Senate Report 109-128 - DOMINICAN REPUBLIC-CENTRAL AMERICA-UNITED STATES FREE TRADE AGREEMENT IMPLEMENTATION ACT

[Senate Report 109-128]
[From the U.S. Government Publishing Office]

109th Congress Report
SENATE
1st Session 109-128

======================================================================

DOMINICAN REPUBLIC-CENTRAL AMERICA-UNITED STATES FREE TRADE AGREEMENT
IMPLEMENTATION ACT

_______

August 31, 2005.--Ordered to be printed

Filed, under authority of the order of the Senate of July 29, 2005.

_______

Mr. Grassley, from the Committee on Finance, submitted the following

R E P O R T

[To accompany S. 1307]

[Including cost estimate of the Congressional Budget Office]

The Committee on Finance, to which was referred the bill
(S. 1307) to implement the Dominican Republic-Central America-
United States Free Trade Agreement, having considered the same,
reports favorably thereon without amendment and recommends that
the bill do pass.

CONTENTS

Page
I. Report and Other Materials of the Committee......................2
A. Report of the Committee on Finance.................... 2
B. Summary of Congressional Consideration of the
Dominican Republic-Central America-United States Free
Trade Agreement...................................... 2
1. Background........................................ 2
2. Trade Promotion Authority Procedures in General... 3
3. Notification Prior to Negotiations................ 4
4. Notification of Intent to Enter Into an Agreement. 5
5. Development of the Implementing Legislation....... 5
6. Formal Submission of the Agreement and
Implementing Legislation......................... 8
7. Committee and Floor Consideration................. 8
C. Trade Relations with the Dominican Republic and
Central America...................................... 9
1. United States-Dominican Republic-Central America
Trade and Investment............................. 9
2. Tariffs and Trade Agreements...................... 11
3. U.S. International Trade Commission Study......... 12
D. Overview of the Dominican Republic-Central America-
United States Free Trade Agreement................... 13
1. Overview of the Agreement......................... 13
2. USTR Summary of the Agreement..................... 13
E. General Description of the Bill to Implement the
Dominican Republic-Central America-United States Free
Trade Agreement...................................... 40
Title I--Approval of, and General Provisions Relating
to, the Agreement.................................... 41
Title II--Customs Provisions.......................... 42
Title III--Relief From Imports........................ 48
Title IV--Miscellaneous............................... 54
F. Vote of the Committee in Reporting the Bill........... 55
II. Budgetary Impact of the Bill.....................................55
III.Regulatory Impact of the Bill and Other Matters..................59

IV. Changes in Existing Law Made by the Bill, as Reported............59

I. REPORT AND OTHER MATERIALS OF THE COMMITTEE

A. Report of the Committee on Finance

B. Summary of Congressional Consideration of the Dominican Republic-
Central America-United States Free Trade Agreement

1. Background

President George W. Bush announced his intention to explore
the possibility of entering into a free trade agreement with
Central America (i.e. Costa Rica, El Salvador, Guatemala,
Honduras, and Nicaragua) on January 16, 2002. On August 6,
2002, President Bush signed the Trade Act of 2002 (Pub. L. 107-
210), which grants the President the authority to enter into
trade agreements and provides expedited procedures for
consideration of legislation implementing trade agreements that
meet certain specified objectives. On October 1, 2002,
Ambassador Robert B. Zoellick, United States Trade
Representative, formally notified Congress of the President's
intention to enter into negotiations for a free trade agreement
with Central America. On January 8, 2003, Ambassador Zoellick
and ministers from the Central American countries announced the
launch of those negotiations. On August 4, 2003, Ambassador
Zoellick notified Congress of the President's intention to
enter into negotiations for a free trade agreement with the
Dominican Republic and to seek to integrate the Dominican
Republic into the free trade agreement with Central America. On
November 18, 2003, Ambassador Zoellick announced that those
negotiations would start in January 2004. The first round of
negotiations with the Government of the Dominican Republic took
place in Santo Domingo from January 12-16, 2004.
On February 20, 2004, President Bush notified Congress of
his intention to enter into a free trade agreement with Central
America. On March 24, 2004, President Bush notified Congress of
his intention to enter into a free trade agreement with the
Dominican Republic. On May 28, 2004, Ambassador Zoellick and
trade ministers from the Central American countries signed the
U.S.-Central America Free Trade Agreement (``CAFTA''). On July
22, 2004, the day after the U.S. Senate passed the U.S.-Morocco
Free Trade Agreement Implementation Act by a vote of 85 to 13,
Senator Charles E. Grassley, Chairman of the Senate Committee
on Finance, called upon President Bush to send CAFTA to
Congress ``at the earliest opportunity.'' Chairman Grassley
also vowed to work with the President and Members of the Senate
to lay the groundwork for a successful vote later that year. On
August 5, 2004, the Dominican Republic joined the agreement in
a subsequent signing of the Dominican Republic-Central America-
United States Free Trade Agreement (the ``Agreement'' or
``CAFTA-DR agreement'') by all parties. On October 4, 2004,
Ambassador Zoellick transmitted to Congress a description of
changes to existing U.S. laws required to comply with the terms
of the CAFTA-DR agreement.
On September 20, 2004, Chairman Grassley wrote letters to
the President of the Dominican Republic, His Excellency Leonel
Fernandez Reyna, and to the President of the Senate of the
Dominican Republic, The Honorable Andres Bautista Garcia, to
express concerns regarding the incompatibility of a proposal
contained in tax reform legislation (i.e. to impose a 25
percent tax on beverages containing high-fructose corn syrup
(``HFCS'')) with the obligations of the Dominican Republic as a
member of the World Trade Organization (``WTO'') and as a party
to the CAFTA-DR agreement. Chairman Grassley shared the letters
with Ambassador Zoellick and raised concerns about proceeding
with implementation of the CAFTA-DR agreement should the HFCS
beverage tax become law. In October 2004, the Dominican
Republic passed the tax reform legislation into law, including
the 25 percent HFCS beverage tax. On November 3, 2004, Chairman
Grassley identified passage of the CAFTA-DR agreement as a
priority for the Finance Committee during the first session of
the 109th Congress. On November 16, 2004, Ambassador Zoellick
sent Chairman Grassley a letter confirming that the 25 percent
HFCS beverage tax was incompatible with the commitments of the
Dominican Republic under the CAFTA-DR agreement and outlined
plans to drop the Dominican Republic from the Agreement should
the HFCS beverage tax remain in place. On November 17, 2004,
Chairman Grassley vowed to strongly oppose any trade agreement
with the Dominican Republic as long as the HFCS beverage tax
remained in place. In early January 2005, President Fernandez
signed into law legislation repealing the 25 percent HFCS
beverage tax, thereby bringing the Dominican Republic into
compliance with its WTO obligations and CAFTA-DR commitments.
Chairman Grassley welcomed this development on January 5, 2005,
and pledged to work toward implementation of the Agreement. On
January 25, 2005, Chairman Grassley stated that he hoped for
Senate passage of the CAFTA-DR agreement by the summer of 2005.

2. Trade promotion authority procedures in general

Article I, section 8 of the Constitution of the United
States vests Congress with the authority to regulate
international trade. Congress has periodically delegated a
portion of this authority to the President, in order to advance
the economic interests of the United States. This delegation
represents a compact between Congress and the executive by
which Congress guarantees it will vote on a trade agreement
entered into by the executive without amendment and the
executive guarantees close consultation with Congress during
the negotiation of the trade agreement in order to achieve
objectives identified by Congress. Thorough and timely
consultation by the executive with Congress is the essential
bedrock upon which Congress' delegation of constitutional
authority rests. This compact has successfully resulted in the
negotiation and implementation of numerous trade agreements
that have substantially contributed to the economic growth and
prosperity of the United States for decades.
The most recent incarnation of this compact is found in the
Bipartisan Trade Promotion Authority Act of 2002, which was
included in the Trade Act of 2002 (the ``Act'') (Pub. L. 107-
210). The Act includes prerequisites for congressional
consideration of a trade agreement under expedited procedures
(known as Trade Promotion Authority (``TPA'') procedures),
which are found in sections 2103 through 2106 of the Act (19
U.S.C. Sec. Sec. 3803-3806) and section 151 of the Trade Act of
1974 (19 U.S.C. Sec. 2191). Section 2103 of the Act authorizes
the President to enter into reciprocal trade agreements with
foreign countries to reduce or eliminate tariff or nontariff
barriers and other trade-distorting measures. Section 2102 of
the Act outlines the negotiating objectives the President is to
achieve if the President intends to use TPA procedures to
implement a trade agreement. Section 151 of the Trade Act of
1974 sets out expedited procedures for congressional
consideration of a trade agreement without amendment. The
President's authority under section 2103 extends to trade
agreements entered into on or before June 30, 2007.

3. Notification prior to negotiations

Under section 2104(a)(1) of the Act, the President must
provide written notice to the Congress at least 90 calendar
days before initiating negotiations. On October 1, 2002,
Ambassador Zoellick sent letters to The Honorable Robert C.
Byrd, President Pro Tempore, United States Senate, and The
Honorable J. Dennis Hastert, Speaker, United States House of
Representatives, to notify Congress of the President's
intention to initiate negotiations for a free trade agreement
with the CAFTA countries. Those negotiations were initiated on
January 8, 2003. On August 4, 2003, Ambassador Zoellick sent
letters to The Honorable Ted Stevens, President Pro Tempore,
United States Senate, and The Honorable J. Dennis Hastert,
Speaker, United States House of Representatives, to notify
Congress of the President's intention to initiate negotiations
for a free trade agreement with the Dominican Republic and to
integrate the Dominican Republic into CAFTA. Negotiations with
the Dominican Republic were initiated in January 2004.
Section 2104(a)(2) of the Act requires the President,
before and after submission of the notice, to consult regarding
the negotiations with the relevant committees of Congress and
the Congressional Oversight Group established under section
2107 of the Act. The Administration engaged in extensive
consultations with the Committee on Finance and the
Congressional Oversight Group (``COG''), including appearances
by Ambassador Zoellick at meetings of the COG on January 7,
2003, April 11, 2003, July 24, 2003, May 6, 2004, and September
8, 2004, and by Deputy USTR Peter Allgeier and Deputy USTR
Josette Shiner at meetings of the COG on February 2, 2005.

4. Notification of intent to enter into an agreement

Section 2105(a)(1)(A) of the Act requires the President, at
least 90 days before entering into an agreement, to notify
Congress of his intention to enter into the agreement. On
February 20, 2004, President Bush notified Congress of his
intention to enter into a free trade agreement with the
governments of the CAFTA countries. The CAFTA agreement was
signed on May 28, 2004. On March 24, 2004, President Bush
notified Congress of his intention to enter into a free trade
agreement with the Government of the Dominican Republic. The
CAFTA-DR agreement, which integrates the Dominican Republic
into the CAFTA agreement, was signed by all parties on August
5, 2004.

5. Development of the implementing legislation

Section 2105(a)(1)(B) of the Act requires the President,
within 60 days of signing an agreement, to submit to Congress a
description of changes to existing U.S. laws that the President
considers would be required to bring the United States into
compliance with such agreement. On October 4, 2004, Ambassador
Zoellick transmitted to Congress a description of changes to
existing U.S. laws required to comply with the terms of the
CAFTA-DR agreement.
Under TPA procedures, Congress and the Administration work
together to produce the legislation to implement a free trade
agreement. Draft legislation is developed in close consultation
between the Administration and the committees with jurisdiction
over the laws that must be enacted or amended to implement the
agreement. The committees may then hold informal meetings to
consider the draft legislation and to make non-binding
recommendations to the Administration, if any. The
Administration then finalizes implementing legislation for
formal submission to Congress and referral to the committees of
jurisdiction. These procedures are meant to ensure close
cooperation between the executive and legislative branches of
government to develop legislation that faithfully implements
the agreement. The final legislation should include only those
provisions that are necessary or appropriate to implement
faithfully the agreement.
On November 3, 2004, Chairman Grassley identified passage
of the CAFTA-DR agreement as a priority for the Finance
Committee during the first session of the 109th Congress. On
March 14, 2005, the Finance Committee set a date for hearing
testimony on the CAFTA-DR agreement. On April 6, 2005, Chairman
Grassley hosted a Finance Committee Members Meeting with the
Ministers of Trade and Ministers of Labor from the CAFTA-DR
countries. At that meeting, participants discussed a White
Paper released by the Inter-American Development Bank that
outlined additional steps that CAFTA-DR countries could take to
improve labor laws in those countries. The recommendations
contained in the White Paper were endorsed by the Ministers for
Trade and Ministers for Labor from the CAFTA-DR countries.
The Finance Committee held its hearing on the CAFTA-DR
agreement on Wednesday, April 13, 2005. During the hearing, a
broad and diverse group of witnesses from the agriculture,
business, and environmental communities expressed strong
support for the Agreement. Additional witnesses representing
labor and sugar interests expressed concerns with the
Agreement. One week later, on April 21, 2005, the House
Committee on Ways and Means considered testimony on the CAFTA-
DR agreement. On April 27, 2005, Chairman Grassley hosted a
rally with Secretary of Agriculture Mike Johanns and a wide
array of representatives from U.S. business and agriculture to
demonstrate broad support for the Agreement. On May 9, 2005,
Chairman Grassley hosted a media event with representatives
from U.S. food processing companies which highlighted the
importance of comprehensive trade agreements to many sectors of
the U.S. economy.
Prior to informal committee consideration of draft
implementing legislation for the Agreement, a number of
Senators expressed concern that the CAFTA-DR agreement would
harm the existing U.S. sugar program. The Administration argued
that these concerns were unfounded as the Agreement provides
for only a minimal increase in sugar imports from CAFTA-DR
countries and includes a number of unprecedented protections
for the U.S. sugar industry. Still, for several months, the
U.S. sugar industry and a number of U.S. Senators vowed to
oppose the CAFTA-DR agreement unless the Agreement was
renegotiated to exclude any new sugar imports. However, the
vast majority of U.S. agriculture producers and food processors
supported the CAFTA-DR agreement precisely because the
Agreement is comprehensive, i.e. with no sector of agriculture
excluded from the Agreement. These groups fear that, if the
United States excludes an import sensitive agricultural
commodity from a trade agreement, our negotiating partners
would reciprocate by seeking to exclude U.S. agricultural
exports from an agreement that are import sensitive to them.
Chairman Grassley agreed that the CAFTA-DR agreement should be
comprehensive, i.e. with no exclusions, and thus successfully
resisted efforts to remove sugar from the Agreement.
The Finance Committee subsequently met in open executive
session on Tuesday, June 14, 2005, to informally consider draft
implementing legislation for the CAFTA-DR agreement. Committee
Members filed 34 amendments to the draft implementing
legislation. Sixteen of these amendments sought to exclude
sugar from the Agreement (and thus require renegotiation of the
Agreement). However, few amendments were offered. And none of
the amendments which sought to exclude sugar from the agreement
were offered or debated, presumably due to a lack of majority
support. In fact, only two amendments were offered. The first
amendment offered (i.e. Amendment #32) extended Trade
Adjustment Assistance (``TAA'') programs to include service
workers and firms in the services sector. The amendment also
doubled the annual authorization of the TAA for Workers
program, from $220 million to $440 million, as well as the
annual authorization of the TAA for Firms program, from $16
million to $32 million. In addition, the amendment contained
data collection and reporting requirements. Chairman Grassley
noted that Amendment #32 would essentially establish an
entirely new program that was not contemplated by the
underlying trade agreement, and thus the amendment was not
necessary or appropriate to implement the CAFTA-DR agreement.
Chairman Grassley also raised concerns regarding certain
aspects of the substance of Amendment #32. Chairman Grassley
offered to work with the proponents of Amendment #32 to further
develop the substance of the amendment in a more appropriate
legislative forum. The Chairman's offer was not accepted, and
despite the concerns raised by the Chairman, Amendment #32 was
approved by voice vote, a quorum being present.
The second amendment offered (i.e. Amendment #30) called
for renegotiation of the dispute settlement provisions in the
Agreement to provide that violations of the Agreement would be
subject to identical remedies regardless of subject matter.
However, the negotiating objectives that Congress attached to
TPA procedures call for violations of a trade agreement to be
subject to equivalent, rather than identical remedies. This
distinction, which is found in section 2102 of the Act,
recognizes that some non-compliance practices may be better
addressed through cooperation and technical assistance rather
than through rote application of trade sanctions. Amendment #30
thus contravened this negotiating objective. In addition,
because the amendment required renegotiation of the CAFTA-DR
agreement, it was on its face neither necessary nor appropriate
in implementing the Agreement. The Chairman called for a roll
call vote on the amendment, a quorum being present. Amendment
#30 was not approved by the Committee on a vote of 10 ayes (one
by proxy), 10 nays (five by proxy).
With all of the amendments disposed of, the Chairman
subsequently called for a vote on the Committee's informal
recommendation, as amended, a quorum being present. The
Committee voted to approve the informal recommendation, as
amended, to implement the CAFTA-DR agreement, by recorded vote,
a quorum being present, 11 ayes, 8 nays (with one additional
nay vote by proxy). Ayes: Grassley, Hatch, Lott, Kyl, Thomas,
Santorum, Frist, Smith, Bunning, Lincoln, Wyden. Nays: Snowe,
Crapo, Baucus, Rockefeller, Conrad, Jeffords, Bingaman (proxy),
Kerry, Schumer.
The next day, on Wednesday, June 15, 2005, the House Ways
and Means Committee met to consider informally the draft
implementing legislation. The Ways and Means Committee voted
25-16 for approval of a Chairman's amendment in the nature of a
substitute to the draft implementing legislation. The
Chairman's amendment added two non-binding provisions to the
draft implementing legislation: (1) a provision to create
periodic reporting and meeting requirements on labor provisions
of the CAFTA-DR agreement, particularly with respect to
capacity-building efforts; and, (2) a provision to require the
President to prepare a report that would examine after one year
whether the CAFTA-DR agreement has had a net negative effect on
the services industry--if there were a finding of negative
effects on the services industry, the provision would further
require the President to recommend how the TAA programs should
be amended to respond to such negative effects.
The Senate Finance Committee and House Ways and Means
Committee subsequently sent their respective recommendations to
the President. The committees did not conduct a formal ``mock
conference'' to reconcile the different versions of informal
non-binding recommendations that had been approved by the two
committees. Committee precedent does not mandate that a formal
``mock conference'' take place to reconcile differences in
informal recommendations. For example, the two committees
approved different versions of draft implementing legislation
for the North American Free Trade Agreement, but there is no
record of a formal mock conference taking place to reconcile
the differences. In contrast, the committees did proceed with a
formal mock conference to reconcile different versions of draft
implementing legislation for the Uruguay Round Agreements Act.
The need for a formal ``mock conference'' depends upon the type
and degree of differences between the informal recommendations.
In this case, the Office of the United States Trade
Representative consulted with each committee, and based upon
those consultations, the President reconciled the two versions
of the draft implementing bill by including the provision
relating to periodic reporting requirements on the labor
provisions of the Agreement and omitting those provisions
relating to TAA programs for service workers.

6. Formal submission of the agreement and implementing legislation

When the President formally submits a trade agreement to
Congress under section 2105 of the Act, the President must
include in the submission the final legal text of the
agreement, together with implementing legislation, a statement
of administrative action (describing regulatory and other
changes that are necessary or appropriate to implement the
agreement), a statement setting forth the reasons of the
President regarding how and to what extent the agreement makes
progress in achieving the applicable policies, purposes,
priorities, and objectives set forth in the Act, and a
statement setting forth the reasons of the President regarding
how the agreement serves the interests of U.S. commerce.
The implementing legislation is introduced in both Houses
of Congress on the day it is submitted by the President and is
referred to Committees with jurisdiction over its provisions.
President George W. Bush transmitted the final text of the
CAFTA-DR agreement, along with implementing legislation, a
Statement of Administrative Action, and other supporting
information, as required under section 2105 of the Act, to
Congress on June 23, 2005. The identical legislation was
introduced that same day in both the House (H.R. 3045) and the
Senate (S. 1307).
To qualify for TPA procedures, the implementing bill itself
must contain provisions formally approving the agreement and
the statement of administrative action. Further, the
implementing bill must contain only those provisions necessary
or appropriate to implement the Agreement. The implementing
bill reported here--which approves the CAFTA-DR agreement and
the accompanying Statement of Administrative Action and
contains provisions necessary or appropriate to implement the
CAFTA-DR agreement into U.S. law--was referred to the Senate
Committee on Finance.

7. Committee and floor consideration

When the requirements of the Act are satisfied,
implementing revenue bills such as the Dominican Republic-
Central America-United States Free Trade Agreement
Implementation Act (``Implementation Act'') are subject to the
legislative procedures of section 151 of the Trade Act of 1974.
The following schedule for congressional consideration applies
under these procedures:
(i) House committees have up to 45 calendar days in
session in which to report the bill; any committee
which does not do so in that period will be
automatically discharged from further consideration.
(ii) A vote on final passage by the House must occur
on or before the 15th calendar day in session after the
committees report the bill or are discharged from
further consideration.
(iii) Senate committees must act within 15 calendar
days in session of receiving the implementing revenue
bill from the House or within 45 calendar days in
session of Senate introduction of the implementing
bill, whichever is later, or they will be discharged
automatically.
(iv) The full Senate then must vote within 15
calendar days in session on the implementing bill.
Thus, Congress has a maximum of 90 calendar days in session
to complete action on the bill. Once the implementing bill has
been formally submitted by the President and introduced, no
amendments to the bill are in order in either House of
Congress. Floor debate in each House is limited to no more than
20 hours, to be equally divided between those favoring the bill
and those opposing the bill.
Although the Implementation Act is a revenue measure, and
thus must ultimately originate in the House, the Senate Finance
Committee led congressional action on the measure. The Finance
Committee met in open executive session on Tuesday, June 28,
2005, to consider favorably reporting S. 1307. In order to
allow Members ample opportunity to voice their views on the
Implementation Act in committee, the Chairman held the meeting
open until the following day. On Wednesday, June 29, 2005, the
Chairman reconvened the open executive session of the
Committee, during which the Committee favorably reported S.
1307 by voice vote, a quorum being present (Senator Thomas
voted no). Later that day the Senate agreed to a motion to
proceed to consider S. 1307 by a vote of 61-34. Pursuant to TPA
procedures, on Thursday, June 30, 2005, the Senate voted to
approve S. 1307 by a vote of 54-45, whereupon the bill was held
at the desk. The House Ways and Means Committee took up H.R.
3045 on Thursday, June 30, 2005, and voted 25-16 to report the
measure favorably. The Chairman of the House Ways and Means
Committee did not report H.R. 3045 until Monday, July 25, 2005.
The House passed H.R. 3045 on Thursday, July 28, 2005, by a
vote of 217-215, whereupon the bill was transmitted to the
Senate. The Senate took up H.R. 3045 that same day, passing the
bill by a vote of 55-45. H.R. 3045 was signed into law by
President Bush on August 2, 2005 (Public Law 109-53).

C. Trade Relations With the Dominican Republic and Central America

1. United States-Dominican Republic-Central America trade and
investment

The CAFTA-DR countries together make up the 2nd largest
market for U.S. exports in Latin America, behind only Mexico.
U.S. exports total more than $15 billion annually, making it
the 10th largest export market worldwide. The United States is
the largest trading partner of the CAFTA countries, accounting
for some 56 percent of exports from the CAFTA countries and 44
percent of imports into the CAFTA countries. The United States
is also the largest trading partner of the Dominican Republic,
accounting for 80 percent of exports from the Dominican
Republic and 50 percent of imports into the Dominican Republic.
Over the past 5 years, U.S. exports to the CAFTA-DR countries
grew by over 25 percent, while U.S. imports from the CAFTA-DR
countries grew by more than 15 percent.
The following tables summarize the top U.S. merchandise
exports to the CAFTA-DR countries and the top U.S. merchandise
imports from the CAFTA-DR countries during the past six years.

U.S. EXPORTS TO THE CAFTA-DR COUNTRIES, 1999-2004
[In millions of U.S. dollars]
----------------------------------------------------------------------------------------------------------------
Top 15 product descriptions, by HTS chapter 1999 2000 2001 2002 2003 2004
----------------------------------------------------------------------------------------------------------------
85. Electrical Machinery...................... 1,390.8 1,329.2 1,229.2 1,664.1 1,812.9 1,938.0
84. Machinery................................. 1,250.8 1,293.6 1,249.2 1,206.6 1,092.3 1,141.1
52. Cotton yarns and fabrics.................. 172.7 287.9 594.7 762.5 812.4 1,076.1
61. Knit apparel.............................. 1,609.5 2,121.8 1,680.4 1,269.0 1,163.2 999.5
27. Fuels..................................... 255.8 431.7 327.8 387.2 1,004.8 988.8
98. Special classifications................... 666.2 644.4 706.8 695.0 796.3 937.3
39. Plastics.................................. 458.6 574.8 675.0 763.1 799.6 870.7
60. Knit fabrics.............................. 80.7 92.5 251.0 515.9 785.3 836.8
10. Cereals................................... 441.5 459.8 506.6 559.2 603.2 742.5
62. Woven apparel............................. 1,594.2 1,596.7 1,050.4 890.6 731.0 572.0
48. Paper and paperboard...................... 484.3 501.0 507.3 507.6 517.2 553.9
90. Optical and medical instruments........... 269.4 291.4 318.6 337.8 394.2 376.9
87. Vehicles.................................. 382.8 392.2 312.5 330.2 312.0 343.1
55. Manmade fibers, yarns, and fabrics........ 57.2 66.1 166.8 238.2 282.8 278.6
58. Special fabrics and trimmings............. 133.2 186.2 331.2 402.1 214.4 247.9
-----------------------------------------------------------------
Subtotal for top 15 products.............. 9,247.6 10,269.2 9,907.4 10,529.2 11,321.6 11,903.2
-----------------------------------------------------------------
Subtotal for all other products........... 2,904.4 2,932.9 3,117.2 3,002.4 3,050.1 3,076.8
=================================================================
Total U.S. exports to the DR-CAFTA 12,152.0 13,202.2 13,024.6 13,531.6 14,371.7 14,980.0
countries............................
----------------------------------------------------------------------------------------------------------------
Note.--HTS is the Harmonized Tariff Schedule of the United States.
Source.--U.S. International Trade Commission Dataweb.

U.S. IMPORTS FROM THE CAFTA-DR COUNTRIES, 1999-2004
[In millions of U.S. dollars]
----------------------------------------------------------------------------------------------------------------
Top 15 product descriptions, by HTS chapter 1999 2000 2001 2002 2003 2004
----------------------------------------------------------------------------------------------------------------
61. Knit apparel.............................. 4,266.6 4,894.2 5,020.4 5,307.8 5,593.7 5,998.5
62. Woven apparel............................. 3,898.3 4,151.7 4,046.8 3,822.5 3,628.8 3,562.6
85. Electrical machinery...................... 691.1 895.9 892.0 1,040.1 1,352.3 1,375.7
8. Fruits and nuts........................... 795.6 878.3 991.9 1,013.4 1,049.2 1,064.6
90. Optical and medical instruments........... 448.9 550.5 664.1 729.9 939.5 909.4
9. Coffee and tea............................ 595.2 735.1 398.2 394.1 463.6 512.7
71. Precious metals........................... 304.3 240.5 315.1 404.6 420.2 499.5
98. Special classifications................... 236.4 242.5 264.7 388.6 355.2 378.8
24. Tobacco................................... 296.4 307.1 303.2 313.9 305.6 334.5
3. Fish...................................... 294.0 351.9 321.7 325.5 295.2 294.4
17. Sugar..................................... 221.9 185.2 174.3 187.1 254.0 256.6
27. Fuels..................................... 94.2 161.4 102.9 167.1 186.8 182.5
39. Plastics.................................. 83.9 88.2 110.4 124.9 170.3 178.6
84. Machinery................................. 1,484.1 849.5 122.2 144.1 137.8 176.4
72. Steel..................................... 51.7 80.8 36.4 83.7 105.7 173.2
-----------------------------------------------------------------
Subtotal for top 15 products.............. 13,762.8 14,612.8 13,764.2 14,447.4 15,257.7 15,897.8
-----------------------------------------------------------------
Subtotal for all other products........... 1,533.3 1,537.0 1,540.2 1,565.3 1,604.1 1,764.8
=================================================================
Total U.S. imports from the DR-CAFTA 15,296.1 16,149.7 15,304.4 16,012.7 16,861.8 17,662.6
countries................................
----------------------------------------------------------------------------------------------------------------
Note.--HTS is the Harmonized Tariff Schedule of the United States.
Source.--U.S. International Trade Commission Dataweb.

The United States is the largest foreign investor in each
of the CAFTA-DR countries. Total U.S. foreign direct investment
(``FDI'') in the CAFTA-DR countries averaged between $4 billion
and $5 billion annually during the period 1999-2003. The CAFTA
countries are negligible sources of FDI in the United States.
The Dominican Republic accounted for $57 million of FDI in the
United States in 2002.

2. Tariffs and trade agreements

In 2002 and 2003, about 80 percent of U.S. imports from the
CAFTA-DR countries entered the United States duty free. Today,
about 99 percent of U.S. imports of food and agriculture
products from the CAFTA-DR countries enter the United States
duty free. In contrast, U.S. exports of food and agriculture
products to the CAFTA-DR countries face an average 11 percent
tariff, with some tariffs ranging as high as 150 percent. With
respect to manufactured goods, a number of important U.S.
exports to the CAFTA-DR countries face tariffs ranging from 10
to 20 percent. Under the Agreement, duties on 80 percent of
U.S. exports of manufactured goods to the CAFTA-DR countries
would be eliminated immediately, with the rest phased out over
a period of up to 10 years. For agricultural goods, duties on
over 50 percent of U.S. exports to the CAFTA-DR countries would
be eliminated immediately, with the rest phased out over a
period of up to 20 years. For the CAFTA-DR countries, 100
percent of non-textile and non-agricultural exports would enter
the United States duty free immediately. For other products,
the United States retains safeguards during the applicable
period of duty phase-out under the Agreement.
The CAFTA-DR countries are each members of the WTO. They
also participate in the following regional trade agreements:
Central America Common Market (``CACM'') (all but the Dominican
Republic); Costa Rica-Caribbean Community (``CARICOM'') Free
Trade Agreement (signed 2004) (CARICOM members are Antigua and
Barbuda, the Bahamas, Barbados, Belize, Dominica, Grenada,
Guyana, Haiti, Jamaica, Montserrat, Saint Lucia, Saint Kitts
and Nevis, St. Vincent and the Grenadines, Suriname, and
Trinidad and Tobago); Costa Rica-Canada Free Trade Agreement
(effective 2002); Central America-Chile Free Trade Agreement
(signed 1999, effective 2002 with respect to Costa Rica and El
Salvador, others pending implementation); Central America-
Panama Free Trade Agreement (signed 2002); Central America-
Dominican Republic Free Trade Agreement (signed 1998, effective
2001 with respect to El Salvador, Guatemala, and Honduras, and
effective 2002 with respect to Costa Rica); El Salvador,
Guatemala, and Honduras Free Trade Agreement with Mexico
(effective 2001); Nicaragua-Mexico Free Trade Agreement
(effective 1998); and the Dominican Republic-CARICOM Free Trade
Agreement (signed 1998).
Each of the CAFTA-DR countries receives unilateral trade
preferences from the United States (under the Caribbean Basin
Economic Recovery Act and the Caribbean Basin Trade Partnership
Act; in addition, all but Nicaragua are designated beneficiary
countries under the Generalized System of Preferences) and the
European Union (under the European Union's Generalized System
of Preferences; in addition, the Dominican Republic is included
among the African, Caribbean, and Pacific (``ACP'') countries
that traditionally have enjoyed nonreciprocal preferential
access to the European Union market).

3. U.S. International Trade Commission study

In August 2004, the United States International Trade
Commission (``ITC'') released the results of its investigation
(Investigation No. TA-2104-13) into the probable economic
effects of a United States-Central America-Dominican Republic
Free Trade Agreement (USITC Publication 3717). The ITC
concluded that the economy-wide effects of the Agreement's
tariff reductions alone are likely to result in an increase in
overall U.S. welfare in the range of $135.3 million to $248.2
million. The ITC projected that U.S. exports to the CAFTA-DR
countries would increase by about $2.7 billion, and U.S.
imports from the CAFTA-DR countries would increase by about
$2.8 billion. The ITC further concluded that as a result of the
Agreement, total U.S. exports to the world are likely to
increase by approximately $1.9 billion and total U.S. imports
from the world are likely to increase by about $1.2 billion,
with minimal impact on U.S. employment and output. In other
words, the ITC found that full implementation of the CAFTA-DR
agreement would likely reduce the overall U.S. trade deficit by
about $700 million.
At the sectoral level, the ITC report concluded that some
sectors of the U.S. economy are likely to experience increased
import competition from the CAFTA-DR countries, while other
sectors are likely to experience increased export opportunities
to the markets of the CAFTA-DR countries. The ITC provided more
detailed analyses for the following sectors: textiles and
apparel, sugar and sugar-containing products (``SCPs''), and
grains (i.e. corn and rice). The ITC concluded that the
Agreement is likely to result in a moderate increase in the
quantity of U.S. imports of textiles and apparel from the
CAFTA-DR countries, with most of the increase displacing
imports from other countries. Consequently, the ITC concluded
that the Agreement is likely to result in only a small increase
in total U.S. imports of textiles and apparel. Second, the ITC
concluded that the Agreement is likely to result in a small
increase in imports of sugar and SCPs into the United States.
In particular, the ITC found that increases in the volume of
sugar imports under the Agreement likely will not trigger the
suspension of domestic marketing allotments under the current
U.S. sugar program. The ITC estimated that the U.S. price of
sugar would decline by about 1 percent as a result of increased
sugar imports under the Agreement. Third, the ITC concluded
that by the end of the 15-20 year phase-out of tariff-rate
quotas on corn and rice imports in the CAFTA-DR countries, U.S.
exports would increase by at least 20 percent, or $120 million
(based on 2003 prices), offering significant market
opportunities for U.S. corn growers and U.S. rice growers. The
ITC also examined the impact of the Agreement on the services
sector. The ITC found that the Agreement improves upon
commitments scheduled by the CAFTA-DR countries under the WTO
General Agreement on Trade in Services (``GATS'') by, in many
instances, guaranteeing market access and national treatment in
areas where the countries previously had no commitments. The
ITC further found that in addition to according substantial
market access across the entire CAFTA-DR services regime, the
Agreement also provides improved regulatory transparency and
establishes a secure and predictable framework for U.S.
investors operating in the CAFTA-DR countries.

D. Overview of the Dominican Republic-Central America-United States
Free Trade Agreement

1. Overview of the agreement

The Dominican Republic-Central America-United States Free
Trade Agreement establishes a plurilateral free trade area that
eliminates tariffs on most merchandise trade. The Agreement
liberalizes trade in services and contains provisions that
cover investment, intellectual property, environment, labor,
government procurement, and competition policy. The Agreement
also contains a mechanism for settling disputes that arise
under the Agreement. Throughout the Agreement there are
important provisions that promote plurilateral consultation and
cooperation, procedural and substantive due process,
administrative and judicial review, transparency, and the rule
of law.

2. USTR summary of the agreement

The Office of United States Trade Representative (``USTR'')
prepared a summary of the CAFTA-DR agreement, which was
distributed to Members of the Senate Finance Committee to aid
in their consideration of legislation to implement the
Agreement. This summary, which is available on the USTR
website, is reprinted below:

THE DOMINICAN REPUBLIC-CENTRAL AMERICA-UNITED STATES FREE TRADE
AGREEMENT

Summary of the Agreement

This summary briefly describes key provisions of the
Dominican Republic-Central America-United States Free Trade
Agreement (``Agreement'' or ``CAFTA-DR'') that the United
States has concluded with Costa Rica, El Salvador, Guatemala,
Honduras, and Nicaragua (collectively ``Central America'') and
the Dominican Republic.

Preamble

The Preamble to the Agreement provides the Parties'
underlying objectives in entering into the Agreement and
provides context for the provisions that follow.

CHAPTER ONE: INITIAL PROVISIONS

Chapter One sets out provisions establishing a free trade
area, describing the objectives of the Agreement, and providing
that the Parties will interpret and apply the Agreement in
light of these objectives. The Parties affirm their existing
rights and obligations with respect to each other under the
Marrakesh Agreement Establishing the World Trade Organization
(WTO) and other agreements to which they are all party. The
Parties also agree that they will give effect to the Agreement,
including, in the case of the United States, by taking steps
necessary to ensure observance of provisions applicable to
state governments.

CHAPTER TWO: GENERAL DEFINITIONS

Chapter Two defines certain terms that recur in various
chapters of the Agreement.

CHAPTER THREE: NATIONAL TREATMENT AND MARKET ACCESS FOR GOODS

Chapter Three and its relevant annexes and appendices set
out the Agreement's principal rules governing trade in goods.
It requires each Party to treat products from another Party in
a non- discriminatory manner, provides for the phase-out and
elimination of tariffs on ``originating'' goods (as defined in
Chapter Four) traded between the Parties, and requires the
elimination of a wide variety of non-tariff trade barriers that
restrict or distort trade flows.
Tariff Elimination. Chapter Three provides for the
elimination of customs duties on originating goods traded
between the Parties. Duties on most tariff lines covering
industrial and consumer goods will be eliminated as soon as the
Agreement enters into force. Duties on other goods will be
phased out over periods of up to 10 years. Some agricultural
goods will have longer periods for elimination of duties or be
subject to other provisions, including, in some cases, the
application of preferential tariff-rate quotas (TRQs). The
General Notes to the U.S. Schedule to Annex 3.3 include
detailed provisions on staging of tariff reductions and
application of TRQs for certain agricultural goods. The Chapter
provides that the Parties may agree to speed up tariff phase-
outs on a product-by-product basis after the Agreement takes
effect. Annex 3.3.6 of the Agreement establishes additional
tariff commitments that apply between the Central American
Parties and the Dominican Republic. These commitments largely
reflect tariff commitments these Parties have under an earlier
free trade agreement between them.
Waiver of Customs Duties. Chapter Three provides that
Parties may not adopt new duty waivers or expand existing duty
waivers conditioned on the fulfillment of a performance
requirement. However, Costa Rica, the Dominican Republic, El
Salvador, and Guatemala are permitted to maintain such measures
through 2009, provided they do so in accordance with the WTO
Subsidies and Countervailing Measures (SCM) Agreement. Honduras
and Nicaragua are permitted to maintain such measures
indefinitely, provided they do so in accordance with the SCM
Agreement. Chapter Three defines the term ``performance
requirements'' so as not to restrict a Party's ability to
provide duty drawback on goods imported from the other Parties.
Temporary Admission. Chapter Three requires the Parties to
provide duty-free temporary admission for certain products.
Such items include professional equipment, goods for display or
demonstration, and commercial samples. The Chapter also
includes specific provisions on transit of vehicles and
containers used in international traffic.
Import/Export Restrictions, Fees, and Formalities. The
Agreement clarifies that restrictions prohibited under the
General Agreement on Tariffs and Trade (GATT) 1994 and this
Agreement include export and import price requirements (except
under antidumping and countervailing duty orders) and import
licensing conditioned on the fulfillment of a performance
requirement. In addition, a Party must limit all fees and
charges imposed on or in connection with importation or
exportation to the approximate cost of services rendered. The
United States agreed not to apply its merchandise processing
fee on imports of originating goods. The Central American
Parties and the Dominican Republic agreed not to require a
person of another Party to have or maintain a relationship with
a ``dealer'' as a condition for allowing the importation of a
good. These Parties also agreed not to prohibit or restrict the
importation of any good of another Party as a remedy for a
violation or alleged violation of any law, regulation, or other
measure relating to the relationship between a ``dealer'' in
its territory and a person of another Party.
Distinctive Products. The Central American Parties and the
Dominican Republic agreed to recognize Bourbon Whiskey and
Tennessee Whiskey as ``distinctive products'' of the United
States, meaning these Parties will not permit the sale of any
product as Bourbon Whiskey or Tennessee Whiskey unless it was
manufactured in the United States in accordance with applicable
laws and regulations.
Committee on Trade in Goods. Chapter Three also establishes
a Committee on the Trade in Goods to consider matters arising
under Chapters Three, Four, and Five. The functions of the
Committee are to promote and address barriers to trade in goods
and to provide advice and recommendations on trade capacity
building with respect to matters covered by Chapters Three,
Four, and Five.

Agriculture

TRQs. Chapter Three requires that TRQs be administered in a
manner that is transparent, non-discriminatory, responsive to
market conditions and minimally burdensome on trade and allows
importers to fully utilize import quotas. In addition, the
Chapter provides that Parties may not condition application
for, or utilization of, import licenses or quota allocations on
the re-export of an agricultural good.
Export Subsidies. Each Party will eliminate export
subsidies on agricultural goods destined for another CAFTA-DR
country. Under Article 3.14, no Party may introduce or maintain
a subsidy on agricultural goods destined for another Party
unless the exporting Party believes that a third country is
subsidizing its exports to that other Party. In such a case,
the exporting Party may initiate consultations with the
importing Party to develop measures the importing Party may
adopt to counteract such subsidies. If the importing Party
agrees to such measures, the exporting Party must refrain from
applying export subsidies to its exports of the good to the
importing Party.
Safeguards. Chapter Three sets out a transitional
agricultural safeguard mechanism that allows a Party to impose
a temporary additional duty on specified agricultural products
if imports exceed an established volume ``trigger''. The
safeguard measure will remain in force until the end of the
calendar year in which the measure applies. A Party may not
apply an agricultural safeguard on a good after the date that
the good is subject to duty-free treatment under the Party's
Schedule to Annex 3.3 of the Agreement.
A Party may not apply a safeguard measure to a good that is
already the subject of a safeguard measure under either Chapter
Eight (Trade Remedies) of the Agreement or Article XIX of GATT
1994 and the WTO Safeguards Agreement. All agricultural
safeguard measures must be applied and maintained in a
transparent manner and the Party applying such a measure must,
upon request, consult with the other Party concerning the
application of the measure.
No Party may impose safeguard duties pursuant to the WTO
Agreement on Agriculture on originating goods.
Sugar. The Agreement contains several unique features
applicable to imports of sugar into the United States. First,
imports under the TRQs created in the Agreement will be limited
to the lesser of (i) the quantity established in the TRQ, or
(ii) the exporting Party's trade surplus in specific sugar
goods. (A Party's ``trade surplus'' is the amount by which its
exports to all destinations exceed its imports from all sources
in specified sugar and sweetener goods, except that a Party's
exports of sugar to the United States and its imports of high
fructose corn syrup from the United States are not included in
the calculation of its trade surplus.) The aggregate quantities
established in the TRQs are modest--107,000 metric tons in the
first year. The maximum quantities increase to approximately
151,000 metric tons in year 15 of the Agreement. The United
States will also establish a quota for specialty sugar goods of
Costa Rica in the amount of 2,000 metric tons annually. Second,
unlike other commodities, the United States will not eliminate
its over-quota duty on sugar imports under the Agreement.
Lastly, the Agreement includes a mechanism that allows the
United States, at its option, to provide some form of
alternative compensation to CAFTA-DR country exporters in place
of imports of sugar.
Ethanol. In the General Notes to the Schedule of the United
States to Annex 3.3 of the Agreement, the United States agreed
to continue to treat the Central American countries and the
Dominican Republic as beneficiary countries under the Caribbean
Basin Initiative (CBI) preference program with respect to
ethanol imports. Accordingly, the Central American countries
and the Dominican Republic will continue to share in the duty-
free quota that the United States makes available to CBI
beneficiary countries. The United States also agreed to
establish country-specific allocations for Costa Rica and El
Salvador, but did not increase the total quantity allowed under
the CBI quota.
Additional Provisions. Chapter Three provides for the
creation of a Committee on Agricultural Trade. The Committee
will be established within 90 days of entry into force of the
Agreement and will provide a forum for promoting cooperation in
the implementation and administration of the Agreement, as well
as for consultations on matters related to the agricultural
provisions of the Agreement. The Chapter also provides for the
establishment of an Agriculture Review Commission. The
Commission will be established 14 years after entry into force
of the Agreement and will review the implementation and
operation of the Agreement as it relates to trade in
agricultural goods, including whether to extend the
agricultural safeguard mechanism. Further, the Chapter provides
that the Parties will consult on and review the operation of
the Agreement as it relates to trade in chicken nine years
after entry into force of the Agreement.

Textiles and apparel

Chapter Three also sets out various provisions specifically
addressing trade in textile and apparel goods.
Tariff Elimination. Duties on nearly all originating
textile or apparel goods will be eliminated when the Agreement
enters into force. Moreover, the preferential duty treatment
under the Agreement may, on a reciprocal basis, be made
retroactive to January 1, 2004.
Safeguards. The Chapter establishes a transitional
safeguard procedure for textile and apparel goods, under which
an importing Party may temporarily impose additional duties up
to the level of the normal trade relations/most-favored-nation
(NTR/MFN) duty rates on imports of textile or apparel goods
that cause, or threaten to cause, serious damage to a domestic
industry as a result of the elimination or reduction of duties
under the Agreement. An importing Party may impose a textile
safeguard measure only once on the same textile or apparel
good. The measure may not be in place for more than three
years. The ability to impose textile safeguards lapses five
years after the entry into force of the Agreement. A Party may
not apply a textile safeguard measure to a good while the good
is subject to a safeguard measure under (i) Chapter Eight
(Trade Remedies), or (ii) Article XIX of the GATT 1994 and the
WTO Agreement on Safeguards.
A Party imposing a safeguard measure must provide the
exporting Party with mutually agreed-upon compensation in the
form of trade concessions for textile or apparel goods that
have substantially equivalent value to the increased duties
resulting from application of the safeguard measure. If the
Parties cannot agree on compensation, the exporting Party may
raise duties on any goods from the importing Party in an amount
that has substantially equivalent value to the increased duties
resulting from application of the safeguard measure.
Rules of Origin and Related Matters. Under the Agreement, a
textile or apparel good will generally qualify as an
``originating good'' only if all processing after fiber
formation (e.g., yarn-spinning, fabric production, cutting, and
assembly) takes place in the territory of the United States or
another CAFTA-DR Party, or if there is an applicable change in
tariff classification under the specific rules of origin
contained in Annex 4.1 of the Agreement.
Chapter Three sets out special rules for determining
whether a textile or apparel good is an ``originating good,''
including a de minimis exception for non-originating yarns or
fibers, a process for designating inputs not available in
commercial quantities, a rule for treatment of sets, an
exception for use of certain nylon filament yarn, and
consultation provisions.
The de minimis rule applies to goods that ordinarily would
not be considered originating goods because certain of their
fibers or yarns do not undergo an applicable change in tariff
classification. Under the rule, the Parties will consider a
good to be originating if such fibers or yarns constitute ten
percent or less of the total weight of the component of the
good that determines origin. This special rule does not apply
to elastomeric yarns.
Annex 3.25 of the Agreement sets out a list of fabrics,
yarns, and fibers that the Parties have determined are not
available in commercial quantities in a timely manner from
producers in the United States or the other CAFTA-DR countries.
A textile or apparel good that includes the fabrics, yarns, or
fibers included in this list will be treated as if it is
originating for purposes of the specific rules of origin in
Annex 4.1 of the Agreement, regardless of the actual origin of
those inputs. Chapter Three establishes procedures under which
the United States will determine whether additional fabrics,
yarns, or fibers are not available in commercial quantities in
the United States or the other CAFTA-DR countries. The United
States may also remove a fabric, yarn, or fiber from the list
if it determines that the fabric, yarn, or fiber has become
available in commercial quantities.
Appendix 4.1-B of the Agreement provides that for purposes
of determining whether woven apparel (of chapter 62 of the HTS)
is originating, materials used in the production of the article
that are produced in Canada or Mexico will be treated as if the
materials were produced in a CAFTA-DR country, provided that
Canada and Mexico, respectively: (i) provide reciprocal
treatment for U.S.-produced inputs under their free trade
agreements with the other CAFTA-DR countries; and (ii) agree
with the United States to textile verification procedures that
are substantially similar to the procedures under the CAFTA-DR.
This treatment of woven apparel made with Canadian or
Mexican materials is subject to an overall quantitative limit,
which is set initially at 100 million square meter equivalents,
and to sublimits for trousers and skirts, jeans, and tailored
wool apparel. The overall limit may increase to a maximum of
200 square meter equivalents, with corresponding increases in
the sublimits, based on the percentage increase in U.S. imports
of originating woven apparel from the other CAFTA-DR countries.
The overall limit may also increase as a result of negotiations
between the Parties following entry into force of the
Agreement.
Customs Cooperation. Chapter Three commits each Party to
cooperate to enforce or assist in enforcing laws related to
trade in textile and apparel goods, to ensure the accuracy of
claims of origin, and to prevent circumvention of laws of the
Parties or agreements affecting trade in textile and apparel
goods. The Parties also agreed that, under certain
circumstances, the exporting Party must conduct a verification
to determine that a claim of origin is accurate, or to
determine compliance with relevant laws. Such a verification
may include site visits to the premises of the exporter or
producer of the goods in question. If there is insufficient
information to make the relevant determination, or if an
enterprise provides incorrect information, the importing Party
may take appropriate action, which may include denying
application of preferential tariff treatment or denying entry
to the goods in question. Further, any Party may convene
consultations to resolve technical or interpretive issues
arising with respect to customs cooperation or may request
technical assistance from another Party in implementing the
customs cooperation provisions.
Additional Provisions. Chapter Three provides for duty-free
treatment for goods that an importing Party and exporting Party
agree qualify as handmade, hand-loomed, or traditional folklore
goods. Separately, the Chapter establishes that, for the first
two years of the Agreement, the United States will charge
duties that are half the NTR/MFN rate for a limited quantity of
tailored wool apparel goods assembled in Costa Rica regardless
of the origin of the fabric used to make the goods. Moreover,
for the first ten years of the Agreement, the United States
shall provide preferential tariff treatment to cotton and man-
made fiber apparel goods assembled in Nicaragua that do not
qualify as ``originating'' goods. The United States also agreed
that goods assembled in CAFTA-DR countries from U.S. components
with U.S. thread that do not qualify as ``originating'' goods
will be subject to NTR/MFN duties on only the value of the
assembled good minus the value of U.S. components used in the
good.

CHAPTER FOUR: RULES OF ORIGIN AND ORIGIN PROCEDURES

To benefit from various trade preferences provided under
the Agreement, including reduced duties, a good must qualify as
an ``originating good'' under the rules of origin set out in
Chapter Four and Annex 4.1. These rules ensure that the special
tariff and other benefits of the Agreement accrue primarily to
firms or individuals that produce or manufacture goods in the
Parties' territories.
Key Concepts. Chapter Four provides general criteria under
which a good may qualify as an ``originating good'':
When the good is wholly obtained or produced
in the territory of one or more of the Parties (e.g.,
crops grown or minerals extracted in the United
States); or
When the good: (1) is manufactured or
assembled from non-originating materials that undergo a
specified change in tariff classification in one or
more of the Parties; or (2) meets any applicable
``regional value content'' requirement (see below); and
(3) satisfies all other requirements of Chapter Four,
including Annex 4.1; or
When the good is produced in one or more
Parties entirely from ``originating'' materials.
De Minimis. Even if a good does not undergo a specified
change in tariff classification, it will be treated as an
originating good if the value of non-originating materials that
do not undergo the required tariff shift does not exceed 10
percent of the adjusted value of the good, and the good
otherwise meets the criteria of the Chapter. This de minimis
requirement does not apply to certain agricultural and textile
goods.
Regional Value Content. Some origin rules under the
Agreement require that certain goods meet a regional value
content test in order to qualify as ``originating,'' meaning
that a specified percentage of the value of the good must be
attributable to originating materials. In general, the
Agreement provides two methods for calculating that percentage:
(1) the ``build-down method'' (based on the value of non-
originating materials used); and (2) the ``build-up method''
(based on the value of originating materials used). The
regional value content of certain automotive goods, however,
may be calculated on the basis of the net cost of the good.
Finally, accessories, spare parts, and tools delivered with a
good are considered part of the material making up the good so
long as these items are not separately classified or invoiced
and their quantities and values are customary. The de minimis
rule does not apply in calculating regional value content.
Claims for Preferential Treatment. Under the Chapter,
importers who wish to claim preferential tariff treatment for
particular goods must be prepared to submit, on the request of
the importing Party's customs authority, a statement explaining
why the good qualifies as an originating good. A Party may only
deny preferential treatment in writing, and must provide legal
and factual findings. The Chapter establishes a procedure for
filing post-importation claims for preferential treatment up to
one year from importation and for seeking a refund of any
excess duties paid. Chapter Four also provides that a Party
will not penalize an importer if the importer promptly and
voluntarily corrects an incorrect claim and pays any duties
owed within one year of submission of the claim.
Verification. For purposes of determining whether a good is
an originating good, each Party must ensure that its customs
authority may conduct verifications. Where an importing Party
determines through verification that an importer, exporter, or
producer has engaged in a pattern of conduct in providing false
or unsupported statements, declarations, or certifications that
a good is an originating good, the Party may suspend
preferential tariff treatment to identical goods covered by
subsequent statements, declarations, or certifications by that
importer, exporter, or producer until the importing Party
determines that the importer, exporter, or producer is in
compliance with the Chapter.
Additional Rules. Chapter Four further delineates specific
rules with respect to the treatment of (1) packing materials
and containers; (2) indirect materials; (3) fungible goods; and
(4) sets of goods. The Chapter provides that Parties may not
treat a good as originating if the good undergoes production
outside the territories of the Parties or does not remain under
the control of customs authorities in the territory of a non-
Party. Chapter Four also calls for the Parties to publish
guidelines for interpreting, applying, and administering
Chapter Four and the relevant provisions of Chapter Three.

CHAPTER FIVE: CUSTOMS ADMINISTRATION AND TRADE FACILITATION

Chapter Five establishes rules designed to encourage
transparency, predictability, and efficiency in the operation
of each Party's customs procedures and to provide for
cooperation between the Parties on customs matters.
General Principles. Chapter Five commits each Party to
observe certain transparency obligations. Each Party must
promptly publish its customs measures, including on the
Internet, and, where possible, solicit public comments before
amending its customs regulations. Each Party must also provide
written advance rulings, on request, to its importers and to
exporters and producers of another Party, regarding whether a
product qualifies as an ``originating'' good under the
Agreement, as well as on other customs matters. In addition,
each Party must guarantee importers access to both
administrative and judicial review of customs decisions. The
Parties must release goods from customs promptly and
expeditiously clear express shipments. The Chapter provides a
transition period of between one and three years to comply with
several of these obligations in the case of the Central
American Parties and the Dominican Republic.
Cooperation. Chapter Five also is designed to enhance
customs cooperation. It encourages the Parties to give each
other advance notice of customs developments likely to affect
the Agreement. The Chapter calls for the Parties to cooperate
in securing compliance with each other's customs measures
related to the implementation and operation of the provisions
of the Agreement governing importations and exportations. It
includes specific provisions requiring the Parties to share
customs information where a Party has a reasonable suspicion of
unlawful activity relating to its laws and regulations
governing the importation of goods.

CHAPTER SIX: SANITARY AND PHYTOSANITARY MEASURES

Chapter Six defines the Parties' obligations to each other
regarding sanitary and phytosanitary (SPS) matters. It reflects
the Parties' understanding that implementation of existing
obligations under the WTO Agreement on the Application of
Sanitary and Phytosanitary Measures (SPS Agreement) is a shared
objective.
Key Concepts. SPS measures are laws or regulations that
protect human, animal, or plant life or health from certain
risks, including plant- and animal-borne pests and diseases,
additives, contaminants, toxins, or disease-causing organisms
in food and beverages.
Cooperation. Under Chapter Six, the Parties will establish
an SPS Committee consisting of relevant trade and regulatory
officials. The objectives of the Committee are to (i) help each
Party to implement the WTO SPS Agreement; (ii) assist each
Party to protect human, animal, or plant life or health; (iii)
enhance consultation and cooperation between the Parties on SPS
matters; and (iv) facilitate trade between the Parties. The
Committee will also provide a forum for enhancing mutual
understanding of each Party's SPS measures and the regulatory
processes that relate to those measures; consulting on SPS
matters that may affect trade between the Parties; and
consulting on issues, agendas, and positions for meetings of
certain international organizations.
Dispute Settlement. Neither Party may invoke the
Agreement's dispute settlement procedures for a matter arising
under Chapter Six. Instead, any SPS dispute between the Parties
must be resolved under the applicable agreement(s) and rules of
the WTO.

CHAPTER SEVEN: TECHNICAL BARRIERS TO TRADE

Under Chapter Seven, the Parties will build on WTO rules
related to technical barriers to trade to promote transparency,
accountability, and cooperation between the Parties on
regulatory issues.
Key Concepts. The term ``technical barriers to trade''
(TBT) refers to barriers that may arise in preparing, adopting,
or applying voluntary product standards, mandatory product
standards (``technical regulations''), and procedures used to
determine whether a particular good meets such standards, i.e.,
``conformity assessment'' procedures.
International Standards. The principles articulated in the
WTO TBT Committee Decision on Principles for the Development of
International Standards, Guides and Recommendations emphasize
the need for openness and consensus in the development of
international standards. Under Chapter Seven, the Parties will
apply these principles and consult on pertinent matters under
consideration by international or regional bodies.
Cooperation. Chapter Seven sets out multiple means for
cooperation between the Parties to reduce barriers and improve
market access, and provides for a Committee on Technical
Barriers to Trade to oversee implementation of the Chapter and
facilitate cooperation. The Committee's specific functions
include: (i) enhancing cooperation in the development and
improvement of standards, technical regulations, and conformity
assessment procedures; (ii) facilitating sectoral cooperation
between governmental and non-governmental conformity assessment
bodies; (iii) exchanging information on developments in non-
governmental, regional, and multilateral fora engaged in
activities related to standards, technical regulations, and
conformity assessment procedures; and (iv) consulting, at a
Party's request, on any matter arising under the Chapter.
Conformity Assessment. Chapter Seven provides for a
dialogue between the Parties on ways to facilitate the
acceptance of conformity assessment results. Chapter Seven
further provides that Parties shall recognize conformity
assessment bodies in the territories of the other Parties on no
less favorable terms than it accords conformity assessment
bodies in its own territory.
Transparency. Chapter Seven contains various transparency
obligations, including obligations on each Party to: (i) allow
persons of the other Parties to participate in the development
of technical regulations, standards, and conformity assessment
procedures on a non-discriminatory basis; (ii) transmit
regulatory proposals notified under the TBT Agreement directly
to the other Parties; (iii) describe in writing the objectives
of and reasons for regulatory proposals; and (iv) consider
comments on regulatory proposals and respond in writing to
significant comments it receives.

CHAPTER EIGHT: TRADE REMEDIES

Safeguards. Chapter Eight establishes a safeguard procedure
that will be available to aid domestic industries that sustain
or are threatened with serious injury due to increased imports
resulting from tariff reductions or elimination under the
Agreement. The Chapter does not affect the Parties' rights or
obligations under the WTO's safeguard provisions (global
safeguards) or under other WTO trade remedy rules.
Chapter Eight authorizes each Party to impose temporary
duties on an imported originating good if, as a result of the
reduction or elimination of a duty under the Agreement, the
good is being imported in such increased quantities and under
such conditions as to constitute a substantial cause of serious
injury, or threat of serious injury, to a domestic industry
producing a ``like'' or ``directly competitive'' good. Unlike
agricultural and textile or apparel safeguard measures, which
will apply bilaterally, safeguard measures under Chapter Eight
will apply with respect to all imports of an originating good,
other than imports from a Party whose import market share is de
minimis (i.e., a market share of less than three percent of
total imports of the originating good, unless the import market
share of all such Parties exceeds nine percent).
A safeguard measure may be applied on a good only during
the Agreement's ``transition period'' for phasing out duties on
the good. A safeguard measure may take one of two forms--a
temporary increase in duties to NTR/MFN levels or a temporary
suspension of duty reductions called for under the Agreement. A
Party may not impose a safeguard measure under Chapter Eight
more than once on any good. A safeguard measure may be in place
for a total of four years, including any extensions of the
measure. A Party may extend a measure if it determines that the
industry is adjusting and the measure remains necessary to
facilitate adjustment and prevent or remedy serious injury. If
a measure lasts more than one year, the Party must scale it
back at regular intervals. Annex 8.3 sets out the procedural
and substantive investigation requirements that Parties must
follow in conducting safeguard investigations.
If a Party imposes a safeguard measure, Chapter Eight
requires it to provide offsetting trade compensation to the
other Parties whose goods are subject to the measure. If the
Parties cannot agree on the amount or nature of the
compensation, a Party entitled to compensation may unilaterally
suspend ``substantially equivalent'' trade concessions that it
has made to the importing Party.
Global Safeguards. Chapter Eight maintains each Party's
right to take action against imports from all sources under
Article XIX of GATT 1994 and the WTO Agreement on Safeguards. A
Party may exclude imports of an originating good from another
Party from a global safeguard measure if such imports are not a
substantial cause of serious injury or threat thereof. A Party
may not apply a safeguard measure under Chapter Eight at the
same time that it applies a safeguard measure on the same good
under the WTO Agreement on Safeguards.
Antidumping and Countervailing Duties. Chapter Eight
confirms that the Parties retain their rights and obligations
under the WTO agreements relating to the application of
antidumping and countervailing duties. Antidumping and
countervailing duty measures may not be challenged under the
Agreement's dispute settlement procedures. The Chapter provides
that the United States will continue to treat the other CAFTA-
DR countries as CBI beneficiary countries for purposes of
Sections 771(7)(G)(ii)(III) and 771(7)(H) of the Tariff Act of
1930 (19 U.S.C. Sec. 1677(7)(G)(ii)(III) and 1677(7)(H)), which
preclude the U.S. International Trade Commission from
aggregating (or ``cumulating'') imports from CBI beneficiary
countries with imports from non-beneficiary countries in
determining in antidumping and countervailing duty
investigations whether imports of a particular product from
such beneficiary countries are injuring or threaten to injure a
U.S. industry.

CHAPTER NINE: GOVERNMENT PROCUREMENT

Chapter Nine provides comprehensive obligations requiring
each Party to apply fair and transparent procurement procedures
and rules and prohibiting each government and its procuring
entities from discriminating in purchasing practices against
goods, services, and suppliers from the other Parties. The
rules of Chapter Nine are broadly based on the rules of the WTO
Agreement on Government Procurement.
General Principles. Chapter Nine establishes a basic rule
of ``national treatment,'' meaning that each Party's
procurement rules and the entities applying those rules must
treat goods, services, and suppliers of such goods and services
from the other Parties in a manner that is ``no less
favorable'' than the domestic counterparts. The Chapter also
bars discrimination against locally established suppliers on
the basis of foreign affiliation or ownership. Chapter Nine
also provides rules aimed at ensuring a fair and transparent
procurement process.
Coverage and Thresholds. Chapter Nine applies to purchases
and other means of obtaining goods and services valued above
certain dollar thresholds by those government departments,
agencies, and enterprises listed in each Party's schedule.
Specifically, the Chapter applies to procurements by listed
``central'' (i.e., national or U.S. Federal) government
agencies of goods and services valued at $58,550 or more and
construction services valued at $6,725,000 or more. The
equivalent thresholds for purchases by listed ``sub-central''
government entities (i.e., Central American and Dominican
Republic municipalities and U.S. state government agencies) are
$477,000 and $6,725,000, for goods and services and
construction services, respectively. For the three-year period
following entry into force of the Agreement, the Chapter
applies, in the case of the Central American Parties and the
Dominican Republic, to purchases of goods and services by
central government agencies valued at $117,100 or more and by
sub-central government agencies valued at $650,000 or more and
purchases of construction services by either central or sub-
central government agencies valued at $8,000,000 or more. The
Chapter's thresholds for listed ``government enterprises'' are
either $250,000 or $538,000 for goods and services, and
$6,725,000 for construction services, except that for the
three-year period following entry into force of the Agreement,
the threshold for construction services in the Central American
Parties and the Dominican Republic is $8,000,000. All
thresholds are subject to adjustment every two years for
inflation. (Separate annexes to Chapter Nine establish special
coverage rules with respect to procurement between (i) the
Central American Parties, and (ii) each Central American Party
and the Dominican Republic.)
Transparency. Chapter Nine establishes rules designed to
ensure transparency in procurement procedures. Each Party must
publish its laws, regulations, and other measures governing
procurement, along with any changes to those measures.
Procuring entities must publish notices of procurement
opportunities in advance. The Chapter also lists minimum
information that such notices must include.
Tendering Rules. Chapter Nine provides rules for setting
deadlines on ``tendering'' (bidding on government contracts).
It requires procuring entities to give suppliers all the
information they need to prepare tenders, including the
criteria that procuring entities will use to evaluate tenders.
Entities must also, where appropriate, base their technical
specifications (i.e., detailed descriptions of the goods or
services to be procured) on performance-oriented criteria and
international standards. Chapter Nine provides that procuring
entities may not write technical specifications to favor a
particular supplier, good, or service. It also sets out the
circumstances under which procuring entities are allowed to use
limited tendering, i.e., award a contract to a supplier without
opening the procurement to all interested suppliers.
Award Rules. Chapter Nine requires that to be considered
for an award, a tender must be submitted by a qualified
supplier. The tender must meet the criteria set out in the
tender documentation, and procuring entities must base their
award of contracts on those criteria. Procuring entities must
publish information on awards, including the name of the
supplier, a description of the goods or services procured, and
the value of the contract. Chapter Nine also calls for each
Party to ensure that suppliers may bring challenges against
procurement decisions before independent reviewers.
Additional Provisions. Chapter Nine builds on the anti-
corruption provisions of Chapter Eighteen, including by
requiring each Party to maintain procedures to declare
suppliers that have engaged in fraudulent or other illegal
procurement actions ineligible for participation in the Party's
procurement. It establishes procedures under which a Party may
modify its coverage under the Chapter, such as when a Party
privatizes an entity whose purchases are covered under the
Chapter. It also provides that Parties may adopt or maintain
measures necessary to protect: (1) public morals, order, or
safety; (2) human, animal, or plant life or health, including
environmental measures necessary to protect human, animal, or
plant life or health; or (3) intellectual property. Parties may
also adopt measures relating to goods or services of
handicapped persons, philanthropic institutions, or prison
labor.

CHAPTER TEN: INVESTMENT

Chapter Ten establishes rules to protect investors from one
Party against unfair or discriminatory government actions when
they make or attempt to make investments in another Party's
territory. Its provisions reflect traditional standards
incorporated in earlier U.S. investment agreements (including
those in the North American Free Trade Agreement and U.S.
bilateral investment treaties) and in customary international
law, and contain several innovations that were incorporated in
the free trade agreements with Chile and Singapore as well as
others.
Key Concepts. Under Chapter Ten, the term ``investment''
covers all forms of investment, including enterprises,
securities, debt, intellectual property rights, licenses, and
contracts. It includes both investments existing when the
Agreement enters into force and future investments. The term
``investor of a Party'' encompasses U.S., Central American, and
Dominican Republic nationals as well as firms (including
branches) established in one of the Parties.
General Principles. Investors enjoy six basic protections:
(1) non-discriminatory treatment relative to domestic investors
as well as investors of non-Parties; (2) limits on
``performance requirements''; (3) free transfer of funds
related to an investment; (4) protection from expropriation
other than in conformity with customary international law; (5)
a ``minimum standard of treatment'' in conformity with
customary international law; (6) and the ability to hire key
managerial personnel without regard to nationality. (As to this
last protection, a Party may require that a majority of the
board of directors be of a particular nationality, as long as
this does not prevent the investor from controlling its
investment.)
Sectoral Coverage and Non-Conforming Measures. With the
exception of investments in or by regulated financial
institutions (which are treated in Chapter Twelve), Chapter Ten
generally applies to all sectors, including service sectors.
However, each Party has listed in annexes to the Chapter
particular sectors or measures for which it negotiated an
exemption from the Chapter's rules relating to national
treatment, most favored nation treatment, performance
requirements, or senior management and boards of directors. All
current state and local laws and regulations are exempted from
these rules. A Party may liberalize a measure that it has
exempted, but it may not make such measures more restrictive.
Investor-State Disputes. Chapter Ten provides a mechanism
for an investor of a Party to submit to binding international
arbitration a claim for damages against another Party. The
investor may assert that the Party has breached a substantive
obligation under the Chapter or that the Party has breached an
investment agreement with, or an investment authorization
granted to, the investor. ``Investment agreements'' and
``investment authorizations'' are particular types of
arrangements between an investor and a host government based on
contracts and authorizations, respectively. These terms are
defined in Chapter 10.
Chapter Ten affords public access to information on the
Chapter's investor-State proceedings. For example, Chapter Ten
requires that hearings will generally be open to the public and
that key documents will be publicly available, with exceptions
for confidential business information. The Chapter also
authorizes tribunals to accept amicus submissions from the
public. In addition, the Chapter includes provisions similar to
those used in U.S. courts to dispose quickly of frivolous
claims. Finally, an annex to Chapter Ten calls on the Parties,
within three months of the date of entry into force of the
Agreement, to initiate negotiations to develop an appellate
body to review arbitral awards rendered by tribunals under the
Chapter.
Chapter Ten also provides that, ``except in rare
circumstances,'' nondiscriminatory regulatory actions designed
and applied to meet legitimate public welfare objectives, such
as public health and the environment, are not expropriatory.

CHAPTER ELEVEN: CROSS-BORDER TRADE IN SERVICES

Chapter Eleven governs measures affecting cross-border
trade in services between the Parties. Certain provisions also
apply to measures affecting investments to supply services.
Chapter provisions are drawn in part from the services
provisions of the NAFTA and the WTO General Agreement on Trade
in Services (GATS), as well as priorities that have emerged
since those agreements.
Key Concepts. Under the Agreement, cross-border trade in
services covers supply of a service:
from the territory of one Party into the
territory of another Party (e.g., electronic delivery
of services from the United States to Costa Rica);
in the territory of a Party by a person of
that Party to a person of another Party (e.g., a
Guatemalan company provides services to U.S. visitors
in Guatemala); and
by a national of a Party in the territory of
another Party (e.g., a U.S. lawyer provides legal
services in El Salvador).
Chapter Eleven should be read together with Chapter Ten
(Investment), which establishes rules pertaining to the
treatment of service firms that choose to provide their
services through a local presence, rather than cross-border.
Chapter Eleven applies where, for example, a service supplier
is temporarily present in a territory of a Party and does not
operate through a local investment.
General Principles. Among Chapter Eleven's core obligations
are requirements to provide national treatment and MFN
treatment to service suppliers of the other Parties. Thus, each
Party must treat service suppliers of another Party no less
favorably than its own suppliers or those of any other country.
This commitment applies to state and local governments as well
as the federal government. Chapter provisions relate to the
rights of existing service suppliers as well as those who seek
to supply services, subject to any reservations by a Party. The
Chapter also includes a provision prohibiting the Parties from
requiring firms to establish a local presence as a condition
for supplying a service on a cross-border basis. In addition,
certain types of market access restrictions to the supply of
services (e.g., that limit the number of firms that may offer a
particular service or that restrict or require specific types
of legal structures or joint ventures with local companies in
order to supply a service) are also barred. The Chapter's
market access rules apply both to services supplied on a cross-
border basis and through a local investment.
Sectoral Coverage and Non-Conforming Measures. Chapter
Eleven applies across virtually all services sectors. The
chapter excludes financial services (which are addressed in
Chapter Twelve), except that certain provisions of Chapter
Eleven apply to investments in unregulated financial services
that are covered by Chapter Ten (Investment). In addition,
Chapter Eleven does not cover air transportation, although it
does apply to specialty air services and aircraft repair and
maintenance.
Each Party has listed in annexes measures in particular
sectors for which it negotiated exemptions from the chapter's
core obligations. All existing state and local laws and
regulations are exempted from these obligations. Once a Party,
including a state or local government, liberalizes a measure
that it has exempted, however, it must, in most cases,
thereafter maintain the measure at least at that level of
openness.
Specific Commitments. Chapter Eleven includes a
comprehensive definition of express delivery services that
requires each Party to provide national treatment, MFN
treatment, and additional benefits to express delivery services
of the other Parties. The Chapter provides that the Central
American Parties and the Dominican Republic may not adopt or
maintain any restriction on express delivery services that was
not in place on the date the Agreement was signed. The Chapter
also addresses the issue of postal monopolies directing
revenues derived from monopoly postal services to confer an
advantage on express delivery services. Costa Rica, the
Dominican Republic, El Salvador, Guatemala, and Honduras also
made commitments regarding their ``dealer protection'' regimes.
Under existing ``dealer protection'' regimes, U.S. firms may be
tied to exclusive or inefficient distributor arrangements. The
commitments under the Agreement give U.S. firms and their
Central American and Dominican Republic partners more freedom
to contract the terms of their commercial relations and
encourage the use of arbitration to resolve disputes between
parties to dealer contracts.
Transparency and Domestic Regulation. Provisions on
transparency and domestic regulation complement the core rules
of Chapter Eleven. The transparency rules apply to the
development and application of regulations governing services.
The Chapter's rules on domestic regulation govern the operation
of approval and licensing systems for service suppliers. Like
the Chapter's market access rules, its provisions on
transparency and domestic regulation cover services supplied
both on a cross-border basis and through a local investment. An
annex to Chapter Eleven sets out specific commitments that
individual Parties have agreed to undertake.
Exclusions. Chapter Eleven excludes any service supplied
``in the exercise of governmental authority''--that is, a
service that is provided on a non-commercial and non-
competitive basis. Chapter Eleven also does not generally apply
to government subsidies, although the Parties have undertaken a
commitment relating to cross-subsidization of express delivery
services.

CHAPTER TWELVE: FINANCIAL SERVICES

Chapter Twelve provides rules governing each Party's
treatment of: (1) financial institutions of another Party; (2)
investors of another Party, and their investments, in financial
institutions; and (3) cross-border trade in financial services.
Key Concepts. The Chapter defines a ``financial
institution'' as any financial intermediary or other
institution authorized to do business and regulated or
supervised as a financial institution under the law of the
Party where it is located. A ``financial service'' is any
service of a financial nature, including, for example,
insurance, banking, securities, asset management, financial
information and data processing services, and financial
advisory services.
General Principles. Chapter Twelve's core obligations
parallel those in Chapters Ten (Investment) and Eleven (Cross-
Border Trade in Services). Specifically, Chapter Twelve imposes
rules requiring national treatment and MFN treatment, prohibits
certain quantitative restrictions on market access of financial
institutions, and bars restrictions on the nationality of
senior management. As appropriate, these rules apply to
measures affecting financial institutions, investors and
investments in financial institutions of another Party, and
services companies that are currently supplying and that seek
to supply financial services on a cross-border basis. As
between the Central American Parties and the Dominican
Republic, obligations pertaining to banking services, or as
between Guatemala and the Dominican Republic, financial
services generally, do not apply until two years after entry
into force of the Agreement.
Non-Conforming Measures. Similar to Chapters Ten and
Eleven, each Party has listed in an annex to Chapter Twelve
particular financial services measures for which it negotiated
exemptions from the Chapter's core obligations. Existing non-
conforming U.S. state and local laws and regulations are
exempted from these obligations. Once a Party, including a
state or local government, liberalizes one of these non-
conforming measures, however, it must, in most cases, maintain
the measure at least at that new level of openness.
Other Provisions. Chapter Twelve also includes provisions
on regulatory transparency, ``new'' financial services, self-
regulatory organizations, and the expedited availability of
insurance products.
Relationship to Other Chapters. Measures that a Party
applies to financial services suppliers of another Party, other
than regulated financial institutions, that make or operate
investments in the Party's territory are covered principally by
Chapter Ten (Investment) and certain provisions of Chapter
Eleven (Cross-Border Trade in Services). In particular, the
core obligations of Chapter Ten apply to such measures, as do
the market access, transparency, and domestic regulation
provisions of Chapter Eleven. Chapter Twelve incorporates by
reference certain provisions of Chapter Ten, such as those
relating to transfers and expropriation.

CHAPTER THIRTEEN: TELECOMMUNICATIONS

Chapter Thirteen creates disciplines beyond those imposed
under Chapters Ten (Investment) and Eleven (Cross-Border Trade
in Services) on regulatory measures affecting
telecommunications trade and investment between the Parties. It
is designed to ensure that service suppliers of each Party have
non-discriminatory access to public telecommunications networks
in the territories of the other Parties. In addition, the
Chapter requires each Party to regulate its dominant
telecommunications suppliers in ways that will ensure a level
playing field for new entrants. Chapter Thirteen also seeks to
ensure that telecommunications regulations are set by
independent regulators applying transparent procedures, and is
designed to encourage adherence to principles of deregulation
and technological neutrality.
Key Concepts. Under Chapter Thirteen, a ``public
telecommunications service'' is any telecommunications service
that a Party requires to be offered to the public generally.
The term includes voice and data transmission services. It does
not include the offering of ``information services'' (e.g.,
services that enable users to create, store, or process
information over a network). A ``major supplier'' is a company
that, by virtue of its market position or control over certain
facilities, can materially affect the terms of participation in
the market.
Competition. Chapter Thirteen establishes rules promoting
competition in telecommunications services. It also provides
flexibility to account for changes that may occur through new
legislation or regulatory decisions. The Chapter includes
commitments by each Party to:
ensure that all service suppliers of another
Party that seek to access or use a public
telecommunications network in the Party's territory can
do so on reasonable and non- discriminatory terms
(e.g., El Salvador must ensure that its public phone
companies do not provide preferential access to
Salvadoran banks or Internet service providers, to the
detriment of U.S. competitors);
give another Party's telecommunications
suppliers, in particular, the right to interconnect
their networks with public networks in the Party's
territory;
ensure that telecommunications suppliers of
another Party that seek to build physical networks in
the Party's territory have access to key physical
facilities where they can install equipment, thus
facilitating cost-effective investment;
ensure that telecommunications suppliers of
another Party enjoy the right to lease lines to
supplement their own networks or, alternatively,
purchase telecommunications services from domestic
suppliers and resell them in order to build a customer
base; and
impose disciplines on the behavior of
``major suppliers.''
Regulation. The Chapter addresses key regulatory concerns
that may create barriers to trade and investment in
telecommunications services. In particular, the Parties:
will adopt procedures that will help ensure
that they maintain open and transparent
telecommunications regulatory regimes, including
requirements to publish interconnection agreements and
service tariffs;
will require their telecommunications
regulators to explain their rule-making decisions and
provide foreign suppliers the right to challenge those
decisions;
may elect to deregulate telecommunications
services when competition emerges and certain standards
are met; and
will avoid impeding telecommunications
suppliers from choosing technologies they consider
appropriate for supplying their services.
Costa Rica. Costa Rica's obligations with respect to
telecommunications are contained in a separate annex to Chapter
13. The annex recognizes the unique nature of Costa Rica's
social policy on telecommunications and commits Costa Rica to
undertake certain obligations as of January 1, 2006. These
obligations include ensuring that enterprises have access to,
and use of, public telecommunications services, and that
suppliers of public communications services are provided
interconnection with major suppliers.

CHAPTER FOURTEEN: ELECTRONIC COMMERCE

Chapter Fourteen establishes rules designed to prohibit
discriminatory regulation of electronic trade in digitally
encoded products such as computer programs, video, images, and
sound recordings. The Chapter represents a major advance over
previous international understandings on this subject.
Customs Duties. Chapter Fourteen provides that a Party may
not impose customs duties on digital products of another Party
transmitted electronically and will determine the customs value
of an imported carrier medium bearing a digital product based
on the value of the carrier medium alone, without regard to the
value of the digital product stored on the carrier medium.
Non-Discrimination. Chapter Fourteen requires the Parties
to apply the principles of national treatment and MFN treatment
to trade in electronically-transmitted digital products. Thus,
a Party may not discriminate against electronically-transmitted
digital products on the grounds that they have a nexus to
another country, either because they have undergone certain
specific activities (e.g., creation, production, first sale)
there or are associated with certain categories of persons of
another Party or a non-Party (e.g., authors, performers,
producers). Nor may a Party provide less favorable treatment to
digital products that have a nexus to another Party than it
gives to like products that have a nexus to a third country.
The non-discrimination rules do not apply to non-conforming
measures adopted under Chapters Ten (Investment), Eleven
(Cross-Border Trade in Services), or Twelve (Financial
Services).
Cooperation. Chapter Fourteen provides for future
cooperation between the Parties, including exchanging
information in areas such as data privacy and cyber-security.

CHAPTER FIFTEEN: INTELLECTUAL PROPERTY RIGHTS

Chapter Fifteen complements and enhances existing
international standards for the protection of intellectual
property and the enforcement of intellectual property rights,
consistent with U.S. law.
General Provisions. Under Chapter Fifteen the Parties are
obligated to ratify or accede to several agreements on
intellectual property rights, including, by the date of entry
into force of the Agreement, the WIPO Copyright Treaty and WIPO
Performances and Phonograms Treaty, and, within specified time
frames, the International Convention for the Protection of New
Varieties of Plants, the Trademark Law Treaty, the Brussels
Convention Relating to the Distribution of Programme-Carrying
Satellite Signals, and the Patent Cooperation Treaty. The
United States is already a Party to these Agreements. National
treatment requirements apply broadly.
Trademarks and Geographical Indications. Chapter Fifteen
establishes that marks include marks in respect of goods and
services, collective marks, and certification marks, and that
geographical indications are eligible for protection as marks.
It sets out rules with respect to the registration of marks and
geographical indications. Each Party must provide protection
for marks and geographical indications, including protecting
preexisting trademarks against infringement by later
geographical indications. Furthermore, the Parties must provide
efficient and transparent procedures governing the application
for protection of marks and geographical indications. The
Chapter also provides for rules on domain name management that
require a dispute resolution procedure to prevent trademark
cyber-piracy.
Copyright and Related Rights. Chapter Fifteen provides
broad protection of copyright and related rights, affirming and
building on rights set out in several international agreements.
For instance, each Party must provide copyright protection for
the life of the author plus 70 years (for works measured by a
person's life), or 70 years (for corporate works). The Chapter
clarifies that the right to reproduce literary and artistic
works, recordings, and performances encompasses temporary
copies, an important principle in the digital realm. It also
calls for each Party to provide a right of communication to the
public, which will further ensure that right holders have the
exclusive right to make their works available online. The
Chapter specifically protects the rights of performers and
producers of phonograms.
To curb copyright piracy, government agencies of the
Parties must use only legitimate computer software, setting an
example for the private sector. The Chapter also includes
provisions on anti-circumvention, under which the Parties
commit to prohibit tampering with technology used to protect
copyrighted works. In addition, Chapter Fifteen sets out
obligations with respect to the liability of Internet service
providers in connection with copyright infringements that take
place over their networks. Finally, recognizing the importance
of satellite broadcasts, Chapter Fifteen ensures that each
Party will protect encrypted program-carrying satellite
signals. It obligates the Parties to extend protection to the
signals themselves, as well as to the content contained in the
signals.
Patents. Chapter Fifteen also includes a variety of
provisions for the protection of patents. The Parties agree to
make patents available for any invention, subject to limited
exclusions, and confirm the availability of patents for new
uses or methods of using a known product. The Chapter provides
for protection to stop imports of patented products when the
patent owner has placed restrictions on import by contract or
other means. To guard against arbitrary revocation of patents,
each Party must limit the grounds for revoking a patent to the
grounds that would have justified a refusal to grant the
patent. Under Chapter Fifteen, Parties must provide adjustments
to the patent term to compensate for unreasonable delays that
occur while granting the patent, as well as unreasonable
curtailment of the effective patent term as a result of the
marketing approval process for pharmaceutical products.
Certain Regulated Products. Chapter Fifteen includes
specific measures relating to certain regulated products,
including pharmaceuticals and agricultural chemicals. Among
other things, it protects test data that a company submits in
seeking marketing approval for such products by precluding
other firms from relying on the data. It provides specific
periods for such protection--five years for pharmaceuticals and
ten years for agricultural chemicals. This means, for example,
that during the period of protection, test data that a company
submits for approval of a new agricultural chemical product
could not be used without that company's consent in granting
approval to market a combination product. The Chapter also
requires Parties to implement measures to prevent the marketing
of pharmaceutical products that infringe patents.
Enforcement Provisions. Chapter Fifteen also creates
obligations with respect to the enforcement of intellectual
property rights. Among these, the Parties, in determining
damages, must take into account the value of the legitimate
goods as well as the infringer's profits. The Chapter also
provides for damages based on a fixed range (i.e., ``statutory
damages''), at the option of the right holder or alternatively
additional damages in cases involving copyright infringement.
Chapter Fifteen provides that the Parties' law enforcement
agencies must have authority to seize suspected pirated and
counterfeit goods, the equipment used to make or transmit them,
and documentary evidence. Each Party must give its courts
authority to order the forfeiture and/or destruction of such
items. Chapter Fifteen also requires each Party to empower its
law enforcement agencies to take enforcement action at the
border against pirated or counterfeit goods without waiting for
a formal complaint. Chapter Fifteen provides that each Party
must apply criminal penalties against counterfeiting and
piracy, including end-user piracy.
Transition Periods. Most obligations in the Chapter take
effect upon the Agreement's entry into force. However, the
Central American Parties and the Dominican Republic may delay
giving effect to certain specified obligations for periods
ranging from six months to four years from the date of entry
into force of the Agreement.

CHAPTER SIXTEEN: LABOR

Chapter Sixteen sets out the Parties' commitments and
undertakings regarding trade-related labor rights. Chapter
Sixteen draws on the North American Agreement on Labor
Cooperation (the supplemental NAFTA labor agreement) and the
labor provisions of other recent U.S. FTAs, including those
with Jordan, Chile, Singapore, Australia, and Morocco. The
Chapter goes further than these prior FTAs, however, in that it
contains the most comprehensive set of commitments and
undertakings regarding trade-related labor rights. As described
below, the Chapter (i) includes detailed provisions to ensure
that labor law enforcement is fair, equitable, and transparent;
(ii) requires Parties to provide for public input on labor
matters; and (iii) establishes a detailed framework that will
assist Parties to develop the institutional capacity to fulfill
the goals of the Chapter.
General Principles. Under Chapter Sixteen, the Parties
reaffirm their obligations as members of the International
Labor Organization (ILO) and under the 1998 ILO Declaration on
Fundamental Principles and Rights at Work. Each Party must
strive to ensure that its law recognizes and protects the
fundamental labor principles spelled out in the ILO Declaration
as listed in the Chapter. Each Party also must strive to ensure
that it does not derogate from or waive the protections of its
labor laws to encourage trade with or investment from another
Party. The Parties also commit to afford procedural guarantees
that ensure workers and employers have access to fair,
equitable, and transparent procedures in the enforcement of
labor laws. While committing each Party to effective
enforcement of its labor laws, the Chapter also recognizes each
Party's right to establish its own labor laws, exercise
discretion in investigatory, regulatory, prosecutorial, and
compliance matters, and allocate enforcement resources.
Effective Enforcement. In Chapter Sixteen each Party
commits not to fail to effectively enforce its labor laws on a
sustained or recurring basis in a manner affecting trade
between the Parties. The Chapter defines labor laws to include
those related to: (1) the right of association; (2) the right
to organize and bargain collectively; (3) a prohibition of
forced or compulsory labor; (4) a minimum age for the
employment of children and elimination of the worst forms of
child labor; and (5) acceptable conditions of work with respect
to wages, hours, and occupational safety and health. For the
United States, ``labor laws'' includes federal statutes and
regulations addressing these areas, but it does not cover state
or local labor laws.
Procedural Guarantees. In Chapter Sixteen, the Parties also
commit to afford procedural guarantees that ensure workers and
employers have access to fair, equitable, and transparent
procedures in the enforcement of labor laws. To this end, each
Party must ensure that workers and employers have access to
tribunals for the enforcement of its labor laws and that
decisions of such tribunals are in writing, made publicly
available, and based on information or evidence in respect of
which the parties were offered the opportunity to be heard. In
addition, hearings in such proceedings must be open to the
public, except where the administration of justice otherwise
requires. Chapter Sixteen also commits each Party to make
remedies available to ensure the enforcement of its labor laws.
Such remedies might include orders, fines, penalties, or
temporary workplace closures.
Dispute Settlement. Chapter Sixteen provides for
cooperative consultations if a Party believes that another
Party is not complying with the obligations in this Chapter. If
the matter concerns a Party's compliance with its obligation
not to fail to effectively enforce its labor law, the
complaining Party may, after an initial 60-day consultation
period under Chapter Sixteen, invoke the provisions of Chapter
Twenty (Dispute Settlement) by requesting additional
consultations or a meeting of the Agreement's cabinet-level
Free Trade Commission under that Chapter. If the Commission is
unable to resolve the dispute, the matter may be referred to a
dispute settlement panel. The Parties will maintain a roster of
experts to serve on any dispute settlement panel convened to
hear disputes regarding a Party's obligation to effectively
enforce its labor laws.
Cooperation and Capacity Building. Chapter Sixteen
establishes a cabinet-level Labor Affairs Council to oversee
the Chapter's implementation and to provide a forum for
consultations and cooperation on labor matters. The Chapter
requires each Party to designate a contact point for
communications with the other Parties and the public regarding
the Chapter. Each Party's contact point must provide
transparent procedures for the submission, receipt, and
consideration of any communications from the public relating to
the provisions of the Chapter.
The Chapter also creates a labor cooperation and capacity
building mechanism through which the Parties will work together
to strengthen each Party's institutional capacity to fulfill
the goals of the Labor Chapter. In particular, the mechanism
will assist the Parties to establish priorities for, and carry
out, bilateral and regional cooperation and capacity building
activities relating to such topics as: the effective
application of fundamental labor rights; legislation and
practice relating to compliance with ILO Convention 182 on the
worst forms of child labor; strengthening labor inspection
systems and the institutional capacity of labor administrations
and tribunals; mechanisms for supervising compliance with laws
and regulations pertaining to working conditions; and the
elimination of gender discrimination in employment.

CHAPTER SEVENTEEN: ENVIRONMENT

Chapter Seventeen sets out the Parties' commitments and
undertakings regarding environmental protection. Chapter
Seventeen draws on the North American Agreement on
Environmental Cooperation and the environmental provisions of
other recent U.S. FTAs, including those with Jordan, Chile,
Singapore, Australia, and Morocco. The Chapter goes further
than these prior FTAs, however. In particular, the CAFTA-DR is
the first U.S. FTA that includes a process for public
submissions on environmental enforcement matters in the body of
the FTA.
General Principles. Under Chapter Seventeen, the Parties
must ensure that their laws provide for high levels of
environmental protection. Each Party also must strive not to
weaken or reduce its environmental laws to encourage trade with
or investment from another Party. Chapter Seventeen further
includes commitments to enhance cooperation between the Parties
in environmental matters and encourages the Parties to develop
voluntary, market-based mechanisms as one means for achieving
and sustaining high levels of environmental protection.
Effective Enforcement. In Chapter Seventeen each Party
commits not to fail to effectively enforce its environmental
laws on a sustained or recurring basis in a manner affecting
trade between the Parties. At the same time, the Chapter
recognizes the right of each Party to: (1) establish its own
environmental laws; (2) exercise discretion in regulatory,
prosecutorial, and compliance matters; and (3) allocate
enforcement resources in a bona fide manner. For the United
States, ``environmental laws'' includes federal environmental
statutes and regulations enforceable by the federal government.
Procedural Matters. Chapter Seventeen commits each Party to
make judicial, quasi-judicial, or administrative proceedings
available to sanction or remedy violations of its environmental
laws. Each Party must ensure that such proceedings are fair,
equitable, and transparent, and, to this end, comply with due
process of law and are open to the public, except where the
administration of justice otherwise requires. The Chapter
requires each Party to ensure that interested persons may
request the Party's competent authorities to investigate
alleged violations of its environmental laws and that each
Party's competent authorities give such requests due
consideration. Chapter Seventeen also commits each Party to
make appropriate and effective remedies available for
violations of its environmental laws. Such remedies may
include, for example, fines, injunctions, or requirements to
take remedial action or pay for damage to the environment.
Public Submissions. Chapter Seventeen commits each Party to
provide for the receipt and consideration of public submissions
on matters related to the Chapter. In addition, the Chapter
provides that any person of a Party may file a submission with
a secretariat asserting that a Party has failed to effectively
enforce its environmental laws. The secretariat will review the
submission according to specified criteria and in appropriate
cases recommend to the Environmental Affairs Council that a
factual record concerning the matter be developed. The
secretariat will prepare a factual record if one member of the
Environmental Affairs Council instructs it to do so. The
Council will consider the record and, where appropriate,
provide recommendations to an environmental cooperation
commission that will be created under a related environmental
cooperation agreement. U.S. persons who consider that the
United States is failing to effectively enforce its
environmental laws may invoke the comparable public submissions
process under the North American Agreement on Environmental
Cooperation. Pursuant to a separate understanding between the
Parties, a new environmental unit within the Secretariat for
Central American Economic Integration (SIECA) will serve as the
secretariat for the receipt of public submissions.
Dispute Settlement. Chapter Seventeen provides for
cooperative consultations if a Party believes that another
Party is not complying with its obligations under the Chapter.
If the matter concerns a Party's compliance with its obligation
not to fail to effectively enforce its environmental law, the
complaining Party may, after an initial 60-day consultation
period under Chapter Seventeen, invoke the provisions of
Chapter Twenty (Dispute Settlement) by requesting additional
consultations or a meeting of the Agreement's cabinet-level
Free Trade Commission under that Chapter. If the Commission is
unable to resolve the dispute, the matter may be referred to a
dispute settlement panel. The Parties will maintain a roster of
experts to serve on any dispute settlement panel convened to
hear disputes regarding a Party's obligation to effectively
enforce its environmental laws.
Institutional arrangements and cooperation. Chapter
Seventeen establishes a cabinet-level Environment Affairs
Council to oversee the implementation and operation of the
Chapter. Opportunities will be provided at Council meetings for
the public to express views on the implementation of Chapter
Seventeen and cooperative work between the Parties. The Parties
also agree under Chapter Seventeen to continue to seek ways to
enhance the mutual supportiveness of multilateral agreements
and trade agreements to which they are all party, and to
consult as appropriate on negotiations in the WTO regarding
multilateral environmental agreements. In addition, to
facilitate cooperation efforts, the Parties will enter into a
separate environmental cooperation agreement.

CHAPTER EIGHTEEN: TRANSPARENCY

Chapter Eighteen sets out requirements designed to foster
openness, transparency, and fairness in the adoption and
application of administrative measures covered by the
Agreement. For example, it requires that, to the extent
possible, each Party must promptly publish all laws,
regulations, procedures, and administrative rulings of general
application concerning subjects covered by the Agreement, and
give interested persons a reasonable opportunity to comment.
Wherever possible, each Party must provide reasonable notice to
the other Parties' nationals and enterprises that are directly
affected by an agency process, including an adjudication,
rulemaking, licensing, determination, and approval process. A
Party is to afford such persons a reasonable opportunity to
present facts and arguments prior to any final administrative
action, when time, the nature of the process, and the public
interest permit.
Chapter Eighteen also provides for independent review and
appeal of final administrative actions. Appeal rights must
include a reasonable opportunity to present arguments and to
obtain a decision based on evidence in the administrative
record.
Chapter Eighteen also affirms the Parties' resolve to
eliminate bribery and corruption in international trade and
investment. To this end, Parties are obligated to make it a
criminal offense to offer or accept a bribe in exchange for
favorable government action in matters affecting international
trade or investment. Parties must also endeavor to protect
persons who, in good faith, report acts of bribery or
corruption and to work together to encourage and support
initiatives in relevant international fora to prevent bribery
and corruption.

CHAPTER NINETEEN: ADMINISTRATION OF THE AGREEMENT AND TRADE CAPACITY
BUILDING

Chapter Nineteen creates a Free Trade Commission to
supervise the implementation and overall operation of the
Agreement. The Commission will be comprised of the Parties'
trade ministers. It will meet annually and make decisions by
consensus. The Commission will assist in the resolution of any
disputes that may arise under the Agreement. The Commission may
issue interpretations of the Agreement and agree to accelerate
duty elimination on particular products and adjust the
Agreement's product-specific rules of origin.
Chapter Nineteen requires each Party to designate an office
to provide administrative assistance to dispute settlement
panels and perform such other functions as the Commission may
direct.
Chapter Nineteen also establishes a Committee on Trade
Capacity Building, comprised of representatives of each Party.
The overall objective of the Committee is to assist the Central
American Parties and the Dominican Republic to implement the
Agreement and adjust to liberalized trade. Particular functions
of the Committee include: seeking the prioritization of trade
capacity building projects at the national and regional level
within Central America and the Dominican Republic; inviting
international donor institutions, private sector entities, and
non-governmental organizations to assist in the development and
implementation of trade capacity building projects in
accordance with each country's national trade capacity building
strategy; and monitoring and assessing progress in implementing
trade capacity building projects.

CHAPTER TWENTY: DISPUTE SETTLEMENT

Chapter Twenty sets out detailed procedures for the
resolution of disputes between the Parties over compliance with
the Agreement. Those procedures emphasize amicable settlements,
relying wherever possible on bilateral cooperation and
consultations. When disputes arise under provisions common to
the Agreement and other agreements (e.g., the WTO agreements),
the complaining government may choose the forum for resolving
the matter. The selected forum is the exclusive venue for
resolving that dispute.
Consultations. A Party may request consultations with
another Party on any actual or proposed measure that it
believes might affect the operation of the Agreement. Any other
Party having a substantial trade interest in the matter may
participate in the consultations. If the Parties cannot resolve
the matter through consultations within a specified period
(normally 60 days), any consulting Party may refer the matter
to the Free Trade Commission, which will attempt to resolve the
dispute.
Panel Procedures. If the Commission cannot resolve the
dispute within a specified period (normally 30 days), any
consulting Party may refer the matter, if it involves an actual
measure, to a panel comprising independent experts that the
Parties select. Any party that participated in the
consultations may participate in the panel proceedings as a
complaining Party. Any other Party may participate in the panel
proceedings as a third party.
The Parties will set rules to protect confidential
information, provide for open hearings and public release of
submissions, and allow an opportunity for the panel to accept
submissions from non-governmental entities in the Parties'
territories.
Unless the disputing Parties agree otherwise, a panel is to
present its initial report within 120 days after the last
panelist is selected. This period can be extended to 180 days
in certain circumstances. Once the panel presents its initial
report containing findings of fact and a determination on
whether a Party has met its obligations, the Parties will have
the opportunity to provide written comments to the panel. When
the panel receives these comments, it may reconsider its report
and make any further examination that it considers appropriate.
Within 30 days after it presents its initial report, the panel
will submit its final report. The Parties will then seek to
agree on how to resolve the dispute, normally in a way that
conforms to the panel's determinations and recommendations.
Subject to protection of confidential information, the panel's
final report will be made available to the public 15 days after
the Parties receive it.
Suspension of Benefits. In disputes involving the
Agreement's ``commercial'' obligations (i.e., obligations other
than enforcement of labor and environmental laws), if the
disputing Parties cannot resolve the dispute after they receive
the panel's final report, the disputing Parties will seek to
agree on acceptable trade compensation. If they cannot agree on
compensation, or if the complaining Party believes the
defending Party has failed to implement an agreed resolution,
the complaining Party may provide notice that it intends to
suspend trade benefits equivalent in effect to those it
considers were impaired, or may be impaired, as a result of the
disputed measure.
If the defending Party considers that the proposed level of
benefits to be suspended is ``manifestly excessive,'' or
believes that it has modified the disputed measure to make it
conform to the Agreement, it may request the panel to reconvene
and decide the matter. The panel must issue its determination
no later than 90 days after the request is made (or 120 days if
the panel is reviewing both the level of the proposed
suspension and a modification of the measure).
The complaining Party may suspend trade benefits up to the
level that the panel sets or, if the panel has not been asked
to determine the level, up to the amount that the complaining
Party has proposed. The complaining Party cannot suspend
benefits, however, if the defending Party provides notice that
it will pay an annual monetary assessment to the other Party.
The amount of the assessment will be established by agreement
of the disputing Parties or, failing that, will be set at 50
percent of the level of trade concessions the complaining Party
was authorized to suspend.
Labor and Environment Disputes. Equivalent compliance
procedures apply to disputes over a Party's conformity with the
labor and environmental law enforcement provisions of the
Agreement. If a panel determines that a Party has not met its
enforcement obligations and the disputing Parties cannot agree
on how to resolve the dispute, or the complaining Party
believes that the defending Party has failed to implement an
agreed resolution, the complaining Party may ask the panel to
determine the amount of an annual monetary assessment to be
imposed on the defending Party. The Panel will establish the
amount of the assessment, subject to a $15 million annual cap,
taking into account relevant trade- and non-trade-related
factors. The assessment will be paid into a fund established by
the Commission for appropriate labor and environmental
initiatives. If the defending Party fails to pay an assessment,
the complaining Party may take other appropriate steps, which
may include suspending tariff benefits, as necessary to collect
the assessment, while bearing in mind the Agreement's objective
of eliminating barriers to trade and while seeking to avoid
unduly affecting parties or interests not party to the dispute.
Compliance Review Mechanism. If, at any time, the defending
Party believes it has made changes in its laws or regulations
sufficient to comply with its obligations under the Agreement,
it may refer the matter to the panel. If the panel agrees, the
dispute ends and the complaining Party must withdraw any
offsetting measures it has put in place. Concurrently, the
defending government will be relieved of any obligation to pay
a monetary assessment.
The Parties will review the operation of the compliance
procedures for both commercial and labor and environment
disputes either five years after the entry into force of the
Agreement or within six months after benefits have been
suspended or assessments paid in five proceedings initiated
under this Agreement, whichever occurs first.
Settlement of Private Disputes. The Parties will encourage
the use of arbitration and other alternative dispute resolution
mechanisms to settle international commercial disputes between
private parties. Each Party must provide appropriate procedures
for the recognition and enforcement of arbitral awards, for
example by complying with the 1958 United Nations Convention on
the Recognition and Enforcement of Foreign Arbitral Awards or
the 1975 Inter-American Convention on International Commercial
Arbitration.

CHAPTER TWENTY-ONE: EXCEPTIONS

Chapter Twenty-One sets out general provisions that apply
to the entire Agreement with the following exception. Article
XX of the GATT 1994 and its interpretive notes are incorporated
into and made part of the Agreement, mutatis mutandis, and
apply to those Chapters related to treatment of goods.
Likewise, for the purposes of Chapters Eleven (Cross-Border
Trade in Services), Thirteen (Telecommunications), and Fourteen
(Electronic Commerce), GATS Article XIV (including its
footnotes) is incorporated into and made part of the Agreement.
For both goods and services, the Parties understand that these
exceptions include certain environmental measures.
Essential Security. Chapter Twenty-One allows each Party to
take actions it considers necessary to protect its essential
security interests.
Taxation. An exception for taxation limits the field of tax
measures subject to the Agreement. For example, the exception
generally provides that the Agreement does not affect a Party's
rights or obligations under any tax convention. The exception
sets out certain circumstances under which tax measures are
subject to the Agreement's: (1) national treatment obligation
for goods; (2) national treatment and MFN obligations for
services; (3) prohibitions on performance requirements; and (4)
expropriation rules.
Balance of Payments. Chapter Twenty-One establishes
criteria that a Party must follow if it applies a balance-of-
payments measure on trade in goods.
Disclosure of Information. The Chapter also provides that a
Party may withhold information from another Party where such
disclosure would impede domestic law enforcement, otherwise be
contrary to the public interest, or prejudice the legitimate
commercial interests of particular enterprises.

CHAPTER TWENTY-TWO: FINAL PROVISIONS

Chapter Twenty-Two provides that (i) the annexes,
appendices, and footnotes are part of the Agreement, (ii) the
Parties may amend the Agreement subject to applicable domestic
procedures, and (iii) the English and Spanish texts are both
authentic. It also provides for consultations if any provision
of the WTO Agreement that the Parties have incorporated into
the Agreement is amended.
Chapter Twenty-Two provides for the entry into force of the
Agreement, and establishes procedures under which a Party may
withdraw from the Agreement. The Chapter provides that any
other country or group of countries may accede to this
agreement on terms and conditions that are agreed with the
Parties and approved according to each Party's domestic
procedures. Finally, the Chapter provides that the original
texts of the Agreement shall be deposited with the Organization
of American States.

E. General Description of the Bill to Implement the Dominican Republic-
Central America-United States Free Trade Agreement

Sec. 1. Short title; table of contents

This section provides that the short title of the act
implementing the Dominican Republic-Central America-United
States Free Trade Agreement (the ``Agreement'') is the
``Dominican Republic-Central America-United States Free Trade
Agreement Implementation Act'' (``Implementation Act'').
Section 1 also provides the table of contents for the
Implementation Act.

Sec. 2. Purposes

This section provides that the purposes of the
Implementation Act are: to approve and implement the Agreement;
to strengthen and develop economic relations between the United
States, Costa Rica, the Dominican Republic, El Salvador,
Guatemala, Honduras, and Nicaragua; to establish free trade
between the United States, Costa Rica, the Dominican Republic,
El Salvador, Guatemala, Honduras, and Nicaragua, through the
reduction and elimination of barriers to trade in goods and
services and to investment; and to lay the foundation for
further cooperation to expand and enhance the benefits of the
Agreement.

Sec. 3. Definitions

This section defines the terms ``Agreement,'' ``CAFTA-DR
country,'' ``Commission,'' ``HTS,'' and ``textile or apparel
good.''

TITLE I--APPROVAL OF, AND GENERAL PROVISIONS RELATING TO, THE AGREEMENT

Sec. 101. Approval and entry into force of the agreement

This section provides congressional approval for the
Agreement and its accompanying Statement of Administrative
Action. Section 101 also provides that, once the President
determines that other countries that have signed the Agreement
have taken measures necessary to comply with their obligations
under the Agreement, the President is authorized to provide for
the Agreement to enter into force with respect to those
countries that provide for the Agreement to enter into force
for them.

Sec. 102. Relationship of the agreement to United States and state law

This section establishes the relationship between the
Agreement and U.S. law. It clarifies that no provision of the
Agreement will be given effect under domestic law if it is
inconsistent with federal law; this would include provisions of
federal law enacted or amended by the bill.
Section 102 provides that no state law may be declared
invalid on the ground that the law is inconsistent with the
Agreement, except in an action brought by the United States for
the purpose of declaring such law invalid. Section 102 also
precludes any private right of action against the federal
government or a state government based on the provisions of the
Agreement.

Sec. 103. Implementing actions in anticipation of entry into force and
initial regulations

This section provides that, following the enactment of the
Implementation Act, the President may proclaim such actions,
and other appropriate officers of the federal government may
issue such regulations, as may be necessary to ensure that
provisions of the legislation that take effect on the date the
Agreement enters into force are appropriately implemented on
such date. Section 103 provides that, with respect to any
action proclaimed by the President that is not subject to the
consultation and layover provisions contained in section 104,
such action may not take effect before the 15th day after the
date on which the text of the proclamation is published in the
Federal Register. The 15-day restriction is waived, however, to
the extent that it would prevent an action from taking effect
on the date the Agreement enters into force. Section 103 also
provides that, to the maximum extent feasible, initial
regulations necessary or appropriate to carry out the actions
required by the Implementation Act or the Statement of
Administrative Action shall be issued within one year of the
date the Agreement enters into force. In accordance with the
accompanying Statement of Administrative Action, any agency
unable to issue a regulation within one year must provide a
report 30 days prior to the end of the one-year period to the
Finance Committee outlining the reasons for the delay and
stating the expected date for issuance of the regulation.

Sec. 104. Consultation and layover provisions for, and effective date
of, proclaimed actions

This section sets forth consultation and layover steps that
must precede the President's implementation of any duty
modification by proclamation. Under the consultation and
layover provisions, the President must obtain the advice of the
relevant private sector advisory committees and the U.S.
International Trade Commission on a proposed action. The
President must submit a report to the Senate Committee on
Finance and the House Committee on Ways and Means setting forth
the action proposed, the reasons for the proposed action, and
the advice of the private sector advisors and the International
Trade Commission. Section 104 sets aside a 60-day period
following the date of transmittal of the report for the
President to consult with the Senate Committee on Finance and
the House Committee on Ways and Means on the action.

Sec. 105. Administration of dispute settlement proceedings

This section authorizes the President to establish or
designate within the Department of Commerce an office
responsible for providing administrative assistance to dispute
settlement panels established under Chapter 20 of the
Agreement. This section also authorizes the appropriation of
funds to support this office.

Sec. 106. Arbitration of claims

This section authorizes the United States to use binding
arbitration to resolve claims by investors of Agreement
countries under article 10.16.1 (a)(i)(C) or article
10.16.1(b)(i)(C) of the Agreement, pursuant to the investor-
state dispute settlement procedures set forth in section B of
chapter 10 of the Agreement.

Sec. 107. Effective dates; effect of termination

This section provides that the provisions of the
Implementation Act take effect on the date that the Agreement
enters into force with the exceptions of sections 1 through 3
and Title I, which take effect on the date of enactment. During
any period in which a country ceases to be a CAFTA-DR country,
the provisions of the Implementation Act will no longer have
effect with respect to that country. This section also provides
that the provisions of the Implementation Act will cease to
have effect if the United States withdraws from the Agreement
or if the Agreement terminates.

TITLE II--CUSTOMS PROVISIONS

Sec. 201. Tariff modifications

This section provides that the President may proclaim the
modification, continuation, or imposition of duties, or the
continuation of duty-free treatment, as the President
determines to be necessary or appropriate to carry out terms of
the Agreement. Section 201 requires the President to terminate
the designation of each CAFTA-DR country as a beneficiary
country for purposes of the Generalized System of Preferences
(``GSP'') on the date the Agreement enters into force with
respect to that country.
This section also requires the President to terminate the
designation of each CAFTA-DR country as a beneficiary country
under the Caribbean Basin Economic Recovery Act (19 U.S.C.
Sec. 2701 et seq.) (``CBERA'') on the date the Agreement enters
into force with respect to that country. However, there are
three exceptions by which each such country shall continue to
be considered a beneficiary country under CBERA. The exceptions
are: (1) that the ITC will continue to treat a CAFTA-DR country
as a beneficiary country under CBERA for the purpose of not
cumulating imports from CBERA beneficiary countries with
imports from non-beneficiary countries in determining whether a
U.S. industry is materially injured or threatened with material
injury by reason of dumped or subsidized imports in antidumping
and countervailing duty investigations; (2) that the CAFTA-DR
countries will continue to be treated as beneficiary countries
under CBERA for the purpose of implementing the duty-free
treatment provided under paragraph 12 of Appendix I of the
General Notes to the Schedule of the United States to Annex 3.3
of the Agreement; and, (3) that the status quo will be
maintained for each CAFTA-DR country with respect to existing
taxpayer deductions for business travel to CBERA countries.
Section 201(b) authorizes the President, subject to the
consultation and layover provisions of section 104, to proclaim
the continuation, modification, or addition of tariffs, or the
continuation of duty-free treatment, as the President
determines to be necessary or appropriate to maintain the
general level of reciprocal and mutually advantageous
concessions with respect to CAFTA-DR countries provided for by
the Agreement.
With respect to any good for which the base rate in the
Schedule of the United States to Annex 3.3 of the Agreement is
a specific or compound rate of duty, section 201(c) authorizes
the President to substitute for the base rate an ad valorem
rate that the President determines to be equivalent to the base
rate.

Sec. 202. Additional duties on certain agricultural goods

Section 202 implements the agricultural safeguard
provisions of article 3.15 and Annex 3.15 of the Agreement.
Article 3.15 permits the United States to impose an
``agricultural safeguard measure,'' in the form of additional
duties, on imports of certain goods of Agreement countries
specified in the Schedule of the United States to Annex 3.15 of
the Agreement that exceed the volume thresholds set out in that
Annex. The categories of goods that may be subject to an
agricultural safeguard measure are: certain dairy products,
certain peanut butter, and certain peanuts.
Under the Agreement, the sum of the duties assessed under
an agricultural safeguard plus the applicable rate of duty in
the Schedule of the United States to Annex 3.3 of the Agreement
may not exceed the general normal trade relations/most-favored
nation (``NTR/MFN'') rate of duty. Pursuant to section
202(a)(5), no additional duty may be applied on a good under
the agricultural safeguard if, at the time of entry, the good
is subject to a bilateral safeguard measure under the
procedures set out in subtitle A of Title III of the
Implementation Act or to a global safeguard measure under the
procedures set out in chapter 1 of Title II of the Trade Act of
1974 (19 U.S.C. Sec. 2251 et seq.). The agricultural safeguard
provision ceases to apply with respect to a good on the date on
which duty-free treatment must be provided to the good under
the Schedule of the United States to Annex 3.3 of the
Agreement.
Section 202(b) provides for the Secretary of the Treasury
to impose agricultural safeguard duties if the Secretary
determines that the volume of imports of the good from an
Agreement country exceeds 130 percent of the in-quota quantity
allocated to that country for the good in that calendar year in
the Schedule of the United States to Annex 3.3 of the
Agreement. Under the Agreement, an agricultural safeguard
measure may be maintained only until the end of the calendar
year in which it is imposed.

Sec. 203. Rules of origin

This section implements the general rules of origin set
forth in chapter 4 of the Agreement. Under the general rules,
there are three basic means by which a good of an Agreement
country can qualify as an originating good, and thus be
eligible for preferential treatment when imported into the
United States.
First, a good is originating if it is ``wholly obtained or
produced entirely in the territory of one or more of the CAFTA-
DR countries.'' For purposes of section 203 only, the term
``CAFTA-DR country'' is defined to include the United States.
For all other sections of the Implementation Act, the United
States is not included within the definition of ``CAFTA-DR
country.'' Second, the general rules of origin provide that a
good is ``originating'' if the good is produced in one or more
of the CAFTA-DR countries and the materials used to produce the
good that are not themselves originating goods are transformed
in such a way as to cause their tariff classification to change
and to meet other requirements, as specified in Annex 4.1 of
the Agreement. Third, the general rules of origin provide that
a good is ``originating'' if the good is produced entirely in
the territory of one or more of the CAFTA-DR countries
exclusively from materials that themselves qualify as
originating goods.
The remainder of section 203 sets forth additional rules
concerning whether a good meets the Agreement's specific
requirements to qualify as an originating good. Section 203(c)
implements provisions of Annex 4.1 of the Agreement that
require that certain goods have at least a specified percentage
of ``regional value content'' to qualify as originating goods.
Section 203(f) provides that a good is not disqualified as an
originating good if it contains de minimis quantities of non-
originating materials that do not undergo a change in tariff
classification. Section 203(d) addresses how materials are to
be valued when calculating the regional value content of a good
under section 203(c) and for purposes of applying the de
minimis rules of section 203(f). Section 203(g) addresses how
to determine whether fungible goods and materials qualify as
originating goods.
Section 203(o)(1) authorizes the President to proclaim as
part of the HTS the provisions set out in Annex 4.1 of the
Agreement, as well as any additional subordinate rules
necessary to carry out the customs provisions of the
Implementation Act consistent with the Agreement. Section
203(o)(3) authorizes the President to modify certain of the
Agreement's rules of origin by proclamation, subject to the
consultation and layover provisions of section 104 of the bill.
But section 203(o)(3) limits the President's authority to
modify by proclamation specific rules of origin pertaining to
textile or apparel goods (listed in Chapters 50 through 63 of
the HTS and identified in Annex 4.1 of the Agreement)--those
rules of origin may be modified by proclamation only within one
year of enactment and only for the purpose of correcting
typographical, clerical, or other non-substantive technical
errors.
Section 203 also implements the fabrics, yarns, and fibers
``short supply'' provisions of the Agreement. Section 203(o)(2)
provides authority for the President to carry out the provision
in article 3.25.4(e) of the Agreement pursuant to which the
United States will add materials to the list (the ``Short
Supply List'' of Annex 3.25) that it has determined are
unavailable in commercial quantities in a timely manner in the
United States under its regional trade preference programs
(i.e. the African Growth and Opportunity Act (``AGOA''), the
Andean Trade Preference Act (``ATPA''), and CBERA) before the
Agreement enters into force. Section 203(o)(4) implements the
provisions of article 3.25 of the Agreement that provide for
the United States to make modifications to the Short Supply
List of Annex 3.25 of the Agreement after the Agreement enters
into force. Under section 203(o)(4)(C), an ``interested
entity'' (i.e. a potential or actual purchaser or seller or the
government of a CAFTA-DR country) may request that the
President determine that a fabric, yarn, or fiber is not
available in commercial quantities in a timely manner in the
CAFTA-DR countries and add the material to the Short Supply
List of Annex 3.25 in a restricted or unrestricted quantity.
Section 203(o)(4)(C) provides that if the President
determines that the material is not commercially available in a
timely manner in the region, or if no interested entity has
objected, the President may issue a proclamation adding the
material to the Short Supply List in a restricted or
unrestricted quantity. Under section 203(o)(4)(C), the
President may issue a proclamation within 30 days of the
submission of a request, or within 44 days if there is
insufficient information to make the determination within 30
days. This section states that such proclamations shall take
effect on the date on which they are published in the Federal
Register. Section 203(o)(4)(C) also provides that within six
months of adding a fabric, yarn, or fiber to the Short Supply
List of Annex 3.25 in a restricted quantity, the President may
eliminate the restriction upon determining that the material is
not available in commercial quantities in a timely manner in
the CAFTA-DR countries. Under section 203(o)(4)(D), in the
unlikely event that the President takes no action in response
to a request to add a material to the Short Supply List of
Article 3.25, the material is automatically added in an
unrestricted quantity beginning 45 days after the request was
submitted or, if the President has determined under section
203(4)(C) that sufficient information is not available to make
the determination within 30 days, then beginning 60 days after
the request was submitted.
Under section 203(o)(4)(E), an interested entity may
request that the President limit the amount of any fabric,
yarn, or fiber that the United States has included in an
unrestricted quantity on the Short Supply List of Annex 3.25,
or the interested entity may request that the material be
removed from the list. An interested entity may submit such a
request beginning six months after the product was placed on
the list in an unrestricted amount. The President must
determine within 30 days of the request whether the material is
available in commercial quantities in a timely manner in the
CAFTA-DR countries. If the determination is affirmative, the
President is authorized to issue a proclamation carrying out
the request; such a proclamation may take effect no earlier
than six months after it is published in the Federal Register.
Other provisions in section 203 provide specific rules with
respect to determining origin for accessories, spare parts, or
tools; packaging materials; indirect materials; and goods
classifiable as goods put up in sets.

Sec. 204. Customs user fees

This section provides for the immediate elimination of the
merchandise processing fee for goods qualifying as originating
goods under the Agreement. Processing of goods qualifying as
originating goods will be financed by money from the General
Fund of the Treasury.

Sec. 205. Retroactive application for certain liquidations and
reliquidations of textile or apparel goods

This section provides that the United States must liquidate
or reliquidate entries of textile or apparel goods of an
eligible Agreement country made between January 1, 2004, and
the date that the Agreement enters into force with respect to
that country, provided that the goods would have been
considered originating goods if the Agreement had been in force
at that time. The Secretary of the Treasury shall refund any
excess customs duties paid with respect to such entries.

Sec. 206. Disclosure of incorrect information; false certifications of
origin; denial of preferential tariff treatment

This section provides for the imposition of penalties on
exporters and producers that issue false CAFTA-DR
certifications of origin through fraud, gross negligence, or
negligence. These penalties do not apply, under certain
circumstances, where an exporter or producer voluntarily
corrects an error and pays any duties owing.

Sec. 207. Reliquidation of entries

This section implements U.S. obligations under article
4.15.5 of the Agreement by amending section 520(d) of the
Tariff Act of 1930 (19 U.S.C. Sec. 1520(d)) to allow an
importer to claim preferential tariff treatment for originating
goods within one year of their importation.

Sec. 208. Recordkeeping requirements

This section sets forth the requirement that a U.S.
exporter or producer who completes and issues a CAFTA-DR
certification of origin for a good exported from the United
States must keep copies and records of the certification and,
if requested pursuant to rules and regulations promulgated by
the Secretary of the Treasury, render these materials for
examination and inspection. Under section 208, the copies and
records must be kept by the exporter or producer for five
years.

Sec. 209. Enforcement relating to trade in textile or apparel goods

Under article 3.24 of the Agreement, the United States may
request that a government of an Agreement country conduct a
verification to determine the accuracy of claims of origin for
textile or apparel goods and to determine that exporters and
producers are complying with applicable laws and regulations
regarding trade in textile and apparel goods. The United States
may assist in the verification or, at the request of the other
government, conduct the investigation itself. The United States
may take appropriate action during and after a verification
pursuant to article 3.24 of the Agreement.
Section 209 implements article 3.24 of the Agreement. Under
section 209(a), if the Secretary of the Treasury requests that
the government of a CAFTA-DR country conduct a verification,
the President may direct the Secretary to take ``appropriate
action'' while the verification is underway. Under section
209(b), such an ``appropriate action'' includes: the suspension
of preferential tariff treatment under the Agreement for any
textile or apparel goods exported or produced by the person
subject to the verification if the Secretary determines that
there is insufficient information to support any claim for
preferential tariff treatment; the denial of preferential
tariff treatment under the Agreement for any textile or apparel
goods exported or produced by the person subject to the
verification if the Secretary determines that the person has
provided incorrect information to support a claim for
preferential tariff treatment; the detention of textile or
apparel goods if the Secretary considers that there is
insufficient information with which to determine their country
of origin; and the denial of entry to such goods if the
Secretary determines that the person subject to the
verification has provided incorrect information as to the
country of origin of such goods.
Under section 209(c), following the completion of a
verification the President may also direct the Secretary of the
Treasury to take ``appropriate action.'' Under section 209(d),
such an ``appropriate action'' includes: the denial of
preferential tariff treatment under the Agreement for any
textile or apparel goods exported or produced by the person
that is the subject of a verification if the Secretary
determines either that there is insufficient information to
support a claim for preferential treatment or that the person
has provided incorrect information to support a claim for
preferential treatment; and the denial of entry of any textile
or apparel goods exported or produced by the person that is the
subject of the verification if the Secretary determines either
that there is insufficient information to determine the country
of origin of the textile or apparel goods or that the person
has provided incorrect information regarding their country of
origin. Unless the President sets an earlier termination date,
any such action may remain in place until the Secretary obtains
sufficient information to determine whether the exporter or
producer that was subject to the verification is complying with
applicable customs laws, regulations, and procedures, or
whether an accurate claim was made that textile or apparel
goods qualify for preferential tariff treatment or originate in
an Agreement country.
The Secretary of the Treasury may, under section 209(e),
publish the name of any person that the Secretary has
determined is engaged in intentional circumvention of
applicable laws or regulations affecting trade in textile or
apparel goods, or any person that has failed to demonstrate
that it produces, or is capable of producing, textile or
apparel goods.

Sec. 210. Regulations

This section authorizes the Secretary of the Treasury to
prescribe regulations necessary to carry out the rules of
origin and customs user fee provisions in the Implementation
Act, as well as the President's proclamation authority with
respect to fabrics, yarns, or fibers.

TITLE III--RELIEF FROM IMPORTS

Sec. 301. Definitions

This section defines the terms ``CAFTA-DR article,''
``CAFTA-DR textile or apparel article,'' ``de minimis supplying
country,'' and ``relevant CAFTA-DR article,'' for purposes of
the general bilateral safeguard provision contained in chapter
8 of the Agreement and the textile and apparel bilateral
safeguard provision contained in chapter 3 of the Agreement.
The term ``CAFTA-DR article'' is defined as an article that
qualifies as an originating good under section 203(b) of the
Implementation Act. The term ``CAFTA-DR textile or apparel
article'' is defined as a textile or apparel good that is
listed in the Annex to the Agreement on Textiles and Clothing
referred to in section 101(d)(4) of the Uruguay Round
Agreements Act (19 U.S.C. Sec. 3511(d)(4)), other than a good
listed in Annex 3.29 of the Agreement, that qualifies as an
originating good under section 203(b) of the Implementation
Act.
The term ``de minimis supplying country'' is defined as a
CAFTA-DR country whose share of imports of the relevant CAFTA-
DR article into the United States does not exceed 3 percent of
the total volume of such imports during the most recent 12-
month period for which data are available that precedes the
filing of a general bilateral safeguard petition. However, if
there is more than one CAFTA-DR country that satisfies the
foregoing criterion, an additional limitation applies--i.e. a
CAFTA-DR country shall not be considered to be a de minimis
supplying country if the aggregate share of imports from all
CAFTA-DR countries that satisfy the foregoing criterion exceeds
9 percent of total imports of the relevant CAFTA-DR article
during the applicable 12-month period. Finally, the term
``relevant CAFTA-DR article'' is defined as a CAFTA-DR article
with respect to which a general bilateral safeguard petition
has been filed.

Subtitle A.--Relief From Imports Benefitting From the Agreement

Sec. 311. Commencing of action for relief

This section requires the filing of a petition with the
U.S. International Trade Commission (``Commission'') by an
entity, including a trade association, firm, certified or
recognized union, or group of workers, that is representative
of an industry in order to commence a bilateral safeguard
investigation.
Section 311(b) provides that, upon the filing of a
petition, the Commission shall promptly initiate an
investigation to determine whether, as a result of the
reduction or elimination of a duty provided for under the
Agreement, a CAFTA-DR article is being imported into the United
States in such increased quantities, and under such conditions,
that imports of the CAFTA-DR article constitute a substantial
cause of serious injury, or threat of serious injury, to the
domestic industry producing an article that is like, or
directly competitive with, the imported article.
Section 311(c) extends certain provisions (both substantive
and procedural) contained in subsections (b), (c), and (i) of
section 202 of the Trade Act of 1974 (19 U.S.C. Sec. 2252(b),
(c), and (i)) to any bilateral safeguard initiated under the
Agreement. These provisions include, inter alia, the
requirement that the Commission publish notice of the
commencement of an investigation; the requirement that the
Commission hold a public hearing at which interested parties
and consumers have the right to be present, to present
evidence, and to respond to the presentations of other parties
and consumers; the factors to be taken into account by the
Commission in making its determinations; and authorization for
the Commission to promulgate regulations to provide access to
confidential business information under protective order to
authorized representatives of interested parties in an
investigation.
Section 311(d) precludes the initiation of a bilateral
safeguard investigation with respect to any CAFTA-DR article
for which import relief has already been provided under this
bilateral safeguard provision.

Sec. 312. Commission action on petition

This section establishes deadlines for Commission
determinations following the initiation of a bilateral
safeguard investigation. Section 312(b) applies certain
statutory provisions that address an equally divided vote by
the Commission in a global safeguard investigation under
section 202 of the Trade Act of 1974 (19 U.S.C. Sec. 2252) to
Commission determinations under this section. If the Commission
renders an affirmative injury determination, or a determination
that the President can consider to be an affirmative
determination in the event of a divided vote by the Commission,
section 312(c) requires that the Commission also find and
recommend to the President the amount of import relief that is
necessary to remedy or prevent the injury found by the
Commission and to facilitate the efforts of the domestic
industry to make a positive adjustment to import competition.
Section 312(d) specifies the information to be included by the
Commission in a report to the President regarding its
determination. Upon submitting the requisite report to the
President, section 312(e) requires the Commission to make
public promptly such report, except for confidential
information contained in the report.

Sec. 313. Provision of relief

This section directs the President, not later than 30 days
after receiving the report from the Commission, to provide
relief from imports of the article subject to an affirmative
determination by the Commission, or a determination that the
President considers to be an affirmative determination in the
event of a divided vote by the Commission, to the extent that
the President determines necessary to remedy or prevent the
injury and to facilitate the efforts of the domestic industry
to make a positive adjustment to import competition. Under
section 313(b), the President is not required to provide import
relief if the President determines that the provision of the
import relief will not provide greater economic and social
benefits than costs.
Section 313(c) specifies the nature of the import relief
that the President may impose to include: the suspension of any
further reduction in duty provided for under Annex 3.3 of the
Agreement; and an increase in the rate of duty imposed on such
article to a level that does not exceed the lesser of (1) the
NTR/MFN duty rate imposed on like articles at the time the
import relief is provided, or (2) the NTR/MFN duty rate imposed
on like articles on the day before the date on which the
Agreement enters into force. Section 313(c) also requires that,
if the period for which import relief is provided exceeds one
year, the President shall provide for the progressive
liberalization (described in article 8.2.3 of the Agreement) of
such relief at regular intervals during the period of its
application.
Section 313(d) provides that any import relief that the
President imposes in a bilateral safeguard action may not, in
the aggregate, exceed four years. If the initial period of
import relief is less than four years, the President may extend
the effective period of such import relief to a total of no
more than four years if the Commission first determines and
reports to the President whether import relief continues to be
necessary to remedy or prevent serious injury and whether there
is evidence that the domestic industry is making a positive
adjustment to import competition. If the Commission reports an
affirmative determination, or a determination that the
President considers to be an affirmative determination in the
event of a divided vote by the Commission, then the President
can extend the effective period of import relief to a total of
no more than four years if the President determines that import
relief continues to be necessary to remedy or prevent serious
injury and to facilitate adjustment by the domestic industry to
import competition, and that there is evidence that the
domestic industry is making a positive adjustment to import
competition.
Section 313(e) provides that upon termination of import
relief under the bilateral safeguard provision, the rate of
duty to be applied in the calendar year of termination is the
rate of duty that would have been in effect one year after the
provision of import relief according to the Schedule of the
United States to Annex 3.3 of the Agreement. The rate of duty
to be applied thereafter shall be, at the discretion of the
President, either (1) the applicable rate of duty for that
article set out in the Schedule of the United States to Annex
3.3 of the Agreement, or (2) the rate of duty resulting from
the elimination of the tariff in equal annual stages ending on
the date set out in the Schedule of the United States to Annex
3.3 of the Agreement for the elimination of the tariff.
Section 313(f) provides that no import relief may be
provided under the bilateral safeguard mechanism on any article
that is subject to import relief under the global safeguard
mechanism provided for in chapter 1 of Title II of the Trade
Act of 1974 (19 U.S.C. Sec. 2251 et seq.). Section 313(f)
further provides that no import relief may be provided under
the bilateral safeguard mechanism on imports of a CAFTA-DR
article from a CAFTA-DR country that is a de minimis supplying
country with respect to that article.

Sec. 314. Termination of relief authority

This section provides that the President's authority to
impose import relief under the bilateral safeguard mechanism
ends after the date that is 10 years after the date on which
the Agreement enters into force, or, if the period for tariff
elimination (set out in the Schedule of the United States to
Annex 3.3 of the Agreement) for an article subject to import
relief is greater than 10 years, after the date on which such
period ends.

Sec. 315. Compensation authority

This section authorizes the President, under section 123 of
the Trade Act of 1974 (19 U.S.C. Sec. 2133), to grant CAFTA-DR
countries new concessions as compensation for the imposition of
import relief in a bilateral safeguard investigation in order
to maintain the general level of reciprocal concessions under
the Agreement.

Sec. 316. Confidential business information

This section applies the same procedures for the treatment
and release of confidential business information by the
Commission in a global safeguard investigation under chapter 1
of Title II of the Trade Act of 1974 (19 U.S.C. Sec. 2251 et
seq.) to bilateral safeguard investigations under subtitle A of
Title III of the Implementation Act.

Subtitle B.--Textile and Apparel Safeguard Measures

Sec. 321. Commencement of action for relief

This section requires the filing of a request with the
President by an interested party in order to commence action
for relief under the textile and apparel safeguard provision.
Upon the filing of a request, the President shall review the
request to determine, from the information presented in the
request, whether to commence consideration of the request.
Section 321(b) provides that, if the President determines that
the request provides the information necessary for the request
to be considered, the President shall cause to be published in
the Federal Register a notice of commencement of consideration
of the request, and notice seeking public comments regarding
the request. The notice shall include a summary of the request
and the dates by which comments and rebuttals must be received.
The Committee notes that our regulatory processes should be
administered in an open and transparent manner that can serve
as a model for our trading partners. For example, in addition
to publishing a summary of a request for safeguard relief, the
Committee notes that the President plans to make available the
full text of the request on the website of the International
Trade Administration of the U.S. Department of Commerce,
subject to the protection of business confidential information.
The Committee encourages this and similar efforts to enhance
government transparency. In particular, the Committee
encourages the President to issue regulations on procedures
for: requesting a textile and apparel safeguard measure under
section 321(a) of the Implementation Act; making a
determination under section 322(a) of the Implementation Act;
providing safeguard relief under section 322(b) of the
Implementation Act; and, extending safeguard relief under
section 323(b) of the Implementation Act.

Sec. 322. Determination and provision of relief

This section provides that following the President's
commencement of consideration of a request, the President shall
determine whether, as a result of the reduction or elimination
of a duty under the Agreement, a CAFTA-DR textile or apparel
article of a specified CAFTA-DR country is being imported into
the United States in such increased quantities and under such
conditions as to cause serious damage, or actual threat
thereof, to a domestic industry producing an article that is
like, or directly competitive with, the imported article.
Section 322(a) provides that in making a determination the
President shall examine the effect of increased imports on the
domestic industry's output, productivity, capacity utilization,
inventories, market share, exports, wages, employment, domestic
prices, profits, and investment, none of which is necessarily
decisive. Section 322(a) also provides that the President shall
not consider changes in technology or consumer preference as
factors supporting a determination of serious damage or actual
threat thereof. The President must make a determination no
later than 30 days after the completion of any consultations
held pursuant to article 3.23.4 of the Agreement.
Section 322(b) authorizes the President, in the event of an
affirmative determination of serious damage or actual threat
thereof, to provide import relief to the extent that the
President determines necessary to remedy or prevent the serious
damage and to facilitate adjustment by the domestic industry to
import competition. Section 322(b) also specifies the nature of
the import relief that the President may impose to consist of
an increase in the rate of duty imposed on the article to a
level that does not exceed the lesser of (1) the NTR/MFN duty
rate imposed on like articles at the time the import relief is
provided, or (2) the NTR/MFN duty rate imposed on like articles
on the day before the date on which the Agreement enters into
force.

Sec. 323. Period of relief

Section 323(a) provides that any import relief that the
President imposes under the textile and apparel safeguard
mechanism may not, in the aggregate, exceed three years. If the
initial period of import relief is less than three years, then
under section 323(b) the President may extend the effective
period of such import relief to a total of no more than three
years if the President determines that the import relief
continues to be necessary to remedy or prevent serious damage
and to facilitate adjustment by the domestic industry to import
competition, and that there is evidence that the domestic
industry is making a positive adjustment to import competition.

Sec. 324. Articles exempt from relief

This section precludes the President from providing import
relief under the textile and apparel safeguard mechanism with
respect to any article to which import relief has already been
provided under subtitle B of Title III of the Implementation
Act, or any article that is subject to import relief under
either the bilateral safeguard mechanism under subtitle A of
Title III of the Implementation Act or the global safeguard
mechanism set forth in chapter 1 of Title II of the Trade Act
of 1974 (19 U.S.C. Sec. 2251 et seq.).

Sec. 325. Rate after termination of import relief

This section provides that the duty rate applicable to a
textile or apparel article after termination of the import
relief shall be the duty rate that would have been in effect
but for the provision of such import relief.

Sec. 326. Termination of relief authority

This section provides that the President's authority to
provide import relief under the textile and apparel safeguard
mechanism terminates after the date that is five years after
the date on which the Agreement enters into force.

Sec. 327. Compensation authority

This section authorizes the President, under section 123 of
the Trade Act of 1974 (19 U.S.C. Sec. 2133), to grant a CAFTA-
DR country new concessions as compensation for the imposition
of import relief in a textile and apparel safeguard proceeding,
in order to maintain the general level of reciprocal
concessions under the Agreement.

Sec. 328. Confidential business information

This section precludes the President from releasing
information received in a textile and apparel safeguard
proceeding that the President considers to be confidential
business information unless the party submitting the
confidential business information had notice, at the time of
submission, that such information would be released by the
President, or such party subsequently consents to the release
of the information. This section also provides that, to the
extent a party provides confidential business information, the
party shall also provide a nonconfidential version of the
information in which the confidential business information is
summarized or, if necessary, deleted.

Subtitle C.--Cases Under Title II of the Trade Act of 1974

Sec. 331. Findings and action on goods of CAFTA-DR countries

If the Commission initiates an investigation under the
global safeguard mechanism provided for in chapter 1 of Title
II of the Trade Act of 1974, and the Commission reports to the
President an affirmative determination in that investigation,
or a determination that the President can consider to be an
affirmative determination in the event of a divided vote by the
Commission, then section 331(a) requires the Commission to
include in its report to the President a finding as to whether
imports of the investigated article from each CAFTA-DR country
that qualify as originating goods under the Agreement's rules
of origin are a substantial cause of serious injury or threat
thereof. Pursuant to section 331(b), the President may then
exclude from any global import relief goods of a CAFTA-DR
country with respect to which the Commission made a negative
finding under section 331(a).

TITLE IV--MISCELLANEOUS

Sec. 401. Eligible products

This section amends section 308(4)(A) of the Trade
Agreements Act of 1979 (19 U.S.C. Sec. 2518(4)(A)) to implement
the government procurement provisions of the Agreement.

Sec. 402. Modifications to the Caribbean Basin Economic Recovery Act

This section amends sections 212 and 213 of the Caribbean
Basin Economic Recovery Act (19 U.S.C. Sec. Sec. 2702-03)
(``CBERA'') to reflect that parties to the Agreement are no
longer eligible to be designated as beneficiary countries under
CBERA or under the Caribbean Basin Trade Partnership Act
(``CBTPA''), which amended CBERA. Section 402 further provides,
however, that the remaining CBERA and CBTPA beneficiary
countries (i.e. non CAFTA-DR countries) may continue to utilize
inputs from a CAFTA-DR country in satisfying the rules of
origin under CBERA and CBTPA. Section 402 is thus intended to
avoid disrupting the existing benefit structure under CBERA and
CBTPA for the remaining CBERA and CBTPA beneficiary countries
(i.e. non CAFTA-DR countries).
Section 402(d) provides that if, under the non-preferential
rules of origin that the United States applies in the normal
course of trade, a good is determined to be a good of a CAFTA-
DR country that has implemented the Agreement, then the good is
not eligible for preferential tariff treatment under CBTPA.
However, section 402(d) includes an exception with respect to a
good that is co-produced in Haiti and the Dominican Republic.
Specifically, if a good is determined to be a good of the
Dominican Republic under U.S. non-preferential rules of origin,
and the good either contains inputs of Haiti or underwent
processing in Haiti, the resulting apparel item will continue
to be eligible for CBTPA preferential treatment. This exception
is thus intended to avoid disrupting investment in co-
production relationships in Haiti and the Dominican Republic.

Sec. 403. Periodic reports and meetings on labor obligations and labor
capacity-building provisions

This section provides that not later than two years after
the Agreement enters into force, and not later than the end of
each two-year period thereafter during the succeeding 14 years,
the President shall report to Congress on the progress of the
CAFTA-DR countries in implementing the labor provisions of the
Agreement and the April 2005 report of the Working Group of the
Vice Ministers Responsible for Trade and Labor in the Countries
of Central America and the Dominican Republic entitled ``The
Labor Dimension in Central America and the Dominican Republic--
Building on Progress: Strengthening Compliance and Enhancing
Capacity.'' Section 403 also provides that the Secretary of
Labor should take the necessary steps to meet periodically with
the labor ministers of the CAFTA-DR countries to discuss the
operation of the labor provisions of the Agreement, progress on
the labor commitments made by the CAFTA-DR countries, the work
of the International Labor Organization (``ILO'') in the CAFTA-
DR countries, and such other matters as the Secretary of Labor
and the labor ministers of the CAFTA-DR countries deem
appropriate.

F. Vote of the Committee in Reporting the Bill

In compliance with section 133 of the Legislative
Reorganization Act of 1946, the Committee states that on June
29, 2005, S. 1307 was ordered favorably reported, without
amendment, by voice vote, a quorum being present (Senator
Thomas voted no).

II. BUDGETARY IMPACT OF THE BILL

U.S. Congress,
Congressional Budget Office,
Washington, DC, July 18, 2005.
Hon. Charles E. Grassley,
Chairman, Committee on Finance,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for S. 1307, the Dominican
Republic-Central America-United States Free Trade Agreement
Implementation Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Annabelle
Bartsch.
Sincerely,
Douglas Holtz-Eakin,
Director.
Enclosure.

S. 1307--Dominican Republic-Central America-United States Free Trade
Agreement Implementation Act

Summary: S. 1307 would approve the Dominican Republic-
Central America-United States Free Trade Agreement (CAFTA-DR)
between the government of the United States and the governments
of the Dominican Republic and five Central American countries.
The agreement, which was entered into with Costa Rica, El
Salvador, Guatemala, Honduras, and Nicaragua on May 28, 2004,
and with the Dominican Republic on August 5, 2004, would
provide for tariff reductions and other changes in law related
to implementation of the agreement.
The Congressional Budget Office estimates that implementing
the agreement would reduce revenues by $3 million in 2006,
about $1.1 billion over the 2006-2010 period, and about $4.4
billion over the 2006-2015 period, net of income and payroll
tax offsets. CBO estimates it also would increase direct
spending by $35 million in 2006, $245 million over the 2006-
2010 period, and $621 million over the 2006-2015 period.
CBO has determined that S. 1307 contains no
intergovernmental or private-sector mandates as defined in the
Unfunded Mandates Reform Act (UMRA) and would not directly
affect the budgets of state, local, or tribal governments.
Estimated cost to the Federal Government: The estimated
budgetary impact of S. 1307 over the 2005-2015 period is shown
in the following table.

--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year in millions of dollars--
----------------------------------------------------------------------------------------------
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN REVENUES

Estimated Revenues 0 -3 -5 -7 -525 -556 -582 -608 -646 -689 -733

CHANGES IN DIRECT SPENDING

Effect on Farm Program:
Estimated Budget Authority........................... 0 24 35 41 49 55 55 57 59 61 64
Estimated Outlays.................................... 0 24 35 41 49 55 55 57 59 61 64
Merchandise Processing Fee:
Estimated Budget Authority........................... 0 11 15 16 17 17 18 19 20 21 0
Estimated Outlays.................................... 0 11 15 16 17 17 18 19 20 21 0
Trade Adjustment Assistance:
Estimated Budget Authority........................... 0 * * * * * * * * * *
Estimated Outlays.................................... 0 * * * * * * * * * *
Total Changes:
Estimated Budget Authority........................... 0 27 39 45 64 70 75 77 79 81 64
Estimated Outlays.................................... 0 27 39 45 64 70 75 77 79 81 64
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes.--Less than $500,000. Negative changes in revenues and positive changes in direct spending correspond to increases in budget deficits.

Basis of estimate

Revenues
Under the agreement, tariffs on U.S. imports from the
Dominican Republic, Costa Rica, El Salvador, Guatemala,
Honduras, and Nicaragua would be phased out over time. The
tariffs would be phased out for individual products at varying
rates according to one of several different timetables ranging
from immediate elimination on January 1, 2006, to gradual
elimination over 20 years. According to the U.S. International
Trade Commission (USITC), the United States collected $518
million in customs duties in 2004 on $17.7 billion of imports
from those six countries. Those imports consist mostly of
various types of apparel articles and produce. Nearly 80
percent of all imports from the region entered the United
States duty-free because the United States has normal trading
relations with those six countries or because the goods are
imported under one of several U.S. trade programs. However
those programs are scheduled to expire in the next three years.
The Generalized System of Preferences will expire on September
30, 2006, and the Caribbean Basin Initiative will expire on
September 30, 2008.
CAFTA-DR would afford imports from the region preferential
treatment similar to what they currently receive. Based on data
from USITC and CBO's most recent forecast of U.S. imports, CBO
estimates that phasing out tariff rates as outlined in the
agreement would reduce revenues by $3 million in 2006, about
$1.1 billion over the 2006-2010 period, and about $4.4 billion
over the 2006-2015 period, net of income and payroll tax
offsets.
This estimate includes the effects of increased imports
from the region that would result from the reduced prices of
imported products in the United States, reflecting the lower
tariff rates. It is likely that some of the increase in U.S.
imports from the six countries would displace imports from
other countries. In the absence of specific data on the extent
of this substitution effect, CBO assumes that an amount equal
to one-half of the increase in U.S. imports from the region
would displace imports from other countries.
Direct spending
Effect on Department of Agricultural Sugar Programs. CAFTA-
DR would provide the six countries with guaranteed minimum
access to the U.S. sugar market. Imports of sugar from these
countries would be tariff-free and could increase over time. By
increasing the amount of sugar supplied to the U.S. by
exporting countries, CBO estimates that the cost of the federal
sugar program would likely increase.
Federal government programs support the income of sugar
growers primarily by limiting the supply of sugar through
domestic marketing allotments--permission to market
domestically produced sugar--and import quotas. In addition, a
system of nonrecourse price-support loans is used to guarantee
sugar growers a minimum price, if the domestic and import
restrictions do not result in a sufficiently high market price.
The nonrecourse loan program allows producers to pledge their
sugar as collateral against a loan from the government at the
price-support loan rate. The ``nonrecourse'' aspect allows them
to forfeit their sugar to the government in lieu of repaying
the loan when prices are low, resulting in a quantity of sugar
being removed from the market, thus supporting the price. The
government attempts to limit the supply of sugar through
domestic allotments and import quotas to avoid costs in the
price-support loan system in most years. Unexpected market
events have resulted in substantial costs for the price-support
loan program in some recent years (for example, sugar program
costs were $465 million in 2000 and $61 million in 2004).
In addition, trade agreements and other commitments have
provided other sugar-producing countries with minimum access
guarantees to our markets, and tariffs on over-quota U.S.
imports from Mexico are scheduled to drop to zero in 2008.
Furthermore, if the total amount of U.S. sugar imports in any
year exceeds (or is estimated to exceed) a legislated quantity
of 1,532 million short tons (excluding some categories, for
instance, re-exported sugar), domestic marketing allotments
must be canceled under current law, meaning that marketing of
domestically produced sugar would be unrestrained.
CBO estimates that by providing additional import access
guarantees in compliance with CAFTA-DR, the sugar program will
likely cost an additional $500 million over the 2006-2015
period. Annual estimates are shown in the table above. As with
programs for most agricultural commodities, conditions in
domestic and world markets are highly variable, making
estimates of program costs for sugar somewhat uncertain. Actual
costs could be either higher or lower in any given year, and
these estimated costs represent our best estimate of expected
costs over the estimation period. Consistent with the current
budget resolution (H. Con. Res. 95), this estimate is relative
to CBO's March 2005 assumptions about sugar market conditions.
More current information concerning that market indicates that
the cost of this legislation would likely be lower in 2006 and
possibly lower in 2007, with no significant change in later
years.
Merchandise Processing Fee. This legislation would exempt
certain goods imported from the Dominican Republic, Costa Rica,
El Salvador, Guatemala, Honduras, and Nicaragua from
merchandise processing fees collected by the Department of
Homeland Security. Such fees are recorded as offsetting
receipts (a credit against direct spending). Based on the value
of goods imported from those countries in 2004, CBO estimates
that implementing this provision would reduce fee collections
by about $3 million in fiscal year 2006 and by a total of $120
million over the 2006-2014 period, with no effect thereafter
because the authority to collect merchandise processing fees
expires at the end of 2014.
Trade Adjustment Assistance. Implementing CAFTA-DR could
have a negligible effect on the Trade Adjustment Assistance
program (TAA). TAA provides extended unemployment compensation,
job training, and health insurance tax credits for individuals
who lose their job due to increases in imports. Based on
information from the International Trade Commission regarding
projected employment losses in various industries, CBO
estimates that the added costs to TAA would be less than $5
million over the 2006-2015 period, and less than $500,000 in
each year over that period.
Estimated Impact on State, Local, and Tribal Governments:
S. 1307 contains no intergovernmental mandates as defined in
UMRA and would not affect the budgets of state, local, or
tribal governments.
Estimated impact on the private sector: CBO estimates that
under the act, the tariff rates would be no greater than under
current law. Consequently, S. 1307 would not impose any
private-sector mandates as defined in UMRA.
Previous CBO estimate: On July 18, 2005, CBO also
transmitted a cost estimate for H.R. 3045, an identical bill
that was ordered reported by the House Committee on Ways and
Means on June 30, 2005. The two cost estimates are identical.
Estimate prepared by: Federal Revenues: Annabelle Bartsch
and Emily Schlect. Federal Spending: Mark Grabowicz and David
Hull. Christi Hawley-Sadoti. Impact on State, Local, and Tribal
Governments: Melissa Merrell. Impact on the Private Sector:
Selena Caldera.
Estimate approved by: G. Thomas Woodward, Assistant
Director for Tax Analysis; Peter H. Fontaine, Deputy Assistant
Director for Budget Analysis.

III. REGULATORY IMPACT OF THE BILL AND OTHER MATTERS

Pursuant to the requirements of paragraph 11(b) of rule
XXVI of the Standing Rules of the Senate, the Committee states
that S. 1307 will not significantly regulate any individuals or
businesses, will not affect the personal privacy of
individuals, and will result in no significant additional
paperwork.
The following information is provided in accordance with
section 423 of the Unfunded Mandates Reform Act of 1995
(``UMRA'') (Pub. L. No. 104-04). The Committee has reviewed the
provisions of S. 1307 as approved by the Committee on June 29,
2005. In accordance with the requirement of Pub. L. No. 104-04,
the Committee has determined that the bill contains no
intergovernmental mandates, as defined in the UMRA, and would
not affect the budgets of State, local, or tribal governments.

IV. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

Pursuant to the requirements of paragraph 12 of rule XXVI
of the Standing Rules of the Senate, changes in existing law
made by the bill, as reported, are shown as follows (existing
law proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, existing law in which no change
is proposed is shown in roman):

SECTION 13031 OF THE CONSOLIDATED OMNIBUS BUDGET RECONCILIATION ACT OF
1985

SEC. 13031. FEES FOR CERTAIN CUSTOMS SERVICES.

(a) * * *
(b) Limitations on Fees.--(1) * * *

* * * * * * *

(15) No fee may be charged under subsection (a) (9)
or (10) with respect to goods that qualify as
originating goods under section 203 of the Dominican
Republic-Central America-United States Free Trade
Agreement Implementation Act. Any service for which an
exemption from such fee is provided by reason of this
paragraph may not be funded with money contained in the
Customs User Fee Account.

* * * * * * *

----------

TARIFF ACT OF 1930

* * * * * * *

SEC. 508. RECORDKEEPING.

(a) * * *

* * * * * * *

(g) Certifications of Origin for Goods Exported Under the
Dominican Republic-Central America-United States Free Trade
Agreement.--
(1) Definitions.--In this subsection:
(A) Records and supporting documents.--The
term ``records and supporting documents''
means, with respect to an exported good under
paragraph (2), records and documents related to
the origin of the good, including--
(i) the purchase, cost, and value of,
and payment for, the good;
(ii) the purchase, cost, and value
of, and payment for, all materials,
including indirect materials, used in
the production of the good; and
(iii) the production of the good in
the form in which it was exported.
(B) CAFTA-DR certification of origin.--The
term ``CAFTA-DR certification of origin'' means
the certification established under article
4.16 of the Dominican Republic-Central America-
United States Free Trade Agreement that a good
qualifies as an originating good under such
Agreement.
(2) Exports to cafta-dr countries.--Any person who
completes and issues a CAFTA-DR certification of origin
for a good exported from the United States shall make,
keep, and, pursuant to rules and regulations
promulgated by the Secretary of the Treasury, render
for examination and inspection all records and
supporting documents related to the origin of the good
(including the certification or copies thereof).
(3) Retention period.--Records and supporting
documents shall be kept by the person who issued a
CAFTA-DR certification of origin for at least 5 years
after the date on which the certification was issued.
[(g)] (h) Penalties.--Any person who fails to retain records
and supporting documents required by subsection (f) or (g) or
the regulations issued to implement [that subsection] either
such subsection shall be liable for the greater of--
(1) * * *

* * * * * * *

SEC. 514. PROTEST AGAINST DECISIONS OF THE CUSTOMS SERVICE.

(a) * * *

* * * * * * *

(h) Denial of Preferential Tariff Treatment Under the
Dominican Republic-Central America-United States Free Trade
Agreement.--If the Bureau of Customs and Border Protection or
the Bureau of Immigration and Customs Enforcement finds
indications of a pattern of conduct by an importer, exporter,
or producer of false or unsupported representations that goods
qualify under the rules of origin set out in section 203 of the
Dominican Republic-Central America-United States Free Trade
Agreement Implementation Act, the Bureau of Customs and Border
Protection, in accordance with regulations issued by the
Secretary of the Treasury, may suspend preferential tariff
treatment under the Dominican Republic-Central America-United
States Free Trade Agreement to entries of identical goods
covered by subsequent representations by that importer,
exporter, or producer until the Bureau of Customs and Border
Protection determines that representations of that person are
in conformity with such section 203.

* * * * * * *

SEC. 520. REFUNDS AND ERRORS.

(a) * * *

* * * * * * *

(d) Goods Qualifying Under Free Trade Agreement Rules of
Origin.--Notwithstanding the fact that a valid protest was not
filed, the Customs Service may, in accordance with regulations
prescribed by the Secretary, reliquidate an entry to refund any
excess duties (including any merchandise processing fees) paid
on a good qualifying under the rules of origin set out in
section 202 of the North American Free Trade Agreement
Implementation Act [or section 202 of the United States-Chile
Free Trade Agreement Implementation Act], section 202 of the
United States-Chile Free Trade Agreement Implementation Act, or
section 203 of the Dominican Republic-Central America-United
States Free Trade Agreement Implementation Act for which no
claim for preferential tariff treatment was made at the time of
importation if the importer, within 1 year after the date of
importation, files, in accordance with those regulations, a
claim that includes--
(1) * * *
(2) copies of all applicable NAFTA Certificates of
Origin (as defined in section 508(b)(1)), or other
certificates or certifications of origin, as the case
may be; and

* * * * * * *

SEC. 592. PENALTIES FOR FRAUD, GROSS NEGLIGENCE, AND NEGLIGENCE.

(a) * * *

* * * * * * *

(9) Prior disclosure regarding claims under the
dominican republic-central america-united states free
trade agreement.--An importer shall not be subject to
penalties under subsection (a) for making an incorrect
claim that a good qualifies as an originating good
under section 203 of the Dominican Republic-Central
America-United States Free Trade Agreement
Implementation Act if the importer, in accordance with
regulations issued by the Secretary of the Treasury,
promptly and voluntarily makes a corrected declaration
and pays any duties owing.
[(9)] (10) Seizure.--If the Secretary has reasonable
cause to believe that a person has violated the
provisions of subsection (a) and that such person is
insolvent or beyond the jurisdiction of the United
States or that seizure is otherwise essential to
protect the revenue of the United States or to prevent
the introduction of prohibited or restricted
merchandise into the customs territory of the United
States, then such merchandise may be seized and, upon
assessment of a monetary penalty, forfeited unless the
monetary penalty is paid within the time specified by
law. Within a reasonable time after any such seizure is
made, the Secretary shall issue to the person concerned
a written statement containing the reasons for the
seizure. After seizure of merchandise under this
subsection, the Secretary may, in the case of
restricted merchandise, and shall, in the case of any
other merchandise (other than prohibited merchandise),
return such merchandise upon the deposit of security
not to exceed the maximum monetary penalty which may be
assessed under subsection (c).

* * * * * * *

(h) False Certifications of Origin Under the Dominican
Republic-Central America-United States Free Trade Agreement.--
(1) In general.--Subject to paragraph (2), it is
unlawful for any person to certify falsely, by fraud,
gross negligence, or negligence, in a CAFTA-DR
certification of origin (as defined in section
508(g)(1)(B) of this Act) that a good exported from the
United States qualifies as an originating good under
the rules of origin set out in section 203 of the
Dominican Republic-Central America-United States Free
Trade Agreement Implementation Act. The procedures and
penalties of this section that apply to a violation of
subsection (a) also apply to a violation of this
subsection.
(2) Prompt and voluntary disclosure of incorrect
information.--No penalty shall be imposed under this
subsection if, promptly after an exporter or producer
that issued a CAFTA-DR certification of origin has
reason to believe that such certification contains or
is based on incorrect information, the exporter or
producer voluntarily provides written notice of such
incorrect information to every person to whom the
certification was issued.
(3) Exception.--A person may not be considered to
have violated paragraph (1) if--
(A) the information was correct at the time
it was provided in a CAFTA-DR certification of
origin but was later rendered incorrect due to
a change in circumstances; and
(B) the person promptly and voluntarily
provides written notice of the change in
circumstances to all persons to whom the person
provided the certification.

* * * * * * *

----------

SECTION 202 OF THE TRADE ACT OF 1974

SEC. 202. INVESTIGATIONS, DETERMINATIONS, AND RECOMMENDATIONS BY
COMMISSION.

(a) Petitions and Adjustment Plans.--
(1) * * *

* * * * * * *

(8) The procedures concerning the release of
confidential business information set forth in section
332(g) of the Tariff Act of 1930 shall apply with
respect to information received by the Commission in
the course of investigations conducted under this
chapter, part 1 of title III of the North American Free
Trade Agreement Implementation Act, title II of the
United States-Jordan Free Trade Area Implementation
Act, title III of the United States-Chile Free Trade
Agreement Implementation Act, title III of the United
States-Singapore Free Trade Agreement Implementation
Act, title III of the United States-Australia Free
Trade Agreement Implementation Act, [and] title III of
the United States-Morocco Free Trade Agreement
Implementation Act, and title III of the Dominican
Republic-Central America-United States Free Trade
Agreement Implementation Act. The Commission may
request that parties providing confidential business
information furnish nonconfidential summaries thereof
or, if such parties indicate that the information in
the submission cannot be summarized, the reasons why a
summary cannot be provided. If the Commission finds
that a request for confidentiality is not warranted and
if the party concerned is either unwilling to make the
information public or to authorize its disclosure in
generalized or summarized form, the Commission may
disregard the submission.

* * * * * * *

----------

SECTION 308 OF THE TRADE AGREEMENTS ACT OF 1979

SEC. 308. DEFINITIONS.

As used in this title--
(1) * * *

* * * * * * *

(4) Eligible products.--
(A) In general.--The term ``eligible
product'' means, with respect to any foreign
country or instrumentality that is--
(i) * * *
(ii) a party to the North American
Free Trade Agreement, a product or
service of that country or
instrumentality which is covered under
the North American Free Trade Agreement
for procurement by the United States;
[or]
(iii) a party to a free trade
agreement that entered into force with
respect to the United States after
December 31, 2003, and before January
2, 2005, a product or service of that
country or instrumentality which is
covered under the free trade agreement
for procurement by the United
States[.]; or
(iv) a party to the Dominican
Republic-Central America-United States
Free Trade Agreement, a product or
service of that country or
instrumentality which is covered under
that Agreement for procurement by the
United States.

* * * * * * *

----------

CARIBBEAN BASIN ECONOMIC RECOVERY ACT

TITLE II--CARIBBEAN BASIN INITIATIVE

SEC. 201. SHORT TITLE.

This title may be cited as the ``Caribbean Basin Economic
Recovery Act''.

* * * * * * *

SEC. 212. BENEFICIARY COUNTRY.

(a)(1) For purposes of this title--
(A) * * *

* * * * * * *

(F) The term ``former beneficiary country'' means a
country that ceases to be designated as a beneficiary
country under this title because the country has become
a party to a free trade agreement with the United
States.

* * * * * * *

(b) In designating countries as ``beneficiary countries''
under this title the President shall consider only the
following countries and territories or successor political
entities:

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

In addition, the President shall not designate any country a
beneficiary country under this title--
(1) * * *

* * * * * * *

SEC. 213. ELIGIBLE ARTICLES.

(a)(1) Unless otherwise excluded from eligibility by this
title, and subject to section 423 of the Tax Reform Act of
1986, and except as provided in subsection (b)(2) and (3), the
duty-free treatment provided under this title shall apply to
any article which is the growth, product, or manufacture of a
beneficiary country if--
(A) * * *

* * * * * * *

For purposes of determining the percentage referred to in
subparagraph (B), the term ``beneficiary country'' includes
[the Commonwealth of Puerto Rico and the United States Virgin
Islands] the Commonwealth of Puerto Rico, the United States
Virgin Islands, and any former beneficiary country. If the cost
or value of materials produced in the customs territory of the
United States (other than the Commonwealth of Puerto Rico) is
included with respect to an article to which this paragraph
applies, an amount not to exceed 15 per centum of the appraised
value of the article at the time it is entered that is
attributed to such United States cost or value may be applied
toward determining the percentage referred to in subparagraph
(B).

* * * * * * *

(b) Import-Sensitive Articles.--
(1) * * *

* * * * * * *

(5) Definitions and special rules.--For purposes of
this subsection--
(A) * * *

* * * * * * *

(G) Former cbtpa beneficiary country.--The
term ``former CBTPA beneficiary country'' means
a country that ceases to be designated as a
CBTPA beneficiary country under this title
because the country has become a party to a
free trade agreement with the United States.
(H) Articles that undergo production in a
cbtpa beneficiary country and a former cbtpa
beneficiary country.--(i) For purposes of
determining the eligibility of an article for
preferential treatment under paragraph (2) or
(3), references in either such paragraph, and
in subparagraph (C) of this paragraph to--
(I) a ``CBTPA beneficiary country''
shall be considered to include any
former CBTPA beneficiary country, and
(II) ``CBTPA beneficiary countries''
shall be considered to include former
CBTPA beneficiary countries,
if the article, or a good used in the
production of the article, undergoes production
in a CBTPA beneficiary country.
(ii) An article that is eligible for
preferential treatment under clause (i) shall
not be ineligible for such treatment because
the article is imported directly from a former
CBTPA beneficiary country.
(iii) Notwithstanding clauses (i) and (ii),
an article that is a good of a former CBTPA
beneficiary country for purposes of section 304
of the Tariff Act of 1930 (19 U.S.C. 1304) or
section 334 of the Uruguay Round Agreements Act
(19 U.S.C. 3592), as the case may be, shall not
be eligible for preferential treatment under
paragraph (2) or (3), unless--
(I) it is an article that is a good
of the Dominican Republic under either
such section 304 or 334; and
(II) the article, or a good used in
the production of the article,
undergoes production in Haiti.

* * * * * * *