graduation was effective on January 2, 1989, and was based on the President's assessment that these countries had "achieved an impressive level of economic development and competitiveness, which can be sustained without the preferences provided by the program." In addition to the annual review of petitions on article eligibility and discretionary graduation of particular products from particular countries, section 504 as amended by the 1984 Act applies statutory "competitive need" limitations of GSP duty-free treatment, subject to waiver under certain conditions. The basic purposes of the competitive need limitations are to (1) establish a benchmark for determining when products from particular countries are competitive in the U.S. market and therefore no longer need preferential tariff treatment; and (2) to reallocate GSP benefits to less competitive producers. The limits have also provided some measure of protection to domestic producers of like or directly competitive products. Under the competitive need limits, if imports of a particular article from a particular BDC exceed either (1) a value level adjusted annually in relation to changes in the U.S. gross national product (GNP) (increased from $25 million in 1974 to about $88.9 million in 1989) or (2) 50 percent of total U.S. imports of the article in a particular calendar year, GSP treatment on that article from that country must be removed and the normal rate of duty imposed on all imports of the article from that country by July 1 of the following year. GSP treatment may be reinstated in a subsequent calendar year if imports of the product from the excluded country have fallen below the competitive need ceilings then in effect during the preceding calendar year. There are four statutory circumstances in which competitive need limits may not apply: (1) If the President determines that an article like or directly competitive with a particular GSP article was not produced in the United States on January 3, 1985, then that GSP product is exempt from the 50-percent, but not the dollar value, competitive need limit. (2) The President may waive the 50-percent, but not the dollar, competitive need limit on articles for which total U.S. imports are de minimis, i.e., not more than $5 million during the preceding calendar year indexed annually to changes in the U.S. GNP since 1979 (about $10.4 million in 1989). (3) Neither of the competitive need limits applies after at least 60 days advance notice to the Congress to any BDC the President determines to be a least developed developing country. (4) The President may waive the competitive need limits for a particular country based on a determination that (a) there has been an historical preferential trade relationship between the United States and such country; (b) there is a treaty or trade agreement in force covering economic relations between such country and the United States; and (c) such country does not discriminate against or impose unjustifiable or unreasonable barriers to U.S. commerce. This waiver authority which was designed for possible exemption of the Philippines, has never been utilized. As amended by the 1984 Act, section 504 required the President to conduct a general review of eligible articles by January 4, 1987, and periodically thereafter, and report to the Congress by January 4, 1988, on the actions he had taken to withdraw, suspend, or limit GSP benefits for failure to take actions described in the country designation criteria. If, after any general product review, the President determines that a country has demonstrated a sufficient degree of competitiveness in a particular article relative to other BDCs, then he must reduce the competitive need limits on that article from that country to $25 million, adjusted annually to changes in the U.S. GNP since 1984 (about $34.7 million in 1989), or 25 percent of total U.S. imports of the article whichever is larger. The President may waive competitive need limits on any article as of January 4, 1987, if he (1) receives ITC advice on whether any U.S. industry is likely to be adversely affected; (2) determines a waiver is in the national economic interest based upon the country designation factors under section 501 and 502(c) as amended; and (3) publishes his determination. In making the national interest determination the President must give great weight to (1) assurances of equitable and reasonable market access in the BDC; and (2) the extent the country provides adequate and effective intellectual property rights protection. Total waivers for all countries above existing competitive need limits cannot exceed 30 percent of total GSP duty-free imports in any year, of which not more than onehalf (i.e., 15 percent of total GSP duty-free imports) may apply to waivers on articles from countries which account for at least a 10percent share of total GSP duty-free imports or have a per capita GNP of $5,000 or more in that year. Any BDC which reaches a per capita GNP level of $8,500 in a particular calendar year, indexed annually by 50 percent of the annual change in U.S. GNP since 1984, must be graduated from GSP on all eligible articles over a 2-year phaseout period. Other provisions Section 505 as amended by the 1984 Act required the President to submit a report to the Congress on the operation of the GSP program by January 4, 1990, as well as an annual report on the status of internationally recognized worker rights within each BDC. Section 506 as added by the 1984 Act requires appropriate U.S. agencies to assist BDCs to develop and implement measures designed to assure that the agricultural sectors of their economies are not directed to export markets to the detriment of foodstuff production for their own citizens. Caribbean Basin Initiative (CBI) The Caribbean Basin Economic Recovery Act (CBERA), 16 commonly referred to as the Caribbean Basin Initiative or CBI, was enacted on August 5, 1983, authorizing certain U.S. unilateral and preferential trade and tax measures for Caribbean Basin countries and territories. 16 Public Law 98-67, title II, approved August 5, 1983, 19 U.S.C. 2701 et seq. The United States developed this program for responding to the economic crisis in the Caribbean in close consultation with governments and private sectors of potential recipients and with other donor countries in the region. On February 24, 1982, President Reagan outlined the CBI before the Organization of American States and on March 17, 1982, he first submitted this plan to the Congress. H.R. 7397 containing amended versions of the trade and tax proposals, was passed by the House of Representatives in the 97th Congress on December 17, 1982, but was not acted on by the Senate. The President resubmitted the House-passed version of the plan on February 23, 1983; the Initiative as further amended became title II of the conference report on H.R. 2973, to repeal the withholding of tax from interest and dividends, agreed to by both Houses on July 28, 1983. Separate foreign assistance legislation increased aid to the region as the third element of the program. Following extensive congressional consideration and consultations with representatives of the countries involved and U.S. private sector interests on measures to improve the program, the Caribbean Basin Economic Recovery Expansion Act of 1990, so-called CBI II, was enacted as title II of the Customs and Trade Act of 1990.17 CBI II amended the CBERA to make the trade benefits permanent by repealing the 12-year September 30, 1995, termination date and to make certain improvements in the trade and tax benefits. The Act also included measures to promote tourism and created a scholarship assistance program for the region. The centerpiece of the CBI is authority granted to the President to provide unilateral duty-free treatment on U.S. imports of eligible articles from designated Caribbean Basin countries and territories. Duty-free treatment became effective as of January 1, 1984, and currently applies to imports from 24 designated beneficiary countries or territories. 18 Beneficiary countries or territories Section 212 of the CBERA lists the following 27 countries and territories as potentially eligible for designation by the President as CBI beneficiary countries: 18 Anguilla, Cayman Islands, Suriname, and the Turks and Caicos Islands are not currently designated; Aruba is designated separately. Section 212(b) of the CBERA, as amended, prohibits the President from designating a country or territory as a beneficiary of CBI trade or tax benefits if it: (1) Is a Communist country; (2) Has nationalized or expropriated U.S. property including any patent, trademark, or other intellectual property without compensation or submission to arbitration; (3) Fails to recognize awards arbitrated in favor of U.S. citi zens; (4) Affords preferential tariff treatment to products of other developed countries that has or is likely to have a significant adverse effect on U.S. commerce; (5) Broadcasts U.S. copyrighted material without the owners' consent; (6) Has not signed an extradition agreement with the United States; and (7) Has not or is not taking steps to afford internationally recognized worker rights (as defined for the GSP program) to workers in the country (including any designated zone in that country). The President may waive conditions (1), (2), (3), (5), and (7) if he determines that designation of the particular country would be in the national economic or security interest of the United States and so reports to the Congress. In addition, the President must take into account certain other factors under section 212(c) in determining whether to designate a country a CBI beneficiary: the country's desire to be designated; economic conditions and living standards in the country; the extent the country will afford reasonable access to U.S. products and observes international trading rules; the degree the country uses export subsidies or imposes export performance or local content requirements; the degree the country's trade policies contribute to regional revitalization and the country is undertaking self-help measures; whether or not such country has taken or is taking steps to afford its workers (including in any designated zone of the country) internationally recognized worker rights; the extent the country prohibits its nationals from broadcasting copyrighted materials without permission; the extent the country provides adequate and effective means for foreign nationals to secure, exercise, and enforce exclusive rights in intellectual property; and the extent to which the country is prepared to cooperate in the administration of the CBI. The President must notify the Congress of his intention to designate countries, together with the considerations entering the decision. The President may later withdraw or suspend the designation of any country as a beneficiary country or withdraw, suspend, or limit the application of duty-free treatment for any eligible article of such country if he determine that, based on changed circumstances, such country would be barred from designation under the criteria set forth in subsection (b) of section 212.19 The President is 19 Section 1909 of the Omnibus Trade and Competitiveness Act (P.L. 100-418). required to publish notice of such proposed action in the Federal Register at least 30 days prior to taking such action. During such 30-day notice period, USTR is required to hold a public hearing and accept public comments on the proposed action. The President must submit a complete report to the Congress by October 1, 1993, and every 3 years thereafter regarding the operation of the CBI. This report must include general reviews of CBI beneficiary countries based upon all section 212 designation criteria. Eligible articles CBI duty-free treatment under section 213(a) of the CBERA applies only to an article which meets three "rule of origin" requirements: quirements: (1) The article must be imported directly from a beneficiary country into the U.S. customs territory; (2) The article must contain a minimum 35 percent local content of one or more beneficiary countries (up to 15 percent of the total value of the articles from U.S.-made materials may count toward the 35 percent requirement); and (3) The article must be wholly the growth, product, or manufacture of a beneficiary country, or, if it contains foreign materials, be substantially transformed into a new or different article in a beneficiary country. Other provisions and regulations preclude minor pass through operations or transshipments from qualification. CBI II requires the President to submit recommendations to the Congress regarding new rules of origin for CBI beneficiary countries, to be followed by any appropriate congressional action. The U.S. International Trade Commission (ITC) was directed to initiate an investigation to form the basis for the recommendations. Special criteria have been established for the duty-free entry of ethanol under the CBI program. The Tax Reform Act of 1986 20 amended the 1983 CBI legislation to require increasing amounts of CBI feedstock in order for ethanol to qualify for duty-free treatment-30 percent in 1987; 60 percent in 1988; and 75 percent in 1989 and thereafter. Several companies were "grandfathered" for two years, allowing them to operate under pre-1986 criteria through 1989. The Omnibus Trade and Competitiveness Act of 1988 21 extended the "grandfather" through the end of 1989 for six dehydration plants already built or under construction but imposed an import cap of 20 million gallons per facility. The Act also requested reports by the ITC and the General Accounting Office (GAO) on whether or not the current local feedstock requirements make CBI ethanol production economically feasible. Those reports concluded that CBI ethanol production would not be economically feasible under those local feedstock requirements. The Steel Trade Liberalization Program Implementation Act of 1989 22 provided that for calendar years 1990 and 1991, ethanol 20 Public Law 99-514, October 22, 1986, section 423. |