been given by the administering
authority, and
(B) calculate an injurious pricing charge in
an amount equal to the amount by which the
normal value exceeds the export price of the
subject vessel.
(2) Issuance of order; effect of negative
determination.--If the determinations of the
administering authority and the Commission under
subsections (a)(1) and (b)(1) are affirmative, then the
administering authority shall issue an injurious
pricing order under section 806. If either of such
determinations is negative, the investigation shall be
terminated upon the publication of notice of that
negative determination.
(d) Publication of Notice of Determinations.--Whenever the
administering authority or the Commission makes a determination
under this section, it shall notify the petitioner, other
parties to the investigation, and the other agency of its
determination and of the facts and conclusions of law upon
which the determination is based, and it shall publish notice
of its determination in the Federal Register.
(e) Correction of Ministerial Errors.--The administering
authority shall establish procedures for the correction of
ministerial errors in final determinations within a reasonable
time after the determinations are issued under this section.
Such procedures shall ensure opportunity for interested parties
to present their views regarding any such errors. As used in
this subsection, the term ``ministerial error'' includes errors
in addition, subtraction, or other arithmetic function,
clerical errors resulting from inaccurate copying, duplication,
or the like, and any other type of unintentional error which
the administering authority considers ministerial.
SEC. 806. IMPOSITION AND COLLECTION OF INJURIOUS PRICING CHARGE.
(a) In General.--Within 7 days after being notified by the
Commission of an affirmative determination under section
805(b), the administering authority shall publish an order
imposing an injurious pricing charge on the foreign producer of
the subject vessel which--
(1) directs the foreign producer of the subject
vessel to pay to the Secretary of the Treasury, or the
designee of the Secretary, within 180 days from the
date of publication of the order, an injurious pricing
charge in an amount equal to the amount by which the
normal value exceeds the export price of the subject
vessel,
(2) includes the identity and location of the foreign
producer and a description of the subject vessel, in
such detail as the administering authority deems
necessary, and
(3) informs the foreign producer that--
(A) failure to pay the injurious pricing
charge in a timely fashion may result in the
imposition of countermeasures with respect to
that producer under section 807,
(B) payment made after the deadline described
in paragraph (1) shall be subject to interest
charges at the Commercial Interest Reference
Rate (CIRR), and
(C) the foreign producer may request an
extension of the due date for payment under
subsection (b).
(b) Extension of Due Date for Payment in Extraordinary
Circumstances.--
(1) Extension.--Upon request, the administering
authority may amend the order under subsection (a) to
set a due date for payment or payments later than the
date that is 180 days from the date of publication of
the order, if the administering authority determines
that full payment in 180 days would render the producer
insolvent or would be incompatible with a judicially
supervised reorganization. When an extended payment
schedule provides for a series of partial payments, the
administering authority shall specify the circumstances
under which default on one or more payments will result
in the imposition of countermeasures.
(2) Interest charges.--If a request is granted under
paragraph (1), payments made after the date that is 180
days from the publication of the order shall be subject
to interest charges at the CIRR.
(c) Notification of Order.--The administering authority shall
deliver a copy of the order requesting payment to the foreign
producer of the subject vessel and to an appropriate
representative of the government of the exporting country.
(d) Revocation of Order.--The administering authority--
(1) may revoke an injurious pricing order if the
administering authority determines that producers
accounting for substantially all of the capacity to
produce a domestic like vessel have expressed a lack of
interest in the order, and
(2) shall revoke an injurious pricing order--
(A) if the sale of the vessel that was the
subject of the injurious pricing determination
is voided,
(B) if the injurious pricing charge is paid
in full, including any interest accrued for
late payment,
(C) upon full implementation of an
alternative equivalent remedy described in
subsection (e), or
(D) if, with respect to the vessel sale that
was at issue in the investigation that resulted
in the injurious pricing order, an antidumping
proceeding conducted by a WTO member who is not
a Shipbuilding Agreement Party has been
completed and resulted in the imposition of
antidumping measures.
(e) Alternative Equivalent Remedy.--
(1) Agreement for alternate remedy.--The
administering authority may suspend an injurious
pricing order if the administering authority enters
into an agreement with the foreign producer subject to
the order on an alternative equivalent remedy, that the
administering authority determines--
(A) is at least as effective a remedy as the
injurious pricing charge,
(B) is in the public interest,
(C) can be effectively monitored and
enforced, and
(D) is otherwise consistent with the domestic
law and international obligations of the United
States.
(2) Prior consultations and submission of comments.--
Before entering into an agreement under paragraph (1),
the administering authority shall consult with the
industry, and provide for the submission of comments by
interested parties, with respect to the agreement.
(3) Material violations of agreement.--If the
injurious pricing order has been suspended under
paragraph (1), and the administering authority
determines that the foreign producer concerned has
materially violated the terms of the agreement under
paragraph (1), the administering authority shall
terminate the suspension.
SEC. 807. IMPOSITION OF COUNTERMEASURES.
(a) General Rule.--
(1) Issuance of order imposing countermeasures.--
Unless an injurious pricing order is revoked or
suspended under section 806 (d) or (e), the
administering authority shall issue an order imposing
countermeasures.
(2) Contents of order.--The countermeasure order
shall--
(A) state that, as provided in section 468, a
permit to lade or unlade passengers or
merchandise may not be issued with respect to
vessels contracted to be built by the foreign
producer of the vessel with respect to which an
injurious pricing order was issued under
section 806, and
(B) specify the scope and duration of the
prohibition on the issuance of a permit to lade
or unlade passengers or merchandise.
(b) Notice of Intent To Impose Countermeasures.--
(1) General rule.--The administering authority shall
issue a notice of intent to impose countermeasures not
later than 30 days before the expiration of the time
for payment specified in the injurious pricing order
(or extended payment provided for under section
806(b)), and shall publish the notice in the Federal
Register within 7 days after issuing the notice.
(2) Elements of the notice of intent.--The notice of
intent shall contain at least the following elements:
(A) Scope.--A permit to lade or unlade
passengers or merchandise may not be issued
with respect to any vessel--
(i) built by the foreign producer
subject to the proposed
countermeasures, and
(ii) with respect to which the
material terms of sale are established
within a period of 4 consecutive years
beginning on the date that is 30 days
after publication in the Federal
Register of the notice of intent
described in paragraph (1).
(B) Duration.--For each vessel described in
subparagraph (A), a permit to lade or unlade
passengers or merchandise may not be issued for
a period of 4 years after the date of delivery
of the vessel.
(c) Determination To Impose Countermeasures; Order.--
(1) General rule.--The administering authority shall,
within the time specified in paragraph (2), issue a
determination and order imposing countermeasures.
(2) Time for determination.--The determination shall
be issued within 90 days after the date on which the
notice of intent to impose countermeasures under
subsection (b) is published in the Federal Register.
The administering authority shall publish the
determination, and the order described in paragraph
(4), in the Federal Register within 7 days after
issuing the final determination, and shall provide a
copy of the determination and order to the Customs
Service.
(3) Content of the determination.--In the
determination imposing countermeasures, the
administering authority shall determine whether, in
light of all of the circumstances, an interested party
has demonstrated that the scope or duration of the
countermeasures described in subsection (b)(2) should
be narrower or shorter than the scope or duration set
forth in the notice of intent to impose
countermeasures.
(4) Order.--At the same time it issues its
determination, the administering authority shall issue
an order imposing countermeasures, consistent with its
determination under paragraph (1).
(d) Administrative Review of Determination To Impose
Countermeasures.--
(1) Request for review.--Each year, in the
anniversary month of the issuance of the order imposing
countermeasures under subsection (c), the administering
authority shall publish in the Federal Register a
notice providing that interested parties may request--
(A) a review of the scope or duration of the
countermeasures determined under subsection
(c)(3), and
(B) a hearing in connection with such a
review.
(2) Review.--If a proper request has been received
under paragraph (1), the administering authority
shall--
(A) publish notice of initiation of a review
in the Federal Register not later than 15 days
after the end of the anniversary month of the
issuance of the order imposing countermeasures,
and
(B) review and determine whether the
requesting party has demonstrated that the
scope or duration of the countermeasures is
excessive in light of all of the circumstances.
(3) Time for review.--The administering authority
shall make its determination under paragraph (2)(B)
within 90 days after the date on which the notice of
initiation of the review is published. If the
determination under paragraph (2)(B) is affirmative,
the administering authority shall amend the order
accordingly. The administering authority shall promptly
publish the determination and any amendment to the
order in the Federal Register, and shall provide a copy
of any amended order to the Customs Service. In
extraordinary circumstances, the administering
authority may extend the time for its determination
under paragraph (2)(B) to not later than 150 days after
the date on which the notice of initiation of the
review is published.
(e) Extension of Countermeasures.--
(1) Request for extension.--Within the time described
in paragraph (2), an interested party may file with the
administering authority a request that the scope or
duration of countermeasures be extended.
(2) Deadline for request for extension.--
(A) Request for extension beyond 4 years.--If
the request seeks an extension that would cause
the scope or duration of countermeasures to
exceed 4 years, including any prior extensions,
the request for extension under paragraph (1)
shall be filed not earlier than the date that
is 15 months, and not later than the date that
is 12 months, before the date that marks the
end of the period that specifies the vessels
that fall within the scope of the order by
virtue of the establishment of material terms
of sale within that period.
(B) Other requests.--If the request seeks an
extension under paragraph (1) other than one
described in subparagraph (A), the request
shall be filed not earlier than the date that
is 6 months, and not later than a date that is
3 months, before the date that marks the end of
the period referred to in subparagraph (A).
(3) Determination.--
(A) Notice of request for extension.--If a
proper request has been received under
paragraph (1), the administering authority
shall publish notice of initiation of an
extension proceeding in the Federal Register
not later than 15 days after the applicable
deadline in paragraph (2) for requesting the
extension.
(B) Procedures.--
(i) Requests for extension beyond 4
years.--If paragraph (2)(A) applies to
the request, the administering
authority shall consult with the Trade
Representative under paragraph (4).
(ii) Other requests.--If paragraph
(2)(B) applies to the request, the
administering authority shall
determine, within 90 days after the
date on which the notice of initiation
of the proceeding is published, whether
the requesting party has demonstrated
that the scope or duration of the
countermeasures is inadequate in light
of all of the circumstances. If the
administering authority determines that
an extension is warranted, it shall
amend the countermeasure order
accordingly. The administering
authority shall promptly publish the
determination and any amendment to the
order in the Federal Register, and
shall provide a copy of any amended
order to the Customs Service.
(4) Consultation with trade representative.--If
paragraph (3)(B)(i) applies, the administering
authority shall consult with the Trade Representative
concerning whether it would be appropriate to request
establishment of a dispute settlement panel under the
Shipbuilding Agreement for the purpose of seeking
authorization to extend the scope or duration of
countermeasures for a period in excess of 4 years.
(5) Decision not to request panel.--If, based on
consultations under paragraph (4), the Trade
Representative decides not to request establishment of
a panel, the Trade Representative shall inform the
party requesting the extension of the countermeasures
of the reasons for its decision in writing. The
decision shall not be subject to judicial review.
(6) Panel proceedings.--If, based on consultations
under paragraph (4), the Trade Representative requests
the establishment of a panel under the Shipbuilding
Agreement to authorize an extension of the period of
countermeasures, and the panel authorizes such an
extension, the administering authority shall promptly
amend the countermeasure order. The administering
authority shall publish notice of the amendment in the
Federal Register.
(f) List of Vessels Subject to Countermeasures.--
(1) General rule.--At least once during each 12-month
period beginning on the anniversary date of a
determination to impose countermeasures under this
section, the administering authority shall publish in
the Federal Register a list of all delivered vessels
subject to countermeasures under the determination.
(2) Content of list.--The list under paragraph (1)
shall include the following information for each
vessel, to the extent the information is available:
(A) The name and general description of the
vessel.
(B) The vessel identification number.
(C) The shipyard where the vessel was
constructed.
(D) The last-known registry of the vessel.
(E) The name and address of the last-known
owner of the vessel.
(F) The delivery date of the vessel.
(G) The remaining duration of countermeasures
on the vessel.
(H) Any other identifying information
available.
(3) Amendment of list.---The administering authority
may amend the list from time to time to reflect new
information that comes to its attention and shall
publish any amendments in the Federal Register.
(4) Service of list and amendments.--
(A) Service of list.--The administering
authority shall serve a copy of the list
described in paragraph (1) on--
(i) the petitioner under section
802(b),
(ii) the United States Customs
Service,
(iii) the Secretariat of the
Organization for Economic Cooperation
and Development,
(iv) the owners of vessels on the
list,
(v) the shipyards on the list, and
(vi) the government of the country in
which a shipyard on the list is
located.
(B) Service of amendments.--The administering
authority shall serve a copy of any amendments
to the list under paragraph (3) or subsection
(g)(3) on--
(i) the parties listed in clauses
(i), (ii), and (iii) of subparagraph
(A), and
(ii) if the amendment affects their
interests, the parties listed in
clauses (iv), (v), and (vi) of
subparagraph (A).
(g) Administrative Review of List of Vessels Subject to
Countermeasures.--
(1) Request for review.--
(A) In general.--An interested party may
request in writing a review of the list
described in subsection (f)(1), including any
amendments thereto, to determine whether--
(i) a vessel included in the list
does not fall within the scope of the
applicable countermeasure order and
should be deleted, or
(ii) a vessel not included in the
list falls within the scope of the
applicable countermeasure order and
should be added.
(B) Time for making request.--Any request
seeking a determination described in
subparagraph (A)(i) shall be made within 90
days after the date of publication of the
applicable list.
(2) Review.--If a proper request for review has been
received, the administering authority shall--
(A) publish notice of initiation of a review
in the Federal Register--
(i) not later than 15 days after the
request is received, or
(ii) if the request seeks a
determination described in paragraph
(1)(A)(i), not later than 15 days after
the deadline described in paragraph
(1)(B), and
(B) review and determine whether the
requesting party has demonstrated that--
(i) a vessel included in the list
does not qualify for such inclusion, or
(ii) a vessel not included in the
list qualifies for inclusion.
(3) Time for determination.--The administering
authority shall make its determination under paragraph
(2)(B) within 90 days after the date on which the
notice of initiation of such review is published. If
the administering authority determines that a vessel
should be added or deleted from the list, the
administering authority shall amend the list
accordingly. The administering authority shall promptly
publish in the Federal Register the determination and
any such amendment to the list.
(h) Expiration of Countermeasures.--Upon expiration of a
countermeasure order imposed under this section, the
administering authority shall promptly publish a notice of the
expiration in the Federal Register.
(i) Suspension or Termination of Proceedings or
Countermeasures; Temporary Reduction of Countermeasures.--
(1) If injurious pricing order revoked or
suspended.--If an injurious pricing order has been
revoked or suspended under section 806(d) or (e), the
administering authority shall, as appropriate, suspend
or terminate proceedings under this section with
respect to that order, or suspend or revoke a
countermeasure order issued with respect to that
injurious pricing order.
(2) If payment date amended.--
(A) Suspension or modification of deadline.--
Subject to subparagraph (C), if the payment
date under an injurious pricing order is
amended under section 845, the administering
authority shall, as appropriate, suspend
proceedings or modify deadlines under this
section, or suspend or amend a countermeasure
order issued with respect to that injurious
pricing order.
(B) Date for application of countermeasure.--
In taking action under subparagraph (A), the
administering authority shall ensure that
countermeasures are not applied before the date
that is 30 days after publication in the
Federal Register of the amended payment date.
(C) Reinstitution of proceedings.--If--
(i) a countermeasure order is issued
under subsection (c) before an
amendment is made under section 845 to
the payment date of the injurious
pricing order to which the
countermeasure order applies, and
(ii) the administering authority
determines that the period of time
between the original payment date and
the amended payment date is significant
for purposes of determining the
appropriate scope or duration of
countermeasures,
the administering authority may, in lieu of
acting under subparagraph (A), reinstitute
proceedings under subsection (c) for purposes
of issuing a new determination under that
subsection.
(j) Comment and Hearing.--In the course of any proceeding
under subsection (c), (d), (e), or (g), the administering
authority--
(1) shall solicit comments from interested parties,
and
(2)(A) in a proceeding under subsection (c), (d), or
(e), upon the request of an interested party, shall
hold a hearing in accordance with section 841(b) in
connection with that proceeding, or
(B) in a proceeding under subsection (g), upon the
request of an interested party, may hold a hearing in
accordance with section 841(b) in connection with that
proceeding.
SEC. 808. INJURIOUS PRICING PETITIONS BY THIRD COUNTRIES.
(a) Filing of Petition.--The government of a Shipbuilding
Agreement Party may file with the Trade Representative a
petition requesting that an investigation be conducted to
determine if--
(1) a vessel from another Shipbuilding Agreement
Party has been sold directly or indirectly to one or
more United States buyers at less than fair value, and
(2) an industry, in the petitioning country,
producing or capable of producing a like vessel is
materially injured by reason of such sale.
(b) Initiation.--The Trade Representative, after consultation
with the administering authority and the Commission and
obtaining the approval of the Parties Group under the
Shipbuilding Agreement, shall determine whether to initiate an
investigation described in subsection (a).
(c) Determinations.--Upon initiation of an investigation
under subsection (a), the Trade Representative shall request
the following determinations be made in accordance with
substantive and procedural requirements specified by the Trade
Representative, notwithstanding any other provision of this
title:
(1) Sale at less than fair value.--The administering
authority shall determine whether the subject vessel
has been sold at less than fair value.
(2) Injury to industry.--The Commission shall
determine whether an industry in the petitioning
country is or has been materially injured by reason of
the sale of the subject vessel in the United States.
(d) Public Comment.--An opportunity for public comment shall
be provided, as appropriate--
(1) by the Trade Representative, in making the
determinations required by subsection (b), and
(2) by the administering authority and the
Commission, in making the determinations required by
subsection (c).
(e) Issuance of Order.--If the administering authority makes
an affirmative determination under paragraph (1) of subsection
(c), and the Commission makes an affirmative determination
under paragraph (2) of subsection (c), the administering
authority shall--
(1) order an injurious pricing charge in accordance
with section 806, and
(2) make such determinations and take such other
actions as are required by sections 806 and 807, as if
affirmative determinations had been made under
subsections (a) and (b) of section 805.
(f) Reviews of Determinations.--For purposes of review under
section 516B, if an order is issued under subsection (e)--
(1) the final determinations of the administering
authority and the Commission under subsection (c) shall
be treated as final determinations made under section
805, and
(2) determinations of the administering authority
under subsection (e)(2) shall be treated as
determinations made under section 806 or 807, as the
case may be.
(g) Access to Information.--Section 843 shall apply to
investigations under this section, to the extent specified by
the Trade Representative, after consultation with the
administering authority and the Commission.
Subtitle B--Special Rules
SEC. 821. EXPORT PRICE.
(a) Export Price.--For purposes of this title, the term
``export price'' means the price at which the subject vessel is
first sold (or agreed to be sold) by or for the account of the
foreign producer of the subject vessel to an unaffiliated
United States buyer. The term ``sold (or agreed to be sold) by
or for the account of the foreign producer'' includes any
transfer of an ownership interest, including by way of lease or
long-term bareboat charter, in conjunction with the original
transfer from the producer, either directly or indirectly, to a
United States buyer.
(b) Adjustments to Export Price.--The price used to establish
export price shall be--
(1) increased by the amount of any import duties
imposed by the country of exportation which have been
rebated, or which have not been collected, by reason of
the exportation of the subject vessel, and
(2) reduced by--
(A) the amount, if any, included in such
price, attributable to any additional costs,
charges, or expenses which are incident to
bringing the subject vessel from the shipyard
in the exporting country to the place of
delivery,
(B) the amount, if included in such price, of
any export tax, duty, or other charge imposed
by the exporting country on the exportation of
the subject vessel, and
(C) all other expenses incidental to placing
the vessel in condition for delivery to the
buyer.
SEC. 822. NORMAL VALUE.
(a) Determination.--In determining under this title whether a
subject vessel has been sold at less than fair value, a fair
comparison shall be made between the export price and normal
value of the subject vessel. In order to achieve a fair
comparison with the export price, normal value shall be
determined as follows:
(1) Determination of normal value.--
(A) In general.--The normal value of the
subject vessel shall be the price described in
subparagraph (B), at a time reasonably
corresponding to the time of the sale used to
determine the export price under section
821(a).
(B) Price.--The price referred to in
subparagraph (A) is--
(i) the price at which a foreign like
vessel is first sold in the exporting
country, in the ordinary course of
trade and, to the extent practicable,
at the same level of trade, or
(ii) in a case to which subparagraph
(C) applies, the price at which a
foreign like vessel is so sold for
consumption in a country other than the
exporting country or the United States,
if--
(I) such price is
representative, and
(II) the administering
authority does not determine
that the particular market
situation in such other country
prevents a proper comparison
with the export price.
(C) Third country sales.--This subparagraph
applies when--
(i) a foreign like vessel is not sold
in the exporting country as described
in subparagraph (B)(i), or
(ii) the particular market situation
in the exporting country does not
permit a proper comparison with the
export price.
(D) Contemporaneous sale.--For purposes of
subparagraph (A), `a time reasonably
corresponding to the time of the sale' means
within 3 months before or after the sale of the
subject vessel or, in the absence of such
sales, such longer period as the administering
authority determines would be appropriate.
(2) Fictitious markets.--No pretended sale, and no
sale intended to establish a fictitious market, shall
be taken into account in determining normal value.
(3) Use of constructed value.--If the administering
authority determines that the normal value of the
subject vessel cannot be determined under paragraph
(1)(B) or (1)(C), then the normal value of the subject
vessel shall be the constructed value of that vessel,
as determined under subsection (e).
(4) Indirect sales.--If a foreign like vessel is sold
through an affiliated party, the price at which the
foreign like vessel is sold by such affiliated party
may be used in determining normal value.
(5) Adjustments.--The price described in paragraph
(1)(B) shall be--
(A) reduced by--
(i) the amount, if any, included in
the price described in paragraph
(1)(B), attributable to any costs,
charges, and expenses incident to
bringing the foreign like vessel from
the shipyard to the place of delivery
to the purchaser,
(ii) the amount of any taxes imposed
directly upon the foreign like vessel
or components thereof which have been
rebated, or which have not been
collected, on the subject vessel, but
only to the extent that such taxes are
added to or included in the price of
the foreign like vessel, and
(iii) the amount of all other
expenses incidental to placing the
foreign like vessel in condition for
delivery to the buyer, and
(B) increased or decreased by the amount of
any difference (or lack thereof) between the
export price and the price described in
paragraph (1)(B) (other than a difference for
which allowance is otherwise provided under
this section) that is established to the
satisfaction of the administering authority to
be wholly or partly due to--
(i) physical differences between the
subject vessel and the vessel used in
determining normal value, or
(ii) other differences in the
circumstances of sale.
(6) Adjustments for level of trade.--The price
described in paragraph (1)(B) shall also be increased
or decreased to make due allowance for any difference
(or lack thereof) between the export price and the
price described in paragraph (1)(B) (other than a
difference for which allowance is otherwise made under
this section) that is shown to be wholly or partly due
to a difference in level of trade between the export
price and normal value, if the difference in level of
trade--
(A) involves the performance of different
selling activities, and
(B) is demonstrated to affect price
comparability, based on a pattern of consistent
price differences between sales at different
levels of trade in the country in which normal
value is determined.
In a case described in the preceding sentence, the
amount of the adjustment shall be based on the price
differences between the two levels of trade in the
country in which normal value is determined.
(7) Adjustments to constructed value.--Constructed
value as determined under subsection (e) may be
adjusted, as appropriate, pursuant to this subsection.
(b) Sales at Less Than Cost of Production.--
(1) Determination; sales disregarded.--Whenever the
administering authority has reasonable grounds to
believe or suspect that the sale of the foreign like
vessel under consideration for the determination of
normal value has been made at a price which represents
less than the cost of production of the foreign like
vessel, the administering authority shall determine
whether, in fact, such sale was made at less than the
cost of production. If the administering authority
determines that the sale was made at less than the cost
of production and was not at a price which permits
recovery of all costs within 5 years, such sale may be
disregarded in the determination of normal value.
Whenever such a sale is disregarded, normal value shall
be based on another sale of a foreign like vessel in
the ordinary course of trade. If no sales made in the
ordinary course of trade remain, the normal value shall
be based on the constructed value of the subject
vessel.
(2) Definitions and special rules.--For purposes of
this subsection:
(A) Reasonable grounds to believe or
suspect.--There are reasonable grounds to
believe or suspect that the sale of a foreign
like vessel was made at a price that is less
than the cost of production of the vessel, if
an interested party described in subparagraph
(C), (D), (E), or (F) of section 861(17)
provides information, based upon observed
prices or constructed prices or costs, that the
sale of the foreign like vessel under
consideration for the determination of normal
value has been made at a price which represents
less than the cost of production of the vessel.
(B) Recovery of costs.--If the price is below
the cost of production at the time of sale but
is above the weighted average cost of
production for the period of investigation,
such price shall be considered to provide for
recovery of costs within 5 years.
(3) Calculation of cost of production.--For purposes
of this section, the cost of production shall be an
amount equal to the sum of--
(A) the cost of materials and of fabrication
or other processing of any kind employed in
producing the foreign like vessel, during a
period which would ordinarily permit the
production of that vessel in the ordinary
course of business, and
(B) an amount for selling, general, and
administrative expenses based on actual data
pertaining to the production and sale of the
foreign like vessel by the producer in
question.
For purposes of subparagraph (A), if the normal value
is based on the price of the foreign like vessel sold
in a country other than the exporting country, the cost
of materials shall be determined without regard to any
internal tax in the exporting country imposed on such
materials or on their disposition which are remitted or
refunded upon exportation.
(c) Nonmarket Economy Countries.--
(1) In general.--If--
(A) the subject vessel is produced in a
nonmarket economy country, and
(B) the administering authority finds that
available information does not permit the
normal value of the subject vessel to be
determined under subsection (a),
the administering authority shall determine the normal
value of the subject vessel on the basis of the value
of the factors of production utilized in producing the
vessel and to which shall be added an amount for
general expenses and profit plus the cost of expenses
incidental to placing the vessel in a condition for
delivery to the buyer. Except as provided in paragraph
(2), the valuation of the factors of production shall
be based on the best available information regarding
the values of such factors in a market economy country
or countries considered to be appropriate by the
administering authority.
(2) Exception.--If the administering authority finds
that the available information is inadequate for
purposes of determining the normal value of the subject
vessel under paragraph (1), the administering authority
shall determine the normal value on the basis of the
price at which a vessel that is--
(A) comparable to the subject vessel, and
(B) produced in one or more market economy
countries that are at a level of economic
development comparable to that of the nonmarket
economy country,
is sold in other countries, including the United
States.
(3) Factors of production.--For purposes of paragraph
(1), the factors of production utilized in producing
the vessel include, but are not limited to--
(A) hours of labor required,
(B) quantities of raw materials employed,
(C) amounts of energy and other utilities
consumed, and
(D) representative capital cost, including
depreciation.
(4) Valuation of factors of production.--The
administering authority, in valuing factors of
production under paragraph (1), shall utilize, to the
extent possible, the prices or costs of factors of
production in one or more market economy countries that
are--
(A) at a level of economic development
comparable to that of the nonmarket economy
country, and
(B) significant producers of comparable
vessels.
(d) Special Rule for Certain Multinational Corporations.--
Whenever, in the course of an investigation under this title,
the administering authority determines that--
(1) the subject vessel was produced in facilities
which are owned or controlled, directly or indirectly,
by a person, firm, or corporation which also owns or
controls, directly or indirectly, other facilities for
the production of a foreign like vessel which are
located in another country or countries,
(2) subsection (a)(1)(C) applies, and
(3) the normal value of a foreign like vessel
produced in one or more of the facilities outside the
exporting country is higher than the normal value of
the foreign like vessel produced in the facilities
located in the exporting country,
the administering authority shall determine the normal value of
the subject vessel by reference to the normal value at which a
foreign like vessel is sold from one or more facilities outside
the exporting country. The administering authority, in making
any determination under this subsection, shall make adjustments
for the difference between the costs of production (including
taxes, labor, materials, and overhead) of the foreign like
vessel produced in facilities outside the exporting country and
costs of production of the foreign like vessel produced in
facilities in the exporting country, if such differences are
demonstrated to its satisfaction.
(e) Constructed Value.--
(1) In general.--For purposes of this title, the
constructed value of a subject vessel shall be an
amount equal to the sum of--
(A) the cost of materials and fabrication or
other processing of any kind employed in
producing the subject vessel, during a period
which would ordinarily permit the production of
the vessel in the ordinary course of business,
and
(B)(i) the actual amounts incurred and
realized by the foreign producer of the subject
vessel for selling, general, and administrative
expenses, and for profits, in connection with
the production and sale of a foreign like
vessel, in the ordinary course of trade, in the
domestic market of the country of origin of the
subject vessel, or
(ii) if actual data are not available with
respect to the amounts described in clause (i),
then--
(I) the actual amounts incurred and
realized by the foreign producer of the
subject vessel for selling, general,
and administrative expenses, and for
profits, in connection with the
production and sale of the same general
category of vessel in the domestic
market of the country of origin of the
subject vessel,
(II) the weighted average of the
actual amounts incurred and realized by
producers in the country of origin of
the subject vessel (other than the
producer of the subject vessel) for
selling, general, and administrative
expenses, and for profits, in
connection with the production and sale
of a foreign like vessel, in the
ordinary course of trade, in the
domestic market, or
(III) if data are not available under
subclause (I) or (II), the amounts
incurred and realized for selling,
general, and administrative expenses,
and for profits, based on any other
reasonable method, except that the
amount allowed for profit may not
exceed the amount normally realized by
foreign producers (other than the
producer of the subject vessel) in
connection with the sale of vessels in
the same general category of vessel as
the subject vessel in the domestic
market of the country of origin of the
subject vessel.
For purposes of this paragraph, the profit shall be
based on the average profit realized over a reasonable
period of time before and after the sale of the subject
vessel and shall reflect a reasonable profit at the
time of such sale. For purposes of the preceding
sentence, a ``reasonable period of time'' shall not,
except where otherwise appropriate, exceed 6 months
before, or 6 months after, the sale of the subject
vessel. In calculating profit under this paragraph, any
distortion which would result in other than a profit
which is reasonable at the time of the sale shall be
eliminated.
(2) Costs and profits based on other reasonable
methods.--When costs and profits are determined under
paragraph (1)(B)(ii)(III), such determination shall,
except where otherwise appropriate, be based on
appropriate export sales by the producer of the subject
vessel or, absent such sales, to export sales by other
producers of a foreign like vessel or the same general
category of vessel as the subject vessel in the country
of origin of the subject vessel.
(3) Costs of materials.--For purposes of paragraph
(1)(A), the cost of materials shall be determined
without regard to any internal tax in the exporting
country imposed on such materials or their disposition
which are remitted or refunded upon exportation of the
subject vessel produced from such materials.
(f) Special Rules for Calculation of Cost of Production and
for Calculation of Constructed Value.--For purposes of
subsections (b) and (e)--
(1) Costs.--
(A) In general.--Costs shall normally be
calculated based on the records of the foreign
producer of the subject vessel, if such records
are kept in accordance with the generally
accepted accounting principles of the exporting
country and reasonably reflect the costs
associated with the production and sale of the
vessel. The administering authority shall
consider all available evidence on the proper
allocation of costs, including that which is
made available by the foreign producer on a
timely basis, if such allocations have been
historically used by the foreign producer, in
particular for establishing appropriate
amortization and depreciation periods, and
allowances for capital expenditures and other
development costs.
(B) Nonrecurring costs.--Costs shall be
adjusted appropriately for those nonrecurring
costs that benefit current or future
production, or both.
(C) Startup costs.--
(i) In general.--Costs shall be
adjusted appropriately for
circumstances in which costs incurred
during the time period covered by the
investigation are affected by startup
operations.
(ii) Startup operations.--Adjustments
shall be made for startup operations
only where--
(I) a producer is using new
production facilities or
producing a new type of vessel
that requires substantial
additional investment, and
(II) production levels are
limited by technical factors
associated with the initial
phase of commercial production.
For purposes of subclause (II), the
initial phase of commercial production
ends at the end of the startup period.
In determining whether commercial
production levels have been achieved,
the administering authority shall
consider factors unrelated to startup
operations that might affect the volume
of production processed, such as
demand, seasonality, or business
cycles.
(iii) Adjustment for startup
operations.--The adjustment for startup
operations shall be made by
substituting the unit production costs
incurred with respect to the vessel at
the end of the startup period for the
unit production costs incurred during
the startup period. If the startup
period extends beyond the period of the
investigation under this title, the
administering authority shall use the
most recent cost of production data
that it reasonably can obtain, analyze,
and verify without delaying the timely
completion of the investigation.
For purposes of this subparagraph, the startup
period ends at the point at which the level of
commercial production that is characteristic of
the vessel, the producer, or the industry is
achieved.
(D) Costs due to extraordinary circumstances
not included.--Costs shall not include actual
costs which are due to extraordinary
circumstances (including, but not limited to,
labor disputes, fire, and natural disasters)
and which are significantly over the cost
increase which the shipbuilder could have
reasonably anticipated and taken into account
at the time of sale.
(2) Transactions disregarded.--A transaction directly
or indirectly between affiliated persons may be
disregarded if, in the case of any element of value
required to be considered, the amount representing that
element does not fairly reflect the amount usually
reflected in sales of a like vessel in the market under
consideration. If a transaction is disregarded under
the preceding sentence and no other transactions are
available for consideration, the determination of the
amount shall be based on the information available as
to what the amount would have been if the transaction
had occurred between persons who are not affiliated.
(3) Major input rule.--If, in the case of a
transaction between affiliated persons involving the
production by one of such persons of a major input to
the subject vessel, the administering authority has
reasonable grounds to believe or suspect that an amount
represented as the value of such input is less than the
cost of production of such input, then the
administering authority may determine the value of the
major input on the basis of the information available
regarding such cost of production, if such cost is
greater than the amount that would be determined for
such input under paragraph (2).
SEC. 823. CURRENCY CONVERSION.
(a) In General.--In an injurious pricing proceeding under
this title, the administering authority shall convert foreign
currencies into United States dollars using the exchange rate
in effect on the date of sale of the subject vessel, except
that if it is established that a currency transaction on
forward markets is directly linked to a sale under
consideration, the exchange rate specified with respect to such
foreign currency in the forward sale agreement shall be used to
convert the foreign currency.
(b) Date of Sale.--For purposes of this section, `date of
sale' means the date of the contract of sale or, where
appropriate, the date on which the material terms of sale are
otherwise established. If the material terms of sale are
significantly changed after such date, the date of sale is the
date of such change. In the case of such a change in the date
of sale, the administering authority shall make appropriate
adjustments to take into account any unreasonable effect on the
injurious pricing margin due only to fluctuations in the
exchange rate between the original date of sale and the new
date of sale.
Subtitle C--Procedures
SEC. 841. HEARINGS.
(a) Upon Request.--The administering authority and the
Commission shall each hold a hearing in the course of an
investigation under this title, upon the request of any party
to the investigation, before making a final determination under
section 805.
(b) Procedures.--Any hearing required or permitted under this
title shall be conducted after notice published in the Federal
Register, and a transcript of the hearing shall be prepared and
made available to the public. The hearing shall not be subject
to the provisions of subchapter II of chapter 5 of title 5,
United States Code, or to section 702 of such title.
SEC. 842. DETERMINATIONS ON THE BASIS OF THE FACTS AVAILABLE.
(a) In General.--If--
(1) necessary information is not available on the
record, or
(2) an interested party or any other person--
(A) withholds information that has been
requested by the administering authority or the
Commission under this title,
(B) fails to provide such information by the
deadlines for the submission of the information
or in the form and manner requested, subject to
subsections (b)(1) and (d) of section 844,
(C) significantly impedes a proceeding under
this title, or
(D) provides such information but the
information cannot be verified as provided in
section 844(g),
the administering authority and the Commission shall,
subject to section 844(c), use the facts otherwise
available in reaching the applicable determination
under this title.
(b) Adverse Inferences.--If the administering authority or
the Commission (as the case may be) finds that an interested
party has failed to cooperate by not acting to the best of its
ability to comply with a request for information from the
administering authority or the Commission, the administering
authority or the Commission (as the case may be), in reaching
the applicable determination under this title, may use an
inference that is adverse to the interests of that party in
selecting from among the facts otherwise available. Such
adverse inference may include reliance on information derived
from--
(1) the petition, or
(2) any other information placed on the record.
(c) Corroboration of Secondary Information.--When the
administering authority or the Commission relies on secondary
information rather than on information obtained in the course
of an investigation under this title, the administering
authority and the Commission, as the case may be, shall, to the
extent practicable, corroborate that information from
independent sources that are reasonably at their disposal.
SEC. 843. ACCESS TO INFORMATION.
(a) Information Generally Made Available.--
(1) Progress of investigation reports.--The
administering authority and the Commission shall, from
time to time upon request, inform the parties to an
investigation under this title of the progress of that
investigation.
(2) Ex parte meetings.--The administering authority
and the Commission shall maintain a record of any ex
parte meeting between--
(A) interested parties or other persons
providing factual information in connection
with a proceeding under this title, and
(B) the person charged with making the
determination, or any person charged with
making a final recommendation to that person,
in connection with that proceeding,
if information relating to that proceeding was
presented or discussed at such meeting. The record of
such an ex parte meeting shall include the identity of
the persons present at the meeting, the date, time, and
place of the meeting, and a summary of the matters
discussed or submitted. The record of the ex parte
meeting shall be included in the record of the
proceeding.
(3) Summaries; non-proprietary submissions.--The
administering authority and the Commission shall
disclose--
(A) any proprietary information received in
the course of a proceeding under this title if
it is disclosed in a form which cannot be
associated with, or otherwise be used to
identify, operations of a particular person,
and
(B) any information submitted in connection
with a proceeding which is not designated as
proprietary by the person submitting it.
(4) Maintenance of public record.--The administering
authority and the Commission shall maintain and make
available for public inspection and copying a record of
all information which is obtained by the administering
authority or the Commission, as the case may be, in a
proceeding under this title to the extent that public
disclosure of the information is not prohibited under
this chapter or exempt from disclosure under section
552 of title 5, United States Code.
(b) Proprietary Information.--
(1) Proprietary status maintained.--
(A) In general.--Except as provided in
subsection (a)(4) and subsection (c),
information submitted to the administering
authority or the Commission which is designated
as proprietary by the person submitting the
information shall not be disclosed to any
person without the consent of the person
submitting the information, other than--
(i) to an officer or employee of the
administering authority or the
Commission who is directly concerned
with carrying out the investigation in
connection with which the information
is submitted or any other proceeding
under this title covering the same
subject vessel, or
(ii) to an officer or employee of the
United States Customs Service who is
directly involved in conducting an
investigation regarding fraud under
this title.
(B) Additional requirements.--The
administering authority and the Commission
shall require that information for which
proprietary treatment is requested be
accompanied by--
(i) either--
(I) a nonproprietary summary
in sufficient detail to permit
a reasonable understanding of
the substance of the
information submitted in
confidence, or
(II) a statement that the
information is not susceptible
to summary, accompanied by a
statement of the reasons in
support of the contention, and
(ii) either--
(I) a statement which permits
the administering authority or
the Commission to release under
administrative protective
order, in accordance with
subsection (c), the information
submitted in confidence, or
(II) a statement to the
administering authority or the
Commission that the business
proprietary information is of a
type that should not be
released under administrative
protective order.
(2) Unwarranted designation.--If the administering
authority or the Commission determines, on the basis of
the nature and extent of the information or its
availability from public sources, that designation of
any information as proprietary is unwarranted, then it
shall notify the person who submitted it and ask for an
explanation of the reasons for the designation. Unless
that person persuades the administering authority or
the Commission that the designation is warranted, or
withdraws the designation, the administering authority
or the Commission, as the case may be, shall return it
to the party submitting it. In a case in which the
administering authority or the Commission returns the
information to the person submitting it, the person may
thereafter submit other material concerning the subject
matter of the returned information if the submission is
made within the time otherwise provided for submitting
such material.
(c) Limited Disclosure of Certain Proprietary Information
Under Protective Order.--
(1) Disclosure by administering authority or
commission.--
(A) In general.--Upon receipt of an
application (before or after receipt of the
information requested) which describes in
general terms the information requested and
sets forth the reasons for the request, the
administering authority or the Commission shall
make all business proprietary information
presented to, or obtained by it, during a
proceeding under this title (except privileged
information, classified information, and
specific information of a type for which there
is a clear and compelling need to withhold from
disclosure) available to all interested parties
who are parties to the proceeding under a
protective order described in subparagraph (B),
regardless of when the information is submitted
during the proceeding. Customer names (other
than the name of the United States buyer of the
subject vessel) obtained during any
investigation which requires a determination
under section 805(b) may not be disclosed by
the administering authority under protective
order until either an order is published under
section 806(a) as a result of the investigation
or the investigation is suspended or
terminated. The Commission may delay disclosure
of customer names (other than the name of the
United States buyer of the subject vessel)
under protective order during any such
investigation until a reasonable time before
any hearing provided under section 841 is held.
(B) Protective order.--The protective order
under which information is made available shall
contain such requirements as the administering
authority or the Commission may determine by
regulation to be appropriate. The administering
authority and the Commission shall provide by
regulation for such sanctions as the
administering authority and the Commission
determine to be appropriate, including
disbarment from practice before the agency.
(C) Time limitations on determinations.--The
administering authority or the Commission, as
the case may be, shall determine whether to
make information available under this
paragraph--
(i) not later than 14 days (7 days if
the submission pertains to a proceeding
under section 803(a)) after the date on
which the information is submitted, or
(ii) if--
(I) the person that submitted
the information raises
objection to its release, or
(II) the information is
unusually voluminous or
complex,
not later than 30 days (10 days if the
submission pertains to a proceeding
under section 803(a)) after the date on
which the information is submitted.
(D) Availability after determination.--If the
determination under subparagraph (C) is
affirmative, then--
(i) the business proprietary
information submitted to the
administering authority or the
Commission on or before the date of the
determination shall be made available,
subject to the terms and conditions of
the protective order, on such date, and
(ii) the business proprietary
information submitted to the
administering authority or the
Commission after the date of the
determination shall be served as
required by subsection (d).
(E) Failure to disclose.--If a person
submitting information to the administering
authority refuses to disclose business
proprietary information which the administering
authority determines should be released under a
protective order described in subparagraph (B),
the administering authority shall return the
information, and any nonconfidential summary
thereof, to the person submitting the
information and summary and shall not consider
either.
(2) Disclosure under court order.--If the
administering authority or the Commission denies a
request for information under paragraph (1), then
application may be made to the United States Court of
International Trade for an order directing the
administering authority or the Commission, as the case
may be, to make the information available. After
notification of all parties to the investigation and
after an opportunity for a hearing on the record, the
court may issue an order, under such conditions as the
court deems appropriate, which shall not have the
effect of stopping or suspending the investigation,
directing the administering authority or the Commission
to make all or a portion of the requested information
described in the preceding sentence available under a
protective order and setting forth sanctions for
violation of such order if the court finds that, under
the standards applicable in proceedings of the court,
such an order is warranted, and that--
(A) the administering authority or the
Commission has denied access to the information
under subsection (b)(1),
(B) the person on whose behalf the
information is requested is an interested party
who is a party to the investigation in
connection with which the information was
obtained or developed, and
(C) the party which submitted the information
to which the request relates has been notified,
in advance of the hearing, of the request made
under this section and of its right to appear
and be heard.
(d) Service.--Any party submitting written information,
including business proprietary information, to the
administering authority or the Commission during a proceeding
shall, at the same time, serve the information upon all
interested parties who are parties to the proceeding, if the
information is covered by a protective order. The administering
authority or the Commission shall not accept any such
information that is not accompanied by a certificate of service
and a copy of the protective order version of the document
containing the information. Business proprietary information
shall only be served upon interested parties who are parties to
the proceeding that are subject to protective order, except
that a nonconfidential summary thereof shall be served upon all
other interested parties who are parties to the proceeding.
(e) Information Relating to Violations of Protective Orders
and Sanctions.--The administering authority and the Commission
may withhold from disclosure any correspondence, private
letters of reprimand, settlement agreements, and documents and
files compiled in relation to investigations and actions
involving a violation or possible violation of a protective
order issued under subsection (c), and such information shall
be treated as information described in section 552(b)(3) of
title 5, United States Code.
(f) Opportunity for Comment by Vessel Buyers.--The
administering authority and the Commission shall provide an
opportunity for buyers of subject vessels to submit relevant
information to the administering authority concerning a sale at
less than fair value or countermeasures, and to the Commission
concerning material injury by reason of the sale of a vessel at
less than fair value.
(g) Publication of Determinations; Requirements for Final
Determinations.--
(1) In general.--Whenever the administering authority
makes a determination under section 802 whether to
initiate an investigation, or the administering
authority or the Commission makes a preliminary
determination under section 803, a final determination
under section 805, a determination under subsection
(b), (c), (d), (e)(3)(B)(ii), (g), or (i) of section
807, or a determination to suspend an investigation
under this title, the administering authority or the
Commission, as the case may be, shall publish the facts
and conclusions supporting that determination, and
shall publish notice of that determination in the
Federal Register.
(2) Contents of notice or determination.--The notice
or determination published under paragraph (1) shall
include, to the extent applicable--
(A) in the case of a determination of the
administering authority--
(i) the names of the United States
buyer and the foreign producer, and the
country of origin of the subject
vessel,
(ii) a description sufficient to
identify the subject vessel (including
type, purpose, and size),
(iii) with respect to an injurious
pricing charge, the injurious pricing
margin established and a full
explanation of the methodology used in
establishing such margin,
(iv) with respect to countermeasures,
the scope and duration of
countermeasures and, if applicable, any
changes thereto, and
(v) the primary reasons for the
determination, and
(B) in the case of a determination of the
Commission--
(i) considerations relevant to the
determination of injury, and
(ii) the primary reasons for the
determination.
(3) Additional requirements for final
determinations.--In addition to the requirements set
forth in paragraph (2)--
(A) the administering authority shall include
in a final determination under section 805 or
807(c) an explanation of the basis for its
determination that addresses relevant
arguments, made by interested parties who are
parties to the investigation, concerning the
establishment of the injurious pricing charge
with respect to which the determination is
made, and
(B) the Commission shall include in a final
determination of injury an explanation of the
basis for its determination that addresses
relevant arguments that are made by interested
parties who are parties to the investigation
concerning the effects and impact on the
industry of the sale of the subject vessel.
SEC. 844. CONDUCT OF INVESTIGATIONS.
(a) Certification of Submissions.--Any person providing
factual information to the administering authority or the
Commission in connection with a proceeding under this title on
behalf of the petitioner or any other interested party shall
certify that such information is accurate and complete to the
best of that person's knowledge.
(b) Difficulties in Meeting Requirements.--
(1) Notification by interested party.--If an
interested party, promptly after receiving a request
from the administering authority or the Commission for
information, notifies the administering authority or
the Commission (as the case may be) that such party is
unable to submit the information requested in the
requested form and manner, together with a full
explanation and suggested alternative forms in which
such party is able to submit the information, the
administering authority or the Commission (as the case
may be) shall consider the ability of the interested
party to submit the information in the requested form
and manner and may modify such requirements to the
extent necessary to avoid imposing an unreasonable
burden on that party.
(2) Assistance to interested parties.--The
administering authority and the Commission shall take
into account any difficulties experienced by interested
parties, particularly small companies, in supplying
information requested by the administering authority or
the Commission in connection with investigations under
this title, and shall provide to such interested
parties any assistance that is practicable in supplying
such information.
(c) Deficient Submissions.--If the administering authority or
the Commission determines that a response to a request for
information under this title does not comply with the request,
the administering authority or the Commission (as the case may
be) shall promptly inform the person submitting the response of
the nature of the deficiency and shall, to the extent
practicable, provide that person with an opportunity to remedy
or explain the deficiency in light of the time limits
established for the completion of investigations or reviews
under this title. If that person submits further information in
response to such deficiency and either--
(1) the administering authority or the Commission (as
the case may be) finds that such response is not
satisfactory, or
(2) such response is not submitted within the
applicable time limits,
then the administering authority or the Commission (as the case
may be) may, subject to subsection (d), disregard all or part
of the original and subsequent responses.
(d) Use of Certain Information.--In reaching a determination
under section 803, 805, or 807, the administering authority and
the Commission shall not decline to consider information that
is submitted by an interested party and is necessary to the
determination but does not meet all the applicable requirements
established by the administering authority or the Commission
if--
(1) the information is submitted by the deadline
established for its submission,
(2) the information can be verified,
(3) the information is not so incomplete that it
cannot serve as a reliable basis for reaching the
applicable determination,
(4) the interested party has demonstrated that it
acted to the best of its ability in providing the
information and meeting the requirements established by
the administering authority or the Commission with
respect to the information, and
(5) the information can be used without undue
difficulties.
(e) Nonacceptance of Submissions.--If the administering
authority or the Commission declines to accept into the record
any information submitted in an investigation under this title,
it shall, to the extent practicable, provide to the person
submitting the information a written explanation of the reasons
for not accepting the information.
(f) Public Comment on Information.--Information that is
submitted on a timely basis to the administering authority or
the Commission during the course of a proceeding under this
title shall be subject to comment by other parties to the
proceeding within such reasonable time as the administering
authority or the Commission shall provide. The administering
authority and the Commission, before making a final
determination under section 805 or 807, shall cease collecting
information and shall provide the parties with a final
opportunity to comment on the information obtained by the
administering authority or the Commission (as the case may be)
upon which the parties have not previously had an opportunity
to comment. Comments containing new factual information shall
be disregarded.
(g) Verification.--The administering authority shall verify
all information relied upon in making a final determination
under section 805.
SEC. 845. ADMINISTRATIVE ACTION FOLLOWING SHIPBUILDING AGREEMENT PANEL
REPORTS.
(a) Action by United States International Trade Commission.--
(1) Advisory report.--If a dispute settlement panel
under the Shipbuilding Agreement finds in a report that
an action by the Commission in connection with a
particular proceeding under this title is not in
conformity with the obligations of the United States
under the Shipbuilding Agreement, the Trade
Representative may request the Commission to issue an
advisory report on whether this title permits the
Commission to take steps in connection with the
particular proceeding that would render its action not
inconsistent with the findings of the panel concerning
those obligations. The Trade Representative shall
notify the Committee on Ways and Means of the House of
Representatives and the Committee on Finance of the
Senate of such request.
(2) Time limits for report.--The Commission shall
transmit its report under paragraph (1) to the Trade
Representative within 30 calendar days after the Trade
Representative requests the report.
(3) Consultations on request for commission
determination.--If a majority of the Commissioners
issues an affirmative report under paragraph (1), the
Trade Representatives shall consult with the
congressional committees listed in paragraph (1)
concerning the matter.
(4) Commission determination.--Notwithstanding any
other provision of this title, if a majority of the
Commissioners issues an affirmative report under
paragraph (1), the Commission, upon the written request
of the Trade Representative, shall issue a
determination in connection with the particular
proceeding that would render the Commission's action
described in paragraph (1) not inconsistent with the
findings of the panel. The Commission shall issue its
determination not later than 120 calendar days after
the request from the Trade Representative is made.
(5) Consultations on implementation of commission
determination.--The Trade Representative shall consult
with the congressional committees listed in paragraph
(1) before the Commission's determination under
paragraph (4) is implemented.
(6) Revocation of order.--If, by virtue of the
Commission's determination under paragraph (4), an
injurious pricing order is no longer supported by an
affirmative Commission determination under this title,
the Trade Representative may, after consulting with the
congressional committees under paragraph (5), direct
the administering authority to revoke the injurious
pricing order.
(b) Action by Administering Authority.--
(1) Consultations with administering authority and
congressional committees.--Promptly after a report or
other determination by a dispute settlement panel under
the Shipbuilding Agreement is issued that contains
findings that--
(A) an action by the administering authority
in a proceeding under this title is not in
conformity with the obligations of the United
States under the Shipbuilding Agreement,
(B) the due date for payment of an injurious
pricing charge contained in an order issued
under section 806 should be amended,
(C) countermeasures provided for in an order
issued under section 807 should be
provisionally suspended or reduced pending the
final decision of the panel, or
(D) the scope or duration of countermeasures
imposed under section 807 should be narrowed or
shortened,
the Trade Representative shall consult with the
administering authority and the congressional
committees listed in subsection (a)(1) on the matter.
(2) Determination by administering authority.--
Notwithstanding any other provision of this title, the
administering authority shall, in response to a written
request from the Trade Representative, issue a
determination, or an amendment to or suspension of an
injurious pricing or countermeasure order, as the case
may be, in connection with the particular proceeding
that would render the administering authority's action
described in paragraph (1) not inconsistent with the
findings of the panel.
(3) Time limits for determinations.--The
administering authority shall issue its determination,
amendment, or suspension under paragraph (2)--
(A) with respect to a matter described in
subparagraph (A) of paragraph (1), within 180
calendar days after the request from the Trade
Representative is made, and
(B) with respect to a matter described in
subparagraph (B), (C), or (D) of paragraph (1),
within 15 calendar days after the request from
the Trade Representative is made.
(4) Consultations before implementation.--Before the
administering authority implements any determination,
amendment, or suspension under paragraph (2), the Trade
Representative shall consult with the administering
authority and the congressional committees listed in
subsection (a)(1) with respect to such determination,
amendment, or suspension.
(5) Implementation of determination.--The Trade
Representative may, after consulting with the
administering authority and the congressional
committees under paragraph (4), direct the
administering authority to implement, in whole or in
part, the determination, amendment, or suspension made
under paragraph (2). The administering authority shall
publish notice of such implementation in the Federal
Register.
(c) Opportunity for Comment by Interested Parties.--Before
issuing a determination, amendment, or suspension, the
administering authority, in a matter described in subsection
(b)(1)(A), or the Commission, in a matter described in
subsection (a)(1), as the case may be, shall provide interested
parties with an opportunity to submit written comments and, in
appropriate cases, may hold a hearing, with respect to the
determination.
Subtitle D--Definitions
SEC. 861. DEFINITIONS.
For purposes of this title:
(1) Administering authority.--The term
``administering authority'' means the Secretary of
Commerce, or any other officer of the United States to
whom the responsibility for carrying out the duties of
the administering authority under this title are
transferred by law.
(2) Commission.--The term ``Commission'' means the
United States International Trade Commission.
(3) Country.--The term ``country'' means a foreign
country, a political subdivision, dependent territory,
or possession of a foreign country and, except as
provided in paragraph (16)(E)(iii), may not include an
association of 2 or more foreign countries, political
subdivisions, dependent territories, or possessions of
countries into a customs union outside the United
States.
(4) Industry.--
(A) In general.--Except as used in section
808, the term ``industry'' means the producers
as a whole of a domestic like vessel, or those
producers whose collective capability to
produce a domestic like vessel constitutes a
major proportion of the total domestic
capability to produce a domestic like vessel.
(B) Producer.--A ``producer'' of a domestic
like vessel includes an entity that is
producing the domestic like vessel and an
entity with the capability to produce the
domestic like vessel.
(C) Capability to produce a domestic like
vessel.--A producer has the ``capability to
produce a domestic like vessel'' if it is
capable of producing a domestic like vessel
with its present facilities or could adapt its
facilities in a timely manner to produce a
domestic like vessel.
(D) Related parties.--(i) In an investigation
under this title, if a producer of a domestic
like vessel and the foreign producer, seller
(other than the foreign producer), or United
States buyer of the subject vessel are related
parties, or if a producer of a domestic like
vessel is also a United States buyer of the
subject vessel, the domestic producer may, in
appropriate circumstances, be excluded from the
industry.
(ii) For purposes of clause (i), a domestic
producer and the foreign producer, seller, or
United States buyer shall be considered to be
related parties, if--
(I) the domestic producer directly or
indirectly controls the foreign
producer, seller or United States
buyer,
(II) the foreign producer, seller, or
United States buyer directly or
indirectly controls the domestic
producer,
(III) a third party directly or
indirectly controls the domestic
producer and the foreign producer,
seller, or United States buyer, or
(IV) the domestic producer and the
foreign producer, seller, or United
States buyer directly or indirectly
control a third party and there is
reason to believe that the relationship
causes the domestic producer to act
differently than a nonrelated producer.
For purposes of this subparagraph, a party
shall be considered to directly or indirectly
control another party if the party is legally
or operationally in a position to exercise
restraint or direction over the other party.
(E) Product lines.--In an investigation under
this title, the effect of the sale of the
subject vessel shall be assessed in relation to
the United States production (or production
capability) of a domestic like vessel if
available data permit the separate
identification of production (or production
capability) in terms of such criteria as the
production process or the producer's profits.
If the domestic production (or production
capability) of a domestic like vessel has no
separate identity in terms of such criteria,
then the effect of the sale of the subject
vessel shall be assessed by the examination of
the production (or production capability) of
the narrowest group or range of vessels, which
includes a domestic like vessel, for which the
necessary information can be provided.
(5) Buyer.--The term ``buyer'' means any person who
acquires an ownership interest in a vessel, including
by way of lease or long-term bareboat charter, in
conjunction with the original transfer from the
producer, either directly or indirectly, including an
individual or company which owns or controls a buyer.
There may be more than one buyer of any one vessel.
(6) United states buyer.--The term ``United States
buyer'' means a buyer that is any of the following:
(A) A United States citizen.
(B) A juridical entity, including any
corporation, company, association, or other
organization, that is legally constituted under
the laws and regulations of the United States
or a political subdivision thereof, regardless
of whether the entity is organized for
pecuniary gain, privately or government owned,
or organized with limited or unlimited
liability.
(C) A juridical entity that is owned or
controlled by nationals or entities described
in subparagraphs (A) and (B). For the purposes
of this subparagraph--
(i) the term ``own'' means having
more than a 50 percent interest, and
(ii) the term ``control'' means the
actual ability to have substantial
influence on corporate behavior, and
control is presumed to exist where
there is at least a 25 percent
interest.
If ownership of a company is established under
clause (i), other control is presumed not to
exist unless it is otherwise established.
(7) Ownership interest.--An ``ownership interest'' in
a vessel includes any contractual or proprietary
interest which allows the beneficiary or beneficiaries
of such interest to take advantage of the operation of
the vessel in a manner substantially comparable to the
way in which an owner may benefit from the operation of
the vessel. In determining whether such substantial
comparability exists, the administering authority shall
consider--
(A) the terms and circumstances of the
transaction which conveys the interest,
(B) commercial practice within the industry,
(C) whether the vessel subject to the
transaction is integrated into the operations
of the beneficiary or beneficiaries, and
(D) whether in practice there is a likelihood
that the beneficiary or beneficiaries of such
interests will take advantage of and the risk
for the operation of the vessel for a
significant part of the life-time of the
vessel.
(8) Vessel.--
(A) In general.--Except as otherwise
specifically provided under international
agreements, the term ``vessel'' means--
(i) a self-propelled seagoing vessel
of 100 gross tons or more used for
transportation of goods or persons or
for performance of a specialized
service (including, but not limited to,
ice breakers and dredgers), and
(ii) a tug of 365 kilowatts or more,
that is produced in a Shipbuilding Agreement
Party or a country that is not a Shipbuilding
Agreement Party and not a WTO member.
(B) Exclusions.--The term ``vessel'' does not
include--
(i) any fishing vessel destined for
the fishing fleet of the country in
which the vessel is built,
(ii) any military vessel, and
(iii) any vessel sold before the date
that the Shipbuilding Agreement enters
into force with respect to the United
States, except that any vessel sold
after December 21, 1994, for delivery
more than 5 years after the date of the
contract of sale shall be a ``vessel''
for purposes of this title unless the
shipbuilder demonstrates to the
administering authority that the
extended delivery date was for normal
commercial reasons and not to avoid
applicability of this title.
(C) Self-propelled seagoing vessel.--A vessel
is ``self-propelled seagoing'' if its permanent
propulsion and steering provide it all the
characteristics of self-navigability in the
high seas.
(D) Military vessel.--A ``military vessel''
is a vessel which, according to its basic
structural characteristics and ability, is
intended to be used exclusively for military
purposes.
(9) Like vessel.--The term ``like vessel'' means a
vessel of the same type, same purpose, and approximate
size as the subject vessel and possessing
characteristics closely resembling those of the subject
vessel.
(10) Domestic like vessel.--The term ``domestic like
vessel'' means a like vessel produced in the United
States.
(11) Foreign like vessel.--Except as used in section
822(e)(1)(B)(ii)(II), the term ``foreign like vessel''
means a like vessel produced by the foreign producer of
the subject vessel for sale in the producer's domestic
market or in a third country.
(12) Same general category of vessel.--The term
``same general category of vessel'' means a vessel of
the same type and purpose as the subject vessel, but of
a significantly different size.
(13) Subject vessel.--The term ``subject vessel''
means a vessel subject to investigation under section
801 or 808.
(14) Foreign producer.--The term ``foreign producer''
means the producer or producers of the subject vessel.
(15) Exporting country.--The term ``exporting
country'' means the country in which the subject vessel
was built.
(16) Material injury.--
(A) In general.--The term ``material injury''
means harm which is not inconsequential,
immaterial, or unimportant.
(B) Sale and consequent impact.--In making
determinations under sections 803(a) and
805(b), the Commission in each case--
(i) shall consider--
(I) the sale of the subject
vessel,
(II) the effect of the sale
of the subject vessel on prices
in the United States for a
domestic like vessel, and
(III) the impact of the sale
of the subject vessel on
domestic producers of a
domestic like vessel, but only
in the context of production
operations within the United
States, and
(ii) may consider such other economic
factors as are relevant to the
determination regarding whether there
is or has been material injury by
reason of the sale of the subject
vessel.
In the notification required under section
805(d), the Commission shall explain its
analysis of each factor considered under clause
(i), and identify each factor considered under
clause (ii) and explain in full its relevance
to the determination.
(C) Evaluation of relevant factors.--For
purposes of subparagraph (B)--
(i) Sale of the subject vessel.--In
evaluating the sale of the subject
vessel, the Commission shall consider
whether the sale, either in absolute
terms or relative to production or
demand in the United States, in terms
of either volume or value, is or has
been significant.
(ii) Price.--In evaluating the effect
of the sale of the subject vessel on
prices, the Commission shall consider
whether--
(I) there has been
significant price underselling
of the subject vessel as
compared with the price of a
domestic like vessel, and
(II) the effect of the sale
of the subject vessel otherwise
depresses or has depressed
prices to a significant degree
or prevents or has prevented
price increases, which
otherwise would have occurred,
to a significant degree.
(iii) Impact on affected domestic
industry.--In examining the impact
required to be considered under
subparagraph (B)(i)(III), the
Commission shall evaluate all relevant
economic factors which have a bearing
on the state of the industry in the
United States, including, but not
limited to--
(I) actual and potential
decline in output, sales,
market share, profits,
productivity, return on
investments, and utilization of
capacity,
(II) factors affecting
domestic prices, including with
regard to sales,
(III) actual and potential
negative effects on cash flow,
employment, wages, growth,
ability to raise capital, and
investment,
(IV) actual and potential
negative effects on the
existing development and
production efforts of the
domestic industry, including
efforts to develop a derivative
or more advanced version of a
domestic like vessel, and
(V) the magnitude of the
injurious pricing margin.
The Commission shall evaluate all
relevant economic factors described in
this clause within the context of the
business cycle and conditions of
competition that are distinctive to the
affected industry.
(D) Standard for determination.--The presence
or absence of any factor which the Commission
is required to evaluate under subparagraph (C)
shall not necessarily give decisive guidance
with respect to the determination by the
Commission of material injury.
(E) Threat of material injury.--
(i) In general.--In determining
whether an industry in the United
States is threatened with material
injury by reason of the sale of the
subject vessel, the Commission shall
consider, among other relevant economic
factors--
(I) any existing unused
production capacity or
imminent, substantial increase
in production capacity in the
exporting country indicating
the likelihood of substantially
increased sales of a foreign
like vessel to United States
buyers, taking into account the
availability of other export
markets to absorb any
additional exports,
(II) whether the sale of a
foreign like vessel or other
factors indicate the likelihood
of significant additional sales
to United States buyers,
(III) whether sale of the
subject vessel or sale of a
foreign like vessel by the
foreign producer are at prices
that are likely to have a
significant depressing or
suppressing effect on domestic
prices, and are likely to
increase demand for further
sales,
(IV) the potential for
product-shifting if production
facilities in the exporting
country, which can presently be
used to produce a foreign like
vessel or could be adapted in a
timely manner to produce a
foreign like vessel, are
currently being used to produce
other types of vessels,
(V) the actual and potential
negative effects on the
existing development and
production efforts of the
domestic industry, including
efforts to develop a derivative
or more advanced version of a
domestic like vessel, and
(VI) any other demonstrable
adverse trends that indicate
the probability that there is
likely to be material injury by
reason of the sale of the
subject vessel.
(ii) Basis for determination.--The
Commission shall consider the factors
set forth in clause (i) as a whole. The
presence or absence of any factor which
the Commission is required to consider
under clause (i) shall not necessarily
give decisive guidance with respect to
the determination. Such a determination
may not be made on the basis of mere
conjecture or supposition.
(iii) Effect of injurious pricing in
third-country markets.--
(I) In general.--The
Commission shall consider
whether injurious pricing in
the markets of foreign
countries (as evidenced by
injurious pricing findings or
injurious pricing remedies of
other Shipbuilding Agreement
Parties, or antidumping
determinations of, or measures
imposed by, other countries,
against a like vessel produced
by the producer under
investigation) suggests a
threat of material injury to
the domestic industry. In the
course of its investigation,
the Commission shall request
information from the foreign
producer or United States buyer
concerning this issue.
(II) European communities.--
For purposes of this clause,
the European Communities as a
whole shall be treated as a
single foreign country.
(F) Cumulation for determining material
injury.--
(i) In general.--For purposes of
clauses (i) and (ii) of subparagraph
(C), and subject to clause (ii) of this
subparagraph, the Commission shall
cumulatively assess the effects of
sales of foreign like vessels from all
foreign producers with respect to
which--
(I) petitions were filed
under section 802(b) on the
same day,
(II) investigations were
initiated under section 802(a)
on the same day, or
(III) petitions were filed
under section 802(b) and
investigations were initiated
under section 802(a) on the
same day,
if, with respect to such vessels, the
foreign producers compete with each
other and with producers of a domestic
like vessel in the United States
market.
(ii) Exceptions.--The Commission
shall not cumulatively assess the
effects of sales under clause (i)--
(I) with respect to which the
administering authority has
made a preliminary negative
determination, unless the
administering authority
subsequently made a final
affirmative determination with
respect to those sales before
the Commission's final
determination is made, or
(II) from any producer with
respect to which the
investigation has been
terminated.
(iii) Records in final
investigations.--In each final
determination in which it cumulatively
assesses the effects of sales under
clause (i), the Commission may make its
determinations based on the record
compiled in the first investigation in
which it makes a final determination,
except that when the administering
authority issues its final
determination in a subsequently
completed investigation, the Commission
shall permit the parties in the
subsequent investigation to submit
comments concerning the significance of
the administering authority's final
determination, and shall include such
comments and the administering
authority's final determination in the
record for the subsequent
investigation.
(G) Cumulation for determining threat of
material injury.--To the extent practicable and
subject to subparagraph (F)(ii), for purposes
of clause (i) (II) and (III) of subparagraph
(E), the Commission may cumulatively assess the
effects of sales of like vessels from all
countries with respect to which--
(i) petitions were filed under
section 802(b) on the same day,
(ii) investigations were initiated
under section 802(a) on the same day,
or
(iii) petitions were filed under
section 802(b) and investigations were
initiated under section 802(a) on the
same day,
if, with respect to such vessels, the foreign
producers compete with each other and with
producers of a domestic like vessel in the
United States market.
(17) Interested party.--The term ``interested party''
means, in a proceeding under this title--
(A)(i) the foreign producer, seller (other
than the foreign producer), and the United
States buyer of the subject vessel, or
(ii) a trade or business association a
majority of the members of which are the
foreign producer, seller, or United States
buyer of the subject vessel,
(B) the government of the country in which
the subject vessel is produced or manufactured,
(C) a producer that is a member of an
industry,
(D) a certified union or recognized union or
group of workers which is representative of an
industry,
(E) a trade or business association a
majority of whose members are producers in an
industry,
(F) an association, a majority of whose
members is composed of interested parties
described in subparagraph (C), (D), or (E), and
(G) for purposes of section 807, a purchaser
who, after the effective date of an order
issued under that section, entered into a
contract of sale with the foreign producer that
is subject to the order.
(18) Affirmative determinations by divided
commission.--If the Commissioners voting on a
determination by the Commission are evenly divided as
to whether the determination should be affirmative or
negative, the Commission shall be deemed to have made
an affirmative determination. For the purpose of
applying this paragraph when the issue before the
Commission is to determine whether there is or has
been--
(A) material injury to an industry in the
United States,
(B) threat of material injury to such an
industry, or
(C) material retardation of the establishment
of an industry in the United States,
by reason of the sale of the subject vessel, an
affirmative vote on any of the issues shall be treated
as a vote that the determination should be affirmative.
(19) Ordinary course of trade.--The term `ordinary
course of trade' means the conditions and practices
which, for a reasonable time before the sale of the
subject vessel, have been normal in the shipbuilding
industry with respect to a like vessel. The
administering authority shall consider the following
sales and transactions, among others, to be outside the
ordinary course of trade:
(A) Sales disregarded under section
822(b)(1).
(B) Transactions disregarded under section
822(f)(2).
(20) Nonmarket economy country.--
(A) In general.--The term ``nonmarket economy
country'' means any foreign country that the
administering authority determines does not
operate on market principles of cost or pricing
structures, so that sales of vessels in such
country do not reflect the fair value of the
vessels.
(B) Factors to be considered.--In making
determinations under subparagraph (A) the
administering authority shall take into
account--
(i) the extent to which the currency
of the foreign country is convertible
into the currency of other countries,
(ii) the extent to which wage rates
in the foreign country are determined
by free bargaining between labor and
management,
(iii) the extent to which joint
ventures or other investments by firms
of other foreign countries are
permitted in the foreign country,
(iv) the extent of government
ownership or control of the means of
production,
(v) the extent of government control
over the allocation of resources and
over the price and output decisions of
enterprises, and
(vi) such other factors as the
administering authority considers
appropriate.
(C) Determination in effect.--
(i) Any determination that a foreign
country is a nonmarket economy country
shall remain in effect until revoked by
the administering authority.
(ii) The administering authority may
make a determination under subparagraph
(A) with respect to any foreign country
at any time.
(D) Determinations not in issue.--
Notwithstanding any other provision of law, any
determination made by the administering
authority under subparagraph (A) shall not be
subject to judicial review in any investigation
conducted under subtitle A.
(21) Shipbuilding agreement.--The term ``Shipbuilding
Agreement'' means The Agreement Respecting Normal
Competitive Conditions in the Commercial Shipbuilding
and Repair Industry, resulting from negotiations under
the auspices of the Organization for Economic
Cooperation and Development, and entered into on
December 21, 1994.
(22) Shipbuilding agreement party.--The term
``Shipbuilding Agreement Party'' means a state or
separate customs territory that is a Party to the
Shipbuilding Agreement, and with respect to which the
United States applies the Shipbuilding Agreement.
(23) WTO agreement.--The term ``WTO Agreement'' means
the Agreement defined in section 2(9) of the Uruguay
Round Agreements Act.
(24) WTO member.--The term ``WTO member'' means a
state, or separate customs territory (within the
meaning of Article XII of the WTO Agreement), with
respect to which the United States applies the WTO
Agreement.
(25) Trade representative.--The term `Trade
Representative' means the United States Trade
Representative.
(26) Affiliated persons.--The following persons shall
be considered to be ``affiliated'' or ``affiliated
persons'':
(A) Members of a family, including brothers
and sisters (whether by the whole or half
blood), spouse, ancestors, and lineal
descendants.
(B) Any officer or director of an
organization and such organization.
(C) Partners.
(D) Employer and employee.
(E) 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.
(F) Two or more persons directly or
indirectly controlling, controlled by, or under
common control with, any person.
(G) Any person who controls any other person,
and such other person.
For purposes of this paragraph, a person shall be
considered to control another person if the person is
legally or operationally in a position to exercise
restraint or direction over the other person.
(27) Injurious pricing.--The term ``injurious
pricing'' refers to the sale of a vessel at less than
fair value.
(28) Injurious pricing margin.--
(A) In general.--The term ``injurious pricing
margin'' means the amount by which the normal
value exceeds the export price of the subject
vessel.
(B) Magnitude of the injurious pricing
margin.--The magnitude of the injurious pricing
margin used by the Commission shall be--
(i) in making a preliminary
determination under section 803(a) in
an investigation (including any
investigation in which the Commission
cumulatively assesses the effect of
sales under paragraph (16)(F)(i)), the
injurious pricing margin or margins
published by the administering
authority in its notice of initiation
of the investigation; and
(ii) in making a final determination
under section 805(b), the injurious
pricing margin or margins most recently
published by the administering
authority before the closing of the
Commission's administrative record.
(29) Commercial interest reference rate.--The term
``Commercial Interest Reference Rate'' or ``CIRR''
means an interest rate that the administering authority
determines to be consistent with Annex III, and
appendices and notes thereto, of the Understanding on
Export Credits for Ships, resulting from negotiations
under the auspices of the Organization for Economic
Cooperation, and entered into on December 21, 1994.
(30) Antidumping.--
(A) WTO members.--In the case of a WTO
member, the term ``antidumping'' refers to
action taken pursuant to the Agreement on
Implementation of Article VI of the General
Agreement on Tariffs and Trade 1994.
(B) Other cases.--In the case of any country
that is not a WTO member, the term
``antidumping'' refers to action taken by the
country against the sale of a vessel at less
than fair value that is comparable to action
described in subparagraph (A).
(31) Broad multiple bid.--The term ``broad multiple
bid'' means a bid in which the proposed buyer extends
an invitation to bid to at least all the producers in
the industry known by the buyer to be capable of
building the subject vessel.
TRADE ACT OF 1974
* * * * * * *
[TITLE V--GENERALIZED SYSTEM OF PREFERENCES
[Sec. 501. Authority to extend preferences.
[Sec. 502. Beneficiary developing country.
[Sec. 503. Eligible articles.
[Sec. 504. Limitations on preferential treatment.
[Sec. 505. Termination of duty-free treatment and reports.
[Sec. 506. Agricultural exports of beneficiary developing countries.]
TITLE V--GENERALIZED SYSTEM OF PREFERENCES
Sec. 501. Authority to extend preferences.
Sec. 502. Designation of beneficiary developing countries.
Sec. 503. Designation of eligible articles.
Sec. 504. Review and report to Congress.
Sec. 505. Date of termination.
Sec. 506. Agricultural exports of beneficiary developing countries.
Sec. 507. Definitions.
* * * * * * *
[TITLE V--GENERALIZED SYSTEM OF PREFERENCES
[SEC. 501. AUTHORITY TO EXTEND PREFERENCE.
[The President may provide duty-free treatment for any
eligible article from any beneficiary developing country in
accordance with the provisions of this title. In taking any
such action, the President shall have due regard for--
[(1) the effect such action will have on furthering
the economic development of developing countries
through the expansion of their exports;
[(2) the extent to which other major developed
countries are undertaking a comparable effort to assist
developing countries by granting generalized
preferences with respect to imports of products of such
countries;
[(3) the anticipated impact of such action on United
States producers of like or directly competitive
products; and
[(4) the extent of the beneficiary developing
country's competitiveness with respect to eligible
articles.
[SEC. 502. BENEFICIARY DEVELOPING COUNTRY.
[(a)(1) For purposes of this title, the term ``beneficiary
developing country'' means any country with respect to which
there is in effect an Executive order or Presidential
proclamation by the President of the United States designating
such country as a beneficiary developing country for purposes
of this title. Before the President designates any country as a
beneficiary developing country for purposes of this title, he
shall notify the House of Representatives and the Senate of his
intention to make such designation, together with the
considerations entering into such decision.
[(2) If the President has designated any country as a
beneficiary developing country for purposes of this title, he
shall not terminate such designation (either by issuing an
Executive order or Presidential proclamation for that purpose
or by issuing an Executive order or Presidential proclamation
which has the effect of terminating such designation) unless,
at least 60 days before such termination, he has notified the
House of Representatives and the Senate and has notified such
country of his intention to terminate such designation,
together with the consideration entering into such decision.
[(3) For purposes of this title, the term ``country'' means
any foreign country, any overseas dependent territory or
possession of a foreign country, or the Trust Territory of the
Pacific Islands. In the case of an association of countries
which is a free trade area or customs union, or which is
contributing to comprehensive regional economic integration
among its members through appropriate means, including, but not
limited to, the reduction of duties, the President may by
Executive order or Presidential proclamation provide that all
members of such association other than members which are barred
from designation under subsection (b) shall be treated as one
country for purposes of this title.
[(4) For purposes of this title, the term ``internationally
recognized worker rights'' includes--
[(A) the right of 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.
[(b) No designation shall be made under this section with
respect to any of the following:
[Australia
[Austria
[Canada
[European Economic Community member states
[Finland
[Iceland
[Japan
[Monaco
[New Zealand
[Norway
[Sweden
[Switzerland
[In addition, the President shall not designate any country a
beneficiary developing country under this section--
[(1) if such country is a Communist country, unless
(A) the products of such country receive
nondiscriminatory treatment, (B) such country is a
contracting party to the General Agreement on Tariffs
and Trade and a member of the International Monetary
Fund, and (C) such country is not dominated or
controlled by international communism;
[(2) if such country is a member of the Organization
of Petroleum Exporting Countries, or a party to any
other arrangement of foreign countries, and such
country participates in any action pursuant to such
arrangement the effect of which is to withhold supplies
of vital commodity resources from international trade
or to raise the price of such commodities to an
unreasonable level and to cause serious disruption of
the world economy;
[(3) if such country affords preferential treatment
to the products of a developed country, other than the
United States, which has, or is likely to have, a
significant adverse effect on United States commerce,
unless the President has received assurances
satisfactory to him that such preferential treatment
will be eliminated before January 1, 1976, or that
action will be taken before January 1, 1976, to assure
that there will be no such significant adverse effect,
and he reports those assurances to the Congress;
[(4) if such country--
[(A) has nationalized, expropriated, or
otherwise seized ownership or control of
property, including patents, trademarks, or
copyrights owned by a United States citizen or
by a corporation, partnership, or association
which is 50 percent or more beneficially owned
by United States citizens,
[(B) has taken steps to repudiate or nullify
an existing contract or agreement with a United
States citizen or a corporation, partnership,
or association which is 50 percent or more
beneficially owned by United States citizens,
the effect of which is to nationalize,
expropriate, or otherwise seize ownership or
control of property, including patents,
trademarks, or copyrights, so owned, or
[(C) has imposed or enforced taxes or other
exactions, restrictive maintenance or
operational conditions, or other measures with
respect to property, including patents,
trademarks, or copyrights, so owned, the effect
of which is to nationalize, expropriate, or
otherwise seize ownership or control of such
property,
[(D) the President determines that--
[(i) prompt, adequate, and effective
compensation has been or is being made
to such citizen, corporation,
partnership, or association,
[(ii) good faith negotiations to
provide prompt, adequate, and effective
compensation under the applicable
provisions of international law are in
progress, or such country is otherwise
taking steps to discharge its
obligations under international law
with respect to such citizen,
corporation, partnership, or
association, or
[(iii) a dispute involving such
citizen, corporation, partnership, or
association over compensation for such
a seizure has been submitted to
arbitration under the provisions of the
Convention for the Settlement of
Investment Disputes, or in another
mutually agreed upon forum, and
promptly furnishes a copy of such determination to the
Senate and House of Representatives;
[(5) if such country fails to act in good faith in
recognizing as binding or in enforcing arbitral awards
in favor of United States citizens or a corporation,
partnership, or association which is 50 percent or more
beneficially owned by United States citizens, which
have been made by arbitrators appointed for each case
or by permanent arbitral bodies to which the parties
involved have submitted their dispute;
[(6) if such country aids or abets, by granting
sanctuary from prosecution to, any individual or group
which has committed an act of international terrorism;
and
[(7) if such country has not taken or is not taking
steps to afford internationally recognized worker
rights to workers in the country (including any
designated zone in that country).
[Paragraphs (4), (6), (7), and (8) shall not prevent the
designation of any country as a beneficiary developing country
under this section if the President determines that such
designation will be in the national economic interest of the
United States and reports such determination to the Congress
with his reasons therefor.
[(c) In determining whether to designate any country a
beneficiary developing country under this section, the
President shall take into account--
[(1) an expression by such country of its desire to
be so designated;
[(2) the level of economic development of such
country, including its per capita gross national
product, the living standards of its inhabitants, and
any other economic factors which he deems appropriate;
[(3) whether or not the other major developed
countries are extending generalized preferential tariff
treatment to such country;
[(4) the extent to which such country has assured the
United States it will provide equitable and reasonable
access to the markets and basic commodity resources of
such country and the extent to which such country has
assured the United States that it will refrain from
engaging in unreasonable export practices;
[(5) the extent to which such country is providing
adequate and effective means under its laws for foreign
nationals to secure, to exercise, and to enforce
exclusive rights in intellectual property, including
patents, trademarks, and copyrights;
[(6) the extent to which such country has taken
action to--
[(A) reduce trade distorting investment
practices and policies (including export
performance requirements); and
[(B) reduce or eliminate barriers to trade in
services; and
[(7) whether or not such country has taken or is
taking steps to afford to workers in that country
(including any designated zone in that country)
internationally recognized worker rights.
[(d) Amendment of general headnote 3(a) to the Tariff
Schedules of the United States relating to products of insular
possessions.]
[(e)(1) The President may exempt from the application of
paragraph (2) of subsection (b) any country during the period
during which such country (A) is a party to a bilateral or
multilateral trade agreement to which the United States is also
a party if such agreement fulfills the negotiating objectives
set forth in section 108 of assuring the United States fair and
equitable access at reasonable prices to supplies of articles
of commerce important to the economic requirements of the
United States and (B) is not in violation of such agreement by
action denying the United States such fair and equitable
access.
[(2) The President may exempt from the application of
paragraph (2) of subsection (b) any country that enters into a
bilateral product-specific trade agreement with the United
States under section 101 or 102 of the Trade Act of 1974 before
January 3, 1980. The President shall terminate the exemption
granted to any country under the preceding sentence if that
country interrupts or terminates the delivery of supplies of
petroleum and petroleum products to the United States.
[(19 U.S.C. 2462)
[SEC. 503. ELIGIBLE ARTICLES.
[(a) The President shall, from time to time, publish and
furnish the International Trade Commission with lists of
articles which may be considered for designation as eligible
articles for purposes of this title. Before any such list is
furnished to the Commission, there shall be in effect an
Executive order or Presidential proclamation under section 502
designating beneficiary developing countries. The provisions of
sections 131, 132, 133, and 134 of this Act shall be complied
with as though action under section 501 were action under
section 101 of this Act to carry out a trade agreement entered
into under section 101. After receiving the advice of the
Commission with respect to the listed articles, the President
shall designate those articles he considers appropriate to be
eligible articles for purposes of this title by Executive order
or Presidential proclamation.
[(b)(1) The duty free treatment provided under section 501
shall apply to any eligible article which is the growth,
product, or manufacture of a beneficiary developing country
if--
[(A) that article is imported directly from a
beneficiary developing country into the customs
territory of the United States;
[(B) the sum of (i) the cost or value of the
materials produced in the beneficiary developing
country or any 2 or more countries which are members of
the same association of countries which is treated as
one country under section 502(a)(3), plus (ii) the
direct costs of processing operations performed in such
beneficiary developing country or such member countries
is not less than 35 percent of the appraised value of
such article at the time of its entry into the customs
territory of the United States.
[(2) The Secretary of the Treasury, after consulting with the
United States Trade Representative, shall prescribe such
regulations as may be necessary to carry out this subsection,
including, but not limited to, regulations providing that, in
order to be eligible for duty-free treatment under this title,
an article must be wholly the growth, product, or manufacture
of a beneficiary developing country, or must be a new or
different article of commerce which has been grown, produced,
or manufactured in the beneficiary developing country; but no
article or material of a beneficiary developing country shall
be eligible for such treatment by virtue of having merely
undergone--
[(A) simple combining of packaging operations, or
[(B) mere dilution with water or mere dilution with
another substance that does not materially alter the
characteristics of the article.
[(c)(1) The President may not designate any article as an
eligible article under subsection (a) if such article is within
one of the following categories of import-sensitive articles--
[(A) textile and apparel articles which are subject
to textile agreements,
[(B) 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 the United States insular possessions,
[(C) import-sensitive electronic articles,
[(D) import-sensitive steel articles,
[(E) footwear, handbags, luggage, flat goods, work
gloves, and leather wearing apparel which were not
eligible articles for purposes of this article on April
1, 1984,
[(F) import-sensitive semimanufactured and
manufactured glass products, and
[(G) any other articles which the President
determines to be import-sensitive in the context of the
Generalized System of Preferences.
[(2) No article shall be an eligible article for purposes of
this title for any period during which such article is the
subject of any action proclaimed pursuant to section 203 of
this Act or section 232 or 351 of the Trade Expansion Act of
1962.
[(d) Tariff-Rate Quotas.--No quantity of an agricultural
product subject to a tariff-rate quota that exceeds the in-
quota quantity shall be eligible for duty-free treatment under
this title.
[(19 U.S.C. 2463)
[SEC. 504. LIMITATIONS ON PREFERENTIAL TREATMENT.
[(a)(1) The President may withdraw, suspend, or limit the
application of the duty-free treatment accorded under section
501 with respect to any article or with respect to any country;
except that no rate of duty may be established in respect of
any article pursuant to this section other than the rate which
would apply but for this title. In taking any action under this
subsection, the President shall consider the factors set forth
in sections 501 and 502(c).
[(2) The President shall, as necessary, advise the Congress
and, by no later than January 4, 1988, submit to the Congress a
report on the application of sections 502 and 502(c), and the
actions the President has taken to withdraw, to suspend, or to
limit the application of duty-free treatment with respect to
any country which has failed to adequately take the actions
described in section 502(c).
[(b) The President shall, after complying with the
requirements of section 502(a)(2), withdraw or suspend the
designation of any country as a beneficiary developing country
if, after such designation, he determines that as the result of
changed circumstances such country would be barred from
designation as a beneficiary developing country under section
502(b). Such country shall cease to be a beneficiary developing
country on the day on which the President issues an Executive
order or Presidential proclamation revoking his designation of
such country under section 502.
[(c)(1) Subject to paragraphs (2) through (7) and subsection
(d), whenever the President determines that any country--
[(A) has exported (directly or indirectly) to the
United States during a calendar year a quantity of an
eligible article having an appraised value in excess of
an amount which bears the same ratio to $25,000,000 as
the gross national product of the United States for the
preceding calendar year (as determined by the
Department of Commerce) bears to the gross national
product of the United States for calendar year 1974; or
[(B) has exported (either directly or indirectly) to
the United States a quantity of any eligible article
equal to or exceeding 50 percent of the appraised value
of the total imports of such article into the United
States during any calendar year;
then, not later than July 1 of the next calendar year, such
country shall not be treated as a beneficiary developing
country with respect to such article.
[(2)(A) Not later than January 1, 1987, and periodically
thereafter, the President shall conduct a general review of
eligible articles based on the considerations described in
section 501 or 502(c).
[(B) If, after any review under subparagraph (A), the
President determines that this subparagraph should apply
because a beneficiary developing country has demonstrated a
sufficient degree of competitiveness (relative to other
beneficiary developing countries) with respect to any eligible
article, then paragraph (1) shall be applied to such country
with respect to such article by substituting--
[(i) ``1984'' for ``1974'' in subparagraph (A), and
[(ii) ``25 percent'' for ``50 percent'' in
subparagraph (B).
[(3)(A) Not earlier than January 4, 1987, the President may
waive the application of this subsection with respect to any
eligible article of any beneficiary developing country if,
before July 1 of the calendar year beginning after the calendar
year for which a determination described in paragraph (1) was
made with respect to such eligible article, the President--
[(i) receives the advice of the International Trade
Commission on whether any industry in the United States
is likely to be adversely affected by such waiver,
[(ii) determines, based on the considerations
described in sections 501 and 502(c) and the advice
described in clause (i), that such waiver is in the
national economic interest of the United States, and
[(iii) publishes the determination described in
clause (ii) in the Federal Register.
[(B) In making any determination under subparagraph (A), the
President shall give great weight to--
[(i) the extent to which the beneficiary developing
country has assured the United States that such country
will provide equitable and reasonable access to the
markets and basic commodity resources of such country,
and
[(ii) the extent to which such country provides
adequate and effective means under its law for foreign
nationals to secure, to exercise, and to enforce
exclusive rights in intellectual property, including
patent, trademark, and copyright rights.
[(C) Any waiver granted pursuant to this paragraph shall
remain in effect until the President determines that such
waiver is no longer warranted due to changed circumstances.
[(D)(i) The President may not exercise the waiver authority
provided under subparagraph (A) with respect to a quantity of
eligible articles entered in any calendar year which exceeds an
aggregate value equal to 30 percent of the total value of all
articles which entered duty-free under this title during the
preceding calendar year.
[(ii) The President may not exercise the waiver authority
provided under subparagraph (A) with respect to a quantity of
eligible articles entered during any calendar year beginning
after 1986 the aggregate value of which exceeds 15 percent of
the total value of all articles that have entered duty-free
under this title during the preceding calendar year from those
beneficiary developing countries which for the preceding
calendar year--
[(I) had a per capita gross national product
(calculated on the basis of the best available
information, including that of the World Bank) of
$5,000 or more; or
[(II) had exported (either directly or indirectly) to
the United States a quantity of articles that was duty-
free under this title that had an appraised value of
more than 10 percent of the total imports of all
articles that entered duty-free under this title during
that year.
[(iii) There shall be counted against the limitations imposed
under clauses (i) and (ii) for any calendar year only that
quantity of any eligible article of any country that--
[(I) entered duty-free under this title during such
calendar year; and
[(II) is in excess of the quantity of that article
that would have been so entered during such calendar
year if the 1974 limitation applied under paragraph
(1)(A) and the 50 percent limitation applied under
paragraph (1)(B).
[(4) Except in any case to which paragraph (2)(B) applies,
the President may waive the application of this subsection if,
before July 1 of the calendar year beginning after the calendar
year for which a determination described in paragraph (1) was
made, the President determines and publishes in the Federal
Register that, with respect to such country--
[(A) there has been a 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,
United States commerce.
[(5) A country which is no longer treated as a beneficiary
developing country with respect to an eligible article by
reason of this subsection may be redesignated a beneficiary
developing country with respect to such article, subject to the
provisions of sections 501 and 502, if imports of such article
from such country did not exceed the limitations in paragraph
(1) (after application of paragraph (2)) during the preceding
calendar year.
[(6)(A) This subsection shall not apply to any beneficiary
developing country which the President determines, based on the
considerations described in sections 501 and 502(c), to be a
least-developed beneficiary developing country.
[(B) The President shall--
[(i) make a determination under subparagraph (A) with
respect to each beneficiary developing country before
July 4, 1985, and periodically thereafter, and
[(ii) notify the Congress at least 60 days before any
such determination becomes final.
[(7) For purposes of this subsection, the term ``country''
does not include an association of countries which is treated
as one country under section 502(a)(3), but does include a
country which is a member of any such association.
[(d)(1) Subsection (c)(1)(B) (after application of subsection
(c)(2)) shall not apply with respect to any eligible article if
a like or directly competitive article is not produced in the
United States on January 3, 1985.
[(2) The President may disregard subsection (c)(1)(B) with
respect to any eligible article if the appraised value of the
total imports of such article into the United States during the
preceding calendar year is not in excess of an amount which
bears the same ratio to $5,000,000 as the gross national
product of the United States for that calendar year (as
determined by the Department of Commerce) bears to the gross
national product of the United States for calendar year 1979.
[(e) No action pursuant to section 501 may affect any tariff
duty imposed by the Legislature of Puerto Rico pursuant to
section 319 of the Tariff Act of 1930 (19 U.S.C. sec. 1319) on
coffee imported into Puerto Rico.
[(f)(1) If the President determines that the per capita gross
national product (calculated on the basis of the best available
information, including that of the World Bank) of any
beneficiary developing country for any calendar year (hereafter
in this subsection referred to as the ``determination year'')
after 1984, exceeds the applicable limit for the determination
year--
[(A) subsection (c)(1)(B) shall be applied for the 2-
year period beginning on July 1 of the calendar year
succeeding the determination year by substituting ``25
percent'' or ``50 percent'', and
[(B) such country shall not be treated as a
beneficiary developing country under this title after
the close of such 2-year period.
[(2)(A) For purposes of this subsection, the term
``applicable limit'' means a sum of--
[(i) $8,500, plus
[(ii) 50 percent of the amount determined under
subparagraph (B) for the determination year.
[(B) The amount determined under this subparagraph for the
determination year is an amount equal to--
[(i) $8,500, multiplied by
[(ii) the percentage determined by dividing--
[(I) the excess, if any, of the gross
national product of the United States (as
determined by the Secretary of Commerce) for
the determination year over the gross national
product of the United States for 1984, by
[(II) the gross national product for 1984.
[(19 U.S.C. 2464)
[SEC. 505. TERMINATION OF DUTY-FREE TREATMENT AND REPORTS.
[(a) No duty-free treatment provided under this title shall
remain in effect after July 31, 1995.
[(b) On or before January 4, 1990, the President shall submit
to the Congress a full and complete report regarding the
operation of this title.
[(c) The President shall submit an annual report to the
Congress on the status of internationally recognized worker
rights within each beneficiary developing country.
[(19 U.S.C. 2465)
[SEC. 506. AGRICULTURAL EXPORTS OF BENEFICIARY DEVELOPING COUNTRIES.
[The appropriate agencies of the United States shall assist
beneficiary developing countries 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 the production of foodstuffs for their citizenry.
[(19 U.S.C. 2466)]
TITLE V--GENERALIZED SYSTEM OF PREFERENCES
SEC. 501. AUTHORITY TO EXTEND PREFERENCES.
The President may provide duty-free treatment for any
eligible article from any beneficiary developing country in
accordance with the provisions of this title. In taking any
such action, the President shall have due regard for--
(1) the effect such action will have on furthering
the economic development of developing countries
through the expansion of their exports;
(2) the extent to which other major developed
countries are undertaking a comparable effort to assist
developing countries by granting generalized
preferences with respect to imports of products of such
countries;
(3) the anticipated impact of such action on United
States producers of like or directly competitive
products; and
(4) the extent of the beneficiary developing
country's competitiveness with respect to eligible
articles.
SEC. 502. DESIGNATION OF BENEFICIARY DEVELOPING COUNTRIES.
(a) Authority To Designate Countries.--
(1) Beneficiary developing countries.--The President
is authorized to designate countries as beneficiary
developing countries for purposes of this title.
(2) Least-developed beneficiary developing
countries.--The President is authorized to designate
any beneficiary developing country as a least-developed
beneficiary developing country for purposes of this
title, based on the considerations in section 501 and
subsection (c) of this section.
(b) Countries Ineligible for Designation.--
(1) Specific countries.--The following countries may
not be designated as beneficiary developing countries
for purposes of this title:
(A) Australia.
(B) Canada.
(C) European Union member states.
(D) Iceland.
(E) Japan.
(F) Monaco.
(G) New Zealand.
(H) Norway.
(I) Switzerland.
(2) Other bases for ineligibility.--The President
shall not designate any country a beneficiary
developing country under this title if any of the
following applies:
(A) Such country is a Communist country,
unless--
(i) the products of such country
receive nondiscriminatory treatment,
(ii) such country is a WTO Member (as
such term is defined in section 2(10)
of the Uruguay Round Agreements Act)
(19 U.S.C. 3501(10)) and a member of
the International Monetary Fund, and
(iii) such country is not dominated
or controlled by international
communism.
(B) Such country is a party to an arrangement
of countries and participates in any action
pursuant to such arrangement, the effect of
which is--
(i) to withhold supplies of vital
commodity resources from international
trade or to raise the price of such
commodities to an unreasonable level,
and
(ii) to cause serious disruption of
the world economy.
(C) Such country affords preferential
treatment to the products of a developed
country, other than the United States, which
has, or is likely to have, a significant
adverse effect on United States commerce.
(D)(i) Such country--
(I) has nationalized, expropriated,
or otherwise seized ownership or
control of property, including patents,
trademarks, or copyrights, owned by a
United States citizen or by a
corporation, partnership, or
association which is 50 percent or more
beneficially owned by United States
citizens,
(II) has taken steps to repudiate or
nullify an existing contract or
agreement with a United States citizen
or a corporation, partnership, or
association which is 50 percent or more
beneficially owned by United States
citizens, the effect of which is to
nationalize, expropriate, or otherwise
seize ownership or control of property,
including patents, trademarks, or
copyrights, so owned, or
(III) has imposed or enforced taxes
or other exactions, restrictive
maintenance or operational conditions,
or other measures with respect to
property, including patents,
trademarks, or copyrights, so owned,
the effect of which is to nationalize,
expropriate, or otherwise seize
ownership or control of such property,
unless clause (ii) applies.
(ii) This clause applies if the President
determines that--
(I) prompt, adequate, and effective
compensation has been or is being made
to the citizen, corporation,
partnership, or association referred to
in clause (i),
(II) good faith negotiations to
provide prompt, adequate, and effective
compensation under the applicable
provisions of international law are in
progress, or the country described in
clause (i) is otherwise taking steps to
discharge its obligations under
international law with respect to such
citizen, corporation, partnership, or
association, or
(III) a dispute involving such
citizen, corporation, partnership, or
association over compensation for such
a seizure has been submitted to
arbitration under the provisions of the
Convention for the Settlement of
Investment Disputes, or in another
mutually agreed upon forum,
and the President promptly furnishes a copy of
such determination to the Senate and House of
Representatives.
(E) Such country fails to act in good faith
in recognizing as binding or in enforcing
arbitral awards in favor of United States
citizens or a corporation, partnership, or
association which is 50 percent or more
beneficially owned by United States citizens,
which have been made by arbitrators appointed
for each case or by permanent arbitral bodies
to which the parties involved have submitted
their dispute.
(F) Such country aids or abets, by granting
sanctuary from prosecution to, any individual
or group which has committed an act of
international terrorism.
(G) Such country has not taken or is not
taking steps to afford internationally
recognized worker rights to workers in the
country (including any designated zone in that
country).
Subparagraphs (D), (E), (F), and (G) shall not prevent
the designation of any country as a beneficiary
developing country under this title if the President
determines that such designation will be in the
national economic interest of the United States and
reports such determination to the Congress with the
reasons therefor.
(c) Factors Affecting Country Designation.--In determining
whether to designate any country as a beneficiary developing
country under this title, the President shall take into
account--
(1) an expression by such country of its desire to be
so designated;
(2) the level of economic development of such
country, including its per capita gross national
product, the living standards of its inhabitants, and
any other economic factors which the President deems
appropriate;
(3) whether or not other major developed countries
are extending generalized preferential tariff treatment
to such country;
(4) the extent to which such country has assured the
United States that it will provide equitable and
reasonable access to the markets and basic commodity
resources of such country and the extent to which such
country has assured the United States that it will
refrain from engaging in unreasonable export practices;
(5) the extent to which such country is providing
adequate and effective protection of intellectual
property rights;
(6) the extent to which such country has taken action
to--
(A) reduce trade distorting investment
practices and policies (including export
performance requirements); and
(B) reduce or eliminate barriers to trade in
services; and
(7) whether or not such country has taken or is
taking steps to afford to workers in that country
(including any designated zone in that country)
internationally recognized worker rights.
(d) Withdrawal, Suspension, or Limitation of Country
Designation.--
(1) In general.--The President may withdraw, suspend,
or limit the application of the duty-free treatment
accorded under this title with respect to any country.
In taking any action under this subsection, the
President shall consider the factors set forth in
section 501 and subsection (c) of this section.
(2) Changed circumstances.--The President shall,
after complying with the requirements of subsection
(f)(2), withdraw or suspend the designation of any
country as a beneficiary developing country if, after
such designation, the President determines that as the
result of changed circumstances such country would be
barred from designation as a beneficiary developing
country under subsection (b)(2). Such country shall
cease to be a beneficiary developing country on the day
on which the President issues an Executive order or
Presidential proclamation revoking the designation of
such country under this title.
(3) Advice to congress.--The President shall, as
necessary, advise the Congress on the application of
section 501 and subsection (c) of this section, and the
actions the President has taken to withdraw, to
suspend, or to limit the application of duty-free
treatment with respect to any country which has failed
to adequately take the actions described in subsection
(c).
(e) Mandatory Graduation of Beneficiary Developing
Countries.--If the President determines that a beneficiary
developing country has become a `high income' country, as
defined by the official statistics of the International Bank
for Reconstruction and Development, then the President shall
terminate the designation of such country as a beneficiary
developing country for purposes of this title, effective on
January 1 of the second year following the year in which such
determination is made.
(f) Congressional Notification.--
(1) Notification of designation.--
(A) In general.--Before the President
designates any country as a beneficiary
developing country under this title, the
President shall notify the Congress of the
President's intention to make such designation,
together with the considerations entering into
such decision.
(B) Designation as least-developed
beneficiary developing country.--At least 60
days before the President designates any
country as a least-developed beneficiary
developing country, the President shall notify
the Congress of the President's intention to
make such designation.
(2) Notification of termination.--If the President
has designated any country as a beneficiary developing
country under this title, the President shall not
terminate such designation unless, at least 60 days
before such termination, the President has notified the
Congress and has notified such country of the
President's intention to terminate such designation,
together with the considerations entering into such
decision.
SEC. 503. DESIGNATION OF ELIGIBLE ARTICLES.
(a) Eligible Articles.--
(1) Designation.--
(A) In general.--Except as provided in
subsection (b), the President is authorized to
designate articles as eligible articles from
all beneficiary developing countries for
purposes of this title by Executive order or
Presidential proclamation after receiving the
advice of the International Trade Commission in
accordance with subsection (e).
(B) Least-developed beneficiary developing
countries.--Except for articles described in
subparagraphs (A), (B), and (E) of subsection
(b)(1) and articles described in paragraphs (2)
and (3) of subsection (b), the President may,
in carrying out section 502(d)(1) and
subsection (c)(1) of this section, designate
articles as eligible articles only for
countries designated as least-developed
beneficiary developing countries under section
502(a)(2) if, after receiving the advice of the
International Trade Commission in accordance
with subsection (e) of this section, the
President determines that such articles are not
import-sensitive in the context of imports from
least-developed beneficiary developing
countries.
(C) Three-year rule.--If, after receiving the
advice of the International Trade Commission
under subsection (e), an article has been
formally considered for designation as an
eligible article under this title and denied
such designation, such article may not be
reconsidered for such designation for a period
of 3 years after such denial.
(2) Rule of origin.--
(A) General rule.--The duty-free treatment
provided under this title shall apply to any
eligible article which is the growth, product,
or manufacture of a beneficiary developing
country if--
(i) that article is imported directly
from a beneficiary developing country
into the customs territory of the
United States; and
(ii) the sum of--
(I) the cost or value of the
materials produced in the
beneficiary developing country
or any two or more such
countries that are members of
the same association of
countries and are treated as
one country under section
507(2), plus
(II) the direct costs of
processing operations performed
in such beneficiary developing
country or such member
countries,
is not less than 35 percent of the
appraised value of such article at the
time it is entered.
(B) Exclusions.--An article shall not be
treated as the growth, product, or manufacture
of a beneficiary developing country by virtue
of having merely undergone--
(i) simple combining or packaging
operations, or
(ii) mere dilution with water or mere
dilution with another substance that
does not materially alter the
characteristics of the article.
(3) Regulations.--The Secretary of the Treasury,
after consulting with the United States Trade
Representative, shall prescribe such regulations as may
be necessary to carry out paragraph (2), including, but
not limited to, regulations providing that, in order to
be eligible for duty-free treatment under this title,
an article--
(A) must be wholly the growth, product, or
manufacture of a beneficiary developing
country, or
(B) must be a new or different article of
commerce which has been grown, produced, or
manufactured in the beneficiary developing
country.
(b) Articles That May Not Be Designated As Eligible
Articles.--
(1) Import sensitive articles.--The President may not
designate any article as an eligible article under
subsection (a) if such article is within one of the
following categories of import-sensitive articles:
(A) Textile and apparel articles which were
not eligible articles for purposes of this
title on January 1, 1994, as this title was in
effect on such date.
(B) 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 the United States insular
possessions.
(C) Import-sensitive electronic articles.
(D) Import-sensitive steel articles.
(E) Footwear, handbags, luggage, flat goods,
work gloves, and leather wearing apparel which
were not eligible articles for purposes of this
title on January 1, 1995, as this title was in
effect on such date.
(F) Import-sensitive semimanufactured and
manufactured glass products.
(G) Any other articles which the President
determines to be import-sensitive in the
context of the Generalized System of
Preferences.
(2) Articles against which other actions taken.--An
article shall not be an eligible article for purposes
of this title for any period during which such article
is the subject of any action proclaimed pursuant to
section 203 of this Act (19 U.S.C. 2253) or section 232
or 351 of the Trade Expansion Act of 1962 (19 U.S.C.
1862, 1981).
(3) Agricultural products.--No quantity of an
agricultural product subject to a tariff-rate quota
that exceeds the in-quota quantity shall be eligible
for duty-free treatment under this title.
(c) Withdrawal, Suspension, or Limitation of Duty-Free
Treatment; Competitive Need Limitation.--
(1) In general.--The President may withdraw, suspend,
or limit the application of the duty-free treatment
accorded under this title with respect to any article,
except that no rate of duty may be established with
respect to any article pursuant to this subsection
other than the rate which would apply but for this
title. In taking any action under this subsection, the
President shall consider the factors set forth in
sections 501 and 502(c).
(2) Competitive need limitation.--
(A) Basis for withdrawal of duty-free
treatment.--
(i) In general.--Except as provided
in clause (ii) and subject to
subsection (d), whenever the President
determines that a beneficiary
developing country has exported
(directly or indirectly) to the United
States during any calendar year
beginning after December 31, 1995--
(I) a quantity of an eligible
article having an appraised
value in excess of the
applicable amount for the
calendar year, or
(II) a quantity of an
eligible article equal to or
exceeding 50 percent of the
appraised value of the total
imports of that article into
the United States during any
calendar year,
the President shall, not later than
July 1 of the next calendar year,
terminate the duty-free treatment for
that article from that beneficiary
developing country.
(ii) Annual adjustment of applicable
amount.--For purposes of applying
clause (i), the applicable amount is--
(I) for 1996, $75,000,000,
and
(II) for each calendar year
thereafter, an amount equal to
the applicable amount in effect
for the preceding calendar year
plus $5,000,000.
(B) Country defined.--For purposes of this
paragraph, the term ``country'' does not
include an association of countries which is
treated as one country under section 507(2),
but does include a country which is a member of
any such association.
(C) Redesignations.--A country which is no
longer treated as a beneficiary developing
country with respect to an eligible article by
reason of subparagraph (A) may, subject to the
considerations set forth in sections 501 and
502, be redesignated a beneficiary developing
country with respect to such article if imports
of such article from such country did not
exceed the limitations in subparagraph (A)
during the preceding calendar year.
(D) Least-developed beneficiary developing
countries.--Subparagraph (A) shall not apply to
any least-developed beneficiary developing
country.
(E) Articles not produced in the united
states excluded.--Subparagraph (A)(i)(II) shall
not apply with respect to any eligible article
if a like or directly competitive article was
not produced in the United States on January 1,
1995.
(F) De minimis waivers.--
(i) In general.--The President may
disregard subparagraph (A)(i)(II) with
respect to any eligible article from
any beneficiary developing country if
the aggregate appraised value of the
imports of such article into the United
States during the preceding calendar
year does not exceed the applicable
amount for such preceding calendar
year.
(ii) Applicable amount.--For purposes
of applying clause (i), the applicable
amount is--
(I) for calendar year 1996,
$13,000,000, and
(II) for each calendar year
thereafter, an amount equal to
the applicable amount in effect
for the preceding calendar year
plus $500,000.
(d) Waiver of Competitive Need Limitation.--
(1) In general.--The President may waive the
application of subsection (c)(2) with respect to any
eligible article of any beneficiary developing country
if, before July 1 of the calendar year beginning after
the calendar year for which a determination described
in subsection (c)(2)(A) was made with respect to such
eligible article, the President--
(A) receives the advice of the International
Trade Commission under section 332 of the
Tariff Act of 1930 on whether any industry in
the United States is likely to be adversely
affected by such waiver,
(B) determines, based on the considerations
described in sections 501 and 502(c) and the
advice described in subparagraph (A), that such
waiver is in the national economic interest of
the United States, and
(C) publishes the determination described in
subparagraph (B) in the Federal Register.
(2) Considerations by the president.--In making any
determination under paragraph (1), the President shall
give great weight to--
(A) the extent to which the beneficiary
developing country has assured the United
States that such country will provide equitable
and reasonable access to the markets and basic
commodity resources of such country, and
(B) the extent to which such country provides
adequate and effective protection of
intellectual property rights.
(3) Other bases for waiver.--The President may waive
the application of subsection (c)(2) if, before July 1
of the calendar year beginning after the calendar year
for which a determination described in subsection
(c)(2) was made with respect to a beneficiary
developing country, the President determines that--
(A) there has been a 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, United States
commerce,
and the President publishes that determination in the
Federal Register.
(4) Limitations on waivers.--
(A) In general.--The President may not
exercise the waiver authority under this
subsection with respect to a quantity of an
eligible article entered during any calendar
year beginning after 1995, the aggregate
appraised value of which equals or exceeds 30
percent of the aggregate appraised value of all
articles that entered duty-free under this
title during the preceding calendar year.
(B) Other waiver limits.--The President may
not exercise the waiver authority provided
under this subsection with respect to a
quantity of an eligible article entered during
any calendar year beginning after 1995, the
aggregate appraised value of which exceeds 15
percent of the aggregate appraised value of all
articles that have entered duty-free under this
title during the preceding calendar year from
those beneficiary developing countries which
for the preceding calendar year--
(i) had a per capita gross national
product (calculated on the basis of the
best available information, including
that of the International Bank for
Reconstruction and Development) of
$5,000 or more; or
(ii) had exported (either directly or
indirectly) to the United States a
quantity of articles that was duty-free
under this title that had an aggregate
appraised value of more than 10 percent
of the aggregate appraised value of all
articles that entered duty-free under
this title during that year.
(C) Calculation of limitations.--There shall
be counted against the limitations imposed
under subparagraphs (A) and (B) for any
calendar year only that value of any eligible
article of any country that--
(i) entered duty-free under this
title during such calendar year; and
(ii) is in excess of the value of
that article that would have been so
entered during such calendar year if
the limitations under subsection
(c)(2)(A) applied.
(5) Effective period of waiver.--Any waiver granted
under this subsection shall remain in effect until the
President determines that such waiver is no longer
warranted due to changed circumstances.
(e) International Trade Commission Advice.--Before
designating articles as eligible articles under subsection
(a)(1), the President shall publish and furnish the
International Trade Commission with lists of articles which may
be considered for designation as eligible articles for purposes
of this title. The provisions of sections 131, 132, 133, and
134 shall be complied with as though action under section 501
and this section were action under section 123 to carry out a
trade agreement entered into under section 123.
(f) Special Rule Concerning Puerto Rico.--No action under
this title may affect any tariff duty imposed by the
Legislature of Puerto Rico pursuant to section 319 of the
Tariff Act of 1930 on coffee imported into Puerto Rico.
SEC. 504. REVIEW AND REPORT TO CONGRESS.
The President shall submit an annual report to the Congress
on the status of internationally recognized worker rights
within each beneficiary developing country.
SEC. 505. DATE OF TERMINATION.
No duty-free treatment provided under this title shall remain
in effect after May 12, 1997.
SEC. 506. AGRICULTURAL EXPORTS OF BENEFICIARY DEVELOPING COUNTRIES.
The appropriate agencies of the United States shall assist
beneficiary developing countries 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 the production of foodstuffs for their citizenry.
SEC. 507. DEFINITIONS.
For purposes of this title:
(1) Beneficiary developing country.--The term
``beneficiary developing country'' means any country
with respect to which there is in effect an Executive
order or Presidential proclamation by the President
designating such country as a beneficiary developing
country for purposes of this title.
(2) Country.--The term ``country'' means any foreign
country or territory, including any overseas dependent
territory or possession of a foreign country, or the
Trust Territory of the Pacific Islands. In the case of
an association of countries which is a free trade area
or customs union, or which is contributing to
comprehensive regional economic integration among its
members through appropriate means, including, but not
limited to, the reduction of duties, the President may
by Executive order or Presidential proclamation provide
that all members of such association other than members
which are barred from designation under section 502(b)
shall be treated as one country for purposes of this
title.
(3) Entered.--The term ``entered'' means entered, or
withdrawn from warehouse for consumption, in the
customs territory of the United States.
(4) Internationally recognized worker rights.--The
term ``internationally recognized worker rights''
includes--
(A) the right of 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.
(5) Least-developed beneficiary developing country.--
The term ``least-developed beneficiary developing
country'' means a beneficiary developing country that
is designated as a least-developed beneficiary
developing country under section 502(a)(2).
FOREIGN ASSISTANCE ACT OF 1961
* * * * * * *
SEC. 231A. ADDITIONAL REQUIREMENTS.
(a) Worker Rights.--
(1) Limitation on OPIC activities.--The Corporation
may insure, reinsure, guarantee, or finance a project
only if the country in which the project is to be
undertaken is taking steps to adopt and implement laws
that extend internationally recognized worker rights,
as defined in section [502(a)(4) of the Trade Act of
1974 (19 U.S.C. 2462(a)(4))] 507(4) of the Trade Act of
1974, to workers in that country (including any
designated zone in that country).
(2) Use of annual reports on workers rights.--The
Corporation shall, in making its determinations under
paragraph (1), use the reports submitted to the
Congress pursuant to section [505(c) of the Trade Act
of 1974 (19 U.S.C. 2465(c))] 504 of the Trade Act of
1974. The restriction set forth in paragraph (1) shall
not apply until the first such report is submitted to
the Congress.
* * * * * * *
(4) Operations of opic in the people's republic of
china.--In making a determination under this section
for the People's Republic of China, the Corporation
shall discuss fully and completely the justification
for making such determination with respect to each item
set forth in subparagraphs (A) through (E) of section
[502(a)(4)] 507(4).
* * * * * * *
TITLE 28, UNITED STATES CODE
* * * * * * *
PART IV--JUDICIARY AND JUDICIAL PROCEDURE
* * * * * * *
CHAPTER 95--COURT OF INTERNATIONAL TRADE
* * * * * * *
SEC. 1581. CIVIL ACTIONS AGAINST THE UNITED STATES AND AGENCIES AND
OFFICERS THEREOF.
(a) The Court of International Trade shall have exclusive
jurisdiction of any civil action commenced to contest the
denial of a protest, in whole or in part, under section 515 of
the Tariff Act of 1930.
(b) The Court of International Trade shall have exclusive
jurisdiction of any civil action commenced under section 516 of
the Tariff Act of 1930.
(c) The Court of International Trade shall have exclusive
jurisdiction of any civil action commenced under section 516A
or 516B of the Tariff Act of 1930.
* * * * * * *
PART VI--PARTICULAR PROCEEDINGS
* * * * * * *
CHAPTER 169--COURT OF INTERNATIONAL TRADE PROCEDURE
* * * * * * *
SEC. 2643. RELIEF.
* * * * * * *
(c)(1) Except as provided in paragraphs (2), (3), (4), [and
(5)] (5), and (6) of this subsection, the Court of
International Trade may, in addition to the orders specified in
subsections (1) and (b) of this section, order any other form
of relief that is appropriate in a civil action, including, but
not limited to, declaratory judgments, orders of remand,
injunctions, and writs of mandamus and prohibition.
* * * * * * *
(6) In any civil action under section 516B of the Tariff
act of 1930, the Court of International Trade may not issue
injunctions or any other form of equitable relief, except with
regard to implementation of a countermeasure order under
section 468 of that Act, upon a proper showing that such relief
is warranted.
UNITED STATES-ISRAEL FREE TRADE AREA IMPLEMENTATION ACT OF 1985
* * * * * * *
SEC. 9. ADDITIONAL PROCLAMATION AUTHORITY.
(a) Elimination or Modifications of Duties.--The President is
authorized to proclaim elimination or modification of any
existing duty as the President determines is necessary to
exempt any article from duty if--
(1) that article is wholly the growth, product, or
manufacture of the West Bank, the Gaza Strip, or a
qualifying industrial zone or is a new or different
article of commerce that has been grown, produced, or
manufactured in the West Bank, the Gaza Strip, or a
qualifying industrial zone;
(2) that article is imported directly from the West
Bank, the Gaza Strip, Israel, or a qualifying
industrial zone; and
(3) the sum of--
(A) the cost or value of the materials
produced in the West Bank, the Gaza Strip,
Israel, or a qualifying industrial zone, plus
(B) the direct costs of processing operations
performed in the West Bank, the Gaza Strip,
Israel, or a qualifying industrial zone,
is not less than 35 percent of the appraised value of
the product at the time it is entered into the United
States.
For purposes of determining the 35 percent content requirement
contained in paragraph (3), the cost or value of materials
which are used in the production of an article in the West
Bank, the Gaza Strip, or a qualifying industrial zone, and are
the products of the United States, may be counted in an amount
up to 15 percent of the appraised value of the article.
(b) Applicability of Certain Provisions of the Agreement.--
(1) Nonqualifying operations.--No article shall be
considered a new or different article of commerce under
this section, and no material shall be included for
purposes of determining the 35 percent requirement of
subsection (a)(3), by virtue of having merely
undergone--
(A) simple combining or packaging operations,
or
(B) mere dilution with water or with another
substance that does not materially alter the
characteristics of the article or material.
(2) Requirements for new or different article of
commerce.--For purposes of subsection (a)(1), an
article is a `new or different article of commerce' if
it is substantially transformed into an article having
a new name, character, or use.
(3) Cost or value of materials.--(A) For purposes of
this section, the cost or value of materials produced
in the West Bank, the Gaza Strip, or a qualifying
industrial zone includes--
(i) the manufacturer's actual cost for the
materials;
(ii) when not included in the manufacturer's
actual cost for the materials, the freight,
insurance, packing, and all other costs
incurred in transporting the materials to the
manufacturer's plant;
(iii) the actual cost of waste or spoilage,
less the value of recoverable scrap; and
(iv) taxes or duties imposed on the materials
by the West Bank, the Gaza Strip, or a
qualifying industrial zone, if such taxes or
duties are not remitted on exportation.
(B) If a material is provided to the manufacturer
without charge, or at less than fair market value, its
cost or value shall be determined by computing the sum
of--
(i) all expenses incurred in the growth,
production, or manufacture of the material,
including general expenses;
(ii) an amount for profit; and
(iii) freight, insurance, packing, and all
other costs incurred in transporting the
material to the manufacturer's plant.
If the information necessary to compute the cost or
value of a material is not available, the Customs
Service may ascertain or estimate the value thereof
using all reasonable methods.
(4) Direct costs of processing operations.--(A) For
purposes of this section, the ``direct costs of
processing operations performed in the West Bank, Gaza
Strip, or a qualifying industrial zone'' with respect
to an article are those costs either directly incurred
in, or which can be reasonably allocated to, the
growth, production, manufacture, or assembly, of that
article. Such costs include, but are not limited to,
the following to the extent that they are includible in
the appraised value of articles imported into the
United States:
(i) All actual labor costs involved in the
growth, production, manufacture, or assembly of
the article, including fringe benefits, on-the-
job training, and costs of engineering,
supervisory, quality control, and similar
personnel.
(ii) Dies, molds, tooling, and depreciation
on machinery and equipment which are allocable
to the article.
(iii) Research, development, design,
engineering, and blueprint costs insofar as
they are allocable to the article.
(iv) Costs of inspecting and testing the
article.
(B) Those items that are not included as direct costs
of processing operations with respect to an article are
those which are not directly attributable to the
article or are not costs of manufacturing the article.
Such items include, but are not limited to--
(i) profit; and
(ii) general expenses of doing business which
are either not allocable to the article or are
not related to the growth, production,
manufacture, or assembly of the article, such
as administrative salaries, casualty and
liability insurance, advertising, and
salesmen's salaries, commissions, or expenses.
(5) Imported directly.--For purposes of this
section--
(A) articles are ``imported directly'' if--
(i) the articles are shipped directly
from the West Bank, the Gaza Strip, a
qualifying industrial zone, or Israel
into the United States without passing
through the territory of any
intermediate country; or
(ii) if shipment is through the
territory of an intermediate country,
the articles in the shipment do not
enter into the commerce of any
intermediate country and the invoices,
bills of lading, and other shipping
documents specify the United States as
the final destination; or
(B) if articles are shipped through an
intermediate country and the invoices and other
documents do not specify the United States as
the final destination, then the articles in the
shipment, upon arrival in the United States,
are imported directly only if they--
(i) remain under the control of the
customs authority in an intermediate
country;
(ii) do not enter into the commerce
of an intermediate country except for
the purpose of a sale other than at
retail, but only if the articles are
imported as a result of the original
commercial transactions between the
importer and the producer or the
producer's sales agent; and
(iii) have not been subjected to
operations other than loading,
unloading, or other activities
necessary to preserve the article in
good condition.
(6) Documentation required.--An article is eligible
for the duty exemption under this section only if--
(A) the importer certifies that the article
meets the conditions for the duty exemption;
and
(B) when requested by the Customs Service,
the importer, manufacturer, or exporter submits
a declaration setting forth all pertinent
information with respect to the article,
including the following:
(i) A description of the article,
quantity, numbers, and marks of
packages, invoice numbers, and bills of
lading.
(ii) A description of the operations
performed in the production of the
article in the West Bank, the Gaza
Strip, a qualifying industrial zone, or
Israel and identification of the direct
costs of processing operations.
(iii) A description of any materials
used in production of the article which
are wholly the growth, product, or
manufacture of the West Bank, the Gaza
Strip, a qualifying industrial zone,
Israel or United States, and a
statement as to the cost or value of
such materials.
(iv) A description of the operations
performed on, and a statement as to the
origin and cost or value of, any
foreign materials used in the article
which are claimed to have been
sufficiently processed in the West
Bank, the Gaza Strip, a qualifying
industrial zone, or Israel so as to be
materials produced in the West Bank,
the Gaza Strip, a qualifying industrial
zone, or Israel.
(v) A description of the origin and
cost or value of any foreign materials
used in the article which have not been
substantially transformed in the West
Bank, the Gaza Strip, or a qualifying
industrial zone.
(c) Shipment of Articles of Israel Through West Bank or Gaza
Strip.--The President is authorized to proclaim that articles
of Israel may be treated as though they were articles directly
shipped from Israel for the purposes of the Agreement even if
shipped to the United States from the West Bank, the Gaza
Strip, or a qualifying industrial zone, if the articles
otherwise meet the requirements of the Agreement.
(d) Treatment of Cost or Value of Materials.--The President
is authorized to proclaim that the cost or value of materials
produced in the West Bank, the Gaza Strip, or a qualifying
industrial zone may be included in the cost or value of
materials produced in Israel under section 1(c)(i) of Annex 3
of the Agreement, and the direct costs of processing operations
performed in the West Bank, the Gaza Strip, or a qualifying
industrial zone may be included in the direct costs of
processing operations performed in Israel under section
1(c)(ii) of Annex 3 of the Agreement.
(e) Qualifying Industrial Zone Defined.--For purposes of this
section, a ``qualifying industrial zone'' means any area that--
(1) encompasses portions of the territory of Israel
and Jordan or Israel and Egypt;
(2) has been designated by local authorities as an
enclave where merchandise may enter without payment of
duty or excise taxes; and
(3) has been specified by the President as a
qualifying industrial zone.
MERCHANT MARINE ACT OF 1936
* * * * * * *
TITLE V--CONSTRUCTION-DIFFERENTIAL SUBSIDY
* * * * * * *
SEC. 511. RESERVE FUNDS FOR CONSTRUCTION OR ACQUISITION OF VESSELS;
TAXATION (46 APP. U.S.C. 1161 (1994)).
(a) ``New Vessel'' Defined.--When used in this section the
term ``new vessel'' means any vessel (1) documented or agreed
with the Secretary of Transportation to be documented under the
laws of the United States; (2) construction in the United
States after December 31, 1939 or, if the vessel is a
Shipbuilding Agreement vessel, constructed in a Shipbuilding
Agreement Party, but only with regard to moneys deposited, on
or after the date on which the Shipbuilding Trade Agreement Act
takes effect, into a construction reserve fund established
under subsection (b), or the construction of which has been
financed under Titles V or VII of this Act, as amended, or the
construction of which has been aided by a mortgage insured
under Title XI of this Act as amended; and (3) either (A) of
such type, size, and speed as the Secretary of Transportation
shall determine to be suitable for use on the high seas or
Great Lakes in carrying out the purposes of this Act, but not
of less than two thousand gross tons or of less speed than
twelve knots, unless the Secretary of Transportation shall
determine and certify in each case that a vessel of a specified
lesser tonnage or speed is desirable for use by the United
States in case of war or national emergency, or (B) constructed
to replace a vessel or vessels requisitioned or purchased by
the United States.
* * * * * * *
TITLE VI--OPERATING-DIFFERENTIAL SUBSIDY
SEC. 601. SUBSIDY AUTHORIZED FOR OPERATION OF VESSELS IN FOREIGN TRADE
OR IN OFF-SEASON CRUISES (46 APP. U.S.C. 1171
(1994)).
(a) Application for Subsidy; Conditions Precedent to
Granting.--The Secretary of Transportation is authorized and
directed to consider the application of any citizen of the
United States for financial aid in the operation of a vessel or
vessels, which are to be used in an essential service in the
foreign commerce of the United States or in such service and in
cruises authorized under section 613 of this title. In this
title VI the term ``essential service'' means the operation of
a vessel on a service, route, or line described in section
211(a) or in bulk cargo carrying service described in section
211(b). No such application shall be approved by the Secretary
of Transportation unless he determines that (1) the operation
of such vessel or vessels in an essential service is required
to meet foreign-flag competition and to promote the foreign
commerce of the United States except to the extent such vessels
are to be operated on cruises authorized under section 613 of
this title[, and that such vessel or vessels were built in the
United States, or have been documented under the laws of the
United States not later than February 1, 1928, or actually
ordered and under construction for the account of citizens of
the United States prior to such date;] and that such vessel or
vessels were built in the United States, or, if the vessel or
vessels are Shipbuilding Agreement vessels, in a Shipbuilding
Agreement Party; (2) the applicant owns or leases, or can and
will build or purchase or lease, a vessel or vessels of the
size, type, speed, and number, and with the proper equipment
required to enable him to operate in an essential service, in
such manner as may be necessary to meet competitive conditions,
and to promote foreign commerce; (3) the applicant possesses
the ability, experience, financial resources, and other
qualifications necessary to enable him to conduct the proposed
operations of the vessel or vessels as to meet competitive
conditions and promote foreign commerce; (4) the granting of
the aid applied for is necessary to place the proposed
operations of the vessel or vessels on a parity with those of
foreign competitors, and is reasonably calculated to carry out
effectively the purposes and policy of this Act. To the extent
the application covers cruises, as authorized under section 613
of this title, the Secretary of Transportation may make the
portion of this last determination relating to parity on the
basis that any foreign flag cruise from the United States
competes with any American flag cruise from the United States.
* * * * * * *
SEC. 606. READJUSTMENTS; CHANGE IN SERVICE; WITHDRAWAL FROM SERVICE;
PAYMENT OF EXCESS PROFITS; WAGES, ETC.; AMERICAN
MATERIALS (46 APP. U.S.C. 1176 (1994)).
Every contract for an operating-differential subsidy under
this title shall provide (1) that the amount of the future
payments to the contractor shall be subject to review and
readjustment from time to time, but not more frequently than
once a year, at the instance of the Secretary of Transportation
or of the contractor. If any such readjustment cannot be
reached by mutual agreement, the Secretary of Transportation,
on his own motion or on the application of the contractor,
shall, after a proper hearing, determine the facts and make
such readjustment in the amount of such future payments as he
may determine to be fair and reasonable and in the public
interest. The testimony in every such proceeding shall be
reduced to writing and filed in the office of the Secretary of
Transportation. His decision shall be based upon and governed
by the changes which may have occurred since the date of the
said contract, with respect to the items theretofore considered
and on which such contract was based, and other conditions
affecting shipping, and shall be promulgated in a formal order,
which shall be accompanied by a report in writing in which the
Secretary of Transportation shall state his findings of fact;
(2) that the compensation to be paid under it shall be reduced,
under such terms and in such amounts as the Secretary of
Transportation shall determine, for any periods in which the
vessel or vessels are laid up; (3) that if the Secretary of
Transportation shall determine that a change in an essential
service, which is receiving an operating-differential subsidy
under this title, is necessary in the accomplishment of the
purposes of this Act, he may make such change upon such
readjustment of payments to the contractor as shall be arrived
at by the method prescribed in clause (1) of these conditions;
(4) that if at any time the contractor receiving an operating-
differential subsidy claims that he cannot maintain and operate
his vessels in such an essential service, with a reasonable
profit upon his investment, and applies to the Secretary of
Transportation for a modification or rescission of his contract
to maintain such essential service, and the Secretary of
Transportation determines that such claim is proved, the
Secretary of Transportation shall modify or rescind such
contract and permit the contractor to withdraw such vessels
from such essential service, upon a date fixed by the Secretary
of Transportation, and upon the date of such withdrawal the
further payment of the operating-differential subsidy shall
cease and the contractor be discharged from any further
obligation under such contract; (5) that the contractor shall
conduct his operations with respect to essential service, and
any services authorized under section 613 of this title,
covered by his contract in an economical and efficient manner;
and (6) that whenever practicable, and operator who receives
subsidy with respect to subsistence of officers and crews shall
use as such subsistence items only articles, materials, and
supplies of the growth, production, and manufacture of the
United States, as defined in section 505 herein, except when it
is necessary to purchase supplies outside the United States to
enable such vessel to continue and complete here voyage, and an
operator who receives subsidy with respect to repairs shall
perform such repairs within any of the United States or the
Commonwealth of Puerto Rico, or, if the vessel is a
Shipbuilding Agreement vessel, in a Shipbuilding Agreement
Party or in the United State except in an emergency.
* * * * * * *
SEC. 607.7 CAPITAL CONSTRUCTION FUND (46 APP. U.S.C. 1177 (1994)).
(a) Agreement Rules; Persons Eligible; Replacement,
Additional, or Reconstructed Vessels for Prescribed Trade and
Fishery Operations; Amount of Deposits, Annual Limitation;
Conditions and Requirements for Deposits and Withdrawals.--Any
citizen of the United States owning or leasing one or more
eligible vessels (as defined in subsection (k)(1)) may enter
into an agreement with the Secretary under, and as provided in,
this section to establish a capital construction fund
(hereinafter in this section referred to as the ``fund'') with
respect to any or all of such vessels. Any agreement entered
into under this section shall be for the purpose of providing
replacement vessels, additional vessels, or reconstructed
vessels, built in the United States or, if the vessel is a
Shipbuilding Agreement vessel, in a Shipbuilding Agreement
Party, and documented under the laws of the United States for
operation in the United States foreign, Great Lakes, or
noncontiguous domestic trade or in the fisheries of the United
States and shall provide for the deposit in the fund of the
amounts agreed upon as necessary or appropriate to provide for
qualified withdrawals under subsection (f). The deposits in the
fund, and all withdrawals from the fund, whether qualified or
nonqualified, shall be subject to such conditions and
requirements as the Secretary may by regulations prescribe or
are set forth in such agreement; except that the Secretary may
not require any person to deposit in the fund for any taxable
year more than 50 percent of that portion of such person's
taxable income for such year (computed in the manner provided
in subsection (b)(1)(A)) which is attributable to the operation
of the agreement vessels.
* * * * * * *
(k) Definitions.--For the purposes of this section--
(1) The term ``eligible vessel'' means any vessel--
[(A) constructed in the United States and,
if reconstructed, reconstructed in the United
States,]
(A)(i) constructed in the United States and,
if reconstructed, reconstructed in the United
States or in a Shipbuilding Agreement Party, or
(ii) that is a Shipbuilding Agreement vessel
and is constructed in a Shipbuilding Agreement
Party and, if reconstructed, is reconstructed
in a Shipbuilding Agreement Party or in the
United States,
* * * * * * *
(2) The term ``qualified vessel'' means any vessel--
[(A) constructed in the United States and, if
reconstructed, reconstructed in the United
States,]
(A)(i) constructed in the United States and,
if reconstructed, reconstructed in the United
States or in a Shipbuilding Agreement Party, or
(ii) that is a Shipbuilding Agreement vessel
and is constructed in a Shipbuilding Agreement
Party and, if reconstructed, is reconstructed
in a Shipbuilding Agreement Party or in the
United States, but only with regard to moneys
deposited into the fund on or after the date on
which the Shipbuilding Trade Agreement Act
takes effect.
* * * * * * *
SEC. 610. VESSELS ELIGIBLE TO SUBSIDY (46 APP. U.S.C. 1180 (1994)).
An operating-differential subsidy shall not be paid under
authority of this title on account of the operation of any
vessel which does not meet the following requirements: (1) The
vessel shall be of steel or other acceptable metal, shall be
propelled by steam or motor, shall be as nearly fireproof as
practicable, [shall be built in a domestic yard or shall have
been documented under the laws of the United States not later
than February 1, 1928, or actually ordered and under
construction for the account of citizens of the United States
prior to such date,] shall be built in the United States or, if
the vessel is a Shipbuilding Agreement vessel, in a
Shipbuilding Agreement Party, and shall be documented under
the laws of the United States, during the entire life of the
subsidy contract; and (2) if the vessel shall be constructed
after the passage of this act it shall be either a vessel
constructed according to plans and specifications approved by
the Secretary of Transportation and the Secretary of the Navy,
with particular reference to economic conversion into an
auxiliary naval vessel, or a vessel approved by the Secretary
of Transportation and the Navy Department as otherwise useful
to the United States in time of national emergency.
* * * * * * *
TITLE IX--MISCELLANEOUS PROVISIONS
SEC. 901. TRANSPORTATION IN AMERICAN VESSELS OF GOVERNMENT PERSONNEL
AND CERTAIN CARGOES (46 APP. U.S.C. 1241 (1994)).
* * * * * * *
(b) Cargoes Procured, Furnished or Financed by United
States; Waiver in Emergencies; Exceptions; Definition.--
(1) Whenever the United States shall procure,
contract for, or otherwise obtain for its own account,
or shall furnish to or for the account of any foreign
nation without provision for reimbursement, any
equipment, materials, or commodities, within or without
the United States, or shall advance funds or credits or
guarantee the convertibility of foreign currencies in
connection with the furnishing of such equipment,
materials, or commodities, the appropriate agency or
agencies shall take such steps as may be necessary and
practicable to assure that at least 50 per centum of
the gross tonnage of such equipment, materials, or
commodities (computed separately for dry bulk carriers,
dry cargo liners, and tankers), which may be
transported on ocean vessels shall be transported on
privately owned United States-flag commercial vessels,
to the extent such vessels are available at fair and
reasonable rates for United States-flag commercial
vessels, in such manner as will insure a fair and
reasonable participation of United States-flag
commercial vessels in such cargoes by geographic areas:
Provided, That the provisions of this subsection may be
waived whenever the Congress by concurrent resolution
or otherwise, or the President of the United States or
the Secretary of Defense declares that an emergency
exists justifying a temporary waiver of the provisions
of section 901(b)(1) and so notifies the appropriate
agency or agencies: Provided further, That the
provisions of this subsection shall not apply to
cargoes carried in the vessels of the Panama Canal
Company. Nothing herein shall repeal or otherwise
modify the provisions of Public Resolution Numbered 17,
Seventy-third Congress (48 Stat. 500), as amended. [For
purposes of this section, the term ``privately owned
United States-flag commercial vessels'' shall not be
deemed to include any vessel which, subsequent to the
date of enactment of this amendment, shall have been
either (a) built outside the United States, (b) rebuilt
outside the United States, or (c) documented under any
foreign registry, until such vessel shall have been
documented under the laws of the United States for a
period of three years: Provided, however, That the
provisions of this amendment shall not apply where, (1)
prior to the enactment of this amendment, the owner of
a vessel, or contractor for the purchases of a vessel,
originally constructed in the United States and rebuilt
abroad or contracted to be rebuilt abroad, has notified
the Maritime Administration in writing of its intent to
document such vessel under United States registry, and
such vessel is so documented on its first arrival at a
United States port not later than one year subsequent
to the date of the enactment of this amendment, or (2)
where prior to the enactment of this amendment, the
owner of a vessel under United States registry has made
a contract for the rebuilding abroad of such vessel and
has notified the Maritime Administration of such
contract, and such rebuilding is completed and such
vessel is thereafter documented under United States
registry on its first arrival at a United States port
not later than one year subsequent to the date of the
enactment of this amendment.]
For purposes of this section, the term ``privately owned
United States-flag commercial vessels'' shall be deemed to
include--
(A) any privately owned United States-flag commercial
vessel constructed in the United States, and if
rebuilt, rebuilt in the United States or in a
Shipbuilding Agreement Party on or after the date on
which the Shipbuilding Trade Agreement Act takes
effect, and
(B) any privately owned vessel constructed in a
Shipbuilding Agreement Party on or after the date on
which the Shipbuilding Trade Agreement Act takes
effect, and if rebuilt, rebuilt in a Shipbuilding
Agreement Party or in the United States, that is
documented pursuant to chapter 121 of title 46, United
States Code.
The term ``privately owned United States-flag commercial
vessels'' shall also be deemed to include any cargo vessel that
so qualified pursuant to section 615 of this Act or this
paragraph before the date on which the Shipbuilding Trade
Agreement Act takes effect. The term ``privately owned United
States-flag commercial vessels'' shall not be deemed to include
any liquid bulk cargo vessel that does not meet the
requirements of section 3703a of title 46, United States Code.
* * * * * * *
SEC. 905. DEFINITIONS (46 APP. U.S.C. 1244 (1994)).
* * * * * * *
(h) The term ``Shipbuilding Agreement'' means the Agreement
Respecting Normal Competitive Conditions in the Commercial
Shipbuilding and Repair Industry, which resulted from
negotiations under the auspices of the Organization for
Economic Cooperation and Development, and was entered into on
December 21, 1994.
(i) The term ``Shipbuilding Agreement Party'' means a state
or separate customs territory that is a Party to the
Shipbuilding Agreement, and with respect to which the United
States applies the Shipbuilding Agreement.
(j) The term ``Shipbuilding Agreement vessel'' means a
vessel to which the Secretary determines Article 2.1 of the
Shipbuilding Agreement applies.
(k) The term ``Export Credit Understanding'' means the
Understanding on Export Credits for Ships which resulted from
negotiations under the auspices of the Organization for
Economic Cooperation and Development and was entered into on
December 21, 1994.
(l) The term ``Export Credit Understanding vessel'' means a
vessel to which the Secretary determines the Export Credit
Understanding applies.
* * * * * * *
TITLE XI--FEDERAL SHIP MORTGAGE INSURANCE
* * * * * * *
SEC. 1104A. ELIGIBILITY FOR GUARANTEE (46 APP. U.S.C. 1274 (1994)).
* * * * * * *
(b) Contents of Obligations.--Obligations guaranteed under
this title--
* * * * * * *
[(5) shall bear interest (exclusive of charges for
the guarantee and service charges, if any) at rates not
to exceed such per centum per annum on the unpaid
principal as the Secretary determines to be reasonable,
taking into account the range of interest rates
prevailing in the private market for similar loans and
the risks assumed by the Secretary;]
(5) shall bear interest (exclusive of charges for the
guarantee and service charges, if any) at rates not to
exceed such percent per annum on the unpaid principal
as the Secretary determines to be reasonable, taking
into account the range of interest rates prevailing in
the private market for similar loans and the risks
assumed by the Secretary, except that, with respect to
Export Credit Understanding vessels, and Shipbuilding
Agreement vessels, the obligations shall bear interest
at a rate the Secretary determines to be consistent
with obligations of the United States under the Export
Credit Understanding or the Shipbuilding Agreement, as
the case may be;
* * * * * * *
[(i) Limitation on Establishment of Percentage.--The
Secretary may not with respect to--
(1) the general 75 percent or less limitation in
subsection (b)(2);
(2) the 87\1/2\ percent or less limitation in the
1st, 2nd, 4th, or 5th proviso to subsection (b)(2) or
section 1112(b); or
(3) the 80 percent or less limitation in the 3rd
proviso to such subsection;
establish by rule, regulation, or procedure any percentage
within any such limitation that is, or is intended to be,
applied uniformly to all guarantees or commitments to guarantee
made under this section that are subject to the limitation.]
(i)(1) Except as provided in paragraph (2), the Secretary
may not, with respect to--
(A) the general 75 percent or less limitation
contained in subsection (b)(2),
(B) the 87\1/2\ percent or less limitation contained
in the 1st, 2nd, 4th, or 5th proviso to subsection
(b)(2) or in section 1121(b), or
(C) the 80 percent or less limitation in the 3rd
proviso to such subsection,
establish by rule, regulation, or procedure any percentage
within any such limitation that is, or is intended to be,
applied uniformly to all guarantees or commitments to guarantee
made under this section that are subject to the limitation.
(2) With respect to Export Credit Understanding vessels and
Shipbuilding Agreement vessels, the Secretary may establish by
rule, regulation, or procedure a uniform percentage that the
Secretary determines to be consistent with obligations of the
United States under the Export Credit Understanding or the
Shipbuilding Agreement, as the case may be.
* * * * * * *
SEC. 1104B. FINANCING CONTRACT FOR CONSTRUCTION OR RECONSTRUCTION OF
COMMERCIAL VESSEL; VESSEL REPLACEMENT GUARANTEE
FUND (46 APP. U.S.C. 1274a (1994)).
* * * * * * *
(b) For the purposes of this section--
(1) the maximum term for obligations guaranteed under
this program may not exceed 25 years;
(2) obligations guaranteed may not exceed 87\1/2\
percent of the actual cost or depreciated actual cost
to the applicant for the construction or reconstruction
of the vessel; and
(3) reconstruction cost obligations may not be
guaranteed unless the vessel after reconstruction will
have a useful life of at least 15 years[.], except
that, with respect to Export Credit Understanding
vessels and Shipbuilding Agreement vessels, the
Secretary may establish by rule, regulation, or
procedure a uniform percentage that the Secretary
determines to be consistent with obligations of the
United States under the Export Credit Understanding or
the Shipbuilding Agreement, as the case may be.
CARIBBEAN BASIN ECONOMIC RECOVERY ACT
* * * * * * *
Subtitle A--Duty-Free Treatment
* * * * * * *
SEC. 212. BENEFICIARY COUNTRY.
* * * * * * *
(b) In designating countries as ``beneficiary countries''
under this title the President shall consider only the
following countries and territories or successor political
entities:
* * * * * * *
(7) if such country has not or is not taking steps to
afford internationally recognized worker rights (as
defined in section [502(a)(4)] 507(4) of the Trade Act
of 1974) to workers in the country (including any
designated zone in that country).
Paragraphs (1), (2), (3), (5), and (7) shall not prevent the
designation of any country as a beneficiary country under this
Act if the President determines that such designation will be
in the national economic or security interest of the United
States and reports such determination to the Congress with his
reasons therefor.
* * * * * * *
EXPORT ENHANCEMENT ACT OF 1988
* * * * * * *
Subchapter II--General Provisions
SEC. 2202. COUNTRY REPORTS ON ECONOMIC POLICY AND TRADE PRACTICES.
* * * * * * *
(8) the country's laws, enforcement of those laws,
and practices with respect to internationally
recognized worker rights (as defined in section
[502(a)(4)] 507(4)) the conditions of worker rights in
any sector which produces goods in which United States
capital is invested, and the extent of such investment.
* * * * * * *
AGRICULTURAL ACT OF 1949
* * * * * * *
SEC. 103B. LOANS, PAYMENTS, AND ACREAGE REDUCTION PROGRAMS FOR THE 1991
THROUGH 1997 CROPS OF UPLAND COTTON.
(a) Loans.--
(1) In general.--* * *
* * * * * * *
(5) Marketing loan provisions.--
(A) In general.--* * *
* * * * * * *
(F) Special import quota.--
(i) Establishment.--* * *
* * * * * * *
(v) Preferential tariff treatment.--
The quantity under a special import
quota shall be considered to be an in-
quota quantity for purposes of section
213(d) of the Caribbean Basin Economic
Recovery Act (19 U.S.C. 2703(d)),
section 204 of the Andean Trade
Preference Act (19 U.S.C. 3203),
section [503(d) of the Trade Act of
1974 (19 U.S.C. 2463(d))] 503(b)(3) of
the Trade Act of 1974, and General Note
3(a)(iv) to the HTS.
* * * * * * *
(n) Limited Global Import Quota.--
(1) In general.--* * *
* * * * * * *
(A) Quantity.--* * *
* * * * * * *
(C) Preferential Tariff Treatment.--The
quantity under a limited global import quota
shall be considered to be an in-quota quantity
for purposes of section 213(d) of the Caribbean
Basin Economic Recovery Act (19 U.S.C.
2703(d)), section 204 of the Andean Trade
Preference Act (19 U.S.C. 3203), section
[503(d) of the Trade Act of 1974 (19 U.S.C.
2463(d))] 503 (b)(3) of the Trade Act of 1974,
and General Note 3(a)(iv) to the HTS.
* * * * * * *
ANDEAN TRADE PREFERENCE ACT
* * * * * * *
TITLE II--TRADE PREFERENCE FOR THE ANDEAN REGION
* * * * * * *
SEC. 203. BENEFICIARY COUNTRY.
(a) Definitions.--* * *
* * * * * * *
(c) Limitations on Designation.--The President shall not
designate any country a beneficiary country under this title--
* * * * * * *
(7) if such country has not or is not taking steps to
afford internationally recognized worker rights (as
defined in section [502(a)(4)] 507(4) of the Trade Act
of 1974) to workers in the country (including any
designated zone in that country).
* * * * * * *
HARMONIZED TARIFF SCHEDULE OF THE UNITED STATES
* * * * * * *
GENERAL NOTES
* * * * * * *
3. Rates of Duty.--The rates of duty in the ``Rates of
Duty'' columns designated 1 (``General'' and ``Special'') and 2
of the tariff schedule apply to goods imported into the customs
territory of the United Sates as hereinafter provided in this
note:
(a) Rate of Duty Column 1.
* * * * * * *
(iv) Products of Insular Possessions.
(A) * * *
* * * * * * *
(C) Subject to the limitations
imposed under [sections 503(b) and
504(c)] subsections (a), (c), and (d)
of section 503 of the Trade Act of
1974, goods designated as eligible
under section 503 of such Act which are
imported from an insular possession of
the United States shall receive duty
treatment no less favorable than the
treatment afforded such goods imported
from a beneficiary developing country
under title V of such Act.
* * * * * * *
NORTH AMERICAN FREE TRADE AGREEMENT IMPLEMENTATION ACT
* * * * * * *
TITLE II--CUSTOMS PROVISIONS
SEC. 201. TARIFF MODIFICATIONS.
(a) Tariff Modifications Provided for in the Agreement.--
(1) Proclamation authority.--The President may
proclaim--
(A) such modifications or continuation of any
duty,
(B) such continuation of duty-free or excise
treatment, or
(C) such additional duties,
as the President determines to be necessary or
appropriate to carry out or apply articles 302, 305,
307, 308, and 703 and Annexes 302.2, 307.1, 308.1,
308.2, 300-B, 703.2, and 703.3 of the Agreement.
(2) Effect on mexican gsp status.--Notwithstanding
section [502(a)(2) of the Trade Act of 1974 (19 U.S.C.
2462(a)(2))] 502(f)(2) of the Trade Act of 1974, the
President shall terminate the designation of Mexico as
a beneficiary developing country for purposes of title
V of the Trade Act of 1974 on the date of entry into
force of the Agreement between the United States and
Mexico.
* * * * * * *
OMNIBUS TRADE AND COMPETITIVENESS ACT OF 1988
TITLE I--TRADE, CUSTOMS, AND TARIFF LAWS
* * * * * * *
Subtitle B--Implementation of the Harmonized Tariff Schedule
* * * * * * *
SEC. 1211. TRANSITION TO THE HARMONIZED TARIFF SCHEDULE.
* * * * * * *
(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))] (as in effect on July 31, 1995).
(2) In applying section 504(c)(1) of the Trade Act of
1974 [(19 U.S.C. 2464(c)(1))] (as in effect on July 31,
1995) for calendar year 1989, the reference in such
section to July 1, shall be treated as a reference to
September 1.
* * * * * * *
URUGUAY ROUND AGREEMENTS ACT
* * * * * * *
Subtitle D--Related Provisions
SEC. 131. WORKING PARTY ON WORKER RIGHTS.
(a) In General.--The President shall seek the establishment
in the GATT 1947, and, upon entry into force of the WTO
Agreement with respect to the United States, in the WTO, of a
working party to examine the relationship of internationally
recognized worker rights, as defined in section [502(a)(4)]
507(4) of the Trade Act of 1974, to the articles, objectives,
and related instruments of the GATT 1947 and of the WTO,
respectively.
(b) Objectives of Working Party.--The objectives of the
United States for the working party described in subsection (a)
are to--
(1) explore the linkage between international trade
and internationally recognized worker rights, as
defined in section [502(a)4)] 507(4) of the Trade Act
of 1974, taking into account differences in the level
of development among countries;
(2) examine the effects on international trade of the
systematic denial of such rights;
(3) consider ways to address such effects; and
(4) develop methods to coordinate the work program of
the working party with the International Labor
Organization.
* * * * * * *
INTERNATIONAL FINANCIAL INSTITUTIONS ACT
* * * * * * *
SEC. 1621. ENCOURAGEMENT OF FAIR LABOR PRACTICES.
(a) Adoption of Policies and Procedures.-- The Secretary of
the Treasury shall direct the United States Executive directors
of the international financial institutions (as defined in
section 262r(c)(2) of this title) to use the voice and vote of
the United States to urge the respective institution--
(1) to adopt policies to encourage borrowing
countries to guarantee internationally recognized
worker rights (within the meaning of section
[502(a)(4)] 507(4) and to include the status of such
rights as an integral part of the institution's policy
dialogue with each borrowing country;
* * * * * * *