[Senate Report 105-280]
[From the U.S. Government Publishing Office]
Calendar No. 517
105th Congress Report
SENATE
2d Session 105-280
_______________________________________________________________________
TRADE AND TARIFF ACT OF 1998
_______
July 31, 1998.--Ordered to be printed
_______________________________________________________________________
Mr. Roth, from the Committee on Finance, submitted the following
R E P O R T
[To accompany 2400]
[Including cost estimate of the Congressional Budget Office]
The Committee on Finance, having considered legislation to
provide certain tariff preferences to the countries of sub-
Saharan Africa and the Caribbean Basin, to renew the
Generalized System of Preferences, to renew the President's
authority to proclaim changes in tariffs resulting from the
negotiation of reciprocal trade agreements and to renew
congressional procedures for implementing provisions of such
agreements in United States law, to reauthorize existing trade
adjustment assistance programs, to introduce a mechanism for
investigating foreign barriers to United States agricultural
exports, to implement an international agreement imposing
disciplines on shipbuilding subsidies, to normalize trade
relations with Mongolia, and to make minor changes to the
customs laws of the United States, reports favorably thereon
and refers the bill to the full Senate with a recommendation
that the bill do pass.
CONTENTS
Page
I. Background.......................................................2
II. Summary of Bill..................................................3
III. General Description of Bill......................................4
A. Title I--Trade and Development........................ 4
1. Subtitle A--Legislation Authorizing a New Trade
Policy for Sub-Saharan Africa...................... 4
a. Background...................................... 4
b. Summary of Subtitle............................. 5
c. General Description of Subtitle................. 6
2. Subtitle B--Legislation Extending Duty-Free
Treatment Under the Generalized System of
Preferences...................................... 10
a. Background...................................... 11
b. General Description of Subtitle................. 11
3. Subtitle C--Legislation Authorizing the United
States-Caribbean Basin Trade Enhancement Act..... 11
a. Background...................................... 11
b. General Description of Subtitle................. 13
B. Title II Legislation To Extend Tariff Proclamation
Authority and Fast Track Procedures for Congressional
Consideration of Trade Agreements.................... 16
1. Background........................................ 16
2. Summary of Title.................................. 18
3. General Description of Title...................... 19
C. Title III Legislation Reauthorizing the Trade
Adjustment Assistance Programs....................... 34
1. Background........................................ 34
2. General Description of Title...................... 35
D. Title IV--Legislation Establishing a Mechanism for
Identifying Market Access Barriers for Agricultural
Products............................................. 35
1. Background........................................ 35
2. General Description of Title...................... 36
E. Title V--Legislation To Implement the OECD
Shipbuilding Agreement .............................. 37
1. Background........................................ 37
2. Summary of Title.................................. 38
a. Injurious Pricing and Countermeasures........... 39
b. Other Provisions................................ 39
3. General Description of Title...................... 40
F. Title VI--Miscellaneous Trade and Tariff Provisions... 62
1. Subtitle A--Legislation to Extend Permanent Normal
Trade Relations (NTR) Tariff Treatment to Imports
from Mongolia.................................... 62
a. Background...................................... 62
b. General Description of Subtitle................. 63
2. Subtitle B--Legislation Implementing Certain
Miscellaneous Tariff Provisions.................. 63
G. Title VII--Legislation Implementing Revenue Provisions 67
IV. Congressional Action............................................69
V. Votes of the Committee..........................................69
A. Motion to Report the Bill............................. 69
B. Votes on Amendments................................... 69
VI. Budgetary Impact ...............................................70
A. Committee Estimates................................... 70
B. Budget Authority and Tax Expenditures................. 72
1. Budget Authority.................................. 72
2. Tax Expenditures.................................. 72
C. Consultation with Congressional Budget Office......... 72
VII. Regulatory Impact and Unfunded Mandates.........................79
A. Regulatory Impact..................................... 79
1. Impact on Regulations............................. 79
2. Impact on Personal Privacy and Paperwork.......... 81
B. Unfunded Mandates..................................... 81
VIII.Changes in Existing Law Made by the Bill, as Reported ..........82
I. BACKGROUND
The Finance Committee's work on the Trade and Tariff Act of
1998 takes place against the backdrop of dramatic events
unfolding in the global economy. As the Committee's recent
hearings have underscored, the Asian financial crisis in
particular is dampening the prospects for economic growth at
home and abroad.
The impact has been felt most dramatically in our
agricultural sector. American farmers depend on export markets
for forty percent of their family income. The decline in
international demand, combined with other factors, has forced a
sharp decline in commodity prices and farm income.
Other sectors of the economy have been affected as well.
United States manufacturers face both a decline in their export
markets and strong price competition at home as the dollar has
continued to appreciate against foreign currencies. Service
providers have faced a decline in export demand as well.
In the past, economic events such as these have frequently
led to calls both at home and abroad for increased protection
against foreign competition. As history has proved, those calls
have led to disastrous consequences for both the United States
and world economies.
In the Committee's view, what is needed, instead, is strong
international leadership to prevent a rising tide of
protectionism from washing away the benefits the international
trading system has afforded both producers and consumers in the
United States. American farmers, manufacturers and service
providers can expect little in the way of progress in
reclaiming and expanding markets for their goods and services
unless the United States provides that leadership.
Recent events underscore the need for a strong, unequivocal
statement of the United States' commitment to a free and open
trading system that will provide a rising standard of living
for both U.S. and foreign workers. The Trade and Tariff Act of
1998 makes that statement. Trade is a positive-sum game from
which both the United States and its trading partners can
benefit if the United States can move aggressively ahead with
its trade agenda. The Trade and Tariff Act of 1998 helps
establish that agenda and provides the President with the tools
he needs to implement it.
II. SUMMARY OF BILL
The Trade and Tariff Act of 1998 is divided into seven
titles, a number of which incorporate legislation previously
reported favorably by the Committee. Title I establishes a new
program of trade preferences for the countries of sub-Saharan
Africa in order to encourage investment and trade in one of the
poorest regions in the world. Title I also renews the existing
Generalized System of Preferences program and affords
additional trade benefits to the eligible beneficiary countries
under the Caribbean Basin Economic Recovery Act.
Title II of the Trade and Tariff Act of 1998 would renew
the President's authority to proclaim changes in United States
tariff schedules resulting from the negotiation of reciprocal
trade agreements. Title II would also renew congressional
procedures for implementing any changes to United States law
required by an international trade agreement achieving the
objectives established by Congress.
Title III reauthorizes existing trade adjustment assistance
programs without modification for a two-year period. Those
programs include (1) trade adjustment assistance for workers
displaced by import competition, (2) trade adjustment
assistance for firms facing a significant adjustment due to
increased import competition, and (3) trade adjustment
assistance programs established in conjunction with the NAFTA.
Those programs would expire on September 30, 1998, in the
absence of reauthorization.
Title IV creates a new mechanism for highlighting and
potentially investigating barriers to U.S. trade in
agricultural products. Title IV is intended to expand access to
foreign markets for United States agricultural products.
Title V incorporates legislation implementing the Agreement
Respecting Normal Competitive Conditions in the Commercial
Shipbuilding and Repair Industry negotiated under the auspices
of the Organization for Economic Cooperation and Development.
With minor modifications, Title V reflects legislation reported
favorably last year by both the Finance and Commerce
Committees.
Title VI would extend normal trade relations to Mongolia on
a permanent and unconditional basis. Title VI would also make
various changes to the United States tariff laws, including
suspending certain duties on wool fabric and on certain
articles brought to the United States by athletes and trainers
participating in the Olympics and other world sporting events,
expanding a trade program for United States insular
possessions, allowing the importation of gum arabic and
extending current duty drawback rules to materials used in the
construction or equipment of certain mobile offshore drilling
units.
Title VII adds two further revenue provisions. One would
expand the definition of vessels qualified for capital
construction fund treatment. The other would modify the period
allowed for carryback and carryover of the Foreign Tax Credit.
III. GENERAL DESCRIPTION OF BILL
A. Title I--Trade and Development
1. Subtitle A--Legislation Authorizing a New Trade Policy for Sub-
Saharan Africa
Subtitle A of Title I of the bill authorizes a new trade
policy for sub-Saharan Africa. This subtitle would create a
Senate substitute for the trade-related provisions of the
African Growth and Opportunity Act (H.R. 1432), which was
passed by the House of Representatives on March 11, 1998.
a. Background
The subtitle is based on the trade-related provisions of
the African Growth and Opportunity Act (H.R. 1432), with
certain modifications that are outlined below. The purpose of
this legislation is to authorize a new trade and investment
policy that is designed to encourage increased trade and
economic cooperation between the United States and the sub-
Saharan African (``SSA'') countries. It is the expectation of
the Finance Committee that the increased trade and investment
resulting from this legislation will encourage those sub-
Saharan African countries committed to political and economic
reform to continue to pursue such reforms.
Currently, sub-Saharan Africa is a region that faces
significant economic and political difficulties, as well as
opportunities. The SSA countries are among the poorest and
least developed in the world. According to World Bank data, the
annual per capita GNP for the SSA countries averages only $490.
The political climate in several of the SSA countries, however,
has improved in recent years, though there remain a number of
SSA countries that suffer from significant instability.
Moreover, over 30 countries, with assistance from the World
Bank and the International Monetary Fund, have taken steps
toward economic reform, including some liberalizing of exchange
rates and prices, privatizing state-owned enterprises,
instituting tighter disciplines over government expenditures,
limiting subsidies and reducing barriers to trade and
investment.
Currently, trade between the United States and the SSA
countries is small. In 1997, United States merchandise exports
to the SSA countries amounted to less than 1 percent of total
U.S. merchandise exports ($6.2 billion), while imports from
those countries totaled only 1.7 percent of U.S. merchandise
imports ($16.4 billion). Primary U.S. exports are
transportation equipment, machinery, electronic products,
agricultural products and chemicals. Principal imports from
sub-Saharan Africa are energy-related products and minerals and
metals.
The United States' efforts to encourage trade with the SSA
countries have had limited success. For example, under the
Generalized System of Preferences (``GSP'') program, developing
countries are eligible to receive duty-free access to the U.S.
market for certain specified products. Although most of the SSA
countries are eligible for preferential tariff treatment under
the GSP program, only 6.9 percent of imports under the program
in 1997 were from the SSA countries. U.S. imports from sub-
Saharan Africa under GSP totaled $1.1 billion in 1997, with
imports from South Africa ($450.8 million in 1997) accounting
for almost half of this amount. Significantly, most petroleum
products--which constitute the largest category of merchandise
exports from the SSA countries--are not eligible for duty-free
treatment under the GSP program.
The Senate Finance Committee held a hearing on the U.S.-
sub- Saharan Africa trading relationship generally, and H.R.
1432 specifically, on June 17, 1998. During this hearing, the
Committee heard testimony from the chief sponsors of the
legislation from the House and Senate, officials from the
Administration and interested parties from the private sector.
The Committee also heard testimony on the issue of trade with
Africa on September 17, 1997.
The African Growth and Opportunity Act (H.R. 1432) was
introduced in the House of Representatives on April 24, 1997,
and was referred to the House Committees on International
Relations, Ways and Means, and Banking and Financial Services.
The Committees on International Relations and Ways and Means
each reported the bill on March 2, 1998. The Banking and
Financial Services Committee was discharged of the bill on
March 2, 1998. The bill was passed by the House on March 11,
1998, by a vote of 233-186.
b. Summary of Subtitle
This subtitle has four primary components. First, this
subtitle provides eligible SSA countries with enhanced benefits
under the GSP program. Second, this subtitle provides those
countries quota-free andduty-free access to the United States
for certain textile and apparel products. Third, this subtitle directs
the President to create a United States-Sub-Saharan African Trade and
Economic Cooperation Forum. Fourth, this subtitle directs the President
to examine the feasibility of negotiating a free trade agreement with
one or more of the SSA countries.
c. General Description of Subtitle
What follows is a section-by-section description of the
subtitle.
Section 1001. Short title
Section 1001 provides that this subtitle may be referred to
as the ``African Growth and Opportunity Act.''
Section 1002. Findings
Section 1002 enumerates twelve findings with regard to this
subtitle:
That it is in the mutual interest of the United
States and the countries of sub-Saharan Africa to
promote stable and sustainable economic growth and
development in sub-Saharan Africa.
That the 48 countries of sub-Saharan Africa form a
region richly endowed with both natural and human
resources.
That sub-Saharan Africa represents a region of
enormous economic potential and of enduring political
significance to the United States.
That the region has experienced a rise in both
economic development and political freedom as countries
in sub-Saharan Africa have taken steps toward
liberalizing their economies and encouraged broader
participation in the political process.
That the countries of sub-Saharan Africa have made
progress toward regional economic integration that can
have positive benefits for the region.
That despite these gains, the per capita income in
sub-Saharan Africa averages less than $500 annually.
That United States foreign direct investment in the
region has fallen in recent years and the sub-Saharan
African region receives only minor inflows of direct
investment from around the world.
That trade between the United States and sub-Saharan
Africa, apart from the import of oil, remains an
insignificant part of total United States trade.
That trade and investment, as the American experience
has shown, can represent powerful tools for economic
development and for building a stable political
environment in which political freedom can flourish.
That increased trade and investment flows have the
greatest impact in an economic environment in which
trading partners eliminate barriers to trade and
capital flows and encourage the development of a
vibrant private sector that offers individual African
citizens the freedom to expand their economic
opportunities and provide for their families.
That offering the countries of sub-Saharan Africa
enhanced trade preferences will encourage both higher
levels of trade and direct investment for the region as
well as enhance commercial and political ties between
the United States and sub-Saharan Africa.
That encouraging the reciprocal reduction of trade
and investment barriers in Africa will enhance the
benefits of trade and investment for the region as well
as enhance commercial and political ties between the
United States and sub-Saharan Africa.
Section 1003. Statement of policy
Section 1003 states the support of Congress for:
Encouraging increased trade and investment between
the United States and sub-Saharan Africa.
Reducing tariff and nontariff barriers and other
obstacles to sub-Saharan African and United States
trade.
Expanding United States assistance to sub-Saharan
Africa's regional integration efforts.
Negotiating reciprocal and mutually beneficial trade
agreements, including the possibility of establishing
free trade areas that serve the interests of both the
United States and the countries of sub-Saharan Africa.
Focusing on countries committed to accountable
government, economic reform, and the eradication of
poverty.
Strengthening and expanding the private sector in sub-
Saharan Africa.
Supporting the development of civil societies and
political freedom in sub-Saharan Africa.
Establishing a United States-Sub-Saharan African
Economic Cooperation Forum.
Section 1004. Eligibility requirements for additional trade benefits
under the generalized system of preferences
Section 1004 amends the Generalized System of Preferences
(GSP) program, Title V of the Trade Act of 1974, by inserting a
new section 506A. This new section authorizes the President to
designate certain countries as beneficiary SSA countries
eligible for certain enhanced benefits under the GSP program.
In order to be designated as a beneficiary SSA country, and
therefore eligible for the benefits set forth in this section,
a country must satisfy three sets of criteria. First, the
President must find that the sub-Saharan African country has
established, or is making continual progress toward
establishing:
A market-based economy, where private property rights
are protected and the principles of an open, rules-
based trading system are observed.
A democratic society, where the rule of law, political
freedom, participatory democracy, and the right to due
process and a fair trial are observed.
An open trading system through the elimination of
barriers to United States trade and investment and the
resolution of bilateral trade and investment disputes.
Economic policies to reduce poverty, increase the
availability of health care and educational
opportunities, expand physical infrastructure, and
promote the establishment of private enterprise.
Second, the President must find that the SSA country does not
engage in gross violations of internationally recognized human
rights or provide support for international terrorism and
cooperates in international efforts to eliminate human rights
violations and terrorist activities. Third, the SSA country
must satisfy the eligibility criteria for the GSP program.
Once a country has satisfied the eligibility criteria, it
can be designated by the President as a beneficiary sub-Saharan
African country and receive the enhanced GSP benefits set forth
in this section. The Committee intends that the eligibility
criteria described insection 1004 apply only to the new
benefits described in new section 506A and are not meant to
limit the GSP benefits available to the SSA countries under
current law.
The new section 506A would authorize the President to
provide duty-free treatment for any item, other than textile or
apparel products or textile luggage, that is designated as
import sensitive under subsection 503(b)(1) of Title V. The
general rules of origin governing duty-free entry under the GSP
program will continue to apply, except that, in determining
whether products are eligible for the enhanced benefits of the
bill, up to 15 percent of the appraised value of the article at
the time of importation may be derived from materials produced
in the United States. In addition, under new section 506A, the
value of materials produced in any beneficiary SSA country may
be applied in determining whether the product meets the
applicable rules of origin for purposes of determining the
eligibility of an article to receive the duty-free treatment
provided by this section. Section 1004 also amends subsection
503(c)(2)(D) to waive permanently the competitive need limits
that would otherwise apply to beneficiary SSA countries.
The new section 506A established by section 1004 of the Act
also requires the President to monitor, and report annually to
Congress, on the progress the SSA countries have made in
meeting the three categories of eligibility criteria set forth
above. The Committee expects that in the annual report required
in section 1008 of this subtitle, the President will provide an
explanation of his assessment of the progress being made by
each country listed in section 1009 toward meeting the stated
eligibility requirements, citing specific examples where
possible.
New section 506A would require the President to terminate
the designation of a country as a beneficiary SSA country if
that country is not making continual progress in meeting the
eligibility requirements. Any such termination would be
effective on January 1 of the year following the year in which
the determination is made that the eligibility criteria are no
longer met.
As provided in Subtitle B, the entire GSP program will
remain in effect through June 30, 2008 for GSP beneficiary
countries in sub-Saharan Africa.
Section 1005. Treatment of certain textiles and apparel
Section 1005 provides beneficiary sub-Saharan African
countries (as designated under the new section 506A of the
Trade Act of 1974 added by section 1004 above) with duty-free
and quota-free access to the U.S. market for certain textiles
and apparel products. In order to receive these benefits, a
beneficiary sub-Saharan African country must (1) adopt an
effective and efficient visa system to guard against unlawful
transshipment of textile and apparel products and the use of
counterfeit documents; and, (2) enact legislation or
regulations that would permit the United States Customs Service
to investigate thoroughly allegations of transshipment through
such country. Section 1005 directs the United States Customs
Service to provide technical assistance to the beneficiary sub-
Saharan African countries in complying with these two
requirements.
The benefits under section 1005 are available only for the
following textile and apparel products:
Apparel articles assembled in beneficiary sub-Saharan
African countries from fabrics wholly formed and cut in
the United States, from yarns wholly formed in the
United States.
Apparel articles cut and assembled in beneficiary
sub-Saharan African countries from fabric wholly formed
in the United States from yarns wholly formed in the
United States, and assembled with thread formed in the
United States.
Handloomed, handmade and folklore articles from
beneficiary sub-Saharan African countries, that have
been certified as such by the competent authority in
the beneficiary sub-Saharan African country.
The Committee expects that only genuinely handcrafted articles,
normally produced in limited quantities, will be designated as
eligible; this provision is not intended to benefit large-
scale, industrial production of textile or apparel articles. In
addition, the Committee intends that textile luggage (i.e.,
luggage made of textile material identified in headings 4202.12
and 4202.92 of the Harmonized Tariff Schedule of the United
States (HTS)) be treated as a textile product, and therefore it
will not be eligible for duty-free or quota-free treatment
under this legislation (except when such textile luggage has
been certified as a handloomed, handmade or folklore article).
The Committee also intends that this new program of textile
and apparel benefits will be administered in a manner
consistent with the regulations that currently apply under the
``Special Access Program'' for textile and apparel articles
from Caribbean and Andean Trade Preference Act countries, as
described in 63 Fed. Reg. 16474-16476 (April 3, 1998). Thus,
the requirement that products must be assembled from fabric
formed in the United States applies to all textile components
of the assembled products, including linings and pocketing,
subject to the exceptions that currently apply under the
``Special Access Program.''
Section 1005 provides that if an exporter is found to have
engaged in transshipment with respect to textile or apparel
products from a beneficiary SSA country, then the President
must deny all benefits under this section and under section
1004 of this subtitle to such exporter, any successor of such
exporter, and any other entity owned or operated by the
principal of the exporter for a period of 2 years.
Section 1005 also includes a safeguard measure, authorizing
the President to impose appropriate remedies, including
restrictions on or the removal of quota-free and duty-free
treatment, in the event that imports oftextile and apparel
articles from a beneficiary SSA country are being imported in such
increased quantities as to cause serious damage, or actual threat of
such damage, under the Agreement on Textiles and Clothing (``ATC'). The
Committee intends that the injury standard be the same as set forth
under the ATC, even though the remedies the President may impose under
this provision include withdrawing or restricting both the duty-free
and quota-free treatment provided under this section. With respect to
the imposition of quotas, the intent of the Committee is that the
President exercise his authority under the safeguard provisions of this
section only in a manner consistent with the ATC; thus, the Committee
does not intend that this provision would authorize the President to
impose quotas on WTO members once they are eliminated under the ATC in
2005.
The benefits provided by this section will be effective
from January 1, 1999 through June 30, 2008.
The benefits available under section 1005 with regard to
textiles and apparel products are not provided as a part of the
GSP program. It is not the intent of the Committee that tariff
relief or quota removal for textile and apparel products become
or be treated as benefits provided under the GSP program.
Section 1006. United States-Sub-Saharan Africa Trade and Economic
Cooperation Forum
Section 1006 directs the President to establish a United
States-Sub-Saharan African Trade and Economic Cooperation Forum
with interested SSA countries. The purpose of this Forum is to
foster close economic ties between the United States and sub-
Saharan Africa by encouraging meetings between private sector,
governmental and nongovernmental leaders to discuss expanding
trade and investment relations between the United States and
sub-Saharan Africa. Section 1006 also directs the President to
meet with the heads of the governments of interested SSA
countries for the purpose of discussing expanding trade and
investment relations between the United States and sub-Saharan
Africa.
Section 1007. United States-Sub-Saharan African free trade area
Section 1007 directs the President to examine, and report
back to the Senate Committee on Finance and the House Committee
on Ways and Means regarding, the feasibility of negotiating a
free trade agreement with interested sub-Saharan African
countries. If the President finds that such an agreement is
feasible, then the President must provide a detailed plan for
such negotiation(s) that outlines the objectives, timing, any
potential benefits to the United States and sub-Saharan Africa,
and the likely economic impact of any such agreement.
Section 1008. Reporting requirement
Section 1008 directs the President to submit to Congress
each year, for five years following enactment of this subtitle,
a report on the implementation of this subtitle.
Section 1009. Sub-Saharan Africa defined
Section 1009 defines sub-Saharan Africa as the forty-eight
countries listed in that section.
2. Subtitle B--Legislation Extending Duty-Free Treatment Under the
Generalized System of Preferences
Subtitle B reauthorizes the Generalized System of
Preferences program through June 30, 2008 for beneficiary
developing countries in sub-Saharan Africa and through December
31, 2000 for all other beneficiary developing countries.
a. Background
The Generalized System of Preferences (GSP), title V of the
Trade Act of 1974, as amended, grants authority to the
President to provide duty-free treatment to imports of eligible
articles from designated beneficiary developing countries,
subject to certain conditions and limitations. To qualify for
GSP benefits, each beneficiary country is subject to
variousmandatory and discretionary eligibility criteria. Import
sensitive products are ineligible for GSP. The President's authority to
grant GSP benefits expired on June 30, 1998.
b. General Description of Subtitle
Section 1101. Extension of duty-free treatment under Generalized System
of Preferences
Section 1101 of this subtitle reauthorizes the GSP program
through June 30, 2008 for beneficiary developing countries in
sub-Saharan Africa and through December 31, 2000 with respect
to all other beneficiary developing countries.
Section 1102. Effective date
Subsection 1102(a) of this subtitle provides that the new
termination dates, as set forth in section 1101, apply to
articles entered on or after October 1, 1998.
Subsection 1102(b) of this legislation provides for
retroactive application for certain liquidations and
reliquidations. Specifically, this subsection allows the
Secretary of the Treasury to liquidate or reliquidate as free
of duty any article that was entered after June 30, 1998, and
before October 1, 1998, and that would have otherwise been
eligible for duty-free treatment under the GSP program if the
entry had been made on June 30, 1998. This subsection directs
the Secretary to refund any duty paid with respect to such
entries, although no refund shall be paid prior to October 1,
1998.
Subsection 1102(c) of this subtitle provides that requests
for liquidation or reliquidation under subsection 1102(b) must
be filed with the Customs Service within 180 days after the
enactment of this Act. Such requests must contain sufficient
information to enable the Customs Service to locate the entry
or to reconstruct the entry if it cannot be located.
3. Subtitle C--Legislation Authorizing the United States-Caribbean
Basin Trade Enhancement Act
Subtitle C authorizes the grant of additional trade
preferences available under the United States-Caribbean Basin
Trade Enhancement Act as described below.
a. Background
Congress enacted the Caribbean Basin Economic Recovery Act
(``CBERA'') in 1983 to respond to an economic crisis in Central
America and the Caribbean. The principal U.S. response to that
crisis under CBERA was a broad grant of unilateral tariff
preferences to qualifying beneficiary countries.
In order to qualify, the beneficiary country had to request
the opportunity to participate. The President then determined
whether the country was eligible based on a variety of factors,
including, among others, the country's commitment to afford the
United States equitable and reasonable market access, the
country's participation (at the time) in the General Agreement
on Tariffs and Trade (GATT), its willingness to accept subsidy
disciplines, the extent to which the country afforded adequate
intellectual property protection, whether or not the country
had taken steps to afford internationally recognized worker
rights, and the extent to which the country's economic policies
would contribute to the goals of the Caribbean Basin
Initiative, or ``CBI'' as it is widely known.
The original grant of preferences was limited to a period
of 12 years. It covered virtually all trade with the CBI
countries with the exception of textiles and apparel, canned
tuna, petroleum and petroleum products, and certain watches and
watch parts, handbags, luggage, flat goods such as wallets,
change purses and key and eyeglass cases, work gloves and
leather wearing apparel.
The current CBI beneficiaries include Antigua and Barbuda,
Aruba, Bahamas, Barbados, Belize, Costa Rica, Dominica,
Dominican Republic, El Salvador, Grenada, Guatemala, Guyana,
Haiti, Honduras, Jamaica, Montserrat, Netherlands Antilles,
Nicaragua, Panama, Saint Kitts and Nevis, Saint Lucia, Saint
Vincent and the Grenadines, Trinidad and Tobago, and the
British Virgin Islands.
In 1990, Congress passed the Caribbean Basin Economic
Recovery Expansion Act of 1990, the so-called ``CBI II.'' That
Act made theunilateral grant of preferences permanent. It also
expanded the tariff preferences. CBI II permitted the President to
proclaim a tariff reduction of 20 percent (but not more than 2.5
percent ad valorem on any article) on tariffs applicable to a subset of
the previously excluded products--handbags, luggage, flat goods, work
gloves, and leather wearing apparel. CBI II also allowed for duty-free
treatment on articles, other than textiles and petroleum-based
products, if made from U.S. fabricated components.
In 1993, the United States, Canada, and Mexico signed the
North American Free Trade Agreement (NAFTA). Among the
commitments made by the United States to Mexico were the sharp
reduction in duties and quantitative limits applicable to
products ineligible for CBI treatment, including textiles and
apparel. This subtitle is intended to afford CBI beneficiaries
treatment akin to that afforded Mexican products in order to
avoid undermining investment in the Caribbean Basin based on
preferences previously available under the CBI.
Like the CBI II, enacted in 1990, this legislation would
expand the existing CBI by providing for additional tariff
preferences on a number of products not previously covered by
the program. Those benefits, however, are conditioned on the
eligible beneficiary countries' trade policies, their
participation and cooperation in the Free Trade Area of the
Americas (FTAA) or other comparable trade initiatives, as well
as certain non-trade factors provided for in the legislation.
b. General Description of Subtitle
What follows is a section-by-section description of the
subtitle.
Section 1201. Short title
Section 1201 provides that, if enacted, the measure may be
cited as the ``United States-Caribbean Basin Trade Enhancement
Act.''
Section 1202. Findings and policy
The findings contained in section 1202 set out the
underlying rationale for expansion of the CBI program. The
over-arching purpose of the subtitle is to provide
opportunities that will enhance the beneficiary countries'
economic development and integration into the international
trading system, while providing expanded export opportunities
for U.S. goods as a result of the increased trade and economic
growth that the enhanced CBI program is designed to foster. The
findings underscore that point, as well as emphasize the United
States' commitment to encouraging the development of strong
democratic governments and revitalized economies throughout the
region.
The policy provisions of section 1202 reflect the policy of
the United States to encourage CBI beneficiaries to become a
party to the FTAA or a comparable trade agreement at the
earliest possible date. The provisions make the preferences
afforded under this subtitle expressly contingent on a CBI
beneficiary country's willingness to join the United States in
those initiatives.
Section 1203. Definitions
Section 1203 provides certain definitions applicable to the
provisions of the Subtitle, including definitions of
``beneficiary country,'' ``CBTEA,'' ``NAFTA,'' ``NAFTA
country,'' ``WTO,'' and ``WTO member.''
Section 1204. Temporary provisions to provide additional trade benefits
to certain beneficiary countries
This section amends subsection 213(b) of the CBERA to
provide a tariff preference to imports from the Caribbean Basin
of products previously excluded from the CBI, including certain
textile and apparel products, footwear, canned tuna, petroleum
and derivatives, watches and watch parts. This legislation
would establish a ``transition period'' of three years (from
January 1, 1999 through December 31, 2001) during which
additional tariff preferences could be made available on
certain of those items.
Eligibility for the program is left in the discretion of
the President, but the proposal would provide very specific
guidance as to the criteria the President should apply in
making that determination. The starting point under this
subtitle is compliance with the eligibility criteria set out in
the original CBERA. This subtitle would add certain trade-
related criteria, such as the extent to which the beneficiary
country fully implements the various Uruguay Round agreements,
whether the beneficiary country affords adequate intellectual
property protection and protection to U.S. investors, and the
extent to which the country applies internationallyaccepted
rules on government procurement and customs valuation.
This section also adds other criteria that reflect
important U.S. initiatives. They include, among others, the
extent to which the country has become a party to and
implements the Inter-American Convention Against Corruption, is
or becomes a party to a convention regarding the extradition of
its nationals, satisfies the criteria for counter-narcotics
certification under section 490 of the Foreign Assistance Act
of 1961, and provides internationally recognized worker rights.
Section 1204 imposes two reporting requirements. The first
obliges the President to report at the outset of the program
and at the end of the three-year transition period on the
performance of each beneficiary country in meeting the
applicable criteria. Before submitting such report, the United
States Trade Representative (USTR) must seek public comment.
The second reporting requirement obliges the United States
International Trade Commission to assess the impact of the
various CBI programs on U.S. industries and consumers.
The preferences offered under this subtitle are divided
between those made available for imports of certain textile and
apparel products and those available for all other products
covered by the legislation.
Textiles
With respect to textiles, this legislation adopts an
approach consistent with that of the CBI II, one that will both
provide expanded benefits to the CBI beneficiaries' apparel
industry while affording new opportunities for U.S. textile,
yarn, and thread producers. Section 1204 would extend immediate
duty-free and quota-free treatment to the following products:
(1) Apparel articles assembled in an eligible CBI
beneficiary country from U.S. fabrics wholly formed
from U.S. yarns and cut in the United States that would
enter the United States under HTS subheading 9802.00.80
(a provision that otherwise allows an importer to pay
duty solely on the value-added abroad when U.S.
components are shipped abroad for assembly and re-
imported into the United States);
(2) Apparel articles entered under chapters 61 and 62
of the HTS that would have qualified for HTS 9802.00.80
treatment but for the fact that the articles were
subjected to certain types of washing and finishing;
(3) Apparel articles cut and assembled in the
eligible CBI country from U.S. fabric formed from U.S.
yarn and sewn in such country with U.S. thread;
(4) Handloomed, handmade and folklore articles
originating in the CBI beneficiary country;
(5) Textile luggage assembled in an eligible CBI
beneficiary country from U.S. fabrics wholly formed
from U.S. yarns and cut in the United States that would
enter the United States under HTS subheading
9802.00.80; and
(6) Textile luggage cut and assembled in the eligible
CBI beneficiary country from U.S. fabric formed from
U.S. yarn and sewn in such country with U.S. thread.
With respect to handloomed, handmade, and folkloric items,
section 1204 provides that the President, in consultation with
the relevant beneficiary country, will determine which, if any,
particular textile and apparel articles are to be treated as
handloomed, handmade or folklore goods eligible for trade
preferences under this program. The Committee expects that only
genuinely handcrafted articles, normally produced in limited
quantities, will be designated as eligible; this provision is
not intended to benefit large-scale, industrial production of
textile or apparel articles.
As regards textile luggage, the Committee intends that the
program cover items covered by two HTS categories. The program
would cover luggage made of textile materials identified in
headings 4202.12 and 4202.92 of the HTS.
The Committee intends that the new program of textile and
apparel benefits will be administered in a manner consistent
with the regulations that currently apply under the ``Special
Access Program'' for textile and apparel articles from
Caribbean and Andean Trade Preference Act countries, as
described in 63 Fed. Reg. 16474-16476 (April 3, 1998). Thus,
the requirement that products must be assembled from fabric
formed in theUnited States applies to all textile components of
the assembled products, including linings and pocketing, subject to the
exceptions that currently apply under the ``Special Access Program.''
Section 1204 would allow for the snapback of the tariff
preferences provided under this section in the event of surges
in imports that could cause serious damage to the U.S. industry
producing a like product in the United States. To ensure that
the preferences made available under this subtitle do not lead
to the transshipment of textile and apparel products from other
countries where the goods would be subject to U.S. quotas, this
section includes two provisions penalizing such actions.
First, it would penalize exporters found, on the basis of
sufficient evidence, to have engaged in transshipment--all
benefits under the CBERA program would be denied for a period
of two years. Second, any country that was found, on the basis
of sufficient evidence, to have failed to take action to
prevent transshipment after a specific request for assistance
in that regard from the President would have its exports
reduced by three times the quantities found to have been
transshipped. The Committee intends the ``sufficient evidence''
standard used here to be the same as that applied under Article
5:4 of the Agreement on Textiles and Clothing administered by
the World Trade Organization (WTO).
Other products
On all other products covered by this subtitle (footwear,
canned tuna, petroleum and derivatives, and watches and watch
parts, and certain leather goods), the program would provide an
immediate reduction in tariffs equal to 50 percent of the
preference Mexican products enjoy under NAFTA relative to
imports of the same articles from CBI beneficiaries. In other
words, the applicable duty paid by importers on such goods
would be equal to the duty applicable to the same good if
entered from Mexico, plus one-half of the difference between
the duty rate afforded Mexico on that product and the duty rate
that would otherwise apply to the product if imported from the
CBI beneficiary country but for the enactment of this subtitle.
This legislation allows for additional reductions over the
duration of the program if the President determines that
eligible CBI beneficiary countries are making progress toward
fulfilling the criteria set out in the eligibility criteria set
out in this subtitle.
In order for their products to qualify for the preferences
afforded under this subtitle, whether applied to textiles and
apparel or other products, the beneficiary country must comply
with customs procedures equivalent to those required under the
NAFTA.
Section 1205. Adequate and effective protection for intellectual
property rights
Section 1205 of this subtitle clarifies that, for purposes
of assessing whether a CBI beneficiary is offering adequate
intellectual property protection, compliance with the WTO
Agreement on Trade-Related Aspects of Intellectual Property
Rights is not determinative.
B. Title II--Legislation To Extend Tariff Proclamation Authority and
Fast Track Procedures for Congressional Consideration of Trade
Agreements
Title II extends tariff proclamation authority and fast
track procedures for congressional consideration of trade
agreements. Title II incorporates the provisions of S. 1216,
the Reciprocal Trade Agreements Act of 1997 as reported by the
Senate Committee on Finance on October 8, 1997 with a few minor
modifications.
1. Background
Article I, section 8, clause 2 of the Constitution
delegates the power to regulate foreign commerce to Congress.
Congress has historically exercised that power through
legislation regulating imports of goods, services, and
investment into the United States.
Beginning with the Reciprocal Trade Agreements Act of 1934,
however, Congress introduced a new means of addressing the
changing needs of American trade policy. Congress delegated
authority to the President to proclaim changes in U.S. tariffs,
within prescribed limits, based on the results of mutually
beneficial trade agreements concluded with our foreign trading
partners. Congress set the overall objectives of the
negotiation, but offered the President and our trading partners
the assurancethat, if the agreement reached was consistent with
the objectives and conditions set by Congress, the agreement would be
implemented in U.S. law.
With the progress of the Trade Agreements Program initiated
by Secretary of State Cordell Hull (a former member of the
Finance Committee) under the authority of the 1934 Act and of
later rounds of multilateral negotiations within the framework
of the General Agreement on Tariffs and Trade (GATT), U.S.
negotiators achieved significant reductions in tariffs abroad.
Those agreements called for significant reductions in U.S.
tariffs as well. As tariff levels fell, particularly after the
Kennedy Round of tariff negotiations concluded in 1967, it
became clear that future rounds of trade talks would focus on
the panoply of non-tariff measures that our trading partners
used to bar or inhibit U.S. exports from reaching their
markets.
That, in turn, posed a problem in terms of the
implementation of any agreement that called for a reciprocal
reduction in U.S. non-tariff measures limiting imports of
foreign goods, services, and investment. In this Committee's
view then and now, Congress could not, consistent with its
constitutional responsibilities, delegate authority to the
President to revise U.S. domestic law by proclamation in the
manner it had delegated the authority to proclaim changes in
tariffs. At the same time, Congress recognized that the
President, as a practical matter, might be unable to conclude
future trade agreements unless he could assure our trading
partners that the agreement would not be amended by Congress
after the fact.
In order to overcome that problem, Congress introduced what
have become known as the ``fast track'' procedures for
implementing trade agreements in the Trade Act of 1974. The
procedures, referred to in the Committee's bill as the ``trade
agreement approval procedures,'' were designed to preserve
Congress' constitutional role in the regulation of foreign
commerce, while offering the President and our trading partners
the assurance that a trade agreement requiring changes in U.S.
law would receive an up-or-down vote within a time certain when
brought before Congress.
Consistent with the approach of the Reciprocal Trade
Agreements Act of 1934, Congress set the President's
negotiating objectives. The President was then obliged to
notify Congress prior to entry into any trade agreement,
consult on the nature and scope of the accord, and submit the
President's findings as to how the pact met the objectives set
by Congress, together with legislation needed to implement the
agreement in U.S. law.
Congress has preserved that basic structure each time it
has renewed the trade agreement approval procedures. The
procedures were renewed once for eight years by the Trade
Agreements Act of 1979, and a second time for five years in the
Omnibus Trade and Competitiveness Act of 1988. The authority
granted by the 1988 Act was extended in 1993 for an additional
six months in order to complete the Uruguay Round of
multilateral trade negotiations. It has not been renewed since.
The fast track authority has been used on five occasions.
Congress used the fast track procedures to implement the Tokyo
and Uruguay Rounds of GATT multilateral trade negotiations, in
1979 and 1994 respectively. Congress also relied on the fast
track to implement free trade accords with Israel in 1985 and
Canada in 1988, and to implement the North American Free Trade
Agreement (NAFTA) in 1993.
The Reciprocal Trade Agreements Act of 1998 would retain
the same basic structure and authority for the President
contained in prior extensions of the trade agreement approval
procedures. It would, however, make several important changes
designed to reemphasize the original purpose of the authority--
the reduction of trade barriers and the expansion of market
access for U.S. exports--as well as strengthen Congress' role
in and oversight of the process.
The motivation and intent behind those changes is to
restore the trade agreement approval procedures to their
intended role. Those procedures were not designed and were
never intended to provide a means to revise the fundamental
objectives and contours of U.S. domestic law. Rather, the
procedures are designed to implement changes in U.S. law
necessary to conform to our obligations under a trade
agreement.
Prior law allowed provisions in implementing legislation
that were ``necessary or appropriate'' to the approval of the
agreement or its implementation in U.S. law. Title II of the
Committee's bill would clarify that the trade agreement
approval procedures are available only to those measures
necessary to approve and implement a trade agreement and those
traded-related measures that are otherwise related to the
implementation, enforcement, or adjustment to the effects of
such agreement. Thosemeasures would include such items as
amendments to the unfair trade laws needed to ensure that U.S. goods
and services do not face unfair competition from imports and
implementation of the Trade Adjustment Assistance programs reauthorized
elsewhere in this legislation.
The Committee is confident that the framework established
by the Reciprocal Trade Agreements Act of 1998 lays the proper
foundation for the limited purpose the trade agreement approval
procedures were originally designed to serve. The Act sets out
specific negotiating objectives that the Committee expects the
President to pursue with our trading partners. The Act
strengthens existing notice and consultation requirements by
mandating comprehensive consultations at the outset and at
every succeeding stage of the negotiations. The Act provides a
process by which Congress may disapprove of new negotiations
that might otherwise be eligible for implementation under the
fast track procedures. Finally, the Act limits the application
of the fast track procedures to agreements that achieve one or
more of the negotiating objectives set by Congress and those
provisions that are directly related to trade and otherwise
related to the implementation, enforcement and adjustment to
the effects of any such accord.
The Reciprocal Trade Agreements Act of 1998 grants the
President the authority he needs to offer the international
leadership only America can provide on trade. At the same time,
it assures that the trade agreement approval procedures will be
used as originally intended: as a tool to assist in the
reduction of barriers to U.S. trade.
2. Summary of Title
The legislation is divided into ten sections. Apart from
section 2001, which provides a short title for this title, the
provisions fall into three categories.
Sections 2002 and 2003 address the nature, purpose, and
scope of the authority granted in this bill. Section 2002 sets
out the purposes for which the implementing procedures in
section 2003 are provided, specifies the principal trade
negotiating objectives on which Congress expects the President
to focus in future trade negotiations for which such procedures
may be used, and identifies complementary international
economic objectives that would reinforce the trade negotiations
process.
Section 2003 includes two separate implementing procedures,
one allowing the President to proclaim changes in U.S. tariffs
resulting from trade agreements reached with our foreign
trading partners, and another establishing a set of trade
agreement approval procedures for congressional review of
implementing legislation needed to make changes in U.S. law
other than tariff changes (i.e., the fast track). Section 2003
also defines what types of measures would qualify for expedited
congressional review.
Sections 2004 and 2005 contain the procedural aspects of
the measure, including those provisions intended to strengthen
Congress' role in and oversight of the trade negotiations
process. Section 2004 sets out the notice and consultation
requirements, which require the President to notify the
Congress of the initiation of negotiations and the potential
entry into an agreement and obligate the President to consult
at every stage of the process. Section 2005 sets out the
implementing procedures themselves, including provisions
allowing for congressional disapproval of negotiations under
certain circumstances.
Sections 2006 through 2008 set out various provisions that
are integral to the operation of the legislation or reinforce
the principal purpose of this title. Those include the waiver
of notice requirements for negotiations already under way, as
well as definitions and conforming amendments.
3. General Description of Title
What follows is a section-by-section description of the
title.
Section 2001. Short title
Section 2001 provides that, if enacted, the measure would
be cited as the ``Reciprocal Trade Agreements Act of 1998.''
Section 2002. Trade negotiating objectives of the United States
Section 2002, which sets out the trade negotiating
objectives of the United States, is divided into three parts--a
statement of purposes, the trade negotiating objectives
themselves, and a complementary set of economic policy
objectives designed to reinforce the trade agreements process.
(i) Statement of purposes
Subsection 2002(a), the Statement of Purposes, provides the
underlying rationale for which Congress grants access to the
trade agreement approval procedures--expanding U.S. access to
foreign markets, reducing barriers to trade, creating more
effective international trade rules, and promoting economic
growth, higher living standards and full employment in the
United States, as well as economic growth and development among
our trading partners that will lead to expanding markets for
U.S. goods, services, and investments.
(ii) Principal trade negotiating objectives
Subsection 2002(b), the Principal Trade Negotiating
Objectives, identifies the specific sectors and practices on
which Congress expects U.S. negotiators to focus in their use
of the authority provided to the President. The provision links
access to the trade agreement approval procedures to agreements
fulfilling one or more of the enumerated objectives.
While the Principal Trade Negotiating Objectives are
largely self-explanatory, several deserve some additional
comment. They include--
Trade in Goods: The provision clarifies that the principal
objective of the United States with respect to trade in goods
is reducing barriers to U.S. exports. The provision cites three
specific examples: (1) the elimination of disparities between
higher foreign and lower U.S. tariffs left over from previous
rounds of multilateral tariff negotiations, (2) the elimination
of those tariff and nontariff measures identified in the United
States Trade Representative's (USTR) annual trade barriers
study produced under section 181 of the Trade Act of 1974, and
(3) the elimination of tariffs on those items specifically
identified in section 111(b) of the Uruguay Round Agreements
Act and the related Statement of Administrative Action as
targets for the reciprocal elimination of tariffs on a tariff
category-by-tariff category basis.
By specifying those examples, the Committee intends to
provide particular focus to the President's efforts. They are
not meant as a limit on the products or sectors covered by the
negotiating objective. Rather, the Committee expects that the
President will use the authority broadly to address all
barriers that inhibit U.S. merchandise exports, including the
barriers to be addressed in extended negotiations under World
Trade Organization (WTO) auspices called for by section 135 of
the Uruguay Round Agreements Act and the related Statement of
Administrative Action on trade in civil aircraft.
Trade in Services: The principal negotiating objective on
trade in services reinforces the Congress' direction to the
President contained in prior law to expand access to foreign
markets for U.S. service providers. The provision extends
guidance for negotiators from prior law regarding U.S. domestic
policy objectives in various areas, including health, safety,
national security, environmental protection, consumer
protection, and employment, but makes clear that the guidance
should not be construed as authority to modify U.S. law related
to those domestic policy objectives.
The Committee recognizes that the Uruguay Round represents
a significant step toward achieving the goals set out both here
and in prior law. The Committee retained the objective in order
to underscore the need to expand the coverage of and
participation in agreements reached in the Uruguay Round, to
complete the negotiations called for in those agreements, and
to encourage continuing bilateral efforts to eliminate barriers
to U.S. service providers. With respect to future services
agreements under the WTO, the Committee reemphasizes its
expectation that the President shall agree solely to those
arrangements benefiting U.S. interests on a mutual and
reciprocal basis.
Investment: The principal negotiating objective with
respect to foreign investment is the reduction of barriers to
U.S. investment and the establishment of effective means for
the equitable resolution of investment disputes. The guidance
from prior law with respect to domestic policy objectives is
extended here as well, along with the proviso noted above that
the guidance should not be construed as authority to modify
U.S. law.
Intellectual Property: The Committee intends to ensure that
intellectual property protection, given its importance to the
future of the U.S. economy and the ability of American firms to
compete globally, remains a trade policy priority. As a
consequence, the principal negotiating objective of the United
States with respect to intellectual property protection
continues to focus on the enactment and enforcement of adequate
intellectual property protection abroad.
The surest route to that goal is the full implementation of
the Uruguay Round Agreement on Trade-Related Aspects of
IntellectualProperty Rights (TRIPS). The full benefit of the
TRIPS agreement has been delayed by the lengthy transition periods
allowed for under that accord. The Committee expects that the President
will use both the WTO and trade negotiations in other fora to
accelerate the full implementation of those rules.
The Committee views Chapter 17 of the NAFTA as the baseline
for future negotiations on intellectual property protection.
The Committee expects future agreements, whether concluded in
the WTO or in other contexts, to contain intellectual property
protection at least as strong as that of NAFTA.
Along with the rights themselves, holders of intellectual
property rights need access to effective enforcement mechanisms
to ensure that other private parties do not violate the rights
that accrue under domestic law. The provisions of the bill with
respect to enforcement mechanisms are not intended to prejudge
the nature of those mechanisms or the sanctions, whether civil
or criminal, that might apply as a result of an infringement.
The objective is to ensure that the means are available,
however designed, to ensure that U.S. holders of intellectual
property rights can enforce those rights against infringing
parties.
The objective reflected in the Act is designed to ensure
the fullest possible protection for U.S. holders of
intellectual property rights as those rights relate to
international trade in goods and services and to international
investment. Nothing in the Act should be construed to imply
endorsement of agreements or conventions arising in contexts
other than international trade which may serve to limit such
rights through compulsory licensing or other methods.
Agriculture: Despite the accomplishments of the Uruguay
Round Agreement on Agriculture, the agricultural sector remains
blighted by the trade distorting policies of foreign
governments. The overarching goal of U.S. negotiators should
continue to be achieving more open and fair conditions of trade
by reducing barriers to trade in agricultural products. In the
Committee's view, that means such actions as eliminating trade
distorting practices of state trading enterprises (particularly
those that limit price transparency) and addressing a variety
of other market distorting practices that unfairly decrease
U.S. market access opportunities.
The Committee also expects that the President will address
the proliferation of regulatory and commercial practices
affecting new technologies. In practical terms, that means
eliminating discriminatory standards or labeling requirements
that unfairly bar access of U.S. farm products to particular
markets.
While the primary objective should be expanding the scope
of international disciplines over trade distorting practices in
agricultural markets, the Committee expects that the President
will focus on improving existing arrangements as well. That
means ensuring the enforcement of the rules that do exist and
addressing particular issues, such as the lack of adequate
safeguards under existing rules for domestic producers of
seasonal and perishable agricultural products due to the nature
of their product.
Unfair Trade Practices: The principal objective of the
United States with respect to unfair trade practices is
intentionally outward-looking. The Committee intends the focus
of U.S. negotiators to be the elimination of the unfair trade
practices abroad, not changes in or weakening of U.S. law at
home. The goal should be to enhance existing international
disciplines against unfair trade practices such as dumping and
trade-distorting subsidies and ensuring the aggressive
enforcement of those disciplines through the WTO agreements or
any other trade agreement the President may conclude under the
authority granted by this legislation.
Over the nearly six decades in which the Trade Agreements
Program has been in place, the United States has seen a
dramatic expansion of trade and a larger than ever percentage
of the U.S. economy is affected by imports and exports. The
core purpose of the unfair trade laws is to ensure that, in the
process of liberalizing trade between the United States and its
trading partners, the United States retains the ability to
deter unfair import competition in its home market. As a
consequence, the Committee does not intend that the authority
granted in this Act be used to weaken the ability of U.S.
unfair trade laws to deter such practices. The Committee
expects the President to consult closely on the issue of the
review of administrative determinations under the unfair trade
laws in future trade agreements.
Improvement of the WTO and Multilateral Trade Agreements:
In the Committee's view, the work within the WTO is far from
complete despite the progress made in the Uruguay Round.
Expanding the coverage of and participation in the WTO
agreements is of paramount importance. The Committee expects
further attention to compliance with existing agreements in
order to ensure that the United States receives the full
benefit of theunderlying bargain it struck in supporting the
creation of the WTO and in negotiating the various WTO agreements.
The Committee wants to ensure that U.S. negotiators adopt a
similar approach to any other existing multilateral accords or
any they may negotiate in the future. It is just as important
to seek constant improvement in the existing framework of our
trading arrangements as it is to negotiate new ones. Support
for future trade-liberalizing agreements depends on adequately
addressing problems with the function of existing arrangements.
Dispute Settlement: The basic objective of the United
States in the area of dispute settlement remains the same:
ensuring the effectiveness of trade dispute settlement
procedures for the enforcement of U.S. rights, particularly
within the WTO. Absent the effective enforcement of U.S.
rights, international trade agreements are meaningless. The
Committee encourages the President to consult closely on the
means for enforcing U.S. trade agreements, whether in regard to
changes in existing law or the resources dedicated to
enforcement and compliance.
Transparency: The Committee recognizes that, absent access
to foreign trade laws, regulations, and administrative
proceedings, U.S. exporters, service providers, or investors
have no means of ensuring that they are receiving the market
access that the letter of our trade agreements provide.
Similarly, absent an understanding of the processes of
international institutions like the WTO, it is difficult for
the public to see how U.S. interests are being protected (e.g.,
whether the United States has received a fair hearing on its
trade complaints and the benefit of its bargain in the
implementation of any trade agreement). Accordingly, the
Committee expects the President to ensure that trade laws,
regulations, and processes among our trading partners, and
dispute settlement processes within international institutions
like the WTO, provide for appropriate public access.
Regulatory Competition: Successive rounds of multilateral
trade negotiations and bilateral accords with Israel, Canada,
and Mexico have gradually reduced or eliminated tariffs and
other border measures used by governments to deter competition
and international trade. That raises the risk (already evident
in certain sectors such as agriculture) that governments will
increasingly rely on government regulation as a means of
discriminating against U.S. goods, services, and investment.
Such practices can take the form of direct limits on
commerce, such as limits on distribution and retail sales, or
the toleration of anticompetitive practices which otherwise
hinder the sale of U.S. exports in particular markets. Such
practices can also involve less direct means by foreign
governments to afford a commercial advantage to their domestic
producers, service providers, or investors, such as the use of
health, safety, labor and environmental standards to
discriminate in favor of domestically produced goods or
lowering of or derogating from such standards in order to
attract investment or inhibit U.S. exports.
Like the Act's treatment of unfair trade practices
discussed above, the negotiating objective in this context is
consciously outward-looking. The Committee intends that the
provisions be used to address foreign government practices that
discriminate against U.S. goods, services, and investment
abroad or lower or derogate from existing health, safety,
labor, environmental or other regulatory standards to attract
investment or inhibit exports.
With respect to foreign government practices designed to
attract investment or inhibit U.S. exports through the lowering
of or derogating from such standards, the Committee emphasizes
that the negotiating objective should not be construed to
permit the inclusion of any provision in an implementing bill
submitted under the trade agreement approval procedures set out
in subsection 2003(b) of the Act, or in any agreement that
would be the subject of an implementing bill submitted under
those procedures, that would restrict the autonomy of the
United States in those areas. Such provision should not be
construed to call for negotiation of agreements providing for
international enforcement of or changes to U.S. health, safety,
labor or environmental standards. Nor would that provision
authorize the imposition of any limit on the sovereign right of
individual U.S. states to establish their own levels of health,
safety, labor, environmental, land use, tax, or other
regulatory standards as they deem appropriate.
(iii) International economic policy objectives designed to
reinforce the trade agreements process
Recent events have underscored the fact that trade
negotiations and trade agreements do not operate in a vacuum.
Subsection 2002(c) establishes international economic policy
objectives that would reinforce the trade negotiations process.
Those objectives would, for example,include: (1) work within
international monetary institutions to encourage currency stability and
coordination between trade and monetary institutions, (2) efforts in
international contexts other than the WTO TRIPS agreement to strengthen
standards for protection of intellectual property rights, (3) the
promotion of respect for workers' rights, such as use of the ILO to
monitor its members' adherence to certain accepted labor standards
(e.g., the prohibition on exploitative child labor), and (4) expanding
trade to ensure the optimal use of the world's resources, while seeking
to protect and preserve the environment and to enhance the
international means for doing so. The provision makes clear, however,
that subsection 2002(c) does not authorize the use of the trade
agreement approval procedures (i.e., the fast track) to modify U.S.
law.
As the Committee has in prior law, the Act highlights the
link between international trade and monetary policies. Recent
events have underscored the need to promote policies among our
trading partners that encourage stability in international
currency markets. The Committee recognizes that significant
shifts in exchange rates result from domestic economic
policies, not trade agreements negotiated under authority of
the sort granted in this Act. Nonetheless, such shifts can have
a dramatic impact on the trade opportunities available to U.S.
producers, service providers, and investors that trade
agreements are otherwise designed to provide. The purpose of
the provisions on currency stability reported by the Committee
is simply to encourage U.S. efforts bilaterally and
multilaterally through the appropriate international monetary
institutions to help protect against the adverse consequences
of excessive currency movements. It is the Committee's
expectation that the President will consult on an ongoing basis
regarding such matters as they relate to trade.
The Committee also wants to emphasize its recognition of
the fact that, in the context of intellectual property
protection, the WTO TRIPS agreement is not the only
international forum in which the United States should pursue
its goal of providing adequate and effective protection for
U.S. holders of intellectual property rights. The Committee
wants to encourage progress in other contexts, such as the
World Intellectual Property Organization, the Paris, Rome, and
Berne Conventions, and the Treaty on Intellectual Property in
Respect of Integrated Circuits, that would complement the
efforts of the United States within the WTO, the TRIPS
agreement, and the intellectual property provisions of other
international trade agreements.
As held true for the specific negotiating objective on
intellectual property rights contained in subsection 2002(b)
discussed above, the goal should be to afford the broadest
protection possible for U.S. holders of intellectual property
rights. Accordingly, nothing in the broader economic policy
objective of subsection 2002(c) on intellectual property should
be construed to imply endorsement of any accord reached in
other contexts that would limit such rights by compulsory
licensing requirements or other means.
The provisions on worker rights and the environment are
intended to encourage the President, outside of the context of
trade agreements subject to fast track approval, to develop
initiatives that would complement the agenda that the
Committee's bill would establish for future trade negotiations.
The examples cited with respect to worker rights are not
intended to be exhaustive; rather, they are intended to
identify two means by which the President might pursue
complementary policies in the context of worker rights. The
provision on the environment acknowledges the role that
appropriate agreements between governments on the environment
can play in protecting against environmental damage or
encouraging conservation, such as agreements on international
trade in endangered species, while at the same time ensuring
that due weight is given to the valuable role trade can play in
conservation efforts by ensuring the optimal use of the world's
resources.
Section 2003. Trade agreement negotiating authority
Section 2003 contains two different procedures for
implementing trade agreements--one for implementing the results
of tariff negotiations and one for implementing the results of
trade agreements that require other changes in U.S. law.
The first of those two, commonly referred to as ``tariff
proclamation authority,'' permits the President to ``proclaim''
the results of tariff negotiations directly into U.S. law
without further review by Congress. The second set of
procedures, designed for changes in U.S. law not covered by
tariff proclamation authority, represents what are referred to
in the Act as the ``trade agreement approval procedures,'' but
are commonly referred to as the ``fast track.'' Those
procedures apply to all changes in U.S. law required to
implement the agreement other than the tariff modifications
proclaimed by the President.
(i) Agreements regarding tariff barriers
Tariff negotiating authority contained in subsection
2003(a) tracks prior grants of negotiating authority contained
in every extension of tariff negotiating authority since the
Reciprocal Trade Agreements Act of 1934. It authorizes the
President to modify U.S. duties resulting from any trade
agreement reached with our foreign trading partners before
October 1, 2001. The provision would allow for a single
extension until October 1, 2005 under the procedures set out in
subsection 2003(c).
Subsection 2003(a) imposes various limits on the
President's tariff proclamation authority. It limits the
maximum amount by which the President can cut any individual
tariff (for U.S. tariffs over 5 percent, the President can cut
the tariff by no more than half) and the aggregate reduction
that can go into effect in any given year. Tariff cuts may be
``staged'' or phased-in over a maximum ten-year period. The
provision includes rules on rounding to ensure the
administrability of the staged tariff cuts provided for under
subsection 2003(a).
Subsection 2003(a) also provides a new grant of tariff
proclamation authority that would, notwithstanding the
limitations noted above, authorize the President to eliminate
or harmonize all tariffs on certain articles for which members
of the affected U.S. industry have requested so-called ``zero-
for-zero'' negotiations or tariff harmonization. Under
subsection 2003(a), such negotiations must result in the
reciprocal elimination or harmonization of duties within the
same tariff categories.
The new tariff authority would be subject to the notice and
consultation requirements applicable to agreements that would
normally be subject to consideration under the separate trade
agreement approval procedures of subsection 2003(b) (i.e., the
fast track). In particular, the President could use the
authority to proclaim changes only in those tariff categories
for which the President had provided notice to Congress before
initiating the negotiations or those that are authorized by
section 2006 of this title.
Any tariff agreement negotiated under paragraph (6) of
subsection 2003(a) would also be subject to the consultation
and layover requirements set out in section 115 of the Uruguay
Round Agreements Act, which ensure additional congressional and
private sector input and review by the United States
International Trade Commission (ITC) before the changes go into
effect. The authority is, in addition, circumscribed by the
requirements that all such negotiations take place in the
context of the WTO or as an interim step toward a free trade
agreement.
The Committee underscores its understanding that the new
authority granted in paragraph (6) of subsection 2003(a) will
only be used to the extent requested by industry. The President
shall take into account the ongoing competitive conditions
facing particular domestic products, the extent to which they
have faced or continue to face foreign unfair or trade
distorting practices, and the extent to which sectors producing
such products are currently adjusting to changes in competitive
conditions resulting from prior tariff or non-tariff agreements
(e.g., agricultural products, particularly perishables, citrus
fruit, and fruit juices).
(ii) Agreements regarding tariff and non-tariff barriers
The Act provides a single track for implementing any
changes in U.S. law (other than those subject to the
President's tariff proclamation authority) required by a trade
agreement negotiated by the President pursuant to the
conditions set out in the Committee's bill, and then applies a
common set of implementing procedures to all such agreements.
The Act provides for an initial grant of authority through
October 1, 2001, with the possibility of an extension of the
procedures until October 1, 2005, as provided for in subsection
2003(c).
The Act imposes several conditions on access to the trade
agreement approval procedures. First, consistent with every
grant of trade negotiating authority since 1974, the agreement
must be one that reduces foreign trade barriers. Agreements
that do not fulfill that basic condition, such as arrangements
in other areas that might refer to trade incidentally as an
enforcement mechanism, would not qualify under this provision
because their only potential impact would be trade restrictive.
Second, access to the fast track is tied directly to
fulfillment of the principal trade negotiating objectives set
out in subsection 2002(b). An agreement, and its implementing
legislation, would qualify for fast track only when it made
progress toward fulfilling one or more of the principal
negotiating objectives set out in that subsection.
Third, before an agreement and its implementing legislation
would qualify for the trade agreement approval procedures, the
President wouldhave to have satisfied the notice and
consultation provision of section 2004 of the Act. Thus, the President
would have had to have provided notice and consulted with Congress and
the appropriate industry sector advisory groups prior to initiating the
talks as to their scope, and have consulted with Congress at every
stage of the negotiations (including immediately prior to initialing
any accord) in order to gain access to the trade agreement approval
procedures.
Fourth, subsection 2003(a) would limit access to the trade
agreement approval procedures solely to those provisions of the
implementing legislation that are (1) required to approve an
agreement that achieves one or more of the principal
negotiating objectives and any related statement of
administrative action; (2) necessary to implement such
agreement; (3) otherwise related to the implementation,
enforcement, or adjustment to the effects of such trade
agreement and are directly related to trade; or (4) needed to
comply with the Balanced Budget and Emergency Deficit Control
Act of 1985.
In that regard, the Committee intends that the language
allow solely for those trade-related items that have
traditionally been a part of the implementation, enforcement or
adjustment to new competitive conditions created by trade
agreements. Those include, for example, trade adjustment
assistance, provisions of the U.S. unfair trade laws (including
the antidumping and countervailing duty laws and the provisions
of section 337 of the Tariff Act of 1930), and congressional
guidance on future negotiations. The language would also cover
those items necessary to define or clarify the relationship
between the agreement and U.S. law, such as provisions defining
the relationship between federal and state law, preclusion of
private rights of action based on the agreement itself,
judicial procedures, or the establishment of administrative,
consulting, or reporting mechanisms to carry out U.S.
obligations under the agreement.
(iii) Extension procedures
Subsection 2003(c) of the Act provides a process for
extending both the tariff proclamation authority of subsection
2003(a) and the trade agreement approval procedures of
subsection 2003(b) that is consistent with prior law. The
President must request the extension, provide his reasons for
that request, along with an explanation of the trade agreements
for which he expects to need fast track authority, and a
description of the progress he has made to date toward
achieving the principal negotiating objectives set out in
subsection 2002(b). The President must also notify the Advisory
Committee for Trade Policy and Negotiations established under
section 135 of the Trade Act of 1974, which then must file its
own report with Congress.
The authority would be extended unless either House of
Congress approves a ``resolution of disapproval.'' Any member
of Congress could introduce such a resolution in his or her
respective House of Congress. Such resolutions would be
referred, in the Senate, to the Committee on Finance, and in
the House, jointly to the Committees on Rules and Ways and
Means. Floor action on such resolutions would be out of order
unless the resolution had been reported by the aforementioned
committees.
Section 2004. Notice and consultations
Section 2004 revises and strengthens the notice and
consultation requirements that had been included in the 1988
Act. The Committee acknowledges that the Executive Branch, over
the course of the negotiations that were covered by the
previous authority, frequently briefed the Committee on the
status of trade negotiations. Although the Committee continues
to believe that its Members and staff should be briefed
frequently as trade negotiations progress, it is the
Committee's view that regular briefings alone are not
sufficient to ensure the type of consultation that will
guarantee Congress a meaningful role in the trade agreements
process.
Accordingly, in addition to the notice and consultation
provisions that had been included in the 1988 Act, section 2004
adds a number of new requirements to help ensure close
coordination and consultation at every stage of the
negotiations. The 1988 Act required the President to provide
written notice to this Committee and the House Ways and Means
Committee of bilateral trade agreement negotiations at least 60
days before providing the required 90-day notice to the House
of Representatives and the Senate of his intention to enter
into a resulting agreement, and to consult with the two
committees regarding such negotiations. Subsection 2004(a)
requires the President to provide written notice to the
Congress as a whole of his intention to begin multilateral as
well as bilateral trade negotiations, at least 90 days before
so doing. The notice must specify the date the President
intends to begin such negotiations, the specific objectives for
the negotiations, and whether the President intends to
negotiate a new agreement or modify an existing agreement.
Failure to provide such notice may trigger the introduction and
consideration of a ``procedural disapprovalresolution'' under
the provisions of subsection 2005(b) of this bill, which, if approved,
would deny the use of the trade agreement approval procedures (i.e.,
the fast track) for legislation implementing such an agreement.
Subsection 2004(a) also requires the President to consult
with the Senate Finance and House Ways and Means Committees, as
well with other committees the President deems appropriate,
before and promptly after providing notice of his intention to
begin negotiations. The Committee believes that the broadest
possible consultation is desirable and that other committees
that have an interest in the subject matter of a negotiation
are entitled to be heard. As a consequence, the Committee's
bill also requires the President to consult with any other
committees that request such consultations in writing. The bill
includes as well the requirement that the President must
consult with appropriate private sector advisory committees
established under section 135 of the Trade Act of 1974 before
beginning negotiations. In the view of the Committee, a mandate
for broad consultations will help ensure that all interested
parties are kept fully apprised of proposed negotiations.
Under subsection 2004(b), before entering into a trade
agreement, the President is required to consult with the Senate
Finance and House Ways and Means Committees, as well as with
other committees that have jurisdiction over legislation
involving subject matters that would be affected by the trade
agreement under negotiation. In addition to the requirements
stemming from the 1988 Act--that the consultations must include
discussions as to the nature of the agreement and a detailed
assessment of how and to what extent the agreement meets the
purposes, policies and objectives set forth in section 2002 of
this bill--the consultations must include a discussion of all
matters related to the implementation of the agreement. These
include an assessment as to whether the agreement includes
subject matters that will require implementing legislation that
does not qualify for the fast track procedures authorized by
this bill.
To provide an adequate understanding of the context in
which the negotiations will take place, the Committee expects
that, with respect to free trade agreement negotiations, the
consultations required in section 2004 will include an overview
of the macroeconomic situations of the countries with which the
United States is proposing to negotiate and any implications
for relevant exchange rates. The Committee expects the
President to keep it apprised of developments in this area as
negotiations progress.
In addition, because the Committee is aware that a number
of separate agreements on specific topics were concluded in
conjunction with the implementing legislation for the three
agreements most recently considered under the fast track
procedures--the U.S.-Canada Free Trade Agreement, the NAFTA,
and the Uruguay Round Agreements--the Committee has added a new
consultation requirement: the President must consult with
respect to any other agreement he has entered into or intends
to enter into with the country or countries in question.
The Committee believes that the Congress and the American
public are entitled to know the full range of understandings
and agreements that accompany the formal text of a trade
agreement. The Committee intends that the term ``agreement,''
as used in this context, be broadly construed to encompass all
kinds of agreements, ranging from formal side agreements
entered into pursuant to the President's executive power, to
exchanges of letters (with the country or countries in question
and with Members of Congress and other interested parties), to
any agreed interpretations of the provisions of a trade
agreement or any other agreement entered into in conjunction
with a trade agreement.
Section 135(e) of the Trade Act of 1974 is amended in
sections 2004 and 2007 of this title to require the Advisory
Committee for Trade Policy and Negotiations, appropriate policy
advisory committees, and each sectoral or functional advisory
committee affected by such negotiations to submit a report to
the President, the Congress and the United States Trade
Representative on any trade agreement entered into under the
authority provided in subsections 2003(a) or (b) of this title.
Such reports are to include an advisory opinion on whether and
the extent to which an agreement promotes the economic
interests of the United States and achieves the applicable
purposes and principal negotiating objectives set forth in
section 2002 of this title. The sectoral and functional
advisory committees are to provide advisory opinions as to
whether the agreement provides for equity and reciprocity
within the sector or within the functional area.
Under the 1988 Act, the advisory committee reports were
required to be submitted no later than the date on which the
President notified the Congress of his intention to enter into
an agreement. In recognition of the fact that important terms
of trade agreements often are not determined before the final
hours of the negotiations, the Committee's six-month extension
of the trade agreement approval procedures for purposes
ofconcluding the Uruguay Round negotiations allowed the private sector
advisory committees to file their reports 30 days after the President
transmitted his notification. In the view of the Committee, the 30-day
delay was helpful in that it allowed the advisory committees to factor
in the final terms of the trade agreements in their analysis of the
results. The Committee has adopted that approach in this bill. Advisory
committees will be required to submit their reports not more than 30
days after the President notifies Congress of his intention to enter
into a trade agreement.
Subsection 2004(d) requires the USTR to consult regularly,
promptly, and closely with the congressional advisers for trade
policy and negotiations appointed pursuant to section 161 of
the Trade Act of 1974, as well as with the Senate Finance and
House Ways and Means Committees as a whole, and keep the
advisers and committees fully apprised of the negotiations. As
noted above, consultations should afford Congress a meaningful
opportunity to evaluate the negotiations at their final
stages--the point at which key, and often controversial,
matters are resolved. It is the Committee's view that
comprehensive, detailed consultations are required particularly
at that point.
In that connection, the Committee expects that the USTR
will enter into a formal arrangement, in the form of procedures
similar to that agreed to by the Executive Branch in 1975, that
will implement this section and section 161 of the Trade Act of
1974 in a manner that will ensure that the advice of the trade
advisers and Committee members will be taken fully into account
so that they may play a meaningful role once negotiations
begin, and, in particular, as they reach a conclusion. In
addition, the Committee expects that the trade advisers, as
required by section 161, will be fully accredited advisers to
United States delegations to international conferences,
meetings, and negotiating sessions relating to all trade
agreements.
The Committee expects that the USTR will, consistent with
past practice, commit to a set of procedures for supplying
Members and properly cleared staff with the following
documents, whether classified or unclassified: relevant
incoming and outgoing cables, statements of Executive Branch
position, and formal submissions from the other countries
engaged in the negotiations.
In addition, the Committee believes strongly that
consultations must be improved in particular as trade
negotiations enter their final stages. The Committee is aware
that, in many cases, important and controversial issues often
are not settled until the final hour of negotiations. Although
the Committee recognizes that this is the nature of
negotiations, the Committee nonetheless believes that there
should be a mechanism in place for more formalized consultation
with Committee Members at this critical stage.
Accordingly, it is the Committee's expectation that the
USTR will work with Committee Members to develop a set of
procedures whereby the USTR or appropriate staff will brief
Committee Members and staff on the state of negotiations as
they enter their final days. Committee Members will then have
the opportunity to provide the USTR with their views as to any
potential concerns regarding the status of the negotiations at
that time and possible trade-offs that are likely to occur in
the waning hours.
The Committee recognizes that both the Executive Branch and
the Congress bear the responsibility for ensuring that these
consultations are meaningful. Executive Branch negotiators must
offer detailed information in a timely manner; Congressional
trade advisers and Committee Members must make themselves
available when the negotiations enter their final stage, and
the requirement to consult is contingent upon such
availability.
Subsection 2004(e) also requires the President to request a
study by the International Trade Commission (ITC) of the
potential economic impact of the proposed agreement at least 90
days before entering into such agreement (the same time that he
must notify Congress of his intent to enter into the
agreement). The ITC would then be required to submit a report
to the President and Congress, within 90 days after the
President enters into the agreement, assessing the likely
impact of the agreement on the U.S. economy as a whole and
specific industry sectors. The Committee believes that such a
report should provide an objective assessment of the final
results of the negotiations in sufficient time to inform
Congress' consideration of any trade agreement and implementing
legislation submitted under these procedures.
Section 2005. Implementation of trade agreements
Subsection 2005(a) establishes the basic requirements
regarding notification and submission of the agreement and
implementing legislation that must be met before a trade
agreement subject to the trade agreement approval procedures of
this bill (i.e., the fast track procedures) enters intoforce
for the United States. As was the case in the 1988 Act, the President
is required to notify the House of Representatives and the Senate of
his intention to enter into a trade agreement at least 90 days before
doing so, and to publish promptly in the Federal Register notice of his
intention. The purpose of this advance notification is to give the
Congress an opportunity to review the outcome of the negotiations and
assess, before the agreement becomes final, whether the objectives set
forth in this Act have been met. The 90-day advance notification is
intended to allow sufficient time for the Congress to make its views
known and, if necessary, for the Executive Branch to seek modifications
to the agreement before the negotiations are formally concluded.
As in the past, the fast track procedures established in
this title do not require the President to submit the agreement
and implementing legislation to the Congress within a time
certain. The Committee is of the view, however, that the
Congress ought to be apprised soon after the agreement is
entered into of the changes to U.S. law that will be required
in order to implement it. Accordingly, the Committee has added
a new provision: within 60 days after entering into an
agreement, the President must submit to the Congress a
description of the changes to U.S. laws that he considers
necessary for the United States to comply with the agreement.
Once the President is ready to send the agreement and
proposed implementing legislation to the Congress, subsection
2005(a) requires, as did the 1988 Act, that the President
submit the final legal text of the agreement, together with a
draft of the implementing bill, a statement of the
administrative actions that will be proposed to implement the
agreement, and additional supporting information. The
supporting information must include: (1) an explanation as to
how the implementing bill and proposed administrative action
will modify U.S. law; and (2) an assertion that the agreement
makes progress in achieving the objectives of this Act, setting
forth specific reasons as to how and the extent to which such
objectives are met and why and to what extent other objectives
are not, how the agreement serves the interests of U.S.
commerce, why the implementing bill qualifies for fast track
procedures, and the reasons for any proposed administrative
action. In addition, the Committee has added a requirement that
the President identify whether and how the agreement changes
provisions of any previously-negotiated agreement. It is the
Committee's expectation that the supporting information as to
how the agreement serves the interests of U.S. commerce will
also include the report to be prepared by the ITC pursuant to
subsection 2004(e), as discussed above.
Subsection 2005(a) carries over a provision from the 1988
Act that requires that the President recommend that the
benefits and obligations of any trade agreement eligible for
the procedures authorized by this bill be applied solely to the
parties to the agreement, in order to minimize the ``free
rider'' problem that arises when the benefits of trade
agreements are extended even to those countries that are not
parties to the agreement and that have not themselves made
binding commitments, if such a distinction is consistent with
the agreement. This provision also authorizes the President to
recommend that the benefits and obligations of an agreement not
apply uniformly to all parties to an agreement, if permitted
under the terms of the agreement.
Subsection 2005(b) establishes important checks on the use
of the trade agreement approval procedures, prior to the
commencement of negotiations, as well as during the course of
such negotiations. Paragraph (1) expands upon a provision
included in the 1988 Act that disallowed the use of such
procedures with respect to implementing legislation for
bilateral trade agreements if either this Committee or the
House Ways and Means Committee disapproved of the negotiation
of such an agreement within 60 days of the President's
notification of his intention to begin negotiations. Under the
Committee's bill, the Committees' oversight of the commencement
of negotiations would extend to all trade agreements, and not
merely bilateral trade agreements. However, as disallowing the
use of the trade agreement approval procedures is a serious
step, the Committee has provided that both the Senate Finance
and Ways and Means Committees must disapprove of their use.
Subsection 2005(b) also incorporates the ``procedural
disapproval resolution'' included in the 1988 Act, which
provides for consideration, under expedited procedures, of a
resolution denying the use of the trade agreement approval
procedures to implement the results of any trade agreement with
respect to which the President has failed or refused to consult
with the Congress. The Committee's bill expands this provision
to apply as well where the President has failed to notify the
Congress in accordance with the provisions of section 2004 of
this title. The Committee anticipates that the mere
availability of this procedure will provide a further incentive
for close and continuing consultations with the Congress.
The process for Congressional consideration of procedural
disapproval resolutions remains unchanged from the 1988 Act. In
the event that both Houses of Congress pass resolutions of
disapproval within 60session days of each other, the use of the
trade agreement approval procedures to implement the results of the
trade negotiation at issue will be denied. There is no limitation on
when the resolution may be introduced or acted upon. These procedures
are intended as a check on the Executive Branch throughout the course
of the negotiations. Both the Ways and Means Committee and the Finance
Committee would be privileged to report a resolution of their
respective House at any time the trade agreement approval procedures
are in effect. The resolution may originate only with the appropriate
Committee in each House of Congress. Once reported by the Finance or
Ways and Means Committee, each resolution would itself be considered
under expedited procedures analogous to the trade agreement approval
procedures potentially applicable to trade agreements, i.e., it would
be a privileged matter and could not be amended or delayed. The
resolution would be effective only if reported in exactly the form set
out in the bill and subject to the time limits noted above.
Section 2006. Treatment of certain trade agreements
Subsection 2004(a) of this bill requires the President to
notify the Congress 90 days before commencing negotiations on a
trade agreement the implementation of which would be eligible
for the fast track approval procedures provided by this Act.
Section 2006 waives this requirement for four sets of
negotiations: (1) those negotiations under the auspices of the
WTO regarding trade in information technology products that
commenced before the enactment of this bill; (2) negotiations
or work programs that have commenced pursuant to the ``built-
in'' agenda of the agreements administered by the WTO; (3) an
agreement with Chile, completing the negotiations that had
begun in 1995; and (4) negotiations to achieve a Free Trade
Area of the Americas that began in April 1998 in Santiago,
Chile.
Because these negotiations have either been initiated or
will have commenced by the time this bill is enacted, it is the
view of the Committee that no practical purpose would be served
by requiring the President to notify the Congress of his
intention to begin such negotiations. With respect to the
second category of negotiations--those that form part of the
WTO's ``built-in'' agenda, it is the Committee's understanding
that those that have commenced (and for which notice is,
therefore, not required) are the work program on rules of
origin and the negotiations on financial services.
The Committee wishes to emphasize that all of the other
notice and consultation requirements of this title, as well as
the procedural disapproval resolution procedures of section
2005, will apply to each of the negotiations covered by section
2006.
Section 2007. Conforming amendments
Section 2007 makes conforming changes to a number of
provisions of the Trade Act of 1974, as amended, to ensure that
the provisions applicable to past extensions of fast track
procedures continue to apply. These changes provide, for
example, that the usual requirements for advice from the ITC
and the private sector advisory committees will continue to
apply to agreements negotiated pursuant to the authority
provided in this title.
Section 2008. Definitions
Section 2008 defines a number of the terms used in this
title. Definitions are provided for the following:
``distortion,'' ``trade,'' ``Uruguay Round Agreements,''
``World Trade Organization,'' ``WTO agreement,'' and ``WTO and
WTO member.''
C. Title III--Legislation Reauthorizing the Trade Adjustment Assistance
Programs
Title III extends the authorization of the three Trade
Adjustment Assistance programs through September 30, 2000.
1. Background
Title II of the Trade Act of 1974, as amended, authorizes
three trade adjustment assistance (TAA) programs for the
purpose of providing assistance to individual workers and firms
that are adversely affected by the reduction of barriers to
foreign trade. Those programs include--
The general TAA program for workers provides training
and income support for workers adversely affected by
import competition.
The TAA program for firms provides technical
assistance to qualifying firms. (Both the TAA programs
for workers and for firms were first established by the
Trade Expansion Act of 1962.)
The third program, the North American Free Trade
Agreement (NAFTA) program for workers (established by
the North American Free Trade Agreement Implementation
Act of 1993), provides training and income support for
workers adversely affected by trade with or production
shifts to Canada and/or Mexico.
All three programs expire on September 30, 1998. The TAA
program for firms is also subject to annual appropriations.
2. General Description of Title
Section 3001 of the Act reauthorizes each of the three TAA
programs through September 30, 2000. This provision is
effective on the date of enactment.
The Committee has begun a comprehensive review of the U.S.
trade laws. As a part of this review, the Committee intends to
examine the TAA programs to determine what changes, if any, are
needed to allow the programs to operate in a more effective and
efficient manner. Among other things, the Committee intends to
consider whether the term ``article'' in subsection
251(c)(1)(B)(ii) of the Trade Act of 1974 should be clarified
so that it is not construed in such a manner as to discriminate
against manufacturers of jewelry and other small items. Such
clarification may be necessary because it is the intent of the
Committee on Finance that the term ``article'' should be
construed in such a way that it applies equitably to
manufacturers of all products, including jewelry and other
small items.
D. Title IV--Legislation Establishing a Mechanism for Identifying
Market Access Barriers to Agricultural Products
Title IV establishes a mechanism for identifying countries
that deny market access to United States agricultural products
and for investigating and eliminating such barriers.
1. Background
Title IV incorporates S. 219, which was introduced on
January 28, 1997 by Senators Daschle and Grassley, with one
modification. Title IV would expand the product coverage from
the value-added agricultural products covered under S. 219 to
include all U.S. agricultural commodities and products,
including forest products, fish and seafood.
A combination of natural disasters, crop disease, low
commodity prices, and the loss of Asian markets due to the
ongoing economic crisis in that region have depressed farm
income and the economies of rural areas. Approximately 40
percent of farm income is currently derived from foreign sales.
These circumstances mandate greater attention to the removal of
unfair trade barriers that displace American agricultural
products in foreign markets in an effort to help alleviate the
growing crisis in American agriculture.
Title IV establishes a mechanism for identifying countries
that deny market access to United States agricultural products
and for investigating and eliminating such barriers. This
mechanism is modeled on the so-called Special 301 procedures
that have proved successful in improving protection of American
intellectual property rights in foreign markets and similar
procedures that have proved successful in gaining market access
for U.S. exports of telecommunications equipment and services.
2. General Description of Title
Section 4001. Short title
Section 4001 provides that the title of this provision
shall be the ``United States Agricultural Products Market
Access Act of 1998.''
Section 4002. Purposes
Section 4002 identifies three purposes for this title:
(1) To reduce or eliminate foreign unfair trade
practices and to remove constraints on fair and open
trade in agricultural products;
(2) To ensure fair and equitable market access for
exports of United States agricultural products; and
(3) To promote free and fair trade in agricultural
products.
Section 4003. Identification of countries that deny market access
Section 4003 amends Chapter 8 of title I of the Trade Act
of 1974 to add a new section 183. Subsection 183(a) establishes
a process by which the USTR must identify those foreign
countries that deny fair and equitable market access to United
States agricultural products (including forest products, fish
and seafood) or apply unjustified sanitary or phytosanitary
standards to agricultural products imported from the United
States.
Subsection 183(b) requires that the USTR designate as
``priority foreign countries'' those countries:
That engage in or have the most onerous or egregious
acts, policies, or practices that deny fair and
equitable market access to United States agricultural
products;
Whose acts, policies or practices have the greatest
adverse impact (actual or potential) on the relevant
United States products; and
That are not engaged in good faith negotiations with
the United States, either bilaterally or
multilaterally, to provide fair and equitable market
access to U.S. agricultural exports.
Subsection 183(b) further requires the USTR to consult with
the Secretary of Agriculture and other appropriate officials of
the federal government in determining which countries and
practices would be identified as priorities. The USTR is also
required to take into account information provided from U.S.
agricultural interests, including petitions filed under section
302 of the Trade Act of 1974 requesting investigations of
particular acts, policies, or practices that impose an unfair
burden on U.S. agricultural exports.
The USTR must also take into account a variety of other
factors, including the history of agricultural trade relations
with the foreign country and any history of past efforts to
achieve fair and equitable market access for U.S. agricultural
products. Subsection 183(c) provides that the USTR may, at any
time, either identify or revoke the identification of any
foreign country as a priority foreign country.
Subsection 183(e) requires the USTR to publish in the
Federal Register a list of foreign countries identified under
subsection 183(a). Subsection 183(f) requires that the USTR
must report annually regarding the countries identified under
subsection 183(a) to the Senate Committees on Finance and on
Agriculture, Nutrition, and Forestry and the House Committees
on Ways and Means and on Agriculture. This report must describe
the actions taken under section 183 during the twelve months
preceding the report and the reasons for such actions,
including a description of progress made in achieving fair and
equitable market access for United States agricultural
products.
Section 4004. Investigations
Section 4004 amends subparagraph (A) of subsection
302(b)(2) of the Trade Act of 1974 to require that the USTR
must initiate a formal investigation under that section of
those practices that formed the basis for a foreign country
being identified as a priority foreign country. Such
investigation would not be necessary, however, if the practices
are at the time the subject of another section 301
investigation or action or the investigation would be
detrimental to U.S. economic interests. Subsection 4004(b)
makes conforming amendments to sections 302 and 304 of the
Trade Act of 1974.
E. Title V--Legislation To Implement the OECD Shipbuilding Agreement
Title V would approve and implement the Agreement
Respecting Normal Competitive Conditions in the Commercial
Shipbuilding and Repair Industry (``Shipbuilding Agreement''),
resulting from negotiations conducted under the auspices of the
Organization for Economic Cooperation and Development
(``OECD''). Title V incorporates the provisions of the OECD
Shipbuilding Trade Agreement Act, S. 1216, as reported by the
Senate Committee on Finance on September 24, 1997 and by the
Senate Committee on Commerce, Science and Transportation on
November 10,1997, with a few minor modifications.
1. 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, alleging
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 OECD Council. 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
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.
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. On May 8, 1996, the Committee on Finance reported H.R.
3074, which contained a number of trade items, including
legislation to implement the Shipbuilding Agreement.
Subsequently, on June 13, 1996, the House of Representatives
passed H.R. 2754, which, as amended, contained major
substantive differences from the bill reported by the Committee
on Finance. The Senate was unable to consider H.R. 2754 before
the conclusion of the 104th Congress.
On September 24, 1997, the Finance Committee reported an
original bill (S. 1216) which was sequentially referred to the
Committee on Commerce, Science and Transportation, which
reported the bill with a few modifications on November 10,
1997.
It is the Committee's view that implementation of the
Agreement is long overdue. Accordingly, the Committee has
renewed its efforts to seek prompt passage of this legislation
by including it in the Trade and Tariff Act of 1998.
2. Summary of Title
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, theShipbuilding 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, which
implements the WTO Antidumping Agreement in 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 not
possible to use the antidumping remedies of Title VII of the 1930 Act
to cover the sale of vessels at less than fair value. Accordingly,
separate statutory authority is required to implement the Shipbuilding
Agreement.
a. Injurious Pricing and Countermeasures
Section 5102 of the bill 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 of the 1930 Act, which set
forth procedures under U.S. law for assessment of antidumping
duties. The specific injurious-pricing provisions differ from
the antidumping provisions in Title VII of the 1930 Act 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.
b. Other Provisions
Title V also includes the following changes or additions to
current law:
Repairs made in a Party to the Shipbuilding Agreement on
U.S.-flagged vessels of a type covered by the Shipbuilding
Agreement and on integrated tug-barges 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, 1936, to vessels
constructed in the United States, as well as government
guarantees available under Title XI of the Merchant Marine Act,
1936, 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. Changes to
Title XI will not take effect until January 1, 2001.
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.
The President would be required to commence U.S. withdrawal
from the Shipbuilding Agreement when one or more Shipbuilding
Agreement Parties, accounting for a specified tonnage of
construction of vessels covered by the Shipbuilding Agreement,
withdraws from the Agreement.
Procedures for withdrawing Congressional approval of the
Shipbuilding Agreement when a Shipbuilding Agreement Party
undertakes responsive measures pursuant to a determination that
the Jones Act 1 has significantly undermined the
balance of rights and obligations under the Shipbuilding
Agreement.
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\1\ The Merchant Marine Act, 1920 (46 App. U.S.C. 861 et seq.), the
Act of June 19, 1886 (46 App. U.S.C. 289), or any other provision of
law set forth in Accompanying Note 2 to Annex II of the Shipbuilding
Agreement.
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3. General Description of Title
Section 5001. Short title; purposes; table of contents
Section 5001 provides that the title may be cited as the
``OECD Shipbuilding Trade Agreement Act.'' It also lists three
purposes of the Act:
(1) To enhance the competitiveness of U.S.
shipbuilders which has been diminished as a result of
foreign subsidies and predatory pricing practices;
(2) To ensure that U.S. ownership, manning, registry,
and construction requirements for coastwise trade
vessels, which have provided the Department of Defense
with mariners and assets in times of national
emergency, cannot be compromised by the Shipbuilding
Agreement; and
(3) To strengthen the U.S. shipbuilding industrial
base to ensure that its full capabilities are available
in time of national emergency.
a. Subtitle A--General Provisions
Section 5101. Approval of the Shipbuilding Agreement
Section 5101 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.
Section 5102. Injurious pricing and countermeasures relating to
shipbuilding
Section 5102 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 of the Tariff Act of 1930, this
description outlines only the differences between the two
titles.
New Subtitle A--Injurious Pricing Charge and Countermeasures
Section 801. Injurious pricing charge
The new section 801 of the Tariff Act of 1930 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.
The new section 801 is modeled on and analogous to section
731 of Title VII of the 1930 Act. However, the new 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
the new Title VIII would establish a one-time charge to be
assessed against the shipyard producing the injuriously-priced
vessel.
The Shipbuilding Agreement further 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, the new section 801 of the 1930 Act
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 of the 1930 Act and the new 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
The new section 802 added by the Trade and Tariff Act of
1998 sets forth the procedures for conducting an injurious-
pricing investigation. The new subsection 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. Subsection 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.
The new subsection 802(b)(1)(B)(i) 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.
In some instances, a petitioner may be capable of producing
the vessel in question, but was not invited to participate in a
bid because the buyer claims that it did not know that the
petitioner was capable of producing a vessel to specification.
In determining standing pursuant to the new subsection
802(b)(1)(B)(i)(I), the Committee does not intend that the
Commerce Department narrowly construe the definition of ``broad
multiple bid'' in the new subsection 861(31) to require that
the buyer have actual knowledge of the petitioner's capability
to produce the required vessel. Rather, the Commerce Department
should examine whether the buyer extended invitations to at
least all those producers that the buyer knew or reasonably
should have known were capable of producing the required
vessel. In considering this question, the Commerce Department
should consult with the Maritime Administration. The Commerce
Department should also consider whether the petitioner may
still have standing pursuant to the new subsection
802(b)(1)(B)(i)(III).
The new subsection 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, the new
subsection 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.
The new subsection 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 the new Title VIII differ in a number of
respects from procedures for initiating an antidumping
investigation under Title VII of the 1930 Act. 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 of the 1930 Act, in which all entries of the
subject imports during a specified period (generally 12 months
for Commerce and 3 years for the ITC) are subject to
investigation.
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, under
Title VII of the 1930 Act, 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 petitionerunder
Title VII of the 1930 Act is not required to show that it made an
effort to sell like merchandise to the purchaser.
The new 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 subsection 732(c)(1) of
Title VII of the 1930 Act, because of the Administration's
concern that the new representation requirements and deadlines
for filing petitions under the new Title VIII may create
additional complexities requiring more time to determine the
sufficiency of the petition.
Finally, Title VII of the 1930 Act 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 the new 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 the new Title VIII would require
that the injurious-pricing action not be initiated in certain
circumstances.
Section 803. Preliminary investigations
The new subsection 803(a) of the 1930 Act would require the
ITC to make its preliminary determination within 90 days after
the filing of the injurious-pricing petition. The new
subsection 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 the
new Title VIII cases are generally longer than in antidumping
investigations under Title VII of the 1930 Act. 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 new 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 of the
1930 Act and the new Title VIII are completely different, the
effect of a preliminary affirmative Commerce determination
would be different as well. Title VII of the 1930 Act 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 the new 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
The new subsection 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 the new subsection 804(d) contrasts with
Title VII of the 1930 Act, 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 an action under the new Title VIII 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 the new 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
The new subsection 805(a) provides that Commerce would be
required to make its final determination in an injurious-
pricing investigation under the new 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.
The new subsection 805(b) provides that the ITC would be
required to make its final determination before the later of
the 120th 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 the new Title VIII than
is provided for under section 735 of Title VII of the 1930 Act
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 the new 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 the vessel in
question or on future sales or scrutiny of sales of other
vessels constructed by that shipbuilder unless a new
investigation under the new Title VIII is conducted with
respect to each of those future sales.
This injurious-pricing remedy under the Shipbuilding
Agreement and the new Title VIII is different than the
antidumping remedy under Title VII of the 1930 Act 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 the new 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 of the 1930 Act.
Section 807. Imposition of countermeasures
The new 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.
New subsections 807 (b) and (c) set forth the procedures
for establishing countermeasures. Specifically, the new
subsection 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 the new subsection 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.
The new subsection 807(d) provides that if countermeasures
are imposed, they may be reviewed annually as to scope and
duration.
The new subsection 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, the new subsection 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 the new Title VIII is
essentially an enforcement mechanism. Neither Title VII of the
1930 Act nor the WTO Antidumping Agreement provide for the
imposition of countermeasures. However, an injurious-pricing
order under the new 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
the new Title VIII and the Shipbuilding Agreement establish the
countermeasures procedure as the enforcement mechanism.
The Committee notes that under the new subsection
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 interested parties (such as domestic producers,
respondents, workers, and relevant trade or business
associations) 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
The new section 808 provides that the government of a party
to the Shipbuilding Agreement may file a petition with the 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 the new 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 of
the 1930 Act, 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.
Section 809. Third country injurious pricing
The new section 809 addresses concerns over the effects on
the U.S. industry resulting from the injurious pricing of
vessels sold to buyers in Shipbuilding Agreement Parties other
than the United States. The section establishes procedures
analogous to section 1317 of the Omnibus Trade and
Competitiveness Act of 1988 (19 U.S.C. 1677k) regarding third-
countrydumping. These procedures permit the domestic industry
to petition the USTR if the industry has reason to believe that a
vessel has been sold in another party to the Shipbuilding Agreement at
less than fair value and such sale is injuring the U.S. domestic
industry.
If USTR determines that there is a reasonable basis for the
allegations in the petition, USTR shall submit an application
to the appropriate authority of the Shipbuilding Agreement
Party requesting that an injurious-pricing action be taken on
behalf of the United States under the laws of that country with
respect to the sale of the vessel in question. At the request
of USTR, the appropriate officers of the Commerce Department
and the ITC are to assist USTR in preparing any such
application.
After submitting the application to the appropriate
authorities of the Shipbuilding Agreement Party, USTR must seek
consultations with such authorities regarding the requested
action. The Committee understands that the Shipbuilding
Agreement Party would be able to proceed to initiate an
investigation requested by the United States only after
obtaining the approval of the Parties Group under the
Shipbuilding Agreement. If the government of the Shipbuilding
Agreement Party refuses to take any injurious-pricing action,
USTR must consult with the domestic industry on whether further
action under any other U.S. law is appropriate.
New Subtitle B--Special Rules
Section 821. Export price
The new 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. The new subsection 821(b) sets forth the
adjustments to be made to export price.
The definition of export price under the new section 821 is
similar to the definition in Title VII of the 1930 Act (section
772). However, Title VII of the 1930 Act 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 the new Title VIII.
Section 822. Normal value
The new subsection 822(a)(1) added by this bill 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. The new subsection 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.
The new subsection 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, the new subsection
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.
The new subsection 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.
The new subsection 822(f)(1)(C) provides for adjusting
costs if they have been affected by startup operations.
Subsection 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 the new Title VIII
are similar to those of Title VII of the 1930 Act (section
773), altered only wherenecessary 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 of the 1930 Act 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 the new subsection 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.
The new subsection 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 the new section 823 are essentially the
same as under Title VII of the 1930 Act, specifically 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 the new 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 of the 1930 Act,
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 of the 1930 Act, Commerce is
required to allow exporters time to adjust their export prices
in response to sustained changes in the exchange rate. However,
most of the new 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 distort unreasonably the margin calculation for that sale.
Therefore, the new section 823 requires adjustments to
eliminate such distortions.
New Subtitle C--Procedures
Sections 841 through 845. Procedures
The new sections 841 through 845 set forth procedural
requirements concerning the injurious-pricing mechanism.
Specifically, the new section 841 provides that, upon request,
Commerce and the ITC are each to hold hearings during their
investigations.
The new section 842 provides for determinations on the
basis of the facts available. As in section 776 of Title VII of
the 1930 Act, 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.
The new 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.
The new section 844 sets forth procedures for conducting
investigations, including certification of submissions, the
manner for handling difficulties by the parties in meeting
requirements of theinvestigation, 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 the new Title
VIII are the same as the procedures under Title VII of the 1930
Act 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, the new 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 of the 1930 Act have been repeated
in the new Title VIII, making only those changes necessitated
by the differences between the WTO Antidumping Code and the
Shipbuilding Agreement.
New Subtitle D--Definitions
Section 861. Definitions
Industry; Producer: The new paragraph 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 of the 1930 Act, paragraph
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 the new 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 the new 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 the new Title VIII differs from
Title VII the 1930 Act, 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 subject imports).
Buyer; United States buyer: The new paragraph 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. Paragraph 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.
The new paragraph 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 of the 1930 Act does not contain a definition of
buyer or purchaser because Title VII of the 1930 Act 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 of the 1930 Act 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 the new 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 paragraph 861(5), paragraph 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. Paragraph 861(5) automatically includes
leases or bareboat charters as being ownership interests.
In an antidumping investigation under Title VII of 1930
Act, Commerce may determine that a lease is equivalent to a
sale under paragraph 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: The new
paragraph 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 new Title VIII
remedy may not be utilized.
By contrast, Title VII of the 1930 Act (paragraph 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 of the 1930 Act and the new 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 U.S.
obligations under the WTO.
The new paragraph 861(8) also excludes from the definition
of ``vessel'' and, thereby from the application of the
injurious-pricing provisions in the Shipbuilding Agreement,
certain fishing vessels, military vessels, military reserve
vessels, and certain other vessels sold before the entry into
force of the Shipbuilding Agreement. For purposes of the new
Title VIII, this section also defines the terms ``self-
propelled seagoing vessel,'' and ``military vessel.'' The
definition of ``military reserve vessel'' was removed from this
section since S. 1216 was reported by the Finance and Commerce
Committees. As a result, any prior legislative history defining
this term does not apply.
Like vessel: The new paragraph 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 the new Title VIII is analogous to the
definition of ``like product'' in Title VII of the 1930 Act.
Under Title VII of the 1930 Act, paragraph 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: The new paragraph 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, the new
paragraph 861(16)(B) would require the ITC to consider the sale
of thesubject 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, the new paragraph 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, paragraph 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,
the new paragraph 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.
Paragraph 771(7)(B) of Title VII of the 1930 Act 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 the new 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 the new 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 the new 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: The new paragraph 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 is at a price
that is likely to have a significant depressing or suppressing
effect on domestic prices, and is 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 the new Title VIII for determining
threat of material injury in an injurious-pricing investigation
are analogous to the criteria under paragraph 771(7)(F) in
Title VII of the 1930 Act that the ITC is to consider in
determining threat of material injury by reason of
dumpedimports. 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 of the 1930 Act.
The Committee notes, however, that although both Title VII
of the 1930 Act and the new 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 of the 1930 Act. The ITC's
consideration of ``sale'' in determining threat of material
injury under the new 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 the new paragraph 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. The new paragraph 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 the new Title VIII are analogous to the provisions in
paragraph 771(7)(G) of Title VII of the 1930 Act 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 of the 1930 Act and the new
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 of the 1930 Act, 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 of the new 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: The new paragraph 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, this definition of ``interested party''
is analogous to the definition of ``interested party'' under
paragraph 771(9) in Title VII of the 1930 Act. However, the new
paragraph 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 the
new 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.
Section 5103. Enforcement of countermeasures
Section 5103 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. Subsection
5103(b) provides for certain limited exceptions to this rule.
Unlike the WTO Antidumping Agreement, the
ShipbuildingAgreement, as reflected in this section, specifically
provides for the imposition of countermeasures if the foreign shipyard
in question does not pay the injurious-pricing charge assessed against
it. 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.
Section 5104: Judicial review in injurious pricing and countermeasure
proceedings
Section 5104 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 the 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 of the 1930 Act. 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.
b. Subtitle B--Other Provisions
Section 5201: Equipment and repair of vessels
Section 5201 amends section 466 of the Tariff Act of 1930,
by adding a new subsection (i). The new subsection provides
that the equipment supplied and repairs made in a Party to the
Shipbuilding Agreement on U.S.-flagged vessels of a type
covered under the Shipbuilding Agreement, as well as U.S.-
flagged, integrated tug-barges or tug-barge combinations, 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 5201 implements the provision in the Shipbuilding
Agreement that prohibits the collection of duties on vessel
repairs made in a Party 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 Party. Although not specifically covered by the
Shipbuilding Agreement, this section also applies to integrated
tug-barges and tug-barge combinations (provided that the barge
is of 100 gross tons or more and the tug is of 365 kilowatts or
more) because they share many of the same characteristics as
vessels covered by the Shipbuilding Agreement. However, the
duty would remain in place if the repairs are made in a country
that is not a Party to the Shipbuilding Agreement.
Section 5202. Effect of agreement with respect to private remedies
Section 5202 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 subsection 102(c) of the
Uruguay Round Agreements Act (Public Law 103-465) and
subsection 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 5202
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.
Section 5203. Implementing regulations
Section 5203 authorizes relevant agencies to issue
regulations, as may be necessary to ensure that the amendments
made by this legislation 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 this
legislation 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 1930 Act wherever possible,
making only those changes necessitated by the differences
between existing law and the amendments made by this
legislation.
Section 5204. Amendments to the Merchant Marine Act, 1936
Section 5204 makes several changes to the Merchant Marine
Act, 1936, which fall within the jurisdiction of the Senate
Committee on Commerce, Science, and Transportation and are
explained in Senate Report 105-154.
Section 5205. Applicability of title XI amendments
Section 5205 makes certain changes to Title XI of the
Merchant Marine Act, 1936, which fall within the jurisdiction
of the Senate Committee on Commerce, Science, and
Transportation and are explained in Senate Report 105-154.
Section 5206. Monitoring and enforcement
Section 5206 requires USTR to establish a program to
monitor other Shipbuilding Agreement parties' compliance with
the terms of the Shipbuilding Agreement, which should include
the establishment of an inter-agency task force and
consultations with U.S. embassies, industry, labor, and other
interested parties. USTR is also required to submit an annual
report to Congress on USTR's monitoring activities, the results
of its consultations, and other parties' compliance with the
Agreement. This section also provides that USTR should
vigorously use the consultation procedures under the
Shipbuilding Agreement if it receives information that a
Shipbuilding Agreement Party is materially violating the
Agreement in a manner that is detrimental to U.S. interests. If
the matter is not otherwise resolved through consultation, USTR
is directed to use the dispute settlement procedures provided
for under the Shipbuilding Agreement to redress the situation.
Section 5207. Jones Act and related laws not affected
Section 5207 clarifies the relationship between the
requirements of the Shipbuilding Agreement and the Merchant
Marine Act, 1920 (46 App. U.S.C. 861 et seq.), the Act of June
19, 1886 (46 App. U.S.C. 289), or any other provision of law
set forth in Accompanying Note 2 to Annex II of the
Shipbuilding Agreement (referred to collectively as the ``Jones
Act''). This provision falls within the jurisdiction of the
Senate Committee on Commerce, Science, and Transportation and
are explained in Senate Report 105-154.
Section 5208. Withdrawal from Shipbuilding Agreement
Subsection 5208(a) requires the President to give notice of
withdrawal by the United States from the Shipbuilding Agreement
(under Article 14 of that Agreement) as soon as practicable
(normally within two to four weeks) after one or more
Shipbuilding Agreement Parties accounting for a specified
tonnage of new Shipbuilding Agreement vessel construction
(which does not include vessel repair) gives notice of
intention to withdraw. However, the President may not implement
the United States' withdrawal from the Agreement under this
subsection until such foreign parties have actually withdrawn
from the Agreement. This subsection also provides that the
President may terminate the notice of withdrawal if one or more
of the Shipbuilding Agreement Parties terminates its (their)
notice(s) of withdrawal and that any Parties still intending to
withdraw account for less than the specified tonnage of new
Shipbuilding Agreement vessel construction.
Subsection 5208(b) sets out procedures for withdrawal of
congressional approval of the Shipbuilding Agreement when a
Shipbuilding Agreement Party undertakes responsive measures
pursuant to a determination under the Shipbuilding Agreement
that the Jones Act has significantly undermined the balance of
rights and obligations under the Agreement. Under these
procedures, subsection 5208(b)(1) requires the President to
notify the Senate Committees on Finance and Commerce, Science
and Transportation, and the House Committees on Ways and Means
and National Security upon notice by a Shipbuilding Agreement
Party of intention to apply such responsive measures under
paragraph 2.e of Annex II B of the Shipbuilding Agreement and
the applicable date of such measures. The President should
provide this notice to the committees as soon as practicable,
normally within two to four weeks of the notice by the
Shipbuilding Agreement Party.
The term ``applicable date'' is defined in subsection
5208(b)(5) as the date on which the responsive measures are
first scheduled to be applied by the Shipbuilding Agreement
Party. In some cases, the notification by the Shipbuilding
Agreement Party of its intention to apply responsive measures
will not specify the date those measures may first be applied.
In these instances, USTR should make every effort to determine
the applicable date of the responsive measures from the
Shipbuilding Agreement Party. Once that date is determined, the
President is to issue as soon as practicable, a second
notification to the Senate Committees on Finance and Commerce,
Science, and Transportation, and the House Committees on Ways
and Means and National Security, informing the committees of
the applicable date. If USTR is unable to ascertain the
applicable date, the President shall so inform the committees
and the date of the President's first notification to the
committees shall be deemed to be the applicable date of the
responsive measures.
While the President should consult with the appropriate
Congressional committees in the event that the OECD Parties
Group authorizes one or more Shipbuilding Agreement Parties to
undertake responsive measures pursuant to paragraph 2.e of
Annex II B, such authorization alone does not require formal
notification mandated by subsection 5208(b)(1). Rather, it is
the intention of the Committee that the President issue the
formal notification required by subsection 5208(b)(1) only
after the OECD Parties Group has authorized the undertaking of
responsive measures and a government entity of one or more
Shipbuilding Agreement Parties has issued a notice of intention
to apply such measures.
Subsection 5208(b)(2) provides that, as of the applicable
date of the responsive measures, Congress may consider and
adopt a joint resolution providing for withdrawal of
Congressional approval of the Shipbuilding Agreement. Under
subsections 5208(b) (3) and (4) such a resolution may be
introduced by any Member at any time on or after the applicable
date. Congress then has 90 legislative days from the applicable
date to transmit the resolution to the President; the Senate
Committee on Finance and the House Committee on Ways and Means
have up to 45 of those days to report the resolution or they
are automatically discharged. If the President then vetoes the
resolution, each House has 15 legislative days to vote to
override the veto. Under subsection (b)(4)(B)(ii), the
resolution would be subject to the ``fast track'' rules of
section 152 of the Trade Act of 1974.
Subsection 5208(b)(4)(B)(iv)(III) specifies that it would
not be in order for Congress to consider a joint resolution or
vote to override a Presidential veto of the joint resolution if
the President notifies the appropriate Congressional committees
that the decision to apply the relevant responsive measures has
been withdrawn and the measures have not yet been applied.
Furthermore, subsection 5208(b)(4)(C) states that it would not
be in order for either the House of Representatives or the
Senate to consider another joint resolution (other than a joint
resolution received from the other House), if that House has
already voted on a joint resolution for withdrawal from the
Shipbuilding Agreement with respect to the same Presidential
notification regarding the implementation of responsive
measures.
Subsection 5208(c) provides procedures for the Senate
Committee on Commerce, Science and Transportation and the House
Committee on National Security to report an original bill on an
expedited basis that would restore those provisions of the
Merchant Marine Act of 1936, as amended, that are modified by
section 5204 of this title, but would not be restored by
subsection 5301(b) in the event that the United States
withdraws from the Shipbuilding Agreement. Any changes
authorized by such legislation would take effect on the date of
the United States' withdrawal.
Section 5209. Expanding membership in the Shipbuilding Agreement
Section 5209 requires USTR to monitor the policies and
practices of countries that are not parties to the Shipbuilding
Agreement and to seek the accession of countries that have
significant commercial shipbuilding and repair industries,
including Australia, Brazil, India, the People's Republic of
China, Poland, Romania, Singapore, the Russian Federation, and
Ukraine. USTR is also required to provide Congress with an
annual report on its efforts to expand membership in the
Shipbuilding Agreement.
Section 5210. Protection of United States security interests
Section 5210 clarifies the relationship between the
requirements of the Shipbuilding Agreement and the protection
of U.S. security interests. This provision is within the
jurisdiction of the Senate Committee on Commerce, Science, and
Transportation and is explained in Senate Report 105-154.
Section 5211. Definitions
Section 5211 defines various terms for purposes of this
title.
The term ``appropriate committees'' refers to the Senate
Committees on Finance and Commerce, Science, and Transportation
and the House Committees on Ways and Means and National
Security.
The terms ``Shipbuilding Agreement,'' ``Shipbuilding
Agreement Party,'' ``Shipbuilding Agreement vessels,'' and
``Export Credit Understanding'' have the same meanings as in
subsections (h), (i), (j), and (k) of section 905 of the
Merchant Marine Act, 1936 (as added by section 5204 of this
title), respectively.
The term ``GATT 1994'' has the same meaning as in section 2
of the Uruguay Round Agreements Act (19 U.S.C. 3501).
This section also defines the term ``military vessel.'' The
definition of ``military reserve vessel'' was removed from this
section. As a result, any prior legislative history defining
this term does not apply. Section 5210 of this title describes
the process for defining ``military reserve vessel'' where
appropriate.
c. subtitle c--effective date
Section 5301. Effective date
Subsection 5301(a) provides that the amendments made by
this title take effect on the date that the Shipbuilding
Agreement enters into force with respect to the United States.
It is the expectation of the Committee that the Shipbuilding
Agreement is unlikely to enter into force with respect to the
United States before January 1, 2001, when the current terms of
the Title XI program under the Merchant Marine Act, 1936,
expire with respect to Shipbuilding Agreement vessels.
Subsection 5301(b) also provides that if the United States
withdraws from the Shipbuilding Agreement for any reason, this
title and all changes to U.S. law made by this title would
cease to have effect as of the date of the withdrawal. This
provision also clarifies that any vessel deemed to be a
privately-owned United States-flag vessel as a result of
changes made by this legislation would continue to maintain
that status for certain purposes of the Merchant Marine Act,
1936, after the date of the United States' withdrawal.
F. Title VI--Miscellaneous Trade and Tariff Provisions
1. Subtitle A--Legislation to Extend Permanent Normal Trade Relations
(NTR) Tariff Treatment to Imports from Mongolia
This subtitle authorizes the extension of permanent normal
trade relations (NTR) tariff treatment to imports from
Mongolia.
a. background
Mongolia's NTR status is currently governed by Title IV of
the Trade Act of 1974, as amended by the Customs and Trade Act
of 1990 (Title IV of the 1974 Act). Section 402 of the 1974 Act
(also known as the Jackson-Vanik amendment) sets forth
requirements relating to freedom of emigration, which must be
met or waived by the President in order for the President to
grant nondiscriminatory, NTR status to nonmarket-economy
countries. Title IV of the 1974 Act also requires that a trade
agreement remain in force between the United States and a
nonmarket-economy country receiving NTR status and sets forth
minimum provisions which must be included in such agreement.
The United States and Mongolia concluded a trade agreement
on January 23, 1991, which, among other things, provides for
the protection of intellectual property and the promotion and
facilitation of trade between the two countries. The United
States and Mongolia also signed a bilateral investment treaty
on October 6, 1994.
On January 23, 1991, the President issued a waiver of the
Jackson-Vanik freedom-of-emigration requirements for Mongolia.
On October 31, 1991, Congress passed a joint resolution (H.J.
Res. 281) approving NTR for Mongolia, which the President
signed on November 13, 1991 (P.L. 102-157). On September 4,
1996, the President determined that Mongolia was in full
compliance with the freedom-of-emigration criteria listed in
sections402 and 409 of the 1974 Act. This finding allows for
the continuation of NTR status for Mongolia without the requirement of
a waiver, but requires the President to submit semiannual reports to
Congress regarding Mongolia's continued compliance with the freedom-of-
emigration requirements of Title IV of the 1974 Act. The most recent
report was submitted to the Congress on July 1, 1998.
In his July 1998 report, the President noted that all
current information indicates that the emigration laws and
practices of Mongolia continue to satisfy the criteria of
sections 402 and 409 of the 1974 Act. Specifically, Mongolia's
``Law on Emigration and Private Trips of Mongolian Citizens
Abroad'' has been in effect since February 1, 1994. That law
gives Mongolian citizens the right to move freely within the
country, travel and emigrate, and return to Mongolia. The
President further reported that these rights are exercised in
fact, and that there are no outstanding emigration cases
involving the United States and no divided family cases in
Mongolia.
The President's report also noted that Mongolia continues
to maintain a positive human rights record, that the Mongolian
Constitution's protections for freedom of speech, press and
expression and for an independent judiciary are respected in
practice, and that the country ``continues to demonstrate the
strength of its democracy.''
Mongolia joined the World Trade Organization (WTO) on
January 29, 1997. Because the conditional NTR afforded by Title
IV of the 1974 Act is inconsistent with the obligation under
WTO rules to give all WTO member countries unconditional NTR
treatment, the United States invoked Article XIII of the
Agreement Establishing the World Trade Organization, which
allows the United States to withhold application of the WTO
Agreements with respect to Mongolia. Non-application will
continue for as long as Mongolia remains subject to Title IV of
the 1974 Act.
b. General Description of Subtitle
Section 6001. Congressional findings
Section 6001 of this subtitle sets forth seven
congressional findings that support removing Mongolia from the
requirements of Title IV of the 1974 Act and permanently
extending nondiscriminatory, NTR status to the products of
Mongolia:
1. Mongolia has received conditional NTR under Title
IV of the 1974 Act since 1991 and has been found to be
in full compliance with the requirements of Title IV of
the 1974 Act;
2. Mongolia has made substantial progress in building
a democratic political system and a free-market
economic system;
3. Mongolia had its third election under its new
constitution in 1996, which resulted in a peaceful
transfer of governmental power;
4. Mongolia and the United States signed a bilateral
trade agreement in 1991 and a bilateral investment
treaty in 1994;
5. Mongolia has joined the WTO;
6. Mongolia has demonstrated a strong desire to build
a friendly and cooperative relationship with the United
States; and
7. By extending unconditional NTR to Mongolia, the
United States would be able to avail itself of all
rights under the WTO with respect to that country.
Section 6002. Termination of application of Title IV of the Trade Act
of 1974 to Mongolia
Section 6002 of this subtitle authorizes the President to
determine that Title IV of the 1974 Act should no longer apply
to Mongolia. After making such a determination, the President
would have the authority to proclaim the permanent extension of
unconditional NTR treatment to the products of Mongolia.
2. Subtitle B--Legislation Implementing Certain Miscellaneous Tariff
Provisions
Subtitle B of Title VI implements a number of miscellaneous
provisions relating to the duty treatment of certain fabrics;
the temporary suspension of duties for the personal effects of
participants in certain worldathletic events; expansion of a
production incentive program for U.S. insular possessions; the
importation of gum arabic; and the duty drawback rules relating to
inputs used in the manufacture of certain mobile offshore drilling
units.
a. Background and General Description of Sections
Section 6101. Duty treatment of certain fabrics
This section corrects a competitive imbalance in the tariff
schedule that favors foreign production of wool suits at the
expense of U.S. suit makers. Because of an inverted tariff,
imports of wool fabric used to make wool suits are subject to a
higher rate of duty (31.7 percent) than imports of the wool
suits (which are subject to a compound rate of duty of 31.7
cents per kilogram plus 19.6 percent ad valorem, or the
equivalent of 20.2 percent ad valorem, except for imports from
Canada, which are duty-free, and imports from Mexico, which
have a 3.4 percent duty, pursuant to HTS heading 6203.11.20).
Section 6101 corrects this tariff inversion by temporarily
reducing or suspending, through December 31, 2004, the duties
on certain imports of fine wool fabric used to make suits,
suit-type jackets and trousers. Under this section, the duty is
temporarily suspended on imports of wool fabric that are
certified by the importer as ``Super 90s'' or higher grade. The
duty on imports of wool fabric certified by the importer to be
``Super 70s'' or ``Super 80s'' grade fabric is reduced to 20.2
percent. In addition, if the President proclaims a staged rate
reduction with respect to wool suit-type jackets, this section
provides that corresponding changes would be made to the
tariffs applicable to ``Super 70s'' and ``Super 80s'' wool
fabric. The Committee has relied on the tariff for wool suit-
type jackets as the benchmark because, at 20.2 percent, it is
the simple ad valorem equivalent of the tariff on wool suits.
The Committee notes that once the Uruguay Round tariff cuts
have been phased in, the tariffs on wool suits and wool suit-
type jackets will be the same--17.5 percent ad valorem.
Section 6102. Temporary duty suspension for personal effects of
participants in certain world athletic events
Under current law, U.S. Customs Service inspectors have the
discretion to allow certain articles, not intended for sale or
distribution, to be brought into the United States in
connection with international athletic events on a duty-free
basis. Persons seeking such duty-free treatment are obliged,
however, to comply with certain filing requirements which
significantly lengthen the entry process. Section 6102 reduces
the need for these paperwork requirements by providing
temporary duty-free entry for the personal effects and athletic
equipment of participants and others in certain international
sporting events, while retaining the ability of Customs Service
inspectors to inspect all imports, regardless of their duty
status. This section does not allow products to come into the
United States that would be barred under existing law, but will
help make the customs process as smooth as possible for
upcoming international athletic events, such as the 2002 Salt
Lake City Winter Olympics.
Subsection 6102(a) adds HTS heading 9902.98.08 to
temporarily suspend through December 31, 2003, the imposition
of duties on the personal effects of participants in, officials
of, or accredited members of delegations to (and persons who
are immediate family members of or servants to such persons)
certain world athletic events, provided such items are not
intended for sale or distribution to the public. These events
are the 1999 International Special Olympics, the 1999 Women's
World Cup Soccer, the 2001 International Special Olympics, the
2002 Salt Lake City Winter Olympics, and the 2002 Winter
Paralympic Games. The suspension applies also to other
articles, not intended for sale or distribution to the public,
such as equipment and materials imported in connection with
such events, as well as articles to be used in exhibitions
depicting the culture of a country participating in any such
event.
Subsection 6102(b) exempts from taxes and fees all articles
described in subsection 6102(a). Subsection 6102(c) clarifies
that the articles described in subsection 6102(a) shall not be
free or otherwise exempt or excluded from routine or other
inspections as may be required by the Customs Service.
Subsection 6102(d) provides that this section applies to
articles entered, or withdrawn from warehouse, for consumption
on or after October 1, 1998.
The Committee on Finance expects that the Customs Service,
and other relevant agencies, will cooperate with the organizing
committees of the various athletic events described in this
section, to facilitate the entry of the athletes, officials and
other participants in such events. The practices and procedures
developed during the Centennial Olympic Games in Atlanta,
Georgia to facilitate the entry of goods covered under the
statute,while preserving the traditional inspection authority
of the United States Customs Service, have been cited as having been
highly successful and effective. The Committee intends that subsection
6102(c) simply reaffirms the authority of the Customs Service to
implement practices and procedures, such as those implemented for the
Centennial Olympic Games, to facilitate the entry of persons for
upcoming international athletic events.
Section 6103. Extension of U.S. insular possessions program
The United States has long recognized the importance of
encouraging the economic development of U.S. insular
possessions. Under current law, additional U.S. note 5 to
chapter 91 of the HTS provides limited duty-free treatment with
respect to certain watches and watch movements produced in
insular possessions (i.e., Virgin Islands, Guam and Samoa) and
duty refunds based on the amount of wages paid to produce such
watches in the insular possessions. The note 5 program is
intended to counteract the lack of natural resources and other
competitive disadvantages of the insular possessions. In part
because of this program, the watch manufacturing industry plays
a significant role in the economies of the insular possessions,
particularly the Virgin Islands where it provides high- skill,
high-wage employment to approximately 200 workers.
Section 6103 makes certain articles of fine jewelry,
specifically jewelry articles of silver, gold or platinum under
HTS heading 7113, produced in insular possessions, eligible for
certain note 5 benefits. In particular, subsection 6103(a) adds
an additional U.S. note 3 to chapter 71 of the HTS. Paragraph
(a) of the new note 3 permits the inclusion of wages paid for
jewelry production in the insular possessions as an offset to
duties paid on watches, watch movements and parts imported into
the United States, as currently authorized by additional U.S.
note 5 to Chapter 91 of the HTS. Paragraph (b) of note 3
provides that the extension of note 5 benefits to jewelry may
not result in any increase in the authorized amount of benefits
established by note 5 and paragraph (c) of note 3 provides that
this provision shall not diminish the benefits currently
available to watch producers under paragraph (h)(iv) of Note 5
to chapter 91. Paragraph (d) requires the Secretary of Commerce
and the Secretary of the Interior to issue regulations to carry
out this provision. Recognizing that the establishment of full-
scale jewelry production in the insular possessions will
require a transition period, the Committee intends that the
Secretaries will develop and administer their regulations in a
manner that will promote jewelry production in the insular
possessions.
Section 6104. Gum arabic
Gum arabic is a naturally occurring product that is exuded
from the stems and branches of the acacia tree. This process
can occur only in precise climatic conditions, such as those
found in the Sudan. Gum arabic is the key ingredient in a
variety of soft drinks, baking and confectionary items, dietary
fiber products, pharmaceuticals and other industrial
applications. In many of these products, there is no suitable
alternative ingredient to the use of gum arabic.
On November 3, 1997, President Clinton issued Executive
Order 13067 blocking all property and interests of the
Government of Sudan that are in the United States and
prohibiting U.S. commercial transactions with Sudan, including
the importation into the United States of any goods of Sudanese
origin, except to the extent that licenses are granted. At that
time, President Clinton stated that, ``we intend to license
only those activities that serve U.S. interest,'' including
``the importation of products unavailable from other sources,
such as gum arabic.'' Since the issuance of the executive
order, however, the Department of Treasury's Office of Foreign
Assets Control has declined to grant licenses to U.S.
manufacturers of gum arabic, beyond a one-time exemption for
each company to meet its limited contractual obligations for
1998. This decision threatens the reliability of the supply of
this product to thousands of U.S. companies, without having a
negative effect on the government of Sudan
Section 6104 provides that, notwithstanding any other
provision of law, Executive Order 13067 shall not apply to the
importation into the United States on or before December 31,
2002, of gum arabic of Sudanese origin that is described in
subheadings 1301.20.00 or 1301.90.90 of the HTS.
Section 6105. Mobile offshore drilling units
Section 6105 is intended to modify the treatment of U.S.-
flagged and U.S.-owned mobile offshore drilling units for
purposes of duty drawback under section 313 of the Tariff Act
of 1930, as amended. Under current practice, the U.S. Customs
Service relies principally on the documentationand ownership of
a mobile offshore drilling unit in determining whether imported
materials used in the construction of such units qualify for duty
drawback. This has created a disincentive to U.S. flagging of these
units and, concomitantly, to the use of U.S. crewmen.
Section 6105 provides limited eligibility for duty drawback
purposes designed to address those circumstances where a mobile
offshore drilling unit is manufactured in the United States for
use outside U.S. territorial waters for much of its useful
life. Section 6105 provides that imported materials used in the
construction or equipment of mobile offshore drilling units
shall be eligible for duty drawback undersection313 of the
Tariff Act of 1930 when the unit leaves the exclusive economic
zone of the United States if it is destined for operation for
one year or more in international waters or the exclusive
economic zone of a foreign country. If the mobile offshore
drilling unit reenters the exclusive economic zone of the
United States for any purpose, section 6105 would treat such
reentry into U.S. territorial waters as an entry for customs
purposes and require the repayment of any duty drawback
previously received.
Section 6105 clarifies further that it shall have no effect
on existing customs entry procedures (including the use of
Temporary Importation Bonds pursuant to subchapter XIII of
Chapter 98 of the Harmonized Tariff Schedule of the United
States; bonded warehouses pursuant to section 311 of the Tariff
Act of 1930, as amended; or Foreign Trade Zones pursuant to the
Foreign Trade Zones Act of 1934, as amended). Nor would section
6105 affect the current treatment of imported materials used in
the construction or equipment of mobile offshore drilling units
in any foreign trade zone. In addition, section 6105 makes
clear that it shall have no effect whatsoever on the treatment
of antidumping or countervailing duties imposed under Title VII
of Tariff Act of 1930, as amended, which, pursuant to section
779 of the Tariff Act of 1930, are not eligible for duty
drawback.
G. Title VII--Legislation Implementing Revenue Provisions
Section 7001. Expansion of Definition of Vessels Qualified for Capital
Construction Fund Treatment
Background
Under section 7518 of the Internal Revenue Code (the
``Code''), in determining taxable income for regular tax
purposes, a qualified taxpayer who owns or leases a qualified
vessel (an ``agreement vessel'') is allowed a deduction for
certain amounts contributed to a fund established under section
607 of the Merchant Marine Act, 1936 (a ``capital construction
fund''). In addition, the investment earnings on amounts
contributed to a capital construction fund are excluded from
gross income for regular tax purposes.
If a withdrawal from a capital construction fund is used to
acquire, construct, or reconstruct a qualified vessel, the
amount withdrawn generally is not included in gross income and
the basis of the qualified vessel generally is reduced by the
amount withdrawn to the extent attributable to amounts
previously deducted or excluded from income. In the case of any
other withdrawal from a capital construction fund, the amount
withdrawn generally is included in gross income to the extent
attributable to amounts previously deducted or excluded from
income and interest on the tax liability attributable to such
inclusion generally must be paid from the date of the deduction
or exclusion.
Any term (including the definition of ``agreement vessel'')
provided in section 607(k) of the Merchant Marine Act, 1936, as
in effect as of the date of enactment of the Tax Reform Act of
1986, applies for purposes of section 7518. Under section
607(k) of the Merchant Marine Act, 1936, as in effect as of the
date of enactment of the Tax Reform Act of 1986, an agreement
vessel generally is a vessel constructed or reconstructed in
the United States (the ``U.S.-build requirement'') and
documented under the laws of the United States (the ``U.S.-flag
requirement'). In addition, the person maintaining the capital
construction fund must agree with the Secretary (of Commerce or
Transportation) that the vessel will be operated in the United
States foreign trade, Great Lakes trade, or noncontiguous
domestic trade or in the fisheries of the United States.
Under present law, in order for a vessel to qualify for the
tax benefits provided through capital construction funds, the
vessel must meet certain requirements described in the Merchant
Marine Act, 1936, as in effect as of the date of enactment of
the Tax Reform Act of 1986. Among these requirements is that
the vessel must have been constructed or reconstructed in the
United States. This requirement conflicts with a goal of the
OECDshipbuilding trade agreement, which seeks to minimize or
eliminate shipbuilding subsidies among the signatory nations. Thus, the
Committee amends the Code in order to conform to the definition of
``agreement vessel'' as provided by Title V of this legislation.
General description of section
For purposes of section 7518 of the Code, the terms
``eligible vessel'' and ``qualified vessel'' shall have the
same meaning as provided in section 607(k) of the Merchant
Marine Act, 1936, as amended by Title V of this legislation.
Thus, in general, for purposes of the tax benefits provided by
capital construction funds, an agreement vessel will include
any vessel constructed or reconstructed in any nation that is a
Party to the OECD Shipbuilding Agreement entered into on
December 21, 1994.
The provision is effective as of the date that the
Shipbuilding Agreement enters into force with respect to the
United States.
Section 7002. Modification to foreign tax credit carryback and
carryover periods
Background
U.S. persons may credit foreign taxes against U.S. tax on
foreign- source income. The amount of foreign tax credits that
can be claimed in a year is subject to a limitation that
prevents taxpayers from using foreign tax credits to offset
U.S. tax on U.S.-source income. Separate foreign tax credit
limitations are applied to specific categories of income.
The amount of creditable taxes paid or accrued (or deemed
paid) in any taxable year which exceeds the foreign tax credit
limitation is permitted to be carried back two years and
forward five years. The amount carried over may be used as a
credit in a carryover year to the extent the taxpayer otherwise
has excess foreign tax credit limitation for such year. The
separate foreign tax credit limitations apply for purposes of
the carryover rules.
The Committee believes that reducing the carryback period
for foreign tax credits to one year and increasing the
carryforward period to seven years will reduce some of the
complexity associated with carrybacks while continuing to
address the timing differences between U.S. and foreign tax
rules.
General description of section
This section reduces the carryback period for excess
foreign tax credits from two years to one year. This section
also extends the excess foreign tax credit carryforward period
from five years to seven years. This provision applies to
foreign tax credits arising in taxable years beginning after
December 31, 1998.
IV. CONGRESSIONAL ACTION
The Committee considered the legislation in the form of an
original bill on July 21, 1998, and ordered it reported
favorably on the basis of a recorded vote. Title I, Subtitle C
was, apart from minor amendments, previously reported favorably
by the Committee as an original bill, S. 1278. Titles II and
III were, apart from minor amendments, previously reported
favorably by the Committee as an original bill, S. 1269. Title
V, apart from minor amendments, was previously reported
favorably by both the Finance and Commerce Committees as an
original bill, S. 1216. Title VI, Subtitle A, without
amendment, was previously reported favorably by the Committee
as S. 343.
V. VOTES OF THE COMMITTEE
In compliance with paragraph 7(b) of Rule XXVI of the
Standing Rules of the Senate, the following statements are made
concerning the roll call votes in the Committee's consideration
of the Trade and Tariff Act of 1998.
A. Motion to Report the Bill
The Trade and Tariff Act of 1998 was ordered favorably
reported by a roll call vote of 11 yeas and 1 nay on July 21,
1998. The vote, with a quorum present, was as follows (proxy
votes are not counted in the total vote on a motion to order a
bill reported):
Yeas.--Senators Roth, Chafee, Grassley, Hatch (proxy),
D'Amato (proxy), Murkowski (proxy), Nickles (proxy), Gramm,
Lott, Jeffords, Mack(proxy), Moynihan, Baucus, Rockefeller,
Breaux, Graham (proxy), Bryan, and Kerrey (proxy).
Nays.--Conrad and Moseley-Braun (proxy).
B. Votes on Amendments
(1) An amendment by Senator Conrad to add to Title II a
negotiating objective that trade agreements should include
mechanisms for their renegotiation in the event that provisions
in the agreement yield substantially worse results than
anticipated failed by a vote of 6 yeas and 14 nays.
Yeas.--Senators Grassley, Moynihan, Baucus (proxy), Conrad,
Bryan, and Kerrey (proxy).
Nays.--Senators Roth, Chafee, Hatch, D'Amato, Murkowski,
Nickles (proxy), Gramm, Lott (proxy), Jeffords, Mack (proxy),
Rockefeller, Breaux, Graham (proxy), and Moseley-Braun (proxy).
(2) An amendment by Senators Chafee and Hatch to strike
Subtitle B of Title VI relating to the tariffs imposed on
certain wool fabric and redirect the savings to the further
extension of the Trade Adjustment Assistance program failed by
a vote of 5 yeas and 15 nays.
Yeas.--Senators Chafee, Grassley, Hatch, Lott (proxy), and
Baucus.
Nays.--Senators Roth, D'Amato, Murkowski (proxy), Nickles
(proxy), Gramm, Jeffords, Mack (proxy), Moynihan, Rockefeller,
Breaux, Conrad, Graham (proxy), Moseley-Braun (proxy), Bryan,
and Kerrey (proxy).
(3) An amendment by Senator Conrad to Title II to require
the President to submit to the Congress certain assurances
relating to the currency values of countries with which trade
agreements are negotiated was defeated by a vote of four yeas
and 16 nays.
Yeas.--Senators Moynihan, Conrad, Bryan, and Kerrey
(proxy).
Nays.--Senators Roth, Chafee, Grassley, Hatch (proxy),
D'Amato (proxy), Murkowski (proxy), Nickles (proxy), Gramm,
Lott, Jeffords, Mack (proxy), Baucus, Rockefeller, Breaux
(proxy), Graham (proxy), and Moseley-Braun (proxy).
VI. BUDGETARY IMPACT
A. Committee Estimates
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
statement is made concerning the estimated budget effects of
the bill.
ESTIMATED BUDGET EFFECTS OF TRADE AND REVENUE PROVISIONS OF THE ``TRADE AND TARIFF ACT OF 1998,'' AS APPROVED BY THE SENATE COMMITTEE ON FINANCE ON JULY 21, 1998; FISCAL YEARS 1999-2007
[In millions of dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Provision Effective 1999 2000 2001 2002 2003 2004 2005 2006 2007 1999-02 2003-07 1999-07
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1. Trade Provisions: \1\
a. African Growth and Opportunity Act.. ........................... -15 -21 -47 -57 -60 -63 -67 -70 -74 -140 -334 -474
b. Generalized System of Preferences ........................... -393 -333 -88 ........ ........ ........ ........ ........ ........ -814 ........ -814
Extension.
c. Caribbean Basin Parity Initiative... ........................... -98 -138 -147 -26 ........ ........ ........ ........ ........ -409 ........ -409
d. Trade Adjustment Assistance......... ........................... -34 -43 -17 -3 ........ ........ ........ ........ ........ -97 ........ -97
e. OECD Shipbuilding Agreement......... ........................... ........ ........ -5 -7 -7 -7 -7 -7 -7 -12 -35 -47
f. Normal Trade Relations for Mongolia. ........................... ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........
g. Wool Tariff Correction.............. ........................... -13 -14 -14 -15 -17 -18 -5 ........ ........ -56 -40 -96
h. Mobile Offshore Drilling Units...... ........................... ........ -1 -1 -1 -1 -1 -1 -1 -1 -3 -5 -8
----------------------------------------------------------------------------------------------------------------------------------------------------
Subtotal of Trade Provisions......... ........................... -553 -550 -319 -109 -85 -89 -80 -78 -82 -1,531 -414 -1,945
====================================================================================================================================================
2. Revenue Provisions:
a. Expand the Definition of Vessels (\2\) ........ ........ (\3\) -1 -2 -3 -3 -3 -3 -1 -14 -15
Qualified for Capital Construction
Fund Treatment.
b. Modify Foreign Tax Credit Carryback ftpoai tyba 12/31/98 84 546 487 454 424 394 271 267 263 1,571 1,619 3,190
and Carryforward Rules.
----------------------------------------------------------------------------------------------------------------------------------------------------
Subtotal of Revenue Provisions....... ........................... 84 546 487 453 422 391 268 264 260 1,570 1,605 3,175
====================================================================================================================================================
Net total............................ ........................... -469 -4 168 344 337 302 188 186 178 39 1,191 1,230
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Estimates provided by the Congressional Budget Office.
\2\ Effective as of the date that the OECD Shipbuilding Trade Agreement Act enters into force with respect to the United States.
\3\ Loss of less than $500,000.
Source: Joint Committee on Taxation.
Note: Details may not add to totals due to rounding.
Legend for ``Effective'' column: ftpoai = foreign taxes paid or accrued in; tyba = taxable years beginning after.
B. Budget Authority and Tax Expenditures
1. Budget Authority
In accordance with subsection 308(a)(1) of the Budget Act
the Committee states that the Trade and Tariff Act of 1998
involves new budget authority of $97 million over the 1999-2002
period to cover the outlays under the NAFTA Trade Adjustment
Assistance program.
2. Tax Expenditures
In accordance with subsection 308(a)(2) of the Budget Act,
the Committee state that the provisions of the Trade and Tariff
Act of 1998 will result in increased tax expenditures of $15
million over the period fiscal years 1999-2007.
C. Consultation With Congressional Budget Office
In accordance with section 403 of the Budget Act, the
Committee advises that the Congressional Budget Office has
submitted the following statement on the budgetary impact of
the Trade and Tariff Act of 1998:
U.S. Congress,
Congressional Budget Office,
Washington, DC, July 31, 1998.
Hon. William V. Roth, Jr.
Chairman, Committee on Finance,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for the Trade and Tariff
Act of 1998.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Hester
Grippando.
Sincerely,
James L. Blum
(For June E. O'Neill, Director).
Enclosure.
Congressional Budget Office Cost Estimate
Trade and Tariff Act of 1988
Summary: The Trade and Tariff Act of 1998 is an omnibus
trade bill that would temporarily grant or renew duty
reductions and change the carryback and carryforward rules on
foreign tax credits. The Congressional Budget Office (CBO),
along with the Joint Committee on Taxation (JCT), estimates
that this bill would increase receipts by $472 million over the
1999-2003 period and by $1,326 million over the 1999-2007
period. In addition, CBO estimates that the bill would increase
spending by $97 million over the 1999-2002 period.
The Trade and Tariff Act of 1998 contains no
intergovernmental mandates, as defined in the Unfunded Mandates
Reform Act (UMRA), and would impose no costs on state, local,
or tribal governments. The change in the foreign tax credit
rules would impose a private-sector mandate with costs that
would exceed the annual threshold specified in UMRA ($100
million in 1996, adjusted for inflation).
Description of major provisions: The Trade and Tariff Act
of 1998 would make several changes in current trade law.
Specifically the bill would:
Grant special duty-free tariff treatment to specified
goods from eligible, developing countries in sub-Sahara
Africa;
Renew the currently expired General System of
Preferences (GSP) program, which offers duty-free
tariff treatment on specified goods from approximately
140 eligible developing countries;
Offer specified products of Caribbean Basin
partnership countries tariff and quota treatment
similar to that accorded to products under the North
American Free Trade Agreement (NAFTA);
Re-authorize Trade Adjustment Assistance programs;
Implement the Organization for Economic Cooperation
and Development (OECD) Shipbuilding Trade Agreement;
Change the tariff classification on wool;
Change the drawback procedure on mobile offshore
drilling units;
And change the carryback and carryforward rules on
foreign tax credits.
Estimated cost to the Federal Government: The estimated
budgetary impact of the Trade and Tariff Act of 1998 is shown
in the following table. The costs of this legislation fall
within budget functions 450 (Community and Regional
Development), 500 (Education, Employment, and Social Services),
and 600 (Income Security). The legislation would also affect
revenues.
TABLE 1. ESTIMATED BUDGETARY IMPACT OF THE TRADE AND TARIFF ACT OF 1998
[By fiscal year, in millions of dollars]
----------------------------------------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003
----------------------------------------------------------------------------------------------------------------
CHANGES IN REVENUES
Estimated revenues........................................ 0 -436 39 185 347 337
DIRECT SPENDING
Baseline spending under current law:
Estimated budget authority............................ 325 307 311 318 324 332
Estimated outlays..................................... 317 315 314 318 324 332
Proposed changes:
Estimated budget authority............................ 0 44 47 6 0 0
Estimated outlays..................................... 0 34 43 17 3 0
Baseline spending under the bill:
Estimated budget authority............................ 325 351 358 324 324 332
Estimated outlays..................................... 317 349 357 335 327 332
SPENDING SUBJECT TO APPROPRIATION
Spending under current law:
Budget authority \1\.................................. 10 0 0 0 0 0
Estimated outlays..................................... 9 9 6 5 2 0
Proposed changes:
Authorization level................................... 0 10 10 0 0 0
Estimated outlays..................................... 0 (\2\) 3 4 5 5
Spending under the bill:
Authorization level \1\............................... 10 10 10 0 0 0
Estimated outlays..................................... 9 9 9 9 7 5
----------------------------------------------------------------------------------------------------------------
\1\ The 1998 level is the amount appropriated for that year.
\2\ Less than $500,000.
Basis of estimate: CBO assumes that this bill will be
enacted by October 1, 1998, and that the necessary sums will be
appropriated by the beginning of each fiscal year.
Revenues: The major provisions in the Trade and Tariff Act
that would affect receipts are summarized in Table 2.
TABLE 2. ESTIMATED CHANGES TO REVENUES
[By fiscal year, in millions of dollars]
----------------------------------------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003
----------------------------------------------------------------------------------------------------------------
African Growth and Opportunity Act\1\..................... 0 -15 -21 -47 -57 -60
Extension of the Generalized System of Preferences........ 0 -393 -333 -88 0 0
United States-Caribbean Basin Trade Enhancement Act....... 0 -98 -138 -147 -26 0
OECD Shipbuilding Agreement............................... 0 0 0 -5 -7 -7
Wool Tariff Correction.................................... 0 -13 -14 -14 -15 -17
Mobile Offshore Drilling Units............................ 0 -1 -1 -1 -1 -1
Capital Construction Fund\2\.............................. 0 0 0 0 (\3\) -1
Modify Foreign Tax Credit Carryback and Carryforward
Rules\2\................................................. 0 84 546 487 454 424
-----------------------------------------------------
Total............................................... 0 -436 39 185 347 337
----------------------------------------------------------------------------------------------------------------
\1\ The extension of the GSP program for sub-Saharan Africa through June 30, 2008, beyond its December 31, 2000,
termination for other beneficiary countries, appears under Subtitle B, section 1101 (b) of Title I in the
legislation, but is shown here with the other effects of Subtitle A of Title I.
\2\ Estimate provided by the Joint Committee on Taxation.
\3\ Amount less than $500,000.
African Growth and Opportunity Act. Subtitle A of Title I
would grant sub-Saharan African countries that are eligible as
beneficiary developing countries under the United States
Generalized System of Preferences (GSP) additional benefits
under the program. The bill would amend GSP as related to sub-
Saharan African countries to lessen the rule of origin and
competitive need limitation requirements. The provision also
would authorize the President to grant duty-free and quota-free
treatment for many products that are currently excluded from
GSP, if the International Trade Commission (ITC) determines
that they are not import-sensitive in the context of imports
from the region. In addition, certain textile and apparel
products would be granted duty-free and quota-free tariff
treatment. Subtitle A, section 1101(b) of Title I would extend
the GSP program to beneficiary developing countries in sub-
Saharan Africa through June 30, 2008. CBO estimates that these
provisions would reduce receipts by $200 million over the 1999-
2003 period, net of payroll and income tax offsets. The
estimated loss is based on historical collections and the
assumption that reducing tariffs and quotas on the affected
products would increase the demand for them in the United
States. This estimate assumes that some products that have been
considered import-sensitive by ITC in the past would remain
ineligible for GSP under the bill. The expansion of products
from sub-Saharan Africa eligible for GSP would be effective
January 1, 1999, and the GSP and textile provisions would
expire on June 30, 2008.
Renewal of the Generalized System of Preferences. Subtitle
B of Title I would renew the United States GSP program for
approximately two years. GSP affords nonreciprocal tariff
preferences to approximately 140 developing countries to aid
their economic development and to diversify and expand their
production and exports. Several industrial countries also offer
similar preferences. Generally, duty-free treatment of imported
goods from GSP-designated developing countries is extended to
products that are not competitive internationally. Also, the
program contains safeguards to protect domestic industries that
are sensitive to import competition. GSP expired on June 30,
1998. Subtitle B would renew GSP from October 1, 1998, through
December 31, 2000. In addition taxpayers could apply for
refunds for the period between July 1, 1998, and September 1,
1998, but no refunds could be paid out before October 1, 1998.
CBO estimates that renewing GSP would cost $814 million over
the 1999-2003 period, net of payroll and income tax offsets.
This estimate is based on projections of total United States
imports and historical data on collections from beneficiary
countries under the GSP program.
United States-Caribbean Trade Enhancement Act. Subtitle C
of Title I would provide tariff and quota treatment similar to
that accorded to products under the North American Free Trade
Agreement to products of Caribbean Basin partnership countries.
Under current law, the United States offers duty-free treatment
to a wide range of products of 24 countries in the Caribbean
region through the Caribbean Basin Initiative trade program
(CBI). The CBI excludes the following products from such
treatment: textile and apparel articles, luggage and handbags,
certain leather goods, footwear, tuna, petroleum, watches, and
watch parts. This bill would extend immediate duty-free and
quota-free treatment to certain textile and apparel articles.
The remaining products covered under Subtitle B would receive
an immediate tariff reduction equal to half of the difference
between the duty rate that Mexican products receive under NAFTA
and the duty rate on imports of the same articles from CBI
beneficiaries. NAFTA parity would begin on January 1, 1999, and
would terminate on December 31, 2001. CBO estimates that
Subtitle C would decrease revenues by $409 million over the
1999-2003 period, net of payroll and income tax offsets. This
estimate is based on projections of total United States
imports, historical data on collections from Caribbean Basin
partnership countries, and the assumption of an increase in
demand for the affected products in the United States.
OECD Shipbuilding Agreement Act. Title V would implement
the OECD Shipbuilding Agreement, an international agreement
that was signed by the United States on December 21, 1994.
Under current law (19 U.S.C. 1466), United States flag vessels
are subject to a 50 percent ad valorem duty on the cost of
equipment and non-emergency repairs obtained in foreign
countries. As mandated by the OECD agreement, Subtitle B of
Title V of the proposed legislation would partially repeal the
duty by exempting repairs to United States flag vessels done in
OECD signatory countries. Based on information from the United
States Trade Representative, this estimate assumes that this
provision will be effective on January 1, 2001. BCO estimates
that Subtitle B of the bill, pertaining to vessel repair
duties, would decrease governmental receipts by $19 million
over the fiscal years 1999-2003, net of payroll and income tax
offsets. This estimate assumes that, as a result of this bill,
additional repairs to United States vessels would be made in
ports in OECD countries. It also reflects an estimate of the
United States Maritime Administration of a steady decline in
the size of the United States fleet. In addition, section 5103,
in Subtitle A of Title V, would impose a fine of $10,000 on the
master of any vessel who submits false information in
requesting a permit to lade and unlade, or who attempts to, or
actually does, lade and unlade in violation of a denial of such
a permit. CBO estimates that this additional penalty would not
have a significant impact on governmental receipts.
Wool Tariff Correction. Section 6101, in Subtitle B of
Title VI, would amend the Harmonized Tariff System (HTS) to
change the classification of certain wool products intended for
making suits and would temporarily eliminate or decrease duties
paid on some such products. CBO estimates that this provision
would reduce revenues by $73 million over the 1999-2003 period,
net of payroll and income tax offsets. This measure would take
effect on October 1, 1998, and would terminate on December 31,
2004.
Mobile Offshore Drilling Units. Section 6105, in Subtitle B
of title VI, would amend section 313 of the Tariff Act of 1930
by providing for drawbacks for mobile offshore drilling units
if such units are to be operated in international waters in the
exclusive foreign economic zone for a period of one year or
more. If such units were ever to return to the exclusive
economic zone of the United States, any drawbacks previously
granted would have to be repaid. CBO estimates that this
provision would reduce governmental receipts by $4 million over
the 1999-2003 period, net of payroll and income tax offsets.
This provision would take effect on October 1, 1998.
Capital Construction Fund. Section 7001 of Title VII would
expand the eligibility requirement for the Capital Construction
Fund by permitting repairs and construction of vessels in the
OECD Shipbuilding Agreement to be undertaken overseas. JCT
estimates that this provision would decrease governmental
receipts by about $2 million over the 1999-2003 period.
Modification to Foreign Tax Carryback and Carryover
Provisions. Section 7002 of Title VII would reduce the period
that excess foreign tax credits can be carried back from the
current two years to one, but would increase the time that
excess credits can be carried forward from five to seven years.
JCT estimates that this provision would increase revenues by
about $2.0 billion over the 1999-2003 period.
Other Provisions. Title II would restore the special
authority to the President of the United States to enter into
multilateral and bilateral trade agreements. Under this bill,
the President could reduce certain tariffs by proclamation
within specified bounds prescribed by the law. For provisions
subject to Congressional approval, the Congress could not amend
implementing legislation once it was introduced. Furthermore,
as long as the President met statutory requirements concerning
Congressional consultation during the negotiation process, the
Congress would be required to act on the legislation following
a strict timetable. CBO estimates that this provision would
have no direct effect on revenues, because future trade
agreements would require implementing legislation. The effect
of any changes implemented by the President would be attributed
to the legislation implementing the agreement.
Subtitle A of Title VI would extend Normal Trade Relations
to Mongolia on a permanent basis. Mongolia has received Normal
Trade Relations treatment since 1991 on a conditional basis.
The CBO baseline revenue projects assume that Normal Trade
Relations status for Mongolia will be extended on an annual
basis. Therefore, enacting Title VI would have no budgetary
impact when measured relative to the CBO baseline.
Section 6102, in Subtitle B of Title VI, would temporarily
suspend the duties on personal effects of individuals
associated with the 1999 International Special Olympics, the
1999 Women's World Cup Soccer competition, the 2001
International Special Olympics, the 2002 Salt Lake City Winter
Olympics, and the 2002 Winter Paralympic Games. CBO estimates
that this provision would have no significant impact on
governmental receipts. Without this legislation, many of the
subjected goods would enter informally and without bond.
Personal goods would be admitted free of duty under personal
exemptions. Other goods destined for export would enter free of
duty under bond. Also, many educational and cultural goods
already enter free of duty under various international
agreements. As a result, this provision would not significantly
affect governmental receipts. This measure would take effect
fifteen days after the date of enactment of this bill and
terminate on January 1, 2003.
Section 6103, in Subtitle B of Title VI, would amend the
HTS of the United States to extend to certain fine jewelry that
is the product of the Virgin Islands, Guam, and American Samoa
some trade benefits currently extended to watch producers in
insular possessions of the United States. Since 1983, watch
producers in the insular possessions have been able to import
into U.S. customs territory a specified quantity of watches and
watch parts free of duty and to claim duty refunds, by means of
a formula that takes into account wages paid to insular
possession workers. This provision would amend chapter 71 of
the HTS by allowing fine jewelry producers in the Virgin
Islands, Guam, and American Samoa to share the benefits that
have been granted to watch producers. The bill would not
increase or decrease benefits already in effect or alter
quantitative limits on imports. Watch producers would not
experience a reduction in their benefits. CBO estimates that
this proposal would not have a significant impact on
governmental receipts because producers of fine jewelry would
be taking advantage of the unused certificates and the unfilled
import quantities made available after watch producers had made
use of the benefits available to them.
Section 6104, in Subtitle B of Title VI, would exclude gum
arabic of Sudanese origin from Executive Order 13067. CBO
estimates that this provision would not have a significant
impact on governmental receipts.
Direct spending: The Trade Adjustment Assistance (TAA)
program for workers provides transitional adjustment assistance
for workers who are dislocated as a result of federal policies
that reduce barriers to foreign trade. The program has two
components--one for all workers and one for workers dislocated
because of the implementation of the North American Free Trade
Agreement (NAFTA). Spending for assistance to workers is
considered mandatory, and thus the outlays are direct spending.
Together, the two TAA programs for workers are estimated to
have outlays of $317 million for fiscal year 1998. The bill
would extend these programs through fiscal year 2000, and CBO
expects that they will cost, in total, in the vicinity of $350
million a year. The direct spending costs of extending the main
TAA program are included in the baseline, as required by the
Balanced Budget and Emergency Deficit Control Act of 1985.
However, the costs of extending the NAFTA portion of TAA are
not included in the baseline. CBO estimates that extending the
NAFTA TAA program would cost $97 million over the 1999-2002
period.
Spending subject to appropriations: The bill would
authorize the application of such sums as necessary for Trade
Adjustment Assistance for firms in each of fiscal years 1999
and 2000. CBO estimates that this provision would result in
outlays of about $17 million over the 1999-2003 period,
assuming appropriation of the necessary amounts. This estimate
assumes that the amount appropriated each year under this
authorization would be about $9.5 million, the amount provided
in 1998. Outlays are estimated based on historical spending
rates for the Economic Development Administration.
Pay-as-you-go considerations: Section 252 of the Balanced
Budget and Emergency Deficit Control Act sets up pay-as-you-go
procedures for legislation affecting direct spending or
receipts. The net changes in outlays and governmental receipts
that are subject to pay-as-you-go procedures are shown in the
following table. For the purposes of enforcing such procedures,
only the effects in the current year, the budget year, and the
succeeding four years are counted.
TABLE 3. EFFECTS ON DIRECT SPENDING AND RECEIPTS
[By fiscal year, in millions of dollars]
----------------------------------------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
----------------------------------------------------------------------------------------------------------------
Changes in outlays............... 0 34 43 17 3 0 0 0 0 0 0
Changes in receipts.............. 0 -436 39 185 347 337 302 188 186 178 (\1\)
----------------------------------------------------------------------------------------------------------------
\1\ Not available.
Private-sector mandates: The provision in the Trade and
Tariff Act of 1998 that would modify the foreign tax credit
carryback and carryforward rules would impose a private-sector
mandate. The direct costs of the mandate would exceed the
statutory threshold established in the Unfunded Mandates Reform
Act of 1995 in fiscal years 2000 through 2003. The costs to the
private sector are summarized in Table 4.
TABLE 4. ESTIMATED COST OF MANDATES ON THE PRIVATE SECTOR
[By fiscal year, in millions of dollars]
----------------------------------------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003
----------------------------------------------------------------------------------------------------------------
Cost to the Private Sector................................ 0 84 546 487 454 424
----------------------------------------------------------------------------------------------------------------
Intergovernmental mandates: The Trade and Tariff Act of
1998 contains no intergovernmental mandates, as defined in the
Unfunded Mandates Reform Act, and would impose no costs on
state, local, or tribal governments.
Estimate prepared by: Federal revenues: Hester Grippando.
Federal costs: Christi Hawley-Sadoti and Gary Brown; Impact on
State, local, and tribal governments: Pepper Santalucia; Impact
on the private sector: Lesley Frymier.
Estimate approved by: Frank Sammartino, Assistant Director
for Tax Analysis (Acting); Robert A. Sunshine, Deputy Assistant
Director for Budget Analysis.
VII. REGULATORY IMPACT AND UNFUNDED MANDATES
A. Regulatory Impact
In accordance with paragraph 11(b) of rule XXVI of the
Standing Rules of the Senate, the Committee makes the following
statement concerning the regulatory impact of the Trade and
Tariff Act of 1998.
1. Impact on Regulations
Title I provides for certain tariff preferences on imported
merchandise. Since all imports must now comply with customs
entry procedures and the reduction in tariff levels does not
alter those entry requirements, Title I will impose no
additional paperwork requirements on individuals or businesses.
Title II involves a delegation of authority to the
President to proclaim certain changes in tariff rates resulting
from the negotiation of reciprocal trade agreements. Title II
also renews congressional procedures for the implementation of
any changes in United States law necessitated by such
reciprocal trade agreements. Because Title II relates to
actions by the President or Congress, it involves no new
paperwork or regulatory burdens affecting individuals or
businesses.
Title III reauthorizes certain trade adjustment assistance
programs. Title III does not alter any of the substantive or
procedural requirements of those programs and would not, as a
consequence, involve any new paperwork or regulatory burdens on
individuals.
Title IV requires the United States Trade Representative to
identify significant barriers to United States agricultural
exports and, potentially, to investigate those barriers under
section 302 of the Trade Act of 1974. Because Title IV affects
actions by the USTR, rather than any private parties, Title IV
would not impose any additional paperwork or regulatory burdens
on individuals or businesses.
Title V approves and implements in United States law the
Agreement Respecting Normal Competitive Conditions in the
Commercial Shipbuilding and Repair Industry negotiated under
the auspices of the Organization for Economic Cooperation and
Development. The approval of the Agreement by Congress entails
no additional paperwork or regulatory burdens for individuals
or businesses.
Among the changes it makes in United States law, Title V
would exempt certain repairs made in Parties to the Agreement
from duties otherwise applied to the value of foreign vessel
repairs when a United States-flagged vessel returns to the
United States. It would, in addition, modify certain tax and
subsidy programs available under the Merchant Marine Act, 1936,
to vessels constructed in the United States in order to conform
to the obligations accepted by the United States under the
Agreement. Neither the exemption from duty of foreign vessel
repairs nor the modification of certain Merchant Marine Act tax
and subsidy programs involves any additional paperwork or
regulatory burdens on individuals or businesses.
Title V also creates a new trade procedure under which
United States petitioners might challenge entry of vessels from
other Parties on the ground that they benefit from subsidies in
contravention of the Agreement. Given that the provisions of
Title V provide a process for use at the discretion of the
United States petitioning party, it mandates no additional
paperwork or regulatory burden as such. The petitioning process
(i.e., the process of challenging entry of vessels and
requesting relief) would involve the filing of a petition and
supporting documentary evidence by individuals or businesses
with standing to request such relief.
Title VI normalizes trade relations with Mongolia and makes
various modifications to the tariff laws of the United States.
Providing for permanent normal trade relations with Mongolia
does not alter either the dutiable status of Mongolian products
imported into the United States or the paperwork needed to be
filed to make entry of such products into the customs territory
of the United States. It would not, as a consequence, result in
any additional paperwork or regulatory burden on either
individuals or businesses.
Of the changes Title VI makes to the United States tariff
laws, the suspension of tariffs on wool fabric and articles
entered for the personal use of athletes and trainers attending
world sporting events in the United States would involve no
additional paperwork or regulatory burden for individuals or
businesses because suspension of the tariffs would not modify
the paperwork or regulatory burdens otherwise imposed on the
entry of imported merchandise under the customs laws of the
United States.
Title VI modifies the production incentive program provided
for certain imports from United States insular possessions. It
is a voluntary program available to those individuals or
businesses that choose to availthemselves of the benefits of
the program. As such, those changes to the production incentive program
do not mandate additional paperwork or regulatory burdens. Because it
involves an expansion of benefits that require the filing of production
incentive certificates and the accounting burdens associated with
compliance with the program, the changes would entail additional
paperwork for those choosing to avail themselves of the program.
Title VI would also lift the current embargo imposed under
executive order by the President on imports of gum arabic from
Sudan. Rather than imposing additional paperwork or regulatory
burdens on individuals or businesses, the effect of the change
would be to lift current import licensing requirements
applicable to such imports that were imposed under the
executive order.
The same would hold true for the Title VI provisions
affording duty drawback to imported materials used in the
construction or equipment of mobile offshore drilling units.
Drawback itself is a voluntary program; its expansion to cover
certain mobile offshore drilling units would impose no
additional paperwork or regulatory burdens on individuals or
businesses except for those individuals or businesses that
choose to avail themselves of the program based on the changes
made by Title VI. Title VI makes no changes to the paperwork or
regulatory burdens imposed under the drawback program. Any
additional burdens would flow solely from the increase in the
availability of the program.
Title VII would impose additional paperwork or regulatory
burdens on taxpayers choosing to take advantage of the foreign
tax credit carryback or carryforward rules. Those burdens,
which would apply solely as a result of the taxpayer's choice
to avail itself of the benefits of the credit, would entail
additional filing and recordkeeping requirements.
The Title VII modifications to the capital construction
fund would marginally increase the availability of that program
to any qualified taxpayer owning or leasing a qualified vessel.
The program allows a deduction for amounts contributed to a
capital construction fund. To the extent any newly qualified
taxpayer chooses to avail itself of the benefits of section
7518, it will be subject to the otherwise applicable
requirements of that section in terms of the paperwork and
regulatory burden imposed on individuals or businesses which
choose to participate in the program.
2. Impact on Personal Privacy and Paperwork
The Trade and Tariff Act of 1998 will have little impact on
personal privacy. Certain of its provisions which require the
filing of certain information with the United States government
in order to demonstrate eligibility for certain tax or tariff
benefits would, potentially, subject accounting records to
review by the government agency administering the program.
B. Unfunded Mandates
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4). The Committee on Finance has reviewed the provisions of the
Trade and Tariff Act of 1998 as approved by the Committee on
July 21, 1998. In accordance with the requirements of Public
Law No. 104-4, the Committee has determined that the revenue
provisions of the bill contain the following private sector
mandate:
Modify foreign tax credit carryback and carryforward
rules (bill section 7002).
This revenue provision will involve a net private sector
mandate totaling $1,571 million in fiscal years 1999-2002 and
$3,190 million in fiscal years 1999-2007. These amounts are no
greater than the aggregate estimated amounts the private sector
will be required to pay in order to comply with this private
sector mandate during these periods. The revenue raised from
this provision is intended to offset the budget costs of the
trade provisions of the bill.
The revenue provisions of the bill will not impose a
Federal intergovernmental mandate on State, local or tribal
governments.
VIII. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
In the opinion of the Committee, it is necessary, in order
to expedite the business of the Senate, to dispense with the
requirements of paragraph 12 of rule XXVI of the Standing Rules
of the Senate (relating to the showing of changes in existing
law made by the bill as reported by the Committee).