Highlights of the DR-CAFTA Implementation Bill (Part VII)

Implementation Bill

(Part VII)

On August 2, 2005 President Bush signed H.R. 3045, the "Dominican Republic-Central America-U.S. Free Trade Agreement (DR-CAFTA) Implementation Act" (Act) into law (Public Law (P.L.) 109-53).

A Presidential Proclamation must still be issued to amend the tariff schedule for DR-CAFTA, etc. (USTR sources have previously stated that the DR-CAFTA can enter into force for the U.S. and one or more subject countries that have approved it; the U.S. does not have to wait for all subject countries to approve the agreement. In addition, press and government sources indicate that the DR-CAFTA has been approved by the Dominican Republic, Guatemala, El Salvador and Honduras, but has not been approved by Costa Rica or Nicaragua, and that Nicaragua is expected to approve the agreement within 60 days, but Costa Rica might take 1 - 2 years to approve it.)

This is Part VII of a multi-part series of summaries of the Act that will highlight the provisions of the bill, beginning to end. Part VII covers the Act's provisions on DR-CAFTA origin certifications, textile or apparel compliance verifications, and investigations on petitions requesting relief from imports.

(See ITT's Online Archives or 08/04/05, 08/10/05, 08/18/05, 08/24/05, 08/26/05 and 08/30/05 news, 05080405, 05081015, 05081810, 05082410, 05082615 and 05083010 for Parts I-VI respectively.)

Certifications of origin for goods exported from U.S. to CAFTA-DR countries. Under the Act, any person who completes and issues a CAFTA-DR certification of origin (which certifies that a good qualifies as a CAFTA-DR originating good)for a good exported from the U.S., shall make, keep, and pursuant to rules and regulations issued by the Department of Treasury (Treasury), render for examination and inspection all records and supporting documents related to the origin of the good (including the certification or copies thereof).

Such records and supporting documents shall be kept by the person who issued the certification for at least five years from the certification's date of issuance.

Textile or apparel compliance verifications. U.S. may take action while CAFTA-DR country is conducting a textile or apparel compliance verification.In general, if Treasury requests the government of a CAFTA-DR country to conduct a verification pursuant to Article 3.24 of the Agreement, the President may direct Treasury to take "appropriate action" while the verification is being conducted.

Such "appropriate action" includes suspension or denial of preferential tariff treatment for any textile or apparel good exported or produced by the person that is the subject of the verification, or detention or denial of entry of any textile or apparel good exported or produced by the person that is the subject of a verification, etc.

U.S. may take action after completion of a textile or apparel compliance verification.On completion of a verification, the President, among other things, may direct Treasury to deny preferential tariff treatment or deny entry to any textile or apparel good exported or produced by the person that is the subject of the verification, until such person is in compliance.

Treasury may also publish the name of any person that Treasury determines is engaged in intentional circumvention of the applicable laws, regulations or procedures affecting trade in textiles and apparel, or if this person has failed to demonstrate that it produces or is capable of producing, textile or apparel goods.

Petitions for relief from imports. The Act provides that a petition requesting relief from imports (of any product) may be filed with the International Trade Commission (ITC) by an entity, including a trade association, firm, certified or recognized union, or group of workers, that is representative of an industry.

ITC investigation regarding petition. The Act states that the ITC shall promptly initiate an investigation to determine whether, as a result of the reduction or elimination of a duty provided for under the Agreement, a CAFTA-DR article is being imported into the U.S. in such increased quantities, in absolute terms or relative to domestic production, and under such conditions that imports of the CAFTA-DR article constitute a substantial cause of serious injury or threat thereof to the domestic industry producing an article that is like, or directly competitive with, the imported article.

(The Act also states that this import relief authority shall terminate, as, generally no import relief may be provided after the date that is 10 years after the date the Agreement enters into force.)

ITC determination regarding petition. According to the Act, the ITC shall make its determination within 120 days after it initiates an investigation regarding the petition.

At that time, the ITC shall also determine whether any CAFTA-DR country is a "de minimis supplying country" (among other exemptions, imports of a CAFTA-DR article of a CAFTA-DR country that is a "de minimis supplying country" with respect to that article are exempt from the any relief provided).

(A "de minimis supplying country" means a CAFTA-DR country whose share of imports of the relevant CAFTA-DR article into the U.S. does not exceed 3 percent of the aggregate volume of imports of the relevant CAFTA-DR article in the most recent 12-month period for which data are available that precedes the filing of the petition (unless the aggregate share of imports of the relevant CAFTA-DR article into the U.S. from all de minimis supplying countries exceeds 9 percent of the aggregate volume of imports of the relevant CAFTA-DR article during the applicable 12-month period.))

Affirmative ITC determination that relief from imports should be provided. If the ITC makes an affirmative determination that relief should be provided with respect to imports of a CAFTA-DR article, the ITC shall recommend to the President the amount of import relief that is necessary to remedy or prevent the injury found. The ITC will also issue a report to the President containing its determination, and shall make a summary of non-confidential information in this report available to the public.

President may provide relief. The President shall then provide relief from imports of the article that is the subject of the affirmative determination to the extent that the President determines necessary to remedy or prevent the injury found by the ITC, and to facilitate the efforts of domestic industry to make a positive adjustment to import competition, if the costs of providing import relief are not greater than the benefits provided by the relief.

According to the Act, this relief may take the form of suspension of any further CAFTA-DR duty-rate reduction for the article or an increase in the rate of duty on such article. If the period of relief is greater than one year, the Act states that the relief shall be progressively liberalized.

In addition, no relief shall generally be in effect for more than four years, in the aggregate.

DR-CAFTA is also referred to as CAFTA-DR or CAFTA. It is also referred to in this summary as the Agreement.

H.R. 3045 available at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=109_cong_bills&docid=f:h3045enr.txt.pdf.

Statement of Administrative Action available at http://www.ustr.gov/assets/Trade_Agreements/Bilateral/CAFTA/Transmittal/asset_upload_file816_7815.pdf.

Copy of final text of DR-CAFTA, as posted to USTR website, at http://www.ustr.gov/Trade_Agreements/Bilateral/CAFTA/CAFTA-DR_Final_Texts/Section_Index.html