House and Senate Pass Farm Bill by Veto-Proof Margins

If the President vetoes this measure as expected, both the House and Senate are likely to have enough votes to override his veto and enact the measure into law.

Below are highlights of the trade provisions of the Farm Bill, largely based on the Joint Explanatory Statement (JES) of the Conference Committee. Also included are certain Manager views.

(Note that the JES does not detail all the trade provisions in the measure, especially those that are merely renewed or reauthorized.)

Two-Year Extension of CBTPA

Section 213(b) of the Caribbean Basin Economic Recovery Act would be amended to extend the U.S. Caribbean Basin Trade Partnership Act (CBTPA), including the textile and apparel preference program provisions, through September 30, 2010.

(CBTPA preference provisions were scheduled to expire on September 30, 2008.)

"First Sale" Rule

H.R. 2419 contains provisions that address a January 2008 proposal by U.S. Customs and Border Protection to no longer value merchandise using the "first sale" principle in a series of salesimportation scenario. Instead, CBP proposed to value such merchandise based on the "last sale" occurring prior to the introduction of the goods into the U.S.

Importer declaration.H.R. 2419 states that the CBP Commissioner shall require each importer of merchandise to provide to CBP at the time of entry of the merchandise a declaration as to whether the transaction value of the imported merchandise is determined on the basis of the price paid by the buyer in the first or earlier sale occurring prior to introduction of the merchandise into the U.S. This declaration requirement would take effect 90 days from enactment and remain in effect for a one-year period.

CBP report to ITC.The CBP Commissioner would also be required to submit to the International Trade Commission (ITC) on a monthly basis for the one-year period a report on the information provided by importers during the preceding month.

ITC report to Congress.Not later than 90 days after the submission of the final report as required above, the ITC would be required to submit to the selected congressional committees a report on the information contained in all reports submitted.

Congress advises delay.H.R. 2419 states that it is the "sense of Congress" that the CBP Commissioner should not implement a change to CBP's interpretation of the term "sold for exportation to the U.S." for purposes of applying the transaction value of the imported merchandise in a series of sales, before January 1, 2011.

H.R. 2419 further states that it is the "sense of Congress" that beginning on January 1, 2011, the CBP Commissioner may propose to change or change CBP's interpretation of the term ''sold for exportation to the United States'' only if CBP:

consults with, and provides notice to, the appropriate congressional committees not less than 180 days prior to proposing a change and not less than 90 days prior to publishing a change;

consults with, provides notice to, and takes into consideration views expressed by, the Commercial Operations Advisory Committee (COAC)¹ not less than 120 days prior to proposing a change and not less than 60 days prior to publishing a change; and

receives the explicit approval of the Secretary of the Treasury prior to publishing a change.

H.R. 2419 also states that it is the "sense of Congress" that prior to publishing a change to CBP's interpretation of the term "sold for exportation to the U.S.." for purposes of applying the transaction value of the imported merchandise in a series of sales, the CBP Commissioner should take into consideration the matters included in the ITC's report to Congress.

(See ITT's Online Archives or 05/14/08 news, 08051410, for previous BP summary of these provisions. See ITT's Online Archives or 05/08/08 news, 08050805, for BP summary of Congressional letters sent to DHS regarding CBP's proposed change. See ITT's Online Archives or 01/24/08 and 01/25/08 news, 08012405 and 08012505, for earlier BP summaries of CBP's proposed interpretation.)

Unused Merchandise Drawback for Wine

Section 313(j)(2) of the Tariff Act of 1930 would be amended to provide a standard for what is considered to be "commercially interchangeable" for purposes of unused merchandise drawback for wine. The provision would be effective for claims filed for drawback on or after the date of enactment.

Haitian HOPE II

HOPE II² would provide additional ways that Haitian apparel (and some textile goods) could qualify for duty-free treatment, authorize a new labor monitoring program, extend the apparel preferences for 10 years, etc. Aspects of HOPE II include (partial list):

New and modified apparel/textile provisions. For apparel and some textile goods, the Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2008 (HOPE II) would create six separate paths for receive preferential duty rates (many of which apply without regard to the origin of the fabric, components, or yarn):

(1) Value-added TPL

(2) Woven apparel TPL

(3) Knit apparel TPL (excludes certain mens/boys t-shirts, etc.)

(4) Uncapped benefit for certain apparel

(5) Uncapped benefit for certain apparel under a "3 for 1" earned import allowance (EIA)

(6) Uncapped benefit for certain apparel made from "short supply" yarns or fabrics.

In addition, apparel from Haiti may also qualify for preferential access to the U.S. market under the United States-Caribbean Basin Trade Partnership Act (CBTPA).

Modified single transformation rule for certain apparel, luggage/bags. Brassieres; apparel articles covered by the Dominican Republic-Central America- U.S. Free Trade Agreement (DR-CAFTA) "single transformation" rule; headgear; certain sleepwear, luggage and handbags, and apparel made from "short supply" fabrics/yarns would be subject to a modified single transformation rule.

Earned import allowance program. The "3 for 1" earned import allowance program (EIA) would allow Haitian producers or entities controlling production that purchase certain qualifying fabric for apparel production to be able to export other apparel to the U.S. duty-free and TPL-free.

Direct shipment from/co-production in DR. Direct shipment from the Dominican Republic of certain qualifying apparel would be allowed.

Labor standards. There would be new provisions to promote compliance with core labor standards.

Ten year duration. Most apparel preferences would be extended until September 30, 2018.

Ethyl Alcohol

The existing effective period for ethyl alcohol as classified under HTS heading 9901.00.50 and 9901.00.52 is extended to before January 1, 2011 (from before January 1, 2009).

Duty Drawback for Ethyl Alcohol

Any duty paid under HTS subheading 9901.00.50 on imports of ethyl alcohol or a mixture of ethyl alcohol may not be refunded if the exported article upon which a drawback claim is based does not contain ethyl alcohol or a mixture of ethyl alcohol. In particular, the provision eliminates the ability to export jet fuel as a substitute for motor fuel made with imports of ethyl alcohol or a mixture of ethyl alcohol, and then receive duty drawback based upon the import duty paid on the ethyl alcohol or the mixture of ethyl alcohol under subheading HTS 9901.00.50.

The provision applies to imports of ethyl alcohol or a mixture of ethyl alcohol entered for consumption, or withdrawn from warehouse for consumption, on or after October 1, 2008. With respect to claims for substitution duty drawback that are based upon imports of ethyl alcohol or a mixture of ethyl alcohol entered for consumption, or withdrawn from warehouse for consumption, before October 1, 2008, such claims must be filed not later than September 30, 2010; otherwise, such claims are disallowed.

Import Quota Program for Upland Cotton

A special import quota program would be available for upland cotton, so that whenever certain price thresholds are reached during a four-week period, a quantity of such imports are not subject to the over-quota rate of a tariff rate quota (TRQ). However the quantity under a special import quota shall be considered to be an in-quota quantity for certain CBERA, ATPA, 19 USC 2463(d); and HTS General Note 3(a)(iv) provisions.

Sugar

The USDA would establish at the beginning of the quota year, the minimum TRQs for raw cane sugar and refined sugar, which could be increased on or after April 1 of each fiscal year, or earlier if natural disasters occur. USDA would also be required to collect certain information on the sugar and high fructose corn syrup trade to and in Mexico.

Dairy Exports

The dairy export incentive program would be reauthorized until December 31, 2012, and authorizes the USDA to issue rules to ensure that the maximum volume allowed is exported.

GSM-102 Export Credit Guarantees

Credit subsidies for the GSM-102 Export Credit Guarantee Program would be capped at $40 million annually.

Market Access for Organics

Organic commodities would be eligible for the Market Access Program (Sections 203 and 211 of the 1978 Agricultural Trade Act). This program would also be extended.

Export Enhancement Program to be Repealed

Authority for the Export Enhancement Program (Section 301 of the Agricultural Trade Act of 1978) would be repealed.

Imported Agricultural Products and Child Labor

The USDA, in cooperation with the Labor Department, would be required to develop standards that importers of agricultural products could choose to use to certify that those products were not produced with the use of abusive forms of child labor.

Softwood Lumber Importer Declaration Program

A softwood lumber importer declaration program would be established to require importers to provide certain information (e.g. estimated export charges) about each shipment of softwood lumber or softwood lumber products at the time the importer files the entry summary documentation.

Declaration for Imported Plants

In order to stem the illegal logging of timber, the Lacey Act would be amended to redefine the term "plant" and to make it illegal for any plant to be taken, possessed, transported or sold (1) in violation of any State or foreign law that protects plants or regulates the theft of plants, (2) without the payment of royalties, taxes, or stumpage fees or in violation of any limitation under any State or any foreign law, (3) etc.

The Lacey Act would also be amended to require a plant declaration to be filed upon importation of a plant. The plant declaration must include the scientific name of any plant, a description of the value, quantity (including the unit of measure) of the plant, and the name of the country from where the plant was taken. If a plant species or country of origin cannot be determined, the plant declaration is to include a list of possible plant species that could be found in the product or a list of possible countries from which the plant originated. An exclusion is provided for plants used exclusively as packing material unless the packing materials are the items being brought in. The Secretary is required to review the plant declaration.

(Without such changes, the Managers state the U.S. government is not able to use the criminal and civil penalties of the Lacey Act to preclude the importation of wood and wood products or other plants and plant products harvested in violation of the laws of foreign governments designed to protect such plants, or to seize such illegally harvested plants and products when they enter the United States.)

Identification of Honey

1. USC 1622(h) would be amended to require the grading mark, statement, inspection mark of the USDA to be located in close proximity of the country of origin label on the packaged honey.

Catfish

A voluntary fee-based grading system program at USDA for catfish would be authorized that could expand to other species of farm-raised fish and farm-raised shellfish by petition process. In addition, Congress states that it is its intent that imported catfish inspection programs be found to be equivalent under USDA regulations before foreign catfish may be imported into the U.S.

Country of Origin Labeling for Beef, Lamb, Pork, Goat, Chicken, Wild Fish, Macadamia Nuts, Ginseng, and Pecans

New country of origin labeling requirements for the above products (except processed wild fish) that are of U.S. origin, multiple countries of origin, imported for immediate slaughter, and from a foreign country of origin would be established. Covered commodities such as beef, lamb, pork, chicken or goat present in the U.S. on or before July 15, 2008 would be labeled as products of the U.S. USDA would be authorized to conduct audits to ensure compliance. In addition, current law would be reinstated regarding the labeling of processed wild fish to include locations such as aboard documented vessels.

Trichinae Certification Program for Exports

The USDA would be directed to establish and implement a trichinae certification program to certify farm operations that are trichinae free to be eligible for export or other market opportunities.

Importation of Live Dogs for Resale

No live dog could be imported into the U.S. for purposes of resale unless the USDA determines the dog is in good health; has received all necessary vaccinations; and is at least 6 months of age; if imported for resale. Exemptions would be provided for dogs imported for research purposes, veterinary treatment, and certain dogs into Hawaii.

USDA Reorganization

The Managers are concerned about efforts to reorganize USDA in an attempt to heighten the Department's response and management capabilities regarding threats to agricultural biosecurity. The Managers recognize that the existing structure at USDA to address such threats is adequate, and will continue to successfully prevent, control, and

eradicate agricultural diseases. However, the Managers would codify the Office of Homeland Security at USDA in this Act in response to the concerns of other Congressional Committees.

AQI Transfer from USDA to DHS

The Managers are especially concerned with the degradation of the Agricultural Quarantine Inspection (AQI) program following its transfer from USDA to the Department of Homeland Security in 2002, and are aware that the agriculture sector continues to raise serious concerns about the ability and willingness of DHS to prioritize agricultural quarantine and inspection activities at ports of entry.

While some observers have concluded that the scientific nature of the AQI program does not fit well with the police function of the Customs and Border Protection Program, the Managers have nevertheless chosen to maintain the program within the Department of Homeland Security.

As such, the Managers encourage the USDA to increase its oversight to ensure that the concerns of the agricultural sector are given a priority status commensurate with the threat that these diseases pose to the U.S. economy. To do so, the Managers encourage USDA to establish a comprehensive activity reporting mechanism detailing how DHS uses funds transferred by USDA to carry out the AQI program.

The Managers also encourage USDA to seek detailed information to track the promotion of CBP field officers, import specialists, and agricultural specialists into supervisorial and managerial grades since the transfer of function in 2003.

3% of Duties Would Fund Agriculture Disaster Assistance

An agricultural disaster relief trust fund for farmers and ranchers would be created that would be funded by an amount equal to 3.08% of the duties collected on articles entered, or withdrawn from warehouse, for consumption under the HTS.

Customs User Fees and MPFs Would be Extended

Customs user fees (e.g. fees for processing air and sea passengers, commercial trucks, rail cars, private aircraft and vessels, commercial vessels, dutiable mail packages, barges and bulk carriers, cargo and Customs broker permits) would be extended through September 30, 2017 (from December 27, 2014) and merchandise processing fees (MPFs) would be extended through November 14, 2017 (from December 27, 2014).

¹the Departmental Advisory Committee on Commercial Operations of U.S. Customs and Border Protection and Related Homeland Security Functions.

² The Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2008

Joint explanatory statement of the Conference Committee available at http://www.rules.house.gov/110/text/110_hr2419_jes.pdf

Conference report available at http://www.rules.house.gov/110/text/110_hr2419_confrpt.pdf