[DOCID: f:hr421.110]
From the House Reports Online via GPO Access
[wais.access.gpo.gov]
110th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 110-421
======================================================================
UNITED STATES-PERU TRADE PROMOTION AGREEMENT IMPLEMENTATION ACT
_______
November 5, 2007.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Rangel, from the Committee on Ways and Means, submitted the
following
R E P O R T
together with
ADDITIONAL VIEWS
[To accompany H.R. 3688]
[Including cost estimate of the Congressional Budget Office]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 3688) to implement the United States-Peru Trade
Promotion Agreement, having considered the same, report
favorably thereon without amendment and recommend that the bill
do pass.
I. INTRODUCTION
A. Purpose and Summary
H.R. 3688 would implement the agreement establishing a free
trade area between the United States and Peru.
B. Background
THE UNITED STATES-PERU TRADE PROMOTION AGREEMENT
The United States-Peru Trade Promotion Agreement
(hereinafter ``Peru FTA''), originally signed in April 2006,
was amended in May 2007 to incorporate key aspects of an
historic Congressional-Executive accord (the ``May 10
Agreement''). As a result of this amendment, the Peru FTA has
become the first U.S. free trade agreement to include, in its
core text, fully-enforceable commitments by the Parties to
adopt, maintain, and enforce basic international labor
standards, as stated in the 1988 ILO Declaration on Fundamental
Principles and Rights at Work. It is also the first U.S. free
trade agreement to require the Parties to implement and enforce
their obligations under certain common multilateral
environmental agreements and, further, to require Peru to take
major, specific steps to address illegal logging. These changes
make the Peru FTA the strongest free trade agreement ever to be
considered by the Committee with regard to basic
internationally recognized labor standards and basic
protections for the environment.
The May 10 Agreement also required other important changes
to the Peru FTA, including: (a) modification of the
intellectual property chapter to balance promoting access to
medicines and protecting pharmaceutical innovation; (b)
modification of the government procurement chapter to allow
conditioning of contracts on adherence to basic and minimum
labor standards; (c) clarification that, where there are
national security concerns, the United States can prevent
foreign companies from operating U.S. ports; and (d)
clarification that the Peru FTA accords Peruvian investors in
the United States no greater substantive rights with respect to
investment protections than U.S. investors in the United
States.
With all of these changes, the Peru FTA reflects a new
approach in U.S. trade policy--one that couples traditional
market access initiatives with strong, fully enforceable
commitments on basic worker rights, international environmental
standards, access to medicines, and other key issues. The
Committee believes that such an approach is critically
important to level the playing field for U.S. workers and
business and spread the benefits of globalization more broadly.
Peru has set itself out as an important partner in this
approach. In August 2007, during a Committee delegation visit
to Peru, President Garcia referred to the Peru FTA as an
historic ``New Deal'' for workers and countries, marking the
beginning of a ``grand transformation'' in how governments
should approach world trade. The Committee believes that this
new partnership will broaden and deepen what is already a
strong economic and political relationship between the United
States and Peru.
Under the new rules of the Peru FTA, nearly 90 percent of
current exports by U.S. farmers and ranchers will receive duty-
free treatment immediately upon entry into force of the FTA. In
addition, 80 percent of U.S. exports of consumer and industrial
products to Peru will be duty-free immediately upon entry into
force, with remaining tariffs phased out over ten years.
Average Peruvian tariffs on imports of goods from the United
States were: 5.8% for information technology equipment, 7.1%
for chemicals, 8.8% for metals and ores, 5.9% for
infrastructure and machinery, 5.5% for transportation
equipment, 7.4% for autos and auto parts, 7.9% for building
products, 9.7% for paper and paper products, and 11.1% for
consumer goods.
These and the other trade liberalization benefits of the
Peru agreement are more likely to be spread broadly in both
countries due to the historic provisions on basic international
labor standards, multilateral environmental standards, and
other issues that will raise standards both in the United
States and abroad. This is important for Peru, in its efforts
to improve labor standards and environmental conditions and for
the development of a strong middle class. It is also important
for workers in the United States who do not want to compete
with other nations whose entities suppress their workers or
negatively affect the environment, and for U.S. companies and
workers who depend increasingly on the development of middle
class societies abroad to buy the goods and services produced
in the United States.
The following are key aspects of the Peru FTA, beginning
with those aspects that were amended as a result of the May 10
Agreement:
Labor: Under the May 10 Agreement, the labor chapter of the
Peru FTA was substantially revised to include a fully
enforceable obligation that the Parties adopt and effectively
enforce the five core international labor rights, as stated in
the 1998 International Labor Organization Declaration on
Fundamental Principles and Rights and Work. The Peru FTA also
requires both countries to enforce laws related to a sixth set
of rights--those pertaining to acceptable conditions of work
with respect to minimum wages, hours of work and occupational
safety and health. These obligations are subject to a binding
non-derogation provision.
For the first time in any U.S. free trade agreement, the
obligations under the labor chapter are subject to the same
dispute settlement mechanisms and remedies as all other FTA
obligations. A party seeking to challenge violations is
required to demonstrate that the failure to adopt or maintain
ILO rights has been in a manner affecting either trade or
investment between the countries.
Peru has already been bringing its laws, regulations, and
practices into compliance with internationally-recognized labor
standards. Most recently, in August 2007, Peruvian President
Alan Garcia announced his commitment to change Peru's legal
framework in a number of key areas to implement obligations
under the FTA. PresidentGarcia has since followed through on
his commitment by implementing changes to the legal framework
governing: (1) temporary employment contracts; (2) subcontracting/
outsourcing contracts; (3) the right of workers to strike; (4) recourse
against anti-union discrimination; and (5) workers' right to organize.
The Committee applauds the changes made by the Peruvian government. The
Committee believes that, with these and other recent changes, and the
commitments and mechanisms under the FTA, Peru has in place a framework
to ensure compliance with basic international labor standards.
Environment.--Under the May 10 agreement, the environmental
chapter of the Peru FTA was substantially revised to include a
fully enforceable commitment that the Parties will implement
and enforce in their laws and regulations, their obligations
under certain common major multilateral environmental
agreements (``MEAs''), including the Convention on
International Trade in Endangered Species (``CITES'') and the
Montreal Protocol on Ozone Depleting Substances, as well
certain other environmental laws. The agreement also includes a
fully enforceable, binding commitment that prohibits Peru from
lowering environmental standards in the future in a manner
affecting trade or investment. Further, the agreement
establishes that, in the event of an inconsistency between a
covered MEA obligation and an obligation under the Peru FTA,
the Peru FTA cannot be used to undermine the MEA obligation.
The Peru FTA is not only the first free trade agreement to
include these strong environmental obligations, it is also the
first free trade agreement to make them subject to the same
dispute settlement mechanisms and remedies that apply for other
FTA obligations. The Peru FTA requires a Party challenging a
violation to show that the failure to adopt, maintain or
implement an MEA or enforce other environmental laws has been
in a manner affecting either trade or investment between the
countries.
The Peru FTA also includes specific provisions to address
the problem of illegal logging in Peru. For many years, leading
environmental groups have raised concerns about illegal
logging. Some reports have indicated, for example, that much of
the mahogany exported from Peru--over 80% of which is exported
to the United States--is illegally logged. As a result of the
May 10 Agreement, the Peru FTA includes an extensive Forest
Sector Governance Annex to address this problem.
Under the Annex, Peru is required to take specific steps to
address illegal logging and improve forest sector governance.
The Forest Sector Governance Annex also requires additional
actions to stop illegal logging of mahogany and all CITES-
listed tree species. Further, it establishes innovative new
enforcement tools, permitting the United States to investigate
illegal logging in-country through audits and verifications,
and to stop questionable shipments at the border. Like the
environmental commitments on MEAs and other environmental laws,
no previous FTA has included such commitments on illegal
logging or provided this broad range of enforcement tools.
Intellectual Property Rights and Access to Medicines.--
Under the Peru FTA, Peru will adopt higher and extended
standards for the protection of intellectual property rights
such as copyrights, patents, trademarks and trade secrets. The
Peru FTA also provides enhanced means for enforcing those
rights. Under the agreement, national treatment must be granted
by each partner country to nationals of the other, and all
laws, regulations, procedures and final judicial decisions must
be in writing and published or made publicly available. The
Peru FTA will lengthen terms for copyright protection, covering
electronic and digital media, and increase enforcement to go
beyond the WTO Agreement on Trade-Related Aspects of
Intellectual Property Rights (``TRIPS''). Both parties are
obliged to provide appropriate civil and criminal remedies for
willful violators, and parties must provide legal incentives
for service providers to cooperate with rights holders and
limitations on liability.
With respect to pharmaceuticals, the Peru FTA was amended
in accordance with the May 10 Agreement to balance better the
need for access to medicines with promotion of pharmaceutical
innovation. The amendments include changes to the ``data
exclusivity'' provision (the period in which a generic
manufacturer may not use clinical test data of an innovative
drug manufacturer to obtain approval for a generic version of
the drug) to allow generics to enter the market more quickly
than under the old provision. New provisions also establish a
clear exception that the IPR commitments in the FTA do not and
should not prevent the Parties from taking any measures to
protect public health in accordance with the WTO Doha
Declaration or from utilizing the TRIPS/health solution.
Similarly, the new text eliminates the requirement that an FTA
country extend the term of a patent on a pharmaceutical product
for delays in the patent and regulatory approval process. At
the same time, the FTA requires each Party to ensure an
expeditious patent and regulatory approval process for the
benefit of patients and patent applicants. Finally, the new
text eliminates the requirement that a drug regulatory agency
withhold approval of a generic until it can certify that no
patent would be violated if the generic were marketed. Instead
of that ``linkage'' requirement, the new text provides that
each Party must adopt procedures and remedies for the
expeditious resolution of patent disputes.
Government Procurement.--Peru is not a party to the WTO
Agreement on Government Procurement, but the Peru FTA provides
comparable benefits to U.S. interests. Specifically, U.S.
suppliers will be granted non-discriminatory rights to bid on
contracts above a certain value from Peruvian government
ministries, agencies and departments. The Peru FTA will cover
the purchases of most Peruvian central government entities,
including key ministries and state-owned enterprises, including
Peru's oil company as well as all of its first-tier sub-central
entities (comparable to U.S. states). The Peru FTA requires
fair and transparent procurement procedures, such as advance
notice of purchases and timely and effective bid review
procedures.
For the United States, the Peru FTA excludes from FTA
procurement commitments all procurements by local government
entities. The FTA also excludes all procurements by states that
have not ``opted in'' to the agreement (and only 8 states have
done so). The FTA also excludes, for federal procurements, the
large number of government contracts that fall below the high
monetary threshold and under carve-outs (for example, for small
and minority business set asides, purchase of goods in 27 broad
Federal Supply Classification categories by the Department of
Defense, and for ``Berry Amendment'' procurements of textiles
and machine tools by the Department of Defense).
Like other chapters in the agreement, the Government
Procurement Chapter of the FTA was amended pursuant to the May
10 Agreement. As amended, the Peru FTA provides that U.S.
federal and state governments may condition government
contracts on contractors adhering to the five core labor rights
and acceptable conditions of work and minimum wages.
Port Security.--Pursuant to the May 10 Agreement, the Peru
FTA was amended to clarify that, if there are national security
concerns, the United States has full, non-challengeable
authority to prevent foreign companies from operating U.S.
ports, based on national security concerns.
Agriculture.--More than two-thirds of current U.S. farm
exports to Peru will become duty-free immediately under the
Peru FTA. Tariffs on the remaining U.S. farm products are to be
phased out within 17 years. Many Peruvian agricultural products
enter the United States duty-free currently under the Andean
Trade Preference Act (``ATPA'') and other preference programs.
The Peru FTA would make the duty-free treatment permanent.
In recognition of Peru's large number of small and
subsistence farmers, the Peru FTA includes longer tariff phase-
out periods for some products (such as standard quality beef,
yellow corn, rice, and processed dairy products), with no
tariff cuts required in the initial years of the agreement. The
longer phase-outs are intended to provide a period for Peruvian
farmers to adjust to import competition. Safeguard measures
will also be available for specified products, providing for
tariff increases if import quantities increase to specified
levels. The possibility of employing safeguards will expire
when tariff protection has been phased out.
Services.--The agreement will provide broader market access
and greater regulatory transparency in most industries. The
agreement utilizes the negative list approach for coverage with
very few reservations, which means that all services are
covered unless specifically excluded.
Textile and Apparel.--Under the Peru FTA, textiles and
apparel will be duty-free and quota-free immediately if the
products meet the agreement's rules of origin. Rules of origin
are generally based on the yarn forward standard. The agreement
does not make use of tariff preference levels. A ``de minimis''
provision will allow limited amounts of specified third-country
content to go into U.S. and Peruvian apparel, giving producers
in both countries needed flexibility. The FTA does allow use of
``short supply'' fabrics (that is, fabrics not made in Peru or
the United States that have been determined not to be
commercially available in either country). The Parties agreed
to 20 short supply fabrics, and the Peru FTA includes a process
for adding more.
Customs cooperation commitments between the United States
and Peru will allow for verification of claims of origin or
preferential treatment, and denial of preferential treatment or
entry if claims cannot be verified. A special textile safeguard
will provide for temporary tariff relief if imports under the
Agreement prove to be damaging to domestic producers.
Investment.--The Peru FTA draws from U.S. legal principles
and practices to provide U.S. investors in Peru with a basic
set of substantive and procedural protections that Peruvian
investors currently enjoy under the U.S. legal system. These
include due process protections and the right to receive a fair
market value for property in the event of an expropriation. The
Peru FTA includes recourse to an investor-state dispute
settlement mechanism.
The investment rules in the Peru FTA are significantly
changed from those originally included in NAFTA's Chapter 11 in
response to concerns about overly broad interpretations by some
arbitration panels and creative claims brought by some private
companies against the governments of Mexico, the United States
and Canada. The changes clarified that, except in rare
circumstances, legitimate ``public welfare'' regulations do not
constitute regulatory expropriations, required investor-state
panels to consider the same factors as those considered in U.S.
courts in determining whether there is an expropriation of
property, provided guidance regarding the ``minimum standard of
treatment'' obligation, and imposed new transparency
requirements.
In addition, pursuant to the May 10 agreement, new language
was included in the Peru FTA's Preamble to clarify that foreign
investors in the United States are not to be accorded greater
substantive rights with respect to investment provisions than
U.S. investors under U.S. law.
Dispute Settlement.--The Peru FTA sets out detailed
procedures for the resolution of disputes over compliance with
the obligations under the agreement.
PROCEDURES OF THE TRADE ACT OF 2002
H.R. 3688 is being considered by Congress under the
procedures of the Trade Act of 2002. Pursuant to these
requirements, the President is required to provide written
notice to Congress of the President's intention to enter into
the negotiations. Throughout the negotiating process, and prior
to entering into an agreement, the President is required to
consult with Congress regarding the ongoing negotiations.
The President must notify Congress of his intent to enter
into a trade agreement at least 90 calendar days before the
agreement is signed. Within 60 days after entering in the
Agreement, the President must submit to Congress a description
of those changes to existing laws that the President considers
would be required to bring the United States into compliance
with the Agreement. After entering into the Agreement, the
President must also submit to Congress the formal legal text of
the agreement, draft implementing legislation, a statement of
administrative action proposed to implement the Agreement, and
other related supporting information as required under section
2105(a) of the Trade Act of 2002.
Following submission of these documents, the implementing
bill is introduced, by request, by the Majority Leader and the
Minority Leader in each chamber. The House then has up to 60
days to consider implementing legislation for the Agreement
(the Senate has up to an additional 30 days). No amendments to
the legislation are allowed under the requirements of the Trade
Act of 2002.
C. Legislative History
Negotiations for a free trade agreement between the United
States and Peru began in May 2004. On January 6, 2006, the
United States Trade Representative (``USTR'') formally notified
the Congress of its intention to enter into a free trade
agreement with Peru. Thereafter, on April 12, 2006, then-U.S.
Trade Representative Rob Portman and Peruvian Minister of
Foreign Trade and Tourism Alfredo Ferrero Diez Canseco signed
the United States-Peru Trade Promotion Agreement. The agreement
was ratified by the Peruvian Congress in June 2006.
USTR submitted to Congress on June 9, 2006, a description
of the changes to existing U.S. laws that would be required to
bring the United States into compliance with the Agreement.
On June 24 and 25, 2007, respectively, the United States
and Peru signed a Protocol of Amendment, revising the Peru FTA
to include key aspects of the May 10 Agreement. The Peruvian
Congress approved the amendments to the Peru FTA by a vote of
70-38 on June 27, 2007.
LEGISLATIVE HEARING
On July 12, 2006, the Committee held a hearing on the
implementation of the Peru FTA, as originally negotiated.
COMMITTEE ACTION
On July 20, 2006, the Committee on Ways and Means
considered in an informal mark-up session draft legislation to
implement the Peru FTA, as originally negotiated, and a
Statement of Administrative Action. The Committee approved the
draft legislation by a vote of 23-13, without amendment. No
further action was taken on the draft legislation.
On September 25, 2007, the Committee considered in an
informal mark-up session draft legislation to implement the
Peru FTA, as re-negotiated pursuant to the May 10 Agreement.
The Committee approved the draft legislation, without
amendment, by voice vote.
On September 27, 2007, President Bush transmitted the
United States-Peru Trade Promotion Agreement, a legislative
proposal to implement the agreement, a Statement of
Administrative Action and supporting documents to Congress. On
the same day, H.R. 3688, a bill to implement the United States-
Peru Trade Promotion Agreement, was introduced by Majority
Leader Hoyer, by request, for himself and Minority Leader
Boehner. H.R. 3688 was then referred to the Committee on Ways
and Means.
On October 31, 2007, Committee on Ways and Means formally
met to consider H.R. 3688. The Committee ordered H.R. 3688
favorably reported to the House of Representatives by a vote of
39-0, without amendment (under the procedures of the Trade Act
of 2002, no amendments are permitted after introduction).
II. SECTION-BY-SECTION SUMMARY
Title I: Approval and General Provisions
SECTION 101: APPROVAL AND ENTRY INTO FORCE
Present law
No provision.
Explanation of provision
Section 101 states that Congress approves the Peru FTA and
the Statement of Administrative Action. The Peru FTA enters
into force when the President determines that Peru is in
compliance with all provisions that take effect on the date of
entry into force of the Agreement and exchanges notes with the
Government of Peru providing for entry into force on or after
January 1, 2008.
Reason for change
Approval of the Peru FTA and the Statement of
Administrative Action is required under the procedures of
section 2103(b)(3) of the Trade Act of 2002. Section 101
provides for such approval and for entry into force of the Peru
FTA.
SECTION 102: RELATIONSHIP OF THE AGREEMENT TO UNITED STATES AND STATE
LAW
Present law
No provision.
Explanation of provision
Section 102(a) provides that U.S. law prevails in the case
of a conflict with the Peru FTA. Section 102(b) provides that
only the United States is entitled to bring a courtaction
challenging a state law as being invalid on grounds of inconsistency
with the FTA. Section 102(c) states that there is no private cause of
action or defense under the FTA and no person other than the United
States may challenge a federal or state law in court as being
inconsistent with the FTA.
Reason for change
The provision addresses the issue of the operation of the
agreement relative to federal and state law, as well as private
remedies. Section 102 is necessary to make clear that no
provision of the Peru FTA will be given effect if it is
inconsistent with federal law and that entry into force of the
agreement creates no new private remedy.
SECTION 103: IMPLEMENTING ACTIONS IN ANTICIPATION OF ENTRY INTO FORCE
AND INITIAL REGULATIONS
Present law
No provision.
Explanation of provision
Section 103(a) provides that, after the date of enactment,
the President may proclaim such actions, and other U.S.
Government officers may issue such regulations, as are
necessary to ensure the appropriate implementation of any
provision of the legislation that is to take effect on the date
of entry into force of the Agreement. The effective date of
such actions and regulations may not be earlier than the date
of entry into force of the Peru FTA. Where proclaimed actions
are not subject to consultation and layover requirements under
the Act, proclamations generally may not take effect earlier
than 15 days after their publication.
Section 103(b) establishes that regulations necessary or
appropriate to carry out actions under the Act and Statement of
Administrative Action must, to the maximum extent feasible, be
issued within one year of entry into force of the Peru FTA or,
where a provision takes effect on a later date, within one year
of the effective date of the provision.
Reason for change
Section 103 provides for the issuance of regulations. The
Committee strongly believes that regulations should be issued
in a timely manner to provide maximum clarity to parties
claiming benefits under the Peru FTA. The Committee, therefore,
notes the importance of the one-year period for issuing
regulations and, further, that the Statement of Administrative
Action commits each agency that will be issuing regulations to
provide a report to Congress if it cannot do so within that
time. Such reports must be submitted at least 30 days prior to
the end of the one-year period.
SECTION 104: CONSULTATION AND LAYOVER FOR PROCLAIMED ACTIONS
Present law
No provision.
Explanation of provision
Section 104 establishes requirements for proclamation of
actions that are subject to consultation and layover provisions
under the Act. The President may proclaim such action only
after: (1) obtaining advice from the U.S. International Trade
Commission (``ITC'') and the appropriate private sector
advisory committees, (2) submitting a report to the Ways and
Means and Finance Committees concerning the reasons for the
action, and (3) providing for a 60-day layover period (starting
after the President has both obtained the required advice and
provided the required report). The proposed action cannot take
effect until after the expiration of the 60-day period and
after the President has consulted with the Ways and Means and
Finance Committees regarding the proposed action.
Reason for change
The bill gives the President certain proclamation authority
but requires extensive consultation with Congress before such
authority may be exercised. The Committee believes that such
consultation is an essential component of the delegation of
authority to the President and expects that such consultations
will be conducted in a thorough and timely manner.
SECTION 105: ADMINISTRATION OF DISPUTE SETTLEMENT PROCEEDINGS
Present law
No provision.
Explanation of provision
Section 105 authorizes the President to establish an office
within the Department of Commerce responsible for providing
administrative assistance to dispute settlement panels that are
established under the Peru FTA. The section also authorizes
appropriations necessary for the establishment and operation of
the office and to pay the U.S. share of expenses of the panels.
Reason for change
Dispute settlement procedures and panels are necessary to
ensure that disputes over compliance with FTA provisions can be
resolved effectively. The Committee believes that the Commerce
Department is the appropriate agency to provide administrative
assistance to such panels.
SECTION 106: ARBITRATION OF CLAIMS
Present law
No provision.
Explanation of provision
Section 106 authorizes the United States to resolve certain
claims covered by the Investor-State Dispute Settlement
Procedures set forth in the Peru FTA.
Reason for change
This provision is necessary to meet U.S. obligations under
Section B of Chapter 10 of the Peru free trade agreement.
SECTION 107: EFFECTIVE DATES; EFFECT OF TERMINATION
Present law
No provision.
Explanation of provision
Section 107 provides that, with the exception of Sections
1-3 and Title I, which take effect on the date of enactment of
the Act, the effective date of the Act is the date the Peru FTA
enters into force with respect to the United States. The
provisions of the Act terminate on the date on which the Peru
FTA terminates.
Reason for change
Section 107 implements provisions of the Peru FTA relating
to the effective date and date of termination of the Act.
Title II: Customs Provisions
SECTION 201: TARIFF MODIFICATIONS
Present law
No provision.
Explanation of provision
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
Peru's designation as a beneficiary developing country for the
purpose of the Generalized System of Preferences program as of
the date the Agreement enters into force.
Section 201(b) gives the President the authority, subject
to consultation and layover, to proclaim further tariff
modifications necessary or appropriate to maintain the general
level of reciprocal and mutually advantageous concessions with
respect to Peru provided for by the Agreement.
Section 201(c) allows the President, for any goods for
which the base rate under the Agreement is a specific or
compound rate of duty, to substitute for the base rate an ad
valorem rate to carry out the tariff modifications in
subsections (a) and (b).
Section 201(d) directs the President, when implementing
tariff rate quotas under the Agreement, to ensure that imports
of agricultural goods do not disrupt the orderly marketing of
commodities in the United States.
Reason for change
The provision implements the duty reduction commitments
made in the Peru FTA.
SECTION 202: ADDITIONAL DUTIES ON CERTAIN AGRICULTURAL GOODS
Present law
No provision.
Explanation of provision
Section 202 implements the agricultural safeguard
provisions of Article 2.18 and Annex 2.18 of the Peru FTA.
Section 202(b) directs the Secretary of the Treasury
(``Secretary'') to assess an additional duty in any year when
the volume of imports of a ``safeguard good'' exceeds 130
percent of the in-quota quantity allocated to Peru for the good
in that calendar year as set forth in Annex 2.3 of the
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
Schedule of the United States to Annex 2.3 of the Agreement.
The sum of the duties assessed under the agricultural safeguard
and the applicable rate of duty in the U.S. Schedule may not
exceed the NTR (MFN) rate of duty. No additional duty may be
applied on a good if, at the time of entry, the good is subject
to a safeguard measure under the procedures set out in Subtitle
A of Title III of the bill or under the safeguard procedures
set out in Chapter 1 of Title II of the Trade Act of 1974 (the
``Section 201'' global safeguard). The additional duties remain
in effect only until the end of the calendar year in which they
are imposed.
Reason for change
This provision implements commitments made in the Peru FTA
relating to agricultural safeguards. Such safeguards provide
important temporary relief to farmers in the United States and
Peru who face a surge in certain agricultural imports following
entry into force of the Peru FTA.
SECTION 203: RULES OF ORIGIN
Present law
No provision.
Explanation of provision
Section 203 codifies the rules of origin set out in Chapter
4 of the Peru FTA. Section 203(b) establishes three basic ways
for a Peruvian good to qualify as an ``originating good'' and
therefore be eligible for preferential tariff treatment when it
is imported into the United States. A good is an originating
good if: (1) it is ``wholly obtained or produced entirely in
the territory of Peru, the United States, or both''; (2) it is
produced entirely in the United States, Peru, 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 content and other requirements, as specified in
Annex 3-A or Annex 4.1 of the Peru FTA; or (3) it is produced
entirely in the territory of Peru, the United States, or both
exclusively from originating materials.
Under the rules in Chapter 3, Annex 3-A, Chapter 4, and
Annex 4.1 of the Peru FTA, 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 United States from Peru, an apparel product
must have been cut (or knit to shape) and sewn or otherwise
assembled in Peru, the United States, or both from yarn, or
fabric made from yarn that originates in Peru, the United
States, or both.
Section 203(o)(2) provides authority for the President to
add fabrics or yarns to a list of products that are unavailable
in commercial quantities in a timely manner, and such products
are treated as if they originate in Peru, regardless of their
actual origin, when used as inputs in the production of textile
or apparel goods. Section 203(o)(4) provides a process by which
the President may modify that list at the request of interested
entities, defined as Peru and potential and actual suppliers
and purchasers of textile or apparel goods.
The remainder of Section 203 sets forth more detailed rules
for determining whether a good meets the FTA's requirements
under the second method of qualifying as an originating good.
These rules include those pertaining to de minimis quantities
of non-originating materials that do not undergo a tariff
transformation, transformation by regional content, and
alternative methods for calculating regional value-content.
Other provisions in section 203 address valuation of materials,
determination of the originating or non-originating status of
fungible goods and materials, and treatment of accessories,
spare parts and tools, packaging materials, indirect materials,
and goods put up in sets. Section 203(1) specifies that goods
that undergo further production or other operations outside
Peru or the United States (with certain exceptions) or do not
remain under the control of the customs authorities of such
other countries do not qualify as originating goods.
Reason for change
Rules of origin are needed to confine FTA benefits, such as
tariff cuts, to Peruvian goods and to prevent third-country
goods from being transshipped through Peru and claiming
benefits under the FTA. This provision implements the
commitments made in the Peru FTA with respect to rules of
origin applying to imports from Peru.
SECTION 204: CUSTOMS USER FEES
Present law
No provision.
Explanation of provision
Section 204 of the bill implements the U.S. commitments
under Article 2.10.4 of the Peru FTA to eliminate the
Merchandise Processing Fee (``MPF'') on originating goods. In
accordance with U.S. obligations under the General Agreement on
Tariffs and Trade 1994, the provision also prohibits use of
funds in the Customs User Fee Account to provide services
related to entry of originating goods.
Reason for change
As with other free trade agreements, the Peru FTA
eliminates the MPF on qualifying goods from Peru. Other customs
user fees remain in place. Section 204 is necessary to put the
United States in compliance with the user fee elimination
provisions of the Peru FTA. The Committee expects that the
President, in his yearly budget request, will take into account
the need for funds to pay expenses for entries under the Peru
FTA given that MPF funds will not be available.
SECTION 205: DISCLOSURE OF INCORRECT INFORMATION; FALSE CERTIFICATIONS
OF ORIGIN; DENIAL OF PREFERENTIAL TARIFF TREATMENT
Present law
No provision.
Explanation of provision
Section 205 implements Articles 4.18.5 and 4.19.3 of the
Peru FTA. Section 205(a) 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 certify falsely, by fraud, gross
negligence, or negligence that a good exported from the United
States 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 205(b) provides that if an importer, exporter or
producer has engaged in a pattern of conduct in providing false
or unsupported representations, U.S. authorities may suspend
preferential treatment with respect to identical goods imported
by that importer, exporter or producer.
Reason for change
This provision is necessary to implement commitments in the
Peru FTA relating to application of penalties for submission of
false information or certifications by importers, exporters and
producers.
SECTION 206: RELIQUIDATION OF ENTRIES
Present law
No provision.
Explanation of provision
Section 206 implements Article 4.19.5 of the Peru FTA and
provides authority for the Customs Service to reliquidate an
entry to refund any excess duties (including any merchandise
processing fees) paid on a good qualifying under the rules of
origin for which no claim for preferential tariff treatment was
made at the time of importation if the importer so requests,
within one year after the date of importation.
Reason for change
Article 4.19.5 of the Peru FTA anticipates that private
parties may err in claiming preferential benefits under the
agreement and provides a one-year period for parties to make
such claims for preferential tariff treatment even if the entry
of the goods at issue has already been liquidated, i.e.,
legally finalized by customs officials. Section 207 is
necessary to put the United States into compliance with Article
4.19.5.
SECTION 207: RECORDKEEPING REQUIREMENTS
Present law
No provision.
Explanation of provision
Section 207 of the bill implements Article 4.17 of the Peru
FTA. The provision requires any person who completes and issues
a certificate of origin under Article 4.15 of the agreement for
a good exported from the United States to maintain, for a
period of five years after the date of certification, specified
documents demonstrating that the good qualifies as originating.
Reason for change
Section 207 is necessary to put the United States in
compliance with the recordkeeping requirement provisions in the
Article 4.17 of the Peru FTA.
SECTION 208: ENFORCEMENT RELATING TO TRADE IN TEXTILE OR APPAREL GOODS
Present law
No provision.
Explanation of provision
Section 208 implements the customs cooperation and
verification of origin provisions in Article 3.2 of the Peru
FTA. Under Article 3.2, the United States may request the
Government of Peru 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. Section 208(a) provides that the
President may direct the Secretary to take ``appropriate
action'' while such a verification is being conducted.
``Appropriate action'' may include: (i) suspending preferential
tariff treatment for textile or apparel goods that the person
subject to the verification has produced or exported if the
Secretary believes there is insufficient information to sustain
a claim for such treatment; (ii) denying preferential tariff
treatment to such goods if the Secretary decides that a person
has provided incorrect information to support a claim for such
treatment; (iii) detaining such goods if the Secretary
considers there is not enough information to determine their
country of origin; and (iv) denying entry to such goods if the
Secretary determines that a person has provided erroneous
information on their origin.
Under Section 208(c), the President may also direct the
Secretary 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 considers 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 decides that a person has provided incorrect
information regarding their origin or that there is
insufficient information to determine their origin. Unless the
President sets an earlier date, any such action may remain in
place until the Secretary obtains enough information to decide
whether the exporter or producer that was subject to the
verification is complying with applicable customs rules or
whether a claim that the goods qualify for preferential tariff
treatment or originate in an FTA country is accurate.
Under Section 208(e), the Secretary may publish the name of
a person that the Secretary has determined: (i) is engaged in
circumvention of applicable laws, regulations, or procedures
affecting trade in textile or apparel goods; or (ii) has failed
to demonstrate that it produces, or is capable of producing,
textile or apparel goods.
Reason for change
To avoid textile transshipment, special textile enforcement
provisions were included in the Peru FTA. Section 208 is
necessary to authorize these enforcement mechanisms for use by
U.S. authorities.
SECTION 209: REGULATIONS
Present law
No provision.
Explanation of provision
Section 209 directs the Secretary to prescribe regulations
necessary to carry out the tariff-related provisions of the
Act, including the rules of origin and customs user fee
provisions.
Reason for change
This provision gives the President necessary regulatory
authority to carry out the agreement. No such regulation may
take effect before the Peru FTA enters into force.
Title III: Relief From Imports
SECTION 301: DEFINITIONS
Present law
No provision.
Explanation of provision
Section 301 defines ``Peruvian article'' and ``Peruvian
textile or apparel article,'' which are key terms for Title
III.
Reason for change
This provision clarifies the scope of the provisions in
Title III.
Subtitle A: Relief from Imports Benefiting from the Agreement
SECTIONS 311-316
Present law
No provision.
Explanation of provisions
Sections 311-316 authorize the President, after an
investigation and affirmative determination by the U.S.
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 Peruvian product
is being imported into the United States in such increased
quantities and under such conditions as to be a substantial
cause of serious injury or threat of serious injury to a
domestic industry.
Section 311 provides for the filing of petitions with the
ITC and for the ITC to conduct safeguard investigations under
Subtitle A. Section 311(a)(1) provides that a petition
requesting a safeguard action may be filed by an entity that is
``representative of an industry.'' As under Section 202(a)(1)
of the Trade Act of 1974, a trade association, firm, certified
or recognized union, or a group of workers can be considered
such an entity. Section 311(b) sets out the standard to be used
by the ITC in undertaking an investigation and making a
determination in Subtitle A safeguard proceedings.
Section 311(c) provides that certain provisions of Section
202 of the Trade Act of 1974 also apply with respect to
investigations initiated under Section 311(b), including
provisions defining ``substantial cause'' and listing factors
to be taken into account in making safeguard determinations.
Section 311(d) exempts from investigation under the section
Peruvian articles with respect to which relief has previously
been provided under Subtitle A.
Section 312 requires the ITC to make a determination not
later than 120 days after the date on which the Section 311
investigation is initiated. Under Sections 312(b) and (c), if
the ITC makes an affirmative determination, it must find and
recommend to the President the amount of import relief that is
necessary to remedy or prevent serious injury and to facilitate
the efforts of the domestic industry to make a positive
adjustment to import competition. Section 312(d) directs the
ITC to submit a report to the President regarding the
determination no later than 30 days after the determination is
made. Section 312(e) requires the ITC to make this report
public and to publish a summary of it in the Federal Register.
Section 313(a) provides that the President, within 30 days
of receiving a report from the ITC under Section 312, must
provide import relief to the extent that the President
determines is necessary to remedy or prevent the injury found
by the ITC and to facilitate the efforts of the domestic
industry to make a positive adjustment to import competition.
Under Section 313(b), the President is not required to provide
import relief if the relief will not provide greater economic
and social benefits than costs.
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 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 Peru FTA entered into force. Under Section 313(c)(2), if
the relief the President provides has a duration greater than
one year, the relief must be subject to progressive
liberalization at regular intervals over the course of its
application.
Section 313(d) provides that the President may initially
provide import relief for up to two years. This period may be
extended for an additional two years (to a maximum aggregate
period of four years) if, after an investigation by the ITC and
receipt of an ITC report, the President determines that import
relief continues to be necessary and there is evidence that the
industry is making a positive adjustment to import competition.
The ITC must conduct an investigation on these issues if,
within a specified period before the relief terminates, a
concerned industry files a petition requesting an
investigation. The ITC must issue a report on its investigation
to the President no later than 60 days before the termination
of the import relief.
Section 313(e) specifies that on the termination of import
relief, the rate of duty for the remainder of the calendar year
is the rate that was scheduled to have been in effect one year
after the initial provision of import relief. In the calendar
year that follows the year of termination of import relief, the
President may either apply the rate of duty set out in the
relevant U.S. Schedule to the Peru FTA or eliminate the duty in
equal annual stages until the end of the scheduled phase-out
period.
Section 313(f) exempts from relief any article that is: (i)
subject to import relief under the global safeguard provisions
in U.S. law (Chapter 1 of Title II of the Trade Act of 1974);
(ii) subject to import relief under Subtitle B; or (iii)
subject to additional duties as an agricultural good under
Section 202(b).
Section 314 provides that no relief may be provided under
this subtitle after ten years from the date the Peru FTA enters
into force, unless the scheduled 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 315 authorizes the President to provide
compensation to Peru consistent with Article 8.5 of the Peru
FTA if relief is ordered.
Section 316 provides for the treatment of confidential
business information.
Reason for change
These provisions establish a mechanism for providing
temporary import relief where a U.S. industry experiences
injury or threat of injury by reason of increased import
competition from Peru resulting from reduction or elimination
of a duty under the Peru FTA. The Committee notes that the
President is not required to provide relief if the relief will
not provide greater economic and social benefits than costs and
expects that the President will use this discretion only to the
extent consistent with the letter, spirit and purpose of the
safeguard provisions. The Committee intends that administration
of this safeguard be consistent with U.S. obligations under
Section A of Chapter Eight (Trade Remedies) of the Peru FTA.
Subtitle B: Textile and Apparel Safeguard Measures
SECTIONS 321-328
Present law
No provision.
Explanation of provisions
Sections 321-328 authorize the President to impose certain
import relief measures when he determines that, as a result of
the elimination or reduction of a duty provided under the Peru
FTA, a Peruvian textile or apparel article is being imported
into the United States in such increased quantities, in
absolute terms or relative to the domestic market for that
article, and under such conditions as to cause serious damage,
or actual threat thereof, to the domestic industry.
Section 321 provides that a request for safeguard relief
under this subtitle may be filed with the President by an
interested party. The President must review the request and
determine whether to commence consideration of the request.
Under Section 321(b), if the President determines that the
request contains information necessary to warrant consideration
on the merits, the President must provide notice stating that
the request will be considered and seeking public comments on
the request.
Section 322(a) provides that the President shall determine,
pursuant to a request by an interested party, whether, as a
result of the elimination or reduction of a duty provided under
the Peru FTA, a Peruvian textile or apparel article is being
imported intothe United States in such increased quantities, in
absolute terms or relative to the domestic market for that article, and
under such conditions as to cause serious damage, or actual threat
thereof, to a domestic industry producing an article that is like, or
directly competitive with, the imported article. The President must
make this determination within 30 days after the completion of
consultations held pursuant to Article 3.1.5 of the Agreement.
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 of the bill provides that the period of relief
shall be no longer than two years. The period may be extended
for an additional period not more than one year, if the
President determines that continuation is necessary to remedy
or prevent serious damage and to facilitate adjustment by the
domestic industry and there is evidence the industry is making
a positive adjustment. The aggregate period of relief,
including any extension, may not exceed three years.
Section 324 provides that relief may not be granted to an
article under this subtitle if relief has previously been
granted under this subtitle for that article, or the article is
subject to import relief under Subtitle A of Title III of this
bill or under Chapter 1 of Title II of the Trade Act of 1974.
Under Section 325, after a safeguard expires, the rate of
duty on the article that had been subject to the safeguard
shall be the rate that would have been in effect, but for the
safeguard action.
Section 326 provides that the authority to provide
safeguard relief under this subtitle expires five years after
the date on which the Agreement enters into force.
Section 327 authorizes the President to provide
compensation to Peru if relief is ordered.
Section 328 provides for the treatment of confidential
business information.
Reason for change
This provision implements the commitments under the Peru
FTA relating to textile and apparel safeguard measures. The
Committee intends that the provisions of subtitle B be
administered in a manner that is transparent and that will
serve as an example to our trading partners. In addition, the
Committee encourages the President promptly to issue
regulations on procedures for requesting such safeguard
measures, for making determinations under section 322(a), and
for providing relief under section 322(b).
Subtitle C: Cases Under Title II of the Trade Act of 1974
SECTION 331: FINDINGS AND ACTION ON GOODS FROM PERU
Present law
No provision.
Explanation of provision
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 Peruvian imports of the article that qualify
as originating goods under the Peru FTA 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.
Reason for change
This provision implements commitments under the Peru FTA
relating to treatment of Peruvian imports in global safeguard
investigations under Section 202(b) of the Trade Act of 1974.
Title IV: Procurement
SECTION 401: GOVERNMENT PROCUREMENT
Present law
No provision.
Explanation of provision
Section 401 implements Chapter 9 of the Peru FTA and amends
the definition of ``eligible product'' in Section 308(4)(A) of
the Trade Agreements Act of 1979. As amended, Section 308(4)(A)
will provide that an ``eligible product'' means a product or
service of Peru that is covered under the Agreement for
procurement by the United States.
Reason for change
This provision implements U.S. commitments under Chapter 9
of the Peru FTA (Government Procurement).
Title V: Trade in Timber Products of Peru
SECTIONS 501-502
Present law
No provision.
Explanation of provision
Sections 501-502 implement obligations set out in Annex
18.3.4 to the Peru FTA (Annex on Forest Sector Governance).
Section 501(a) provides that, within 90 days of entry into
force of the agreement, the President shall establish an
interagency committee responsible for overseeing the
implementation of the Annex on Forest Sector Governance.
Section 501(b) authorizes the interagency committee to
request the Government of Peru to conduct an audit to determine
whether a particular producer or exporter in Peru is complying
with all applicable Peruvian laws, regulations and measures
governing the harvest of, and trade in, timber products.
Section 501(c) also authorizes the interagency committee to
request the Government of Peru to conduct a verification with
respect to a particular shipment of timber products from Peru
to the United States, to determine whether the exporter or
producer of the products has complied with the applicable
Peruvian laws, regulations and measures governing the harvest
of, and trade in, timber products. The interagency committee
may request that officials of an agency represented on the
committee participate in a verification visit conducted by the
Government of Peru. While a verification is pending, the
interagency committee may direct U.S. Customs and Border
Protection to detain the shipment that is the subject of the
verification. If the Government of Peru has denied a request
that a U.S. government official participate in a verification
visit, the interagency committee may also direct U.S. Customs
and Border Protection to deny entry to the shipment that is the
subject of the verification.
Upon receipt of a report of the results of a verification
from the Government of Peru, the interagency committee shall
determine whether it is appropriate to take any action with
respect to the shipment that was the subject of the
verification, or the products of the relevant producer or
exporter. Under paragraph 7 of Section 501(c), appropriate
actions may include: (1) directing U.S. Customs and Border
Protection to deny entry to the shipment, (2) directing U.S
Customs and Border Protection to deny entry to any products of
the producer or exporter derived from any tree species listed
in Appendices to the Convention on International Trade in
Endangered Species of Wild Fauna and Flora in those cases in
which a producer or exporter is found to have knowingly
provided false information to Peruvian or U.S. officials
regarding a shipment, and (3) any other action the interagency
committee determines to be appropriate. In determining the
appropriate action to take, and duration thereof, the
interagency committee must consider anyrelevant information
available to it, including the verification report from the Government
of Peru and any information obtained by U.S. officials during a
verification visit. Any appropriate action is to terminate no later
than the date notified by the interagency committee to the Government
of Peru or, if the Government of Peru conducts an audit and concludes
that the subject of the audit has come into compliance with all
applicable laws, regulations, and other measures of Peru governing the
harvest of, and trade in, timber products, within 15 days after the
Government of Peru submits the results of such an audit to the United
States.
If the Government of Peru fails to provide a verification
report, the interagency committee may take such action with
respect to the relevant exporter's timber products as the
committee considers appropriate, including any action described
in paragraph 7 of Section 501(c).
Section 501(d) provides for confidential treatment of
documents or information received in the course of an audit
under Section 501(b) or a verification under Section 501(c).
Section 501(e) directs the interagency committee to make
publicly available in a timely manner any information on
bilateral trade in timber products exchanged with Peru under
paragraph 17 of Annex 18.3.4 of the Peru FTA.
Section 501(f) addresses coordination with other laws,
including with respect to the authority of various
administering agencies and the effect on proceedings and
determinations under other laws.
Section 501(g) directs the Secretary of Agriculture, the
Secretary of Homeland Security, the Secretary of the Interior,
and the Secretary of the Treasury, in consultation with the
interagency committee, to prescribe such regulations as are
necessary to carry out Section 501. In addition, Section 501(h)
provides that, within 90 days of entry into force of the Peru
FTA, the President shall consult with the Ways and Means and
Finance Committees on the resources, including staffing, needed
to implement Annex 18.3.4 of the Agreement.
Section 502 directs the USTR, in consultation with the
appropriate agencies, to report to the Ways and Means and
Finance Committees regarding implementation of Annex 18.3.4 of
the Peru FTA and activities related to forest sector governance
carried out under the Environmental Cooperation Agreement
entered into between the United States and Peru on July 24,
2006. Reports are to be provided by the end of each of the
first and second years following entry into force of the Peru
FTA and periodically thereafter.
Reason for change
These provisions implement obligations under Annex 18.3.4
to the Peru FTA (Annex on Forest Sector Governance). As noted
above, this Annex, negotiated as a result of the May 10
Agreement, addresses the problem of illegal logging in Peru.
Peru lies at the heart of the Tropical Andes and is one of the
most biologically rich and diverse eco-regions in world.
Illegal logging poses a severe threat to Peru's irreplaceable
plant and animal communities. The Committee notes the critical
importance of stopping this practice of illegal logging. The
Annex on Forest Sector Governance and Sections 501-502 of this
Act provide groundbreaking new tools for the United States to
use in that fight. The Committee expects that the President and
the interagency committee will make the fullest possible use of
these tools to ensure that the commitments under the Annex on
Forest Sector Governance are being faithfully implemented and
enforced and that any violation of the applicable Peruvian
laws, regulations and measures governing the harvest of, and
trade in, timber products is addressed.
The Committee also notes the requirement under Section 502
for the USTR to report to the Ways and Means and Finance
Committees regarding implementation of obligations under the
Annex on Forest Sector Governance. Given the critical
importance of addressing the problem of illegal logging, the
Committee expects that the USTR will provide timely, frequent
and thorough reports regarding implementation of the
obligations both of Peru and the United States (for example,
regarding the work of the interagency committee, regulations to
implement the obligations under the agreement, cases considered
by the interagency committee and the Peruvian authorities and
their resolution, audits and verifications conducted, and other
related matters).
Title VI: Offsets
SECTION 601: CUSTOMS USER FEES
Present law
Section 13031 of the Consolidated Omnibus Budget
Reconciliation Act of 1985 (``COBRA'') authorized the Secretary
of the Treasury to collect certain service fees. Section 412 of
the Homeland Security Act of 2002 authorized the Secretary of
the Treasury to delegate such authority to the Secretary of
Homeland Security. Provided for under 19 U.S.C. 58c, these fees
include: Processing fees for air and sea passengers, commercial
trucks, rail cars, private aircraft and vessels, commercial
vessels, dutiable mail packages, barges and bulk carriers,
merchandise, and Customs broker permits. COBRA was amended on
several occasions. The current authorization for the collection
of the passenger and conveyance processing fees is through
September 30, 2014. The current authorization for the
collection of the merchandise processing fees is through
October 21, 2014.
Description of proposal
The proposal extends the passenger and conveyance
processing fees and the merchandise processing fees authorized
under COBRA through December 13, 2014.
Reason for change
The Committee believes it is appropriate to extend the
passenger and conveyance processing fees and the merchandise
processing fees authorized under COBRA.
SECTION 602: TIME FOR PAYMENT OF CORPORATE ESTIMATED TAXES
Present law
In general, corporations are required to make quarterly
estimated tax payments of their income tax liability. For a
corporation whose taxable year is a calendar year, these
estimated tax payments must be made by April 15, June 15,
September 15, and December 15.
Under present law, in the case of a corporation with assets
of at least $1 billion, the payments due in July, August, and
September, 2012, shall be increased to 115 percent of the
payment otherwise due and the next required payment shall be
reduced accordingly.
Explanation of provision
The provision increases the percentage by 0.75 of a
percentage point, from 115 percent to 115.75 percent.
Reason for change
The Committee believes it is appropriate to adjust the
corporate estimated tax payments.
III. VOTES OF THE COMMITTEE
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the following statements are made
concerning the vote of the Committee on Ways and Means in its
consideration of the bill H.R. 3688.
Motion to Report the Bill
The bill, H.R. 3688, was ordered favorably reported by a
roll call vote of 39 yeas to 0 nays (with a quorum being
present). The vote was as follows:
----------------------------------------------------------------------------------------------------------------
Representative Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Rangel..................... X ........ ......... Mr. McCrery...... X ........ .........
Mr. Stark...................... X ........ ......... Mr. Herger....... X ........ .........
Mr. Levin...................... X ........ ......... Mr. Camp......... X ........ .........
Mr. McDermott.................. X ........ ......... Mr. Ramstad...... X ........ .........
Mr. Lewis (GA)................. X ........ ......... Mr. Johnson...... X ........ .........
Mr. Neal....................... X ........ ......... Mr. English...... X ........ .........
Mr. McNulty.................... X ........ ......... Mr. Weller....... ........ ........ .........
Mr. Tanner..................... X ........ ......... Mr. Hulshof...... X ........ .........
Mr. Becerra.................... X ........ ......... Mr. Lewis (KY)... X ........ .........
Mr. Doggett.................... X ........ ......... Mr. Brady........ X ........ .........
Mr. Pomeroy.................... X ........ ......... Mr. Reynolds..... X ........ .........
Ms. Tubbs Jones................ X ........ ......... Mr. Ryan......... X ........ .........
Mr. Thompson................... X ........ ......... Mr. Cantor....... X ........ .........
Mr. Larson..................... X ........ ......... Mr. Linder....... X ........ .........
Mr. Emanuel.................... X ........ ......... Mr. Nunes........ X ........ .........
Mr. Blumenauer................. X ........ ......... Mr. Tiberi....... X ........ .........
Mr. Kind....................... X ........ ......... Mr. Porter....... X ........ .........
Mr. Pascrell................... X ........ .........
Ms. Berkley.................... ........ ........ .........
Mr. Crowley.................... X ........ .........
Mr. Van Hollen................. X ........ .........
Mr. Meek....................... X ........ .........
Ms. Schwartz................... X ........ .........
Mr. Davis...................... X ........ .........
----------------------------------------------------------------------------------------------------------------
IV. BUDGET EFFECTS
A. Committee Estimate of Budgetary Effects
In compliance with clause 3(d)(2) of the rule XIII of the
Rules of the House of Representatives, the following statement
is made concerning the effects on the budget of this bill, H.R.
3688, as reported: The Committee agrees with the estimate
prepared by the Congressional Budget Office (``CBO'') which is
included below.
B. Statement Regarding New Budget Authority and Tax Expenditures
In compliance with subdivision 3(c)(2) of rule XIII of the
Rules of the House of Representatives, the Committee states
that the provisions of H.R. 3688 would reduce customs duty
receipts due to lower tariffs imposed on goods from Peru.
C. Cost Estimate Prepared by the Congressional Budget Office
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, requiring a cost estimate
prepared by CBO, the following report prepared by CBO is
provided.
U.S. Congress,
Congressional Budget Office
Washington, DC, November 2, 2007.
Hon. Charles B. Rangel,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 3688, the United
States-Peru Trade Promotion Agreement Implementation Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Zachary
Epstein.
Sincerely,
Robert A. Sunshine
(For Peter R. Orszag, Director).
Enclosure.
H.R. 3688--United States-Peru Trade Promotion Agreement Implementation
Act
Summary: H.R. 3688 would approve the free trade agreement
between the government of the United States and the government
of Peru that was entered into on April 12, 2006. It would
provide for tariff reductions and other changes in law related
to implementation of the agreement. It also would shift some
corporate income tax payments between fiscal years.
The Congressional Budget Office (CBO) and the Joint
Committee on Taxation (JCT) estimate that enacting the
legislation would reduce revenues by $20 million in 2008,
increase revenues by $292 million over the 2008-2012 period,
and reduce revenues by $423 million over the 2008-2017 period.
CBO estimates that enacting H.R. 3688 also would increase
direct spending by $4 million in 2008 and by $27 million over
the 2008-2012 period, and reduce direct spending by $443
million over the 2008-2017 period. Further, CBO estimates that
implementing the legislation would result in new discretionary
spending of less than $500,000 per year, assuming the
availability of appropriated funds.
CBO and JCT have determined that the bill contains no
intergovernmental mandates as defined in the Unfunded Mandates
Reform Act (UMRA). CBO has determined that the non-tax
provisions of the bill contain private-sector mandates with
costs that would greatly exceed the annual threshold
established in UMRA for private-sector mandates ($131 million
in 2007, adjusted annually for inflation) in fiscal year 2015.
JCT has determined that the tax provision of the bill (section
602) contains no private-sector mandate as defined in UMRA.
Estimated cost to the Federal Government: The estimated
budgetary impact of the legislation over the 2008-2017 period
is shown in the following table. The cost of this legislation
falls within budget function 750 (administration of justice).
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
---------------------------------------------------------------------------------------------------------------------------------------
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2008- 2012 2008- 2017
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN REVENUES
Free Trade Agreement.................................... -20 -35 -37 -39 -41 -44 -47 -50 -53 -56 -173 -423
Payment of Corporate Estimated Tax...................... 0 0 0 0 465 -465 0 0 0 0 465 0
Total Changes in Revenues............................... -20 -35 -37 -39 424 -509 -47 -50 -53 -56 292 -423
CHANGES IN DIRECT SPENDING
Customs User Fees:
Estimated Budget Authority.......................... 4 5 6 6 6 7 7 -484 0 0 27 -443
Estimated Outlays................................... 4 5 6 6 6 7 7 -484 0 0 27 -443
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: Congressional Budget Office and Joint Committee on Taxation.
Basis of estimate:
Revenues
Under the United States-Peru agreement, tariffs on U.S.
imports from Peru would be phased out over time. The tariffs
would be phased out for individual products at varying rates
according to one of several different timetables ranging from
immediate elimination on the date the agreement enters into
force to gradual elimination over 10 years.
According to the U.S. International Trade Commission, the
United States collected about $5 million in customs duties in
2006 on $6 billion of imports from Peru. However, since 1991,
imports to the United States from Peru have been subject to
reduced tariff rates in accordancewith the Andean Trade
Preference Act (ATPA), which was expanded in legislation enacted in
2002, and is currently scheduled to expire on February 29, 2008. The
ATPA overlaps to a large extent with the free trade agreement that
would be implemented by this bill. As a result, enacting the bill would
effectively extend the ATPA for Peru after February 29, 2008, while
also lowering tariff rates not covered by the ATPA. Based on expected
imports from Peru, CBO estimates that implementing the tariff schedule
outlined in the U.S.-Peru agreement would reduce revenues by $20
million in 2008, by $173 million over the 2008-2012 period, and by $423
million over the 2008-2017 period, net of income and payroll tax
offsets.
This estimate includes the effects of increased imports
from Peru that would result from the reduced prices of imported
products in the United States, reflecting the lower tariff
rates. It is likely that some of the increase in U.S. imports
from Peru would displace imports from other countries. In the
absence of specific data on the extent of this substitution
effect, CBO assumes that an amount equal to one-half of the
increase in U.S. imports from Peru would displace imports from
other countries.
H.R. 3688 would also shift payments of corporate estimated
taxes between 2012 and 2013. For corporations with at least $1
billion in assets, the bill would increase the portion of
corporate estimated payments due from July through September of
2012. JCT estimates that this change would increase revenues by
$465 billion in 2012 and decrease revenues by $465 billion in
2013.
Direct spending
Under current law, customs user fees will expire either
after October 7, 2014 (for COBRA fees) or after October 21,
2014 (for merchandise processing fees). Such fees are recorded
in the budget as offsetting receipts (a credit against direct
spending). H.R. 3688 would extend both COBRA fees and
merchandise processing fees through December 13, 2014. CBO
estimates that this provision would increase offsetting
receipts by $485 million in fiscal year 2015.
In addition, the bill would exempt certain goods imported
from Peru from merchandise processing fees. Based on the value
of goods imported from Peru in 2007, CBO estimates that
implementing this provision would reduce fee collections by
about $4 million in fiscal year 2008 and by about $42 million
over the 2008-2015 period. There would be no effects after
December 13, 2014, because fees expire after that date.
Spending subject to appropriation
Title I of the bill would authorize the appropriation of
necessary funds for the Department of Commerce to pay the
United States' share of the costs of the dispute settlement
procedures established by the agreement. Based on information
from the agency, CBO estimates that implementing this provision
would cost less than $500,000 per year, subject to the
availability of appropriated funds.
Title III would authorize the International Trade
Commission (ITC) to conduct investigations, if petitioned, into
whether Peruvian imports might threaten or cause serious injury
to domestic competitors. The ITC would report to the President
on its findings and determinations, and if necessary, recommend
the appropriate amount of import relief. Based on information
from the agency, CBO estimates that implementing these
provisions would cost less than $500,000 per year, subject to
the availability of appropriated funds.
Title V would require the United States Trade
Representative to prepare a report for Congress regarding
activities carried out to promote legal trade in timber
products as stipulated in the agreement. CBO estimates that
complying with this reporting requirement also would cost less
than $500,000 per year.
Estimated impact on state, local, and tribal governments:
CBO and JCT have determined that the provisions of H.R. 3688
contain no intergovernmental mandates as defined in UMRA.
Estimated impact on the private sector: CBO has determined
that the non-tax provisions of H.R. 3688 would impose private-
sector mandates, as defined in UMRA, by extending the customs
user fees and by enforcing new record-keeping requirements on
exporters of goods to Peru. The aggregate costs of those
mandates would greatly exceed the annual threshold established
in UMRA for private-sector mandates ($131 million in 2007,
adjusted annually for inflation) in 2015. JCT has determined
that the tax provision of the bill (section 602) contains no
private-sector mandate as defined in UMRA.
Customs user fees
The bill would extend through December 13, 2014 the customs
user fees that are scheduled to expire on October 7, 2014 or
October 21, 2014. These fees are used to fund the processing
costs of the U.S. Customs Service. CBO estimates that the
aggregate cost to the private sector to comply with this
mandate relative to the case where the mandate is allowed to
expire would be about $485 million in fiscal year 2015.
Record-keeping requirement
The bill also would require any person exporting goods to
Peru who is required to complete a certificate of origin to
keep all documents that relate to the origin of goods being
certified for at least five years after the date of
certification. CBO estimates that the cost of that record-
keeping requirement for the private sector would be minimal.
Previous CBO estimate: On October 24, 2007, CBO transmitted
a cost estimate of S. 2113, an identically titled bill ordered
reported by the Senate Committee on Finance on October 4, 2007.
The provisions of S. 2113 and H.R. 3688 are identical, as are
CBO's estimates.
Estimate prepared by: Federal revenues: Andrew Langan,
Zachary Epstein; Direct spending: Mark Grabowicz; Spending
subject to appropriation: Susan Willie, Sunita D'Monte; Impact
on state, local, and tribal governments: Neil Hood; Impact on
the private sector: Jacob Kuipers.
Estimate approved by: G. Thomas Woodward, Assistant
Director for Tax Analysis; Theresa Gullo, Deputy Assistant
Director for Budget Analysis.
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE
A. Committee Oversight Findings and Recommendations
With respect to clause 3(c)(1) of rule XIII of the Rules of
the House of Representatives (relating to oversight findings),
the Committee, based on public hearing testimony and
information from the Administration, concluded that it is
appropriate and timely to consider H.R. 3688 as reported.
B. Summary of Findings and Recommendations of the Government Reform and
Oversight Committee
With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the performance goals and
objectives of the part of this legislation that authorizes
funding are for (a) the payment of the U.S. share of the
expenses incurred in dispute settlement proceedings established
under Chapter 21 of the Peru FTA and (b) the establishment and
operation of an office within the Department of Commerce
responsible for providing assistance to the panels in such
proceedings.
C. Constitutional Authority Statement
With respect to clause 3(d)(1) of rule XIII of the Rules of
the House of Representatives, relating to Constitutional
Authority, the Committee states that the Committee's action in
reporting the bill is derived from Article 1 of the
Constitution, Section 8 (`The Congress shall have power to lay
and collect taxes, duties, imposts and excises, to pay the
debts and to provide for * * * the general Welfare of the
United States.').
D. Information Relation to Unfunded Mandates
This information is provided in accordance with section 423
of the Unfunded Mandates Act of 1995 (P.L. 104-4) (``UMRA'').
The Committee has determined that the non-tax provisions of the
bill do impose federal mandates on the private sector by
extending the customs user fees and by enforcing new record-
keeping requirements on exporters of goods to Peru. The
aggregate costs of those mandates will exceed the annual
threshold established in UMRA for private-sector mandates ($131
million in 2007, adjusted annually for inflation) in 2015.
The Committee has determined that the bill does not impose
a federal intergovernmental mandate on State, local, or tribal
governments.
E. Limited Tax Benefits
Pursuant to clause 9 of rule XXI of the Rules of the House
of Representatives, the Ways and Means Committee has determined
that the bill as reported contains no congressional earmarks,
limited tax benefits, or limited tariff benefits within the
meaning of that Rule.
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
SECTION 13031 OF THE CONSOLIDATED OMNIBUS BUDGET RECONCILIATION ACT OF
1985
SEC. 13031. FEES FOR CERTAIN CUSTOMS SERVICES.
(a) * * *
(b) Limitations on Fees.--(1) * * *
* * * * * * *
(18) No fee may be charged under subsection (a) (9) or (10)
with respect to goods that qualify as originating goods under
section 203 of the United States-Peru Trade Promotion Agreement
Implementation Act. Any service for which an exemption from
such fee is provided by reason of this paragraph may not be
funded with money contained in the Customs User Fee Account.
* * * * * * *
(j) Effective Dates.--(1) * * *
* * * * * * *
(3)(A) Fees may not be charged under paragraphs (9) and (10)
of subsection (a) after [October 21, 2014] December 13, 2014.
(B)(i) Subject to clause (ii), Fees may not be charged under
paragraphs (1) through (8) of subsection (a) after [October 7,
2014] December 13, 2014.
* * * * * * *
----------
TARIFF ACT OF 1930
* * * * * * *
SEC. 508. RECORDKEEPING.
(a) * * *
* * * * * * *
(h) Certifications of Origin for Goods Exported Under the
United States-Peru Trade Promotion Agreement.--
(1) Definitions.--In this subsection:
(A) Records and supporting documents.--The
term ``records and supporting documents''
means, with respect to an exported good under
paragraph (2), records and documents related to
the origin of the good, including--
(i) the purchase, cost, and value of,
and payment for, the good;
(ii) the purchase, cost, and value
of, and payment for, all materials,
including indirect materials, used in
the production of the good; and
(iii) the production of the good in
the form in which it was exported.
(B) PTPA certification of origin.--The term
``PTPA certification of origin'' means the
certification established under article 4.15 of
the United States-Peru Trade Promotion
Agreement that a good qualifies as an
originating good under such Agreement.
(2) Exports to peru.--Any person who completes and
issues a PTPA certification of origin for a good
exported from the United States shall make, keep, and,
pursuant to rules and regulations promulgated by the
Secretary of the Treasury, render for examination and
inspection all records and supporting documents related
to the origin of the good (including the certification
or copies thereof).
(3) Retention period.--The person who issues a PTPA
certification of origin shall keep the records and
supporting documents relating to that certification of
origin for a period of at least 5 years after the date
on which the certification is issued.
[(h)] (i) Penalties.--Any person who fails to retain records
and supporting documents required by subsection [(f) or (g)]
(f), (g), or (h) or the regulations issued to implement [either
such subsection] any such subsection shall be liable for the
greater of--
(1) * * *
* * * * * * *
SEC. 514. PROTEST AGAINST DECISIONS OF THE CUSTOMS SERVICE.
(a) * * *
* * * * * * *
(i) Denial of Preferential Tariff Treatment Under the United
States-Peru Trade Promotion Agreement.--If U.S. Customs and
Border Protection or U.S. Immigration and Customs Enforcement
of the Department of Homeland Security finds indications of a
pattern of conduct by an importer, exporter, or producer of
false or unsupported representations that goods qualify under
the rules of origin provided for in section 203 of the United
States-Peru Trade Promotion Agreement Implementation Act, U.S.
Customs and Border Protection, in accordance with regulations
issued by the Secretary of the Treasury, may suspend
preferential tariff treatment under the United States-Peru
Trade Promotion Agreement to entries of identical goods covered
by subsequent representations by that importer, exporter, or
producer until U.S. Customs and Border Protection determines
that representations of that person are in conformity with such
section 203.
* * * * * * *
SEC. 520. REFUNDS AND ERRORS.
(a) * * *
* * * * * * *
(d) Goods Qualifying Under Free Trade Agreement Rules of
Origin.--Notwithstanding the fact that a valid protest was not
filed, the Customs Service may, in accordance with regulations
prescribed by the Secretary, reliquidate an entry to refund any
excess duties (including any merchandise processing fees) paid
on a good qualifying under the rules of origin set out in
section 202 of the North American Free Trade Agreement
Implementation Act, section 202 of the United States-Chile Free
Trade Agreement Implementation Act, section 203 of the
Dominican Republic-Central America-United States Free Trade
Agreement Implementation Act, [or] section 202 of the United
States-Oman Free Trade Agreement Implementation Act [for
which], or section 203 of the United States-Peru Trade
Promotion Agreement Implementation Act for which no claim for
preferential tariff treatment was made at the time of
importation if the importer, within 1 year after the date of
importation, files, in accordance with those regulations, a
claim that includes--
(1) * * *
* * * * * * *
SEC. 592. PENALTIES FOR FRAUD, GROSS NEGLIGENCE, AND NEGLIGENCE.
(a) * * *
* * * * * * *
(c) Maximum Penalties.--
(1) * * *
* * * * * * *
(10) Prior disclosure regarding claims under the
united states-peru trade promotion agreement.--An
importer shall not be subject to penalties under
subsection (a) for making an incorrect claim that a
good qualifies as an originating good under section 203
of the United States-Peru Trade Promotion Agreement
Implementation Act if the importer, in accordance with
regulations issued by the Secretary of the Treasury,
promptly and voluntarily makes a corrected declaration
and pays any duties owing with respect to that good.
[(10)] (11) Seizure.--If the Secretary has reasonable
cause to believe that a person has violated the
provisions of subsection (a) and that such person is
insolvent or beyond the jurisdiction of the United
States or that seizure is otherwise essential to
protect the revenue of the United States or to prevent
the introduction of prohibited or restricted
merchandise into the customs territory of the United
States, then such merchandise may be seized and, upon
assessment of a monetary penalty, forfeited unless the
monetary penalty is paid within the time specified by
law. Within a reasonable time after any such seizure is
made, the Secretary shall issue to the person concerned
a written statement containing the reasons for the
seizure. After seizure of merchandise under this
subsection, the Secretary may, in the case of
restricted merchandise, and shall, in the case of any
other merchandise (other than prohibited merchandise),
return such merchandise upon the deposit of security
not to exceed the maximum monetary penalty which may be
assessed under subsection (c).
* * * * * * *
(i) False Certifications of Origin Under the United States-
Peru Trade Promotion Agreement.--
(1) In general.--Subject to paragraph (2), it is
unlawful for any person to certify falsely, by fraud,
gross negligence, or negligence, in a PTPA
certification of origin (as defined in section
508(h)(1)(B) of this Act) that a good exported from the
United States qualifies as an originating good under
the rules of origin provided for in section 203 of the
United States-Peru Trade Promotion Agreement
Implementation Act. The procedures and penalties of
this section that apply to a violation of subsection
(a) also apply to a violation of this subsection.
(2) Prompt and voluntary disclosure of incorrect
information.--No penalty shall be imposed under this
subsection if, promptly after an exporter or producer
that issued a PTPA certification of origin has reason
to believe that such certification contains or is based
on incorrect information, the exporter or producer
voluntarily provides written notice of such incorrect
information to every person to whom the certification
was issued.
(3) Exception.--A person shall not be considered to
have violated paragraph (1) if--
(A) the information was correct at the time
it was provided in a PTPA certification of
origin but was later rendered incorrect due to
a change in circumstances; and
(B) the person promptly and voluntarily
provides written notice of the change in
circumstances to all persons to whom the person
provided the certification.
* * * * * * *
----------
SECTION 202 OF THE TRADE ACT OF 1974
SEC. 202. INVESTIGATIONS, DETERMINATIONS, AND RECOMMENDATIONS BY
COMMISSION.
(a) Petitions and Adjustment Plans.--
(1) * * *
* * * * * * *
(8) The procedures concerning the release of
confidential business information set forth in section
332(g) of the Tariff Act of 1930 shall apply with
respect to information received by the Commission in
the course of investigations conducted under this
chapter, part 1 of title III of the North American Free
Trade Agreement Implementation Act, title II of the
United States-Jordan Free Trade Area Implementation
Act, title III of the United States-Chile Free Trade
Agreement Implementation Act, title III of the United
States-Singapore Free Trade Agreement Implementation
Act, title III of the United States-Australia Free
Trade Agreement Implementation Act, title III of the
United States-Morocco Free Trade Agreement
Implementation Act, title III of the Dominican
Republic-Central America-United States Free Trade
Agreement Implementation Act, title III of the United
States-Bahrain Free Trade Agreement Implementation Act,
[and] title III of the United States-Oman Free Trade
Agreement Implementation Act, and title III of the
United States-Peru Trade Promotion Agreement
Implementation Act. The Commission may request that
parties providing confidential business information
furnish nonconfidential summaries thereof or, if such
parties indicate that the information in the submission
cannot be summarized, the reasons why a summary cannot
be provided. If the Commission finds that a request for
confidentiality is not warranted and if the party
concerned is either unwilling to make the information
public or to authorize its disclosure in generalized or
summarized form, the Commission may disregard the
submission.
* * * * * * *
----------
SECTION 308 OF THE TRADE AGREEMENTS ACT OF 1979
SEC. 308. DEFINITIONS.
As used in this title--
(1) * * *
* * * * * * *
(4) Eligible products.--
(A) In general.--The term ``eligible
product'' means, with respect to any foreign
country or instrumentality that is--
(i) * * *
* * * * * * *
(v) a party to a free trade agreement
that entered into force with respect to
the United States after December 31,
2005, and before July 2, 2006, a
product or service of that country or
instrumentality which is covered under
the free trade agreement for
procurement by the United States; [or]
(vi) a party to the United States-
Oman Free Trade Agreement, a product or
service of that country or
instrumentality which is covered under
that Agreement for procurement by the
United States[.]; or
(vii) a party to the United States-
Peru Trade Promotion Agreement, a
product or service of that country or
instrumentality which is covered under
that agreement for procurement by the
United States.
* * * * * * *
----------
SECTION 401 OF THE TAX INCREASE PREVENTION AND RECONCILIATION ACT OF
2005
SEC. 401. TIME FOR PAYMENT OF CORPORATE ESTIMATED TAXES.
Notwithstanding section 6655 of the Internal Revenue Code of
1986--
(1) in the case of a corporation with assets of not
less than $1,000,000,000 (determined as of the end of
the preceding taxable year)--
(A) * * *
(B) the amount of any required installment of
corporate estimated tax which is otherwise due
in July, August, or September of 2012 shall be
[115 percent] 115.75 percent of such amount,
* * * * * * *
VII. VIEWS
ADDITIONAL VIEWS ON H.R. 3688, THE ``UNITED STATES-PERU TRADE PROMOTION
AGREEMENT IMPLEMENTATION ACT''
A. INTRODUCTION
We are pleased to join with our colleagues across the aisle
to support the Peru Trade Promotion Agreement (PTPA). We write
these additional views to: (1) put the debate on the United
States-Peru Trade Promotion Agreement (PTPA) in the context of
our complete trade agenda; (2) highlight some of the commercial
benefits of the PTPA for American businesses, workers, farmers,
ranchers, and consumers; and (3) explain why the PTPA and the
other pending Free Trade Agreements (FTA) with Colombia and
Panama are so important for promoting stability and economic
development in these countries and in Latin America, not to
mention the importance of the pending FTA with our 7th largest
trading partner, Korea.
B. PERU AND THE ENTIRE U.S. TRADE AGENDA
On May 10, 2007, Congressional Republicans and the
Administration agreed to a ``bipartisan trade deal'' with
Congressional Democrats to consider trade agreements on a
bipartisan basis and improve our trading partners' standards
for labor, environmental, intellectual property rights, port
security, and investment. We believe that agreement is a good
and fair compromise that takes into account the concerns of all
parties. The breakthrough addresses concerns about labor, the
environment, and other issues without compromising American
sovereignty or jeopardizing future trade agreements. It will
improve our trading partners' standards on labor, environmental
regulation, intellectual property, port security, and
investment. In short, this agreement balances long-standing
concerns of Democrats and Republicans with a continuing
bipartisan commitment to free trade, which has improved the
economy and raised standards of living here in the United
States and around the world. The text of the agreement is now
reflected in all of our pending free trade agreements (Peru,
Colombia, Panama, and Korea). We strongly believe that this
agreement should pave the way for moving forward on all of the
pending free trade agreements without delay.
In June 2007, Peru's legislature overwhelmingly approved a
Protocol of Amendment to the PTPA reflecting the terms of the
May 10th deal; Peru had already approved the original PTPA last
year. Over the last few months, Peru has been implementing all
of the required labor obligations described below in the PTPA,
despite the unprecedented demand by Congressional Democrats
that a U.S. FTA partner do so before Congressional
consideration.
As amended by the May 10th deal, the PTPA will do the
following:
<bullet> The PTPA requires the parties to comply with
internationally recognized core labor standards, as defined by
the 1998 ILO Declaration on Fundamental Principles and Rights
at Work, to which the United States is already in compliance.
Peru, under the leadership of President Garcia and former
President Toledo, has consistently been making massive strides
in the last several years to improve its labor conditions, and
the PTPA reaffirms Peru's commitment and cements these
improvements within the context of the agreement. At the same
time, U.S. federal and state laws are protected.
<bullet> The PTPA will improve environmental enforcement in
Peru with no new obligations for the United States. The United
States and Peru commit to enforce their own domestic
environmental laws and also seven multilateral environment
agreements to which the United States is already a party in
full compliance. The PTPA also establishes a process to prevent
the imports of illegally harvested mahogany from Peru.
<bullet> The PTPA balances the interest in access to
medicines in Peru with need to encourage development and sales
of innovative medicines.
<bullet> The PTPA allows the United States to prevent an
investor from providing port security services if the U.S.
essential security is threatened.
<bullet> The PTPA recognizes that foreign investors in the
United States will not be accorded greater investment
protections than U.S. investors in the United States.
C. NEW MARKET OPPORTUNITIES FOR AMERICAN BUSINESSES AND WORKERS
The PTPA promises to provide significant economic benefits
to American businesses, workers, farmers, ranchers, and
consumers. The United States already provides duty-free access
to almost all imports from Peru under the Andean Trade
Preferences and Drug Eradication Act. However, Peru continues
to maintain significant tariffs and other barriers to U.S.
exports of goods and services.
U.S. exports to Peru currently face an average tariff of 8%
and many exports face tariffs of up to 70 percent.
Additionally, U.S. service sector firms are subject to
employment and investment restrictions in Peru. The PTPA will
remedy the unequal treatment faced by U.S. exporters.
Immediately upon implementation the average tariff faced by
U.S. exports will decline by 72%. The U.S. International Trade
Commission estimates that the market access provisions of the
PTPA alone will increase U.S. exports by $1.1 billion. Because
the PTPA also improves access for U.S. services exports and
investment, the actual increase in U.S. exports should be much
larger. Indeed, U.S. exports to every country with which the
United States has implemented a free trade agreement under
Trade Promotion Authority has exceeded the ITC's estimate.
The PTPA will benefit small and medium sized American
businesses that rely on Peru as an important export market.
While small and medium size businesses account for 29% of total
U.S. exports, they account for 38% of U.S. exports to Peru. The
PTPA will benefit America's farmers and ranchers, as more than
two-thirds of Peru's tariffs on U.S. agriculture exports are
removed immediately.
The PTPA will also improve the position of U.S. businesses
competing in Peru against imports from third-countries. Peru
maintains: preferential trading programs with several of its
South American neighbors. The PTPA turns this disadvantage into
an advantage, as U.S. firms will receive even better market
access. For example, U.S. exporters of wheat and white corn
currently pay a 17% tariff in Peru, while Argentina pays only
3.4% and controls two-thirds of Peru's market. The PTPA will
eliminate the 17% tariff on U.S. exports, while Argentina will
still be subject to the 3.4% duty.
The implementation of PTPA will further the positive
economic impact of free trade agreements on U.S. businesses and
workers. The U.S. trade balance with the twelve countries with
which free trade agreements were implemented under TPA have
improved by 162 percent, swinging from a deficit to a surplus
of $13.9 billion. The implantation of the PTPA, and the free
trade agreements with Colombia, Panama, and Korea, will
continue to increase U.S. exports and improve the U.S. trade
balance.
D. PROMOTING STABILITY AND ECONOMIC DEVELOPMENT IN PERU AND LATIN
AMERICA
Peru has resisted the efforts of Venezuela's authoritarian
President Hugo Chavez to wage a war of words and ideas in Latin
America against the United States. Chavez has promoted
restricting free markets and increasing the role of the state
in the economy, and his demagogic actions ultimately harm the
people he purports to help by eliminating investment and job
creation. His troubling and short-sighted economic policies
would leave Latin American economies in ruins and condemn the
people to a generation of poverty. Peru's market-oriented
policies under former President Toledo and current President
Garcia have made that country one of the world's fastest-
growing emerging economies.
Chavez blatantly tried to intervene in Peru's democratic
elections, espousing sentiments against the United States and
the principles for which America stands--democracy, free
markets, liberty. On June 4, 2006, Peruvian voters decisively
rejected Chavez's candidate in Peru, Ollanta Humala, and
instead chose Alan Garcia to be their next President. The
election was a clear sign of support from the people of Peru
that they reject Chavez's fiery populism and instead support
continuing Peru's current policies of economic engagement with
the United States and market reform.
On June 28, 2006, Peru's legislature followed the direction
set by its electorate and overwhelmingly approved the PTPA by a
vote of 79-14, with the full support of members of then
President-elect Garcia's political party. On June 27, 2007,
Peru's legislature voted to approve a Protocol of Amendment to
the PTPA, reflecting the May 10th bipartisan trade deal, by a
vote of 70 to 38. It is past time for the U.S. Congress to
respond positively to these strong Peruvian actions by
immediately passing the PTPA by a strong bipartisan vote.
The PTPA and the pending FTAs with Panama and Colombia are
an important part of promoting democracy and economic stability
in Latin America. Congressional passage and implementation of
all three of these FTAs will help these countries continue to
provide a positive alternative to the efforts by Venezuelan
President Hugo Chavez to restrict free markets and increase the
role of the state in Latin America. Not giving these PTAs the
broad, bipartisan, and immediate support they deserve from the
U.S. Congress would only strengthen the hand of Chavez, support
radical policies in neighboring Bolivia and Ecuador, and
undermine U.S. foreign policy in the region.
E. CONCLUSION
We are glad that, more than five and a half months after
Congressional Democrats agreed to the May 10th ``bipartisan
trade deal'' with the Administration and Congressional
Republicans we are finally moving the PTPA to the House floor.
But we would note that the majority has made no commitments on
the other three pending FTAs with Colombia, Panama, and Korea.
It is time for us to act on these FTAs as well. Each day we
fail to do so delays the ability of our businesses, workers,
farmers, ranchers, and consumers to begin to reap the same
types of commercial benefits and legal protections that they
will vis-a-vis Peru.
Jim McCrery.
Wally Herger.
Jim Ramstad.
Jerry Weller.
Kenny Hulshof.
Ron Lewis.
Kevin Brady.
Paul Ryan.
Eric Cantor.
Pat Tiberi.
Jon Porter.
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