House "Trade Reform Bill" Introduced to Modify GSP and AGOA, Create New Preference Program

Measure Would Modify GSP and AGOA, Create New Preference Program

According to McDermott's press release and H.R. 4101, the bill would extend the Generalized System of Preferences (GSP) program to 2019 and modify its origin rules; create a new preference program for least developed countries that would include certain capped duty-free apparel benefits and use the modified origin rules of the GSP program; extend the third country fabric TPL for the African Growth and Opportunity Act (AGOA) to 2015, and transition its origin rule to the modified origin rules of the GSP program.

An overview of the bill includes the following provisions (partial list):

Opportunity to Grant Duty-Free Treatment to GSP Excluded Articles

The President could designate an article excluded from GSP treatment (e.g. most textiles and apparel, watches, etc.) for GSP, AGOA, or new preference program benefits, if doing so would not cause or threaten material harm to a U.S. producer of the same or like article - or to certain countries.

GSP Origin Rules Would be Modified

The GSP rules of origin would retain their 35% value threshold for origin, and would allow the materials to be produced or processing operations to occur in one or more beneficiary developing countries.

The bill would define processing operation costs to include all actual labor costs (including fringe benefits, on the job training, and the like), and dies, molds and tooling, etc. allocable to the article. Such costs would exclude profit and certain general expenses.

PR and Virgin Islands. Both Puerto Rico and the U.S. Virgin Islands would be considered beneficiary countries for the 35% percent determination.

Textiles and apparel. For allowed textile and apparel articles, the 35% percent determination would include the cost or value of any materials (regardless of origin), as long as the material is both cut (or knit to shape) and sewn or otherwise assembled into such an article in one or more beneficiary developing countries, with a special rule for textile or apparel sets.

Textiles and apparel would be defined as any article classified in HTS Chapters 50-63, Headings 6501, 6502, 6503, or 6504, and subheadings 6406.99 or 6505.90.

New Preference Program for Articles of Least-Developed Countries

The bill would direct the President to establish a new, duty-free program for eligible articles from qualified least-developed beneficiary countries (other than certain AGOA countries). Eligible articles would not be subject to quantitative restriction - except for certain apparel from certain countries (see below).

Rules of origin. The rules of origin would be the modified GSP origin rules.

Limits for significant apparel suppliers. A quantitative limit would be imposed for any eligible cotton and manmade fiber apparel such as pants, shorts, knit shirts and blouses, woven shirts and blouses, and coats from any least-developed country that is a significant apparel supplier.

The limit would last for 10 years and would start at 50% of 2007 import levels. In addition, it could be increased by 10% annually if 50% that country's use of apparel inputs comes from GSP and least developed countries.

AGOA Third Country Apparel TPL Would be Extended, Transition to GSP 35% Rule

The bill would extend the AGOA program's third country tariff preference level to September 30, 2015, and until that date, allow either the AGOA origin rules or the GSP's modified origin rules, to be used for the program.

(This bill has just been introduced, and has not yet been considered by any committee or Congress.)

H.R. 4101 available at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h4101ih.txt.pdf/

McDermott press release and section-by-section summary of H.R. 4101 available by emailing documents@brokerpower.com.