Details of House Summaries of Colombia, Panama FTA Draft Implementing Bills

(On July 7, 2011, the House Ways and Means and Senate Finance Committees held "mock" mark-ups and approved without amendment draft implementing bills for the Korea, Colombia, and Panama free trade agreements. Following the Administration's review of the implementing bills approved by the House Ways and Means and Senate Finance Committees, it is expected that final versions of the implementing bills will be submitted to Congress for an up-or-down vote (i.e., no amendments).)

Summaries of Colombia and Panama FTA Implementing Bills Are Similar

Highlights from the summaries of the draft implementing bills for the U.S.-Colombia and U.S.-Panama agreements (note the summaries are very similar) include the following provisions:

Section 101: Approval and Entry into Force

Section 101 states the Agreement will enter into force when the President determines that the FTA country is in compliance with all provisions that are to take effect on the date of entry into force of the Agreement and exchanges notes with the FTA government providing for entry into force on or after January 1, 2012.

Section 201: Tariff Modifications

Section 201(a) provides the President with the authority to proclaim tariff modifications necessary or appropriate to carry out the Agreement and requires the President to terminate the FTA country’s designation as a beneficiary developing country for the purpose of the Generalized System of Preferences (GSP) program and as a beneficiary country for the purposes of the Andean Trade Preference Act (ATPA) (Colombia) and the Caribbean Basin Economic Recovery Act (Panama), as of the date that the Agreement enter into force.

Section 202: Additional Duties on Certain Agricultural Goods

Section 202 implements the agricultural safeguard provisions of the Agreement. Section 202(b) directs the Secretary of the Treasury to assess an additional duty in any year when the volume of imports to the U.S. of a "safeguard good" exceeds:

For Colombia: 140% of the in-quota quantity allocated to Colombia for the good in that calendar year, as set forth in Appendix I of the General Notes to the Schedule of the U.S. to Annex 2.3 of the U.S.-Colombia Agreement.

For Panama: the trigger level for the good in that calendar year as set forth in the Schedule of the U.S. to Annex 3.17 of the U.S.-Panama Agreement.

The additional duty is calculated as a specified percentage of the difference between the Normal Trade Relations (NTR or MFN) rate of duty and the duty set out in the Agreement.

Section 203: Rules of Origin

Section 203 codifies the Agreement’s rules of origin. Section 203(b) establishes three basic ways for a FTA country good to qualify as an "originating good" and therefore to be eligible for preferential tariff treatment when it is imported into the U.S. A good is an originating good if:

(1) it is wholly obtained or produced entirely in the territory of the U.S., the FTA country, or both;

(2) it is produced entirely in the U.S., the FTA country, or both, and any materials used to produce the good that are not themselves originating goods are transformed in such a way as to cause their tariff classification to change or the good otherwise meets regional value-content and other requirements, as specified in the Agreement; or

(3) it is produced entirely in the territory of the U.S., the FTA country, or both, exclusively from originating materials.

Under the rules in the Agreement, an apparel product must generally meet a tariff shift rule that effectively imposes a "yarn forward" requirement. Thus, to qualify as an originating good imported into the U.S. from the FTA country, an apparel product must have been cut (or knit to shape) and sewn or otherwise assembled in the U.S., the FTA country, or both, from yarn, or fabric made from yarn, that originates in the U.S., the FTA country, or both.

Section 204: Customs User Fees

Section 204 implements the U.S. commitments under the Agreement to eliminate the Merchandise Processing Fee (MPF) on originating goods. In accordance with U.S. obligations under the General Agreement on Tariffs and Trade (GATT) of 1994, the provision also prohibits use of funds in the Customs User Fee Account to provide services related to entry of originating goods.

Section 205: Disclosure of Incorrect Information; False Certifications of Origin; Denial of Preferential Tariff Treatment

Section 205 prohibits the imposition of a penalty upon importers who make an invalid claim for preferential tariff treatment under the Agreement if the importer acts promptly and voluntarily to correct the error and pays any duties owed on the good in question. The provision also makes it unlawful for a person to falsely certify, by fraud, gross negligence, or negligence that a good exported from the U.S. is an originating good. However, the provision prohibits the imposition of a penalty if the exporter or producer promptly and voluntarily provides notice of the incorrect information to every person to whom a certification was issued.

Section 207: Recordkeeping Requirements

Section 207 implements the recordkeeping requirements of the Agreement. Section 207 requires any person who completes and issues a certificate of origin under the Agreement for a good exported from the U.S. to maintain, for a period of five years after the date of certification, specified documents demonstrating that the good qualifies as originating.

Section 208: Enforcement Relating to Trade in Textile or Apparel Goods

Section 208 implements the customs cooperation and verification of origin provisions, under which the U.S. may request the FTA country government to conduct a verification of whether a claim of origin for a textile or apparel good is accurate or a particular exporter or producer is complying with applicable customs laws, regulations, and procedures regarding trade in textile or apparel goods.

Under Section 208(c), the President may also direct the Secretary of the Treasury to take "appropriate action" after a verification has been completed. Such action may include (i) denying preferential tariff treatment to textile or apparel goods that the person subject to the verification has exported or produced if the Secretary determines that there is insufficient information to support a claim for such treatment or determines that a person has provided incorrect information to support a claim for such treatment; and (ii) denying entry to such goods if the Secretary determines that a person has provided incorrect information regarding their origin or that there is insufficient information to determine their origin.

Sections 311: Commencing of Action for Relief

Sections 311 to 316 authorize the President, after an investigation and affirmative determination by the International Trade Commission (ITC), to impose certain import relief measures when, as a result of the reduction or elimination of a duty under the Agreement, a FTA country product is being imported into the U.S. in such increased quantities and under such conditions as to be a substantial cause of serious injury or threat of serious injury to the domestic industry.

Section 313: Provision of Relief

Section 313(c) sets forth the nature of the relief that the President may provide. The President may take action in the form of a suspension of further reductions in the rate of duty to be applied to the articles in question, or in the form of an increase in the rate of duty on the articles in question to a level that does not exceed the lesser of the existing NTR (MFN) rate or the NTR (MFN) rate of duty that was imposed on the day before the Agreement entered into force.

Section 314: Termination of Relief Authority

Section 314 provides that no relief may be provided under this Act after ten years from the date the Agreement enters into force, unless the scheduled tariff phase-out period for the article under the Agreement is greater than ten years, in which case relief may not be provided for that article after the scheduled phase-out period ends.

Section 321: Commencement of Action for Relief

Section 321 provides that an interested party may file a request with the President for safeguard relief under Subtitle B of Title III of the Act (Sections 321 to 328). The President must review the request and determine whether to commence consideration of the request.

Section 322: Determination and Provision of Relief

Section 322(b) sets forth the relief that the President may provide, which is an increase in the rate of duty on the articles in question to a level that does not exceed the lesser of the existing NTR (MFN) rate or the NTR (MFN) rate of duty that was imposed on the day before the Agreement entered into force.

Section 323: Period of Relief

Section 323 provides that the period of relief shall be no longer than two years (for Colombia) or three years (for Panama). The aggregate period of relief, including any extension, may not exceed three years.

Section 331: Findings and Action on Goods from FTA Countries

Section 331(a) provides that, if the ITC makes an affirmative determination or a determination that the President may consider to be an affirmative determination in a global safeguard investigation under Section 202(b) of the Trade Act of 1974, the ITC must find and report to the President whether FTC country imports of the article that qualify as originating goods under the Agreement are a substantial cause of serious injury or threat thereof. Under Section 331(b), if the ITC makes a negative finding under Section 331(a), the President may exclude any imports that are covered by the ITC’s finding from the global safeguard action.

See Future Issue of ITT for BP House Summary of KORUS FTA Draft Implementing Bill

See future issue of ITT for highlights of the House Ways and Means Committee's summary of the draft implementing bill for the U.S.-Korea Free Trade Agreement (KORUS).

(See ITT's Online Archives or 07/13/11 news, 11071320, for BP summary of provisions in the draft implementing bills which were not FTA-related, such as provisions to increase the Merchandise Processing Fee, extend GSP and ATPDEA, renew certain user fees, etc.)

Ways and Means summary of the Colombia FTA draft implementing bill available here.

Ways and Means summary of the Panama FTA draft implementing bill available here.