With the expiration of Trade Promotion Authority (“TPA”) on June 30, 2007, the U.S. Trade Representative (“USTR”) sought to advance as many open free trade agreements (“FTA”) and other trade programs as possible. This includes the United States- South Korea FTA (“KORUS FTA”), United States-Peru Trade Promotion Agreement (“PTPA”), United States- Colombia Trade Promotion Agreement (“CTPA”), United States-Panama Trade Promotion Agreement, United States-Vietnam Trade and Investment Framework Agreement (“U.S.-Vietnam TIFA”), and United States-Georgia TIFA.
The government’s failure to extendTPA, or “fast track” authority, means this could be the last we hear about FTAs for awhile, possibly until the new administration enters offi ce in 2008. Although the expiration of TPA does not mean FTA negotiations are completely off the table, according to the State Department, countries will be less willing to discuss free trade agreements with the U.S. without TPA, which allows the president to negotiate agreements that Congress can approve or disapprove in their entirety without amendment. When TPA lapsed previously, between 1995 and 2001, not a single U.S. free trade agreement was advanced during that time.
In related news, Congress voted to extend the Andean Trade Preference Act (“ATPA”) and President Bush issued a proclamation making certain changes to the Generalized System of Preferences (“GSP”) and the African Growth and Opportunity Act (“AGOA”). Finally, U.S. Customs and Border Protection (“CBP”) has published interim regulations on the United States-Singapore FTA (“U.S.-Singapore FTA”), for which it seeks comments.
FREE TRADE AGREEMENT SUMMARY
On June 30, 2007, the U.S. and South Korea signed the KORUS FTA, which is considered the most commercially signifi cant FTA for the U.S. since the North American Free Trade Agreement (“NAFTA”). Negotiations for the KORUS FTA concluded on April 1, 2007, and the USTR quickly moved the agreement into the execution stage before TPA expired.
The U.S. estimates that South Korea, which has the world’s tenth largest economy, is the seventh largest trading partner for the U.S., with two-way trade in 2006 totaling approximately $78 billion. This FTA will make 95 percent of bilateral trade in consumer and industrial products duty free within three years of the agreement’s enactment, with all remaining tariffs eliminated within ten years. This FTA is expected to be particularly benefi cial for the U.S. automobile industry due to large strides taken in eliminating tariffs and non-tariff barriers that the U.S. believes are impediments to U.S. companies’ sales in the Korean market.
The KORUS FTA is modeled on NAFTA, as are the U.S. FTAs with Australia, Chile, Singapore and the United States-Dominican Republic-Central American Free Trade Agreement (“CAFTA-DR”). Therefore, many of the provisions and rules of origin for these agreements are similar. The regional value content (“RVC”) methodology is akin to that used for the agreements with Australia, Chile, Singapore and CAFTA-DR. Although many hope that the KORUS FTA will be addressed by Congress during the current session, certain Democratic leaders in Congress have expressed their unwillingness to vote in favor of this FTA. Similar delays have occurred in connection with the agreements with Peru, Colombia and Panama.
U.S.-Peru Trade Promotion Agreement
On June 25, 2007, the USTR reported that the U.S. and Peru agreed on amendments to the PTPA, which includes provisions on the environment and labor. These amendments were necessary for the PTPA to move forward in Congress. While Congress was expected to vote on the PTPA in July, due to the views of certain Democrats in Congress, this agreement may not move forward in the current session.
The U.S. and Peru concluded negotiations on this agreement on December 7, 2005, and the agreement was signed on April 12, 2006. The PTPA would make duty-free entry of qualifying merchandise into the U.S. permanent, without reliance upon the continual extension of ATPA, and would mean duty-free exports to Peru as well.
U.S.-Colombia Trade Promotion Agreement The “sister” agreement to the PTPA, the CTPA underwent similar amendments on June 28, 2007, which will allow the agreement to enter its fi nal stage of implementation.
The CTPA was signed on November 22, 2006. Both the PTPA and CTPA follow the NAFTA model rather than the GSP model for determining whether merchandise qualifi es for duty preferences under the agreement. The RVC methodology applied to the PTPA and CTPA is the build-up/build-down method rather than direct costs of processing (used in the U.S. trade agreements with Israel, Jordan, Morocco, Bahrain and Oman). U.S.-Panama Trade Promotion Agreement
The U.S.-Panama Trade Promotion Agreement was fi nally signed on June 28, 2007, after a lengthy negotiation process that commenced in April 2004. Although imports from Panama are already duty-free under the Caribbean Basin Initiative and GSP, the agreement with Panama is expected to be fruitful for U.S. exporters, especially once the Panama Canal is expanded, which has a target completion year of 2014. Congress must approve and the president must sign the agreement prior to its taking effect.
U.S.-Vietnam Trade and Investment Framework Agreement
The U.S.-Vietnam TIFA was signed on June 21, 2007 to further expand and deepen the trade and investment relationship between the countries. Vietnam became a WTO member on January 11, 2007 and negotiations on the TIFA commenced in March 2007.
U.S.-Georgia Trade and Investment Framework Agreement
The U.S.-Georgia TIFA, signed on June 20, 2007, is also viewed as an important step to the expansion of the countries’ trade and investment relationship.
Eight-Month Extension of ATPA
With bated breath, some awaited the extension of the ATPA. This trade preference program with the Andean nations of Peru, Colombia, Bolivia and Ecuador, which was scheduled to expire on June 30, 2007, was extended by Congress. H.R. 1830 provides for an eightmonth extension, through February 29, 2008, of the ATPA. The ATPA allows goods from these countries to enter the U.S. duty-free. The extension gives Congress additional time to pass legislation enacting the PTPA and CTPA.
Presidential Proclamation on GSP, AGOA and Other Purposes
Presidential Proclamation 8157, issued by the president on June 29, 2007, modifi es certain benefi ts under the GSP as of July 1, 2007. The countries and products that are no longer eligible for GSP benefi ts are:
- Colombia: certain fl owers; methyl ethyl ketoxime; frozen sweet potatoes; certain leather; hats and lead buillion
- Bolivia: tungsten ores
- Peru: certain lima beans; certain potatoes; pecans; vegetable extracts; gold rope necklaces; and mercury and zinc products
- Ecuador: hats On the other hand, these products from the following countries are now eligible for duty-free treatment under the GSP:
- Ivory Coast: kola nuts
- Brazil: Chinese water chestnuts in pulp; certain leather; copper wire; wooden posts, beams and fl ooring panels; ferrozirconium and certain brakes
- Thailand: certain gold necklaces; certain television reception apparatus and polyethylene terephthalate
- Jordan: certain tires
- India: certain gold necklaces; electrical generating sets; certain pesticides; certain television reception apparatus and non-electric brass lamps
- Kazakhstan: certain copper cathodes and ammonium perrhenate
- Turkey: copper wire and boric acid
- Philippines: ignition wiring sets
- Venezuela: certain methanol
- Argentina: certain hams
With regard to AGOA, the president has redesignated Mauritania as an eligible benefi ciary sub-Saharan African country and a lesser developed benefi ciary sub- Saharan African country (Mauritania’s eligibility under AGOA was previously terminated per Proclamation 7970 on December 22, 2005). The proclamation also terminates duty-free treatment for certain eligible articles that were imported in quantities exceeding the competitive need limitations (“CNL”) and redesignates other countries as benefi ciary developing countries with respect to certain eligible articles that no longer exceed the applicable CNL. Finally, the proclamation makes technical and conforming changes to the Harmonized Tariff Schedule of the United States, effective October 1, 2006, which primarily affect specifi c provisions within Chapter 98.
U.S.-Singapore FTA Interim Regulations
CBP has published a request for comments from the trade on the interim regulations for the U.S.-Singapore FTA. 72 Fed. Reg. 35,895 (June 29, 2007) (attached). Comments must be received by CBP on or before August 10, 2007.
Some of the notable provisions that will be found in 19 C.F.R. §§10.501-10.570 include:
- No merchandise processing fee applies to goods that qualify as originating that are entered on or after January 1, 2004, the effective date of the U.S.-Singapore FTA.
- Unlike NAFTA and the U.S.-Chile FTA, the U.S.-Singapore FTA does not specify a procedure for making a post-importation claim, although an adjustment prior to liquidation via Supplemental Information Letter and a protest after liquidation are both acceptable.
- The importer is required promptly to correct invalid U.S.-Singapore FTA claims to avoid being subjected to penalties.
- The U.S.-Singapore FTA allows duty-free treatment for goods re-entered after repair or alteration in Singapore.
These additional free trade agreements, if and when implemented, will provide companies with more options for sourcing raw materials and fi nished goods from “low cost” countries. Likewise, they will increase possibilities for exports to these countries, which may have traditionally subjected goods to extraordinarily high tariffs and non-tariff barriers.
The extension of ATPA for a limited time will provide some relief to companies doing business with the Andean nations, which may be made permanent with respect to Peru and Colombia if Congress votes in favor of these agreements. The changes the president proclaimed with regard to GSP and AGOA should be noted to ensure compliance with respect to imports of relevant products from certain countries. Finally, it would be prudent for companies to review the interim U.S.- Singapore FTA regulations to determine whether current procedures for making U.S.-Singapore FTA claims comply with the regulations.