New House Bill Introduced on GSP, AGOA and Haiti Benefits

Highlights of H.R. 6142

According to a House Ways and Means Committee press release, H.R. 6142 has three major components:

GSP. Generalized System of Preferences (GSP) extension/modification - which would extend the GSP program for two years with modifications to assure preferences benefit countries most in need;

AGOA. African Investment Incentive Act - which would provide investment incentives for U.S. companies in Africa and extend modified third country fabric benefits;

Haiti. Haitian Hemispheric Opportunity through Partnership Encouragement (HOPE) Act - which would provide certain apparel benefits to Haiti.

According to a House Ways and Means Committee summary, H.R. 6142 would:

GSP extension/modification:

extend GSP for two years, consistent with the President's budget request.

tighten rules on competitive need limit (CNL) waivers to tailor the program for use by lesser developed countries that need help exporting to the U.S. by:

• eliminate the opportunity for waivers on any product category where a country exports more than $1.5 billion of that product in the prior year.
• eliminate the opportunity for waivers for countries with per capita income more than $3,400.

African Investment Incentive Act:

Extend current provision allowing benefits for apparel made with fabric from third countries until September 2008, with a full 3.5% cap.

starting in October 2008, replace current third country fabric benefit with a new rule of origin for lesser developed countries for apparel products based upon the percentage of African content. The new rule would allow duty free access for apparel containing 50% or more African content (or U.S., U.S. free trade agreement (FTA), or Caribbean content). This 50% in the rule would grow to 60% in increments through 2015 and be subject to a 3.5% cap.

provide an exception to the third country fabric benefit and to the benefit under the newly created rule of origin for apparel goods made from components that are in "abundant supply" in Africa. The purpose is to remove the current disincentives for the investment in fabric production in Africa.

Specifically, the bill would require the International Trade Commission (ITC) to determine which products are being produced commercially in Africa and in what amount. After the ITC-determined level of African supply is used, then apparel companies in Africa may use the third country rule for additional demand. In particular, denim is deemed to be in abundant supply because of known production in Lesotho.

allow duty-free treatment for lesser developed countries for certain textiles (non-apparel) of wholly made African fabric.

provide a tax credit for new U.S. labor and capital investments in African Growth and Opportunity Act (AGOA)-eligible countries.

HOPE Act:

apply the same political, economic, and labor criteria as the AGOA.

apply the same textile and apparel transshipment requirements as AGOA.

in addition to current Caribbean Basin Initiative (CBI) benefits, provide a new rule of origin for apparel:

• 50% of the value of the finished product must be of U.S., Haitian, NAFTA, AGOA, CBI, Andean or FTA origin in years 1-3; in year 4, the percentage grows to 55%; and in year 5, the percentage grows to 60%.
• allow the new test to be applied on an annual, aggregated basis.
• cap the amount of trade under the new test at 1% of U.S. apparel imports in year 1, growing by 0.25 percentage points per year through year 5.

allow a "single transformation" rule of origin for bras, so that components can be sourced from anywhere as long as they are assembled in Haiti.

provide a small tariff preference level (TPL) for woven apparel, of 50 million square meter equivalents (SMEs) in years 1 and 2 and 33.5 million SMEs in year 3.

require a study by the ITC to determine the effects of the textile and apparel benefits on the trade markets and industries in Haiti, the Caribbean Basin countries, and the U.S.

assure that short supply determinations can be revoked in the case of fraud.

liberalize the rule of origin for wire harnesses, providing benefits if 50% of the value added is of U.S., Haitian, NAFTA, AGOA, CBI, Andean, or FTA origin.

House Ways and Means Committee press release on H.R. 6142 (dated 09/21/06) available at http://waysandmeans.house.gov/news.asp?formmode=release&id=429.

House Ways and Means Committee summary of H.R. 6142 (dated 09/21/06) available at http://waysandmeans.house.gov/media/pdf/trade/hrsummary.pdf.

BP Note

In August 2006, the Office of the U.S. Trade Representative (USTR) issued a notice requesting additional comments on whether (1) to limit, suspend, or withdraw GSP eligibility for 13 top beneficiaries, including Brazil and India; and (2) existing CNL waivers are no longer warranted. (See ITT's Online Archives or 08/11/06 news, 06081110, for BP summary of the USTR's August 2006 notice.)

According to a recent USTR press release, the USTR has received over 800 comments on these GSP issues, which are available for viewing online.

USTR press release (dated 09/20/06) available at http://www.ustr.gov/Document_Library/Press_Releases/2006/September/Comments_on_the_Eligibility_of_Certain_GSP_Beneficiaries_Existing_Competitive_Need_Limitation_(CNL)_Waivers_Available_for_On.html.