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On April 12, 2006, the United States and Peru signed the U.S.-Peru Trade
Promotion Agreement (PTPA). The PTPA achieves two key objectives: it
makes agricultural trade more of a two-way street, and it levels the
playing field with U.S. competitors in the Peruvian market.
Currently, less
than 2 percent of U.S. agricultural exports enjoy duty-free access to
Peru. Most Peruvian agricultural tariffs range up to 25 percent, with
no assurance that Peru will not raise tariffs to their WTO limits of
30-68 percent. Additionally, Peru applies variable tariffs based on
price bands on more than 40 products, including corn, rice, dairy, and
sugar. Under the current price band system, the tariffs on these
products vary with world prices and may range up to Peru’s WTO bound
rate of 68 percent.
Upon
implementation of this agreement, U.S. exporters will receive duty-free
treatment on products accounting for nearly 90 percent of current trade
and will see all tariffs phased out for the remaining products.
Moreover, under the agreement, Peru will immediately eliminate its price
band system.
Under the Andean
Trade Promotion and Drug Eradication Act (ATPDEA) legislation passed
through the Congress in 2002, the United States allows over 99 percent
of Peru’s exports into the U.S. market duty-free. The PTPA makes the
preferential treatment permanent.
This agreement,
which includes a CAFTA-plus agricultural package, is seen as another key
building block in the U.S. strategy to advance free trade within the
hemisphere.
Key Elements of the Agreement
Market Access.
No products are excluded from this agreement. Liberalization of Peru’s
market will occur through tariff elimination for all commodities
combined with zero-duty tariff-rate quotas (TRQs) on commodities for
which tariff elimination takes place over longer periods. The agreement
eliminates Peru’s use of Andean Price Bands (variable tariffs), thereby
ensuring that Peru stops applying high duties.
Tariff Elimination.
Tariff phase-outs range from immediate duty-free access to 17 years.
Almost 60 percent of all agricultural tariff lines, accounting for
nearly 90 percent of trade, will be eliminated on entry into force of
the agreement. Peru will eliminate many tariffs within 5 years and most
other tariffs in 15 years. As a general rule, almost all tariffs will
be reduced in equal annual installments over the agreed phase-out
period.
Tariff-Rate Quotas (TRQs).
For some products with longer tariff phase-outs, immediate market access
will be provided through the creation and annual expansion of TRQs
(zero-duty access for a specified quantity of imports). General
principles--and in some cases, specific commitments--on TRQ
administration will encourage full utilization of the TRQs.
Safeguards.
The agreement
includes volume-based agricultural safeguards for a limited number of
products covered by TRQs. The safeguard triggers are set as a
percentage of the growing TRQ quantities. Increased tariffs resulting
from the triggering of the safeguard can only be maintained for the
remainder of the current calendar or marketing year. Safeguards on
agricultural products expire when the tariff has been phased out.
Sanitary and Phytosanitary
Measures. An SPS
Committee will be established to expedite resolution of technical
issues. The United States and Peru have worked to resolve sanitary and
phytosanitary (SPS) barriers to agricultural trade, including: complying
with the WTO regarding imports of beef and poultry products; continuing
to recognize the U.S. meat inspection system as equivalent to that of
Peru; modifying Peru’s import permit requirements for the import of
beef, pork, and poultry shipments; and agreeing to withdraw draft
standards for Peru’s imports of rice.
Export Subsidies.
The parties agree not to use export subsidies on products shipped into
each other’s market, except to compete with third party export
subsidies.
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Specific Products
Beef.
Peru’s
WTO tariff bindings on beef are currently 30 percent, with applied
tariff rates ranging from 0 to 25 percent. Under the agreement, the
United States secured immediate duty-free treatment on the products most
important to the U.S. beef industry; i.e., high quality USDA Prime and
Choice cuts. All other tariffs on beef and beef products will be
eliminated within 15 years, earlier in a number of cases. For Standard
Quality beef, the agreement also provides for an 800-ton TRQ with
6-percent annual growth and a 25-percent above-quota tariff phased out
over 12 years. Additionally, there is a 10,000-ton beef offal TRQ with
6-percent growth and a 12-percent above-quota tariff phased out over 10
years. Peru will have the right to use safeguards on Standard Quality
beef if imports surge.
Regarding SPS
measures, Peru reopened its market to U.S. boneless beef and certain
offals on April 12 and agreed to fully open to U.S. beef and beef
products other than specified risk materials no later than May 31,
2006. Peru agreed to continue to recognize the equivalence of the U.S.
meat inspection system and to accept beef shipments accompanied by a
USDA FSIS Export Certificate of Wholesomeness with content of the
certificate agreed between the two countries.
The 26-percent U.S.
tariff on beef imports will be phased out over 15 years.
Pork.
Peru’s WTO tariff bindings on pork are currently 30 percent, with
applied tariff rates ranging from 0 to 25 percent. The agreement
provides for tariff phase-out in 10 years or less on all pork products,
with many key pork tariffs eliminated in 5 years.
Regarding SPS
measures, Peru agreed to continue to recognize the equivalence of the
U.S. meat inspection system and to accept pork shipments accompanied by
a USDA FSIS Export Certificate of Wholesomeness with content of the
certificate agreed between the two countries.
Under the ATPDEA,
U.S. tariffs on pork imports from Peru are currently zero. The PTPA
continues the zero-duty treatment.
Poultry.
Peru’s WTO tariff bindings on poultry are currently 30 percent, with
applied tariff rates ranging from 4 to 25 percent. The United States
secured a 12,000-ton TRQ at zero duty with 8- percent annual compound
growth for chicken leg quarters. Under the deal, the 25-percent
above-quota tariff will begin phase-out after an 8-year grace period and
will be completely eliminated in 17 years. Peru will have access to
safeguards on chicken leg quarters in the event of import surges during
the 17-year tariff phase-out period. Phase-out tariffs on other poultry
products range from 2 to 10 years.
Regarding SPS
measures, Peru agreed to fully reopen its markets to U.S. poultry and
products from all states. Peru also agreed to continue to recognize the
equivalence of the U.S. poultry meat inspection system and to accept
poultry shipments accompanied by a USDA FSIS Export Certificate of
Wholesomeness with content of the certificate agreed between the two
countries.
Under the ATPDEA,
U.S. tariffs on imports from Peru are currently zero. The PTPA
continues the zero-duty treatment.
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Dairy.
Peru’s
WTO tariff bindings on dairy products range from 30 to 68 percent, with
applied tariffs on many products subject to price bands that can range
up to the WTO bound rates. Tariffs on whey will be eliminated upon
entry into force. Additionally, U.S. exporters will have access to six
dairy TRQs, all at zero duty, under this agreement. A 4,630-ton TRQ
with 12-percent annual compound growth was agreed for milk powder. The
out-of-quota base rate ranges from 25 to 35 percent. Tariffs will be
phased out from these rates after a 10-year grace period and will be
completely eliminated in 17 years. The TRQ for cheese was set at 2,500
tons with a 12-percent annual compound growth rate and an out-of-quota
base of 25 percent phased out starting after 10 years, with elimination
in 17 years. The 25-percent out-of-quota base tariff rates for
yogurt, butter, and ice cream are set to be phased out in 15 years. TRQs
for these products are set at 70 tons, 500 tons, and 300 tons,
respectively. Finally, there is a processed dairy products TRQ set at
2,000 tons with a 10-percent annual compound growth rate and an
out-of-quota base tariff rate of 17 percent phased out over 15 years.
Peru will phase out all other dairy lines between 5 and 15 years. Peru
can use safeguards on concentrated milk products, yogurt, butter, and
cheese.
Regarding access to the U.S. market, the United States agreed to
establish TRQs for: cheese (2,500 tons, 12-percent annual compound
growth, out-of-quota tariff reduced starting after 10 years with
elimination in 17 years); condensed and evaporated milk (6,000 tons,
12-percent annual compound growth, out-of-quota tariff reduced starting
after 10 years with elimination in 17 years); and processed dairy
products (2,000 tons, 10-percent annual compound growth, out-of-quota
tariff reduced starting in 15 years). The United States can use
safeguards for cheese, and condensed and evaporated milk.
Vegetables.
Peru’s WTO tariff bindings on
vegetables are 30 percent, with applied tariff rates up to 25 percent.
The United States obtained duty-free access on most vegetable products.
Tariffs for almost all others will be phased out over 5 years.
Under the ATPDEA,
U.S. tariffs on almost all imports from Peru are currently zero,
including asparagus. The PTPA continues the zero-duty treatment.
Additionally, the United States provides immediate duty-free access on
certain fresh and canned olive lines.
Potatoes and Products.
Peru’s WTO tariff bindings on potatoes and potato products are 30
percent, with applied tariff rates ranging from 0 to 25 percent. All
fresh potato lines and almost all processed potato lines, including
frozen french-fries, dehydrated and chips, will receive immediate
duty-free access to Peru upon entry into force of the agreement.
Fruits and Tree Nuts.
Peru’s WTO tariff bindings on fruits and tree nuts are 30 percent,
with applied tariff rates of 25 percent. Most fruits including fresh
grapes, raisins, apples, pears, cherries, peaches, and plums, and tree
nuts such as almonds and pistachios, will receive duty-free access to
Peru when the agreement is implemented. Almost all other tariffs on
fruits and tree nuts will be completely phased out in 5 years.
Under the ATPDEA,
U.S. tariffs on imports from Peru are currently zero. The PTPA
continues the zero-duty treatment.
Dry Peas, Beans, and Lentils.
Peru’s WTO tariff bindings on dry peas, beans, and lentils are 30
percent, with applied tariff rates that range from 0 to 25 percent.
Duty-free treatment was secured for most pulses. The tariff phase-out
for all other products will be 5 years or less.
Under the ATPDEA,
U.S. tariffs on imports from Peru are currently zero. The PTPA
continues the zero-duty treatment.
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Wheat and Barley.
Peru’s WTO tariff bindings
on wheat and barley range from 30 to 68 percent with applied tariff
rates subject to price bands, ranging from 0 up to the WTO bound rate
depending on world prices. Tariffs on wheat, wheat flour, barley, and
many other wheat and barley products will be set at zero immediately.
Most other tariffs for these products will be phased-out over 5 years
with some phased out in 10 years.
Under the ATPDEA,
U.S. tariffs on imports from Peru are currently zero. The PTPA
continues the zero-duty treatment.
Feed Grains
Yellow Corn.
Peru’s WTO tariff binding on yellow corn is 68 percent with the
applied tariff rates subject to prices bands and therefore ranging from
0 percent up to the WTO bound rate, depending on world prices. The
agreement includes a 500,000-ton TRQ with a 6-percent annual compound
growth rate. The out-of-quota tariff will be capped at 25 percent
immediately and phased out over 12 years.
White Corn.
Peru’s WTO tariff binding on white corn is 68 percent, and the applied
tariff rate is 17 percent. Under the agreement, U.S white corn will be
duty free in 10 years.
Sorghum.
Peru’s WTO tariff binding on grain sorghum is 30 percent. Currently,
sorghum is subject to Peru’s price band system. Peru will eliminate the
tariff entirely in 5 years.
Corn Products.
Peru’s WTO
tariff bindings on corn products range from 30 to 68 percent. Applied
tariff rates range from 0 to 25 percent on some products, with others
subject to Peru’s price bands. Tariffs range from 0 percent up to the
WTO bound rate, depending on world prices. The phase-out for tariffs on
other corns and corn products was set for 10 years or less.
Under the ATPDEA,
U.S. tariffs on imports from Peru are currently zero. The PTPA
continues the zero-duty treatment.
Rice.
Peru’s WTO tariff bindings on rice range from 30 to 68 percent, with
applied tariff rates subject to price bands and therefore ranging from 0
percent up to the WTO bound rate, depending on world prices. The United
States obtained a 74,000-ton TRQ on a milled rice-equivalent basis with
an annual compound growth rate of 6 percent. Milled, brown, and rough
rice can be imported under the TRQ. The out-of-quota tariff is capped
at 52 percent and will begin to be phased out after a grace period of 8
years and will be completely eliminated in 17 years. Safeguards will be
available if there are import surges. The rice flour tariff will reach
zero in 5 years and tariffs for bran, sharps, and other milled rice
residues will be phased out in 10 years. Regarding standards, Peru
agreed to withdraw proposed rice standards and to provide no less
favorable treatment than that applied to like Peruvian product.
Under the ATPDEA,
U.S. tariffs on imports from Peru are currently zero. The PTPA
continues the zero-duty treatment.
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Soybeans and Soybean
Products. Peru’s WTO
tariff bindings on soybeans and soybean products are 30 percent, with
applied tariff rates ranging from 0 to 12 percent. Tariffs on soy
beans, soy meal and flour, and crude soybean oil will be eliminated on
entry into force of the agreement. Additionally, the United States
obtained a 7,000-ton TRQ on refined soybean oil with an annual compound
growth rate of 5 percent. The out-of-quota tariff is capped at 52
percent and will be phased out over 10 years.
Under the ATPDEA,
U.S. tariffs imports from Peru are currently zero. The PTPA continues
the zero-duty treatment.
Peanuts.
Peru’s WTO tariff bindings on peanuts are at 30 percent, with applied
tariff rates of 25 percent. Under the agreement, peanut tariffs will be
eliminated immediately.
The United States
has agreed to a phase-out of tariffs on peanuts and peanut products over 15 years.
Sugar.
Peru’s WTO tariff bindings on sugar and sweeteners range from 30 to 68
percent, with some applied tariff rates ranging from 4 to 25 percent.
Other products are subject to Peru’s price band system and with tariffs
ranging up to the WTO bound level. Under the agreement, all tariffs
will be eliminated within 10 years, and in many cases, eliminated
earlier, including 5 years for high fructose corn syrup.
The United States agreed to
provide Peru a 9,000-ton sugar TRQ with 2 percent simple annual growth.
Peru must be a net exporter to be able to export this additional
tonnage. There is also a sugar compensation mechanism that enables the
United States to provide compensation in lieu of accepting imports under
the zero-duty treatment. The United States also provided Peru a
non-growing 2,000-ton TRQ for specialty sugar.
Processed Products.
Peru’s WTO tariff bindings on processed products are 30 percent, with
applied tariff rates ranging from 4 to 25 percent. Under the agreement,
the vast majority of products will immediately enter Peru duty-free.
All others will enter free of tariffs in 10 years or less.
Under the ATPDEA,
U.S. tariffs on imports from Peru are currently zero. The PTPA
continues the zero-duty treatment.
Tobacco.
Peru’s WTO tariff bindings on tobacco are 30 percent, with applied
tariffs ranging from 12 to 25 percent. Burley tobacco will receive
duty-free treatment under the agreement and all other tobacco products
will enter Peru without tariffs in 5 years.
Under the ATPDEA,
U.S. tariffs on some tobacco products, including cigarettes, from Peru
are currently zero. The PTPA continues the zero-duty treatment.
Additionally, the United States will eliminate duties on other tobacco
items within 15 years.
Cotton.
Peru’s WTO tariff bindings on cotton are 30 percent, with applied tariff
rates of 12 percent. Under the agreement, Peru will eliminate cotton
tariffs immediately.
The United States
agreed to eliminate all cotton tariffs upon entry into force of the
agreement.
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U.S.-Peru
Trade Promotion Agreement Page
