[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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------

                    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).

                                
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