Congress Passes Pension Protection Bill Which Includes Trade-Related Provisions (Part I - DR-CAFTA Modifications)

This is Part I of a multi-part series of summaries of H.R. 4 and focuses on the provisions related to the Dominican Republic-Central America-U.S. Free Trade Agreement (DR-CAFTA). See future issues of ITT for additional summaries of the trade-related provisions of H.R. 4.)

(See ITT's Online Archives or 08/03/06 news, 06080399 1, for BP summary on House passage of H.R. 4. See ITT's Online Archives or 08/07/06 news, 06080799 1, for BP summary of Senate passage of H.R. 4.)

Retroactive Benefits for Textiles and Apparel Co-Produced in Countries that Joined DR-CAFTA on Different Dates

H.R. 4 contains a technical correction to provide retroactive DR-CAFTA benefits for textiles and apparel co-produced in countries that USTR has declared eligible for such benefits, that joined DR-CAFTA on different dates.

Specifically, H.R. 4 would add text (denoted by ) to 19 USC 4034 so that it allows the liquidation or reliquidation at the DR-CAFTA rate, and the refund of excess duties paid, for entries of textile or apparel goods of a DR-CAFTA country that would have qualified as originating if entered after the entry into force of DR-CAFTA for that country, if the entry was made on/after January 1, 2004 and before the date of entry into force of the DR-CAFTA for that country or any other DR-CAFTA country.

Proclamation Authority to Modify DR-CAFTA Origin Rules for Pocketing Material for Apparel

H.R. 4 also contains a provision¹ that would extend narrow proclamation authority to the President to implement changes to certain apparel rules of origin (i) with respect to Nicaragua, Honduras, El Salvador, and Guatemala - countries that have entered into letters of understanding regarding pocketing material (pocket bag fabric) with the U.S., and (ii) subject to certain limitations², with respect to Costa Rica and Dominican Republic - countries that have not yet entered into letters of understanding with the U.S. regarding pocketing material. This proclamation authority would expire on December 31, 2007.

According to trade sources³, this authority, if exercised, would require certain pocketing material for DR-CAFTA apparel to be made in the U.S. or DR-CAFTA countries.

Nicaragua Apparel TPL-Related Provisions

TPL certificate of eligibility. H.R. 4 states that Customs may require an importer to submit at the time the importer files a claim for preferential tariff treatment under Annex 3.28 of the DR-CAFTA a certificate of eligibility, properly completed and signed, or transmitted pursuant to an authorized electronic data interchange system, by an authorized official of the government of Nicaragua for purposes of implementing the tariff preference level (TPL) for Nicaragua provided in DR-CAFTA Annex 3.28. According to H.R. 4, this provision would apply to entries made on or after April 1, 2006.

(See ITT's Online Archives or 06/23/06 news, 06062315, for BP summary of U.S. Customs and Border Protection's (CBP's) notice announcing its implementation of a "certificate of eligibility" requirement for Nicaragua apparel TPL effective July 1, 2006.)

TPL may be reduced if Nicaragua fails to comply with its commitment to purchase U.S. trouser fabric. H.R. 4 also authorizes the President to proclaim a reduction in the overall limit in the TPL for Nicaragua provided in DR-CAFTA Annex 3.28 if the President determines that Nicaragua has failed to comply with a commitment under an agreement between the U.S. and Nicaragua with regard to the administration of such TPL.

According to trade sources³, this agreement pertains to the purchase of U.S. trouser fabric.

Status Reports to Congress on Socks and Certain Other Textiles and Apparel

In addition, H.R. 4 also creates a reporting requirement for the U.S. Trade Representative's office on the status of negotiations related to proposed CAFTA-DR changes for socks and certain other textiles and apparel.

Specifically, not later than 30 days after the date of enactment, and at least quarterly thereafter, the USTR shall submit to the appropriate congressional committees a report on the status of negotiations and amendments proposed by the U.S., Nicaragua, El Salvador, Honduras, Guatemala, Costa Rica, and the Dominican Republic to DR-CAFTA regarding any change to the rule of origin or alteration of the tariff treatment of socks (classified in certain 10-digit HTS numbers), or certain technical corrections for elastomeric yarn, women's sleep bottoms, or the application of the short supply provisions to sewing thread, narrow elastics, and visible linings.

In addition, the USTR shall provide to the appropriate congressional committees copies of any amendments to be proposed by the U.S. before the amendments are offered and copies of any amendments received by the U.S. relating to such negotiations.

¹from a House Ways and Means Committee press release

²subject to the consultation and layover provisions of section 104 of the DR-CAFTA Implementation Act and the possibility of Congressional disapproval action.

³from a National Council of Textile Organization (NCTO) press release

H.R. 4, as passed by House and Senate available at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=109_cong_bills&docid=f:h4enr.txt.pdf.

Senate' technical explanation of H.R. 4 available at http://www.house.gov/jct/x-38-06.pdf.

House Ways and Means press release on H.R. 4, dated 07/28/06, available at http://waysandmeans.house.gov/media/pdf/taxdocs/072806pensionsummary.pdf

NCTO press release, dated 08/04/06, available at http://www.ncto.org/newsroom/pr200613.asp

BP Note

CBP refers to the trade portion of the Pension Protection Act of 2006 (P.L. 109-280) as the Miscellaneous Trade and Technical Corrections Act of 2006.