The Offi ce of the United States Trade Representative (“USTR”) has published a request for comments from the trade in the Federal Register with respect to the Generalized System of Preferences (“GSP”), the details of which are summarized below. In addition, this client memorandum includes some recent reports regarding the status of outstanding free trade agreements (“FTAs”) that the USTR has been busy trying to move forward because of the upcoming expiration of Trade Promotion Authority.


GSP, which was scheduled to expire on December 31, 2006, has been extended for all benefi ciary countries through December 31, 2008. The USTR has made available the results of import statistics for 2006 with respect to the competitive need limitations (“CNLs”) under GSP. Based upon this information, changes to GSP eligibility for certain products from designated Benefi ciary Developing Countries (“BDCs”) may result. Accordingly, the USTR is requesting comments from the trade community by March 16, 2007 regarding possible de minimis CNL waivers for certain articles and the possible redesignation under GSP of articles that are currently ineligible for benefi ts due to previously exceeded CNLs, as described in USTR Import Statistics Lists I, II and III. In addition, by March 23, 2007, the USTR would like comments on the potential revocation of CNL waivers on List IV.

A GSP benefi ciary developing country jeopardizes receiving duty-free treatment for an eligible tariff provision if exports of that tariff provision from the benefi ciary country to the United States during a particular calendar year meet either of the following tests: (1) exports of the tariff provision have a value in excess of the applicable amount for the year ($125 million for 2006); or (2) exports of the tariff provision have a value equal to or greater than 50 percent of the value of total U.S. imports of that tariff provision from all countries. Under the recently enacted Tax Relief and Health Care Act of 2006, the President can also revoke a CNL waiver that has been in effect for at least fi ve years for a GSP-eligible product from a particular country if its annual trade level in the previous calendar year exceeds 1.5 times the CNL or 75 percent of U.S. imports of the product during the calendar year at issue.

USTR Import Statistics List I illustrates which articles from BDCs were excluded from GSP treatment on or before July 1, 2006. List I also illustrates the GSP-eligible articles from BDCs that exceeded the 2006- level CNLs due to U.S. imports being in excess of $125 million, or by an amount greater than 50 percent of the total U.S. import value in 2006.

USTR Import Statistics List II identifi es the GSP-eligible articles from BDCs that are above the 50 percent CNL but are eligible for a de minimis waiver of the CNL for 2006 due to trade being under $18 million.

USTR Import Statistics List III shows GSP-eligible articles from certain BDCs that are currently not receiving GSP duty-free treatment, but that may be considered for GSP redesignation on the basis of 2006 trade data and consideration of certain statutory factors, as set forth in the Federal Register notice.

The United States Implements DR-CAFTA for the Dominican Republic

Pursuant to a Presidential Proclamation issued February 28, 2007, the Dominican Republic–Central American Free Trade Agreement (“DRCAFTA”) is in effect for the Dominican Republic with respect to goods entered or withdrawn from warehouse on or after March 1, 2007. The Agreement, which was signed in August 2004 and passed by Congress in August 2005, has been implemented by the various countries sporadically, on the following dates: El Salvador on March 1, 2006; Honduras and Nicaragua on April 1, 2006; and Guatemala on July 1, 2006. Costa Rica remains the only DR-CAFTA party that has not yet ratifi ed the Agreement.

Due to the implementation of the Agreement, as of March 1 the Dominican Republic is no longer eligible for benefi ts under GSP, the Caribbean Basin Economic Recovery Act (“CBERA”) and the United States- Caribbean Basin Trade Partnership Act (“CBTPA”). Although imports and exports of most goods into the United States and the Dominican Republic are duty-free according to the Agreement, some goods are subject to staged duty reductions. In addition, tariff rate quotas (“TRQs”) apply to certain goods originating in the Dominican Republic. The necessary modifi cations to the Harmonized Tariff Schedule of the United States (“HTSUS”) are listed in United States International Trade Commission Publication 3901.

Peru and Colombia TPAs

Although negotiations with respect to the U.S. Trade Promotion Agreements (“TPAs”) with Peru and Colombia have concluded and been signed by the parties for some time now, these TPAs have not yet been ratifi ed by the U.S. Congress. The President decided that the enabling legislation for the agreements should not be sent to the lame duck session for review at the end of last year. Thus, the 110th Congress is expected to vote on these agreements within the next few months.

Imports from Peru and Colombia continue to benefi t from duty-free treatment under the Andean Trade Preference Act (“ATPA”), which encompasses Peru, Colombia, Ecuador and Bolivia. Although ATPA was scheduled to expire December 31, 2006, the Act was extended for all benefi ciary countries through June 30, 2007. The ATPA could be further extended through December 31, 2007, if Congress and an ATPA country’s legislature approve an FTA between the parties by June 30, 2007.

U.S.-Panama TPA

U.S. negotiations with Panama on a TPA were completed on December 19, 2006. The USTR anticipates that Congress will vote on this agreement when it votes on the Peru and Colombia TPAs.


The eighth round of negotiations on the U.S.-Korea FTA (“KORUS FTA”) is scheduled to take place this week in Seoul. The parties are said to have made signifi cant progress in the seventh round of talks on electronic commerce, rules of origin and industrial market access. An agreement was reached on guaranteeing duty-free status and nondiscriminatory treatment for electronically traded products including software, music and movies.

Also, specifi c rules of origin were agreed upon for chemicals, pharmaceuticals, plastics and other products. The most recent round of negotiations also resulted in improved tariff offers by the parties with respect to chemicals, cosmetics, industrial machinery and information technology.

Differences between the parties remain regarding automobiles, pharmaceuticals, agricultural products and antidumping procedures. With respect to textiles, the United States and Korea have yet to agree on whether to use a yarn-forward rule of origin and the appropriate staged tariff phase-out schedule.

The USTR hopes to make as much progress as possible in the eighth round of talks to complete the KORUS negotiations before April, thus allowing consideration of the deal before trade promotion authority expires on July 1st.

U.S.-Malaysia FTA

The United States and Malaysia held their fi fth round of negotiations on an FTA. The USTR has indicated that concluding negotiations before the end of March for consideration under the current Trade Promotion Authority is unlikely. The Malaysian Government has indicated that the reasons for the deadlock are agriculture and procurement policies. No new rounds of negotiations have been scheduled between the parties.