Details on the House-Passed Pakistan/Afghanistan ROZ Bill (Would Provide New Textile Benefits)

House sources indicate the bill would also increase the Customs user fees charged for imports and travel from Afghanistan and Pakistan.

(The Afghanistan-Pakistan Security and Prosperity Enhancement Act was passed as H.R. 1886 on June 11, 2009. H.R. 1886 was later included as part of H.R. 2410, the Foreign Relations Authorization Act, Fiscal Years 2010 and 2011.

Although the House has passed H.R. 2410, it is not in effect. Generally, in order for a bill to be implemented, identical versions of that bill must be passed by both the House and Senate and then the bill must be approved (enacted) by the President.

In February, Senator Cantwell (D) introduced another version of ROZ legislation, S. 496, which was referred to the Senate Finance Committee, but has not seen further action. In recent remarks, Senator Grassley (R), the ranking member of the committee, indicated he is unclear how the Senate will proceed with ROZ legislation, particularly given his broader interest in preference program reform. In March 2009, President Obama called on Congress to pass ROZ legislation.)

Highlights of the Afghanistan-Pakistan Security and Prosperity Enhancement Act include (partial list):

Criteria for Designating ROZs

The President would be given the authority to designate an area within Afghanistan or limited areas within Pakistan as a Reconstruction Opportunity Zone (ROZ) if the President determinates that:

Afghanistan or Pakistan, as the case maybe, meets the eligibility requirements specified in the bill;

Afghanistan or Pakistan, as the case may be, meets the Generalized System of Preferences beneficiary developing country eligibility requirements (and is not ineligible under 19 USC 2462(b)); and

Designation is appropriate taking into account factors such as certain labor-related requirements, the country's desire to have a particular area designated as a ROZ, etc.

Public comment before ROZ designated. Before the President designates an area as a ROZ, he would have to afford interested persons an opportunity to submit their views on the designation.

The bill would also require the President, before making a designation, to notify Congress of his intention to make a designation, along with the reasons for making the designation.

Duty-Free Treatment for Products Other Than Textiles and Apparel

The President would be authorized to proclaim duty-free treatment for eligible articles other than textiles and apparel from ROZs if they meet the relevant rules of origin.

Eligible articles. Specifically, the following would be eligible for duty-free treatment:

any article from a ROZ that is eligible for GSP from beneficiary developing countries (19 USC 2463(a)(1)(A));

any article from a ROZ located in Afghanistan that is eligible for GSP from least-developed beneficiary developing countries (19 USC 2463(a)(1)(B)); or

any article from a ROZ that is not a textile or apparel article, regardless of whether the article has been designated as a GSP/LDBDC GSP article, if, after receiving advice from the International Trade Commission, the President determines that such article is not import sensitive in the context of imports from a ROZ.

(Before proclaiming duty-free treatment for such articles, the President would be required to publish in the Federal Register and provide ITC a list of articles which may be considered for such duty-free treatment.)

ROZ and Afghan ROZ rules of origin. H.R. 2410 establishes separate rules of origin for products other than textiles and apparel from (i) ROZs, and (ii) ROZs in Afghanistan.

Duty-Free Treatment for Certain Textile and Apparel Articles

The President would be authorized to proclaim duty-free treatment for eligible textile and apparel articles from ROZs if (a) the article is a "covered" article; and (b) the President determines that the country in which the ROZ is located has satisfied the requirements for protecting against unlawful transshipment, etc.

Covered articles would be:

Textile and apparel categories. An article that is the product of one or more ROZs and falls within the scope of one of the following textile and apparel category numbers¹:

"Afghanistan only" textile and apparel categories. An article is the product of one or more ROZs in Afghanistan and falls within the scope of one of the following textile and apparel category numbers¹:

Partial textile and apparel categories. The article is the product of one or more ROZs and falls within the scope of one of the following textile and apparel category numbers¹ and is covered by the corresponding description of the category (see bill text for category description).

Textile and apparel tariff numbers. The article is the product of one or more ROZs and falls within the scope of one of 109 listed Harmonized Tariff Schedule numbers¹ in chapters 42, 56, 57, 61, 62, 63, 64, 65, and 94.

General and special rules of origin for textiles and apparel. H.R. 2410 establishes general and special rules of origin for articles from ROZs.

The bill also establishes separate general and special rules for articles from ROZs in Afghanistan.

Protections Against Unlawful Transshipment

Duty-free treatment would not be provided to covered textile and apparel articles that are imported from a ROZ in a country unless the President determines that country meets certain specified criteria (e.g., the adoption of certain measures to prevent unlawful transshipment such as the adoption of an effective visa or electronic certification system, etc., see bill for details.)

NAFTA-like Customs procedures. The Treasury Secretary, after consultation with the U.S. Trade Representative, would be required to issue regulations setting forth customs procedures similar in all material respects to the requirements of article 502(1) of the North American Free Trade Agreement (NAFTA), which would apply to any importer that claims duty-free treatment for certain textile and apparel articles.

This section also includes provisions on certificate of origin requirements, penalties for unlawful transshipment, CBP monitoring and reports to Congress on certain protections against unlawful transshipment, etc.

Petition Process; Withdrawal of Duty-Free Treatment

Any interested party would be able to file a request to have the status of Afghanistan or Pakistan reviewed with respect to eligibility requirements, and the President would be required to provide for this purpose the same procedures as those that are provided for reviewing the status of eligible beneficiary developing countries with respect to GSP designation criteria listed in 19 USC 2462 (b) and (c)).

The President would also be allowed to withdraw, suspend, or limit the application of duty-free treatment upon consideration of certain factors.

Customs User Fees Would be Increased

The Secretary of the Treasury would be required to increase the amount of fees charged and collected under 19 U.S.C. 58c(a) for the provision of customs services in connection with imports and travel from Afghanistan and Pakistan as necessary to meet certain minimum amounts.

(The increase would be not less than $12 million for the period beginning on the date of the enactment and ending at the close of September 30, 2014; and not less than $105 million for the period beginning on the date of enactment and ending at the close of September 30, 2019.)

The amount of the increase in fees charged and collected under the above provision would be in addition to the amount of fees that would otherwise be charged and collected under 19 U.S.C. 58c(a) for the provision of customs services in connection with imports and travel from Afghanistan and Pakistan.

Congressional sources have stated that the increase would only apply to imports and travel from Afghanistan and Pakistan.

See future issues of ITT for summaries on export and other trade-related provisions in H.R. 2410.

(See ITT's Online Archives or 06/15/09 news, 09061515, for BP summary of the House passage of H.R. 1886, which was subsequently added to H.R. 2410. See ITT's Online Archives or 06/12/09 news, 09061230, for BP Capitol Hill update announcing House passage of H.R. 1886. See ITT's Online Archives or 04/02/09 news, 09040210, for BP summary of ROZ bills introduced in the House and Senate.)

¹as set forth in the HTS (as in effect on September 1, 2007)

H.R. 2410 available at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h2410eh.txt.pdf.