[Senate Report 114-43]
[From the U.S. Government Publishing Office]
Calendar No. 74
114th Congress } { Report
SENATE
1st Session } { 114-43
======================================================================
AN ORIGINAL BILL TO EXTEND THE AFRICAN GROWTH AND OPPORTUNITY ACT, THE
GENERALIZED SYSTEM OF PREFERENCES, THE PREFERENTIAL DUTY TREATMENT
PROGRAM FOR HAITI, AND FOR OTHER PURPOSES
_______
May 12, 2015.--Ordered to be printed
_______
Mr. Hatch, from the Committee on Finance, submitted the following
R E P O R T
[To accompany S. 1267]
[Including cost estimate of the Congressional Budget Office]
The Committee on Finance, having considered an original
bill to amend the African Growth and Opportunity Act, the
Generalized System of Preferences, the preferential duty
treatment program for Haiti, and for other purposes, 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 Bill.... 2
1. Background........................................ 2
2. Committee Consideration........................... 2
C. Trade Relations with Preference Program Beneficiaries. 2
1. United States-Sub-Saharan Africa Trade............ 2
2. Generalized System of Preferences................. 3
3. Haiti Preference Programs......................... 4
D. GENERAL DESCRIPTION OF THE BILL....................... 5
TITLE I: EXTENSION OF AFRICAN GROWTH AND OPPORTUNITY
ACT.............................................. 5
TITLE II: EXTENSION OF GENERALIZED SYSTEM OF
PREFERENCES...................................... 10
TITLE III: EXTENSION OF PREFERENTIAL DUTY TREATMENT
PROGRAM FOR HAITI................................ 11
TITLE IV: TARIFF CLASSIFICATIONS OF CERTAIN ARTICLES. 11
TITLE V: MISCELLANEOUS PROVISIONS.................... 12
TITLE VI: OFFSETS.................................... 12
II. BUDGETARY IMPACT OF THE BILL.....................................13
III.VOTES OF THE COMMITTEE...........................................21
A. Motion to Report the Bill............................. 21
B. Votes on Amendments................................... 21
IV. REGULATORY IMPACT OF THE BILL....................................22
V. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED............22
I. REPORT AND OTHER MATERIALS OF THE COMMITTEE
A. Report of the Committee on Finance
The Committee on Finance, having considered an original
bill to amend the African Growth and Opportunity Act (AGOA), to
renew the Generalized System of Preferences (GSP), and the
preferential duty treatment program for Haiti, and for other
purposes, having considered the same, reports favorably thereon
without amendment and recommends that the bill do pass.
B. Summary of Congressional Consideration of the Bill
1. Background
On April 20, 2015 Chairman Hatch introduced S. 1009, on
which this bill is based, on behalf of himself and Senator
Wyden.
2. Committee Consideration
The Senate Committee on Finance met in open executive
session on April 22, 2015 to consider the Chairman's Mark to
extend the AGOA preference and amend provisions of the program,
to extend and retroactively apply benefits under the GSP
program, and to extend preferential duty treatment for Haiti.
The bill the Committee considered was based upon S. 1009 of the
114th Congress. During the Committee's consideration of the
bill, a number of amendments were offered and two were
accepted. The Committee approved the bill by voice vote.
C. Trade Relations With Preference Program Beneficiaries
1. United States-Sub-Saharan Africa Trade
In 2000, Congress created a trade preference program called
the African Growth and Opportunity Act (AGOA) with the goals of
reducing trade barriers, encouraging increased trade and
investment between the United States and sub-Saharan Africa,
supporting regional integration, and incentivizing progress
towards reciprocal trade agreements. To meet these goals, the
AGOA program offered trade preferences and other economic
benefits to sub-Saharan African countries that met certain
criteria, including progress towards a market economy, respect
for the rule of law, elimination of barriers to U.S. trade and
investment, and protection of human and worker rights. AGOA
built on existing U.S. trade programs by including additional
products eligible for duty-free treatment beyond those
previously available under the Generalized System of
Preferences (GSP).
The ``third-country fabric'' provision in AGOA allows duty-
free treatment of apparel assembled in one or more lesser-
developed AGOA beneficiary countries regardless of the country
of origin of the fabric, subject to a cap of 3.5 percent (by
quantity) of all U.S. apparel imports. Lesser-developed
countries are defined in AGOA as those with a per-capita gross
national product of less than $1,500 as measured by the World
Bank. In subsequent amendments of AGOA, Botswana, Namibia, and
Mauritius were also added to the list of lesser-developed
countries. At present, 27 AGOA-eligible countries qualify for
the third-country fabric provision.
AGOA has been amended several times since its initial
enactment. In 2002, Congress amended AGOA to further increase
market access for products from sub-Saharan Africa. In 2004,
Congress further amended AGOA, extending its benefits beyond
the original deadline and clarifying certain provisions. This
legislation also included directives to the President on
investment initiatives and technical assistance. Congress
passed legislation in 2006 that further amended AGOA and
extended third country fabric provisions. Those provisions were
again extended in 2012 to match the expiration date, September
30, 2015, of the underlying AGOA program.
Between 2001 and 2013, imports under the AGOA program
increased approximately 10 percent each year from $7.6 billion
to $24.8 billion. In 2013, U.S. imports under AGOA totaled
$26.8 billion, more than four times the amount in 2001. Major
U.S. imports from AGOA countries include crude oil,
transportation equipment, minerals and metals, textiles and
apparel products, agricultural products, and chemicals.
2. Generalized System of Preferences
The Generalized System of Preferences (GSP) program
provides unilateral, nonreciprocal preferential tariff
treatment to certain products imported from designated
beneficiary developing countries. The U.S. program, established
by Title V of the Trade Act of 1974, is subject to periodic
renewal by Congress, and was last extended through July 31,
2013.
The President may designate countries as beneficiaries
under the program provided those countries meet the prescribed
eligibility criteria including: restrictions on countries that
provide beneficial access to their market that has a
significant negative impact on U.S. commerce; countries that
nationalize, expropriate or otherwise infringe the property
rights of U.S. citizens including patents, trademarks, or
copyrights; and countries that have failed to act in good faith
in recognizing as binding or in enforcing arbitral awards; as
well as requirements that beneficiaries have taken or are
taking steps to grant internationally recognized worker rights
and eliminate worst forms of child labor. The statute includes
discretionary criteria the President may take into account in
determining eligibility including: the level of economic
development; commitments to provide reasonable and equitable
market access; efforts to limit unreasonable export practices
and reduce trade-distorting investment policies and practices;
and steps taken to grant internationally recognized worker
rights.
The President may withdraw, suspend, or limit a
beneficiary's GSP status. Graduation from the program may
follow the President's determination that the country is
sufficiently developed. Mandatory country graduation occurs
when the beneficiary is determined to be a ``high income
country'' as defined by official World Bank statistics. If the
President finds that a beneficiary is not making substantial
progress toward any of the eligibility requirements, he may
take steps to limit or remove the country's benefits. The
President is required to notify Congress of changes to
beneficiary status.
More than 3,500 products are currently eligible for duty-
free treatment, as well as about 1,500 additional articles
originating in Least Developed Beneficiary Countries. The
program authorizes the President to designate certain imports
as eligible for duty-free treatment under the GSP after
receiving advice from the United States International Trade
Commission (USITC). Several products designated as ``import
sensitive'' are specifically excluded from preferential
treatment including most textiles and apparel goods; watches;
footwear and other accessories; most electronics, steel, and
glass products; and certain agricultural products that are
subject to tariff-rate quotas.
Leading imports under GSP in 2012, the last full year of
implementation, included petroleum and other oils; rubber
tires; aluminum alloy plates, sheets, and strips; certain
chemical and silver jewelry.
3. Haiti Preference Programs
In 1983, Congress created the Caribbean Basin Economic
Recovery Act (CBERA) in response to deteriorating economic and
political conditions in the region. The United States' first
regionally-targeted preference program, CBERA provided limited
duty-free entry of select Caribbean exports. CBERA was made
permanent with a few modest additions of eligible products in
the Caribbean Basin Economic Expansion Act of 1990.
On March 1, 2006, the Dominican Republic-Central America-
United States Free Trade Agreement (CAFTA-DR) was implemented,
a reciprocal trade agreement that provides partner countries
with more liberal access to the U.S. market. Haiti was the only
major apparel-producing country in the region that was not
included in CAFTA-DR. As the Haitian economy continued to
struggle, Congress passed legislation creating flexible
unilateral preferences for Haiti's apparel sector by amending
CBERA to include the Haitian Hemispheric Opportunity through
Partnership Encouragement Act of 2006 (HOPE I). These
preferences were enhanced and extended by the HOPE II Act of
2008 (HOPE II) and the Economic Lift Program (HELP) Act of
2010.
The HOPE I, HOPE II and HELP programs include special rules
for the duty-free treatment of select apparel imports from
Haiti made from third-country yarns and fabrics and provide
duty-free treatment to apparel articles wholly assembled or
knit-to-shape in Haiti. Access is provided through tariff
preference levels for knit and woven articles; unlimited duty
free treatment for certain products including selected women's
and girls' sleepwear, luggage, and handbags; and an earned
import allowance program. Eligible articles imported under the
program are capped at 1.25% of total U.S. apparel imports. The
programs collectively expire in September 2020.
In 2013, U.S goods imports from Haiti totaled $847 million.
Preferential access made knit and woven apparel the largest
import groups from Haiti totaling $612 million and $191 million
respectively.
D. General Description of the Bill
TITLE I: EXTENSION OF AFRICAN GROWTH AND OPPORTUNITY ACT
Section 101--Short title
Section 101 entitles the bill the ``Trade Preferences
Extension Act of 2015.''
Section 102--Findings
In Section 102, Congress finds that the AGOA program is the
center of the United States' economic relationship with sub-
Saharan Africa enhancing trade, investment, job creation,
democratic institutions, development and poverty reduction
through trade and investment. Trade supporting these objectives
has more than tripled since the program was enacted in 2000.
Congress also finds that it is in the United States' long-term
economic interest to increase trade with emerging markets and
enhance economic and political ties with the fastest-growing
economies in the world. Further integration of sub-Saharan
African countries into the global economy stimulates these
goals and, to that end, the bill includes Congressional
findings that the implementation of the Agreement on Trade
Facilitation of the World Trade Organization will strengthen
integration and economic growth in the region. The Committee is
increasingly concerned with market-access and investment
barriers in many sub-Saharan countries, most notably South
Africa. Thus the bill includes Congressional findings that the
elimination of trade barriers in sub-Saharan Africa, including
high tariffs, forced localization requirements, restrictions on
investment, and customs barriers, will create opportunities for
workers, businesses, farmers, and ranchers in the United States
and sub-Saharan African countries, increase utilization of the
AGOA program, promote growth and enhance the trade relationship
between the United States and sub-Saharan Africa.
Section 103--Extension of the African Growth and Opportunity Act
Section 103 extends AGOA and the special rule of origin on
third country fabric from September 30, 2015 to September 30,
2025.
Section 104--Promoting greater regional integration
The Committee believes that further regional integration in
sub-Saharan Africa will spur greater economic development.
Therefore, the Committee included new provisions in Section
104(a) that allow for accumulation of the direct costs of
processing operations performed in one or more beneficiary sub-
Saharan African countries or former beneficiary sub-Saharan
African countries in achieving the required minimum 35 percent
local value content. The Committee believes that this provision
will increase program utilization by deepening regional
integration.
Section 104(b) clarifies that rules of origin for certain
articles described in section 503(a)(1) of the Trade Act of
1974 will apply to articles that are the growth, product, and
manufacture of a sub-Saharan beneficiary. The general rule of
origin governing duty-free treatment under the GSP program
would continue to apply to imports from beneficiary sub-Saharan
African countries of any item.
Section 104(c) authorizes the President to amend the
Harmonized Tariff Schedules of the United States to make clear
that articles designated in section 503(a)(1) of the Trade Act
of 1974 are also eligible for beneficial tariff treatment if
they are the growth, product, and manufacture of a sub-Saharan
beneficiary. This section seeks to ease designation of articles
entering the United States under the AGOA Program.
Section 104(d) makes the amendments in paragraphs (a) and
(b) effective 30 days after the implementation of this Act.
Section 105--Monitoring and review of eligibility
Section 105(a) requires the President to provide at least
60 days' notification and provide an explanation to Congress
and the sub-Saharan African country in question of his
intention to terminate the designation of such country as a
beneficiary sub-Saharan African country. This section ensures
greater accountability to Congress in the administration of the
AGOA program and provides Congress with adequate time to
comment on eligibility decisions.
Section 105(b) allows the President to withdraw, suspend,
or limit duty-free treatment for certain articles if he
determines that such treatment would be more effective in
promoting compliance with eligibility requirements than
terminating benefits. The President is required to notify
Congress and the country in question at least 60 days in
advance of any action, along with the reasons for such action.
This section provides the President with greater flexibility in
administering the program in order to promote compliance with
one or more of the eligibility criteria.
Under the current statute, the President's only option is
to terminate the program, effective January 1 of the following
year. However, in some cases, termination of all benefits is
not necessarily the most effective way to address the
underlying problem. For example, if a beneficiary's actions and
policies with regards to a specific sector of their economy
violate the eligibility criteria, then the most effective
action to address the violation may be to limit AGOA benefits
with respect to that sector, rather than for all products.
Similarly, if there is an event that contravenes the
eligibility criteria that may be temporary in nature, then
suspension of benefits for a limited period of time may be a
more effective way to address the issue than termination of
benefits altogether. Finally, if an event occurs that is so
egregious that the Administration determines benefits should be
removed before January 1 of the following year, this language
gives the President the authority to withdraw those benefits
within 60 days, with termination to follow on January 1 of the
following year. The Committee expects that the Administration
will, in appropriate circumstances, make full use of the
additional flexibility provided in this section to address
situations where beneficiary countries have taken steps which
violate eligibility criteria and which may limit or exclude
international trade and investment.
While this provision provides additional flexibility, the
default for a breach of the criteria remains termination of
benefits on January 1 of the following year because AGOA
provides benefits above and beyond GSP and includes additional
eligibility criteria. As such, before invoking the
flexibilities set out in the bill, the President must determine
that withdrawing, suspending, or limiting benefits under the
bill is more effective in promoting compliance with the
criteria than terminating benefits and shall notify Congress of
the rationale for this determination.
The Committee is concerned that, under prior iterations of
the AGOA program, there was no formal mechanism for
stakeholders to voice their concerns about whether a particular
country was meeting its eligibility criteria. Therefore, the
Committee included new provisions in Section 105(c) that
require the President to seek public comment, including a
public hearing, and create a petition process for interested
parties to file petitions at any time with the United States
Trade Representative regarding compliance of a beneficiary
country. These petitions shall be taken into account in
conducting annual monitoring and review of beneficiary
countries eligibility and as the President completes reports
required under the act. This provision seeks to increase public
engagement in the eligibility review process. It is in the
interest of U.S. firms, businesses, and other entities
exporting to, investing in or other otherwise engaged in sub-
Saharan Africa to formally notify the President of trade
practices that limit access and investment in beneficiary
markets, or violate eligibility criteria.
Section 105(c) authorizes the President to conduct out-of-
cycle reviews of any beneficiary country to determine whether
it is making continual progress in meeting the eligibility
criteria. If the President determines that a beneficiary
country is not adequately meeting the eligibility criteria, the
President shall terminate the eligibility of that beneficiary
country or withdraw, suspend, or limit application of duty-free
treatment with respect to articles from that country and report
the findings of the review to the Senate Committee on Finance
and the House of Representatives Committee on Ways and Means.
In executive session, the Committee adopted an amendment
requiring the President to conduct an out-of-cycle review of
South Africa, the most developed beneficiary under the AGOA
program, to review that country's compliance with the
eligibility criteria. The provision highlights the Committee's
commitment to providing benefits only to those countries making
progress towards compliance with all eligibility criteria.
The Committee is aware that U.S. exporters are subject to
market access barriers and other issues for several products,
which should be taken into account when reviewing country
eligibility. For example, officials in Republic of South Africa
recently indicated they will attempt to renegotiate commitments
made under the GATS to require foreign owned companies to
relinquish 51% ownership and control to South Africans. Though
South Africa has increased its enforcement efforts,
counterfeiting and piracy are rampant and it also serves as a
transit point for counterfeit goods destined for neighboring
countries. South Africa developed a draft intellectual property
policy that proposed changes to intellectual property rights
(IPR) laws, which, as described in the 2015 National Trade
Estimate Report, contained significant shortcomings, including
inadequate protections for patents, trademarks and copyrights.
Additionally, countries that impose barriers or limitations to
cross-border data flows or otherwise limit digital trade are
cause for concern.
The Committee is concerned that the Republic of South
Africa effectively closed its market to U.S. poultry in 2001
when it imposed antidumping duties using a questionable
methodology, which has been successfully challenged at the WTO.
The Committee is aware that these issues have been discussed on
numerous occasions between the two governments, but no
successful resolution has been reached. U.S. exports of beef,
pork and poultry continue to face problematic sanitary
measures, and the European Union-Southern African Development
Community Economic Partnership Agreement provisions related to
geographical indications potentially erect additional barriers
to U.S. agricultural exports. The Committee is very concerned
that South Africa has been denying market access for U.S.
poultry for fifteen years while its exports have benefitted
from preferential access to the U.S. market. Section
104(a)(1)(C) of AGOA provides that, in order to be eligible for
preferential duty benefits, the President must determine that
an eligible country has established, or is making continual
progress toward establishing, ``the elimination of barriers to
United States trade and investment, including by . . . the
resolution of bilateral trade and investment disputes.'' The
Committee considers South Africa's denial of market access to
U.S. agricultural products an unresolved bilateral trade
dispute and strongly urges that the President and the
government of the Republic of South Africa will take immediate
and effective steps toward elimination of these barriers to
international trade.
All the above examples highlight the type of economic
concerns the President should take into account when conducting
annual or out-of-cycle reviews of AGOA eligible countries.
Section 106--Promotion of the role of women in social and economic
development in Sub-Saharan Africa
Section 106, adopted by the Committee in Executive Session,
establishes it is the policy of the United States to promote
the role of women in social, political and economic development
through the AGOA program and clarifies the eligibility criteria
under the program applies to both men and women.
Section 107--Biennial AGOA Utilization Strategies
Section 107(a) expresses a Sense of Congress that eligible
sub-Saharan African countries should develop biennial AGOA
Utilization Strategies to more effectively and strategically
utilize benefits available under AGOA and that the United State
trade capacity building agencies should work with and provide
appropriate resources in developing and implementing these
strategies. This provision also encourages USTR to consider
requesting strategies from Regional Economic Communities, as
appropriate. The provision encourages U.S. agencies providing
trade capacity building assistance in the region to assist
beneficiaries in developing and implementing these strategies.
The Committee notes that some of the beneficiaries who have
taken fullest advantage of the AGOA program to date include
those who have developed such a strategy. The Committee
believes these strategies increase awareness of the AGOA
program and the breadth of benefits provided.
Section 107(b) emphasizes that AGOA Utilization Strategies
should identify strategic needs and priorities to bolster AGOA
utilization, including by: reviewing potential exports and
identifying obstacles to increased regional integration, trade,
investment and poverty reduction; developing a plan to address
identified obstacles, including through full implementation of
the Agreement on Trade Facilitation of the World Trade
Organization; and developing a strategy to promote small
businesses and entrepreneurship.
Section 107(c) requires any such report produced pursuant
to Section 107(a) be published on an appropriate Internet
website.
Section 108--Deepening and expanding trade and investment ties between
Sub-Saharan Africa and the United States
Section 108 establishes it is the policy of the United
States to deepen and expand trade and investment ties between
sub-Saharan Africa and the United States.
Section 108 establishes that the United States should
continue to seek all opportunities to deepen and expand ties
between sub-Saharan Africa countries and the United States
through accession by sub-Saharan African countries to the World
Trade Organization and negotiation of Trade and Investment
Framework Agreements, Bilateral Investment Treaties, and Free
Trade Agreements with individual countries and regional
economic communities. The Committee notes that as preference
programs are successful in stimulating economic growth through
trade and investment, expanding the rule of law, and improving
work conditions in beneficiary countries, the United States
should consider further developing our economic relationship
with beneficiaries. Negotiation of Trade and Investment
Framework Agreements and Bilateral Investment Treaties, and
building toward Free Trade Agreements, should be the goal of
further engagement in the region. These agreements not only
ensure permanent access for current beneficiaries, but also
ensure and protect U.S. opportunities to these growing markets.
While economic development continues to be a factor for
selecting partners to negotiate these agreements, demonstration
of substantial progress toward all eligibility criteria under
the AGOA program should be taken into considerable account for
selecting future Trade and Investment, Bilateral Investment and
Trade Agreement partners.
Section 108 establishes that the United States should
promote in sub-Saharan Africa the implementation of all
commitments made under the World Trade Organization agreement
and negotiation of trade agreements that cover substantially
all trade. The Committee recognizes that continued progress
toward implementation of such commitments will further increase
utilization of the AGOA program, enhance economic growth in the
region, improve the rule of law and improve work conditions in
sub-Saharan Africa. To ensure that sub-Saharan African
countries continue progress towards becoming full, competitive
partners in the international economic community, these
countries should seek to negotiate agreements that cover
substantially all trade, which remains the standard of the
international economic community.
Section 109--Agricultural Trade Technical Assistance for Sub-Saharan
Africa
Section 109 expands provisions under the AGOA program that
provide agricultural technical assistance to beneficiary
countries. This section increases the number of beneficiaries
who may receive assistance beyond the current cap and broadens
the type of technical assistance available to include food
safety standards and sanitary and phytosanitary rules. The
section prioritizes agricultural trade technical assistance for
businesses and sectors that engage women. This section directs
the President to coordinate agencies engaged in providing
agricultural technical assistance when identifying which
beneficiaries should receive assistance and providing
assistance.
Section 110--Reports
Section 110(a) requires the President to submit a biennial
comprehensive report to Congress on the trade and investment
relationship between the United States and sub-Saharan Africa.
The first such report must be submitted not later than one year
after the date of enactment.
Section 110(b) requires the United States Trade
Representative to submit to Congress every five years a report
that evaluates each AGOA eligible country's path toward
becoming a trade agreement partner, identifies sub-Saharan
countries that have expressed an interest in entering into a
free trade agreement with the United States, and establishes a
plan for negotiating and concluding such agreements. The first
such report must be submitted not later than one year after the
date of enactment.
Section 110(c) sunsets these reports consistent with the
duration of this Act.
Section 111--Technical amendments
Section 111 deletes section 104(b) of the African Growth
and Opportunity Act, which is duplicative. Beyond those
explicitly changed in the act, the Committee expects no change
in compliance procedures as carried out under section
506A(a)(3) to result from deleting section 104(b).
Section 112--Definitions
Section 112 restates the definition of ``Beneficiary sub-
Saharan African Country'' as described in subsection (e) of
section 506A of the Trade Act of 1974 and as redesignated by
this Act. And the section defines ``sub-Saharan African
Country'' as defined in section 107 of the African Growth and
Opportunity Act.
TITLE II: EXTENSION OF GENERALIZED SYSTEM OF PREFERENCES
Section 201--Extension of Generalized System of Preferences
Section 201 extends the Generalized System of Preferences
until December 31, 2017. This section retroactively applies
benefits to articles imported on or after July 31, 2013 that
would have been eligible for duty-free treatment under the GSP
program as of the date of enactment of this Act.
Section 202--Authority to designate certain cotton articles as eligible
articles only for least-developed beneficiary developing
countries under Generalized System of Preferences
Section 202 authorizes the President to designate certain
cotton articles, classifiable under subheadings 5201.00.18,
5201.00.28, 5201.00.38, 5202.99.30, and 5203.00.30 of the
Harmonized Tariff Schedules of the United States, as eligible
articles for countries designated as least-developed
beneficiary developing countries under the GSP program. This
section implements commitments made at the World Trade
Organization to provide duty-free, quota-free treatment for
certain cotton products originating from least-developed
countries.
Section 203--Application of competitive need limitation and waiver
under Generalized System of Preferences with respect to
articles of beneficiary developing countries exported to the
United States during calendar year 2014
Section 203 allows the Administration to complete the
competitive need limitation review and make waiver
determinations by October 1, 2015 for products entered in 2014.
This section provides the Administration adequate time to
review competitive need limitation petitions for products
entered in 2014 while the program was lapsed.
Section 204--Elimination of the statutory exclusion for travel goods
Section 204 amends section 503(b)(1)(e) of the Trade Act of
1974 by removing the statutory exclusion for travel goods from
the Generalized System of Preferences program. Removing travel
goods from the list of statutorily excluded products allows
producers of such goods to apply for duty-free treatment after
undergoing the review process required under the Generalized
System of Preferences program, including analysis from the
International Trade Commission and opportunity for public
comment.
TITLE III: EXTENSION OF PREFERENTIAL DUTY TREATMENT PROGRAM FOR HAITI
Section 301--Extension of Preferential Duty Treatment Program for Haiti
Section 301 extends preferential access provided under the
HOPE and HELP programs through September 30, 2025.
TITLE IV: TARIFF CLASSIFICATIONS OF CERTAIN ARTICLES
Section 401--Tariff classification of recreational performance
outerwear
Section 401 amends the Additional U.S. notes to Chapter 62
of the Harmonized Tariff Schedule of the United States to
create new tariff lines for ``recreational performance
outerwear.''
Section 402--Modification of definition of certain footwear in the
harmonized tariff schedule of the United States
Section 402 amends the definition of athletic footwear in
the Harmonized Tariff Schedule of the United States. This
section clarifies that footwear for outdoor athletic purposes
that contains protective elements, such as water proofing,
should be classified as ``athletic'' rather than
``protective.'' Athletic footwear with features that protect
against the elements is presently classified in the HTS as
footwear that is protective in nature, subject to a higher
tariff than general athletic footwear.
Section 403--Effective date
Section 403 indicates the changes in Title IV shall take
place 15 days after enactment.
TITLE V: MISCELLANEOUS PROVISIONS
Section 501--Report on contribution of trade preference programs to
reducing poverty and eliminating hunger
Section 501 requires the President to submit a report to
Congress on U.S. preference program's contributions to the
reduction of poverty in beneficiary countries.
TITLE VI: OFFSETS
Section 601--Customs user fees
Section 601(a) amends Section 13031(j)(3)(A) of the
Consolidated Omnibus Budget Reconciliation Act of 1985 to
extend the period that the Secretary of the Treasury may charge
for certain customs services for imported goods from September
30, 2024 to July 7, 2025.
Section 601(b) extends the ad valorem rate for the
Merchandise Processing Fee collected by Customs and Border
Protection that offsets the costs incurred in processing and
inspecting imports, from June 30, 2021 to September 30, 2025.
Section 602--Time for payment of corporate estimated taxes
Section 602 provides that for corporations with at least
one billion dollars in assets, the corporate estimated tax due
in 2020 will be increased by 5.25 percent, with the subsequent
installment being reduced to reflect the prior increase.
Section 603--Improved information reporting on unreported and
underreported financial accounts
PRESENT LAW
The Code requires that every person who makes a payment of
reportable interest (as defined) of $10 or more to any other
person during any calendar year report the aggregate amount of
the payment and information identifying the recipient on an
information return (Form 1099-INT) to the IRS. This report is
not required to be filed for payments to exempt recipients and
certain non-U.S. persons. The Code also requires that the payor
furnish the corresponding information statements to payees
named on the information returns showing the information that
is reported to the IRS.
REASONS FOR CHANGE
A number of people have been earning income, not paying tax
on that income, and using non-interest bearing financial
accounts, such as non-interest bearing bank accounts, to hide
this money from the IRS. In addition, a number of people, when
they have earned interest of less than $10 from one payor, have
not been reporting that interest income even though they are
legally required to do so, because they are not receiving a
Form 1099-INT with respect to that interest income. This
provision addresses both of these issues.
EXPLANATION OF PROVISION
The provision revises the reporting requirement to
eliminate the minimum interest threshold of $10 and applies
information reporting requirements and penalties for banks and
other persons that hold non-interest bearing deposits.
EFFECTIVE DATE
The provision applies to returns filed after December 31,
2015.
II. BUDGETARY IMPACT OF THE BILL
In compliance with sections 308 and 403 of the
Congressional Budget Act of 1974, and paragraph 11(a) and (b)
of rule XXVI of the Standing Rules of the Senate, the following
letter has been received from the Congressional Budget Office
on the budgetary impact of the legislation:
U.S. Congress,
Congressional Budget Office,
Washington, DC, May 11, 2015.
Hon. Orrin G. Hatch,
Chairman, Committee on Finance,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed revised cost estimate for a bill to
extend the African Growth and Opportunity Act, the Generalized
System of Preferences, the preferential duty treatment program
for Haiti, and for other purposes as ordered reported by the
Senate Committee on Finance on April 22, 2015. This estimate
revises the cost estimate that CBO provided for the legislation
on May 6, 2015, because it did not include the budgetary
effects of subsequent technical and conforming amendments
provided to CBO on May 8, 2015.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Mark
Grabowicz for federal spending and Ann Futrell and Susan Willie
for federal revenues.
Sincerely,
Keith Hall.
Enclosure.
S. 1267--A bill to extend the African Growth and Opportunity Act, the
Generalized System of Preferences, the preferential duty
treatment program for Haiti, and for other purposes
Summary: The legislation would extend reduced tariff rates
imposed on products imported under the African Growth and
Opportunity Act (AGOA), the Generalized System of Preferences
(GSP), and the Haitian Hemispheric Opportunity through
Partnership Encouragement Act. The bill also would shift some
corporate income tax payments between fiscal years, expand the
account information that financial institutions and others are
required to report to the Internal Revenue Service (IRS), and
increase the rate of certain fees collected by Customs and
Border Protection (CBP) as well as extend the authority to
collect those fees.
CBO and the staff of the Joint Committee on Taxation (JCT)
estimate that enacting the bill would reduce direct spending by
$5.9 billion and reduce revenues by about $5.8 billion over the
2015-2025 period--resulting in a decrease in deficits over the
11-year period of $81 million. Pay-as-you-go procedures apply
because enacting the legislation would affect direct spending
and revenues. CBO estimates that the Congressional reports
called for under the bill would cost $1 million over the 2015-
2020 period, assuming availability of appropriated funds.
CBO has determined that the nontax provisions of the bill
contain no intergovernmental mandates as defined in the
Unfunded Mandates Reform Act (UMRA) and would not affect the
budgets of state, local, or tribal governments. JCT has
determined that the tax provisions of the bill contain no
intergovernmental mandates.
CBO has determined that the nontax provisions of the
legislation contain private-sector mandates on entities
required to pay merchandise processing fees. CBO estimates the
aggregate cost of the mandates would exceed the annual
threshold established in UMRA for private-sector mandates ($154
million in 2015, adjusted annually for inflation). JCT has
determined that the tax provisions of the bill contain no
private-sector mandates.
Estimated cost to the Federal Government: The estimated
budgetary effects of the bill are shown in the following table.
The costs of this legislation fall within budget functions 750
(administration of justice) and 370 (advancement of commerce).
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
-----------------------------------------------------------------------------------------------------------------------------------
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2015-2020 2015-2025
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING
Estimated Budget Authority.................................. 0 0 0 0 0 0 -162 -873 -916 -962 -2,948 0 -5,861
Estimated Outlays........................................... 0 0 0 0 0 0 -162 -873 -916 -962 -2,948 0 -5,861
CHANGES IN REVENUES
Extension of African Growth and Opportunity Act............. * -121 -130 -238 -284 -298 -312 -329 -345 -365 -387 -1,071 -2,809
Extension of General System of Preferences.................. -1,051 -627 -665 -173 0 0 0 0 0 0 0 -2,516 -2,516
Extension of Preferential Duty Treatment for Haiti.......... 0 0 0 0 -12 -17 -75 -97 -101 -106 -112 -29 -520
Duty-free Treatment for Certain Footwear.................... * -2 -2 -2 -2 -2 -3 -3 -3 -3 -3 -10 -25
Shift in Payment of Corporate Estimated Tax................. 0 0 0 0 0 3,781 -3,781 0 0 0 0 3,781 0
Improved Information Reporting on Unreported and 0 7 7 8 8 9 9 10 10 11 11 39 90
Underreported Financial Accounts...........................
-----------------------------------------------------------------------------------------------------------------------------------
Total Changes in Revenues............................... -1,052 -743 -790 -405 -290 3,473 -4,162 -419 -439 -463 -491 194 -5,780
NET INCREASE OR DECREASE (-) IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING AND REVENUES
Impact on Deficit........................................... 1,052 743 790 405 290 -3,473 4,000 -454 -477 -499 -2,457 -194 -81
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: Congressional Budget Office and the Staff of the Joint Committee on Taxation
Notes: This estimate assumes enactment of the bill by July 1, 2015; * = between -$500,000 and zero.
For direct spending, negative numbers indicate a decrease in outlays; for revenues, negative numbers indicate a reduction in revenues.
Components may not sum to totals because of rounding.
CBO estimates that implementing the bill would cost about $1 million over the 2015-2020 period, assuming availability of appropriated funds, to prepare Congressional reports.
Basis of estimate: For this estimate, CBO assumes that the
legislation will be enacted by July 1, 2015.
Direct Spending
Under current law, the authority to charge merchandise
processing fees collected by Customs and Border Protection will
expire after September 30, 2024. The bill would extend the
authority to collect those fees through July 7, 2025. The bill
also would raise the rate of the merchandise processing fee
from 0.21 percent to 0.3464 percent of the value of goods
entering the U.S. for the period beginning July 1, 2021, and
ending June 30, 2025. CBO estimates those actions would
increase offsetting receipts (certain collections that are
treated as reductions in direct spending) by about $5.9 billion
over the 2021-2025 period. To project collections of
merchandise processing fees, CBO assumes that the fees
collected in future years will grow at the same rate seen in
recent years--about 5 percent. In 2014 collections from the
merchandise processing fee totaled $2.3 billion. By 2024 CBO
estimates those collections will total about $2.7 billion under
current law. CBO expects that the proposed increase in the fee
rate would have a very minor effect on the value of goods
entering the U.S.
Revenues
CBO's estimates of the revenue effects of proposals to
lower tariff rates charged on imports from certain countries or
on certain goods are based on historical data about the value
and volume of those goods entering the United States. Using
that historical data, CBO develops a baseline of future
collections that accounts for expected growth in trade over the
next ten years. To estimate tariff collections under the
proposed legislation, CBO considers both general growth in
trade as well as changes in demand that are likely to result
from lower rates. The changes in revenues for each of the
programs discussed below reflect the difference between the
baseline estimate of collections for each program using
effective tariff rates under current law and projected
collections under each proposal using the proposed duty rate,
net of payroll and income tax offsets. CBO assumes that the
lower tariffs under the legislation would result in an increase
in overall imports, as well as a diversion of imports from
countries or import categories that would not be eligible for
lower tariffs to those that would.
Extension of African Growth and Opportunity Act. Under AGOA
the U.S. provides nonreciprocal tariff reductions to roughly 40
eligible sub-Saharan countries for certain goods that the U.S.
imports. The bill would extend the authority for reduced
tariffs under AGOA, which are set to expire at the end of
September 30, 2015, through September 30, 2025. The bill also
would extend the special rule that would apply to certain
lesser-developed sub-Saharan countries under AGOA. The special
rule also expires on September 30, 2015. Under this rule a
lesser-developed country may export duty-free to the United
States any apparel good that is assembled within the country,
regardless of the origin of the fabric or yarn. In addition,
the bill would revise the rules of origin for AGOA beneficiary
countries under GSP to expand the value of products that would
qualify for duty free treatment. CBO estimates that extending
and amending AGOA would reduce revenues by $2.8 billion over
the 2015-2025 period, net of payroll and income tax offsets.
That estimate includes the revenue loss after December 31,
2017, from imports that are eligible for duty free treatment
under GSP (which the bill would extend through December 31,
2017).
Extension of General System of Preferences. Under the GSP
the U.S. affords nonreciprocal tariff reductions to
approximately 130 developing countries. Generally, duty-free
treatment of imported goods from GSP-designated developing
countries is extended to products that are predominately
produced only in those countries. The bill would renew GSP,
which expired on July 31, 2013, and continue its authority
through December 31, 2017. Under the bill, importers or
exporters that would have otherwise qualified for reduced
tariffs under GSP could obtain refunds for tariffs paid after
July 30, 2013, that would not have been payable had GSP been in
effect. CBO estimates that renewing GSP would reduce revenues
by $2.5 billion over the 2015-2025 period, net of payroll and
income tax offsets. This estimate includes the cost, through
December 31, 2017, of imports that are eligible for duty free
treatment under the African Growth Opportunity Act (which would
be extended through 2025 under this bill).
Extension of Preferential Duty Treatment for Haiti. Under
the Haitian Hemispheric Opportunity through Partnership
Encouragement Act, certain textile and apparel goods imported
to the U.S. from Haiti are eligible for duty-free treatment if
restrictions regarding the source of the yarns and fabrics used
in the imported goods are met. Portions of this program will
begin to expire in 2016; the bill would extend this duty-free
status through 2025. CBO estimates that enacting this provision
would reduce revenues by $520 million over the 2015-2025
period, net of payroll and income tax offsets.
Duty Treatment for Certain Footwear. The bill would
establish new categories in the Harmonized Tariff Schedule
(HTS) for specialized athletic footwear that would enter the
United States at a reduced duty rate. Footwear imports that
meet the criteria for these new categories currently are
charged a duty rate of 37.5 percent, the rate would fall to 20
percent under the bill. In 2014, imports in the HTS categories
that include, among other things, articles that would be
eligible for duty-free treatment under the bill totaled about
$33 million. Based on information from the International Trade
Commission and industry sources familiar with the provisions of
the bill, CBO expects that nearly 75 percent of that amount
would be eligible for the lower duty treatment. That percentage
includes products expected to be imported under current law
that would qualify for the lower duty rate under the bill and
other imports that would shift from other dutiable categories.
The estimate of revenue losses is partially offset by customs
duties from new trade that would be generated as a result of
the lower duty status. CBO estimates that enacting this
provision would reduce revenues by $25 million over the 2015-
2025 period, net of payroll and income tax offsets.
Shift in Payment of Corporate Estimated Tax. The
legislation would shift payments of corporate estimated taxes
between fiscal years 2020 and 2021. 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 2020. The staff of the JCT estimates that those changes
would increase revenues by $3.8 billion in 2020 and reduce
revenues by the same amount in 2021.
Improved Information Reporting on Unreported and
Underreported Financial Accounts. The legislation would expand
the account information that financial institutions and others
are required to report to the IRS and the holder of specified
accounts. In particular, this information would have to be
provided for interest bearing accounts when the annual interest
earnings are less than $10, the threshold for reporting under
current law, and also would have to be provided for certain
non-interest bearing accounts that are currently not subject to
reporting requirements. The staff of the JCT estimates that
enacting this provision would increase revenues by $90 million
over the 2015-2025 period.
Travel Goods. Under section 204, the President would have
the discretion to eliminate import duties on travel goods
brought to the U.S. from countries eligible for preferential
tariff treatment under GSP. Another provision of the
legislation would extend GSP authority through December 31,
2017. Travel goods are a category of consumer goods that
includes handbags and luggage. In 2014, about $60 million in
duties were collected for travel goods imported to the U.S.
from countries eligible for GSP.
Based on information from the U.S. Trade Representative
regarding past decisions made by the Administration to reduce
duty rates, CBO expects that the likelihood of the President
selecting any or all of the items in the travel goods category
for this special treatment is quite small. Thus, CBO estimates
this section would reduce revenues by less than $500,000 over
the 2015-2025 period.
Spending subject to appropriation
The bill would require the United States Trade
Representative to prepare a series of reports on trade
activities with sub-Saharan African countries and their
interest in entering into free trade agreements with the United
States. Based on the cost of similar reports, CBO estimates
that the costs to prepare that series would be significantly
less than $500,000 annually, and would total about $1 million
over the 2015-2020 period.
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 AN ORIGINAL BILL, AS ORDERED REPORTED BY THE SENATE COMMITTEE ON FINANCE ON APRIL 22, 2015
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
-----------------------------------------------------------------------------------------------------------------------------------
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2015-2020 2015-2025
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE OR DECREASE (-) IN THE DEFICIT
Statutory Pay-As-You-Go Impact.............................. 1,052 743 790 405 290 -3,473 4,000 -454 -477 -499 -2,457 -194 -81
Memorandum:
Changes in Outlays...................................... 0 0 0 0 0 0 -162 -873 -916 -962 -2,948 0 -5,861
Changes in Revenues..................................... -1,052 -743 -790 -405 -290 3,473 -4,162 -419 -439 -463 -491 194 -5,780
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated impact on state, local, and tribal governments:
CBO has determined that the nontax provisions of the bill
contain no intergovernmental mandates as defined in UMRA and
would not affect the budgets of state, local, or tribal
governments. JCT has determined that the tax provisions of the
bill contain no intergovernmental mandates.
Estimated impact on the private sector: CBO has determined
that the nontax provisions of the legislation would impose
private-sector mandates, as defined in UMRA, on entities
required to pay merchandise processing fees. The bill would
extend those fees through July 7, 2025; the fee rates would
increase beginning July 1, 2021, and ending June 30, 2025. Some
of the entities that are required to pay merchandise processing
fees may also accrue savings related to the preferential tariff
treatment accorded to certain products that would be extended
under the bill. However, CBO estimates that the aggregate cost
of the mandates would exceed the annual threshold established
in UMRA for private-sector mandates ($154 million in 2015,
adjusted annually for inflation). JCT has determined that the
tax provisions of the bill contain no private-sector mandates.
Previous CBO estimate: On May 6, CBO transmitted a cost
estimate for a bill to extend the African Growth and
Opportunity Act, the Generalized System of Preferences, the
preferential duty treatment program for Haiti, and for other
purposes after the Senate Finance Committee ordered the
legislation reported on April 22, 2015. That estimate did not
include the effects of technical and conforming amendments
subsequently provided to CBO by the Senate Finance Committee on
May 8, 2015, that reduced the cost of the legislation by $156
million over the 2015-2025 period. This cost estimate of the
legislation as ordered reported revises the CBO cost estimate
provided on May 6, 2015 to incorporate those effects.
On April 29, 2015, CBO transmitted a cost estimate for H.R.
1891, a bill to extend the African Growth and Opportunity Act,
the Generalized System of Preferences, the preferential duty
treatment program for Haiti, and for other purposes, as ordered
reported by the House Ways and Means Committee on April 23,
2015. The Senate committee bill contains a provision that would
provide duty-free treatment for certain shoes, which would
reduce revenues by $25 million over the 2015-2025 period that
was not included in the House committee bill. The Senate
committee's bill also includes a provision regarding
information reporting on unreported and underreported financial
accounts that was not included in the House committee bill.
Otherwise, CBO's estimates of the budgetary effects of the
Senate and House committee bills are the same.
Estimate prepared by: Federal Costs: Mark Grabowicz;
Federal Revenues: Ann Futrell, Susan Willie, Mark Booth, and
staff of the Joint Committee on Taxation; Impact on state,
local, and tribal governments: Jon Sperl; Impact on the private
sector: Paige Piper/Bach.
Estimate approved by: Theresa Gullo, Assistant Director for
Budget Analysis.
May 11, 2015.
Hon. Orrin G. Hatch,
Chairman, Committee on Finance,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed revised cost estimate for a bill to
extend the African Growth and Opportunity Act, the Generalized
System of Preferences, the preferential duty treatment program
for Haiti, and for other purposes as ordered reported by the
Senate Committee on Finance on April 22, 2015. This estimate
revises the cost estimate that CBO provided for the legislation
on May 6, 2015, because it did not include the budgetary
effects of subsequent technical and conforming amendments
provided to CBO on May 8, 2015.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Mark
Grabowicz for federal spending and Ann Futrell and Susan Willie
for federal revenues.
Sincerely,
Keith Hall.
Enclosure.
III. VOTES OF THE COMMITTEE
In compliance with paragraph 7(c) of rule XXVI of the
Standing Rules of the Senate, the following statements are made
concerning the roll call votes in the Committee's consideration
of the original bill to extend the African Growth and
Opportunity Act, the Generalized System of Preferences, the
preferential duty treatment program for Haiti, and for other
purposes.
A. Motion To Report the Bill
An original bill to extend the African Growth and
Opportunity Act, the Generalized System of Preferences, the
preferential duty treatment program for Haiti, and for other
purposes, was ordered favorably reported by voice vote with a
quorum present on April 22, 2015.
B. Votes on Amendments
(1) An amendment to require the President to conduct an
out-of-cycle review of South Africa was agreed to by voice
vote.
(2) An amendment to promote the role of women in social and
economic development in sub-Saharan Africa was agreed to by
voice vote.
(3) An amendment sponsored by Senator Toomey to benefit
American Citizens and strengthen the economies of America's
most vulnerable trading partners. Defeated by roll call vote,
10 ayes, 16 nays:
Ayes--Isakson, Portman, Toomey, Coats, Heller, Scott
(proxy), Menendez, Carper (proxy), Casey, Warner (proxy).
Nays--Hatch, Grassley, Crapo, Roberts, Enzi, Cornyn
(proxy), Thune, Burr, Wyden, Schumer, Stabenow, Cantwell,
Nelson, Cardin, Brown (proxy), Bennet.
(4) An amendment to extend the tariff preference level on
certain imports of textiles from Bahrain under the United
States-Bahrain Free Trade Agreement, with an offset. Defeated
by roll call vote, 10 ayes, 16 nays:
Ayes--Toomey, Wyden, Schumer, Stabenow, Cantwell, Nelson,
Menendez, Cardin, Bennet, Warner (proxy).
Nays--Hatch, Grassley, Crapo (proxy), Roberts, Enzi, Cornyn
(proxy), Thune, Burr, Isakson, Portman, Coats, Heller, Scott,
Carper (proxy), Brown, Casey.
IV. REGULATORY IMPACT OF THE BILL
Pursuant to the requirements of paragraph 11(b) of rule
XXVI of the Standing Rules of the Senate, the Committee states
that the resolution will not significantly regulate any
individuals or businesses, will not affect the personal privacy
of individuals, and will result in no significant additional
paperwork.
The following information is provided in accordance with
section 423 of the Unfunded Mandates Reform Act of 1995 (UMRA)
(Pub. L. No. 104--04). The Committee has reviewed the
provisions of S. 3326 as approved by the Committee on July 18,
2012. In accordance with the requirement of Pub. L. No. 104-04,
the Committee has determined that the bill contains no
intergovernmental mandates, as defined in the UMRA, and would
not affect the budgets of state, local, or tribal governments.
V. CHANGES IN EXISTING LAW MADE BY THE BILL,
AS REPORTED
In the opinion of the Committee, in order to expedite the
business of the Senate, it is necessary to dispense with the
requirements of paragraph 12 of rule XXVI of the Standing Rules
of the Senate (relating to the showing of changes in existing
law made by the bill as reported by the Committee).
[all]