[Senate Report 112-224]
[From the U.S. Government Publishing Office]
Calendar No. 191
112th Congress Report
SENATE
2d Session 112-224
======================================================================
UNITED STATES-PANAMA TRADE PROMOTION AGREEMENT IMPLEMENTATION ACT
_______
September 20, 2012.--Ordered to be printed
_______
Mr. Baucus, from the Committee on Finance,
submitted the following
R E P O R T
together with
ADDITIONAL VIEWS
[To accompany S. 1643]
[Including cost estimate of the Congressional Budget Office]
The Committee on Finance, to which was referred the bill
(S. 1643) to implement the United States-Panama Trade Promotion
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 Agreement. 2
1. Background.......................................... 2
2. Trade Promotion Authority Procedures in General..... 2
3. Notification Prior to Negotiations.................. 3
4. Notification of Intent To Enter Into an Agreement... 3
5. Development of the Implementing Legislation......... 4
6. Formal Submission of the Agreement and Implementing
Legislation........................................ 4
7. Committee and Floor Consideration................... 5
C. Trade Relations with Panama............................. 5
1. United States-Panama Trade.......................... 5
2. Tariffs and Trade Agreements........................ 6
3. U.S. International Trade Commission Study........... 7
D. Overview of the Agreement............................... 7
1. Background.......................................... 7
2. Office of the U.S. Trade Representative Summary of
the Agreement...................................... 8
E. General Description of the Bill To Implement the
Agreement.............................................. 36
Title I--Approval of, and General Provisions Relating
to, the Agreement.................................. 36
Title II--Customs Provisions........................... 38
Title III--Relief from Imports......................... 41
Title IV--Miscellaneous................................ 46
Title V--Offsets....................................... 46
F. Vote of the Committee in Reporting the Bill............. 47
II. Budgetary Impact of the Bill....................................47
III. Regulatory Impact of the Bill and Other Matters.................53
IV. Additional Views................................................54
V. Changes in Existing Law Made by the Bill, as Reported...........58
I. REPORT AND OTHER MATERIALS OF THE COMMITTEE
A. Report of the Committee on Finance
The Committee on Finance, to which was referred the bill
(S. 1643) to implement the United States-Panama Trade Promotion
Agreement (``Agreement''), having considered the same, reports
favorably thereon without amendment and recommends that the
bill do pass.
B. Summary of Congressional Consideration of the Agreement
1. Background
On November 18, 2003, U.S. Trade Representative Robert
Zoellick, on behalf of President Bush, notified Congress of the
Administration's intent to negotiate a free trade agreement
(``FTA'') with the Republic of Panama (``Panama''). The two
governments launched the negotiations on April 26, 2004, and
successfully concluded negotiations on December 19, 2006, with
the understanding that the Agreement would be subject to
further discussions regarding labor.
The President notified Congress of his intent to enter into
the Agreement on March 30, 2007, and published notice of his
intent in the Federal Register on April 2, 2007. On April 27,
2007, the U.S. Trade Representative submitted to Congress and
the President the reports from 27 trade advisory groups
commenting on the final text of the Agreement. The Office of
the U.S. Trade Representative also made the reports publicly
available on its website.
On May 10, 2007, the Bush Administration and the bipartisan
leadership of the U.S. Senate Committee on Finance and the U.S.
House of Representatives Committee on Ways and Means reached an
agreement on trade policy. As discussed further below in
Section I.D., the May 10 bipartisan trade deal required
groundbreaking changes to the labor, environmental,
intellectual property, government procurement, services, and
investment provisions of the Agreement. The United States and
Panama agreed to incorporate these changes in the Agreement,
which U.S. Trade Representative Susan C. Schwab and Panamanian
Minister of Commerce and Industry Alejandro Ferrer signed on
June 28, 2007.
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 Administration,
by which Congress guarantees it will vote on a trade agreement
entered into by the Administration without amendment and the
Administration guarantees close consultation with Congress
during the negotiation of the trade agreement in order to
achieve the objectives that Congress identifies. Thorough and
timely consultation by the Administration with Congress is the
essential bedrock upon which Congress's delegation of
constitutional authority rests. This longstanding compact,
spanning decades, has resulted in the successful negotiation
and implementation of numerous trade agreements that have
contributed significantly to increased economic growth and
prosperity in the United States.
The most recent incarnation of this compact is found in the
Bipartisan Trade Promotion Authority Act of 2002 (``the Act''),
which was included in the Trade Act of 2002 (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 that the President
must achieve if the President intends to use TPA procedures to
implement a trade agreement. And section 151 of the Trade Act
of 1974 sets forth 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 Congress at least 90 calendar days
before initiating negotiations. On November 18, 2003, the U.S.
Trade Representative notified Congress of the President's
intent to initiate negotiations with Panama. The negotiations
were initiated on April 26, 2004. Section 2104(a)(2) requires
the President, before and after submission of the notice, to
consult regarding the negotiations with the relevant
congressional committees and the Congressional Oversight Group
established under section 2107 of the Act. The Administration
engaged in the requisite consultations with respect to this
Agreement, including an appearance by the U.S. Trade
Representative at meetings of the Congressional Oversight Group
on November 6, 2003, and May 6, 2004.
4. Notification of intent to enter into an agreement
Under section 2105(a)(1)(A) of the Act, the President must
notify Congress at least 90 calendar days before entering into
an agreement of his intent to enter into the agreement. On
March 30, 2007, the President notified Congress of his intent
to enter into the United States-Panama Trade Promotion
Agreement. The Agreement was signed on June 28, 2007.
5. Development of the implementing legislation
Under TPA procedures, Congress and the Administration work
together to produce legislation that implements 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 hold informal meetings to
consider the draft legislation and to make non-binding
recommendations to the Administration. The Administration then
finalizes the 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. Under TPA
and predecessor legislation, trade agreement implementing bills
may include only those provisions that are necessary or
appropriate to implement the agreement.
The Senate Committee on Finance met in open executive
session on July 7, 2011, to consider informally the draft
implementing legislation for the Agreement and the draft
Statement of Administrative Action (``SAA''). The Committee
approved the draft legislation and draft SAA without amendment
by a roll call vote of 22 ayes, 2 nays, a majority of the
Committee being present. Ayes: Baucus, Conrad, Bingaman, Kerry
(proxy), Wyden, Schumer, Cantwell, Nelson, Menendez, Carper,
Cardin, Hatch, Grassley, Snowe, Kyl (proxy), Crapo (proxy),
Roberts, Enzi, Cornyn (proxy), Coburn (proxy), Thune (proxy),
and Burr (proxy). Nays: Rockefeller (proxy) and Stabenow.
Separately, the Committee on Ways and Means in the House of
Representatives approved the draft implementing legislation and
draft SAA, as amended, on July 7, 2011, by a roll call vote of
22 ayes, 15 nays.
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, an SAA
describing regulatory and other changes 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 purposes, policies,
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.
On October 3, 2011, the President transmitted to Congress
the final text of this Agreement, the implementing legislation,
the SAA, and the other supporting information required under
section 2105 of the Act. That same day, Mr. Baucus, for
himself, Mr. Hatch and Mr. McConnell introduced the bill as S.
1643. The legislation was also introduced that same day in the
House of Representatives (H.R. 3079).
To qualify for TPA procedures, the implementing legislation
itself must contain provisions formally approving the agreement
and the SAA. And, as noted above, the implementing legislation
must contain only those provisions necessary or appropriate to
implement the Agreement. The implementing bill reported here--
which approves the Agreement and the accompanying SAA and
contains provisions necessary or appropriate to implement the
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 United States-Panama
Trade Promotion Agreement 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.
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.
The Committee on Finance met in open executive session on
October 11, 2011, to consider favorably reporting S. 1643. At
the meeting, the Committee favorably reported S. 1643 without
amendment by voice vote, a majority of members being present.
The Committee on Ways and Means in the House of Representatives
favorably reported the House version of the legislation, H.R.
3079, on October 5, 2011, by a roll call vote of 32 ayes, 3
nays.
The House passed H.R. 3079 on October 12, 2011, by a roll
call vote of 300 ayes, 129 nays. On the same day, the Senate
passed H.R. 3079 by a roll call vote of 77 ayes, 22 nays.
President Barack H. Obama signed H.R. 3079 into law on October
21, 2011 (Pub. L. 112-43).
C. Trade Relations With Panama
1. United States-Panama Trade
In 2010, the United States exported $6.1 billion worth of
goods and imported nearly $400 million from Panama, producing a
U.S. trade surplus of $5.7 billion, the second largest in the
Western Hemisphere. Panama ranked as the 36th largest export
market for U.S. goods and the 93rd largest supplier of U.S.
imports. Major U.S. exports to Panama include oil and capital-
and technology-intensive manufactured goods such as aircraft,
pharmaceuticals, machinery, medical equipment, and motor
vehicles. Bulk commodities such as wheat, corn, rice, and
soybeans make up the greatest percentage of U.S. agricultural
exports to Panama.
2010 U.S. EXPORTS TO PANAMA
------------------------------------------------------------------------
HTS Code--Product Value in USD
------------------------------------------------------------------------
27--MINERAL FUEL, OIL ETC.; BITUMIN SUBST; MINERAL 2,451,566,679
WAX.................................................
84--NUCLEAR REACTORS, BOILERS, MACHINERY ETC.; PARTS. 533,060,219
85--ELECTRIC MACHINERY ETC; SOUND EQUIP; TV EQUIP; 426,925,884
PTS.................................................
88--AIRCRAFT, SPACECRAFT, AND PARTS THEREOF.......... 396,799,366
98--SPECIAL CLASSIFICATION PROVISIONS, NESOI......... 272,744,144
87--VEHICLES, EXCEPT RAILWAY OR TRAMWAY, AND PARTS 229,290,875
ETC.................................................
10--CEREALS.......................................... 144,537,635
90--OPTIC, PHOTO ETC, MEDIC OR SURGICAL INSTRMENTS 130,734,420
ETC.................................................
33--ESSENTIAL OILS ETC; PERFUMERY, COSMETIC ETC PREPS 108,016,224
39--PLASTICS AND ARTICLES THEREOF.................... 98,485,680
OTHER................................................ 1,270,649,149
------------------
TOTAL............................................ 6,062,810,275
------------------------------------------------------------------------
(Source: U.S. Department of Commerce, International Trade
Administration).
2010 U.S. IMPORTS FROM PANAMA
------------------------------------------------------------------------
HTS Code--Product Value in USD
------------------------------------------------------------------------
98--SPECIAL CLASSIFICATION PROVISIONS, NESOI......... 131,572,707
03--FISH, CRUSTACEANS & AQUATIC INVERTEBRATES........ 85,458,515
71--NAT ETC PEARLS, PREC ETC STONES, PR MET ETC; COIN 61,129,961
08--EDIBLE FRUIT & NUTS; CITRUS FRUIT OR MELON PEEL.. 20,590,128
17--SUGARS AND SUGAR CONFECTIONARY................... 18,116,959
33--ESSENTIAL OILS ETC; PERFUMERY, COSMETIC ETC PREPS 8,509,369
09--COFFEE, TEA, MATE & SPICES....................... 7,912,709
85--ELECTRIC MACHINERY ETC; SOUND EQUIP; TV EQUIP; 5,609,846
PTS.................................................
76--ALUMINUM AND ARTICLES THEREOF.................... 5,103,797
84--NUCLEAR REACTORS, BOILERS, MACHINERY ETC.; PARTS. 5,103,261
OTHER................................................ 31,874,820
------------------
TOTAL............................................ 380,982,072
------------------------------------------------------------------------
(Source: U.S. Department of Commerce, International Trade
Administration).
2. Tariffs and trade agreements
Panama acceded to the World Trade Organization (``WTO'') in
1997, with an average bound tariff rate of 23.5 percent for all
goods (27.7 percent for agricultural goods and 22.9 percent for
nonagricultural goods). In 2009, Panama maintained an average
applied tariff rate of 7.2 percent for all goods (13.4 percent
for agricultural goods and 6.2 percent for nonagricultural
goods). The United States, by contrast, provides duty-free
treatment to most products from Panama. In 2010, 98 percent of
imports from Panama entered the United States duty free under
our most-favored nation tariff rates and U.S. trade preference
programs. Given that the Agreement will greatly reduce this
existing tariff asymmetry, the U.S. International Trade
Commission (``Commission'') found that the Agreement likely
will result in a larger increase in U.S. exports to Panama than
in U.S. imports from Panama.
Panama has FTAs in place with Costa Rica, Chile, El
Salvador, Guatemala, Honduras, Nicaragua, Singapore, and
Taiwan. Panama also concluded FTA negotiations with Canada in
May 2010 and initialed an agreement with the European Union in
March 2011. In addition, Panama is negotiating an FTA with
Colombia and considering negotiations with Korea, India, and
Peru. Panama has bilateral investment treaties with Argentina,
Canada, Chile, Taiwan, Czech Republic, Dominican Republic,
France, South Korea, Mexico, Netherlands, Spain, Switzerland,
Ukraine, United Kingdom, and Uruguay.
3. U.S. International Trade Commission study
In September 2007, the Commission released the results of
its investigation (Investigation No. TA-2104-025) into the
probable economic effect of the Agreement (USITC Pub. 3948).
The Commission found that the expected growth in U.S. trade
with Panama under the Agreement would likely have a small but
positive impact on the U.S. economy. The Commission indicated,
however, that these benefits may be tempered by the relatively
small size of Panama's economy, its small share of total U.S.
trade, and its existing duty-free access to the U.S. market
under U.S. trade preference programs.
As noted above, the Commission also concluded that the
Agreement likely will result in a larger increase in U.S.
exports to Panama than in U.S. imports from Panama. More
specifically, it estimated that U.S. exports to Panama will
increase by 9 to 145 percent while U.S. imports from Panama are
unlikely to increase significantly due to the fact that the
vast majority of goods from Panama already receive duty-free
treatment in the U.S. market. It further estimated the U.S.
goods exports that would experience relatively large percentage
increases include beef, pork, rice, washing machines, and
passenger vehicles.
With respect to services, the Commission concluded that
U.S. service firms will benefit from improved market access,
national treatment, and regulatory transparency under the
Agreement. The Commission noted, however, that these benefits
will be modest because of the relatively small size of Panama's
economy. Further, the Agreement likely will not have a
significant effect on U.S. imports of services from Panama
because the U.S. services market is generally open to foreign
firms, including those from Panama, and because the Panamanian
industry is small.
D. Overview of the Agreement
1. Background
The Agreement establishes a bilateral free trade area that
eliminates tariffs on trade between the United States and
Panama for all qualifying goods except sugar. The Agreement
also liberalizes trade in services and contains provisions that
address telecommunications, electronic commerce, intellectual
property rights, labor, environment, government procurement,
and investment issues. In addition, the Agreement contains
provisions that promote bilateral consultation and cooperation,
procedural and substantive due process, administrative and
judicial review, transparency, and the rule of law. It also
contains a mechanism for settling disputes that arise under the
Agreement.
As noted above, the Bush Administration and the bipartisan
leadership of the U.S. Senate Committee on Finance and the U.S.
House of Representatives Committee on Ways and Means reached an
agreement on trade policy on May 10, 2007. The United States-
Panama Trade Promotion Agreement incorporates the provisions of
the May 10 agreement. This Agreement therefore includes the
following provisions: (1) fully enforceable commitments by the
Parties to adopt, maintain, and enforce the 5 core
international labor standards incorporated in the 1988
International Labor Organization Declaration on Fundamental
Principles and Rights at Work; (2) fully enforceable
commitments by the Parties to adopt, maintain, and enforce
their obligations under certain common multilateral
environmental agreements; (3) modifications to the intellectual
property chapter that balance the need for access to medicines
with patent protections for pharmaceutical products; (4)
modifications to the government procurement chapter that allow
the Parties to condition government contracts on adherence to
core labor standards; (5) confirmation that the United States
can prevent foreign companies from supplying services at U.S.
ports if the United States deems such action necessary to
protect our national security; and (6) confirmation that the
Agreement accords foreign investors in the United States no
greater substantive rights with regard to investor protections
than U.S. investors in the United States.
2. Office of the U.S. Trade Representative summary of the Agreement
The Office of the U.S. Trade Representative prepared a
summary of the Agreement that was included among the documents
that the President transmitted to Congress on October 3, 2011.
This summary was distributed to Members of the Committee to aid
in their consideration of the implementing legislation, and it
is reprinted below:
THE UNITED STATES-PANAMA TRADE PROMOTION AGREEMENT
Summary of the Agreement
This summary briefly describes key provisions of the United
States-Panama Trade Promotion Agreement (``Agreement'') that
the United States has concluded with Panama and represents an
authoritative expression of Administration views regarding the
interpretation of the Agreement both for purposes of U.S.
international obligations and domestic law.
PREAMBLE
The Preamble to the Agreement provides the Parties'
underlying objectives in entering into the Agreement and
provides context for the provisions that follow. It includes
the following statement:
``AGREE that foreign investors are not hereby accorded
greater substantive rights with respect to investment
protections than domestic investors under domestic law where,
as in the United States, protections of investor rights under
domestic law equal or exceed those set forth in this
Agreement.''
This statement clarifies that, as stated in the Bipartisan
Trade Promotion Authority Act of 2002, under the Agreement
foreign investors in the United States are not to be accorded
greater substantive rights with respect to investment
protections than United States investors in the United States.
CHAPTER ONE: INITIAL PROVISIONS
Chapter One sets out provisions establishing a free trade
area and affirming the Parties' 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 party.
The Agreement does not change the provisions of any
agreement the United States has previously negotiated with
Panama. Article 1.3.2 of the Agreement suspends Articles VII
and VIII of the Treaty Between the United States of America and
the Republic of Panama Concerning the Treatment and Protection
of Investments, with Annex and Agreed Minutes, signed at
Washington on October 27, 1982 (the ``Treaty'') concerning
investor-to-state and state-to-state dispute settlement,
respectively. However, Article 1.3.3 of the Agreement
preserves, for ten years, the option of invoking dispute
settlement under the Treaty with respect to investments covered
by the Treaty as of the date of entry into force of the
Agreement and in the case of disputes that arose prior to the
date of entry into force of the Agreement. Article 1.3.3 also
preserves investor-to-state dispute settlement under the Treaty
with respect to disputes arising on or after the date of entry
into force of the Agreement out of an investment agreement that
was in effect before the date of entry into force of the
Agreement. If the Agreement terminates, the dispute settlement
provisions of the Treaty will automatically resume operation.
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 the other Party
in a non-discriminatory manner, provides for the phase-out and
elimination of tariffs on ``originating'' goods (as defined in
Chapter Four (Rules of Origin and Origin Procedures)) 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, including
all industrial goods, will be phased out over periods of up to
ten 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 each Party'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.
Waiver of Customs Duties. The Parties may not adopt new
duty waivers or expand existing duty waivers conditioned on the
fulfillment of a performance requirement. 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 Party.
Temporary Admission. The Parties agreed 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 1994 (GATT 1994) and
this Agreement include export and import price requirements
(except under antidumping and countervailing duty orders and
undertakings) 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.
Panama agreed not to require a person of the United States to
have or maintain a relationship with a ``dealer'' as a
condition for allowing the importation of a good. Panama also
agreed not to prohibit or restrict the importation of any good
of the United States 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 the United States.
Distinctive Products. Panama will recognize Bourbon Whiskey
and Tennessee Whiskey as ``distinctive products'' of the United
States, meaning Panama 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 Trade in Goods to consider matters arising under
Chapters Three, Four (Rules of Origin and Origin Procedures),
and Five (Customs Administration and Trade Facilitation). The
functions of the Committee are to (i) promote trade in goods
between the Parties, (ii) address barriers to trade in goods
between the Parties, and (iii) provide advice and
recommendations on trade capacity building with respect to
matters those chapters cover.
Agriculture
TRQs. Chapter Three requires each government to administer
TRQs in a manner that is transparent, non-discriminatory,
responsive to market conditions, and minimally burdensome on
trade. The Parties must make every effort to administer TRQs in
a manner that 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 the other Party.
Under Article 3.15, neither Party may introduce or maintain an
export subsidy on agricultural goods destined for the other
Party unless the exporting Party believes that a third country
is subsidizing its exports to the 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 an agricultural 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. All agricultural
safeguard measures must be applied and maintained in a
transparent manner, and the Party applying such a measure must,
on request, consult with the other Party concerning the
application of the measure.
Neither Party may impose safeguard duties pursuant to the
WTO Agreement on Agriculture on originating goods.
Sugar. The United States agreed to establish three TRQs on
sugar goods of Panama. These three TRQs cover, respectively:
(i) raw sugar, (ii) specialty sugar, and (iii) raw sugar,
refined sugar, and certain sugar-containing products. The duty-
free quantity under the TRQ on raw sugar starts at 6,060 metric
tons and increases by 60 metric tons annually through year ten,
after which the duty-free quantity will remain at 6,600 metric
tons. The duty-free quantity under the TRQ on specialty sugar
is 500 metric tons per year (with no annual increases). The
duty-free quantity under the TRQ on raw sugar, refined sugar,
and certain sugar-containing products will be limited in each
year to the lesser of (i) the duty-free quantity set out in the
agreement for that year (505 metric tons in year one,
increasing by five metric tons annually), or (ii) Panama's
trade surplus in specific sugar goods. Panama's ``trade
surplus'' is the amount by which Panama's exports of specified
sugar and sweetener goods to all destinations exceed its
imports of these goods from all sources, except that Panama'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.
In contrast to how it will treat other commodities subject
to TRQs, the United States will not eliminate its over-quota
duty on imports of goods that the three TRQs cover. The
Agreement also includes a mechanism that allows the United
States in any year, at its option, to provide some form of
alternative compensation to Panamanian exporters in place of
duty-free imports under the three TRQs on sugar goods.
Ethanol. The United States agreed to continue to treat
Panama as a beneficiary country under the Caribbean Basin
Initiative (CBI) preference program with respect to ethanol
imports. Accordingly, Panama will continue to share in the
duty-free quota that the United States makes available to CBI
beneficiary countries.
Additional Provisions. Chapter Three provides for the
creation of a Committee on Agricultural Trade. The Committee
will be established within 90 days after the date the Agreement
enters into force 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
the Agreement enters into force 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.
Textiles and apparel
Tariff Elimination. Chapter Three provides for duties on
all originating textile or apparel goods to be eliminated on
the date the Agreement enters into force.
Safeguards. The Chapter also 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. A Party may not impose a textile
safeguard measure more than once on the same textile or apparel
good. The measure may not be in place for more than three
years. The ability to impose or maintain textile safeguards
lapses five years after the Agreement enters into force. 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 textile safeguard measure under Chapter
Three must provide the exporting Party with mutually agreed
compensation in the form of trade concessions for textile or
apparel goods that have a value substantially equivalent 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 a value substantially
equivalent to the increased duties resulting from application
of the safeguard measure.
Rules of Origin and Related Matters. A textile or apparel
good will generally qualify as an ``originating'' good eligible
to receive preferential treatment under the Agreement only if
all processing from the yarn stage to the final product (e.g.,
yarn-spinning, fabric production, cutting, and assembly) takes
place in the United States, Panama, or both, 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 those 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 goods containing elastomeric yarns in the component of the
good that determines the classification.
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 and Panama. 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 and Panama. 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.
Customs Cooperation. Chapter Three commits the Parties to
cooperate in enforcing their laws related to trade in textile
and apparel goods, to ensure the accuracy of claims of origin,
and to prevent circumvention of the Parties' laws or agreements
relating to trade in textile and apparel goods. The Chapter
also provides that, under certain circumstances, the exporting
Party must conduct a verification to determine whether a claim
of origin is accurate, or to determine compliance with relevant
laws, regulations, and procedures. A verification may include
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,
either Party may convene consultations to resolve technical or
interpretive issues arising with respect to customs cooperation
or may request technical assistance from the other Party in
implementing the Chapter's customs cooperation provisions.
Additional Provisions. Chapter Three provides for duty-free
treatment for goods that the United States and Panama agree
qualify as handmade, hand-loomed, or traditional folklore
goods. The United States agreed to provide duty-free treatment
for certain (i) Guayabera-style dresses and shirts that are cut
and sewn or otherwise assembled in Panama or the United States;
and (ii) socks that are sewn or otherwise assembled in Panama
with U.S. thread from components knit-to-shape in the United
States from U.S. yarn. The United States also agreed that goods
assembled in Panama 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 provisions set out in Chapter
Four and Annex 4.1 (Specific Rules of Origin). These rules
ensure that preferential tariff treatment 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 ``originating'':
When the good is wholly obtained or produced
entirely in Panama, the United States, or both
countries (e.g., crops harvested or minerals extracted
in the United States); or
When the good is produced entirely in
Panama, the United States, or both countries and: (i)
is manufactured or assembled from non-originating
materials that undergo a specified change in tariff
classification in Panama, the United States, or both
countries; or (ii) meets any applicable ``regional
value content'' requirement (see below); and (iii)
satisfies all other requirements of Chapter Four,
including Annex 4.1; or
When the good is produced entirely in
Panama, the United States, or both countries,
exclusively 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 ten
percent of the adjusted value of the good, and the good
otherwise meets the criteria of the Chapter. This de minimis
exception 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 an ``originating'' good,
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:
(i) the ``build-down method'' (based on the value of non-
originating materials used); and (ii) 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 Tariff Treatment. Under the
Chapter, importers may make a claim for preferential tariff
treatment based on: (i) a certification issued by the importer,
exporter, or producer, or (ii) the importer's knowledge that
the good is an originating good. Each Party may require an
importer making a claim for preferential tariff treatment to:
declare in its importation document that the good is an
originating good; have in its possession a certification at the
time the claim is made (if a certification forms the basis of
the claim); provide a copy of the certification, on request, to
the Party's customs authority (if a certification forms the
basis of the claim); and demonstrate, on request of the customs
authority, that the good is an originating good under the
Chapter. A Party may only deny preferential tariff treatment
through a written determination that the claim is invalid as a
matter of law or fact. The Chapter establishes a procedure for
filing claims for preferential tariff treatment for up to one
year after a good is imported 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.
Verification. Each Party must ensure that its customs
authority is empowered to conduct verifications for purposes of
determining whether a good is an originating good. Where an
importing Party determines through a 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 from that importer, exporter, or producer until
the importing Party determines that the importer, exporter, or
producer is in compliance with the rules set out in the
Chapter.
Additional Rules. Chapter Four provides specific rules with
respect to the treatment of (i) packing materials and
containers; (ii) indirect materials; (iii) fungible goods; and
(iv) sets of goods for purposes of determining origin. The
Chapter provides that a Party may not treat a good as an
originating good if it undergoes production or any other
operation in a third country other than unloading, reloading,
or any other operation necessary to preserve the good in good
condition or to transport the good to the territory of a Party,
or if the good is shipped through a third country and does not
remain under the control of customs authorities in that
country.
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 the other 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 adopt or maintain procedures to release goods from
customs promptly and expeditiously clear express shipments.
After the Agreement enters into force Panama will have one year
to comply with the Chapter's rules on express shipments; two
years to comply with certain of the Chapter's transparency
obligations and its requirement to provide advance rulings; and
three years to comply with its obligations to adopt electronic
processing and risk management systems.
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 importations.
Panamanian Free Zone Monitoring Program. Chapter Five
requires Panama to maintain its existing program for monitoring
the importation into, exportation from, and processing or
manipulation of goods in Panamanian free zones. The Chapter
also provides that if the United States has a reasonable
suspicion that a good for which a U.S. importer has made a
claim for preferential tariff treatment under another U.S. free
trade agreement has undergone processing in a Panamanian free
zone (other than unloading, reloading, or other operations
necessary to preserve the good or transport it to the United
States), the United States may request Panama to make relevant
records available or visit facilities in the free zone to
verify whether the good was imported into, exported from, or
processed or manipulated in the free zone.
CHAPTER SIX: SANITARY AND PHYTOSANITARY MEASURES
Chapter Six defines the Parties' obligations to each other
regarding sanitary and phytosanitary (SPS) measures. 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. Nothing in the Agreement imposes new
limitations on the United States in terms of maintaining high
safety and inspection standards.
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) address SPS measures affecting 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 that address
SPS matters.
Dispute Settlement. Neither Party may invoke the
Agreement's dispute settlement procedures for a matter arising
under Chapter Six. Instead, any dispute between the Parties
involving an SPS measure must be resolved through the WTO.
CHAPTER SEVEN: TECHNICAL BARRIERS TO TRADE
Chapter Seven builds 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 technical
regulations, and procedures used to determine whether a
particular good meets such standards and regulations, i.e.,
``conformity assessment procedures.''
International Standards. The principles articulated in the
WTO TBT Committee's 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 when determining
whether an international standard exists and consult on
pertinent matters under consideration by relevant international
or regional bodies.
Cooperation. Chapter Seven establishes a Committee on
Technical Barriers to Trade through which the Parties will
cooperate to reduce technical barriers and improve market
access. The Committee's specific functions will 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. Each Party will
recognize conformity assessment bodies in the territory of the
other Party on terms no less favorable than it accords
conformity assessment bodies in its own territory.
Transparency. Chapter Seven contains various transparency
obligations, such as requiring each Party to: (i) allow persons
of the other Party to participate in the development of
technical regulations, standards, and conformity assessment
procedures on terms no less favorable than those accorded to
its own persons; (ii) transmit regulatory proposals notified
under the WTO Agreement on Technical Barriers to Trade directly
to the other Party; (iii) describe in writing the objectives of
proposed technical regulations or conformity assessment
procedures and the rationale for the approach the Party is
proposing; and (iv) consider comments on such proposals and
respond in writing to significant comments it receives. Each
Party must implement the Chapter's transparency provisions as
soon as practicable, and no later than five years after the
Agreement enters into force.
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 reduction 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.
A safeguard measure may be applied on a good only during
the Agreement's ``transition period'' for phasing out duties. 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 the same 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.
If a Party imposes a safeguard measure, Chapter Eight
requires it to provide offsetting trade compensation to the
other Party. If the Parties cannot agree on the amount or
nature of the compensation, the exporting Party 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 the GATT 1994 and the WTO Agreement on
Safeguards. A Party may exclude imports of an originating good
from the other Party from a global safeguard measure if those
imports are not a substantial cause of serious injury or do not
create a threat of serious injury. 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 Article XIX
of the GATT 1994 and the WTO Agreement on Safeguards.
Antidumping and Countervailing Duties. Chapter Eight
confirms that the Parties retain their rights and obligations
under the WTO Agreement 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 Panama as a CBI
beneficiary country for purposes of Sections 771(7)(G)(ii)(III)
and 771(7)(H) of the Tariff Act of 1930 (19 U.S.C.
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 Party. 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 Party in a manner that is ``no less favorable''
than their 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 in
Annex 9.1. Specifically, the Chapter applies to procurements by
listed agencies of the ``central government,'' which for the
United States is the federal government, of goods and services
valued at $193,000 or more and construction services valued at
$7,407,000 or more. The equivalent thresholds for purchases by
listed ``sub-central'' government entities (i.e., provincial
governments for Panama and U.S. state government agencies) are
$526,000 and $7,407,000, for goods and services and
construction services, respectively. The Chapter applies to
purchases of goods and services that the Panama Canal Authority
makes of (i) goods and services valued over $593,000, and (ii)
construction services valued over $12 million for the first 12
years that the Agreement is in force and $10.3 million
thereafter. The Chapter's thresholds for other governmental
entities are either $250,000 or $593,000 for goods and
services, and $7,407,000 for construction services. All
thresholds (other than the $250,000 threshold for other
government entities and the Panama Canal Authority's
transitional $12 million threshold for construction services)
are subject to adjustment every two years on January 1, with
the next adjustment set for January 1, 2012.
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 with the
purpose or effect of creating an unnecessary obstacle to trade
between the Parties while clarifying that an entity may adopt
technical specifications to promote environmental conservation.
The Chapter also clarifies that an entity may adopt technical
specifications that require suppliers to comply with generally
applicable laws regarding fundamental principles and rights at
work and acceptable conditions of work with respect to minimum
wages, hours of work, and occupational safety and health in the
territory where they make the product or perform the service
that the entity will purchase. 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 provides 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 (Transparency),
including by requiring each Party to maintain procedures to
declare suppliers that have engaged in fraudulent or other
illegal actions in relation to procurement 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
a Party may adopt or maintain measures necessary to protect:
(i) public morals, order, or safety; (ii) human, animal, or
plant life or health, including environmental measures
necessary to protect human, animal, or plant life or health; or
(iii) 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 a
Party against wrongful or discriminatory government actions
when they invest or attempt to invest in the other Party's
territory. The Chapter's provisions reflect traditional
standards incorporated in earlier U.S. bilateral investment
treaties, previous trade agreements, and customary
international law.
Key Concepts. Under Chapter Ten, the term ``investment''
covers all forms of investment, including enterprises,
securities, certain forms of debt, intellectual property
rights, licenses, and certain contracts. Chapter Ten covers
both investments existing when the Agreement enters into force
and future investments. The term ``investor of a Party''
encompasses U.S. and Panamanian nationals as well as firms
(including branches) established in one of the Parties.
General Principles. Under the Agreement, investors enjoy
six basic protections: (i) the right to non-discriminatory
treatment relative both to domestic investors and investors of
non-Parties; (ii) limits on imposition by the host Party of
``performance requirements;'' (iii) the right to free transfer
of funds related to an investment; (iv) protection from
expropriation except when in conformity with customary
international law; (v) the right to the minimum standard of
treatment of aliens in accordance with customary international
law; and (vi) the right 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 (Financial
Services)), Chapter Ten generally applies to all sectors,
including service sectors. However, each Party negotiated a
limited list, in Annex I and II, of exemptions from the
Chapter's obligations relating to national treatment, most-
favored-nation treatment, performance requirements, or senior
management and boards of directors (``non-conforming
measures''). Annex I contains each Party's list of existing
non-conforming measures at the central and regional levels of
government. The United States has scheduled an exemption from
all of the aforementioned obligations for all existing state
measures. All existing local measures are exempted from these
obligations for both Parties without the need to be listed. If
a Party liberalizes any of these non-conforming Annex I
measures, it must thereafter maintain the measure at least at
that level of openness. Each Party has listed in Annex II
sectors or activities in which it reserves the right to adopt
or maintain future non-conforming measures. (Annexes I and II
also include exemptions from Chapter Eleven (Cross-Border Trade
in Services). See below.)
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 the other 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 or a covered
investment that the investor owns or controls. ``Investment
agreements'' and ``investment authorizations'' are arrangements
between an investor and a host government based on contracts
and authorizations, respectively. These terms are defined in
Chapter Ten.
Chapter Ten affords public access to information on
investor-State arbitrations conducted pursuant to the
Agreement. For example, Chapter Ten requires that hearings be
generally open to the public and that key documents be publicly
available, with exceptions for confidential information,
including 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 claims a
tribunal finds to be frivolous. Finally, within three years
after the Agreement enters into force the Parties will consider
whether to establish an appellate body, or similar mechanism,
to review arbitral awards rendered by tribunals under the
Chapter.
Chapter Ten provides that, ``except in rare
circumstances,'' nondiscriminatory regulatory actions designed
and applied to meet legitimate public welfare objectives, such
as public health, safety, and the environment, are not indirect
expropriations.
The Agreement does not require the United States to give
Panamanian investors greater substantive rights than U.S.
companies already enjoy in the United States.
Panama Canal Authority. Chapter Ten clarifies that nothing
in it or Chapter Eleven (Cross-Border Trade in Services)
constrains Panama's right to appoint the Panama Canal Authority
as the entity exclusively responsible for administering the
Panama Canal. The Chapter provides that an investor alleging
that an act of the Panama Canal Authority breaches an
``investment agreement'' must first submit the claim to the
Panama Canal Authority for resolution. At the expiration of a
three-month period, the investor may submit its claim to
investor-State arbitration under the Agreement regardless of
whether the Panama Canal Authority has issued a decision
regarding the claim.
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.
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 the other Party (e.g., electronic delivery
of services from the United States to Panama);
in the territory of a Party by a person of
that Party to a person of the other Party (e.g., a
Panamanian company provides services to U.S. visitors
in Panama); and
by a national of a Party in the territory of
the other Party (e.g., a U.S. lawyer provides legal
services in Panama).
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 the 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 most-
favored-nation treatment to service suppliers of the other
Party. Thus, each Party must treat service suppliers of the
other 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. The
Chapter's provisions apply to existing service suppliers as
well as those who seek to supply services. 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 on 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 (Financial Services)), except that certain
provisions of Chapter Eleven apply to investments in financial
services that are not regulated as financial institutions and
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 I and II measures or
sectors for which it negotiated exemptions from Chapter
Eleven's core obligations (national treatment, most-favored-
nation treatment, market access, and local presence). Annex I
contains each Party's list of existing non-conforming measures
at the central and regional levels of government. The United
States has scheduled an exemption from the national treatment,
NTR (MFN), and local presence obligations for all existing
state measures. With respect to the market access discipline,
the United States has reserved the right to take measures that
are not inconsistent with the U.S. commitments in the WTO
General Agreement on Trade in Services (GATS). All existing
local measures are exempted for both Parties without the need
to be listed. If a Party liberalizes any of these non-
conforming Annex I measures, it must thereafter maintain the
measure at least at that level of openness. Each Party has
listed in Annex II sectors or activities in which it reserves
the right to adopt or maintain future non-conforming measures.
Specific Commitments. Chapter Eleven includes a
comprehensive definition of express delivery services that
requires each Party to provide national treatment, most-
favored-nation treatment, and additional benefits to express
delivery services of the other Party. The Chapter provides that
the Parties will try to maintain the level of market openness
for express delivery services they provided on the date the
Agreement was signed. The Chapter provides that Panama 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.
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.
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 apply to
government subsidies. In addition, the Chapter makes clear that
the Agreement does not impose any obligation on a Party with
respect to its immigration measures, including admission or
conditions of admission for temporary entry.
CHAPTER TWELVE: FINANCIAL SERVICES
Chapter Twelve of the Agreement covers measures relating to
the supply of financial services. It provides rules governing
each Party's treatment of: (i) financial institutions of the
other Party; (ii) investors of the other Party, and their
investments, in financial institutions; and (iii) cross-border
trade in financial services.
Key Concepts. The Chapter defines a ``financial
institution'' as any financial intermediary or other enterprise
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 most-favored-nation
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 the
other Party, and services companies that are currently
supplying and that seek to supply financial services on a
cross-border basis. The rules do not apply to measures adopted
or maintained by a Party relating to certain specified services
and activities--for example, activities or services forming
part of a public retirement plan or statutory system of social
security--unless the Party allows its financial institutions to
compete with a public entity or a financial institution to
supply such services and activities. Provisions such as the
prudential and monetary and exchange rate exceptions ensure
that governments may continue to regulate the financial sector
and take action to ensure the stability and integrity of the
financial system in a financial crisis.
Non-Conforming Measures. Similar to Chapters Ten
(Investment) and Eleven (Cross-Border Trade in Services), each
Party has listed in Annex III particular 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. If a Party,
including a state or local government, liberalizes one of these
non-conforming measures with respect to investment, 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 the other 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 includes 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 territory of the other Party. In addition, the Chapter
requires each Party to regulate its major 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
effective 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 the
other 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.,
Panama must ensure that its public phone companies do
not provide preferential access to Panamanian banks or
Internet service providers, to the detriment of U.S.
competitors);
give the other 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
the other 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, each Party:
will adopt procedures that will help ensure
that they maintain open and transparent
telecommunications regulatory regimes, including
requirements to make interconnection agreements and
service tariffs publicly available;
will require their telecommunications
regulators to resolve disputes between suppliers and
provide foreign suppliers the right to seek judicial
review of 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.
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 provisions in this and other recent U.S.
trade agreements represent 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 the other
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. The Parties will apply the principles
of national treatment and most-favored-nation 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
the other 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 the other 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).
Additional Provisions. Chapter Fourteen contains additional
provisions relating to authentication, online consumer
protection, and paperless trade administration.
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. Chapter Fifteen commits the Parties to
ratify or accede to several agreements on intellectual property
rights, including, by the date the Agreement enters into force,
the WIPO Copyright Treaty, the WIPO Performances and Phonograms
Treaty, the Convention Relating to the Distribution of
Programme-Carrying Satellite Signals, and the Patent
Cooperation Treaty, and, within specified periods, the
International Convention for the Protection of New Varieties of
Plants and the Trademark Law Treaty. The United States is
already a party to these agreements. With very limited
exceptions, Chapter Fifteen commits each Party to provide
national treatment to the other Party's nationals with respect
to the enjoyment and protection of the intellectual property
rights covered by the Chapter.
Trademarks and Geographical Indications. Chapter Fifteen
requires each Party to protect trademarks and geographical
indications, including by refusing protection or recognition of
a geographical indication that is likely to cause confusion
with a preexisting trademark. The Chapter calls for trademarks
to include collective marks and certification marks. The
Chapter also requires each Party to establish, to the maximum
degree practical, an electronic system for applying for,
registering, and maintaining trademarks, as well as to work to
provide an online database. Each Party must also provide
efficient and transparent procedures governing applications to
protect trademarks and geographical indications. Furthermore,
the Chapter requires each Party's Internet domain name
management system to include a dispute resolution procedure to
address trademark cyber-piracy.
Copyright and Related Rights. Chapter Fifteen obligates the
Parties to provide broad protection for 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). The Chapter also
provides enhancements of the rights of copyright owners over
digital copies of their works. It also calls for each Party to
provide a right of communication to the public, including the
exclusive right to authorize making protected works available
online. The Chapter specifically requires each Party to protect
the rights of performers and producers of phonograms.
To curb copyright piracy, the Chapter requires government
agencies of the Parties to use only legitimate computer
software, setting an example for the private sector. The
Chapter also includes provisions on anti-circumvention of
technological measures, 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 provides 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 includes a variety of provisions
for the protection of patents. The Parties agree to make
patents available for any invention, subject to limited
exclusions. 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, each Party must make best
efforts to process patent applications and marketing approval
applications expeditiously. With respect to most products, a
Party must adjust the patent term to compensate for
unreasonable delays that occur while granting a patent. For
pharmaceutical products, a Party may provide for such
adjustments if there is an unreasonable delay in granting a
patent or providing marketing approval for a product.
Certain Regulated Products. Chapter Fifteen includes
additional specific provisions relating to pharmaceuticals and
agricultural chemicals. Among other things, the Chapter
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--normally 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
cannot be used without that company's consent in granting
approval to market a new product. If a Party bases its decision
to approve a pharmaceutical product for marketing in its
territory on a marketing approval the other Party has granted
for that product, and it approves the product within six months
after the company applies for the approval in the Party, the
period of test data protection will be counted from the date
the other Party approved the product. The Chapter's rules
governing test data protection for pharmaceutical products are
subject to a public health exception in accordance with the
Doha Declaration on the TRIPS Agreement and Public Health. The
Chapter also requires the Parties to implement procedures for
the expeditious adjudication of disputes concerning the
validity or infringement of a patent, a transparent system to
provide notice to a patent holder that another person is
seeking to market an approved pharmaceutical product during the
term of a patent, and sufficient time and opportunity for a
patent holder to seek, prior to the marketing of an allegedly
infringing product, available remedies for an infringing
product.
Public Health. Chapter Fifteen expresses the Parties'
understanding that its obligations do not and should not
prevent a Party from taking measures to protect public health,
in accordance with the Doha Declaration on the TRIPS Agreement
and Public Health, by promoting access to medicines for all.
Enforcement Provisions. Chapter Fifteen also creates
obligations with respect to the enforcement of intellectual
property rights in administrative, civil, and criminal
proceedings, and at the border. For example, the Parties, in
determining damages in civil proceedings involving copyright
infringement or trademark counterfeiting, must take into
account the value of the legitimate goods as well as the
infringer's profits, and must also provide for damages based on
a fixed range (i.e., ``pre-established damages''), as an option
that the right holder can elect instead of actual damages.
Chapter Fifteen further provides that each Party's 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. The Chapter also provides that each Party must
apply criminal penalties against willful counterfeiting and
piracy, including end-user piracy, on a commercial scale.
Chapter Fifteen also requires each Party to empower its law
enforcement agencies to take ex officio enforcement action at
the border against pirated or counterfeit goods without waiting
for a formal complaint.
Transition Periods. Most obligations in the Chapter take
effect on the date the Agreement enters into force. However,
Panama may delay giving effect to certain specified obligations
for periods ranging from one year to three years after that
date.
CHAPTER SIXTEEN: LABOR
Chapter Sixteen sets out the Parties' commitments and
undertakings regarding trade-related labor rights.
Fundamental Labor Rights. Each Party commits to adopt and
maintain in its statutes, regulations, and practice certain
enumerated labor rights, as stated in the 1998 ILO Declaration
on Fundamental Principles and Rights at Work and Its Follow Up.
Specifically, these are (i) freedom of association; (ii) the
effective recognition of the right to collective bargaining;
(iii) the elimination of all forms of forced or compulsory
labor; (iv) the effective abolition of child labor and, for
purposes of the Agreement, a prohibition on the worst forms of
child labor; and (v) the elimination of discrimination in
respect of employment and occupation. In order to establish a
violation of this obligation, a Party must demonstrate that the
other Party has failed to comply in a manner affecting trade or
investment between the Parties. Neither Party may waive or
otherwise derogate from its statutes or regulations
implementing this obligation in a manner affecting bilateral
trade or investment where the waiver or derogation would be
inconsistent with one of the enumerated rights. For the United
States, the Chapter's provisions regarding fundamental labor
rights apply to federal law only.
Effective Enforcement. Each Party commits not to fail to
effectively enforce its labor laws on a sustained or recurring
basis in a manner affecting trade or investment between the
Parties. The Chapter defines ``labor laws'' to include laws
directly related to the ILO fundamental labor rights, as well
as laws providing for acceptable conditions of work with
respect to minimum wages, hours of work, and occupational
safety and health, and laws providing labor protections for
children and minors, including a prohibition on the worst forms
of child labor. 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. Each Party commits to afford
procedural guarantees that ensure workers and employers have
access to tribunals for the enforcement of its labor laws. To
this end, each Party must ensure that proceedings before these
tribunals are fair, equitable, and transparent and comply with
due process of law. Decisions of such tribunals must be 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. Each Party also
commits 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 as a first step if a Party considers
that the other Party is not complying with its obligations
under the Chapter. The complaining Party may, after an initial
60-day consultation period under Chapter Sixteen, invoke the
Agreement's general dispute settlement mechanism by requesting
additional consultations or a meeting of the Agreement's
cabinet-level Free Trade Commission under Chapter Twenty
(Dispute Settlement). 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
arising under the Chapter.
Institutional Arrangements, 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 Party and the public
regarding the Chapter. Each Party's contact point must provide
transparent procedures for the submission, receipt, and
consideration of communications from persons of a Party
relating to the Chapter.
The Chapter also creates a labor cooperation and capacity
building mechanism through which the Parties will work together
to address labor matters of common interest. In particular, the
mechanism will assist the Parties to establish priorities for,
and carry out, 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.
General Principles. Each Party must strive to ensure that
its environmental laws provide for and encourage high levels of
environmental protection and continue to improve its respective
levels of environmental protection. Each Party also commits not
to waive or otherwise derogate from its environmental laws to
weaken or reduce the levels of environmental protection in a
manner affecting trade or investment between the Parties other
than pursuant to a provision in its environmental law providing
for waivers or derogations. 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.
Multilateral Environmental Agreements. The Parties
recognize that certain multilateral environment agreements
(MEAs) play an important role globally and domestically in
protecting the environment. The Chapter includes a provision
requiring each Party to adopt, maintain, and implement laws,
regulations, and all other measures to fulfill its obligations
under certain MEAs to which both governments are parties
(``covered agreements''). To establish a violation of this
obligation a Party must demonstrate that the other Party has
failed to comply in a manner affecting trade or investment
between the Parties.
Chapter Seventeen provides that in the event of any
inconsistency between a Party's obligations under the Agreement
and a covered agreement, the Party must seek to balance its
obligations under both agreements, but this will not preclude a
Party from taking measures to comply with the covered agreement
as long as the measure's primary purpose is not to impose a
disguised restriction on trade.
Effective Enforcement. Each Party commits not to fail to
effectively enforce its environmental laws, and its laws,
regulations, and other measures to fulfill its obligations
under the covered agreements, on a sustained or recurring basis
in a manner affecting trade or investment between the Parties.
For the United States, ``environmental laws'' comprise federal
environmental statutes and regulations promulgated under those
statutes that are enforceable by action of the federal
government.
Procedural Matters. Each Party commits 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 those authorities duly consider
such requests. Each Party must also make appropriate and
effective remedies available for violations of its
environmental laws. These remedies may include, for example,
fines, injunctions, or requirements to take remedial action or
pay for the cost of containing or cleaning up pollution.
Environmental Performance. Each Party will encourage the
development and use of flexible, voluntary, and incentive-based
mechanisms for environmental protection and will encourage the
development and improvement of goals and indicators for
measuring environmental performance as well as flexible means
for achieving performance goals.
Institutional Arrangements and Cooperation. Chapter
Seventeen establishes a cabinet-level Environmental Affairs
Council to oversee the implementation of the Chapter. The
Council will provide for the public to participate in its work,
including by affording an opportunity at each Council meeting,
unless the Parties otherwise agree, for the public to express
views on how the Chapter is being implemented. The Council must
also provide appropriate opportunities for the public to
participate in the development and implementation of joint
environmental activities, including those developed under a
separate bilateral environmental cooperation agreement that the
Parties have negotiated.
Public Participation and Submissions. Each Party must
provide for the receipt and consideration of submissions from
persons of a Party on matters related to implementation of the
Chapter. Each Party will also convene a national advisory
committee to solicit views on matters related to the
implementation of the Chapter. In addition, the Chapter
provides that any person of a Party may file a submission with
an independent secretariat asserting that a Party is failing 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 a
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. The Parties will designate the secretariat and
make related arrangements through a separate understanding.
Dispute Settlement. Chapter Seventeen provides for
cooperative consultations as a first step if a Party considers
that the other Party is not complying with its obligations
under the Chapter. The complaining Party may, after an initial
60-day consultation period, invoke the Agreement's general
dispute settlement mechanism by requesting additional
consultations or a meeting of the Agreement's cabinet-level
Free Trade Commission under Chapter Twenty (Dispute
Settlement). 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
arising under the Chapter.
CHAPTER EIGHTEEN: TRANSPARENCY
Section A of Chapter Eighteen sets out requirements
designed to foster openness, transparency, and fairness in the
adoption and application of measures on matters covered by the
Agreement. It requires that each Party must promptly publish
all laws, regulations, procedures, and administrative rulings
of general application concerning subjects covered by the
Agreement, or otherwise make them available. It requires that,
to the extent possible, Parties publish proposed regulations in
advance and give interested persons a reasonable opportunity to
comment. Wherever possible, each Party must provide reasonable
notice to the other Party's 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.
In Section B of Chapter Eighteen, the Parties affirm their
commitment to eliminate bribery and corruption, including
bribery in international trade and investment. To this end,
each Party is obligated to make it a criminal offense for their
public officials to solicit or accept a bribe, and for any
person subject to its jurisdiction to bribe a public official
of that Party or a foreign public official in exchange for
favorable government action in matters affecting international
trade or investment. The 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 comprises the Parties' trade
ministers and will meet annually. The Commission will assist in
the resolution of any disputes that may arise under the
Agreement. The Commission may, among other things, issue
interpretations of the Agreement and agree to accelerate duty
elimination on particular products and adjust the Agreement's
product-specific rules of origin.
Each Party must 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. The overall objective of the Committee is to
assist Panama to implement the Agreement and adjust to
liberalized bilateral trade. Particular functions of the
Committee include: prioritizing trade capacity building
projects; inviting international donor institutions, private
sector entities, and non-governmental organizations to assist
in the development and implementation of trade capacity
building projects; and monitoring and assessing progress in
implementing those 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 a forum for resolving the
matter that is set forth in any valid agreement between the
Parties. The selected forum will be the exclusive venue for
resolving that dispute.
Consultations. A Party may request consultations with the
other Party on any actual or proposed measure that it believes
might affect the operation of the Agreement. If the Parties
cannot resolve the matter through consultations within a
specified period (normally 60 days), either 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), the Party
that referred the matter to the Commission may refer the
matter, if it involves an actual measure, to a panel comprising
independent experts that the Parties select. 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 Parties agree otherwise, a panel is to present
its initial report within 120 days after the last panelist is
selected. 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. If the Parties cannot resolve the
dispute after they receive the panel's final report, the
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 Parties or, failing that, will be set at 50 percent of
the level of trade concessions the complaining Party was
authorized to suspend.
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 either five years after the Agreement enters into
force 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 provisions that generally apply
to the entire Agreement. 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 makes clear that
nothing in the Agreement prevents a Party from taking actions
it considers necessary to protect its essential security
interests, and specifically provides that an arbitration panel
must apply the essential security exception if a Party invokes
it. The United States has clarified with respect to non-
conforming measures relating to port activities listed in Annex
II that the landside aspects of port activities are subject to
the Agreement's essential security exception.
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: (i) national treatment obligation
for goods; (ii) national treatment and most-favored-nation
treatment obligations for services; (iii) prohibitions on
performance requirements; and (iv) 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 the other 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 the legal
requirements of each Party, 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 establishes the procedures for the
Agreement to enter into force and terminate.
E. General Description of the Bill to Implement the Agreement
Sec. 1. Short title; table of contents
This section provides that the short title of the act
implementing the Agreement is the ``United States-Panama Trade
Promotion 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 and Panama, to establish free trade between the United
States and Panama 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 the Agreement.
Sec. 3. Definitions
This section defines the terms ``Agreement,''
``Commission,'' ``HTS,'' and ``Textile or apparel good'' for
purposes of the Implementation Act.
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 SAA. Section 101 also provides
that, if the President determines that Panama has taken
measures necessary to comply with obligations that take effect
at the time the Agreement enters into force, the President may
exchange notes with Panama providing for the entry into force
of the Agreement with respect to the United States on or after
January 1, 2012.
Sec. 102. Relationship of the Agreement to United States and state law
This section establishes the relationship between the
Agreement and U.S. law. Section 102 clearly states that no
provision of the Agreement will be given effect if it is
inconsistent with any federal law.
Section 102 also provides that only the United States may
bring a court action to resolve a conflict between a state law
and the Agreement. And it precludes any private right of action
against the federal government, state or local governments, or
a private party 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
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 that date.
Section 103 further 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 proposed in the SAA shall
be issued within 1 year after the date on which the Agreement
enters into force. In accordance with the SAA, any agency
unable to issue a regulation within 1 year must report to the
relevant Congressional committees, at least 30 days prior to
the end of the 1-year period, the reasons for the delay and 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 action by
proclamation that is subject to the requirements of this
section. Under the consultation and layover provisions, the
President must obtain advice regarding the proposed action from
the Commission and from the appropriate advisory committees
established under section 135 of the Trade Act of 1974 (19
U.S.C. Sec. 2155). The President must also submit to the Senate
Committee on Finance and the House Committee on Ways and Means
a report that sets forth the action proposed, the reasons for
the proposed action, and the advice of the appropriate advisory
committees and the 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 proposed 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. Section 105 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 certain claims against the United States
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 and the amendments made by it take effect on
the date on which the Agreement enters into force, except for
sections 1 through 3, title I, and title V, which take effect
on the date of enactment of the Act. This section also provides
that the amendments made by section 204, 205, 207, and 401 of
the Implementation Act take effect on the date of enactment of
the Implementation Act and apply with respect to Panama on the
date on which the Agreement enters into force. Section 107 also
provides that the provisions of the Implementation Act (other
than this subsection and title V) and the amendments to other
statutes made by it (other than the amendments made by title V)
will cease to have effect on the date on which the Agreement
terminates.
TITLE II--CUSTOMS PROVISIONS
Sec. 201. Tariff modifications
Section 201(a) authorizes the President to implement by
proclamation the modification or continuation of any duty,
imposition of any additional duties, or the continuation of
duty-free or excise treatment that the President determines to
be necessary or appropriate to carry out or apply Articles 3.3,
3.5, 3.6, 3.26, 3.27, 3.28, and 3.29, and Annex 3.3 of the
Agreement. In addition, section 201(a) requires the President
to terminate the designation of Panama as a beneficiary
developing country for purposes of the Generalized System of
Preferences and the Caribbean Basin Economic Recovery Act
program on the date the Agreement enters into force.
Section 201(b) authorizes the President, subject to the
consultation and layover provisions of section 104, to proclaim
the modification or continuation of any duty, the modification
of the staging of any duty elimination, the imposition of
additional duties, or the continuation of duty-free or excise
treatment that the President determines to be necessary or
appropriate to maintain the general level of reciprocal and
mutually advantageous concessions with respect to Peru provided
by the Agreement.
Section 201(c) authorizes the President, with respect to
any good for which the base rate of duty in the Tariff Schedule
of the United States to Annex 3.3 of the Agreement is a
specific or compound rate of duty, to substitute for the base
rate an ad valorem rate that the President determines to be
equivalent to the base rate.
Section 201(d) authorizes the President, in implementing
the tariff rate quotas set forth in the Agreement, to take
actions necessary to ensure that imports of agricultural goods
do not disrupt the orderly marketing of commodities in the
United States.
Sec. 202. Additional duties on certain agricultural goods
Section 202 implements the agricultural safeguard
provisions of the Agreement. Section 202(a) defines the terms
``applicable NTR (MFN) rate of duty,'' ``safeguard good,''
``schedule rate of duty,'' ``trigger level,'' ``year 1 of the
agreement'' and ``years other than year 1 of the agreement''
for purposes of section 202. Section 202(b) requires the
Secretary of the Treasury (``Secretary'') to impose additional
duties on imports of certain Panamanian agricultural goods if
the Secretary determines that, prior to such importation, the
total volume of the imported good in a calendar year exceeds
the volume by amounts set forth in this section and in the
Schedule of the United States to Annex 3.3 of the Agreement.
Section 202(c) provides that the Secretary may not impose an
additional duty on a good if, at the time of entry, the good is
subject to a safeguard measure under the procedures set out in
subtitle A of title III of the Implementation Act or under the
safeguard procedures set out in chapter 1 of title II of the
Trade Act of 1974. Finally, Section 202(d) provides that the
additional duties shall cease to apply to a good on the date on
which duty-free treatment must be provided to that good under
the Schedule of the United States to Annex 3.3 of the
Agreement.
Sec. 203. Rules of origin
Section 203 implements the general rules of origin set
forth in Chapter 4 of the Agreement. These rules define the
circumstances under which a good imported from Panama qualifies
as an originating good and is thus eligible for preferential
tariff treatment under the Agreement.
Section 203(a) establishes the Harmonized Tariff Schedule
of the United States (``HTS'') as the basis of any tariff
classification. It also provides that any cost or value
referred to in section 203 shall be recorded and maintained in
accordance with the generally accepted accounting principles
applicable in the territory of the country in which the good is
produced.
Section 203(b) provides that a good is an originating good
if it falls within one of three specified categories. First, a
good qualifies as an originating good if it is wholly obtained
or produced entirely in the territory of Panama, the United
States, or both. Second, a good qualifies as an originating
good if the good is produced in the territory of Panama, the
United States, or both, 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 specified in Annex 4.1 of the
Agreement. Third, and finally, a good qualifies as an
originating good if the good is produced entirely in the
territory of Panama, the United States, or both, exclusively
from materials that fall within the first two categories.
The remainder of section 203 sets forth specific rules
related to determining whether a good meets the Agreement's
specific requirements to qualify as an originating good.
Section 203(c) implements provisions in Annex 4.1 of the
Agreement that require certain goods to have a specified
percentage of ``regional value content'' to qualify as
originating goods. It prescribes alternative methods for
calculating regional value content, as well as a specific
method that must be used in the case of certain automotive
goods. Section 203(d) addresses how materials are to be valued
for purposes of calculating the regional value content of a
good under subsection 203(c) and for purposes of applying the
de minimis rules under subsection 203(f). Section 203(e)
provides a rule of accumulation for originating materials from
the territory of Panama or the United States that are used in
the production of a good in the territory of the other country.
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(g) addresses how to determine
whether fungible goods and materials qualify as originating or
non-originating under the Agreement. Section 203(h) provides
rules for the treatment of accessories, spare parts, or tools
that are delivered with a good. Sections 203(i) and (j) address
the treatment of packaging materials and containers for retail
sale and for shipment in determining whether a good qualifies
as an originating good. Section 203(k) provides that indirect
materials shall be treated as originating materials without
regard to where they are produced. Section 203(l) provides
rules for the treatment of goods that undergo further
production in a third country or that otherwise transit through
a third country. And section 203(m) provides rules for the
treatment of goods classifiable as sets.
Section 203(n) defines various terms used in section 203.
Section 203(o) authorizes the President to proclaim the
specific rules of origin set forth in Annex 4.1 of the
Agreement and to modify certain rules of origin in the
Agreement by proclamation subject to the consultation and
layover provisions of section 104.
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 from the General Fund of the
Treasury.
Sec. 205. Disclosure of incorrect information; false certifications of
origin; denial of preferential tariff treatment
Section 205(a) amends section 592 of the Tariff Act of 1930
(19 U.S.C. Sec. 1592) to impose penalties on an importer,
exporter, or producer that makes an invalid claim for
preferential tariff treatment under the Agreement through
negligence, gross negligence, or fraud, unless the importer,
exporter, or producer, after discovering that the claim is
invalid, promptly and voluntarily corrects the claim and pays
any customs duties owed. Section 205(b) amends section 514 of
the Tariff Act of 1930 (19 U.S.C. Sec. 1514) to provide that,
if an importer, exporter, or producer has engaged in a pattern
of conduct in providing false representations that a good
qualifies as originating, the United States may suspend
preferential tariff treatment under the Agreement to identical
goods covered by any subsequent representations that the person
may make.
Sec. 206. Reliquidation of entries
Section 206 amends 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 an originating good within 1
year of importation, even if no such claim was made at the time
of the importation.
Sec. 207. Recordkeeping requirements
Section 207 amends section 508 of the Tariff Act of 1930
(19 U.S.C. Sec. 1508) to establish recordkeeping requirements
for U.S. exporters and producers that issue certifications of
origin for goods exported to Panama.
Sec. 208. Enforcement relating to trade in textile or apparel goods
This section authorizes the President to apply anti-
circumvention provisions concerning trade in textile and
apparel goods. Pursuant to article 3.21 of the Agreement, the
Secretary may request that the Government of Panama conduct a
verification to determine the compliance of exporters and
producers with applicable customs laws, regulations, and
procedures regarding trade in textile or apparel goods, and to
determine the accuracy of a claim of origin for a textile or
apparel good. Section 208(a) provides that the President may
direct the Secretary to take ``appropriate action'' while the
verification is being conducted. Under section 208(b), such
appropriate action includes detaining, suspending preferential
tariff treatment of, or denying entry to, any textile or
apparel good that the person subject to the verification has
produced or exported or for which a claim has been made that is
the subject of the verification if the Secretary determines
there is insufficient information to support a claim for such
treatment.
Section 208(c) permits the President to direct the
Secretary to take ``appropriate action'' after a verification
has been completed. Section 208(d) defines ``appropriate
action'' to include the denial of preferential treatment or
entry to textile or apparel goods that the person subject to
the verification has exported or produced until such time as
the Secretary receives information sufficient to prove
compliance or until an earlier date as the President may
direct.
Finally, section 208(e) permits the Secretary to publish
the name of any person that the Secretary determines has
engaged in circumvention of applicable laws, regulations, or
procedures affecting trade in textile or apparel goods or has
failed to demonstrate that it produces, or is capable of
producing, textile or apparel goods.
Sec. 209. Regulations
Section 209 authorizes the Secretary to prescribe
regulations necessary to carry out the rules of origin and
customs user fee provisions in the Implementation Act and to
carry out the President's proclamation authority under section
203(o).
TITLE III--RELIEF FROM IMPORTS
Sec. 301. Definitions
This section defines the terms ``Panamanian article'' and
``Panamanian textile or apparel article'' for purposes of this
title. Section 301(1) defines ``Panamanian article'' as an
article that qualifies as an originating good under section
203(b) of the Act. And section 301(2) defines ``Panamanian
textile or apparel article'' as a textile or apparel good as
defined in section 3(4) of the Implementation Act that is a
Panamanian article.
Subtitle A--Relief From Imports Benefiting From the Agreement
Subtitle A of title III implements the bilateral safeguard
provisions set out in Chapter Eight of the Agreement. It
authorizes the President, after an investigation and
affirmative determination by the Commission, to suspend duty
reductions or impose duties temporarily up to normal trade
relations (NTR)/most-favored-nation (MFN) rates on a
``Panamanian article'' when, as a result of the reduction or
elimination of a duty under the Agreement, the article is being
imported into the United States in such increased quantities
and under such conditions as to be a substantial cause of
serious injury or threat of serious injury to a domestic
industry that produces a like or directly competitive good. The
standards and procedures set out in this subtitle closely
parallel the procedures for global safeguards set forth in
sections 201 through 204 of the Trade Act of 1974 (19 U.S.C.
Sec. Sec. 2251-2254).
Sec. 311. Commencing of action for relief
Section 311(a) requires an entity that is representative of
an industry to file a petition with the Commission to commence
a bilateral safeguard investigation. Section 311(a) defines an
entity to include a trade association, firm, certified or
recognized union, or a group of workers.
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 Panamanian article is being imported into the
United States in such increased quantities and under such
conditions that imports of the Panamanian 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)), which apply to global safeguard investigations,
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 and to present evidence; the factors to
be taken into account by the Commission in making its
determinations; and authorization for the Commission to
promulgate regulations providing 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 Panamanian article
for which import relief has already been provided under
subtitle A.
Sec. 312. Commission action on petition
Section 312(a) establishes deadlines for Commission action
following the initiation of a bilateral safeguard
investigation. Section 312(b) applies certain statutory
provisions regarding 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 and findings under this section. If the
Commission renders an affirmative injury determination or a
determination that the President may treat as an affirmative
determination in the event of an equally divided vote by the
Commission, section 312(c) requires the Commission to find and
recommend to the President the amount of import relief that is
necessary to remedy or prevent the injury and to facilitate the
efforts of the domestic industry to make a positive adjustment
to import competition. Section 312(d) requires the Commission
to submit a report to the President regarding its determination
and specifies the information that the Commission must include
in the report. Upon submitting the report to the President,
section 312(e) requires the Commission to promptly release the
report to the public, except for any confidential information
contained therein, and to publish a summary of the report in
the Federal Register.
Sec. 313. Provision of relief
Section 313(a) 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 treats as affirmative, to the extent that the
President determines is necessary to remedy or prevent the
injury and to facilitate the efforts of the domestic industry
to make a positive adjustment to import competition. Section
313(b), however, provides that the President need not provide
import relief if the President determines that 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, which includes the suspension of
any further reduction in the rate of duty imposed on the
article in question 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
at the time the import relief is provided; or (2) the NTR (MFN)
duty rate on the day before the Agreement enters into force.
Section 313(c) also requires the President to provide for the
progressive liberalization of import relief at regular
intervals during the period of its application if that period
exceeds 1 year.
Section 313(d) limits any import relief that the President
imposes in a bilateral safeguard action to no more than 4 years
in the aggregate. The initial period of import relief that the
President imposes may not exceed 2 years. The President may
extend the relief up to an additional 2 years, however, if (1)
the Commission makes an affirmative determination, or a
determination that the President treats as affirmative, that
import relief continues to be necessary to remedy or prevent
serious injury and that there is evidence that the domestic
industry is making a positive adjustment to import competition;
and (2) the President makes a determination to the same effect.
Section 313(e) specifies the duty rate to be applied to
Panamanian articles after termination of a safeguard action. On
the termination of import relief, the rate of duty for the
remainder of the calendar year shall be the rate that was
scheduled to have been in effect 1 year after the initial
provision of import relief. For the rest of the duty phase-out
period, the President may set the duty either at the rate
called for under the Schedule of the United States to Annex 3.3
of the Agreement or in a manner that eliminates the duty in
equal annual stages ending on the date set out in that
Schedule.
Section 313(f) precludes the application of import relief
pursuant to the bilateral safeguard provisions with respect to
any Panamanian article that is (1) subject to import relief
under the global safeguard provisions in chapter 1 of title II
of the Trade Act of 1974 (19 U.S.C. Sec. Sec. 2251 et seq.);
(2) subject to import relief under subtitle B of title III of
the Act; or (3) subject to an additional duty assessment under
section 202(b) of the Act.
Sec. 314. Termination of relief authority
This section provides that the President's authority to
impose import relief under the bilateral safeguard expires 10
years after the date on which the Agreement enters into force.
If, however, the period for elimination of duties on a
particular article exceeds 10 years, relief may be provided for
that article until the date on which the duty elimination
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 new
concessions to Panama as compensation for the imposition of
import relief pursuant to the bilateral safeguard.
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. Sec. 2251
et seq.) to investigations under title III of the Act.
Subtitle B--Textile and Apparel Safeguard Measures
Subtitle B of title III implements the Agreement's textile
and apparel safeguard.
Sec. 321. Commencement of action for relief
Section 321(a) requires an interested party to file a
request with the President in order to commence action for
relief under the textile and apparel safeguard. Upon the filing
of a request, the President must review the request to
determine, from information presented in the request, whether
to commence consideration of the request on its merits. Section
321(b) provides that, if the President determines that the
request contains the information necessary for the request to
be considered on the merits, the President must publish notice
in the Federal Register stating that the request will be
considered and seeking public comments on the request. The
notice must contain a summary of the request and the dates by
which comments and rebuttals must be received.
The Committee notes our regulatory processes should be
administered in an open and transparent manner that can serve
as a model for our trading partners. For example, the Committee
understands that, in addition to publishing a summary of a
request for safeguard relief, the President plans to make the
full text of the request available on the U.S. Department of
Commerce's International Trade Administration website, subject
to the protection of confidential business information, if any.
The Committee encourages this and similar efforts to enhance
government transparency.
Sec. 322. Determination and provision of relief
Section 322 sets out the procedures to be followed in
considering a request filed under section 321. If a positive
determination is made under section 321(b), section 322(a)
requires the President to determine whether, as a result of the
elimination of a duty under the Agreement, a Panamanian textile
or apparel article 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) also
provides that, in making such 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 losses, and investment, none of which is
necessarily decisive. Finally, section 322(a) provides that the
President shall not consider changes in consumer preference or
technology as factors supporting a determination of serious
damage or actual threat thereof.
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 is necessary to remedy or prevent the
serious damage and to facilitate adjustment by the domestic
industry. Section 322(b) also specifies the nature of the
import relief that the President may impose, which consists 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 in place for the textile or apparel article at the time
the import relief is provided; or (2) the NTR (MFN) duty rate
for that article on the day before the Agreement enters into
force.
Sec. 323. Period of relief
Section 323(a) limits any import relief that the President
imposes under the textile and apparel safeguard to no more than
3 years in the aggregate. Section 323(b) provides that if the
initial period of import relief is less than 3 years, the
President may extend the relief (to a maximum of 3 years) if
the President determines that continuation is necessary to
remedy or prevent serious damage and to facilitate adjustment,
and that the domestic industry is, in fact, adjusting to import
competition.
Sec. 324. Articles exempt from relief
Section 324 of the bill provides that relief may not be
granted to an article under the textile and apparel safeguard
if: (i) relief previously has been granted to that article
under the textile and apparel safeguard; or (ii) the article is
subject, or becomes subject, to a safeguard measure under (a)
Chapter Eight of the Agreement (corresponding to subtitle A of
title III of the bill), or (b) chapter 1 of title II of the
Trade Act of 1974.
Sec. 325. Rate after termination of import relief
This section provides that on the date import relief
terminates, imports of the textile or apparel article that was
subject to the safeguard action will be subject to the rate of
duty that would have been in effect on that date in the absence
of the relief.
Sec. 326. Termination of relief authority
This section provides that authority to provide relief
under the textile and apparel safeguard will expire 5 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 new
concessions to Panama as compensation for the imposition of
import relief pursuant to the textile and apparel safeguard.
Sec. 328. Confidential business information
This section provides that confidential business
information submitted in the course of consideration of a
request for a textile or apparel safeguard may not be released
absent the consent of the party providing the information. It
also provides that a party submitting confidential business
information in a textile or apparel safeguard proceeding must
submit a non-confidential version of the information or a
summary of the information.
Subtitle C--Cases Under Title II of the Trade Act of 1974
Subtitle C of title III implements the global safeguard
provisions of the Agreement. It authorizes the President, in
granting global import relief under the global safeguard
provisions in sections 201 through 204 of the Trade Act of 1974
(19 U.S.C. Sec. Sec. 2251-2254), to exclude imports of
originating articles from the relief when certain conditions
are present.
Sec. 331. Findings and action on goods of Panama
Section 331(a) provides that, if the Commission makes an
affirmative determination, or a determination that the
President may treat as an affirmative determination, in a
global safeguard investigation initiated under chapter 1 of
title II of the Trade Act of 1974 (19 U.S.C. Sec. Sec. 2251 et
seq.), the Commission must find and report to the President
whether imports of the article from Panama that qualify as
originating goods under section 203(b) of the Implementation
Act are a substantial cause of serious injury or threat
thereof. Section 331(b) provides that, if the Commission makes
a negative finding under section 331(a), the President may
exclude the Panamanian articles from the global safeguard
action.
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. Modification to the Caribbean Basin Economic Recovery Act
Section 402 of the Implementation Act amends the Caribbean
Basin Economic Recovery Act to delete Panama from the list of
countries that the President may designate as beneficiary
countries. The amendment takes effect on the date on which the
President terminates Panama's designation as a beneficiary
country pursuant to section 201(a)(3) of the Act.
TITLE V--OFFSETS
Sec. 501. Customs user fees
This section amends section 13031(j)(3) of the Consolidated
Omnibus Budget Reconciliation Act of 1985 (19 U.S.C.
Sec. 58c(j)(3)) to extend the collection of passenger and
conveyance processing fees from September 1, 2021 to September
30, 2021.
Sec. 502. Time for payment of corporate estimated taxes
This section increases the amount of the required
installment of estimated tax otherwise due from a corporation
with at least $1 billion in assets in (1) July, August, or
September 2012 by 0.25 percent; and (2) July, August, or
September 2016 by 0.25 percent. The bill reduces the next
required installment to reflect the prior increase.
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
October 11, 2011, S. 1643 was ordered favorably reported,
without amendment, by voice vote, a quorum being present.
II. BUDGETARY IMPACT OF THE BILL
U.S. Congress,
Congressional Budget Office,
Washington, DC, October 12, 2011.
Hon. Max Baucus,
Chairman, Committee on Finance,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for S. 1643, the United
States-Panama Trade Promotion Agreement Implementation Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Kalyani
Parthasarathy.
Sincerely,
Douglas W. Elmendorf,
Director.
Enclosure.
S. 1643--United States-Panama Trade Promotion Agreement Implementation
Act
Summary: S. 1643 would approve the trade promotion
agreement between the government of the United States and the
government of Panama that was signed on June 28, 2007. It would
provide for tariff reductions and other changes in law related
to implementation of the agreement. In addition, the bill would
extend user fees collected by Customs and Border Protection
(CBP) that expire under current law. The bill also would shift
some corporate income tax payments between fiscal years.
The Congressional Budget Office (CBO) and the staff of the
Joint Committee on Taxation (JCT) estimate that enacting S.
1643 would increase revenues by $118 million in 2012 but would
reduce revenues by $6 million over the 2012-2021 period. CBO
estimates that enacting S. 1643 would increase direct spending
by $1 million in 2012 but would decrease direct spending by $8
million over the 2012-2021 period. Thus, the net impact of
those effects is an estimated reduction in deficits of $2
million over the 2012-2021 period. Pay-as-you-go procedures
apply because enacting the legislation would affect direct
spending and revenues.
Further, CBO estimates that implementing the legislation
would cost $4 million over the 2012-2016 period, assuming the
availability of appropriated funds.
CBO has determined that the nontax provisions of S. 1643
contain no intergovernmental mandates as defined in the
Unfunded Mandates Reform Act (UMRA) and would impose no costs
on state, local, or tribal governments.
CBO has determined that the nontax provisions of the bill
contain private-sector mandates with costs that would fall
below the annual threshold established in UMRA for private-
sector mandates ($142 million in 2011, adjusted annually for
inflation).
JCT has determined that the tax provision of S. 1643
contains no intergovernmental or private-sector mandates as
defined in UMRA.
The estimated budgetary impact of S. 1643 is shown in the
following table. The costs of this legislation fall within
budget functions 150 (international affairs), 370 (commerce and
housing credit), 750 (administration of justice), and 800
(general government).
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
------------------------------------------------------------------------------------------------------------------
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012-2016 2012-2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN REVENUES
Preferential Trade Agreement......... * * * * -1 -1 -1 -1 -1 -2 -2 -6
Corporate Payment Shift.............. 118 -118 0 0 172 -172 0 0 0 0 172 0
------------------------------------------------------------------------------------------------------------------
Estimated Revenues............... 118 -118 * * 171 -173 -1 -1 -1 -2 170 -6
CHANGES IN DIRECT SPENDINGa
Extend Customs User Fees:
Estimated Budget Authority....... 0 0 0 0 0 0 0 0 0 -16 0 -16
Estimated Outlays................ 0 0 0 0 0 0 0 0 0 -16 0 -16
Exemption from Merchandise Processing
Fee:
Estimated Budget Authority....... 1 1 1 1 1 1 1 1 0 0 5 8
Estimated Outlays................ 1 1 1 1 1 1 1 1 0 0 5 8
Total Direct Spending:a
Estimated Budget Authority....... 1 1 1 1 1 1 1 1 0 -16 5 -8
Estimated Outlays................ 1 1 1 1 1 1 1 1 0 -16 5 -8
NET INCREASE OR DECREASE (-) IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING AND REVENUES
Impact on Deficit.................... -117 119 1 1 -170 174 2 2 1 -14 -165 -2
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Congressional Budget Office and the staff of the Joint Committee on Taxation.
Notes: Components may not sum to totals because of rounding.
*Indicates a loss of revenue less than $500,000.
aIn addition, CBO estimates that implementing the provisions of S. 1643 would have a discretionary cost of $4 million over the 2012-2016 period,
assuming appropriation of the necessary amounts.
Basis of estimate: For the purposes of this estimate, CBO
assumes that S. 1643 will be enacted early in fiscal year 2012.
Revenues
Under the United States-Panama trade promotion agreement,
tariffs on U.S. imports from Panama would be phased out over
time. The tariffs would be phased out for individual products
at varying rates, ranging from immediate elimination on the
date the agreement enters into force to gradual elimination
over 10 or more years. According to the U.S. International
Trade Commission, the United States collected about $240,000 in
customs duties in 2010 on $380 million of imports from Panama.
However, since 1983, imports to the United States from Panama
have been subject to reduced tariff rates in accordance with
the Caribbean Basin Initiative (CBI), which was expanded in
legislation enacted in 2000, and is scheduled to expire on
September 30, 2020. The CBI overlaps to a large extent with the
trade promotion agreement that would be implemented by this
bill. As a result, enacting the bill would effectively replace
trade preferences under the CBI for Panama until 2021, while
also lowering tariff rates not covered by the CBI.
Based on expected imports from Panama, CBO estimates that
implementing the tariff schedule outlined in the U.S.-Panama
trade promotion agreement would reduce revenues by less than
$500,000 in 2012 and by $6 million over the 2012-2021 period,
net of income and payroll tax offsets.
This estimate includes the effects of increased imports
from Panama 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 Panama 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 Panama would
displace imports from other countries.
S. 1643 also would shift payments of corporate estimated
taxes between fiscal years 2012 and 2013 and between fiscal
years 2016 and 2017. For corporations with at least $1 billion
in assets, the bill would increase the portion of corporate
estimated payments due from July through September in both 2012
and 2016. JCT estimates that those changes would increase
revenues by $118 million in 2012 and decrease them by $118
million in 2013, and would increase revenues by $172 million in
2016 and decrease them by $172 million in 2017.
Direct spending
Under current law, certain fees (known as COBRA fees, which
were established in the Consolidated Omnibus Budget
Reconciliation Act of 1985) collected by CBP will expire in
January 2020. The bill would permit CBP to collect those fees
from September 1, 2021, to September 30, 2021. CBO estimates
that this change would increase offsetting receipts (a credit
against direct spending) by $16 million in 2021.
In addition, the bill would exempt imports from Panama from
merchandise processing fees. CBO estimates that this would
reduce offsetting receipts by $8 million over the 2012-2021
period.
Spending subject to appropriation
Implementing provisions of S. 1643 would increase the costs
of several agencies affected by the bill including:
The Department of Commerce to provide
administrative support for dispute-settlement panels
established in the agreement;
The International Trade Commission to
conduct investigations, if petitioned, into whether
Panamanian imports might threaten or cause serious
injury to domestic competitors; and
The Department of the Treasury and the
United States Trade Representative to establish
regulations to carry out provisions of the agreement.
Based on information from the agencies, CBO estimates that
those activities would cost $4 million over the 2012-2016
period, assuming appropriation of the necessary amounts.
Pay-As-You-Go considerations: The Statutory Pay-As-You-Go
Act of 2010 establishes budget-reporting and enforcement
procedures for legislation affecting direct spending or
revenues. The net changes in outlays and revenues that are
subject to those pay-as-you-go procedures are shown in the
following table.
CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR S. 1643 AS ORDERED REPORTED BY THE SENATE COMMITTEE ON FINANCE ON OCTOBER 11, 2011
--------------------------------------------------------------------------------------------------------------------------------------------------------
By Fiscal year, in millions of dollars--
-------------------------------------------------------------------------------------------------------------------------
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012-2016 2012-2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE OR DECREASE (-) IN THE DEFICIT
Statutory Pay-As-You-Go Impact -117 119 1 1 -170 174 2 2 1 -14 -165 -2
Memorandum:
Changes in Revenues....... 118 -118 0 0 171 -173 -1 -1 -1 -2 170 -6
Changes in Outlays........ 1 1 1 1 1 1 1 1 0 -16 5 -8
--------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated impact on state, local, and tribal governments:
CBO has determined that the nontax provisions of S. 1643
contain no intergovernmental mandates as defined in UMRA, and
would impose no costs on state, local, or tribal governments.
JCT has determined that the tax provision of S. 1643 contains
no intergovernmental mandates as defined in UMRA.
Estimated impact on the private sector: CBO has determined
that the nontax provisions of S. 1643 would impose private-
sector mandates, as defined in UMRA, by extending the customs
user fees and by enforcing new recordkeeping requirements on
exporters of goods to Panama. CBO estimates that the aggregate
costs of those mandates would not exceed the annual threshold
established in UMRA for private-sector mandates ($142 million
in 2011, adjusted annually for inflation). JCT has determined
that the tax provision of S. 1643 contains no private-sector
mandates as defined in UMRA.
Previous CBO estimate: On October 5, 2011, CBO transmitted
a cost estimate for H.R. 3079, the United States-Panama Trade
Promotion Agreement Implementation Act, as ordered reported by
the House Committee on Ways and Means on October 5, 2011. S.
1643 and H.R. 3079 are similar, and the CBO cost estimates are
the same.
Estimate prepared by: Federal Revenues: Kalyani
Parthasarathy; Federal Spending: Sunita D'Monte, Mark
Grabowicz, Matthew Pickford, and Susan Willie; Impact on State,
Local, and Tribal Governments: Lisa Ramirez-Branum; Impact on
the Private Sector: Marin Randall.
Estimate approved by: Peter H. Fontaine, Assistant Director
for Budget Analysis; Frank Sammartino, Assistant Director for
Tax 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 the bill 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
the Unfunded Mandates Reform Act of 1995 (``UMRA'') (Pub. L.
No. 104-04). The Committee has reviewed the provisions of S.
1643 as approved by the Committee on October 11, 2011. In
accordance with the requirements of UMRA, the Committee has
determined that the bill contains no intergovernmental
mandates, as defined in the UMRA, and will not affect the
budgets of State, local, or tribal governments. The Committee
has determined that the nontax provisions of S. 1643 would
impose private-sector mandates, as defined in UMRA, by
extending the customs user fees and by enforcing new
recordkeeping requirements on exporters of goods to Panama. The
aggregate costs of those mandates would not exceed the annual
threshold established in UMRA for private-sector mandates ($142
million in 2011, adjusted annually for inflation). The
Committee has determined that the tax provision of S. 1643
contains no private-sector mandates as defined in UMRA.
IV. ADDITIONAL VIEWS OF RANKING MEMBER
ORRIN G. HATCH AND SENATOR JON KYL
Several elements of this report deserve significant
elaboration. The May 10, 2007 agreement (May 10th Agreement)
negotiated by some in Congress and the Bush Administration was
intended to secure votes for the four free trade agreements
(FTAs) with Colombia, Panama, Peru, and South Korea, but it did
not reflect an agreement on a new trade policy as the Majority
contends. We were not part of the negotiations of these new
provisions. We continue to harbor misgivings over several
aspects of these changes, including in the areas of labor, the
environment, and intellectual property. The May 10th Agreement,
however, failed--as only a vote on Peru was allowed by Democrat
congressional leaders during the 110th Congress--and the other
three FTAs had to wait for more than four years before a vote
was secured. The Bush administration and the governments of
Colombia, Panama, Peru, and South Korea upheld their ends of
the bargain by incorporating the May 10th Agreement changes
into each FTA, but the Democrat leadership of Congress refused
to honor its part of the May 10th Agreement and allow a vote on
any of the three remaining FTAs. The Obama administration
continued this pattern of delay for nearly three years.
In the area of labor, the revised Panama FTA incorporates
binding labor obligations predicated upon norms contained in
the International Labor Organization Declaration on Fundamental
Principles and Rights at Work and its Follow-up (1998) (ILO
Declaration). Over the years, we have expressed serious
concerns that by incorporating binding dispute resolution for
obligations which rely upon amorphous and ever-evolving
standards set by an international organization, our labor
chapters potentially expose the United States to risk of
sanction--especially if these standards were to be construed
expansively in the context of dispute resolution.
Unfortunately, we believe that recent actions by the Obama
administration are compounding this risk.
Labor provisions in our existing trade agreements are being
interpreted by the Obama administration in a manner which
appears to be increasingly divorced from any nexus to trade.
Expansive interpretations of the labor obligations contained in
trade agreements, and the blurring of their nexus to trade,
risk setting precedents which could result in unintended
consequences for the United States in the context of future
labor-related disputes.
The purpose of trade agreements is to foster increased
growth in the economy of the United States and those of our
trading partners, which in turn, helps raise the standards of
living for U.S. and foreign workers. Assessing trade sanctions
for labor violations is counterproductive as it impedes
economic growth in the United States and the partner country,
thereby punishing the very workers it purports to assist.
Rather than seeking to punish countries and their workers
for labor protections deemed to be inadequate, the United
States should be encouraging the development of capacity-
building and technical assistance programs that more
effectively improve labor conditions on the ground in poor
developing countries. We should work to ensure that the labor
provisions in the Panama FTA, and any substantive labor
obligations in future trade agreements: (1) are clear and
narrowly tailored so as not to expose the United States to the
risk of retaliatory sanctions; (2) are not used as a means to
change U.S. labor law indirectly by potentially binding the
United States to international standards that exceed current
U.S. law; (3) allow flexibility for the United States and our
trading partners to adopt and change labor laws as needed; (4)
are closely linked to trade; (5) actually help workers both in
the United States and abroad; and (6) do not unduly impede U.S.
businesses operating in markets abroad.
The Committee report asserts that the intellectual property
rights (IPR) provisions in the Panama FTA were revised under
the May 10th Agreement to ``balance the need for access to
medicines with patent protections for pharmaceutical
products''. We do not believe that is what occurred. On the
contrary, these new provisions impede the development of new
treatments and cures, while putting an important, world-
leading, and job-creating U.S. industry at a disadvantage.
First, the Panama FTA makes patent linkage optional.
Linkage requires a country, before it approves a generic
medicine for sale, to ensure that the brand-name medicine is no
longer under patent. Without linkage, governments can help
facilitate patent infringement. Linkage doesn't hinder access
to medicines and is simply about protecting basic patent
rights. The changes to the Panama FTA replace this simple
enforcement procedure with a complex one.
Second, in certain circumstances, the changes shorten the
period of data exclusivity for innovative medicines,
authorizing a shorter period than we require here in the United
States. This change is not only unfair to U.S. innovators but
devalues the incentive for launching new drugs in developing
countries. In developing countries, it is often difficult to
enforce patent rights. But data protection is effective and
relatively easy to administer. It often provides the only real
protection biopharmaceutical companies have when they invest
significant resources to launch new products. You take away the
protection and you take away the incentive to launch.
Finally, the template no longer requires countries to add
time to patent terms for pharmaceuticals to make up for undue
delays in marketing approval or patent grant. The United States
requires patent restoration, so why not require the same
abroad? Critics argue that patent terms are long enough as they
are. But without patent term restoration, we actually move IPR
protection in the other direction. Without patent term
restoration, the effective patent term could actually shrink
significantly.
Some argue that strong intellectual property rights
protection result in some countries having poor health care. We
strongly disagree. In many of these poor countries, IPR
protection for pharmaceuticals and medical devices is weak at
best. On top of that, the vast majority of drugs on the World
Health Organization's (WHO) essential medicines list are not
protected by patent. The fact is that without IPR protection,
there would be few medicines for anyone to access.
Poor infrastructure, high taxes and tariffs, ineffective
health care systems, and misplaced government funding
priorities are far more acute problems when it comes to access
to medicine. To cite one example, until 2005, India did not
grant product patents for pharmaceuticals. Yet India's access
to medicines was woeful. WHO statistics indicate that only 20
percent of India's population had access to unpatented
essential medicines from 2000-2007. Access remains a challenge
in India today, despite the fact that more than 95 percent of
the medicines available in India are not covered by patents. As
we continue to strive to achieve the appropriate balance
between innovation and access to medicines, we hope that the
Obama and future administrations will take these factors into
consideration.
Finally, we would note our extreme disappointment in
President Obama's unprecedented delay in sending the Panama FTA
to Congress for our consideration. For far too long, U.S.
workers, innovators, and farmers have been barred from taking
advantage of this trade agreement. While the United States
delayed, others countries entered into trade agreements with
Panama that gave their workers better access to its growing
market. We hope the Finance Committee will continue working
together to ensure that future agreements are considered
expeditiously.
ADDITIONAL VIEWS OF SENATOR CHUCK GRASSLEY
The Majority has stated that, ``On May 10, 2007, the Bush
Administration and the bipartisan leadership of the U.S. Senate
Committee on Finance and the U.S. House of Representatives
Committee on Ways and Means reached an agreement on trade
policy.'' However, as Ranking Member of the Finance Committee
during that time period, I strongly disagree with the
Majority's statement that the agreement was an agreement ``on
trade policy.'' The Majority's terminology implies the terms of
the agreement reached on May 10, 2007 with President Bush are
somehow now the blueprint for future trade agreements. This is
not the case. The May 10th agreement was made out of necessity
by President Bush as he attempted to gain support from the
democratically-controlled Congress for approving the South
Korea, Panama, Peru, and Colombia trade agreements. As I
expressed at the time, I have reservations about many of the
provisions included in the May 10th agreement, including the
terms regarding labor, environment, and intellectual property.
I continue to have reservations about the May 10th provisions.
Most, if not all, of the members on our side do not see the May
10th provisions as part of a blueprint for future trade
agreements. Those provisions were part of a bargain between
President Bush and Democrat leaders in Congress, for those
specific free trade agreements at the time, not an ``agreement
on trade policy'' as the Majority suggests.
V. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
In compliance with 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, and 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) * * *
* * * * * * *
(21) 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 United States-Panama Trade Promotion
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.
* * * * * * *
(j) Effective Dates.--(1) * * *
* * * * * * *
(3)(A) * * *
* * * * * * *
(D) Notwithstanding subparagraph (B)(i), fees may be charged
under paragraphs (1) through (8) of subsection (a) during the
period beginning on September 1, 2021, and ending on September
30, 2021.
* * * * * * *
TARIFF ACT OF 1930
* * * * * * *
TITLE IV--ADMINISTRATIVE PROVISIONS
Part III--ASCERTAINMENT, COLLECTION, AND RECOVERY OF DUTIES
* * * * * * *
SEC. 508. RECORDKEEPING.
(a) * * *
* * * * * * *
(k) Certification of Origin for Goods Exported Under the
United States-Panama Trade Promotion 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) Panama tpa certification of origin.--The
term ``Panama TPA certification of origin''
means the certification established under
article 4.15 of the United States-Panama Trade
Promotion Agreement that a good qualifies as an
originating good under such Agreement.
(2) Exports to panama.--Any person who completes and
issues a Panama TPA 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.--The person who issues a Panama
TPA certification of origin shall keep the records and
supporting documents relating to that certification of
origin for a period of at least 5 years after the date
on which the certification is issued.
* * * * * * *
SEC. 514. PROTEST AGAINST DECISIONS OF THE CUSTOMS SERVICE.
(a) * * *
* * * * * * *
(l) Denial of Preferential Tariff Treatment Under the
United States-Panama Trade Promotion Agreement.--If U.S.
Customs and Border Protection or U.S. Immigration and Customs
Enforcement of the Department of Homeland Security 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 provided for in section 203
of the United States-Panama Trade Promotion Agreement
Implementation Act, U.S. Customs and Border Protection, in
accordance with regulations issued by the Secretary of the
Treasury, may suspend preferential tariff treatment under the
United States-Panama Trade Promotion Agreement to entries of
identical goods covered by subsequent representations by that
importer, exporter, or producer until U.S. 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, section 202 of the United States-Chile Free
Trade Agreement Implementation Act, section 203 of the
Dominican Republic-Central America-United States Free Trade
Agreement Implementation Act, section 202 of the United States-
Oman Free Trade Agreement Implementation Act, [or] section 203
of the United States-Peru Trade Promotion Agreement
Implementation Act [for which], or section 203 of the United
States-Panama Trade Promotion 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) * * *
* * * * * * *
PART V--ENFORCEMENT PROVISIONS
* * * * * * *
SEC. 592. PENALTIES FOR FRAUD, GROSS NEGLIGENCE, AND NEGLIGENCE.
(a) * * *
* * * * * * *
(c) Maximum Penalties.--
(1) * * *
* * * * * * *
(12) Prior disclosure regarding claims under the
united states-panama trade promotion 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 United States-Panama Trade Promotion 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 with respect to that good.
* * * * * * *
(k) False Certifications of Origin Under the United States-
Panama Trade Promotion 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 Panama TPA
certification of origin (as defined in section 508 of
this Act) that a good exported from the United States
qualifies as an originating good under the rules of
origin provided for in section 203 of the United
States-Panama Trade Promotion 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 Panama TPA 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 shall not be considered to
have violated paragraph (1) if--
(A) the information was correct at the time
it was provided in a Panama TPA 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.
* * * * * * *
TRADE ACT OF 1974
* * * * * * *
TITLE II--RELIEF FROM INJURY CAUSED BY IMPORT COMPETITION
CHAPTER 1--POSITIVE ADJUSTMENT BY INDUSTRIES INJURED BY IMPORTS
* * * * * * *
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, title III of the
United States-Morocco Free Trade Agreement
Implementation Act, title III of the Dominican
Republic-Central America-United States Free Trade
Agreement Implementation Act, title III of the United
States-Bahrain Free Trade Agreement Implementation Act,
title III of the United States-Oman Free Trade
Agreement Implementation Act, [and] title III of the
United States-Peru Trade Promotion Agreement
Implementation Act, and title III of the United States-
Panama Trade Promotion 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.
* * * * * * *
TRADE AGREEMENTS ACT OF 1979
* * * * * * *
TITLE III--GOVERNMENT PROCUREMENT
* * * * * * *
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) * * *
* * * * * * *
(x) a party to the United States-
Panama Trade Promotion Agreement, a
product or service of that country or
instrumentality which is covered under
that agreement for procurement by the
United States.
* * * * * * *
(ix) a party to the United States-
Panama Trade Promotion 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
* * * * * * *
Subtitle A--Duty-Free Treatment
* * * * * * *
SEC. 212. BENEFICIARY COUNTRY.
(a) * * *
(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 Jamaica
Antigua and Barbuda Nicaragua
Bahamas, The [Panama]
Barbados Saint Lucia
Belize Saint Vincent and the Grenadines
Costa Rica Suriname
Dominica Trinidad and Tobago
Dominican Republic Cayman Islands
El Salvador Montserrat
Grenada Netherlands Antilles
Guatemala Saint Christopher-Nevis
Guyana Turks and Caicos Islands
Haiti Virgin Islands, British
Honduras
In addition, the President shall not designate any country
a beneficiary country under this title--
(1) * * *
* * * * * * *