Section 213(c) requires the President to suspend duty-free treatment on imports of sugar and beef products from any beneficiary country that does not submit a satisfactory stable food production plan within 90 days after its designation, or while the country is not making a good faith effort to implement the plan or the plan is not achieving its purpose. The President must withhold suspension if the country agrees to consultations within a reasonable period of time and undertakes to formulate and implement remedial action.

The import relief procedures and authorities under sections 201204 of the Trade Act of 1974, as amended, and national security measures under section 232 of the Trade Expansion Act of 1962 apply to imports from CBI beneficiary countries. Section 213(e) authorizes the President to suspend CBI duty-free treatment and proclaim a rate of duty or other relief measures on CBI imports as on imports of the article from non-CBI countries. Alternatively, the President may maintain duty-free treatment or establish a margin of preference on imports from CBI countries. In its report to the President on import relief investigations covering CBI eligible articles, the ITC must state whether its findings with respect to serious injury to the domestic industry and its recommended remedy apply to imports from CBI beneficiary countries.

Under a special procedure under section 213(b), petitioners for import relief on agricultural perishable products may also file a request with the Secretary of Agriculture for emergency relief. Within 14 days, the Secretary must determine whether there is reason to believe a CBI perishable product is being imported in such increased quantities as to be a substantial cause of serious injury to the domestic industry, and recommend to the President emergency relief, if warranted. The President must determine within 7 days after receiving the Secretary's recommendation whether to take emergency action restoring the normal rate of duty pending final action on the import relief petition.

Section 215 requires the ITC to report annually to the Congress on the actual economic impact and its assessment of the probable future effects of the Act on the U.S. economy generally and on specific domestic industries. Section 216 also requires an annual report to the Congress by the Secretary of Labor on the impact of the CBI on U.S. labor.

Other trade benefits

Under the antidumping and countervailing duty laws, imports from two or more countries subject to investigation must generally be aggregated for the purpose of determining whether the unfair trade practice causes material injury to a U.S. industry, absent certain exceptions. Section 224 of CBI II created an exception to the general cumulation rule for imports from CBI beneficiary countries. If imports from a CBI country are under investigation in an antidumping or countervailing duty case, imports from that country may not be aggregated with imports from non-CBI countries under investigation for purposes of determining whether the imports from the CBI country are causing, or threatening to cause, material injury to a U.S. industry. They may be aggregated with imports from other CBI countries under investigation. Imports from CBI coun

tries continue to be cumulated with imports from non-CBI countries for purposes of determining material injury in investigations of imports from non-CBI countries.

CBI II also increased the duty-free tourist allowance for U.S. residents returning directly or indirectly from a CBI beneficiary country from $400 to $600 and allows such tourists to enter 1 additional liter of alcoholic beverages duty free if produced in a CBI beneficiary country.

Measures for Puerto Rico and U.S. insular possessions

The CBERA contains a number of provisions to maintain and improve the competitive position of Puerto Rico and the U.S. insular possessions (including the Virgin Islands, American Samoa, Guam):

(1) Imports from Puerto Rico and the Virgin Islands may be counted toward the 35 percent minimum local content rule of origin requirement for CBI duty-free treatment. Section 235 of the Tariff and Trade Act of 1984 amended section 213(a) also to permit articles from CBI beneficiary countries to enter under bond for processing or manufacture in Puerto Rico without payment of duty upon withdrawal if they meet CBI rule of origin requirements. As amended by CBI II, any article which is the growth, product, or manufacture of Puerto Rico qualifies for duty-free treatment under the CBI if (a) the article is imported directly from a CBI beneficiary country into the United States; (b) the article was advanced in value in a CBI beneficiary country; and (c) if any materials are added to the article in a CBI beneficiary country, such materials are a product of a beneficiary country or the United States.

(2) The permissible foreign content was increased from 50 to 70 percent for duty-free treatment of imports of CBI eligible articles from U.S. insular possessions.

(3) Duty-free entry of alcoholic beverages by returning U.S. residents arriving directly from insular possessions was increased from 4 to 5 liters provided at least 1 liter is the product of an insular possession. CBI II increased the duty-free allowance for U.S. residents returning from U.S. insular possessions from $800 to $1,200.

(4) Section 221 of the CBERA amended section 7652 of the Internal Revenue Code to require that all excise taxes collected on foreign rum imported into the United States, whether or not from Caribbean countries, be paid to the treasuries of Puerto Rico and the Virgin Islands. Section 214(c) requires the President to consider compensatory measures for the governments of Puerto Rico and the Virgin Islands if there is a reduction in the amount of rum excise tax rebates.

(5) The term "industry" under the import relief provisions of section 201 of the Trade Act of 1974 was clarified to enable producers in the insular possessions to petition for import relief.

(6) Non-toxic rum stillage discharges in the Virgin Islands are exempt from certain provisions of the Federal Water Pollution Control Act if the discharges are 1,500 feet from the shore and are determined by the Governor of the Virgin Islands not to constitute a health or environmental hazard.

Tax measures

Section 222 of the CBERA amended section 274(h) of the Internal Revenue Code to allow deductions for business expenses incurred while attending conventions and meetings in a designated Caribbean Basin beneficiary country (or Bermuda) if the country enters into an executive agreement with the United States to provide, on a reciprocal basis, for information relating to U.S. tax matters to be made available to U.S. tax officials, including agreement to exchange bearer share and bank account information for criminal tax purposes. No deduction is available for attending a convention in a country found by the Secretary of the Treasury to dis-i criminate in its tax laws against conventions held in the United States.

Under section 936 of the Internal Revenue Code, qualified investment income earned in U.S. possessions is exempt from U.S. tax. Most of the tax benefits claimed under this provision are claimed by corporations in Puerto Rico. Prior to the Tax Reform Act of 1986 (1986 Act), this investment income, commonly referred to as “qualified possessions source investment income" or QPSII, had to be derived from sources inside Puerto Rico. Section 936(d)(4), added to the Code in the 1986 Act, amended the definition of QPSII to allow for investments outside of Puerto Rico. Under section 936(d)(4), interest income will qualify as QPSII if derived from loans by qualified financial institutions (including the Puerto Rican Government Development Bank) for the acquisition of active business assets and for the construction of development projects located in eligible Caribbean Basin countries. Section 227 of CBI II requires the government of Puerto Rico to take such steps as may be necessary to ensure that at least $100,000,000 of new investments which qualify under section 936(d)(4) in eligible Caribbean Basin countries shall be made each calendar year. Refinancings of existing investments shall not constitute "new investments" for this purpose.

In general, section 1601y of the Small Business Job Protection Act of 1996: (1) repealed the QPSII exclusion effective July 1, 1996; (2) repealed the section 936 credit for new businesses effective for taxable years beginning after December 31, 1995; and (3) repealed the section 936 credit for existing possession businesses effective for taxable years beginning before January 1, 2006.32

Tourism promotion and scholarship assistance

Section 233 of CBI II required the Commissioner of Customs to carry out preclearance operations during fiscal years 1991 and 1992 at a U.S. Customs Service facility in a Caribbean Basin country which the Commissioner considered appropriate for testing the extent to which the availability of preclearance operations can assist in the development of tourism in the region. The Commissioner of Customs and Commissioner of the Immigration and Naturalization Service were to first determine the viability of establishing such operations in either Aruba or Jamaica. The Commissioner of Customs was required to submit a report to the Congress as soon as practicable after September 30, 1992, regarding the program, including the efficacy of extending preclearance operations to other

32 Public Law 104-188, section 1601, approved August 20, 1996, 26 U.S.C. 30A.

Caribbean countries. In December 1994, the Customs Service signed a bilateral agreement with the government of Aruba regarding the future construction of a preclearance facility.

Section 231 of CBI II requires the Administrator of the Agency for International Development (AID) to establish and administer a program of scholarship assistance, in cooperation with state governments, universities, community colleges, and businesses, to enable students (particularly the economically and socially disadvantaged) from CBI beneficiary countries that also receive U.S. foreign assistance to study in the United States. The Administrator may make grants to states (including the District of Columbia, Puerto Rico, and U.S. possessions and territories) to provide scholarship assistance for undergraduate degree programs and for training programs of at least 1 year in study areas related to the critical development needs of the students' respective countries. The federal share for each year for which a state receives payment will be not less than 50 percent, funded from amounts otherwise made available for Latin American and Caribbean regional programs under the economic support fund of the Foreign Assistance Act of 1961. To the maximum extent practicable, each participating state shall enlist private sector assistance to meet the non-federal share of payments.

Andean Initiative

The Andean Trade Preference Act (ATPA), commonly referred to as the Andean Initiative, was enacted on December 4, 1991 as title II of Public Law 102-182, to authorize preferential trade benefits for the Andean nations similar to those benefits to beneficiary countries under the Caribbean Basin Initiative program. On July 23, 1990, President Bush announced that he would seek congressional approval of a special preferential tariff program for four Andean countries-Bolivia, Ecuador, Colombia, and Peru-to fulfill a commitment made at the February 1990 Cartagena Drug Summit to expand economic incentives to encourage these countries to move out of the production, processing, and shipment of illegal drugs into legitimate products. Increased access to the U.S. market through tariff preferences was part of a package of measures that included expanded agricultural development assistance, additional product coverage under the Generalized System of Preferences program, and negotiation of long-term trade and investment liberalization building on the "Enterprise for the Americas Initiative" announced by the President on June 27, 1990.

On October 5, 1990, President Bush transmitted to Congress proposed implementing legislation. H.R. 661, the "Andean Trade Preference Act of 1991," was introduced on January 28, 1991 reflecting the Administration's proposal. The bill as reported to the House on November 19 was amended during consideration by the Committee on Ways and Means to conform the country designation criteria, rule-of-origin requirements, and the import relief and emergency relief criteria to the conditions and procedures for granting dutyfree treatment under the CBI program. Certain preferential trade benefits, as well as the tax benefits under the CBI program, were maintained for the Caribbean Basin countries and not extended to the Andean countries by the legislation. The authority for the An

dean Initiative was also limited to a 10-year period, to terminate as of December 4, 2001. H.R. 661 as amended was incorporated in a House amendment to a Senate amendment to H.R. 1724, passed by both Houses in a conference report on November 26, 1991.

The ATPA went into effect on December 4, 1991. The designations of Columbia and Bolivia as ATPA beneficiary countries became effective July 22, 1992.33 Designations of Ecuador 34 and Peru 35 became effective, respectively, on April 30, 1993 and August 31, 1993.

Beneficiary countries

The ATPA authorizes the President to proclaim duty-free treat ment on all eligible articles from Bolivia, Ecuador, Colombia, and Peru as potential beneficiary countries. Designation by the Presi dent of beneficiary status is subject to seven conditions identical to the mandatory criteria for designation under the CBI program and subject to the same authority to waive certain conditions in the U.S. national economic or security interest. A country is prohibited from designation under these conditions if it is a communist country, has nationalized or expropriated U.S. property without com pensation or submission to arbitration, fails to recognize arbitra awards in favor of U.S. citizens, affords preferential tariff treat ment to products of other developed countries having or likely to have a significant adverse effect on U.S. commerce, broadcasts U.S copyrighted material without the owner's consent, has not signed an extradition agreement with the United States, or has or is not taking steps to afford internationally-recognized worker rights. In addition, the President must take into account 12 discretionary fac tors prior to designating any of the 4 countries, similar to factors under the CBI, plus whether the country has met narcotics cooperation certification criteria required to be eligible for U.S. for eign aid.

Before designating any country, the President must notify the Congress of his intention to make the designation and the consider ations entering into the decision. The President may withdraw or suspend beneficiary country status or duty-free treatment on any article if he determines subsequently that the country should be barred from designation as a result of changed circumstances. Eligible articles

Duty-free treatment is granted under the ATPA to any otherwise eligible article which is the growth, product, or manufacture of a designated beneficiary country if (1) that article is imported directly from a beneficiary country into the U.S. customs territory; and (2) the sum of the cost or value of materials produced in one or more Andean beneficiary countries or one or more CBI beneficiary countries, plus the direct costs of processing operations performed in one or more Andean or CBI beneficiary countries is not less than 35 percent of the appraised value of the article. Puerto Rico and the Virgin Islands are also considered beneficiary countries for this purpose. Up to 15 percent of the value attributable

33 Presidential Proclamation 6455 and 6456; 57 Fed. Reg. 30069 and 30097.

34 Presidential Proclamation 6544; 58 Fed. Reg. 195547.

35 Presidential Proclamation 6585; 58 Fed. Reg. 43239.