WORLD TRADE ORGANIZATION
ORGANISATION MONDIALE DU COMMERCE
ORGANIZACIÓN MUNDIAL DEL COMERCIO
WT/TPR/M/126/Add.3
22 November 2004
(04-5013)
Original: English/
anglais/
inglés
Trade Policy Review Body
14 and 16 January 2004
TRADE POLICY REVIEW
UNITED STATES
Minutes of Meeting
Addendum
Chairperson: H.E. Mrs. Mary Whelan (Ireland)
This document contains the final responses from the United States1.
__________________________________________________________________________________
Organe d'examen des politiques commerciales
14 et 16 janvier 2004
EXAMEN DES POLITIQUES COMMERCIALES
ÉTATS-UNIS
Compte rendu de la réunion
Addendum
Présidente: S.E. Mme Mary Whelan (Irlande)
Le document contient les réponses finales fournies par les États-Unis1.
__________________________________________________________________________________
Órgano de Examen de las Políticas Comerciales
14 y 16 de enero de 2004
EXAMEN DE LAS POLÍTICAS COMERCIALES
ESTADOS UNIDOS
Acta de la reunión
Addendum
Presidenta: Excma. Sra. Mary Whelan (Irlanda)
Este documento contiene las respuestas finales de los Estados Unidos1.
1
In English only./En anglais seulement./En inglés solamente
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RESPONSES FROM
THE UNITED STATES
CHAPTER I: RECENT ECONOMIC DEVELOPMENTS
Question: (Switzerland #1)
How does the U.S. intend to correct the twin deficits? How sustainable are they in the medium term?
What could be the impact of the continuing dollar depreciation on key elements of the current account
of the balance of payments?
Question: (Turkey #1)
Within the last two years, both the U.S. budget and current account deficits have started to widen.
How does the U.S. consider to tackle the issue of twin deficits?
Answer
Much of the shift from budget surplus to deficit came from a timely fiscal response to the weakening
of the U.S. economy. This fiscal action contributed to the U.S. economic revival, and it is benefiting
both the United States and the rest of the world.
The budget deficit is expected to be about $500 billion in fiscal year 2004. This is a legitimate subject
of concern. We intend to reduce it. Even this large, however, the deficit should be kept in
perspective. The ratio is lower than for deficits in 5 of the previous 20 years and is well below the
deficit peak of 6.0 percent in 1983.
Under U.S. Administration policies, the deficit is projected to begin declining after this year. It is
expected be in a $300 billion range for 2005 and 2006. By 2009, the deficit is expected to fall to half
its 2004 level, or around 1.7 percent of GDP. This is lower than the average deficit-to-GDP ratio over
the last four decades. The ratio of government debt-to-GDP declines over this period as well. This
progress, of course, requires maintaining the fundamentals of strong economic growth together with
spending restraints. The links between budget deficits and current account deficits are tenuous at best.
Over the last 7 years, the most significant increase in the U.S. trade and current account deficits
occurred during the period of fiscal surpluses.
Current account balances are related to many factors other than the budget balance, many of which are
out of the immediate control of the government. These include changes in relative rates of economic
and productivity growth among countries, relative inflation rates and relative attractiveness of capital
markets. Much of the increase in U.S. net capital inflows and the U.S. trade deficit has been related to
the relatively strong performance of the U.S. economy over the last decade. One path of adjustment
for the external deficit would be for Japan, European Union members and a number of other countries
to improve their rates of economic growth and imports of goods and services.
Question: (China #2)
Could the U.S. please provide detailed statistics and information on imports that assist to control its
domestic prices and to achieve the objectives of its macroeconomic policy?
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Answer
The Bureau Labor Statistics collects price data and disseminates an index of U.S. import and export
prices. Statistics and information on trends in U.S. import prices are publicly available at:
http://www.bls.gov/mxp/.
Question: (China #3)
How will U.S. authorities ensure that trade will not be unduly hindered by administrative and other
barriers when dealing with the "twin deficits" issue in the future?
Answer
The United States is fully committed to meeting its obligations under all WTO agreements.
Furthermore, the United States will continue to pursue energetically a successful outcome in the Doha
negotiations, which are an opportunity for all Members to reduce many of the tariff and non-tariff
barriers that hinder trade.
Question: (China #4)
How does the U.S. comment on the fact that Sino-U.S. imports and exports simultaneously increased
in recent years against the adverse trend suffered by U.S. merchandise trade with other partners?
Answer
The Chinese economy has been one of the fastest growing in recent years. Its imports from the world,
not just the United States, are increasing rapidly. It is, therefore, not surprising that U.S. exports to
China have increased sharply in recent years, even as they have shown little growth and even declined
to a number of trade partners that have not enjoyed China's recent economic dynamism. The rapid
growth of U.S. imports from China reflects both the increasingly strong recovery and expansion of the
U.S. economy, as well as China's highly competitive position vis a vis many third country suppliers to
the U.S. market of a considerable range of products imported by the United States.
CHAPTER 2: DEVELOPMENTS IN TRADE AND INVESTMENT POLICY
(4) Preferential and Other Arrangements
Question: (New Zealand #8)
What is the strategy and criteria for conducting further regional and bilateral free trade agreements, in
particular with countries which are already strong advocates of free and open trade? Could the
United States elaborate on how it sees bilateral trade agreements as complementing multilateral
negotiations?
Answer
The U.S. strategy is to pursue actively numerous regional and bilateral initiatives to liberalize trade,
including free-trade agreements (FTAs). All FTAs negotiated by the United States have WTO rules
as a foundation. Initiating FTA negotiations with countries committed to trade liberalization helps
ensure the U.S. goal of comprehensive coverage in the resulting agreement. In addition, pursuing
agreements with free-trade advocates permits even greater degrees of innovation in FTAs. The
innovations pioneered in these agreements can be, and have been, replicated in multilateral
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agreements. These regional and bilateral agreements can act to accelerate and deepen multilateral
liberalization. By pursuing multiple free trade initiatives, we are creating a "competition for
liberalization" that provides leverage for openness in all negotiations and establishes models of
success that can be used on many fronts.
Question: (China #5)
What is the opinion of the United States about the impact of FTA arrangements on the multilateral
trading system regarding the negotiating and administrative resources and the possible impacts
incurred on trade by the multi-structure on implementation, inter alia the rules of origin, of various
FTAs?
Answer
Please refer to the response to New Zealand question #8. Regarding resources, any active trade
agenda will require resources. However, it is our view that the economic benefits to our citizens and
the citizens of our free-trade partners far outweigh any administrative costs or resource burdens.
The United States maintains rule of origin regimes in the context of its preferential trade arrangements
that are transparent and provide great certainty and predictability to the trading community. For
example, as part of its FTA origin regimes, the United States issues binding advance rulings at the
request of traders, consistent with the commitments under the WTO Agreement on Rules of Origin.
The FTA origin regimes are designed for efficient administration by the customs authorities of the
Parties and provide trade facilitative methods for traders to achieve compliance with FTA origin
provisions.
Question: (European Union #6)
The EC notes with concern a growing discrepancy between the pro-market access stance the U.S.
takes in multilateral fora and the use of far-reaching safeguard measures in recent bilateral
agreements, such as the FTA with Chile. Is the U.S. moving the substance of trade agreements including safeguard - into bilateral or regional agreements, while only supporting multilateral trade
liberalization in as far as it benefits U.S. exports?
Answer
U.S. FTAs, from NAFTA to the more recently concluded agreements, are exemplary among WTO
Member regional trade agreements with regard to the great extent they eliminate barriers to
agricultural trade. They therefore squarely promote GATT Article XXIV objectives, rather than
create any discrepancy as suggested in the question. The U.S. - Chile FTA includes a price-based
safeguard mechanism on a limited and fixed number of products that allows for a proportional
increase in the tariff, which cannot exceed MFN rates. Safeguard provisions are fairly common in
FTAs. In the U.S.-Chile agreement, their use as a transitional device in fact facilitates the removal of
tariff barriers on sensitive products. We see no conflict between this safeguard mechanism and
pursuing highly ambitious agriculture goals in the WTO, as the United States has done since the
launch of the Uruguay Round in 1986. We consider our objectives in the Doha Round to serve the
interests of U.S. agriculture as a whole.
Question: (European Union #46)
Bilateral, regional and global trade liberalization is vital for promoting prosperity, growth and
development to the benefits of the world at large. The EC considers that the WTO and multilateral
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liberalization is the most certain way for promoting global interests for industrialized countries and
developing countries at large. How does U.S. judge the relative importance and weight of
bilateral/FTA policies and further development of the WTO system in terms of its own trade and
development needs? And to what extent has the U.S. analyzed and compared the efficiency and level
of economic benefits delivered by bilateral trade agreements by comparison with multilaterally agreed
liberalization?
Answer
The United States is steadfast in its commitment to the rules-based system of the WTO, and continues
to be a leader in pursuit of ambitious multilateral liberalization through the WTO. With regard to
bilateral and regional liberation, the U.S. strategy is to ensure a complementary approach between
multilateral system of the WTO and our regional and bilateral initiatives. Rigorous pursuit of bilateral
and regional liberalization does not lessen the U.S. commitment to the multilateral system. U.S.
bilateral and regional agreements use the WTO as a foundation for further cooperation on trade.
These regional and bilateral agreements can also act to accelerate and deepen multilateral
liberalization. By pursuing multiple free trade initiatives, we are creating a "competition for
liberalization" that provides leverage for openness in all negotiations and establishes models of
success that can be used on many fronts. The innovations for greater liberalization pioneered in our
bilateral and multilateral agreements can be, and have been, replicated in multilateral agreements.
Finally, it is notable that a recent IMF study of U.S. trade agreements concluded the U.S. model for
bilateral and regional agreements meets many of the criteria for ensuring these agreements yield the
greatest possible benefits.
Question: (Japan #3)
Does the U.S. consider that all the FTAs, which the U.S. has concluded after the passing of the TPA
legislation by the Congress, achieve all the 17 principal negotiating objectives stipulated in the TPA
legislation? Do the FTAs, which the U.S. will negotiate in the future, need to be consistent with all
the 17 principal negotiating objectives without exception?
Answer
Section 2102(b) of the Trade Act of 2002 ("Trade Act") (19 U.S.C. 3802(b), sets out seventeen
principal negotiating objectives. Several of those objectives are explicitly applicable to negotiations
in the World Trade Organization (WTO). Objectives relating to Improvement of the WTO and
Multilateral Trade Agreements (Section 2102(b)(7)), WTO Extended Negotiations (Section
2102(b)(13)) and Border Taxes (Section 2102(b)(15) are examples. For agreements that are subject to
trade promotion authority procedures, the Trade Act requires the President to state that the agreement
"makes progress in meeting the applicable objectives described in section 2102(a) and (b)." (Section
2105(a)(2)(B)). President Bush submitted this statement and supporting documentation to the
Congress with the draft bills implementing the United States-Chile Free Trade Agreement and the
United States-Singapore Free Trade Agreement. Future free trade agreements that are submitted to
the Congress for approval and implementation will need to meet these same requirements.
Question: (Japan #4)
Please explain the U.S. position on the relationship between the WTO-based multilateral trading
system and the bilateral and regional FTAs. Does the U.S. pursue different roles for respective FTAs?
If so, does the U.S. consider that it is preferable to have as many FTAs as possible?
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Answer
With regard to the U.S. view on the multilateral/regional/bilateral relationship, please see the response
to question #8 from New Zealand and to question #46 from the European Union. As we understand
Japan's question, the United States does not pursue different roles for its FTAs, but seeks to ensure
their complementarity to the multilateral system. In the choice of FTA partners, the United States
seeks countries committed to liberalizing trade more deeply than required by current multilateral
commitments. While the U.S. FTA strategy is to pursue actively numerous regional and bilateral
initiatives to liberalize trade, the question of whether it is preferable to have as many FTAs as possible
must depend ultimately on the degree of multilateral liberalization our WTO partners are willing to
undertake.
Question: (Japan #5)
The negotiation of the U.S.-Central American Free Trade Agreement (CAFTA) was concluded in
December 2003, between the U.S. and four Central American countries except Costa Rica. Will the
Congress start its discussions on the CAFTA only after conclusion of the negotiations with Costa
Rica? If the U.S. does not reach an agreement with Costa Rica, does the U.S. intend to conclude the
CAFTA only with the four Central American countries excluding Costa Rica? What is the
relationship between CAFTA and FTAA?
Answer
Negotiations between the United States and El Salvador, Guatemala, Honduras and Nicaragua on a
U.S. - Central American Free Trade Agreement (CAFTA) were indeed closed in December 2003.
Costa Rica has been an active participant in CAFTA since the beginning of the negotiations in
January 2003. Costa Rica and the United States concluded negotiations for Costa Rica to join
CAFTA in January 2004. In March 2004, the United States and the Dominican Republic concluded
trade talks integrating the Dominican Republic into CAFTA. United States views the success of
CAFTA as a milestone that lends further momentum toward conclusion of the FTAA. With regard to
Congressional consideration of CAFTA, we have notified Congress of our intent to enter into this
agreement. We will work closely with Congress to ensure timely consideration of CAFTA after it is
signed.
Question: (Japan #6)
The negotiations of the U.S.-Australia FTA and the U.S.-Morocco FTA were not concluded within
2003. What is the prospect of concluding these negotiations? In particular, what is the prospect for
the negotiations on market access for agricultural products in the U.S.-Australia FTA? Does the U.S.
intend to have both FTAs deliberated upon in the U.S. Congress this year?
Answer
Negotiations of the U.S.-Australia FTA were concluded on February 8, 2004 and the U.S.-Morocco
FTA were concluded on March 2, 2004. We have notified Congress of our intent to enter into both of
these agreements, and will work closely with Congress to ensure their timely consideration.
Question: (Japan #7)
The U.S. announced the start of FTA negotiations with Thailand last October. Which ASEAN
countries will be the U.S. priority for FTA negotiations? Japan would like to know how the U.S.
basically sets its priorities among the ASEAN countries.
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Answer
Under the Enterprise for ASEAN Initiative, announced by President Bush in October 2002, the
United States offered the prospect of bilateral free trade agreements with ASEAN countries that are
committed to economic reforms and openness. The United States stated that it would expect any
potential FTA partner to be a WTO Member and to negotiate first a trade and investment framework
(TIFA) with us. We currently have TIFAs with Indonesia, the Philippines, Thailand and Brunei, and
are negotiating one with Malaysia.
Question: (Japan #8)
As for the U.S.-Middle East Free Trade Initiative, we understand that the U.S. intends to start FTA
negotiations with those countries committed to a higher level of trade liberalization. At the same
time, Japan understands that this Initiative is more prominent in its security strategy aspect than the
other FTAs that the U.S. pursues. Japan would thus like to know the future process that the U.S. will
pursue for the Initiative from the perspective of promoting both free trade and security policy.
Answer
The United States is negotiating free trade agreements under MEFTA. These FTAs do not contain
special security-specific provisions. As to the overall strategy behind the MEFTA, the United States
expects that prosperous, regionally-integrated, rules-based and transparent, job-creating and
competitive economies in the region will contribute significantly to security and peace in the Middle
East. The United States expects the MEFTA Initiative to contribute to all of these objectives. The
United States has committed under the MEFTA to engage economically with all countries in the
region. However, for certain countries such as Libya, Syria and Iran, issues concerning security,
support for terrorism and related matters must first be resolved before the United States can pursue
normalized, robust economic relationships.
Question: (Switzerland I #2)
What will be the relationship between NAFTA and the other free-trade agreements concluded by the
United States thus far and the FTAA?
Answer
The FTAA is expected to co-exist with bilateral and sub-regional agreements to the extent that the
rights and obligations under these agreements are not covered by or go beyond the rights and
obligations of the FTAA.
Question: (Switzerland I #3)
What synergies do the United States see between the Doha round of negotiations and the new freetrade agreements negotiations including the FTAA?
Answer
With regard to the U.S. view on the multilateral/regional/bilateral relationship, please see the response
to question #8 from New Zealand and to question #46 from the European Union.
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Question: (Norway #7)
The United States is pursuing negotiations on a number of regional, sub-regional and bilateral
agreements. Norway hopes and believes that these negotiations do not lessen the U.S. willingness to
move forward on the Doha Development Agenda. Does the U.S. believe that progress in the regional,
sub-regional and bilateral negotiations the U.S. is currently pursuing will influence progress on the
DDA,
and vice versa, and if so, how?
Answer
The 70 U.S. papers and proposals submitted in support of the DDA, combined with the U.S.
commitment not to let 2004 be a lost year made by USTR Zoellick in his January 2004 letter to all
WTO Ministers, speak clearly of continued U.S. leadership on the DDA. All of these U.S. efforts on
the DDA have taken place alongside the initiation, negotiation and conclusion by the United States of
several bilateral and regional free trade agreements. With regard to the U.S. view on the
multilateral/regional/bilateral relationship, please see the response to question #8 from New Zealand
and to question #46 from the European Union.
Question: (Chinese Taipei #1)
In the interests of assisting LDCs and certain developing countries in meeting their development
needs through WTO-consistent programmes, we would be interested in learning more about the
administration of the United States' preference programs. In particular, we would like to know how
the United States determines country and product eligibility, whether or not the waiver of these
programmes (such as CBTPA) is sought under the WTO. Furthermore, could these programmes
serve as precursors to regional trade agreements?
Answer
With regard to country eligibility, each U.S. preference program has a set of criteria. With respect to
country eligibility for the Generalized System of Preferences (GSP) program, the President of the
United States is authorized by Title V of the Trade Act of 1974, as amended, to designate as a GSP
beneficiary a developing country that meets the statutory designation criteria.
With respect to country eligibility for the other regionally based unilateral preference programs,
waivers for the Caribbean Basin Economic Recovery Act ("CBERA") and the Andean Trade
Preference Act ("ATPA") have been obtained. The Caribbean Basin Trade Partnership Act
("CBTPA") amended the CBERA, the Andean Trade Promotion and Drug Eradication Act amended
the ATPA, and the African Growth and Opportunity Act created a new preference program for subSaharan African countries. Preference programs are self-standing and are not precursors to free trade
agreements.
Question: (Turkey p. 1 #2)
As a key supporter of the multilateral trading system, how does the U.S. balance its multilateral
commitments and regional-preferential initiatives? Would the U.S. also please explain the differences
between its integration strategy with APEC and the other FTAs?
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Answer
In terms of balance, the 70 U.S. papers and proposals submitted in support of the DDA, combined
with the U.S. commitment not to let 2004 be a lost year made by USTR Zoellick in his recent letter to
all WTO Ministers, speak clearly of continued U.S. leadership on the DDA. Yet, all of these U.S.
efforts on the DDA have taken place along-side the initiation, negotiation and conclusion by the
United States of several bilateral and regional free trade agreements. With regard to the U.S. view on
the multilateral/regional/bilateral relationship, please see the response to question #8 from New
Zealand and to question #46 from the European Union.
As far as the difference in U.S. strategy between APEC and our FTAs - FTAs are binding agreements.
In APEC, members agreed to liberalize in the key trade and investment areas by 2010 for developed
members and 2020 for developing members. This agreement is referred to as the Bogor Goals,
because Leaders from all 21 APEC economies agreed to this in 1994 in Bogor, Indonesia. In 1995,
Members agreed to an elaborate structure to meet these goals, and to an elaborate mechanism to
review progress being made by each member. This structure and peer review mechanism is laid out
in the 1995 Osaka Action Agenda.
Question: (Brazil I #15)
In paragraph 57, page 42, WT/TPR/S/126, it is stated that "Average tariffs under unilateral U.S.
preference schemes are lower than the average MFN rate but still substantially higher than the average
under FTAs that are in force between the United States and Canada, Israel, Jordan and Mexico;
moreover, they are, in general, conditional upon statutory criteria (...)". If the U.S. grants lower tariffs
to some developed countries under FTAs (such as Canada) than to developing countries under
preferential agreements, does not this work against the WTO principle of special and differential
treatment to developing countries? How is it compatible with the U.S. Foreign Policy goal of
promoting development through trade?
Answer
In its question, Brazil cites comparative statistics on average U.S. tariffs under its preference
programs versus its free trade agreements. The differences in the average tariffs under these programs
reflect in large part U.S. adherence to WTO Article XXIV obligations in its FTAs. The obligations on
free trade agreements under this article include the elimination of duties on "substantially all trade".
Elimination of duties on substantially all trade will tautologically result in a very low average tariff.
In fact, as shown in Table III.2 of the Secretariat Report, WT/TPR/S/126, the average is close to zero
under three of the four FTAs cited. The United States maintains among the most generous preference
programs for the developing countries. It is the U.S. view that these preferences should not be an
obstacle to multilateral liberalization and in 2002 the United States submitted proposals in the DDA
for elimination of all consumer, industrial and agricultural tariffs on an MFN basis. The United States
invites all of our WTO partners to work together to promote development through trade in the DDA
by achieving an ambitious outcome on market access.
Question: (Brazil #17)
In paragraph 175, page 71, WT/TPR/S/126, we can read that "In its FTAs, the United States seeks to
restrict the use of duty-drawback programmes, considering that they can distort investment decisions
by creating an incentive for investors to locate in the FTA partner country in order to benefit from
duty drawback when exporting processed goods for sale in the U.S. market. (...) However, there are
no restrictions on the use of drawback in the FTAs with Jordan or Israel." Is there any such provision
on the initiatives of the Caribbean Basin or on the recently agreed CAFTA?
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Answer
The programs of the Caribbean Basin Initiative do not make any changes to the U.S. duty drawback
program. The U.S.-Central America Free Trade Agreement does not discipline or limit the use of
duty drawback.
Question: (EU #48)
Available information at this stage regarding CAFTA underscores that some agricultural sectors (such
as sugar) would be permanently excluded from total trade liberalization. Could the U.S. specify the
list of the agricultural products covered by such provisions? In addition, could the U.S. give some
details as to the length of the transition periods? (Reference is made to the Secretariat report,
paragraph 54)
Answer
No products are excluded from the agreement. Liberalization will occur through tariff reductions,
tariff-rate quota expansion and combination approaches. Tariffs will be phased-out according to
specific schedules negotiated on a product and country-specific basis. Phase-outs will be immediate,
5 years, 10 years, 12 years, 15 years and, for a few products, 20 years. As a general rule, tariffs will
be reduced in equal annual installments over the phase-out period. Products subject to TRQ
expansion only and no out-of-quota duty reduction are sugar, white corn, potatoes and onions.
Question: (EU #49)
Could the U.S. elaborate on the CAFTA provisions regarding investment both concerning the
definition of investment and the rights granted to third parties in case of disputes (amicus curiae,
transparency)? In addition, some information hints that investment definition would cover IPR and
that therefore compulsory licenses might be considered as equivalent to expropriation. Is this
information accurate? What are the details of the agreement on this point?
Answer
All forms of investment are protected under the CAFTA, including enterprises, debt, concessions,
contracts and intellectual property and subject to an effective, transparent and impartial procedure for
dispute settlement. Therefore, submissions to arbitral panels will be available to the public, interested
parties will have the opportunity to comment, and panel hearings will be open to the public. U.S.
views on expropriation are long-standing and clearly laid out in the expropriation article and the
expropriation annex. However, the expropriation article does not apply to the issuance of compulsory
licenses granted in relation to IP rights in accordance with the TRIPS Agreement. Both the
expropriation article and annex can be found in the investment chapter of the CAFTA at
www.ustr.gov.
Question: (EU #50)
According to U.S. government information, CAFTA would include a provision regarding trade marks
and geographical indications based on a "first in time, first in right" principle. Could the U.S.
elaborate about these provisions?
Answer
The United States views the concept of "first in time, first in right" as confirming the appropriate
balance between trademarks and geographical indications and ensuring that trademarks are fully
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protected against later established geographical indications. For further information, the text of
CAFTA is available at http://www.ustr.gov/new/fta/Cafta/text/index.htm.
Question: (EU #55)
The U.S. announced recently its intentions to prolong the AGOA legislation, which grants preferences
to certain African countries. How can this proposal and the overall the existence of trade preferences
for the least developed countries be made compatible with the zero tariff initiative that U.S. put
forward in the WTO?
Answer
The U.S. WTO proposal to eliminate all tariffs on consumer and industrial goods by 2015 reflects the
U.S. policy that the ultimate objective of multilateral trade negotiations should be elimination of all
tariffs. We believe, and World Bank studies show, that developing countries stand to gain
substantially from trade liberalization. The Enabling Clause is clear that preferences are not supposed
to act as an impediment to MFN tariff liberalization. The African Growth and Opportunity Act
(AGOA) is part of the U.S. effort to lower barriers to trade and foster economic development, growth,
and openness. AGOA is a tangible demonstration of the United States' commitment to assisting subSaharan African countries, among the poorest in the world, to develop and participate more fully in
the global economy. By bringing increased investment to and creating new jobs in sub-Saharan
African countries, AGOA is helping to promote sub-Saharan Africa's integration into the multilateral
trading system. AGOA has helped sub-Saharan African nations to experience the benefits of trade
and open markets. AGOA and other preference programs play an important role in the period prior to
full elimination of tariffs by helping developing countries to attract the investment and establish the
industries that will allow them to reap the greatest benefits from trade liberalization. Such programs
give developing countries assistance in making the transition to free trade. President Bush has
indicated his intention to work with the U.S. Congress to extend AGOA beyond its current 2008
expiration.
Question: (EU #56)
In relation to paragraph 62 of the report: the new provisions of AGOA, amended in 2002, improve
upon existing rules on textiles. Thirty-eight countries met the Act's requirements for 2003, up from
36 previously. The United States has not yet requested a WTO waiver for the AGOA program. The
AGOA program is comparable to the EU's EBA initiative, but does not apply to all least-developed
countries. The eligibility to AGOA is, however, not only dependent on objective criteria related to the
development status of individual countries. What political and non-objective criteria are used to
determine AGOA benefits and how do these square with the applicable WTO rules governing such
arrangements?
Answer
AGOA seeks to support the efforts of those sub-Saharan African countries undertaking difficult
economic, political, and social reforms. AGOA's eligibility criteria reflect "best practice" policies that
are ultimately helping to attract trade and investment and foster broadly-shared prosperity. AGOA
requires the President to consider country eligibility based on specific criteria, including whether the
country has established or is making continual progress toward establishing: a market-based
economy, the rule of law, the elimination of barriers to trade and investment, economic policies to
reduce poverty, the protection of internationally recognized worker rights, and a system to combat
corruption.
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AGOA builds on and augments the United States Generalized System of Preferences (GSP) program.
It recognizes the principles and objectives of GATT Part IV (Trade and Development)-Article
XXXVI, the WTO Ministerial Decision on Measures in Favor of Least-Developed Countries, and the
significance and special needs of sub-Saharan Africa. Although over one-tenth of the world's
population lives in sub-Saharan Africa and sub-Saharan African countries represent the largest bloc of
WTO Members, in terms of trade, the region lags behind that of other regions of the world. Many
sub-Saharan African economies continue to depend on exports of a few commodities for the vast
majority of their export earnings, making their economies more vulnerable than those of other
developing countries with more diversified economies. Sub-Saharan African countries are still in the
process of implementing the reforms necessary to create a fully open and market-based economic
system. As the volume of global trade tripled in the past two decades, sub-Saharan Africa's volume of
trade and share of world trade continued to decline, increasing Africa's marginalization in the global
economy and excluding the region from growing world prosperity.
The United States is presently consulting with its trading partners regarding a WTO waiver for
AGOA.
Question: (China #7, #8, and #9)
Reference: p. 25, paras. 58-59
With the only exception of the United States, 28 out of the total of 29 major developed countries with
GSP schemes to developing countries have granted GSP to China since 1980. With its accession to
the WTO on 11 December 2001, China has met all the legal terms to be granted GSP by the U.S.
However, China's application for GSP of the year 2002 was rejected by the U.S.
Could the U.S. delegation explain the required qualifications of the applicants and the review
procedures of the U.S. on granting GSP?
Please clarify the reason why China's 2002 application was rejected.
Is it that the applicant country must have no current account surplus to the U.S. constitutes an extra
restriction in considering granting the GSP?
Answer
The President is authorized by Title V of the Trade Act of 1974, as amended, to designate GSP
program beneficiary developing countries, if a country meets the statutory designation criteria. A
basic concept underlying the U.S. GSP program is to grant tariff preferences to products of a
developing economy that are not competitive internationally to improve their access to the U.S.
market.
China has made extraordinary gains in economic development over the past twenty years, particularly
with respect to expanding exports and becoming a global trading nation. As a result of China's
economic reforms, including its recent entry into the WTO, U.S.-China bilateral trade increased this
year to reach a record high. U.S. trade data shows in particular, that the value of China's exports to
the United States increased by 21.7 percent in 2003, totaling US$152.4 billion. China is now the
second largest exporting country to the United States, and the value of China's exports is almost
equivalent to the total from all GSP beneficiary countries to the United States in 2003. China's
extremely high and expanding access to the U.S. market is clearly demonstrated by these statistics.
Thus, China does not appear to need to become a beneficiary of the U.S. GSP program to improve its
access to the U.S. market. Rather, bilateral trade with China can be increased by both our economies
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continuing to work to remove the bilateral and multilateral trade barriers that currently exist. Our
producers and consumers alike stand to benefit greatly from the progress we make in that regard. The
United States looks forward to continuing to work with the government of China in order to advance
that goal.
Question: (India #1) & Question: (Brazil #16)
The USTR issues a Federal Register notice regarding possible de-minimis competitive need
limitations (CNL) waivers with respect to articles covered under the U.S. GSP scheme and the
imports of which have exceeded the CNL value/quantity limit from particular GSP recipient
countries. The countries who have crossed the CNL by value/quantity stand to lose the GSP benefit
in respect of such items unless a special waiver is granted by the U.S. President. The products on
which India is likely to lose GSP benefit unless a waiver is granted includes whole buffalo skin
leather, unsplit buffalo leather and uppers for footwear materials to the U.S. Could the United States
provide details of the methodology used for granting a waiver and also consider granting India a
waiver in respect of the aforesaid items.
The U.S. GSP program provides (paragraph 64, page 45, WT/TPR/S/126) that "Products can be
removed from GSP benefits when imported from a particular country if imports from that country
exceed a given threshold (competitive need limitation). The country can be redesignated if the share
decreases subsequently." Which are the criteria for setting this threshold? By the number of
countries "redesignated" for preferences, how do American authorities regard the effectiveness of this
procedure to foster sustainable export competitiveness for developing countries? Otherwise, does it
not work as a means to "punish" countries that are becoming competitive?
Answer
A basic concept underlying the U.S. GSP program is to grant tariff preferences to products of a
developing economy that are not competitive internationally to improve their access to the U.S.
market. Under the U.S. GSP statute, determinations of whether a given product from a given country
is internationally competitive are made. These Competitive Need Limitations (CNLs) impose general
ceilings on GSP benefits for each product on a country-specific basis. A country will lose its GSP
eligibility for a product if the CNLs are exceeded unless a waiver is provided. The CNLs are
exceeded if, during the previous calendar year, U.S. imports of a single GSP article from that country:
-
Account for 50 percent or more of the value of total U.S. imports of that product
(50 percent CNL), or
-
Exceed a certain dollar value (dollar value CNL). In 2003 that dollar value limit was
USD110 million in a single eight-digit tariff category.
There are no quantity limitations for GSP benefits.
GSP modifications that result from imports that exceed CNLs in one year take effect on July 1 of the
next calendar year.
Under the GSP statute, the President may grant, among other kinds of waivers, a waiver from the
50 percent CNL when total U.S. imports from all countries of a product are small or de minimis. The
de minimis level is adjusted upward annually, and in 2003 it was set at USD16.5 million in a single
eight-digit tariff category. Each year, a de minimis waiver will automatically be considered, provided
total imports from all countries for the preceding year were below the dollar value CNL. Comments
from interested parties, including foreign governments, are solicited in this process. In advising the
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President regarding these waivers, the economic impact on the U.S. economy of granting the waiver is
considered.
Question: (Brazil #16) & (India #4)
GSP concessions given to India for agro-chemicals and pharmaceuticals were withdrawn in 1992 on
the grounds that we had not taken adequate IPR protection. While all necessary steps have been taken
by India and we are TRIPS compliant as of date, the restoration of the GSP concessions to these
products is awaited. We would request the U.S. authorities to indicate as to when India can expect the
restoration of GSP concessions on these items.
Answer
The U.S. GSP program is an autonomous, unilateral preference program. From the United States'
perspective, the problems continue to persist in India concerning the adequacy of its IPR protection.
These issues are subject to continuing bilateral discussions between the U.S. and Indian governments.
(5) Foreign Investment Regime
Question: (Switzerland #4)
The USA has concluded a number of treaties relating to trade and investment, namely bilateral
investment treaties containing pre-establishment elements (BIT), recently concluded free trade
agreements (e.g. Singapore, Chile, FTAs), the NAFTA and trade and investment framework
agreements, in addition to its membership to WTO and OECD (Code of Liberalization and National
Treatment Instrument).
Do the U.S. foresee to continue to follow a multi-layered approach to international investment
arrangements, and if so, which will be its guiding principles?
Answer
The United States will continue to pursue a multi-level approach to the negotiation of disciplines on
and market access for foreign investment. The United States recently concluded negotiations on
several new free-trade agreements (FTAs), one with Australia, one with five countries in Central
America and the Dominican Republic, and another FTA with Morocco. These FTAs will all include
investment chapters modeled in large part on the investment chapters of the U.S.-Singapore and U.S.Chile FTAs, which were, in turn, based upon prior U.S. investment treaty practice and negotiating
objectives of the Trade Act of 2002. We expect to pursue similar disciplines and market access in the
FTAs we will continue or begin negotiating in 2004 with the countries of the Southern Africa
Customs Union, Bahrain, Thailand, several Andean countries, and Panama.
The U.S. government is also preparing to initiate negotiations on new bilateral investment treaties
(BITs) after a hiatus of several years. We are nearing completion of a comprehensive revision of the
U.S. model BIT, which was last updated in 1994. The new model BIT will be substantively similar to
the investment chapters of recent U.S. FTAs.
As in the investment negotiations since NAFTA, the United States plans to seek agreement with its
current and prospective investment negotiating partners on several core principles. These include
national and most-favored nation treatment for the full life-cycle of investment (i.e., from preestablishment to dissolution); coverage of all investment, whether to manufacture or to supply a
service; the customary international law minimum standard of treatment; disciplines on
expropriation and standards for compensation for expropriation; unimpeded transfers, at market rates
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of exchange, into and out of a host country; disciplines on performance requirements; the ability to
employ senior management of the investor or investment's choice, without regard to nationality;
investor-state arbitration; a negative listing approach to the scheduling of non-conforming measures
(i.e., obligations apply to all investors and investments unless a reservation against a particular
obligation is taken with respect to particular investors or investments in a party's schedule of nonconforming measures); and transparency of investment-related measures and procedures.
Question: (Brazil Set II Services #1)
In paragraph 28 (page xi) it is mentioned that "Aside from those described below in the services
sectors, restrictions on foreign direct investment exist in energy, mining, and fisheries." Could the
U.S. indicate what are the restrictions on FDI in energy?
Answer
The U.S. energy sector is largely open to foreign direct investment (FDI). The few restrictions that
the United States does maintain include those listed below.
Under the Atomic Energy Act of 1954 (42 U.S.C. §2011 et seq.), a license issued by the United States
Nuclear Regulatory Commission is required for any person in the United States to transfer or receive
in interstate commerce, manufacture, produce, transfer, use, import, or export any nuclear "utilization
or production facilities" for commercial or industrial purposes. Such a license may not be issued to
any entity known or believed to be owned, controlled, or dominated by an alien, a foreign corporation,
or a foreign government. A license issued by the United States Nuclear Regulatory Commission is
also required for nuclear "utilization and production facilities," for use in medical therapy, or for
research and development activities. The issuance of such a license to any entity known or believed
to be owned, controlled, or dominated by an alien, a foreign corporation, or a foreign government is
also prohibited.
A company seeking to receive assistance under the Energy Policy Act of 1992 (42 U.S.C. §13525)
must show that its participation in the program will be in the economic interests of the United States,
as evidenced by investments in the United States in research, development, and manufacturing. In
order to receive assistance, the company must also be U.S.-owned or incorporated in the United States
with a parent company incorporated in a country that (1) provides U.S.-owned companies
opportunities comparable to those afforded to any other company; (2) provides U.S.-owned
companies local investment opportunities comparable to those afforded any other company; and (3)
provides adequate and effective intellectual property rights to U.S.-owned firms.
Under the Mineral Lands leasing Act of 1920 (30 U.S.C. Chapter 3A), aliens and foreign corporations
may not acquire rights-of-way for oil or gas pipelines, or pipelines carrying products refined from oil
and gas, across on-shore federal lands or acquire leases or interests in certain minerals, such as coal or
oil, on on-shore federal lands. Non-U.S. citizens may, however, own a 100 percent interest in a U.S.
corporation that acquires a right-of-way for an oil or gas pipelines across on-shore federal lands, or
that acquires a lease to develop mineral resources on on-shore federal lands, unless the foreign
investor's home country denies similar or like privileges for the mineral or access in question to U.S.
citizens or corporations, as compared to the privileges it accords to its own citizens or corporations or
to the citizens or corporations of other countries. Foreign citizens, or corporations controlled by them,
are restricted from obtaining access to federal leases on Naval Petroleum Reserves if the laws,
customs, or regulations of their home country deny the privilege of leasing public lands to citizens or
corporations of the United States.
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Question: (Turkey #5)
According to the Secretariat Report, "the U.S. has a generally liberal foreign investment regime with
some sectoral exceptions. The OECD has recently observed that there has been almost no change in
the U.S. concerning FDI policy, while most other countries have greatly liberalized access for foreign
investors. As a result, the U.S. is at about the OECD mean in terms of overall restrictiveness of
inward FDI."
Could the Representatives of the U.S. make a comment on this issue?
Answer
As the author of the OECD report cited in the Secretariat Report acknowledges, it is very difficult to
quantify with any precision the relative openness of economies to FDI, since the investment policy
regimes of OECD countries differ so substantially in character (Stephen S. Golub, "Measures of
Restrictions on Inward Foreign Direct Investment for OECD Countries," Economics Department
Working Papers No. 357, 2 June 2003). We do not believe there is any doubt, however, that the U.S.
economy is one of the most open economies in the world to FDI. This is demonstrated by the fact that
the United States has been the world's largest recipient of inward FDI for many years.
It is important to note that, as the OECD study observes, the closing of the FDI liberalization gap
between the United States and other OECD countries was the result not of any backsliding by the
United States, but rather of increased liberalization in other countries. Other OECD countries have, in
effect, caught up with the United States in terms of their openness to FDI.
Question: (Chinese Taipei page 1, section 1)
Reference: pp. 27-29, paras. 69-74
We recognize and endorse the United States' strong interest in safeguarding its national security.
However, we are concerned that the so-called "national security" in the Exon-Florio Amendment
might provide wide discretionary powers to relevant authorities, which may have an adverse effect on
the transparency and stability of the U.S. business environment.
Bearing in mind the close investment relationship between the U.S. and the Separate Customs
Territory of Taiwan, Penghu, Kinmen and Matsu, it would be appreciated if the U.S. could elaborate
further on what factors are considered in determining the effects on national security of, for example,
a foreign acquisition.
Answer
Since implementation of the Exon-Florio provision involves national security, there is a limit on the
extent to which the process can be transparent. For example, sometimes the reason for an
investigation is based on information that is classified. In such cases, it may not be possible to reveal
the reasons for an investigation without compromising classified information. Similar considerations
may pertain to the reasons for the final determination by the President.
However, CFIUS endeavors to provide the parties with ample opportunity to present their position
and address issues that may arise during the process of an investigation in order to provide due
process and to ensure that the most complete and accurate information is obtained to inform the
Executive Branch decision making process.
It is not possible to discuss in detail the factors taken into consideration by CFIUS in conducting a
national security review under Exon-Florio beyond those requested in section 800.402 (section
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entitled: "Contents of voluntary notice") of the Exon-Florio regulations. In part this is because these
factors change with each transaction. Moreover, to the extent that these factors relate to classified
information, it would not be possible to discuss them in this forum.
Nonetheless, it is important to note that only a single transaction has been refused under Exon-Florio.
Despite the fact that some companies choose to withdraw their applications voluntarily subsequent to
their filings, the vast majority of transactions submitted to or reviewed by CFIUS proceed without
difficulty.
Question: (Japan #12)
Reference: pp. 27-29, paras. 69-74
The transparency and predictability of government regulations are key elements in the determination
of business investment. They are also prerequisites for competitive businesses to be able to conduct
business under fair conditions. Japan is thus concerned about the Exon-Florio provision from the
following viewpoints:
(a) the lack of predictability, due to the ambiguous definition of "national security";
(b) the lack of legal stability due to the possible investigation of completed transactions in the future;
and
(c) the lack of due process, illustrated by the fact that even the parties concerned are not notified of
the
reasons for the commencement of investigation, nor of the final decisions taken by
the President.
Question: (Japan #13)
Especially, the U.S. has been strengthened its antiterrorism measures after the multiple terrorist
attacks, Japan concerns that this provision is applied rather strictly. Therefore, Japan requests the
U.S., in the operation of the Exon-Florio provision, not only to comply with WTO rules, but also to
take the necessary measures to ensure transparency and fairness, to the maximum extent possible,
during the process starting from the notification to the Committee on Foreign Investment in the U.S.
up until the final decision by the President. Japan would like to have the U.S. view on this request.
Answers
We believe that the United States is fully living up to its responsibilities and has implemented a
regime that is predictable, stable, and that provides an appropriate opportunity for participation in the
review process.
12 (a) Predictability:
In implementing the Exon-Florio provision since its inception in 1988, CFIUS has adhered to the
original intent of the statute to address national security issues raised by foreign acquisitions of U.S.
companies. The vast majority of transactions submitted to CFIUS proceed without difficulty (i.e.,
without initiation of an investigation within thirty days of the initial notification), and since 1988, only
a single transaction subject to Exon-Florio has been acted on by the President.
- Exon-Florio does not define national security, so as to provide flexibility in its application.
- While there is not a statutory definition, there is in the investment community a general recognition
of what businesses are of particular interest to the national security sector (i.e., defense contractors,
companies with technology applicable to defense/military uses, etc.).
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- Although Exon-Florio is limited to national security, no industrial sector is exempt.
(b) Legal Stability:
Transactions notified under Exon-Florio and subject to a national security review will not be reviewed
a second time unless CFIUS determines that the parties made a material omission of fact or a
misrepresentation of the facts that it provided to the Committee.
- There is no time limit on the ability of the President to utilize the authority provided to him under
Exon-Florio when considering appropriate action with regard to non-notified transactions. The only
limitation on his authority is that whatever action the President might deem appropriate under this
authority must be based on the facts, conditions, or circumstances existing at the time the transaction
was concluded.
(c) Process:
- CFIUS shares with parties the reasons for initiating an investigation, to the extent permitted by U.S.
law, and consistent with its mandate to advise the President on matters of national security.
- For example, sometimes the reason for an investigation is based on information that is classified. In
such cases, it may not be possible to reveal the reasons for an investigation without compromising
classified information.
- Similar considerations may pertain to the reasons for the final determination by the President.
- However, CFIUS endeavors to provide the parties with ample opportunity to present their position
during the process of an investigation in order to provide due process and to ensure that the most
complete and accurate information is obtained to inform the Executive Branch decision making
process.
13. The implementation of Exon-Florio is consistent with U.S. obligations under WTO agreements
that provide for national security exceptions. As mentioned in the previous response, since we are
dealing with national security, there are limits on the extent to which the process can be transparent.
For example, we are not in a position to reveal material that compromises classified information.
Similar considerations may pertain to whatever action the President may take.
CFIUS implements Exon-Florio in the context of an open U.S. investment policy and, therefore,
attempts to provide a process that encourages foreign direct investment in the United States. As also
mentioned previously, CFIUS attempts to give the parties ample opportunity to present their position
and address issues that may arise during the process of an investigation in order to provide due
process and to ensure that the most complete and accurate information is obtained to inform the
Executive Branch decision making process.
Question: (Japan #14)
What kind of criteria does the United States use when choosing those countries with which it wishes
to negotiate and conclude a bilateral investment treaty (BIT) or trade and investment framework
agreement (TIFA)?
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Answer
United States decisions on whether to initiate negotiations on a bilateral investment treaty (BIT) or
trade and investment framework agreement (TIFA) with a particular country are made through an
interagency consultation process. In the case of BITs, this interagency process is co-chaired by the
Office of the United States Trade Representative (USTR) and the Department of State. In the case of
TIFAs, the process is chaired by USTR.
A variety of U.S. government agencies and private sector groups suggest potential BIT and TIFA
negotiating partners on an ongoing basis. When making decisions on actual negotiating priorities, the
U.S. government considers a flexible rather than a fixed set of criteria. These criteria are not applied
in a mechanistic manner: considerations that weigh heavily in the case of one country may be
outweighed by other considerations in the case of other countries. Some of the criteria the U.S.
government considers when selecting BIT and TIFA negotiating partners include the following (in no
particular order):








The level of interest of a prospective negotiating partner.
Potential trade and investment market, as identified by the U.S. private sector.
Quality of the trade and investment policy regime, and prospects for future liberalization.
Potential contribution of a BIT or TIFA to the promotion of economic reform and the
development of the rule of law.
Willingness and ability to accept and implement high standards of investor protection.
The existence of outstanding investment disputes.
Potential collateral economic benefits, e.g., regionally.
Support for U.S. trade and foreign policy objectives.
Question: (Korea)
Reference: p. 29, para. 76
Paragraph 76 describes restrictive measures on fishing operations and direct investment by foreigners.
Could the U.S. government provide us with information with respect to the reasons for placing
restrictions on fishing operations and direct investment by foreigners?
Answer
Given that fish are a limited and transient natural resource, governments must impose rules on the
allocation of the resource. Over time, it has become common practice for countries to allocate this
resource on the basis of nationality. Many countries thus impose certain restrictions on foreign
ownership in the fisheries sector. Reasons for giving preference to nationals include practical limits
on the ability of governments to enforce domestic laws with respect to foreign vessels collecting a
transient natural resource. The United States, however, has sought to achieve an appropriate balance
between these practical law enforcement concerns and its otherwise open investment policy by
providing various exceptions to these restrictions. Exceptions exist, for example, for smaller-sized
fishing vessels, for vessels fishing in particular areas, and for vessels from countries that have entered
into bilateral fishing agreements with the United States.
Question: (Korea, page #1)
Reference: p. 28, para. 73
Paragraph 73 indicates that, in the wake of the September 11 attacks, issues relating to terrorism are
given heightened consideration in the review of submissions under the Exon-Florio provisions. Korea
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has concerns that the predictable and transparent business environment of the United States might be
undermined by heightened national security concerns.
Please provide us with further information on how terrorism-related issues are taken into account in
the review process, from the notice to the CFIUS up to the final decision by the President.
Answer
CFIUS thoroughly considers all information about a proposed transaction as it pertains to the potential
for the transaction to support terrorist activity. The United States will not undermine its predictable
and transparent business environment. The Exon-Florio statute contains factors the President may
consider (50 USC Sec 2170(f)) in evaluating the effects of an investment on national security, a
number of which relate to terrorism. These include the potential effects of the proposed or pending
transaction on sales of military goods, equipment, or technology to any country that supports
terrorism, is a country of concern regarding missile proliferation, or is a country of concern regarding
the proliferation of chemical and biological weapons.
Question: (China #10)
The Chinese and the U.S. government have signed the bilateral Agreement on Insurance and
Guarantees for Investments in 1980. As the investment interests of U.S. private capital in China have
increased drastically in the past years, the earliest resumption of the U.S. Overseas Private
Investment Corporations' (OPIC) business activity in China will benefit both China and the U.S.
When will the U.S. resume the OPIC's cooperation with China, which will comprehensively enforce
the Sino-U.S. Agreement on Insurance and Guarantees for Investments?
Answer
As stated in the report, OPIC is required by statute to review projects for their effects on human rights,
the environment, worker rights and U.S. employment. Pursuant to Section 231A(1) of the Foreign
Assistance Act of 1961, as amended, following the events of spring 1989, OPIC determined in 1990
that China no longer met the statutory worker rights standard, effectively suspending the availability
of OPIC programs. In addition, the United States Congress suspended OPIC activities in China
effective February 16, 1990 (Section 902 of the Foreign Relations Act of 1990-1991 (PL 101-206)),
until the President reports to Congress that China has made progress on a program of political reforms
throughout the country and that it is in the national interest of the United States to terminate the
suspension.
CHAPTER 3: BY MEASURE
(1) Customs Procedures, Rules of Origin, Tariffs, Customs Fees (including Customs Security
Issues)
Question: (India #12)
The fees being levied in the U.S. as charges for customs, harbour and other arrival facilities place
foreign products at an unfair disadvantage vis a vis domestic companies. The most significant of the
customs user fees is the Merchandise Processing Fee (MPF) that is being levied on all imported
merchandise except for products from LDCs and other eligible countries under different agreements.
The MPF adversely affects small exporters of low value items usually exporting small consignments.
The U.S. Customs also collects the Harbour Maintenance Tax (HMT) in all U.S. ports on waterbourne
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imports at an ad valorem rate of 0.125 percent. U.S. authorities have stopped collecting HMT on
exports while it is still being collected on imports. We would request the U.S. authorities to clarify
the reasons for such a differential treatment of exports and imports and consider removing these
impediments to trade.
Answer
Congress specifically intended that the MPF approximate the cost to Customs in processing the entry
of imported merchandise. That intent is set in the Senate Report on the 1990 Customs and Trade law
and was intended to meet GATT obligations. The amendment specifically placed a maximum amount
on the assessment, among other changes, to address GATT concerns. It should be noted that domestic
products are subject to similar inspection fees that are administered by other Federal Agencies.
The HMT is imposed equally on imported and domestic water-borne shipments. The purpose of the
HMT is to have the businesses that benefit directly from the use of U.S. harbors to move commercial
cargo bear the cost of maintenance of those harbors. Shippers that load or unload cargo in a harbor
that does not receive Federal funds for maintenance are not assessed the fee.
Question: (India #13)
Local procurement by foreign ships at port: There is a provision that all requirements for daily use
may be procured from local market by all foreign ships calling at U.S. ports. Please provide the U.S.
view on this point.
Answer
We are unable to determine the provision regarding local procurement to which India refers in its
question. We regret, therefore, that we are not able to provide the U.S. view on India's statement.
Question: (Canada #1)
Reference: para. 33
Paragraph 33 in the Secretariat Report indicates that country of origin marking is mandatory for most
imported manufactured products and that the determination of origin relies on self-certification. What
is the basis for determining the country of origin for marking purposes of products imported into the
U.S.?
Answer
The country of origin of a good for the purposes of country of origin marking under 19 U.S. Code
1304 is determined in accordance with the principle of substantial transformation as elaborated in
judicial precedent and in Title 19 Code of Federal Regulations, Part 102. Goods that are not wholly
obtained or produced in a single country, or that are not produced entirely from domestic materials,
will be considered goods of the country of final production if such production results in a substantial
transformation.
Question: (Canada #2)
Paragraph 34 indicates that the U.S. maintains several sets of preferential rules under free-trade
agreements but goes on to provide details only on the NAFTA rules of origin in the subsequent
paragraphs. Can the U.S. provide further details on the rules of origin negotiated under their FTA
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with Singapore and under their FTA with Chile? How do the rules of origin negotiated under these
two FTAs compare with the NAFTA rules of origin?
Answer
The overarching structure of the rules-of-origin regime in U.S. FTAs is largely the same. All U.S.
rules-of-origin regimes are based upon principles of transparency and predictability, and are
consistent with the WTO Agreement on Rules of Origin both in terms of the rules of origin and their
implementation. With respect to the "wholly obtained or produced" criteria for determining origin,
the United States uses the strict and precise definition used by most countries. In both U.S-Chile and
U.S.-Singapore FTAs, product-specific rules are also utilized which are generally articulated in terms
of 'change in tariff classification,' much like NAFTA. The de minimis is 10 percent, rather than 7
percent as it was in NAFTA, and in general terms there is considerably less use of a regional value
content percentage criterion for products. The United States, in concert with Singapore and Chile,
notified the respective agreements along with their full texts, to the WTO in December 2003.
Question: (Canada #3)
Comment
Paragraph 37 indicates that on 1 January 2003, following requests from industry, the United States
together with Canada and Mexico implemented measures to liberalize the NAFTA rules of origin
applicable to alcoholic beverages, crude petroleum, esters of glycerol, pearl jewellery, headphones
with microphones, chassis fitted with engines, and photocopiers.
Answer
This is not quite correct. On 1 January 2003, Canada and the United States implemented measures to
liberalize the rules of origin specified above. Canada extends those benefits to importations from both
the United States and Mexico; the United States extends the benefits to importations from Canada
only. Mexico has yet to implement measures to liberalize these rules of origin. Mexico has informed
the United States that the Mexican Senate has approved the legislation necessary to liberalize these
rules of origin, and the United States is working with Mexico to resolve the situation bilaterally.
Question: (China #1)
Could U.S. delegation explain how the U.S. will ensure that legislations with respect to national
security are consistent with the principle of minimizing the effects on trade and safeguard the normal
operation of international trade and investment to the greatest possible extent?
Answer
Section 343 of the Trade Act of 2002, as amended by section 108 of the Maritime Transportation
Security Act, states that regulations shall be promulgated providing for the transmission to U.S.
Customs and Border Protection (CBP) through an electronic data interchange system of information
pertaining to cargo that is to be brought into or taken out of the United States, prior to the arrival or
departure of the cargo.
CBP drafted a Notice of Proposed Rulemaking (NPRM) taking into consideration the transcripts of
four public meetings, comments that were received as a response to the meetings and a Commercial
Operations Advisory Committee of the Customs Service (COAC) Subcommittee Report. After DHS
approval, the NPRM was published in the Federal Register on July 23, 2003 (68 FR 43574), with a
30-day comment period.
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CBP received additional comments in response to the NPRM, which underwent thorough review and
analysis. Also, a detailed regulatory impact analysis (RIA) of the proposed rule was conducted. A
final draft was completed after careful consideration of the comments and of the economic impacts of
the proposal.
The volume of trade that flows in and out of the United States requires CBP to use the principles of
risk management to align finite resources and personnel with cargo that poses the greatest risk to the
United States. Given that trade volume will only continue to increase, and given that much of the
information needed to perform comprehensive risk management is stored in CBP and other
government databases, it is not only essential that the information pertaining to cargo be electronic, it
is also essential that CBP receive this information in advance of arrival and departure.
Advance cargo information allows CBP personnel to screen cargo information on a fluid basis
through the Automated Targeting System (ATS). This tool allows CBP to review shipment data
against information stored in our law enforcement and commercial databases and in light of strategic
intelligence in order to identify potentially high-risk shipments. Receiving advance electronic cargo
information from all modes of transportation will allow CBP to identify and intercede with high-risk
cargo before the cargo enters the commerce of the U.S. (or departs) and cannot be recovered. By
identifying high-risk cargo at an early stage, the movement of low risk imports and exports will be
facilitated.
The Trade Act was published in the Federal Register on December 5, 2003 (68 FR 68140).
Question: (China #13)
Non-Ad Valorem Tariffs
China urges the U.S. authorities to transform these Non-Ad Valorem duties to the ad valorem duties
as soon as possible. When will the United States take specific steps and measures in this respect?
Answer
The number of non-ad valorem tariff lines in the U.S. schedule has continued to decline, as noted in
paragraph 47 of Chapter III. The WTO Secretariat and the U.S. International Trade Commission
(ITC) have verified that the number of non-ad valorem tariff lines in the U.S. schedule amounts to 12
percent of all tariff lines, not 12.47 percent, as noted in China's comments. The United States has
continued to support the discussion of the phase-out of all non-ad valorem tariff rates as part of the
multilateral Doha Development Agenda negotiations and will continue to discuss this in multilateral
fora.
Question: (China #14)
Tariff Peaks
When will the U.S. take efficient measures to reduce tariff peaks and promote international trade
effectively?
Answer
According to the WTO Secretariat, the number of total tariff lines exceeding 15 percent is 6.6 percent,
as noted in paragraph 50 of Chapter III. The Doha mandate specifically calls upon Members to
address this issue and the United States has continued to state that it supports the reduction and/or
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elimination of all tariffs on a multilateral basis. The U.S. has repeatedly stated its willingness to
reduce and eliminate tariffs in sensitive sectors if other WTO members are willing to do the same.
Question: (China #15)
Tariff Escalation
Is there any plan or immediate timetable for the U.S. government to eliminate the tariff escalations?
Answer
The United States, as part of its market access proposals under the Doha Development Agenda, has
advocated for the total elimination of all tariffs (agricultural and non-agricultural) after a period of
reduction. There is no better method to handle the issues of tariff peaks and tariff escalation than
harmonization and reduction of tariffs with the eventual goal of total elimination at an agreed-upon
date. The United States has continued to be an advocate of multilateral tariff reductions in the Doha
negotiations and will continue to be engaged on these topics as long as there continues to be ambition
among other members for multilateral liberalization.
Question: (China #18)
What is the legal basis for the U.S. to levy merchandise processing fees upon importers?
Answer
The statutory basis for assessment of the merchandise processing fee is 19 USC 58c(a)(9) and (10).
The statute is implemented by the regulations in 19 CFR 24.23.
Question: (China #19)
Could the U.S. Delegation explain the practice's consistency with Article 8 of GATT 1994?
Answer
Congress, in the Customs and Trade Act of 1990 (104 Stat 635-639, Pub. L 101-382), set a maximum
and minimum amount for the user fee in order to ensure that the fee approximates the Customs cost of
processing import entries, in accordance with GATT Article VIII.
Question: (China #89)
Does the U.S. have any schedule to lower its tariff on textiles and clothing?
Answer
Under the Uruguay Round Agreement, the United States agreed to a phased reduction in tariff rates
for textiles and apparel products. Tariffs on textile and apparel products will decline from a trade
weighted average of 17.2 percent ad valorem to a trade weighted average of 15.2 percent ad valorem.
The majority of these reductions were phased over the 10 years. The final Uruguay Round tariff
reductions occurred on January 1, 2004.
With regard to the DDA negotiating agenda, the U.S. Government supports significant movement
toward the harmonization and/or elimination of textile and apparel tariffs and elimination of non-tariff
barriers. Given the sensitivity of these products for a large number of WTO members, clearly
progress in this area can only be achieved in the context of broad participation encompassing key
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players, both developed and developing. This most likely would be facilitated through a sectoral
approach.
Question: (Japan #17)
What is the specific time-table for implementing the Automated Commercial Environment (ACE)?
The Report says that the "ACS (Automated Commercial System) and ACE will initially operate in
parallel." What kind of "operation" is specifically expected? As soon as the ACE gets into full swing,
will the U.S. review the 24-hour rule and the requirement to present cargo information in advance, for
which the final rule was recently announced?
Answer
The Automated Commercial Environment (ACE) is the first project of the U.S. Customs and Border
Protection Modernization Program. Based on current status and projected funding profiles, ACE is
expected to be a six-year development project, culminating in winter 2007-2008.
The ACE is being developed incrementally. During the development period there will be a "release"
of ACE capabilities approximately every six months, for a total of seven releases. Each succeeding
release enhances and expands upon ACE capabilities deployed in the previous release(s). The CBP is
currently working on ACE Release 3. There is a comprehensive, phased plan to move from the
legacy system, the Automated Commercial System (ACS), to ACE.
Generally, as ACE capabilities are developed and tested as part of the release schedule, ACS and
ACE capabilities will initially operate at the same time to ensure there is no degradation in CBP
operations. As ACE capabilities are phased in and operationally verified, the ACS capabilities being
replaced will be "turned off." The ACE is not a technology project. It encompasses a significant reengineering of CBP business processes and the information technology systems that support those reengineering efforts. Moreover, it is the information technology platform supporting the CustomsTrade Partnership against Terrorism, and the Container Security Initiative.
The ACE is a 24-7-365 operation that will enhance border security and facilitate the flow of
legitimate trade by providing a state-of-the-art, integrated system for tracking information on
commerce entering the United States. The ACE will improve communication and coordination
among more than 20 U.S. agencies with border enforcement responsibilities and more than 100 U.S.
agencies that have regulations affecting imports and exports, or are users of statistical trade
information. These agencies will have significantly greater access to advance information on cargo
and conveyances bound for the United States, and information analysis will be significantly enhanced.
The prominent feature of ACE is the Secure Data Portal, which provides one screen for both
interagency coordination and for interface with the trade community. This portal is a single, webbased screen that provides the trade community with a national account view of their trade activity.
The capabilities developed for the portal will speed cargo processing at the border while enhancing
security and information-sharing; enhance the interface between the trade community and government
agencies; help improve trade compliance; and eliminate labor-intensive procedures, thus reducing
costs to both government and private industry. The United States will not be reviewing the 24-hour
rule as a result of ACE deployment.
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Question: (Japan #18)
Reference: p. 36, paras. 30-32
Japan understands and basically supports the importance of implementing measures regarding antiterrorism in order to strengthen transport security, which the U.S. has been promoting. However,
Japan would ask the U.S. to pay considerable attention to fair and free trade by ensuring that these
measures will not hinder a swift, harmonious and effective distribution. Japan also would like to
request the U.S. to aim these measures at becoming compatible with those efforts of other
international organizations and that the U.S.' efforts will contribute to making, building and
implementing and building a world-wide, common, and integrated system.
Answer
The United States is very sensitive to the impact that Customs and Border Protection's (CBP) antiterrorism efforts have on the flow of trade and its resulting effect on the economies of the United
States and our trading partners. CBP has built upon targeting and screening capabilities by
implementing more effective non-intrusive inspection technology and targeting systems. Greater
cooperation and communication between government agencies responsible for homeland security has
provided a stronger defense against terrorist acts, and has not negatively impacted the swift and
effective transportation of merchandise. Also, international traders are participating in cooperative
security partnerships and are providing more detailed information in advance of arrival for those
shipments that are destined for market.
Components of the layered anti-terrorism strategy include: (1) receipt of advance passenger and
cargo information – allowing for more effective risk assessments and inspections in advance of
arrival, (2) investing in non-intrusive inspection equipment provides effective uniform screening
technology for targeted shipments, (3) cooperation between U.S. government agencies, and (4) U.S.
partnership with the trade community. The United States continues to support of the acceptance of
these concepts through our strong support and participation in organizations like the World Customs
Organization and the World Trade Organization.
Question: (Japan #19)
When the U.S. Customs announced the C-TPAT, it promised that C-TPAT participants would enjoy
benefits, such as swifter customs clearance and a reduction in the number of inspections. C-TPAT
participants, however, have not in fact received such benefits, due to the reinforcement of transport
security, including the 24-hour rule. Japan requests that such promised merits be realized, and, in
addition, would like to have the U.S. view.
Answer
Currently, C-TPAT members do receive direct benefits such as a systematic reduction in the number
of cargo examinations for targeted exams and mandatory compliance exams. In addition, C-TPAT
importer participants are experiencing expedited release on our land borders with Canada and Mexico.
The first phases of the Free and Secure Trade (FAST) program are operational in El Paso, Texas and
Port Huron, Michigan which are among the ten busiest U.S. ports by import volume.
Question: (Japan #20)
In June 1999, the U.S. amended the Harmonized Tariff Schedule of the U.S. (HTSUS) to permit an
indelible ink marking, in addition to a dye-stamping, on the surface of movements and cases as a
measure for meeting the labeling requirement of origin for clocks and watches. The amendment,
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however, does not sufficiently respond to Japan's request, which is to limit labeling requirements of
origin to the finished products of clocks and watches only, and to leave the choice of the labeling
methods up to the discretion of manufactures. Japan, therefore, continues to request the U.S. to
simplify its labeling requirements of origin for clocks and watches. Japan would appreciate receiving
the U.S. views on our comment.
Answer
The United States takes note of Japan's request regarding the simplification of labeling requirements
for the country of origin markings for clocks and watches.
Question: (Japan #23)
The U.S. imposes high tariffs, for example 25 percent on most trucks (8704). Compared with Japan,
which sets its rates at 0 percent on the same items, the U.S. figure remains considerably higher. Japan
would also like to know why the U.S. imposes tariff rates on trucks 10 times higher than those on
passenger vehicles (the bound rate being at 2.5 percent). According to the minutes of the 2001 Trade
Policy Review, the U.S. stated its willingness to engage the matter in comprehensive market access
negotiations on goods based on the WTO's built-in agenda. Japan thus requests the earliest possible
elimination of the peak tariff.
Answer
The United States has continued to be an advocate of multilateral tariff reductions in the Doha
negotiations and will continue to be engaged on these topics as long as there continues to be ambition
among other members for multilateral liberalization. Tariffs in sensitive sectors are included in this
approach - the U.S. has repeatedly stated its willingness to reduce and eliminate tariffs in sensitive
sectors if other WTO members are willing to do the same.
Question: (Mexico #2)
According to document WT/TPR/S/126 the Secretariat makes reference to examination of products
under the 24-hour system. In this respect Mexico would like to request the U.S. to provide
information about the percentage of products subject to examination with regard to total imports.
The Report by the Secretariat states that only 75 percent of the 20 largest foreign seaports participate
in the Container Security Initiative (CSI). Therefore Mexico would appreciate that the U.S. could
elaborate about the main obstacles that prevented participation in the CSI.
Regarding the information provided in the Report by the Secretariat about the CSI, it is noted that CSI
may cause trade distortion among the ports that do and do not have such a program in place. In this
respect Mexico would like to request the U.S. to indicate additional actions that would be
implemented with regard to non-CSI ports in order to avoid the possibility of trade distortion and
facilitate trade flows.
Answer
The first 20 CSI ports were selected based on their high volume of container traffic to the United
States. Seventeen of these ports are now operational with CSI personnel in place. Two more of the
first 20 have agreed to accept CSI teams and are in the process of becoming operational.
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In June 2003, CBP announced that the CSI would be expanding to include strategic locations beyond
the 20 initial major ports. This expansion could include ports located in areas of the Middle East,
Africa, Latin America, and other major ports in Asia and Europe.
The criteria for selecting additional ports for CSI is based on the existing volume of container traffic
to the United States, geographic location, strategic concerns, infrastructure capacity, and other factors.
Since the U.S. Customs and Border Protection (CBP) has limited personnel resources, our first
priority for expansion of CSI to additional international seaports is to those ports that currently meet
these criteria.
CSI focuses on containers that are being shipped from a foreign port of lading to or through a port in
the United States. As you are aware, there is not a large volume of containers shipped directly from
Mexican seaports to ports in the United States. The immediate focus of CSI expansion is to those
ports that ship the greatest number of containers that meet the criteria listed above. Therefore, we are
not able to consider expansion of the CSI ports in Mexico at this time.
It is important to mention that there is no "special agreement" necessary for the U.S. and Mexico to
continue to trade in the friendly and cooperative manner practiced for many years. The fact that CSI
will not be expanded at this time to Mexican ports should not affect its ability to trade with the United
States.
CBP appreciates Mexico's interest in the CSI and its resolve to protect international commerce.
Enhanced container security is good for business. Therefore, CBP encourages Mexico to make any
necessary efforts to enhance the security of its ports. This will benefit Mexico's economic welfare as
well as the international maritime trading system.
Question: (Switzerland #6)
§26-29 (The 24-hour Advance Vessel Manifest Rule) outlines some measures on providing mandatory
informational elements before the cargo is loaded in a foreign port and that the data be provided in
electronic form.
How do the U.S. ensure that these measures do not become an unduly administrative burden or even a
new non-tariff barrier?
Answer
The requirements of the 24-hour rule have been in effect for over a year, during this time Customs and
Border Protection (CBP) has continuously worked with trade partners to achieve compliance. The 24hour rule expanded the use of the Sea Automated Manifest System (AMS), which allowed Non-Vessel
Operating Common Carriers (NVOCCs) to become bonded with CBP in order to transmit their data
directly. Additionally, the number of automated carriers and NVOCCs has risen, as well as AMS
service centers available for use.
Question: (Switzerland #7)
Having regard to Part 103 of Title 19 of the Code of Federal Regulations (published on Monday,
August 11, 2003 in the Federal Register Vol. 68) about the availability of information, how does the
U.S. ensure the confidentiality of the information provided and why are the U.S. of the opinion that
making data available is needed for reasons of national security?
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Answer
CBP is regulated by statute (19 USC 1431(c)) regarding disclosure of manifest data. Congress must
enact any changes to the statute.
Title 19 of the Code of Federal Regulations section 103.31(3)(d), (19 CFR 103.31(3)(d)) states that an
importer or consignee may request confidential treatment of its name and address contained in inward
manifests, to include identifying marks and numbers. In addition, an importer or consignee may
request confidential treatment of the name and address of the shipper or shippers to such importer or
consignee.
Each initial certification will be valid for a period of two years from the date of receipt. Renewal
certifications should be submitted to the Disclosure Law Officer at least 60 days prior to the
expiration of the current certification. Certified information may be copied but not published by the
press during the effective period of the certification. An importer or consignee shall be given written
notification by Customs of receipt of its certification of confidentiality.
Question: (Chinese Taipei #2a)
Reference: p. 36, paras. 30-32 and paras. 26-29
(a) Regarding the Customs Trade Partnership Against Terrorism scheme (CTPAT), we note that the
Bureau of Customs and Border Protection (CBP) is now in the process of expanding the scheme to
foreign companies in Europe and Asia. We trust that the scheme will be operated in a manner
consistent with the principle of non-discrimination and we would appreciate it if the U.S. could advise
us of the criteria, if any, to be used in the selection of foreign companies.
Answer
CBP has developed criteria to select foreign manufacturers for inclusion in C-TPAT. This selection
criteria is based on commonly accepted risk management principles and incorporates international
supply chain security concerns. At this time, CBP does not anticipate releasing this sensitive criteria
to any entities public or private.
Question: (Chinese Taipei #2b)
(b) The 24-hour Advance Vessel manifest Rule requires that the vessel's cargo declaration must be
notified in electronic form to the CBP 24 hours before the cargo is loaded in a foreign port. We
wonder whether the U.S. might consider conducting a review of the effectiveness of this practice
within the Rule, with a view to determining whether it should be maintained.
Answer
The requirements of the 24-hour rule have been in effect for over a year, during this time Customs and
Border Protection (CBP) has continuously worked with trade partners to achieve compliance.
Additionally, the 24-hour rule was used as the vessel requirement standard in the recent publication of
the Trade Act final rule published in the Federal Register on December 5, 2003 (68 FR 68140).
Approximately 90 percent of world cargo moves by container; 200 million cargo containers are
transported between the world's seaports each year, constituting the most critical component of global
trade. Nearly half of all incoming trade to the United States (by value) arrives by ship, and most of
that is in sea containers. Annually, nearly 6 million cargo containers are off-loaded at U.S. seaports.
Due to the volume of containers being shipped, the impact of terrorists using sea containers to conceal
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weapons of mass destruction would have an immediate and devastating impact on global trade and the
global economy.
To address the threat terrorists pose to containerized shipping, Customs and Border Protection (CBP)
developed the Container Security Initiative (CSI). Under CSI, CBP is working with other
governments to identify high-risk cargo containers and pre-screen those containers at the foreign ports
before they are shipped to the U.S. In addition to protecting global trade, CSI should facilitate the
flow of that trade. When a container has been pre-screened and sealed under CSI, U.S. Customs will
not, absent additional information affecting its risk analysis, need to inspect it for security purposes
when it reaches the U.S. Moreover, this system could reduce the processing time for certain
shipments because the screening at a CSI port will in most cases take place during "down time."
Question: (Chinese Taipei #2c)
(Reference: p. 65, paras. 146-149)
(c) The Bioterrorism Act of 2002 requires in particular the registration of most food manufacturing
and handling facilities, and prior notice to be given to the FDA of all food shipments destined for the
U.S. Given the time difference between the United States and other areas, it may be difficult to
contact the manufacturer and receive the necessary records/documents within the given timeframe.
With this in mind, we would ask that the deadline be extended, preferably to 24 hours, in order to
avoid creating an unnecessary burden on trade.
Answer
Please refer to the response to Part b above.
Question: (EU #2)
Cumbersome inspection and approval procedures for goods entering the U.S. often lead to perishable
goods being damaged with resulting commercial losses for exporters. What measures might be taken
to improve U.S. Customs sampling and inspection procedures in this respect?
Answer
With respect to improved sampling, the more detailed cargo information that CBP receives the less
likely an examination will be required. With improved information to assess risk, fewer examinations
would be required. However, there are legislative requirements that mandate both examinations and
sampling be conducted on certain goods.
Question: (EU #3)
What procedures does the U.S. have in place to ensure that the principle of proportionality/least trade
restrictiveness and non-discrimination have been adequately observed in the development of new
proposals and new measures to increase security against future terrorist attacks? Have there been any
risk analyses undertaken or studies into the likely impact on trade flows of specific measures?
Answer
CBP has numerous layers of targeting and risk management tools in place to assist in making
decisions concerning threat assessments. By using advance information, risk management and
technology, and by partnering with other nations and with the private sector, the twin goals of the
United States of enhanced security and trade facilitation do not have to be mutually exclusive. Since
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9-11, we have developed ways to make our borders more secure that also ensure the efficient flow of
legitimate trade and travel.
Question: (EU #4)
How does the U.S. intend to ensure that adequate resources are assigned to effectively implement the
provisions of new legislative security measures, in particular where these have a direct or indirect
impact on overseas economic operators?
Answer
CBP is required to enforce legislation and will do what is necessary and required under such
legislation to ensure the task is accomplished.
Question: (Brazil II, Customs Procedures)
Regarding the bilateral agreements with ports under the CSI, it is stated that (paragraph 25, p. 32)
"noting that such a bilateral approach may penalize smaller EU ports that have not signed bilateral
agreements with the United States, the European Commission is seeking a U.S.-EU agreement to
replace the eight bilateral agreements: the authorities noted that negotiations are under way between
the CBP and the Commission."
Does the U.S. consider the possibility of negotiating bilateral agreements with WTO Members under
the CSI, instead of seeking agreements with individual ports? Can the terms of a U.S.-EU agreement
set benchmarks for agreements with other Members?
Answer
International organizations, most notably the World Customs Organization (WCO) and the G8, have
supported CSI expansion through their adoption of resolutions that support the additional security
measures introduced by CSI at ports throughout the world. The implementation of CSI at the world's
largest ports is currently underway; the inclusion of smaller ports will be a subject of ongoing
discussion between the United States and its trade partners.
Question: (Brazil #2)
Paragraph 34 (page 38) informs that the U.S. maintains both preferential and non-preferential rules of
origin. In the case that a certificate is required from importing countries, what authorities would be
responsible for issuing the certificate of origin?
Answer
Certificates of origin are only required with respect to claims for preferential tariff treatment under
certain preferential tariff programs. These certificates of origin are not issued by any government
authority. Rather, they generally are issued and executed by the producers or exporters of the
merchandise for which preferential tariff treatment is sought.
Question: (Brazil #4)
In paragraph 34 (page 38), it is mentioned that "In addition, the Department of Commerce may
determine whether a particular product is produced in the country covered by a specific anti-dumping
or countervailing duty order; its determinations may include different criteria than those used by CBP.
Country of origin marking and labeling regulations are also used to provide consumers with
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information regarding the origin of the product, and are mandatory for most imported manufactured
products, and for many agricultural products (e.g. eggs, meat and poultry section vii below)." Is this
legislation the legislation established in 19 CFR 102.20? What are the different criteria used by the
CBP (and legislation)?
Answer
The U.S. Department of Commerce determines origin for anti-dumping and countervailing duty
purposes. The rules set forth in section 102.20 of title 19 to the U.S. Code of Federal Regulations (19
C.F.R. §102.20) are used to determine the country of origin for products imported from Mexico and
Canada for country of origin marking purposes and for determining the applicable rate of duty under
the North America Free Trade Agreement. Annex 311 to the North American Free Trade Agreement
requires the parties to establish such rules.
Question: (Brazil #5)
Are the rules of origin used for origin marking are the same for non-preferential rules of origin
applying for anti-dumping and countervailing measures?
Answer
There are two sets of rules of origin for country of origin marking purposes. The first set is used to
determine the country of origin of a product for all countries except Canada and Mexico. The second
set, as discussed above, it is used to determine the country of origin of a product imported from
Canada or Mexico. These rules are applied, as appropriate, without regard to anti-dumping or
countervailing duty measures.
Mexico: (Customs Procedures, #1, a-d)
Question: (Mexico #1)
In response to the tragic September 11th attacks, the United States has modified its procedures for the
entry of good into its territory and now requests that it be notified in advance of the arrival of goods in
U.S. territory. Mexico requests that the U.S. expand upon its explanation, addressing the following
points:
Question: (Mexico #1a)
How have the Customs authorities ensured that the information requested in advance will not
result in a duplication of the procedures already required by other agencies?
Answer
CBP continues to work with other government agencies such as FDA and Coast Guard in attempts to
limit the duplication of work by the trade.
Question: (Mexico #1b)
How will notifications not electronically transmitted be treated?
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Answer
The Trade Act of 2002 requires advance electronic cargo information on all cargo arriving or
departing the U.S.
Question: (Mexico #1c)
What results have been achieved to date in the application of these programs?
Answer
The 24-hour rule and Trade Act final regulation heavily leverage use of existing automated manifest
systems in the rail, air and sea environments to accomplish the mandate of receiving electronic data in
advance of shipments arriving in the U.S. The Automated Export System will be the vehicle for
receiving advanced data on goods leaving the country. Shipments arriving by truck will be reported
using existing interim methods of Free and Secure Trade System (FAST), Pre-Arrival Processing
System (PAPS), Border Release Advance Screening and Selectivity (BRASS) and Customs
Automated Forms Entry System (CAFES). Paper based BRASS shipment volumes will be gradually
reduced. When Automated Truck Manifest under ACE is nationally available, it will become the
preferred vehicle of advanced truck reporting.
Question: (Mexico #1d)
Does the U.S. have procedures in place to ensure that the information requested of companies is
protected against disclosure to third parties?
Answer
CBP is regulated by statute (19 USC 1431(c)) regarding disclosure of manifest data. Congress must
enact any changes to the statute.
Title 19 of the Code of Federal Regulations section 103.31(3)(d), (19 CFR 103.31(3)(d)) states that an
importer or consignee may request confidential treatment of its name and address contained in inward
manifests, to include identifying marks and numbers. In addition, an importer or consignee may
request confidential treatment of the name and address of the shipper or shippers to such importer or
consignee.
Question: Mexico (#1-2: CTAP)
Mexico was one for the first countries where C-TPAT's foreign manufacturer phase was implemented.
Participation by Mexican companies in the first worldwide supply chain security initiative ensures a
more secure supply chain for their employees, suppliers and customers. C-TPAT secures the supply
chain from the point of manufacture, through transportation and importation, to ultimate distribution.
To secure their supply chain of goods entering the U.S., exporters that consolidate their products could
benefit from C-TPAT participation by ensuring that their products are being shipped along with other
C-TPAT members. Several benefits of C-TPAT include access to the C-TPAT membership list, and
eligibility to participate in the Free and Secure Trade (FAST). A consolidated shipment crossing the
border containing shipments from Mexican exporters that are all approved for C-TPAT, with a FAST
approved truck driver, C-TPAT carrier and importer, would be eligible for expedited FAST processing.
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Question: Mexico (#1-2a)
According to the Report by the Secretariat the CBP and the Department of Commerce may apply
different
criteria to determine the origin of goods. On this basis Mexico will appreciate that the U.S. could
indicate which criteria would prevail in cases where CBP and the Department of Commerce consider
that a product is originating of different countries and an indication of the costs that will be incurred in
such cases by importers due to the need of complying with different requirements.
Answer
No criterion prevails over another because the differing criteria are applied for the administration of
different programs. Therefore, the criteria are not in conflict and importers are not obliged to satisfy
two criteria for the same program. Importers do not incur additional costs when the Department of
Commerce administers its programs using its origin criteria.
Question: Mexico (#1-2b)
The Report by the Secretariat states that country of origin markings are mandatory for most imported
manufactured products and for many agricultural products. Therefore Mexico would appreciate that
the U.S. could indicate the applicable criteria to exempt products of country of origin marking
requirements.
Answer
Exceptions to the country of origin marking requirements are set out in 19 U.S. Code Section 1304
and in the corresponding regulations in 19 Code of Federal Regulations Part 134.
Question: (Korea Para. 51)
Compared with the average U.S. tariff rate of 2.4 percent on fisheries products, the 35 percent tariff
rate on tuna in oil in airtight containers seems to be excessive. Is there any special reason for
maintaining this high tariff rate?
Answer
The United States, like all WTO members, has a small number of specific domestic sensitivities where
slightly higher tariff rates are sometimes applied (please note in para 50 of Chapter III that according
to the WTO Secretariat, the number of total U.S. tariff lines exceeding 15 percent is only 6.6 percent).
The United States has continued to be an advocate of multilateral tariff reductions in the Doha
negotiations and will continue to be engaged on these topics as long as there continues to be ambition
among other members for multilateral liberalization. Tariffs in sensitive sectors are included in this
approach – the United States has repeatedly stated its willingness to reduce and eliminate tariffs in
sensitive sectors if other WTO members are willing to do the same.
Question: (Turkey Section III, Part #1)
The U.S. bound all tariff lines except two lines covering crude oil. What is the rationale for this?
Answer
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Through our WTO negotiations the United States has bound all tariff lines with the exception of two
petroleum products which have remained unbound since the Uruguay Round as a result of broader
economic policy concerns. The United States is prepared to discuss further tariff reductions in the
context of a new round of the Doha Development Agenda discussions on market access. The United
States urges all Members to increase their binding coverage in the context of the Doha negotiations.
Question: (Turkey Section III, Part #2)
The 12 percent of U.S. tariff lines are still non-ad valorem and these tariffs presumably result in
higher protection than the ad valorem rates. Could the U.S. representative make a comment
converting non-ad valorem duties to ad-valorem?
Answer
The United States continues to honor its obligations under the Uruguay Round and therefore the 2004
U.S. tariff schedule converts a number of previously non-ad valorem tariff lines to ad valorem rates.
In 2004, only 11 percent of U.S. tariff lines are non-ad valorem. Like many countries, the United
States maintains non-ad valorem tariff rates on a small number of products for cultural or historical
reasons. The United States is prepared to discuss further tariff reductions in the context of the Doha
Development Agenda discussions on market access.
Question: (New Zealand #7)
While measures such as the Bioterrorism Act, CSI and the 24 Hour Advance Manifest Rule are key
elements in the campaign against terrorism, it would be helpful if the U.S. could indicate what steps it
is taking to minimize their impact on legitimate trade.
Answer
In reference to the Bioterrorism Act, the U.S. Food and Drug Administration (FDA) has encouraged
public comment at every stage of the bioterrorism regulations' development. FDA developed and
published proposed regulations which were open to public comment from both domestic and foreign
parties. We also conducted numerous outreach meetings directed at foreign stakeholders, both within
the U.S. to foreign embassy officials in Washington and via videoconference. We received numerous
comments from foreign governments, industries, and trade associations on both rules. We reviewed
each comment that was submitted during the comment period and developed the final rule, taking the
comments into account. In the case of the prior notice and registration regulations, we are allowing
for several opportunities for interested individuals to provide comments even as we begin
implementing the interim final rule to make sure that we minimized any negative effect on trade while
ensuring our food safety and security. We have published a compliance policy guide that describes
the U.S. strategy for maintaining an uninterrupted flow of imports while improving their safety in
accordance with the Public Health Security and Bioterrorism Preparedness and Response Act of 2002
(Bioterrorism Act) requirements. FDA included an economic impact analysis in the proposed rules
for affected entities to review and provide comment, and made revisions to the rules based on the
comments we received to further minimize the impact to trade consistent with the requirements in the
Act. Both interim final rules include a regulatory impact analysis.
The United States is very sensitive to the impact that U.S. Customs and Border Protection's (CBP)
anti-terrorism efforts have on the flow of trade and its resulting effect on the economies of the U.S.
and our trading partners. Due to the volume of containers being shipped on a daily basis, the impact
of terrorists using sea containers to conceal weapons of mass destruction would have an immediate
and devastating impact on global trade and the global economy. Greater cooperation and
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communication between government agencies responsible for homeland security has provided a
stronger defense against terrorist acts, and has not negatively impacted the swift and effective
transportation of merchandise. The United States recognizes the potential for trade disruption and has
taken every possible step to ensure that legitimate trade is not disrupted.
To address the threat terrorists pose to containerized shipping, the CBP developed the Container
Security Initiative (CSI). Under CSI, CBP is working with other governments to identify high-risk
cargo containers and pre-screen those containers at the foreign ports before they are shipped to the
U.S. In addition to protecting global trade, CSI should facilitate the flow of that trade. When a
container has been pre-screened and sealed under CSI, CBP will not, absent additional information
affecting its risk analysis, need to inspect it for security purposes when it reaches the U.S. Moreover,
this system could reduce the processing time for certain shipments because the screening at a CSI port
will in most cases take place during "down time."
The requirements of the 24-hour rule have been in effect for over a year, in this time CBP has
continuously worked with trade partners to achieve compliance. Additionally, the 24-hour rule was
used as the vessel requirement standard in the recent publication of the Trade Act final rule published
in the Federal Register on December 5, 2003 (68 FR 68140).
Question: (Indonesia #1)
Indonesia is concerned that the U.S. continues to apply high tariffs, tariff peaks, and tariff escalation
in a number of sectors of export interest to developing countries, including Indonesia. The following
are those products which are of the great interest to Indonesia and need further explanation and
clarification from the U.S.: cocoa, jewelry, ceramics and glass.
Answer
The United States, like all WTO members, has a small number of specific domestic sensitivities where
slightly higher tariff rates are sometimes applied. We continue to support multilateral tariff reductions
in the Doha negotiations and will be engaged on these topics as long as there continues to be ambition
among other members for multilateral liberalization. Tariffs in sensitive sectors are included in this
approach — the U.S. has repeatedly stated its willingness to reduce and eliminate tariffs in sensitive
sectors if other WTO members are willing to do the same.
In addition, we have consistently supported the inclusion of sectoral initiatives in the non-agricultural
market access negotiations that harmonize or eliminate tariffs in agreed-upon product sectors. This is
yet another constructive way to promote liberalization and the lowering of barriers in sectors of
interest to WTO members.
Question: (Indonesia #2a)
Procedures and requirements for exporting certain products to the U.S. tend to be excessive, and in
some instances far exceed normal practices. Some of these procedures and requirements are
burdensome and costly and therefore can constitute a barrier to entry for new exporters and
particularly for micro, small and medium enterprises. Indonesia wishes to have further justification
on these policies in relation to the U.S. obligations under WTO agreements.
Answer
The requirements of the 24-hour rule have been in effect for over a year, during this time Customs and
Border Protection (CBP) has continuously worked with trade partners to achieve compliance.
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Additionally, the 24-hour rule was used as the vessel requirement standard in the recent publication of
the Trade Act final rule published in the Federal Register on December 5, 2003 (68 FR 68140).
Approximately 90 percent of world cargo moves by container; 200 million cargo containers are
transported between the world's seaports each year, constituting the most critical component of global
trade. Nearly half of all incoming trade to the United States (by value) arrives by ship, and most of
that is in sea containers. Annually, nearly 6 million cargo containers are off-loaded at U.S. seaports.
Due to the volume of containers being shipped, the impact of terrorists using sea containers to conceal
weapons of mass destruction would have an immediate and devastating impact on global trade and the
global economy.
To address the threat terrorists pose to containerized shipping, Customs and Border Protection (CBP)
developed the Container Security Initiative (CSI). Under CSI, CBP is working with other
governments to identify high-risk cargo containers and pre-screen those containers at the foreign ports
before they are shipped to the U.S. In addition to protecting global trade, CSI should facilitate the
flow of that trade. When a container has been pre-screened and sealed under CSI, U.S. Customs will
not, absent additional information affecting its risk analysis, need to inspect it for security purposes
when it reaches the U.S. Moreover, this system could reduce the processing time for certain
shipments because the screening at a CSI port will in most cases take place during "down time."
Question: (Indonesia #2b)
Indonesia finds that the requirements under the Bioterrorism Act is basically unnecessary and could
have been accommodated in a more cost effective way. Please comment.
Answer
Please refer to the response to Indonesia's Question 2a.
Question: (Indonesia #2c)
The customs procedures for import of textile and garment to the U.S. require the presentation of
detailed and voluminous information, leading to additional costs and in some instances include
business confidential processing methods. Indonesia believes that much of this information is
irrelevant for customs use or statistical purpose. It is also Indonesia's concern that as the phasing-out
of the quota system draws near, the U.S. industry is pressing the Administration to put in place an
even closer monitoring system that may require not only detailed information, but also additional
information for the purpose of imposing a trade remedy as necessary.
Answer
The procedures of the U.S. Customs and Border Protection (formerly called “Customs”), procedures
for imports of textiles and clothing are streamlined to facilitate all trade. In addition to routine
commercial documentation (invoice & bill of lading), U.S. Customs and Border Protection (CBP)
currently only requires one or two additional documents. The first document, a declaration by the
manufacturer, producer, exporter, or importer concerning the country of origin (19CFR12.130(f)).
The information contained in this document is used to determine the origin of imported textile
products. The information requested is not voluminous, nor is it business confidential. The second
document, a textile visa, is not required on all textile shipments. In fact, this documentation is only
required for certain textile goods and only when our trading partners have requested our assistance in
controlling their textile exports to the United States. The United States will continue to meet all its
commitments under the WTO's Agreement on Textiles and Clothing.
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Question: (Indonesia #2d)
Fees other than Import Duties and Tax: Merchandise Processing Fee (MPF)
Please comment on the Merchandise Processing Fee.
Answer
Congress specifically intended that the MPF approximate the cost to Customs in processing the entry
of imported merchandise. That intent is set in the Senate Report on the 1990 Customs and Trade law
and was intended to meet GATT obligations. The amendment specifically placed a maximum amount
on the assessment, among other changes, to address GATT concerns. It should be noted that domestic
products are subject to similar inspection fees that are administered by other Federal Agencies.
Question: (Indonesia #2e)
Harbor Maintenance Tax (HMT)
The United States has stopped collecting the HMT on exports but continues to collect it on imports.
Please explain.
Answer
The HMT is imposed equally on imported and domestic water-borne shipments. The purpose of the
HMT is to have the businesses that benefit directly from the use of U.S. harbors to move commercial
cargo bear the cost of maintenance of those harbors. Shippers that load or unload cargo in a harbor
that does not receive Federal funds for maintenance are not assessed the fee.
Question: (Columbia IA: 2)
As regards the 24-hour Advance Vessel Manifest Rule, are there guidelines governing the ability of
maritime ports to assess monetary penalties on foreign cargo not adhering to this Rule?
Answer
CBP will not assess penalties in a foreign port for carriers failing to comply with the 24-hour rule.
There are several other options available. Denial to load the cargo on the vessel bound for the United
States, or denial of unloading the container if in fact it reaches the United States. If the container
reaches the United States and is in violation of the 24-hour rule then penalties will/can be assessed at
that point. Penalties are assessed based on existing statutes.
Question: (Argentina #1)
Paragraph 22 indicates that with a view to implementing the Container Security Initiative (CSI),
foreign ports without radiation detection equipment must purchase such equipment before the U.S.
Customs and Border Protection (CBP) deploys inspection agents to said ports. In this regard,
Argentina would like to know what measures the United States is considering with regard to those
countries which cannot afford to purchase the equipment and technology needed to implement the
CSI.
Answer
Customs and Border Protection does not anticipate that the CSI initiative will entail extraordinary
additional costs to the host nations. CBP will be paying the costs to deploy officers and computers in
foreign seaports. Many host nations already have screening and detection technology in place, and
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only ports that already have sophisticated scanning technology in place or are in the process of
purchasing it will participate in the first two rounds of CSI. To the extent that additional detection
equipment is needed to implement CSI, the investment is well worth the cost to the host nation
considering the efficiency and safety that CSI contributes by scanning the containers before they leave
the port, rather than having them waiting for scanning on the docks upon arrival.
Question: (Columbia IA: 1a, 1b and 1c)
The Secretariat's document describes the changes to the U.S. Customs Regulations since the last
review. We found the information on the new import regulations very valuable, namely the Automated
Commercial System (ACS) and the Automated Commercial Environment (ACE).
(a) In this regard, we would like to know the results of the new customs policy based on the "informed
compliance" principle, given the goal of an efficient use of limited customs resources and the
possibility of focusing on areas of highest risk.
(b) If possible, we would like information on the procedures used to distinguish between the different
agents involved in the introduction of merchandise, as well as the methods for tracking and control.
(c) We understand the ACE will enter into force in the spring of 2004 for cargo imports. What does
this new method consist of and how does it differ from the ACS?
Answer (Columbia IA: 1a, 1b and 1c)
The Automated Commercial Environment (ACE) is the first project of the U.S. Customs and Border
Protection Modernization Program. Based on current status and projected funding profiles, ACE is
expected to be a six-year development project, culminating in winter 2007-2008.
The ACE is being developed incrementally. During the development period there will be a "release"
of ACE capabilities approximately every six months, for a total of seven releases. Each succeeding
release enhances and expands upon ACE capabilities deployed in the previous release(s). The CBP is
currently working on ACE Release 3. There is a comprehensive, phased plan to move from the
legacy system, the Automated Commercial System (ACS), to ACE.
Generally, as ACE capabilities are developed and tested as part of the release schedule, ACS and
ACE capabilities will initially operate at the same time to ensure there is no degradation in CBP
operations. As ACE capabilities are phased in and operationally verified, the ACS capabilities being
replaced will be "turned off." The ACE is not a technology project. It encompasses a significant reengineering of CBP business processes and the information technology systems that support those reengineering efforts. Moreover, it is the information technology platform supporting the CustomsTrade Partnership against Terrorism, and the Container Security Initiative.
The ACE is a 24-7-365 operation that will enhance border security and facilitate the flow of
legitimate trade by providing a state-of-the-art, integrated system for tracking information on
commerce entering the United States. The ACE will improve communication and coordination
among more than 20 U.S. agencies with border enforcement responsibilities and more than 100 U.S.
agencies that have regulations affecting imports and exports, or are users of statistical trade
information. These agencies will have significantly greater access to advance information on cargo
and conveyances bound for the United States, and information analysis will be significantly enhanced.
The prominent feature of ACE is the Secure Data Portal, which provides one screen for both
interagency coordination and for interface with the trade community. This portal is a single, webbased screen that provides the trade community with a national account view of their trade activity.
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The capabilities developed for the portal will speed cargo processing at the border while enhancing
security and information-sharing; enhance the interface between the trade community and government
agencies; help improve trade compliance; and eliminate labor-intensive procedures, thus reducing
costs to both government and private industry.
Question: (Columbia IA: 2)
As regards the 24-hour Advance Vessel Manifest Rule, are there guidelines governing the ability of
maritime ports to assess monetary penalties on foreign cargo not adhering to this Rule?
Answer
CBP will not assess penalties in a foreign port for carriers failing to comply with the 24-hour rule.
There are several other options available. Denial to load the cargo on the vessel bound for the United
States, or denial of unloading the container if in fact it reaches the United States. If the container
reaches the United States and is in violation of the 24-hour rule then penalties will/can be assessed at
that point. Penalties are assessed based on existing statutes.
Question: (Colombia IB: 1)
According to the Secretariat's report, the Foreign Trade Act of 2002 mandated the Comptroller
General to conduct a study on the extent to which the amount of each customs user fee is
commensurate with the level of services provided. It also mentions proposals to restructure the
Harbor Maintenance Tax in the form of a fee to vessel owners and operators, thereby ensuring that
fees assessed more closely reflect the use of port services and facilities.
Is there information available on the conclusions reached by the Comptroller General's study on
customs user fees? Is there a timeline for adjusting the Harbor Maintenance Tax to reflect the cost of
services rendered?
Answer
The Comptroller General's report, GAO-02-1033 entitled "Marine Transportation: Federal Financing
and a Framework for Infrastructure Investments" is available at www.gao.gov.
We are not aware of any timeline for adjusting the Harbor Maintenance Fee. The regulation
explaining the fee, mitigation of the fee, and appeals, can be found in 19 CFR 24.24 (CBP
Regulations).
CHAPTER 3: TRADE POLICIES BY MEASURE
(2) Remedies: Anti-dumping, Countervailing, and Safeguards Actions
Question: (China #22)
Could the U.S. please elaborate whether there are relevant provisions on the procedures for an
industry or sector to apply for the market economy conditions pursuant to the criteria provided in the
national anti-dumping legislations of the U.S. If not, please inform us of the plan and timetable to
provide such procedures.
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Answer
Section 771(18)(B) of the Tariff Act of 1930, as amended, lists the six factors that the Department of
Commerce must consider in making a non-market economy country determination. The Department
initiates an inquiry into a country's non-market economy status only on request from that country's
government. Such inquiries are conducted within the framework of a quasi-judicial proceeding,
which is fully open to participation by the public and all interested parties and is subject to strict due
process and transparency requirements. If, as a result of its inquiry, the Department determines that
graduation to market economy status is warranted, producers' prices and costs are then used for
purposes of calculating normal value. Non-market economy producers ("NME") can also have their
prices or costs used to calculate normal value if they operate in a market-oriented industry ("MOI").
The Department has discussed with PRC government officials several times the Department's threepronged MOI test and the procedures for submitting a MOI claim, and the Department would be more
than happy to do so again. In addition, this issue was raised in the JCCT and the Joint Committee
created the market economy working group.
Question: (Switzerland #18)
§57 ff. outlines the safeguards in the steel sector. On December 4, 2003, the U.S. announced the full
and immediate termination of its steel safeguards. The decision had been taken by President George
W. Bush because the measures, introduced in March 2002, had achieved their purpose by helping
U.S. producers consolidate and regain competitiveness. Nevertheless, the Steel Import Licensing
System, introduced on February 1, 2003 is still in place. The system was put in place to provide
timely statistical data on steel imports to monitor significant changes in steel imports. What are the
reasons to keep this system in place? When or under what conditions will it be terminated? What
measures have been taken that this system does not become an unduly administrative burden?
Answer
On December 4, 2003, the President issued a proclamation terminating the safeguard measures; he
also directed the Secretary of Commerce to continue the steel import licensing system. Its purpose is
to provide the public with the most accurate and timely information possible on imports of certain
steel products so that potential steel import surges may be identified quickly. The current system was
established effective February 1, 2003, and will remain in place until the earlier of March 21, 2005 or
such time as the Secretary of Commerce establishes a replacement program.
The current steel licensing system, established under section 203(a)(3)(I), is an easy-to-use,
transparent, WTO-consistent system that is not trade restrictive. In establishing the current license
system, the Department of Commerce sought comments from potential users to ensure that users
would not find it burdensome, before publishing the December 31, 2002 regulations on the licensing
program. It continues to operate smoothly. The web-based system is automatic and there is no fee to
obtain a license.
Question: (China #24 - 26)
In the context of this case [Crawfish Tailmeat from China], could the U.S. elaborate how it will deal
in a fairer manner with the difference of the levels of development of two countries and between the
relevant products?
Could the U.S. please explain its criteria for selecting a surrogate country in this case?
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While selecting surrogate countries, how does the U.S. avoid and rectify the problem with respect to
insufficient relevance of surrogate countries?
Answer
The Department of Commerce's general practice is to select a surrogate country that is both at a level
of economic development comparable to a non-market economy ("NME") country and a significant
producer of comparable merchandise. In some cases, however, there is a significant input that is
special or unique and dedicated to the production of the subject merchandise. In such cases, the
Department places relatively more weight on significant production of comparable merchandise and
adopts stricter definitions of both "significant producer" and "comparable merchandise," to ensure that
special or unique factors are valued appropriately. Thus, in these special cases, the group of
significant producers narrows, and it is from this more narrow group the Department selects a country
at a level of economic development that is most comparable to the NME country. In this way, it can
happen that the economic comparability criterion is not fully satisfied, but the U.S. statute requires
only that the two criteria be satisfied to the extent possible.
The United States appreciates the issues China has raised in questions 24-26. However, such detailed
questions relate to ongoing, quasi-judicial trade remedy proceedings, and are highly case and fact
specific. If China wishes to pursue these questions, we suggest that it be done either on the record of
the specific proceeding before the U.S. Department of Commerce or the U.S. International Trade
Commission, or within the context of the WTO Committees on Anti-Dumping Practices and/or
Subsidies and Countervailing Measures, as appropriate.
Question: (China #27 - 28)
Could the U.S. explain why it discarded the original method in calculating the profit margin of the
surrogate country [in the case involving Color Televisions from China]?
Please provide the justification for the inconsistency regarding the data of the producers at a loss
between the methods in calculating profit margin of the surrogate country and in calculating the cost
and expenses of the producers in the surrogate country.
Answer
The Department of Commerce published its final determination in the anti-dumping investigation of
color TVs from China on April 16, 2004. In accordance with U.S. law and its normal practice, the
Department used data from companies in the surrogate country to calculate the surrogate profit rate
for calculating normal value. The Department fully explained its selection of surrogate companies in
the published notice of its final determination. The United States appreciates the issues China has
raised in questions 27 and 28. However, aspects of these questions relate to quasi-judicial trade
remedy proceedings, and are highly case and fact specific. For these reasons, if China wishes to
pursue these questions, we suggest that it be done either on the record of the specific proceeding
before the U.S. Department of Commerce or the U.S. International Trade Commission, or within the
context of the WTO Committees on Anti-Dumping Practices and/or Subsidies and Countervailing
Measures, as appropriate.
Question: (China #29 - 31)
Could the U.S. elaborate on the criteria for determining the high level of production integration of the
Chinese producers [in the case of aspirin from China]?
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Please provide the legal basis for the U.S. to multiply the indirect overhead cost of the Chinese
producers by several times.
If the U.S. considers this practice to be consistent with WTO Agreements, please clarify the
consistency.
Answer (China #29 - 31)
As an initial matter, we note that the preface to these questions refers to the investigation of aspirin
from China and misconstrues the Department's methodology. In non-market economy cases, the
Department generally does not use actual costs of producers and does not multiply such costs. In any
event, we believe the comment refers to certain surrogate values used in the original final
determination in the aspirin investigation. In that regard, we note that on December 30, 2003, the
Department published an amended final determination in the aspirin investigation. In that amended
determination, the Department did not find the surrogate producers to be less integrated than the
producer in China.
More generally, in non-market economy cases, the Department values the non-market economy
producer's factors of production based on surrogate values in a comparable market economy country.
As noted above, the Department uses the best information available to determine surrogate values for
the factors of production. In determining surrogate values, the Department may take into
consideration, in appropriate circumstances, whether a non-market economy producer is integrated
while a surrogate market economy producer is not, or vice versa, as this may affect the determination
of the appropriate surrogate value used for factory overhead.
The United States appreciates the issues China has raised in questions 29 through 31. However,
aspects of these questions relate to ongoing, quasi-judicial trade remedy proceedings, and are highly
case and fact specific. If China wishes to pursue these questions, we suggest that it be done either on
the record of the specific proceeding before the U.S. Department of Commerce or the U.S.
International Trade Commission, or within the context of the WTO Committees on Anti-Dumping
Practices and/or Subsidies and Countervailing Measures, as appropriate.
Question: (China #32)
Could the U.S. provide the legal basis for excluding "0" duty rate from weighted-average
anti-dumping rate [in the case of apple juice from China]?
Answer
The final determination in the apple juice case was litigated in the United States Court of International
Trade. If no party appeals the court's decision, the Department of Commerce will amend the final
determination to reflect the results of the court-ordered remand redeterminations. The question
appears to refer to these court-ordered remand redeterminations. The United States did not exclude
the zero margins in those redeterminations.
The United States appreciates the issue China has raised in question 32. However, aspects of this
issue relate to ongoing, quasi-judicial trade remedy proceedings, and are highly case and fact specific.
If China wishes to pursue this issue, we suggest that it be done either on the record of the specific
proceeding before the U.S. Department of Commerce or the U.S. International Trade Commission, or
within the context of the WTO Committees on Anti-Dumping Practices and/or Subsidies and
Countervailing Measures, as appropriate.
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Question: (China #33 - 34)
Please clarify the method adopted by the U.S. for calculating the average anti-dumping rate of
enterprises subject to voluntary verification and the legal basis thereof.
Could the U.S. please elaborate how it will avoid such practices in future anti-dumping
investigations?
Answer
In calculating rates applied to cooperative exporters not selected for examination, the United States
generally follows the methodology described in section 735(c)(5) of the Tariff Act.
Question: (China #35 - 36)
Please explain the consistency of the qualification of petitioners in [the case of Color Televisions from
China] with Article 4 of the WTO Agreement on Anti-dumping Measures.
Please explain the consistency of the affirmative determination made by DOC of an injury to the U.S.
domestic industry by the color TV sets imported from China with Article 3 of the WTO Agreement on
Anti-dumping.
Answer
The Department of Commerce published an anti-dumping duty order on color television receivers
from China on June 3, 2004. The petition in this case was filed by or on behalf of the domestic
industry by a domestic producer of like products.
The U.S. International Trade Commission determined on May 14, 2004 that a U.S. industry is
materially injured by reason of imports of certain color television receivers from China that the U.S.
Department of Commerce had determined are sold in the United States at less than fair value. The
U.S. International Trade Commission’s public report, Certain Color Television Receivers from China
(Investigation No. 731-TA-1034 (Final), USITC Publication 3695, May 2004) contains the views of
the Commission and information developed during the investigation.
The United States appreciates the issues China has raised in questions 35 and 36. However, these
detailed questions relate to quasi-judicial trade remedy proceedings, and are highly case and fact
specific. If China wishes to pursue these questions, we suggest that it be done either on the record of
the specific proceeding before the U.S. Department of Commerce or the U.S. International Trade
Commission, or within the context of the WTO Committees on Anti-Dumping Practices and/or
Subsidies and Countervailing Measures, as appropriate.
Question: (China #37 - 40)
Please provide justifications for DOC's refusal to change its wrong decision [to decline to initiate a
new shipper review in the case of honey from China].
Please provide the legal justification for denying this application [for a new shipper review in the case
of honey from China].
Please explain the reason for the inconsistency of this practice [in the case of honey from China] with
19 USC §1675(a)(2)(B)(i) and 19 C.F.R. §351.214(b)(2)(ii)(A), §351.214(b)(2)(ii)(B), §351.214(b)(2)
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(iii)(A), and §351.214(b)(2)(iii)(B), as well as precedents made by U.S. DOC in the case of glycine
from China and in the case of crawfish from China.
From the practice of the U.S. in the above case, it seems that the definition of "sales to the U.S."
consists of an extra restriction that the contractor of the products should also be within the territory of
the U.S. If this understanding is correct, please provide the legal basis for such restriction on "sales to
the U.S." defined in the U.S. anti-dumping legislation.
Answer (China #37 - 40)
The issues raised by these questions do not reflect broader U.S. trade policy so much as specific
factual findings made by U.S. authorities when presented with a certain body of evidence. New
shipper reviews are governed by section 751(a)(2)(B) of the Tariff Act and section 351.214 of the
Department of Commerce's regulations. The decisions in these cases were consistent with those
provisions. The exporters in question have again requested new shipper reviews, and the Department
is considering those requests. If an exporter does not qualify under the requirements established to
request a semi-annual new shipper review, that entity may still request an administrative review to
establish an amount of duty based on its current sales practices.
Question: (China #72)
Will the U.S. kindly indicate how much subsidies and assistance in average terms it grants annually to
its services and service providers?
Answer
There is no readily available source of information with respect to government assistance provided to
the service sector in the United States.
Question: (Japan #29)
Japan claimed, in the WTO dispute settlement system, the WTO inconsistency of the sunset review by
the U.S. of anti-dumping duties on corrosion-resistant carbon steel flat products from Japan. The
report of the Appellate Body supports Japan's arguments that the Sunset Policy Bulletin of the
Department of Commerce, which regulates the rule of the sunset review determinations themselves, is
"challengeable" as such under the WTO Agreement, and that a sunset review determination, based on
the anti-dumping margin calculated with a WTO-inconsistent "zeroing" methodology, is inconsistent
with the WTO agreements. In Japan's view, the U.S. must amend the Sunset Policy Bulletin, and all
sunset review determinations which are based on the U.S. methodology of calculating the dumping
margin, if they are found to be WTO-inconsistent in subsequent dispute settlement cases. Please
explain the U.S. position on the matter.
Answer
We disagree with the premise of Japan's question. The Appellate Body made no finding with respect
to whether the Commerce Department's Sunset Policy Bulletin is challengeable "as such" under the
WTO. Rather, the Appellate Body concluded that the panel had not fully considered relevant
arguments in finding that the Sunset Policy Bulletin cannot be challenged "as such," and reversed the
finding on that basis. Furthermore, the Appellate Body made no finding that the Commerce
Department's dumping margin calculation methodologies are WTO-inconsistent.
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Question: (Canada #1)
The Secretariat Report refers to the current status of the Foreign Sales Corporation Repeal and
Extraterritorial Income Exclusion Acts provisions. Please indicate when the U.S. proposes to rescind
its WTO-inconsistent corporate tax provisions with a view to ending its illegal export subsidies.
Answer
The United States has made clear its commitment to work with the U.S. Congress to fully comply
with the prior recommendations and rulings of the Dispute Settlement Body concerning the
Extraterritorial Income Act. Both branches of Congress are currently considering legislative
proposals that would repeal the ETI Act.
Question: (Canada #2a)
With respect to administrative reviews, please indicate the average time required in 2000-02 for
conducting administrative reviews. Please specify the average time between the importation of a
product subject to an AD or CVD order and the final liquidation of the duties in cases where an
administrative review is conducted.
Answer
Under U.S. law administrative reviews normally take 365 days to complete, but can be extended
under certain circumstances. Regarding the average time between the importation of a product and
the final liquidation of the duties in administrative reviews, the United States does not maintain the
statistical information requested by Canada.
Question: (Canada #2b)
We understand that, out of the 361 sunset reviews of AD and CVD orders completed between July
1998 and July 2003, the question of whether the expiry of the duty would be likely to lead to
continuation or recurrence of dumping or of subsidization has been examined by the Department of
Commerce in 269 cases. Out of these 269 cases, we understand that the Department of Commerce
has made negative determinations in only 3 sunset reviews. Please briefly describe the factors
examined in making such determinations and explain why the proportion of negative determinations
is so low.
Answer
The AD and SCM Agreements provide for the conduct of expiry (sunset in U.S. parlance) reviews to
determine whether expiry of the duty (revocation of an order in U.S. parlance) would be likely to lead
to continuation or recurrence of dumping or subsidization and injury. Under the United States sunset
regime, there are two agencies that play a role in the conduct of sunset reviews. The Department of
Commerce ("Commerce") has the responsibility for determining whether revocation of an order
would be likely to lead to continuation or recurrence of dumping or subsidization. In making its
likelihood determination, Commerce considers, inter alia, information concerning dumping and
import volumes for the subject merchandise. The U.S. International Trade Commission ("USITC")
has the responsibility for determining whether revocation of an order would be likely to lead to
continuation or recurrence of material injury. Canada's figures, even if accurate, are incomplete and
misleading because they do not reflect completed sunset reviews, i.e., where both Commerce and the
USITC have made their final likelihood determinations.
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Of the 321 sunset reviews of anti-dumping and countervailing duty orders initiated between July 1998
and December 1999, almost 50 percent were revoked.
Question: (Brazil Set I #32)
What kind of procedures do U.S. authorities adopt to comply with Art. 5.3 of the ADA?
Answer
The United States carefully reviews each application for an anti-dumping investigation to ensure that
the evidence provided by the domestic industry as required by Article 5.2 of the ADA is both accurate
and sufficient. Under U.S. law (section 732(1) of the Tariff Act of 1930, as amended), the
Department of Commerce is responsible for performing that review and for determining whether the
evidence is sufficient to justify the initiation of an anti-dumping investigation. In performing its
review, Commerce uses a checklist which forms the analytical record for the initiation. A copy of
that checklist, and a more in-depth discussion of the Department's initiation procedures, can be found
at the following website: http://ia.ita.doc.gov/admanual/admanual_ch01.pdf.
Question: (Brazil Set I #33)
With regard to paragraph 94, page 53, WT/TPR/S/126, could the U.S. specify for how long a
suspension agreement may be in force?
Answer
Suspension agreements are subject to five-year reviews (also called sunset reviews), as are antidumping duty orders and countervailing duty orders. If the United States determines that injury and,
as appropriate, dumping or countervailable subsidization is likely to continue or recur in the absence
of the suspension agreement, the suspension agreement may continue beyond five years. Please note
that all parties to a suspension agreement have the option to terminate the agreement at any time.
Question: (Brazil Set I #34)
With regard to paragraph 96, WT/TPR/S/126, could the U.S. indicate, in general terms, what kind of
information interested parties must submit when requesting an administrative review?
Answer
Administrative reviews, which are discussed in paragraph 96, are conducted when requested by
interested parties in the anniversary month of the order or suspension agreement. Requests for such
reviews are to be made in accordance with sections 351.213 and 351.303 of the Department of
Commerce's regulations. When requesting an administrative review, the interested party submitting
the request must identify the producer or exporter that the interested party wishes the Department to
review. Other requirements apply when requests are made for other types of reviews, such as new
shipper reviews or changed circumstances reviews.
Question: (Brazil Set I #35)
We understand that in several cases foreign exporters have paid money to U.S. producers in
connection with U.S. AD and CVD investigations and Reviews. Does the U.S. delegation have any
comments on this practice of direct payments to producers?
WT/TPR/M/126/Add.3
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Answer
While there have been reports of this kind, we have no specific information about such practices. We
are, therefore, not in a position to comment.
Question: (Brazil Set I #36)
Does the U.S. intend to comply with the Appellate Body recommendation also as regards the CVD
illegally charged on imports from Brazil?
Answer
On June 23, 2003, the U.S. Department of Commerce adopted a new methodology for analyzing
changes of ownership in the countervailing duty context. An explanation of this new methodology
was published in the Federal Register under Notice of Final Modification of Agency Practice Under
Section 123 of the Uruguay Round Agreements Act, 68 FR 37125 (June 23, 2003). As stated in that
notice, Commerce is applying this new methodology to all countervailing duty investigations and
reviews initiated on or after June 30, 2003. Accordingly, Commerce will apply this new
methodology, where applicable, to any reviews of the CVD orders cited by Brazil initiated after that
date.
Question: (Mexico Set V #1)
Were the 280 million dollars deposited by virtue of anti-dumping and countervailing duties distributed
among national producers?
Answer
The actual amount disbursed for FY2003 to date (February 2004) is $150 million. An additional
$90 million will be disbursed once the Appeal Court makes a decision in the Candle Corp case,
bringing the total for FY2003 to $240 million. The reason for the difference between the estimated
$280 million stated above and the actual amount disbursed is due to the fact that the amount disbursed
is reduced by any uncollected bills for AD/CV duties. For FY2003 there were a large amount of
uncollected bills, especially for crawfish.
Question: (Mexico Set V #2)
In part III.3 concerning "CDSOA" [Byrd] one observes an increase in the number of claims: from 900
in 2001, rising to 1200 in 2002 and reaching 2100 in 2003. In this respect, to what do you attribute
the increase in the number of claims?
Answer
The United States has not conducted an analysis to explain the number or amounts of claims under the
Continued Dumping and Subsidy Offset Act of 2000, except insofar as it appears that the number and
amounts of claims generally reflect the amount of duties available in the special accounts established
under the Continued Dumping and Subsidy Offset Act of 2000. We note that, for FY2003, the
United States received over 800 new claims on the lumber and honey cases, accounting for most of
the increase noted above.
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Question: (Mexico Set V #3)
Does the United States recognize that the CDSOA represented an incentive to present claims?
Answer
See answer to previous question. See also the report of the WTO Appellate Body in United States Continued Dumping and Subsidy Offset Act of 2000, WT/DS217, 234/AB/R (adopted on
27 January 2003), regarding whether the Continued Dumping and Subsidy Offset Act of 2000
constitutes an inappropriate incentive to present anti-dumping and countervailing duty claims.
Question: (Mexico Set V #4)
Article 11 paragraph 9 of the Subsidies Agreement establishes that the de minimis margin occurs
when the amount of the subsidy is less than 1 percent. Considering this, why in its regulation on the
investigations of the effects of the expiration of the measures does the United States consider as de
minimis whatever rate of subsidy eligible for countervailing that is less than 0.5 percent?
Answer
Article 11.9 of the SCM Agreement sets forth the de minimis standard in countervailing duty
investigations. The United States (specifically, the U.S. Department of Commerce) applies the
Article 11.9 one percent de minimis standard in countervailing duty investigations. Nothing in the
Agreement sets a de minimis standard in sunset reviews conducted pursuant to Article 21.3. Thus,
Members, including the United States, are free to determine what, if any, de minimis standard they
will apply. The Appellate Body in Corrosion-Resistant Steel from Germany agreed. As a matter of
U.S. law and regulation, the United States applies a 0.5 percent de minimis standard in sunset reviews.
Question: (Chile #1)
Given the significant increase in anti-dumping measures applied in recent years and their negative
impact on trade, in addition to the opinion of various WTO members on the lack of justification for
many of the investigations and measures adopted, does the U.S. think it is possible to decrease the
discretionality and substantially increase the number of investigations conducted and measures
adopted solely by making improvements in procedures that do not affect the substance of the AD and
SCM Agreements?
Answer
The mandate of the Doha Declaration, to "clarify and improve" the AD and SCM Agreements, is not
limited either to substantive or to procedural provisions of those Agreements. That being said, the
United States believes that there must be substantial progress made in improving the transparency of
trade remedy proceedings to allow Members and other interested parties to see that those proceedings
have been conducted in accordance with WTO rules. That is not to say that substantive clarifications
and improvements should not also be made; indeed, the United States has proposed a number of such
topics for discussion in the Negotiating Group on Rules.
Question: (Chile #2)
Does the U.S. believe that it is necessary to resolve the ambiguities and the gaps existing in the Antidumping Agreement in order to prevent the proliferation of excessively onerous investigations, of
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arbitrary application, and misuse of anti-dumping measures? If so, is it considering improving the
rules and disciplines of the Agreements in order to achieve this goal?
Answer
The United States has raised numerous issues in the Negotiating Group on Rules to clarify and
improve the AD and SCM Agreements in ways which minimize the possibility for misuse of trade
remedy measures while also increasing the effectiveness of those remedies.
Question: (Chile #3)
The United States indicated in a communication to the Negotiating Group on Rules (document
TN/RL/W/27) the importance it attaches to the need to identify disciplines on trade-distorting
practices, in order to improve the ability to forecast trends in trade on the global level and reduce the
need to use trade remedies. Does the United States believe that while disciplines that prevent
trade-distorting practices are being strengthened or established, trade remedies must not be restricted
or regulated more extensively in order to prevent the undue proliferation and discretional use of such
measures?
Answer
The discussion of disciplines on trade distorting practices does not preclude a parallel discussion of
other ways in which the AD and SCM Agreements should be clarified and improved. The United
States has raised numerous issues in the Negotiating Group on Rules to clarify and improve the AD
and SCM Agreements in ways which minimize the possibility for misuse of trade remedy measures
while also increasing the effectiveness of those remedies.
Question: (Chile #4)
With regard to anti-dumping investigation procedures, especially the treatment of Section 201 and
Countervailing Duties, Chile has learned that the United States might change the way that the
Department of Commerce calculates the dumping margin so as to be able to deduct duties applicable
under Section 201 of the 1974 Trade Act and countervailing duties under the 1930 Customs Tariff Act
from the export price and the reconstructed export price in calculating the dumping margin. When
does the U.S. Government anticipate that this change will become effective? Does the U.S.
Government expect that there will be any incompatibility in this change with prior DOC
interpretations, or with WTO agreements, especially with respect to the application of Article VI of
the GATT or the Agreement on Subsidies and Countervailing Duties?
Answer
The Department of Commerce announced on April 6, 2004 that it had decided not to deduct Section
201 safeguard duties from the export price in calculating dumping margins. The U.S. Government is
currently considering its position on the issue of deduction of countervailing duties in calculating
dumping margins, and is in the process of evaluating public comments that have been filed.
Question: (Indonesia #7)
On the issue of trade remedy, the Secretariat Report stated that contingency measure remain a key
form of protection against imports. The large presentation of the anti-dumping actions has involved
steel related products. As Indonesia is one of the affected countries on the anti-dumping actions
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against imported steels, Indonesia is of the view that anti-dumping actions taken by the U.S. Authority
are directed to provide protection for steel sector rather than remedies. Please explain.
Answer
The Anti-dumping Agreement recognizes anti-dumping duties as a legitimate tool to counter the
effects of injurious dumped imports. An anti-dumping duty is only imposed where an objective and
transparent examination of the facts reveals that such a measure is warranted under the Anti-dumping
Agreements and U.S. law. The United States has in place strong procedural protections for firms
involved in all U.S. anti-dumping duty proceedings.
The United States has no control over the number of petitions filed by private parties or the products
which they cover. The prevalence of steel products covered by anti-dumping measures is evidenced
not only in the United States but throughout the world. The sources of these trade frictions are widely
acknowledged to be protected markets, interventionist government policies as well as other marketdistorting trade practices that have plagued the world steel industry for decades.
Question: (India #22)
The U.S. has imposed anti-dumping duties on the SAIL, India on HR Coil products. In this case,
USA had imposed AD duties and CVD duties at such a high rate that trade which has a potential of 1
to 1.5 million tonnes annually has been totally disrupted. The system of Annual Review is extremely
cumbersome, unpredictable and expensive for a developing country like India. We would like to hear
the response of the U.S. delegation on this matter and the solutions proposed for resumption of trade.
Answer
The Anti-dumping Agreement and the Agreement on Subsidies and Countervailing Measures
recognize anti-dumping and countervailing duties as legitimate tools to counter the effects of injurious
dumped or subsidized imports. A trade remedy is only imposed where an objective and transparent
examination of the facts reveals that such a measure is warranted under the relevant WTO agreements
and U.S. law. The United States has in place strong procedural protections for firms involved in all
U.S. anti-dumping and countervailing duty proceedings. We note that some of these protections go
well beyond what is required under the Agreements.
Question: (India add 1, 2)
Could the U.S. provide the details of the total amount of under-funded pension obligations taken over
by PBGC for the following years 1999-2000, 2000-01, 2001-02, 2002-03?
Could the U.S. further indicate how much of the under-funded pension liabilities taken over by PBGC
during the period 1999-2003 related to the automobile industry, steel industry and airline industry?
Year-wise details may be provided separately in respect of each of the three industries.
Answer
The Pension Benefit Guarantee Corporation (PBGC) protects the pensions of roughly 44 million
people in about 32,500 private defined benefit pension plans. The PBGC has not received any funds
from the U.S. government and its liabilities are not guaranteed by the U.S. government. Operations
are financed by insurance premiums and investment income.
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Table 2
PBGC BENEFITS PAID FOR MAJOR INDUSTRIES 1999-2003
FISCAL YEAR
ENDING 9/30
AIRLINES
AUTOMOTIVE
PRIMARY METALS
ALL OTHERS
TOTAL
1999
2000
276,162,731
16,190,716
236,151,825
372,406,250
$900,911,522
262,180,337
19,218,754
221,452,660
399,217,500
$902,069,251
2001
366,878,028
21,363,588
218,638,152
435,444,291
$1,042,324,059
2002
413,619,123
18,382,191
543,634,532
561,472,358
$1,537,108,204
2003
525,319,249
21,523,101
1,286,337,306
655,037,190
$2,488,216,846
Table 1
PBGC CLAIMS FOR MAJOR INDUSTRIES 1999-2003
FISCAL YEAR
ENDING 9/30
AIRLINES
AUTOMOTIVE
PRIMARY METALS
ALL OTHERS
TOTAL
Sources:
Reports.
1999
2,368,391
9,135,061
156,758,012
$168,261,463
2000
690,121
102,041,507
$102,731,628
2001
710,513,624
309,707,983
307,414,114
$1,327,635,721
2002
2,587,565,314
1,092,867,859
$3,680,433,173
2003
753,687,525
1,303,324
4,925,077,189
536,517,921
$6,216,585,958
PBGC Participant System (PRISM), fiscal year calculations and PBGC Management
Table 1 provides the present value of the net liabilities assumed by the PBGC at the time various
funds were taken over. Please note that the industry categories in Tables One and Two are the
standard industry categories used by the PBGC for statistical monitoring purposes based on the 1987
U.S. Office of Management and Budget Standard Industry Classification (SIC) Codes as follows:
Airlines – 4500-4599; Automotive – 3700-3719; Primary Metals – 3300-3399. In particular, please
note that the “Primary Metals” category includes more than steel products. (Explanations of
industries in each SIC range can be found at: http://www.wave.net/upg/immigration/sic_index.html.)
Question: (India, add 3)
Out of the total disbursement from the PBGC could the U.S. indicate year-wise total disbursements
during the period 1999-2003 of pension benefits from PBGC and the corresponding annual details for
the automobile industry, steel industry, and airline industry?
Answer
Table 2 provides the amount of benefits paid to retirees covered by pension plans taken over by the
PBGC.
Sources:
Reports.
PBGC Participant System (PRISM), fiscal year calculations and PBGC Management
WT/TPR/M/126/Add.3
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Question: (Brazil Set V #19)
How does the American federal government follow the initiatives of business assistance at local levels
and check their compatibility with the WTO rules? How are the U.S. commitments to the WTO
complied at local levels since those initiatives are not notified to the Federal Government?
Answer
The United States federal government has devoted considerable time and resources in working with
government officials at the sub-federal level to ensure their cognizance of the commitments the
United States has undertaken as a WTO Member. The current degree of close cooperation between
federal and sub-federal governments is evidenced by the subsidies notification made by the United
States in 2003 to the Committee on Subsidies and Countervailing Measures pursuant to Article 25 of
the Agreement on Subsidies and Countervailing Measures (see, G/SCM/N/95/USA). In this
notification, the United States notified 330 sub-federal programs, nearly double the number of
programs notified in 2002.
Question: (Canada #3)
Canada would like to point out that the Continued Dumping and Subsidy Offset Act of 2000 (the
CDSOA, also known as the Byrd Amendment) was successfully challenged at the WTO and found to
be inconsistent with the United States’ obligations under the Anti-Dumping and Subsidies
Agreements. In June 2003, an Arbitrator gave the U.S. 11 months from the Appellate Body Report to
bring its measure into compliance with its WTO obligations. Why has the U.S. ignored the
reasonable period of time established by the Arbitrator (until December 27, 2003) and not complied
with the Appellate Body ruling? When can Canada expect the U.S. to repeal this measure that has
been found to be WTO inconsistent?
Answer
The United States Administration proposed repeal of the Continued Dumping and Subsidy Offset Act
in its fiscal year 2004 and 2005 budgets, and has been working with the U.S. Congress on appropriate
legislation. In addition, a bill was introduced in the U.S. Senate to amend the CDSOA in a WTOconsistent manner, and another has been introduced in the U.S. House of Representatives to repeal the
CDSOA. The United States will continue to seek compliance with the DSB recommendations and
rulings.
Question: (Canada #4)
The Report refers to the non-conformity of the Anti-Dumping Act of 1916 with multilateral rules and
recent bills introduced to address the issue. Will the Administration convey to Congress the urgency
of enacting a measure that repeals the Act and terminates pending cases (e.g., S 1080)?
Answer
The United States Administration has conveyed to Congress the importance of timely repeal of the
1916 Act which would terminate pending cases. The Administration will continue to work with
Congress towards this end.
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Question: (China #11 and #12)
Would the U.S. Government expect that other Members will follow the practice of the U.S. thus
harming the world environment of fair trade and the implementation of WTO Agreements?
Does the U.S. have any plan on repealing or amending the relevant legislation inconsistent with the
WTO Agreements?
Answer
The United States has made clear its commitment to work with the U.S. Congress to fully comply
with the prior recommendations and rulings of the Dispute Settlement Body concerning the
Extraterritorial Income Act. Both branches of Congress are currently considering legislative
proposals that would repeal the ETI Act. While the United States cannot specify the precise date on
which this will occur, the United States is confident that the ETI Act will be repealed in the
reasonably near future.
Question: (China #20 & #21)
As the “reasonable period of time” for implementation has expired, what detailed measures will the
United States adopt to implement the WTO recommendation?
Is the U.S. prepared to notify the detailed programme and timetable to comprehensively repeal the
Byrd Amendment?
Answer
The United States Administration proposed repeal of the Continued Dumping and Subsidy Offset Act
in its fiscal year 2004 and 2005 budgets, and has been working with the U.S. Congress on appropriate
legislation. In addition, a bill was introduced in the U.S. Senate to amend the CDSOA in a WTOconsistent manner, and another has been introduced in the U.S. House of Representatives to repeal the
CDSOA. The United States will continue to seek compliance with the DSB recommendations and
rulings.
The United States Congress determines the timing and content of legislation in the United States. The
United States Administration will continue to work with the U.S. Congress to achieve early passage of
legislation on the CDSOA bringing the United States into compliance with its WTO obligations.
Question: (China #23)
Could the U.S. Delegation provide some information about the progress of repealing 1916 Antidumping Act in Congress?
Answer
There are three bills pending in the U.S. Congress to repeal the 1916 Act. One bill in the U.S. Senate,
S. 1080, would repeal the 1916 Act and terminate all pending cases. Two bills, H.R. 1073 in the U.S.
House of Representatives and S. 1155 in the U.S. Senate, would repeal the 1916 Act but not affect
1916 Act litigation already underway. H.R. 1073 was reported favorably out of the Committee on the
Judiciary of the U.S. House of Representatives in January, 2004. The United States is continuing to
work with the U.S. Congress to pass legislation repealing the 1916 Act and terminating pending cases.
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Question: (EC #57)
Article 21.1 of the WTO Understanding on Dispute Settlement (DSU) states that prompt compliance
with recommendations and rulings of the DSB is essential in order to ensure effective resolution of
disputes to the benefit of WTO Members. Moreover, Article 3 of the DSU affirms that "the dispute
settlement system of the WTO is a central element in providing security and predictability to the
multilateral trading system". Notwithstanding these provisions, the U.S. has a patchy record with
regard to compliance with recommendations and rulings formulated by the DSB on the basis of
Panels' and the Appellate Body's reports. What measures are being taken by the U.S. to comply, and
when is full compliance expected, with WTO Dispute Settlement Rulings in the following cases: the
Foreign Sales Corporations legislation (concerning the FSC Repeal and Extraterritorial Income
Exclusion Act (ETI)); the 1916 Anti-dumping measures; Section 110(5) of the U.S. Copyright Act;
the Continued Dumping and Subsidy Offset Act (the so-called “Byrd Amendment”)?
Answer
In the disputes in which U.S. measures have been found inconsistent with U.S. WTO obligations, the
United States has implemented the vast majority of DSB recommendations and rulings in full and
within the reasonable period of time. With respect to the disputes referred to in the EC’s question, the
United States will continue to seek early passage of required legislation in order to fully implement
the DSB’s recommendations and rulings.
Question: (EC #58)
How does the U.S. judge the relevant importance of prompt compliance with WTO rulings, and hence
the upholding of the rules-based international trading system, and the setting of a good example for
the rest of the world, vis-a-vis its own domestic goals and interests in terms of U.S. economic and
commercial development?
Answer
The United States shares the European Communities’ priority in complying with DSB
recommendations and rulings, although as the EC’s own experience in its failures and years’ long
delays in implementing DSB recommendations and rulings demonstrates (e.g., Bananas, Beef
Hormones), compliance is not always possible by the end of the reasonable period of time. In the
disputes in which U.S. measures have been found inconsistent with U.S. WTO obligations, the United
States has implemented the vast majority of DSB recommendations and rulings in full and within the
reasonable period of time. It continues to make efforts to enact legislation where such legislation is
necessary for implementation.
Question: (EC #59)
What explanation can be given for the longstanding trend whereby the U.S. has not implemented the
necessary measures to comply with WTO rulings within the designated time frame?
Answer
Unlike the EC which began its record of not implementing DSB recommendations and rulings from
the beginning of the WTO, in the disputes in which U.S. measures have been found inconsistent with
U.S. WTO obligations, the United States has implemented the vast majority of DSB recommendations
and rulings in full and within the reasonable period of time. The United States further notes that the
EC has continued to be out of compliance longer than any other Member.
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Question: (Japan #10)
p. 22, para. 38 and p. 23, para. 42
The U.S. has been imposing anti-dumping and countervailing duties on certain lumber products from
Canada under the Department of Commerce’s final determination. Concerning these duties, three
related panels based on the DSU of WTO were set up in response to requests by the Canadian
Government. The panel regarding countervailing duty reported on August 29, 2003, that the U.S.'
final determination was inconsistent with the WTO agreement. The U.S. appealed to the Appellate
Body on October 21, while bilateral negotiations have, Japan understands, been held continually.
Could the U.S. explain the latest developments in the bilateral negotiations with Canada?
Question: (Japan #11)
We are aware that the Softwood Lumber Agreement of September 1996 between the U.S. and
Canada, which tackles the exports of Canadian softwood lumber to the U.S., expired on March 31,
2001. We consider this agreement as an “export moderation” as mentioned in para. 1(b) of Article 11
of the Agreement on Safeguards, and request that any measure of this kind not be reintroduced.
Answer
The 1996 U.S. Canada Softwood Lumber Agreement expired on March 31, 2001. The United States
subsequently sought agreement with Canada on fundamental provincial reforms. However,
negotiations broke off and we imposed CVD and AD duties in response to U.S. industry petitions
alleging unfair Canadian trade practices. Specifically, the Department of Commerce (“DOC”) issued
final anti-dumping and countervailing duty (“AD/CVD”) orders applying an average 27.2 percent
duty on imports of softwood lumber from Canada on May 22, 2002.
The CVD statute allows for “changed circumstances reviews” in instances where changes in the
conditions that led to the imposition of duties would justify a reduction or elimination of the CVD
duties. The DOC recently published draft guidelines for reforms in Canadian provincial forest
practices. This Policy Bulletin can be found at the website www.ita.doc.gov. The Policy Bulletin
provides a roadmap of reforms provinces must undertake in their stumpage and forestry practices
before revocation of duties may be assessed. We continue to work with all stakeholders toward
finding a long term, durable solution to the softwood lumber dispute.
Question: (Argentina #2)
In paragraphs 77-79, it is stated that the Continued Dumping and Subsidy Offset Act of 2000
(CDSOA), also known as the Byrd Amendment, is one of the instruments of U.S. trade legislation. It
was reviewed by a Special Panel, which concluded that this measure is inconsistent with a series of
WTO agreements. Given that the number of requests for protection under the Byrd Amendment has
increased exponentially over a three-year period (jumping from 900 in 2001 to 2,100 in 2003), and
that the WTO Appeal Organ has confirmed that it is inconsistent with WTO rules, what measures will
the U.S. implement to comply with the determination of the Special Panel and the Appeal Organ in
this regard?
Answer
The United States Administration proposed repeal of the Continued Dumping and Subsidy Offset Act
in its fiscal year 2004 and 2005 budgets, and has been working with the U.S. Congress on appropriate
legislation. In addition, a bill was introduced in the U.S. Senate to amend the CDSOA in a WTOconsistent manner, and another has been introduced in the U.S. House of Representatives to repeal the
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CDSOA. The United States will continue to seek compliance with the DSB recommendations and
rulings.
Question: (Norway #6)
Can the U.S. delegation update the Members on the status of this [CDSOA] repeal legislation, and
when the Administration envisages it being passed by Congress?
Answer
The United States Administration proposed repeal of the Continued Dumping and Subsidy Offset Act
in its fiscal year 2004 and 2005 budgets, and has been working with the U.S. Congress on appropriate
legislation. In addition, a bill was introduced in the U.S. Senate to amend the CDSOA in a WTOconsistent manner, and another has been introduced in the U.S. House of Representatives to repeal the
CDSOA.
While the United States Congress determines the timing and content of legislation in the United
States, the Administration will continue to work with the U.S. Congress to achieve early passage of
legislation on the CDSOA, in order to bring the United States into compliance with its WTO
obligations.
Question: (Korea)
Reference: p. 47, paras. 74-76
The U.S. Department of Commerce is reportedly considering deducting Section 201 and CVD duties
from the constructed export price in dumping margin calculations. What is the U.S. government’s
position on this matter?
Answer
The Department of Commerce announced on April 6, 2004 that it had decided not to deduct Section
201 safeguard duties from the export price in calculating dumping margins. The U.S. Government is
currently considering its position on the issue of deduction of countervailing duties in calculating
dumping margins, and is in the process of evaluating public comments that have been filed.
Question: (Korea ref. para. 77)
Can the United States provide any detailed plan to implement the ruling of the WTO/DSB?
Answer
The United States Administration proposed repeal of the Continued Dumping and Subsidy Offset Act
in its fiscal year 2004 and 2005 budgets, and has been working with the U.S. Congress on appropriate
legislation. In addition, a bill was introduced in the U.S. Senate to amend the CDSOA in a WTOconsistent manner and another has been introduced in the U.S. House of Representatives to repeal the
CDSOA.
While the United States Congress determines the timing and content of legislation in the United
States, the Administration will continue to work with the U.S. Congress to achieve early passage of
legislation on the CDSOA, in order to bring the United States into compliance with its WTO
obligations.
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Question: (Thailand #1)
Regarding “the Continued Dumping and Subsidy Offset Act of 2000 (CDOSA)” or also known as the
Byrd Amendment which the U.S. has stated its intention to implement the recommendations and
rulings of the DSB, we [Thailand], therefore, would like to urge the U.S. Government to take action
on this matter as soon as possible.
Answer
The United States Administration proposed repeal of the Continued Dumping and Subsidy Offset Act
in its fiscal year 2004 and 2005 budgets, and has been working with the U.S. Congress on appropriate
legislation. In addition, a bill was introduced in the U.S. Senate to amend the CDSOA in a WTOconsistent manner and another has been introduced in the U.S. House of Representatives to repeal the
CDSOA.
While the United States Congress determines the timing and content of legislation in the United
States, the Administration will continue to work with the U.S. Congress to achieve early passage of
legislation on the CDSOA, in order to bring the United States into compliance with its WTO
obligations.
Question: (Mexico Set III #2)
Is the Byrd Amendment considered in the 2004 U.S. budget? If so, how the U.S. believes it complies
with the WTO and the decisions made by the WTO Panel, or how will be the process that the U.S.
Government will follow to comply with it?
Answer
The United States Administration proposed repeal of the Continued Dumping and Subsidy Offset Act
in its fiscal year 2004 and 2005 budgets, and has been working with the U.S. Congress on appropriate
legislation. In addition, a bill was introduced in the U.S. Senate to amend the CDSOA in a WTOconsistent manner and another has been introduced in the U.S. House of Representatives to repeal the
CDSOA.
While the United States Congress determines the timing and content of legislation in the United
States, the Administration will continue to work with the U.S. Congress to achieve early passage of
legislation on the CDSOA, in order to bring the United States into compliance with its WTO
obligations.
Question: (Japan #24 and #25)
Japan urges the U.S. to repeal the Byrd Amendment without delay.
Answer
The United States Administration proposed repeal of the Continued Dumping and Subsidy Offset Act
in its fiscal year 2004 and 2005 budgets, and has been working with the U.S. Congress on appropriate
legislation. In addition, a bill was introduced in the U.S. Senate to amend the CDSOA in a WTOconsistent manner and another has been introduced in the U.S. House of Representatives to repeal the
CDSOA.
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While the United States Congress determines the timing and content of legislation in the United
States, the Administration will continue to work with the U.S. Congress to achieve early passage of
legislation on the CDSOA, in order to bring the United States into compliance with its WTO
obligations.
Question: (Japan #27)
Three years have passed since the Reports of the Panel and the Appellate Body affirmed that the AntiDumping Act of 1916 was inconsistent with WTO Agreement. Even after the extended “reasonable
period of time”, the Act is yet to be repealed. What is the U.S. view on the implementation of the
DSB’s recommendations?
Answer
Legislation repealing the 1916 Act is pending in both the U.S. Senate and U.S. House of
Representatives. The U.S. Administration will continue to work for legislation which would repeal
the 1916 Act with respect to both existing and prospective cases.
Question: (Japan #28)
Could the U.S. Administration look into the judicial administration of 1916 Act? Could the U.S.
Administration make up for the loss suffered by the Japanese company in the same way that the U.S.
made a lump-sum payment regarding Section 110(5) of the U.S. Copyright Act?
Answer
As Japan is aware from bilateral discussions, the United States is monitoring developments in the
administration of the 1916 Act. While the arrangement in the dispute concerning Section 110(5)
reflected the specific circumstances of that dispute, the United States is open to discussion with Japan
on any issue involved in the dispute over the 1916 Act.
Question: (Japan #30)
With regard to paragraph 115 of the Report by the Secretariat concerning the U.S. safeguard measures
on the imports of certain steel products, in the WTO dispute settlement proceedings, the Panel, as well
as the Appellate Body, concluded that these measures were inconsistent with the Agreement on
Safeguards and GATT 1994. Japan requests the U.S. to clarify whether it has the intention to review
the ways and means of the U.S. safeguard investigation, as well as the criteria it applies in the
investigation as a result of the rulings by these WTO dispute settlement bodies. For example, in the
USITC Report concerning the safeguard measures, the USITC used the “substantial cause” as criteria
in conducting causation analysis. According to our understanding, under Section 201 of the U.S.
Trade Act of 1974, more weight is given to increased imports when investigating the causal link
between the increased imports of the product concerned and the serious injury or threat thereof. That
is to say, the existence of a causal link is believed to be proved as long as the increased import is the
cause, which is important and no less than any other cause. On the other hand, under Article 4.2 of
the Agreement on Safeguards, non-attribution requirements are called for when a detailed analysis is
required, in order to demonstrate that factors other than increased imports are not attributed to the
injury caused in the domestic industry. Thus, Japan believes that the issue of the compatibility of the
U.S. domestic safeguards legislation with the WTO Agreement needs to be addressed and carefully
looked into by the U.S. What are the U.S. views on this matter?
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Answer
Section 202(b) of the Trade Act of 1974 provides that in a safeguard investigation, the U.S.
International Trade Commission (USITC) is to determine whether an article is being imported into the
United States in such increased quantities as to be a substantial cause of serious injury, or the threat
thereof, to the domestic industry, producing an article like or directly competitive with the imported
article. It defines “substantial cause” as meaning a cause which is important and not less than any
other cause. Among other statutory requirements, Section 202(c) further requires the USITC, in
making the determinations under Section 202(b), to examine factors other than increased imports
which may be a cause of serious injury, or threat thereof, to the domestic industry, and to include the
results of this examination in its report. Thus, the characterization of the requirements of Section 201
in the question is not accurate or complete.
Moreover, contrary to the suggestion in the question, the Appellate Body has not found the U.S.
domestic safeguards legislation to be incompatible with the Safeguards Agreement. Indeed, in United
States – Wheat Gluten, the Appellate Body expressly reversed a Panel finding that the USITC’s
causation examination pursuant to these statutory requirements was inconsistent with the nonattribution language in Article 4.2(b) of the Agreement. In reversing, the Appellate Body stated that
this Panel finding, based on reasoning similar to that set forth in this question, was “based on an
erroneous interpretation of Article 4.2(b).” United States – Definitive Safeguard Measures on Imports
of Wheat Gluten from the European Communities, WT/DS166/AB/R (22 December 2000), at
Paragraph 79.
Question: (Japan #31)
While the U.S. lifted the safeguard measures on the imports of certain steel products, it continues to
retain the monitoring program and steel import licensing until March 2005, through which it can
closely monitor the status of steel imports into the U.S. On December 4, 2003, the U.S. President said
in his statement on the lifting of safeguard measures that an integral part of our commitment to free
trade is our commitment to enforcing our trade laws In view of such statement, we cannot but address
our concern over the possibility that a trade-controlling measure, such as the above program, may lead
to protective measures, should such measure not be properly used. Therefore, Japan would like to
seek the confirmation of, and commitment by, the U.S. that the above program shall be strictly used in
conformity with the WTO Agreement.
Answer
It is the policy of the United States to comply fully with its WTO commitments. The current steel
licensing system, established under section 203(a)(3)(I), is an easy-to-use, transparent, WTOconsistent system that is not trade restrictive. Its purpose is to identify potential steel import surges
quickly.
Question: (Japan #26)
Japan brought a claim against the U.S. before the WTO Dispute Settlement Body that the antidumping investigations conducted by the U.S. authorities on certain hot-rolled steel products from
Japan are inconsistent with the WTO agreements. The report by the Appellate Body concluded that
the methodology employed by the Department of Commerce for calculating the anti-dumping margin,
as well as the USITC methodology for determining injury is not consistent with the WTO agreements;
the DSB adopted the report in August 2001. The U.S., however, has not yet amended its law
concerning the methodology for calculating the anti-dumping margin. During the DSB session held in
December 2003, the U.S. stated that they intended to renew their efforts to complete the
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implementation of the DSB’s rulings and recommendations when the Congress resumes its activities
in January 2004. Please explain the present status of discussions in the Congress.
Answer
The United States continues to work with Congress to pass the necessary legislation.
Question: (Chinese Taipei)
Reference: p. 3
In view of the fact that at least 6 percent of the anti-dumping measures currently enforced in the U.S.
involve exporters from the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, we
would be particularly interested in knowing whether the U.S. has any plan to improve its investigation
procedures regarding sunset reviews, in recognition of the principle of terminating anti-dumping and
countervailing measures after 5 years of implementation.
Answer
Article 11.3 of the AD Agreement and Article 21.3 of the SCM Agreement permit the authorities to
evaluate an anti-dumping or countervailing duty order, respectively, five years from its imposition;
they do not require the termination of an order after five years if a sunset review results in a
determination that termination of the order would be likely to lead to continuation or recurrence of
dumping or subsidization and injury. U.S. laws and regulations concerning the conduct of sunset
reviews are consistent with the applicable WTO obligations.
Question: (Chinese Taipei pp. 3-4)
(Secretariat Report; p. 197, para. 227). One particular noteworthy remark in the Secretariat Report
states that “All the cases in which safeguard measures were applied by the United States since 1998
have been challenged in the WTO.” In addition, there were striking similarities between the bases of
complaints made by other WTO Members, which were later accepted by the panels and the appellate
body. It appears, for example, that imports from NAFTA countries were excluded from the
application of safeguard measures, but included when it came to consideration of an “import surge”.
Bearing in mind the precedent established by repeated DSB rulings, we would ask the U.S. to advise
us of any improvements it makes in future investigation procedures in order to ensure more WTOacceptable results.
Answer
The Appellate Body has not yet found a single safeguard measure by any WTO Member to be
consistent with the WTO Agreement on Safeguards, so it is not surprising that there have been WTO
challenges to the safeguard measures taken by the United States, given the size of the U.S. market and
its importance to many Members. It should be emphasized, however, that the Appellate Body has not
found the U.S. safeguards law to be incompatible with the Safeguards Agreement.
In the event of any modification to U.S. laws, regulations or administrative procedures relating to
safeguard measures, the United States would promptly provide a notification to the Committee on
Safeguards in accordance with Article 12.6 of the Agreement on Safeguards.
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Question: (Chile – Safeguards #1)
What are the criteria used to determine the application of a tariff surcharge, of quantitative
restrictions, or a tariff rate quota for the safeguards applied by the U.S.? What are the bases and the
mechanics for the application of import licenses and “other measures” referred to in Section 203 of
the 1974 Trade Act? Are such measures applied on a supplemental basis or in replacement of the
aforementioned measures?
Answer
The criteria for what action, if any, the President should take in a safeguard investigation following an
affirmative injury finding by the U.S. International Trade Commission (“USITC”) are specified in
Section 203 of the Trade Act of 1974. Section 203(a)(1)(A) states that after such a USITC finding the
President “shall take all appropriate and feasible action within his power which the President
determines will facilitate efforts by the domestic industry to make a positive adjustment to import
competition and provide greater economic and social benefits than costs.” Section 203(a)(2)
identifies particular factors that the President is to take into account in making this decision,
specifically including the recommendation and report of the USITC containing its recommendations
as to what action(s) to take.
Section 203(a)(3) authorizes various actions (or combinations of actions) that the President may take.
Some of the possible actions authorized by this Section involve the imposition of a safeguard measure
(e.g., tariff increase, quantitative restriction, tariff rate quota), while a number of other actions
authorized by the Section (e.g., trade adjustment assistance) do not. Under section 203, the President
retains the authority to take other actions, including but not limited to import licensing, without regard
to the early termination of safeguard measures. For example, the current steel licensing system,
established under section 203(a)(3)(I), is an easy-to-use, transparent, WTO-consistent system that is
not trade restrictive. Its purpose is to identify potential steel import surges quickly. The licensing
system is not a safeguard measure, and it does not replace or act as a surrogate for the steel safeguard
measures which were terminated on December 4, 2003.
Question: (Chile – Safeguards #2)
Under the NAFTA, imports of products from other NAFTA countries are exempted from application
of the final measure when they do not represent a substantial share of imports. In such cases, does the
United States take into account imports that are not subject to safeguards when calculating the injury
and imposing the safeguard?
Answer
While this may be only a translation error, it is important first to clarify that in its injury
determinations in safeguard investigations, the USITC does not "calculate" injury.
In response to the substance of the question, the USITC was specifically requested by USTR Zoellick
to make a finding during the steel investigation as to whether increased imports from all sources other
than FTA partners were a substantial cause of serious injury or threat of serious injury to the
corresponding domestic industry. The ITC provided a response to this question in its report under
Section 203(a)(5) of the Trade Act of 1974. Similarly, in the evaluation of what relief if any to
impose, the President's analysis of the likely effectiveness of any proposed remedial measure would
be informed by taking into account the possible effects of any imports that would not be subject to the
measure.
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Question: (Chile – Safeguards #3)
How does the U.S. interpret the statement of the WTO Secretariat to the effect that “although the
number of investigations has been low, their scope has been broad in recent years, especially with
regard to steel…”? Is this true, considering the number of products, the type and category of products
involved, or the lack of precision in the tariff headings?
Answer
As the question states, the statement quoted was by the Secretariat, not the U.S. Government. We
assume that the Secretariat’s statement that the number of U.S. investigations has been “limited”
refers to the facts that the investigation regarding certain steel products initiated in June 2001 has been
the only U.S. Section 201 safeguard investigation after 2000, and that there were no Section 201
investigations initiated during the review period. Thus, the United States had fewer such
investigations in this period than some other WTO Members, including Chile.
As to the Secretariat’s statement about breadth of the scope of safeguard investigations, that appears
to be a reference to the steel investigation, since the Secretariat does not identify any other such
investigations with a broad scope. In the steel Section 201 investigation, which was part of the
President’s comprehensive steel initiative, the U.S. International Trade Commission found 29
different products, although the United States ultimately imposed safeguard measures with respect to
only 10 of those products.
Question: (Mexico III #1)
What is the percentage of “non-initiation/petition” related to the ITC determination that a petition
does not contains sufficient information supporting the allegations?
Answer
While a majority of petitions formally filed have led to investigations, it is not unusual for a petition
not to be filed formally following an informal review in the context of pre-petition counseling.
CHAPTER 3 - TRADE POLICIES BY MEASURE
(3.3) TBT/SPS Measures and Environment (including Bio-terrorism)
Question: (Mexico III 1.a)
Mexico has expressed in bilateral forums and multilateral meetings its position on this issue.
Moreover, Mexico actively participated in the public comment period on the regulations with the
submission of comments. Nevertheless, Mexico requests that the U.S. provide clarification on the
following points with reference to the Bioterrorism Act:
How many companies have registered?
Answer
The Government of Mexico requests clarification with respect to the number of companies that have
registered under the requirements of the Bioterrorism Act. As of June 18, 2004, the total number of
registrations was 207,432. Of these, 6,467 registrations are from facilities in Mexico. A total list of
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the number of facilities registered by country as of May 19, 2004 may be found at: http://www.cfsan.
fda.gov/~furls/ffregsum.html.
Question: (Mexico III 1.b)
What are the initial results of application of the Act?
Answer
Regarding the level of compliance with the interim final rule concerning the registration of food
facilities, FDA estimates that the total number of food facilities that must register is approximately
420,000, approximately half of which are domestic. As of June 18, 2004, FDA had received 207,432
registrations, of which 98,654 are from U.S. facilities and 108,778 are from foreign facilities. Most
facilities are registering electronically. FDA continues to encourage the remaining facilities to
register.
In regard to the activities concerning the interim final rule pertaining to prior notice of imported food
shipments, FDA is pleased to announce that on December 3, 2003, under the authority in Section 314
of the Bioterrorism Act, the Bureau of Customs and Border Patrol (CBP) and FDA signed a
Memorandum of Understanding (MOU) commissioning agreement. Under this agreement, we have
commissioned
6,000
CBP
officials
to
date
See
<http://www.fda.gov/bbs/topics/NEWS/2003/NEW00988.html> to assist with responsibilities under
the Bioterrorism Act.
This MOU is a significant factor in FDA being able to reduce the prior notice time frames from noon
the day before the food arrives (proposed rule) to the time frames in the interim final rule, while still
meeting our public health mission.
The level of compliance with the prior notice provision has been encouraging, but it will require
continuing improvement. FDA is still concentrating its efforts on education rather than on
compliance. FDA has been receiving about 150,000 prior notice submissions a week since February.
About 88% (2.1 of 2.4 million) were submitted as additional information on transactions through
CBP's Automated Commercial System (ACS), about 11% came through FDA's new Web-based Prior
Notice System Interface (PNSI). The remaining transactions are in the new form that CBP and FDA
provided for submitting information through ACS on food shipments that do not require CBP ACS
submission at the time of arrival in the U.S., e.g. Transportation and Exportation, Immediate
Transportation, and Foreign Trade Zones. Since March, most of the prior notices received are
complete, and very few submissions of food products through ACS contain no prior notice data.
There have been assertions by industry members that prior notice holds have been placed on
shipments. This is largely inaccurate. The real reasons for a hold range from entry not being filed
yet, importers/exporters not really knowing where their product is, and confusing a prior notice hold
with the more routine holds for product sampling.
Question: (Mexico III 1.c)
How have the U.S. authorities addressed the issue of synchronizing the FDA's and U.S. Customs'
electronic systems?
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Answer
With regard to prior notice, the systems have been synchronized: For those who import food and who
file with Customs and Border Protection (CBP) for entry, the FDA prior notice submission may be
prepared in conjunction with the CBP filing. However, the reverse is not true; persons submitting
prior notice using the FDA's Prior Notice System Interface (PNSI) may not use PNSI to file CBP
entry information. A separate entry must be filed with CBP.
Question: (Mexico III 1.d)
How will discretionarily be minimized with a view to avoiding the arbitrary detention of shipments?
Answer
The United States Food and Drug Administration (FDA) and the U.S. Customs and Border Protection
(CBP) issued a compliance policy guide (CPG) that is available on the FDA website,
http://www.cfsan.fda.gov/~pn/cpgpn.html. The CPG describes our strategy for maintaining an
uninterrupted flow of food imports while improving their safety in accordance with the Public Health
Security and Bioterrorism Preparedness and Response Act of 2002 (Bioterrorism Act) requirements
which became effective on December 12, 2003. FDA and CBP expect a "good faith" effort at
compliance with the requirement that FDA receive a prior notification of all human and animal food,
drinks and dietary supplements imported or offered for import to the U.S. and the requirement that all
facilities that manufacture, process, pack or hold food intended for consumption in the U.S. must be
registered with FDA. During the 8 months following December 12, 2003, the two agencies will
primarily rely on educating the affected firms and individuals. During this period, the agencies will
utilize communication and education initiatives, escalating imposition of civil monetary penalties, and
ultimately refusal of shipments. This phase-in period will end on August 12, 2004. FDA and CBP
personnel have already begun an extensive campaign to educate other government officials, domestic
and foreign food importers, brokers, transporters, and other affected industry representatives with
written material, briefings, and seminars on how to comply with the new regulations implementing
the Bioterrorism Act. As part of this outreach, FDA senior officials traveled to Mexico both after
FDA and CBP issued the proposed rules and again after we issued the two interim final rules to
explain the requirements to government officials and industry members.
Question: (Mexico III 1.e)
What is the possibility of harmonizing prior-notice-of-shipment times under the Bioterrorism Act with
other existing programs, in particular FAST?
Answer
FDA and CBP continuously are assessing the completeness of prior notice submissions received as
well as the amount of time necessary to receive, review, and respond to those submissions requiring a
human review. However, that process is not yet complete, as we are currently operating under the
enforcement discretion policies outlined in the Prior Notice Compliance Policy Guide (CPG). See
"Notice of Availability: Compliance Policy Guide Sec. 110.310--Prior Notice of Imported Food
Under the Public Health Security and Bioterrorism Preparedness and Response Act of 2002" (68 FR
69708, Dec. 15, 2003). http://www.cfsan.fda.gov/guidance.html. We currently do not receive prior
notice for all shipments.
In April 2004 FDA and CBP announced the following plan, which we intend to implement in
August 2004.
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



From August 12, 2004, to October 12, 2004, we plan to assess existing procedures and
staffing needed to receive, review, and respond to the prior notices submitted in accordance
with the Prior Notice IFR (i.e., 2 hours before arrival by land by road; 4 hours before arrival
by air or by land by rail; and 8 hours before arrival by water).
From October 13, 2004, to November 12, 2004, we intend to identify what changes to work
practices and staffing would be necessary to determine if FDA could continue to receive,
review, and respond to all prior notice submissions with reduced timeframes (e.g., 1 hour/30
minutes before arrival by land by road; 2 hours before arrival by land by rail; and by "wheels
up" for flights originating in North and Central America, South America (north of the Equator
only), the Caribbean, and Bermuda; otherwise 4 hours before arrival by air).
From November 13, 2004, to February 12, 2005, we plan to implement necessary changes
and make appropriate adjustments to ensure we could receive, review, and respond to all prior
notice submissions with reduced timeframes.
In March 2005, we intend to issue a prior notice final rule that responds to the comments we
received on the Prior Notice IFR, including this plan, during the two open comment periods.
Question: (Mexico III 1.f)
How are records that are not in electronic form are being handled?
Answer
If the question relates to record keeping requirements, FDA will comment on the provisions once they
are finalized and stakeholders have an opportunity to assess the impact of the final rule as it may
apply to them. FDA will be issuing a final rule after fully considering the timely comments we have
received. Under the Administrative Procedure Act, FDA cannot address comments during a pending
rule making process
If the question relates to how is FDA handling paper registrations, FDA staff are inputting into the
registration database all completed paper forms received via mail or fax and returning to the facility
its registration number and confirmation of registration. This is a slower process than a facility or its
authorized representative registering the facility electronically.
Question: (Brazil II TBT #1)
To what extent do the USA and the EU adopt international standards as a basis for their harmonized
technical regulations under the Transatlantic Economic Partnership?
Answer
The WTO Agreement on Technical Barriers to Trade obliges the United States (and EU) to base its
technical regulations and conformity assessment procedures on international standards to the extent
that relevant ones exist and they are effective and appropriate for meeting legitimate regulatory needs.
The U.S. and EU affirmed this obligation in the Transatlantic Economic Partnership. The U.S.
government does not maintain centralized statistics on the extent to which either Party has based their
regulations on international standards.
Question: (Canada II #16)
Canada continues to have concerns regarding the consistency of the U.S. Marine Mammal Protection
Act (MMPA) with U.S. WTO obligations. In past WTO reviews of U.S. trade policy, the U.S.
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delegation has cited in defense of the MMPA, that a waiver is available, subject to certain conditions,
to allow imports of marine mammal products. However, in response to the last TPR questions, the
U.S. delegation stated that since 1975, no application for an import waiver had been received. On
what objective basis would the U.S. Secretary of Commerce grant a waiver for the commercial import
and retail of marine mammal products? If the conditions for a waiver were met, how would such a
waiver be implemented for the commercial import and retail of marine mammal products? How can
the waiver process be justified as relief from the import ban considering WTO obligations?
Answer
The U.S. Secretary of Commerce may waive the MMPA's moratorium on the taking of marine
mammals if such taking is in accord with sound principles of resource protection and conservation. In
addition, in order to grant a waiver for the import of marine mammal products, the Secretary must
certify that the program for taking marine mammals in the country of origin is consistent with the
MMPA. Implementation of a waiver would entail formal rule making and the issuance of permits.
Thus, the waiver process provides relief from the MMPA's trade ban with respect to marine mammal
products.
The process for waiving the moratorium is a formal rule-making that includes a hearing before an
Administrative Law Judge, and any person could request, in writing, to be a party to the hearing.
The entire process can be summarized as follows:
1. Waiver and regulations - Formal rule making process in accordance with 50 CFR part 228 and
considering the criteria described above. If a waiver is warranted, NMFS would need to promulgate
regulations that would allow issuance of permits to import marine mammal products for commercial
purposes.
2. Permits - NMFS could then issue permits in accordance with the regulations.
The United States believes that the regulatory regime under the Marine Mammal Protection Act, as
described in the detailed answers to Canada's questions, is consistent with our WTO obligations.
Question: (Canada II #17)
If a country requested a waiver of the prohibition of importing marine products and provided
documentation of the following conditions, NOAA could waive the moratorium. The population
stock from which the animals came would have to be within their Optimum Sustainable Population
levels, and the taking for importation would not cause the population level to drop below their
optimum sustainable yield. In addition, regardless of the waiver provision, there are several
prohibitions of the MMPA that would continue to apply to any import. Marine mammals or marine
mammal products cannot be imported if the marine mammal was pregnant, nursing, or less than 8
months old at the time of the taking, taken from a stock designated as depleted, taken in an inhumane
manner, taken in violation of the MMPA or in violation of the law of the country in which it was
taken, or the sale of the marine mammal product is illegal in the country of origin.
In addition to a waiver, Canada understands that permits would be required to import and sell marine
mammal products in the U.S. However, the MMPA and its regulations do not provide for commercial
imports or sales in the United States. How do permits allow for the commercial importation and retail
of marine mammal products? How can that be justified considering WTO obligations? How is this
defensible under WTO obligations?
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Answer
The waiver process itself involves formal rule making that would allow the issuance of permits to
import marine mammal products for commercial purposes. The permits could be issued in
accordance to the regulations that were promulgated following the formal rule making and the waiver
of the moratorium. If the waiver provisions of the MMPA do provide relief from the trade ban with
respect to marine mammal products, then the Presidential order that consideration be withheld "...of
any Canadian requests for waivers to the existing moratorium on the importation of seals and/or seal
products into the United States" removes any possible relief from the trade ban for Canada.
The United States believes that the regulatory regime under the Marine Mammal Protection Act, as
described in the detailed answers to Canada's questions, is consistent with our WTO obligations.
Question: (EU #5)
Reference: Bio-terrorism Act of 2002
Why did the FDA not carry out a specific risk assessment during the development of the proposed set
of four far-reaching rules to implement the food-related provisions of this Act? What efforts are
being made by the FDA to reduce the impact of these new measures on trade? Will there be a review
mechanism of the parent legislation from the date of implementation of the new measures, and if not,
why not? More specifically regarding the new record-keeping measures, what efforts are being made
to improve the manifest lack of communication between U.S. agencies such as the FDA, Tax and
Trade Bureau, and U.S. Customs?
Answer
FDA has published the risk assessment with the interim final rule. Under the U.S. system, legislation
is not normally put into effect until the final regulations take effect. The risk assessment may be
found on the FDA Website at http://www.cfsan.fda.gov/~dms/rabtact.html.
FDA has encouraged public comment at every stage of the Bioterrorism regulations' development.
FDA developed and published proposed regulations which were open to public comment from both
domestic and foreign parties. We also conducted numerous outreach meetings directed at foreign
stakeholders, both within the U.S. to foreign embassy officials in Washington and via
videoconference. We received numerous comments from foreign governments, industries, and trade
associations on both rules. We reviewed each comment that was submitted during the comment
period and developed the final rule, taking the comments into account. In the case of the prior notice
and registration regulations, we are allowing for several opportunities for interested individuals to
provide comments even as we begin implementing the interim final rule to make sure that we
minimized any negative effect on trade while ensuring our food safety and security.
On April 14, 2004 FDA and the Customs and Border Protection (CBP) reopened for 30 days the
comment period for FDA’s prior notice of imported food shipments interim final rule (IFR) and its
registration of food facilities IFR, which were published in the Federal Register of October 10, 2003.
FDA reopened the comment period consistent with its statement in each of the preambles of the IFRs
that it would do this for an additional 30 days in March 2004, to ensure that those who comment on
the IFRs would have had the benefit of our outreach and education efforts and would have had some
experience with the systems, timeframes, and data elements of the registration system and the prior
notice system.
Subsequently, on May 18, 2004, in response to a request from the Government of Canada, FDA
extended the comment period for an additional 60 days for Prior Notice. Accordingly, the comment
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period for the prior notice rulemaking, including the comment period for the "Joint FDA-CBP Plan
for Increasing Integration and Assessing the Coordination of Prior Notice Timeframes,'' is extended to
July 13, 2004.
We have published a compliance policy guide that describes the U.S. strategy for maintaining an
uninterrupted flow of food imports while improving their safety in accordance with the Public Health
Security and Bioterrorism Preparedness and Response Act of 2002 (Bioterrorism Act) requirements.
The Public Health Security and Bioterrorism Preparedness and Response Act of 2002 was signed into
law by President Bush, on June 12, 2002. It is now public law (PL107-188). It is the U.S. legislative
body - our Congress - that makes laws and amends existing laws. From time to time, Congress
reviews existing legislation as it deems necessary.
FDA has worked closely with sister agencies in the development of the Bioterrorism regulations. In
the U.S. regulatory system, the Office of Management and Budget coordinates all draft proposed and
final rules and ensures that all regulations are reviewed by any agency that may be affected by the
regulation. Any affected agency may provide comments or not clear a regulation pending further
consideration. This process makes sure that all affected agencies are consulted prior to a regulation
being published.
Question: (Korea)
Reference: p. 65, paras. 146-149
Does the U.S. government have any intention to streamline such burdensome procedural
requirements?
Answer
FDA has encouraged public comment at every stage of the Bioterrorism regulations' development.
FDA developed and published proposed regulations which were open to public comment from both
domestic and foreign parties. We also conducted numerous outreach meetings directed at foreign
stakeholders, both within the U.S. to foreign embassy officials in Washington and via
videoconference. We received numerous comments from foreign governments, industries, and trade
associations on both rules. We reviewed each comment that was submitted during the comment
period and developed the final rule, taking the comments into account. In the case of the prior notice
and registration regulations, we are allowing for several opportunities for interested individuals to
provide comments even as we begin implementing the interim final rule to make sure that we
minimized any negative effect on trade while ensuring our food safety and security.
FDA and the Customs and Border Protection (CBP) reopened for 30 days the comment period for
FDA’s prior notice of imported food shipments interim final rule (IFR) and its registration of food
facilities IFR, which were published in the Federal Register of October 10, 2003. FDA reopened the
comment period consistent with its statement in each of the preambles of the IFRs that it would do
this for an additional 30 days in March 2004, to ensure that those who comment on the IFRs would
have had the benefit of our outreach and education efforts and would have had some experience with
the systems, timeframes, and data elements of the registration system and the prior notice system.
In response to a request from the Government of Canada, FDA is extending the comment period for
an additional 60 days for Prior Notice. Accordingly, the comment period for the prior notice
rulemaking, including the comment period for the "Joint FDA-CBP Plan for Increasing Integration
and Assessing the Coordination of Prior Notice Timeframes,'' is extended to July 13, 2004.
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The joint plan, which is posted on FDA’s website at: http://www.cfsan.fda.gov/~pn/pnplan.html,
describes the process by which FDA and CBP intend to increase integration and examine whether
they could amend the timeframe requirements in FDA’s prior notice IFR to have the same advanced
notice timeframes for arrivals by land via road or rail, or arrival via air that currently are in CBP’s
Required Advance Electronic Presentation of Cargo Information Final Rule (68 FR 68140).
We have published a compliance policy guide that describes the U.S. strategy for maintaining an
uninterrupted flow of food imports while improving their safety in accordance with the Public Health
Security and Bioterrorism Preparedness and Response Act of 2002 (Bioterrorism Act) requirements.
FDA included an economic impact analysis in the proposed rules for affected entities to review and
provide comment, and made revisions to the rules based on the comments we received to further
minimize the impact to trade consistent with the requirements in the Act. Both interim final rules
include a regulatory impact analysis.
Question: (Switzerland #1 set II)
Switzerland has taken note that the U.S. has not yet ratified neither the PIC, the POPs nor the Basel
Convention although the U.S. is one of the main financial contributors to these conventions. What are
the U.S. intentions referring to the ratification of these chemical and waste conventions?
Answer
The United States intends to join the PIC, POPs and Basel Conventions and is currently developing
the necessary implementing legislation in order to join.
Question: (Mexico II n.1)
Finally, with respect to sanitary and phytosanitary measures, Mexico wishes to pose the following
questions:
Can the United States indicate the percentage of all sanitary and phytosanitary measures that have
been harmonized with international guidelines and recommendations?
Answer
Our SPS measures are transparent, based on risk assessments as appropriate to the circumstances and
are consistent with our WTO obligations.
Question: (Canada II #4)
General Comment: The TBT section provides little information to assist Members in understanding
how the U.S. is meeting its international trade obligations in this area. The heading for the section
does not give any recognition to "standards". For example, the equivalent section in Canada's 2003
Trade Policy Review was entitled "Standards, Technical Regulations and Phytosanitary Measures."
Reports on other Members have similar headings. This leads one to question if the U.S. implicitly
does not recognize the role of standardization in its trade policy regime.
Answer
In response to Canada's comment, we would note that the comment is made in relation to the report
prepared by the WTO Secretariat — we did not dictate to the Secretariat the titles for the subsection.
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Canada questions whether the United States recognizes the role of standardization in its trade policy
regime. Although the heading does not include the word "standards", we would note that in fact the
United States places a significant value on the role of voluntary standardization and the Secretariat has
indeed mentioned aspects of this in paragraphs 8 and 9 of its report.
Question: (Canada II #5)
(Re: para. 124) Reference is made to The Office of Management and Budget's (OMB) role to
"oversee and coordinate agency activity concerning technical and SPS regulations" within the federal
U.S. framework. The OMB issued a draft Bulletin on August 29, 2003 proposing to regulate
scientific information in federal agencies using a more uniform standard of peer review. We
understand that the proposed peer review process would be used by certain federal agencies, which
develop technical regulations whose underpinnings may include science as a basis for their contents.
Issues have arisen since the Bulletin's release, such as: questioning the need for an overarching peer
review policy; its value to the regulatory process; improved access apparently afforded industry to
influence the outcome; and, the role the OMB appears to be taking as the arbiter of science and
information quality [OMB Watcher; http://www.ombwatch.org/article/articleview/1941/1/198)].
Further, seven members of the U.S. House of Representatives, in a letter dated December 15, 2003 to
The Honorable Joshua Bolten of the OMB, describe the peer review process being proposed as
follows: "it actually erects new roadblocks to the use of high-quality science in agency decisionmaking." (http://www.house.gov/reform/min/recent.htm, page 1, para. 3). The requirements of the
Bulletin were to apply to information disseminated on or after January 1, 2004. Has the United States
proceeded with the Bulletin and are any elements of the Bulletin's requirements changed?
Answer
The Bulletin was published for comment by OMB on September 15, 2003 with public comments due
by December 15, 2003 and comments from Departments and agencies due by January 16, 2004.
OMB is currently in the process of reviewing those comments. Due to the extended comment period,
the requirements of a final bulletin were not implemented on January 1, 2004 as originally proposed.
While Canada has referenced several examples of comments received, there is a much larger number
of interested parties who have expressed their views. OMB has posted comments received on its
website at: www.whitehouse.gov/omb/inforeg/2003iq/iq_list.html.
Question: (Canada II #6)
(Re: para. 126) Please provide an elaboration of the extent to which the U.S. is meeting its obligation
under Article 2.4 of the WTO Technical Barriers to Trade (TBT) Agreement to use international
standards as a basis for its technical regulations, given the operation of Title IV of the Trade
Agreements Act of 1979 as noted in this paragraph.
Answer
Title IV of the Trade Agreements Act of 1979, as amended by the Uruguay Round Agreements Act, is
the primary, but not exclusive, means by which the United States ensures its compliance with Article
2.4 and other provisions of the WTO Agreement on Technical Barriers to Trade. Article 2.4 requires
WTO members to use international standards as a basis for technical regulations only to the extent
that a relevant international standard exists and it is effective and appropriate for fulfilling the
legitimate objective pursued. This commitment has been incorporated into U.S. legislation.
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Question: (Canada II #7)
(Re: para 128) Reference is made to "most" U.S. states having enacted statutes containing
transparency procedures in order to meet the Constitutional requirements of due process. Which
states have not enacted such procedures? How do these states meet their transparency obligations
under Article 3 of the TBT Agreement? Reference is also made to the "majority" of U.S. states
having enacted statutes that provide for public access to information and judicial procedures. Which
states have not yet done so? How is a member of the public guaranteed access both to information and
to judicial procedures in these states?
Answer
We are unaware of any states that do not have in place the necessary infrastructure to fulfil the
transparency and other obligations under the WTO Agreement on Technical Barriers to Trade. With
respect to Article 3, the U.S. Federal Government has assumed the responsibility for making the
requisite notifications and contacts with state officials, as foreseen by Article 3.3.
Question: (Canada II #8)
(Re: para. 130) Canada would appreciate if the United States could elaborate on its model of
"public/private partnerships in standardization" as mandated under the National Technology Transfer
and Advancement Act (NTAAA) of 1995, in particular areas or sectors where government players are
involved in the development of voluntary standards.
Answer
Under the NTTAA, each regulatory agency is encouraged to participate in the development of
voluntary standards. Agencies that have participated include the Food and Drug Administration,
Department of Defense, Occupational Safety and Health Administration, and the Environmental
Protection Agency. Some agencies maintain on their websites information regarding their
participation in standards development as well as appointed agency representatives; we encourage you
to visit these sites. Information on specific websites can be obtained via the U.S. inquiry point.
Question: (Canada II #9)
Canada asks the United States to provide information to Members on the requirement under the
NTAAA for federal agencies to publish an annual report on the adoption of voluntary consensus
standards, both domestic and international, in lieu of technical regulations and to identify location(s)
where this information can be found.
Answer
Under the NTTAA, agencies with significant standards development activities report on their
standards development involvement. NIST compiles the annual report on NTTAA activities that
contains information on particular areas or sectors where government agencies participate in the
development of voluntary standards and the adoption by Federal agencies of standards in lieu of
government unique standards. The 2001 report can be found at http://ts.nist.gov/nttaa, Publications,
NTTAA Library. The 2002 report has not yet been published.
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Question: (Canada II #15)
(Re: para. 131) Further to Section 12 of the NTAAA and OMB circular A-119, final policy guidance
was issued by the National Institute of Standards and Technology (NIST) in August 2000 (15 CFR
Part 287) entitled "Guidance on Federal Conformity Assessment Activities". The guideline was
intended to assist federal agencies in evaluating the efficacy and efficiency of their conformity
assessment activities, including to "make more productive use" of resources and "to reduce
unnecessary duplication". Has an evaluation been conducted on the extent to which unnecessary
duplication exists and to what degree it has been reduced since the Act and subsequent guidance has
been in place?
Answer
NIST has not conducted such an evaluation to date.
Question: (Canada II #11)
This paragraph also states that conformity assessment is satisfied mainly by supplier's self-declaration.
How are mandatory requirements for conformity assessment met at the federal, state, and local
government levels? To what extent does government conformity assessment reply upon private sector
testing and certification organizations to fulfil regulatory requirements? Has the United States
assessed the degree to which it has met its obligations related to "local government bodies" contained
in Articles 7.2, 7.4 and 7.5 of the TBT Agreement? If so, are the results publicly available and, if not,
is it intending to conduct such a review and when? Finally, can the United States explain how
coordination occurs between the various federal agencies responsible for conformity assessment?
Answer
We would highlight the statement in the Secretariat's report that, "It is most frequently the
responsibility of the supplier (producer or importer) to ensure compliance with technical regulations,
or with standards when such compliance is required by the purchaser." This does not necessarily
mean that compliance is in the form of a supplier's declaration of conformity (as foreseen in ISO
standards). The United States does not have a monolithic approach to conformity assurance. Some
regulatory authorities do rely on third party testing and certification, but there are many regulations
which do not rely on the submission of test data or certification to assure product conformity to
technical regulations. The United States has no reason to believe it needs to undertake a special
assessment of the degree to which it has met obligations related to local government bodies in Articles
7.2, 7.4 and 7.5 of the TBT Agreement as we believe sufficient mechanisms are in place to ensure
effective and ongoing compliance with the obligations in the TBT Agreement.
Under the NTTAA, NIST published "Guidance on Federal Conformity Assessment Activities"
(Federal Register August 10, 2000), which outlines Federal agencies' responsibility for evaluating the
efficacy and efficiency of their conformity assessment activities. It encourages each agency to
coordinate its conformity assessment activities with other agencies and with the private sector to
maximize resources and reduce unnecessary duplication. The guidelines can be found at
http://ts.nist.gov/nttaa, under the Conformity Assessment heading.
Question: (Canada II #12)
(Re: para. 134) Given the fact that no notifications of proposed U.S. sub-national measures have been
received by the WTO related to the TBT Agreement, how does the United States intend to meet its
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obligations under this Agreement with respect to the notifications of technical regulations prepared or
adopted by local government bodies, in particular the level immediately below the federal level?
Answer
The United States is meeting its obligations with respect to the notification of technical regulations
prepared. The U.S. federal government has assumed responsibility for making notification of
proposed state-level technical regulations and conformity assessment procedures (as foreseen under
Articles 3 and 7). Notification obligations relate only to proposals, and only to those for which (a) a
relevant international standard does not exist or the technical content of a proposed technical
regulation is not in accordance with the technical content of relevant international standards; (b) there
may be a significant effect on trade of other Members; and, (c) the technical content is not
substantially the same as that of previously notified technical regulations of central government
bodies. The United States has not identified a state-level proposal meeting the criteria for notification.
(Comment: There is no notification requirement for technical regulations that have been adopted (i.e.
final regulations) at any level of government under the TBT Agreement, as suggested by Canada's
question.
Question: (Canada II #13)
(Re: para. 136) Please explain why the specific provision of NAFTA Article 908.2 is highlighted in
this paragraph. How is identification of this provision relevant to fulfillment by the United States of
its obligations under the WTO TBT Agreement? Also, who are "the authorities" referred to in this
paragraph?
Answer
This comment has been made in relation to the Secretariat's draft. It is our understanding that the
paragraph in question was intended to provide some information on how the NAFTA related to WTO
obligations on technical barriers to trade. Several, not just one, articles of the NAFTA are
highlighted, presumably to provide some background on this question. It does not appear that the
Secretariat was attempting to ascertain whether or how NAFTA, or the specific provision cited by
Canada, assists the United States in fulfilling WTO obligations. "Authorities" is a term used
throughout the document, presumably in reference to the meetings with a variety of government
officials held by the Secretariat in the preparation of its report. Canada may wish to seek further
information from the Secretariat.
Question: (Canada II #14)
(Re: para. 137) Canada is aware that the FTA between the United States and Chile, in force as of
January 2004, contains provisions which appear to extend certain obligations beyond those found in
the WTO TBT Agreement, e.g., Article 7.3 of the FTA. What is the United States' view of the extent
of this Article's consistency with WTO TBT Agreement Article 2.4?
Answer
Chapter 7 of the Free Trade Agreement with Chile affirms the existing rights and obligations of the
Parties with respect to each other under the WTO Agreement on Technical Barriers to Trade. Article
7.3 incorporates, by reference, the TBT Committee's Decision on Principles for the Development of
International Standards, Guides and Recommendations, originally agreed in the Second Triennial
Review.
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We believe this is consistent with the WTO TBT Agreement.
Question: (Canada II #15)
(Re: para. 138) Please clarify the last sentence since this appears to refer to duplication of
accreditation/verification of foreign conformity assessment bodies, which is not permitted under the
MRAs notified to the WTO.
Answer
The United States is unaware of any prohibition by the WTO TBT Agreement of recognizing foreign
conformity assessment bodies in the absence of a mutual recognition agreement. In fact, MRAs are
but one option foreseen under Article 6 for ensuring the recognition of conformity assessment by
central government bodies - the core obligation of Article 6. Under Article 6, Members are not
required to enter into mutual recognition agreements, rather they are encouraged, when requested by
another Member, to be willing to enter into negotiations (Article 6.3). We would also question
Canada's suggestion that any MRA notified to the WTO is "permitted."
Question: (India #8 and #10)
We would like to know whether the U.S. considering instituting less onerous procedures while
meeting its security concerns do not act as an additional barrier to trade? In order to meet the
additional procedures and information requirements imposed by the Bioterrorism Act exporters are
being asked to pay additional charges. For exporters with small volume or value, these charges are a
significant additionality and operate as a tax. We would like to hear a response from the U.S.
delegation on this matter and also their opinion on whether the U.S. is considering less onerous
procedures?
Answer
FDA has encouraged public comment at every stage of the Bioterrorism regulations' development.
FDA developed and published proposed regulations which were open to public comment from both
domestic and foreign parties. We also conducted numerous outreach meetings directed at foreign
stakeholders, both within the U.S. to foreign embassy officials in Washington and via
videoconference. We received numerous comments from foreign governments, industries, and trade
associations on both rules. We reviewed each comment that was submitted during the comment
period and developed the final rule, taking the comments into account. In the case of the prior notice
and registration regulations, we are allowing for several opportunities for interested individuals to
provide comments even as we begin implementing the interim final rule to make sure that we
minimized any negative effect on trade while ensuring our food safety and security. We have
published a compliance policy guide that describes the U.S. strategy for maintaining an uninterrupted
flow of food imports while improving their safety in accordance with the Public Health Security and
Bioterrorism Preparedness and Response Act of 2002 (Bioterrorism Act) requirements.
FDA and the Customs and Border Protection (CBP) reopened for 30 days the comment period for
FDA’s prior notice of imported food shipments interim final rule (IFR) and its registration of food
facilities IFR, which were published in the Federal Register of October 10, 2003. FDA is reopening
the comment period to ensure that those who comment on the IFRs would have had the benefit of our
outreach and education efforts and would have had some experience with the systems, timeframes,
and data elements of the registration system and the prior notice system.
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In response to a request from the Government of Canada, FDA is extending the comment period for
an additional 60 days for Prior Notice. Accordingly, the comment period for the prior notice
rulemaking, including the comment period for the "Joint FDA-CBP Plan for Increasing Integration
and Assessing the Coordination of Prior Notice Timeframes,'' is extended to July 13, 2004.
The joint plan, which is posted on FDA’s website at: http://www.cfsan.fda.gov/~pn/pnplan.html,
describes the process by which FDA and CBP intend to increase integration and examine whether
they could amend the timeframe requirements in FDA’s prior notice IFR to have the same advanced
notice timeframes for arrivals by land via road or rail, or arrival via air that currently are in CBP’s
Required Advance Electronic Presentation of Cargo Information Final Rule (68 FR 68140).
FDA included an economic impact analysis in the proposed rules for affected entities to review and
provide comment, and made revisions to the rules based on the comments we received to further
minimize the impact to trade consistent with the requirements in the Act. Both interim final rules
include a regulatory impact analysis.
Question: (India #17)
Under the U.S. Milk Act, the import of milk protein into the U.S. is generally permitted. However the
yogurt industry is not allowed to use imported proteins, unless they originate in industries that are
'Grade A' approved buy U.S. authorities. We would like clarification on the reasoning behind this
provision and seek a relaxation in the certification procedure so that industries in developing countries
could get 'Grade A' certification for the purpose of export of dairy products.
Answer
Grade "A" milk products are subject to identity and quality standard regulations in the Code of
Federal Regulations and are further defined in the Grade "A" Pasteurized Milk Ordinance (PMO),
which is available on line at <http://www.cfsan.fda.gov/~ear/pmo01toc.html>. The States utilize the
PMO, to regulate Grade "A" products. The States have formed an organization known as the National
Conference Interstate Milk Shipments (NCIMS) whose purpose is to ensure the safety of Grade "A"
milk and milk products shipped in interstate commerce and to minimize duplicate regulatory
restrictions on these products if they are produced according to this groups stringent public health
standards.
In a 1977 Memorandum of Understanding (MOU) with the NCIMS, FDA accepted the standards,
requirements and procedures of the NCIMS to manage the public health risks associated with Grade
"A" milk and milk products. Based on the 1977 MOU, milk sanitation and safety measures in the
United States have been set by the combined efforts of FDA and the States under the NCIMS milk
safety program. Currently, FDA and NCIMS have identified and mutually accepted three options that
are consistent with NCIMS Procedures and which will allow States to receive PMO defined Grade
"A" milk and milk products produced outside of the United States. These options and the rationale for
them were published in the Federal Register on June 28, 2000, Volume 65, Number 125. In brief
those options include:
1.
FDA can evaluate the exporting country's system of assuring the safety of dairy products and
compare the effect of that system with the effect of the United States system on the safety of dairy
products produced domestically. The NCIMS has adopted a procedure to accept FDA findings of
equivalence and allow NCIMS member states to accept products produced within the scope of such a
finding.
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2.
A dairy firm outside of the United States could contract with any with any current NCIMS
member's regulatory/rating agency to provide the "Grade A" milk safety program in total. This would
include the regulatory licensing, dairy farm and milk plant inspection and sampling, pasteurization
equipment testing, laboratory certification and rating/NCIMS certification. To use this option the firm
would be required to abide by all applicable NCIMS regulatory and rating requirements and the
regulatory/rating agency would have to agree to treat the firm as if it were located within its
jurisdiction for all purposes, including inspection and enforcement. Ratings of the firm would be
checked-rated by FDA.
3.
The exporting country, or a political subdivision thereof, may become a full member of the
NCIMS subject to all NCIMS rules and enjoying all privileges of a U.S. State. This would require,
among other things, that the milk regulatory ministry(ies) of the exporting countries adopt and enforce
rules and regulations, which are the same as those required in the United States and abide by all
applicable NCIMS regulatory and rating requirements. Their ratings would be check-rated by FDA in
the same way as State ratings. FDA would certify their rating, sampling surveillance and laboratory
evaluation officers.
If PMO defined Grade "A" milk and milk products produced outside of the United States have not
been produced, processed, transported and packaged in accordance with one of the three options cited
above, they are subject to the State's seizure or other regulatory actions, notwithstanding the fact that
they may meet the requirements of the FFDCA and other statues and regulations as appropriate.
Question: (Canada #8)
Canada's particular concerns have been with respect to the prior notice requirement. The Canadian
Government submitted formal comments on these proposed regulations in April 2003. On
October 10, 2003, the FDA issued interim final Rules, effective December 12, 2003, which addressed
many of Canada's comments. In particular, the FDA established prior notification timelines, which
reflect the different modes of transportation, such as truck, rail, air, and ship.
The FDA provided an opportunity to comment on the interim final Rules by December 24, 2003.
Canada submitted further comments, which expressed some continuing concerns about the provisions,
as well as how a number of provisions will be implemented. There are still many areas where the
current interpretation of the interim final Rules is causing confusion and imposing questionable costs
on Canadian firms and individuals. Specifically, concerning the Prior Notice Rule, Canada continues
to recommend that timelines for imports by road and rail be amended to reflect those of the U.S.
Bureau of Customs and Border Protection, that the Rule should differentiate sufficiently between high
risk and low risk products/sources, and that it should take into consideration the cost of
implementation by individuals sending manufactured food products to the United States for noncommercial use. In addition, Canada recommends that the FDA eliminate the requirement for prior
notice of transhipments due to the fact that this information will be collected by the U.S. Bureau of
Customs and Border Protection. This will avoid costly duplication, unnecessary disruptions to trade,
and reduce inconsistencies relating to the application of this Rule. Canada requests assurances that its
comments will be taken into consideration.
Answer
FDA and CBP announced the following plan to achieve the goal of a uniform, integrated system and
to coordinate timeframes for import prior notice information while fulfilling the Bioterrorism Act
mandates for air and truck modes of transportation with timeframes promulgated by the Bureau of
Customs and Border Protection (CBP) when it finalizes its rule entitled "Required Advance Electronic
Presentation of Cargo Information." FDA intends to implement in August 2004.
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



From August 12, 2004, to October 12, 2004, we plan to assess existing procedures and
staffing needed to receive, review, and respond to the prior notices submitted in accordance
with the Prior Notice IFR (i.e., 2 hours before arrival by land by road; 4 hours before arrival
by air or by land by rail; and 8 hours before arrival by water).
From October 13, 2004, to November 12, 2004, we intend to identify what changes to work
practices and staffing would be necessary to determine if FDA could continue to receive,
review, and respond to all prior notice submissions with reduced timeframes (e.g., 1 hour/30
minutes before arrival by land by road; 2 hours before arrival by land by rail; and by "wheels
up" for flights originating in North and Central America, South America (north of the Equator
only), the Caribbean, and Bermuda; otherwise 4 hours before arrival by air).
From November 13, 2004, to February 12, 2005, we plan to implement necessary changes
and make appropriate adjustments to ensure we could receive, review, and respond to all prior
notice submissions with reduced timeframes.
In March 2005, we intend to issue a prior notice final rule that responds to the comments we
received on the Prior Notice IFR, including this plan, during the two open comment periods.
Under the statute, any timeframe must be sufficient to receive, review, and respond to prior notice
submissions, as set out in section 801(m)(2)(A) of the Federal Food, Drug, and Cosmetic Act, 21 USC
801(m)(2)(A). The agencies emphasize that the evaluation of whether to reduce the timeframes for
prior notice review will depend on the level of compliance industry achieves during the assessment.
FDA and the Customs and Border Protection (CBP) reopened for 30 days the comment period for
FDA’s prior notice of imported food shipments interim final rule (IFR) which was published in the
Federal Register of October 10, 2003. In the notice to reopen the comment period, FDA posed
questions regarding C-TPAT and FAST as part of our exploration of flexible alternatives for
submission of prior notice for foods or firms covered by programs of other agencies. In response to a
request from the Government of Canada, FDA is extending the comment period for an additional 60
days for Prior Notice. Accordingly, the comment period for the prior notice rulemaking, including the
comment period for the "Joint FDA-CBP Plan for Increasing Integration and Assessing the
Coordination of Prior Notice Timeframes,'' is extended to July 13, 2004.
Prior notice is required for food for transshipment through the U.S. to another country and food for
future export (21 CFR 1.277(a)). As we discuss in the IFR (68 FR 58974 at 58991, we include food
for transshipment (T&E’s) so that a loophole is not created in the prior notice requirements. For
example, if we were to exclude T&E’s, an importer could simply bring in an article of food under a
T&E entry without giving prior notice and then, as allowed by CBP regulations, file a consumption or
other entry.
Under the Administrative Procedure Act, U.S. agencies are required to respond to significant and
relevant comments from all parties that were submitted within the comment period. The comments
are not reviewed and answer individually since many interested parties ask similar questions or
forward similar concerns, but each issue raised is analyzed and responded to within the body of the
final regulation. Thus, any timely comments submitted by any stakeholder are addressed in the
preambles to the final rules.
Question: (Brazil #9)
Paragraph 1.232 of the Interim Final Regulation for the implementation of Section 305 of the
Bioterrorism Act of 2003 — Registration of Food Facilities - as issued by the FDA and published in
the Federal Register in October 2003, requires that all foreign facilities that manufacture/process, pack
or hold food for consumption in the U.S. designate a single U.S. agent for that facility. This U.S., or
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"local" agent, is the liaison for all communication, or routine or emergency nature, between the FDA
and the foreign facility. The agent has to be physically present in the U.S. and be available 7/7 days,
24/24 hours, in case there is an emergency. Foreign facilities may opt to indicate an "emergency
contact" that is not their agent, but this does not preclude the need for the agent itself. Could you
explain that?
Answer
Because the role of the U.S. agent is to act as a communications link between the facility and FDA,
FDA will communicate with the U.S. agent in both routine and emergency situations. This means that
the U.S. agent needs to be accessible to FDA 24 hours a day, 7 days a week, unless the foreign facility
opts to designate a different person other than the facility's U.S. agent to serve as the facility's
emergency contact by providing the information specified in Sec. 1.233(e) in the facility's registration.
If a facility's registration includes an emergency contact person provided under Sec. 1.233(e), FDA
will notify this person instead of the U.S. agent during emergencies, but will continue to use the U.S.
agent for routine communications with the facility.
The requirement for the U.S. agent and the underlying rationale for its importance in addressing
Bioterrorism threats is explained in detail in the Interim Final Rule, 68 Fed. Reg. 58894. The
extensive discussion is covered on pages 58915-58916 in the Responses to Comments 84-93. The
Interim
Final
Rule
can
be
accessed
on
the
FDA
web
site
at
http://www.fda.gov/oc/bioterrorism/bioact.html by clicking on the Interim Final Rule under Section
305. Additional information including a Fact Sheet and Questions and Answers can be accessed by
clicking on Fact Sheet under Section 305.
Question: (Brazil #10)
Domestic facilities are not subject to the request of keeping a local agent in the U.S., although they do
have to indicate an emergency contact, also 7/7 and 22/24. This provision appears to be a clear
discrimination against foreign facilities exporting food to the U.S. and, in this sense, a disguised
restriction to trade (if there is an emergency and the foreign facility has indicated and emergency
contact different from the U.S. agent, as allowed by regulation, what is the agent's purpose?). If not,
can the U.S. explain what sort of legitimate objective - in terms of protecting the U.S. food supply
against bioterrorist menace - is being accomplished by the local agent requirement?
Answer
FDA believes that it has structured the U.S. agent requirement to be consistent with the statutory
mandates of the Bioterrorism Act. To minimize burden and provide flexibility while meeting the
mandate in the Bioterrorism Act that requires registrations from foreign facilities to include the name
of their U.S. agent, the rule sets out only two qualifications for a U.S. agent: The agent is required to
reside or maintain a place of business in the United States and to be physically present in the United
States. Therefore, many foreign facilities are able to use existing contacts in the United States as their
U.S. agents. Moreover, FDA has clarified in the interim final rule that the requirement of a single
U.S. agent for FDA registration purposes does not preclude facilities from having multiple agents
(such as foreign suppliers) for other business purposes.
The requirement for the U.S. agent and the underlying rationale for its importance in addressing
Bioterrorism threats is explained in detail in the Interim Final Rule, 68 Fed. Reg. 58894. The
extensive discussion is covered on pages 58915-58916 in the Responses to Comments 84-93. The
Interim
Final
Rule
can
be
accessed
on
the
FDA
website
at:
http://www.fda.gov/oc/bioterrorism/bioact.html by clicking on the Interim Final Rule under Section
WT/TPR/M/126/Add.3
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305. Additional information including a Fact Sheet and Questions and Answers can be accessed by
clicking on Fact Sheet under Section 305.
Question: (Brazil #11 and #12)
Section 306 of the 2002 Bioterrorism Act authorizes the FDA to have access to certain records of food
processors/manufacturers, packers, holders and importers when there is a reasonable belief that an
article of food is adulterated and presents a threat of serious adverse health consequences or death to
humans or animals. Records to be kept — for two years, in most cases — are those identifying the
previous sources and immediate subsequent recipients of food handled by each facility. The proposed
regulations issued by the FDA to implement Section 306 indicate that foreign facilities are also
subject to the requirement. How do you expect to implement that?
Brazil understands that these traceability requirements may well fulfill a legitimate goal with the U.S.,
in that they would allow prompt action along the chain of production, distribution and
commercialization of food should an emergency arise and a recall be necessary. In the case of foreign
facilities, this same rationale does not apply. The U.S. could obviously not conduct a recall or hazard
investigation in another country, because most records are kept in foreign languages, what would in
principle be meaningless for the U.S. authorities. In this case, the legitimate objective (of protecting
the health and life of the American population) purported by the measure in question is not being
actually promoted. Does the U.S. consider that requiring record-keeping provisions from foreign
facilities amounts to a trade-disruptive measure, possibly leading to the extraterritorial application of
U.S. domestic regulations? Can the U.S. explain what legitimate goal is being promoted through this
measure?
Answer
Regarding the questions relating to the record keeping requirements, FDA will comment on the
provisions once they are finalized and stakeholders have an opportunity to assess the impact of the
final rule as it may apply to them. FDA will be issuing a final rule after fully considering the timely
comments we have received. Under the Administrative Procedure Act, FDA can not address
comments during a pending rule making process.
Question: (Thailand #3)
Reference: p. 65-66 paras. 146-149
We would like to take this opportunity to request the U.S. delegates at this meeting to convey our
deep concerns to relevant agencies to help us gain immediate clarification and guidance regarding
proper and effective preparation, in particular, the "Registration of Food Facilities and Maintenance
and Inspection of Records" in relation to agent in the United States and defined recipe respectively.
Answer
The purpose of the U.S. agent is to serve as a communications link between FDA and an individual
facility for a number of purposes, including both emergency situations and day-to-day registration
issues. These routine issues may include FDA's need for information about that facility and arranging
both routine inspections and inspections or communications with the facility due to a potential
Bioterrorism threat or other public health emergency.
To minimize burden and provide flexibility while meeting the mandate in the Bioterrorism Act that
requires registrations from foreign facilities to include the name of their U.S. agent, the rule sets out
only two qualifications for a U.S. agent: The agent is required to reside or maintain a place of
WT/TPR/M/126/Add.3
Page 82
business in the United States and to be physically present in the United States. Therefore, many
foreign facilities are able to use existing contacts in the United States as their U.S. agents. Moreover,
FDA has clarified in the interim final rule that the requirement of a single U.S. agent for FDA
registration purposes does not preclude facilities from having multiple agents (such as foreign
suppliers) for other business purposes.
The requirement for the U.S. agent and the underlying rationale for its importance in addressing
Bioterrorism threats is explained in detail in the Interim Final Rule, 68 Fed. Reg. 58894. The
extensive discussion is covered on pages 58915-58916 in the Responses to Comments 84-93. The
Interim
Final
Rule
can
be
accessed
on
the
FDA
web
site
at
http://www.fda.gov/oc/bioterrorism/bioact.html by clicking on the Interim Final Rule under Section
305. Additional information including a Fact Sheet and Questions and Answers can be accessed by
clicking on Fact Sheet under Section 305.
Regarding the question relating to the record keeping requirement on recipes, FDA will comment on
the provisions once they are finalized and stakeholders have an opportunity to assess the impact of the
final rule as it may apply to them. FDA will be issuing a final rule after fully considering the timely
comments we have received. Under the Administrative Procedure Act, FDA can not address
comments during a pending rule making process.
Question: (Mexico III 1.c)
How have the U.S. authorities addressed the issue of synchronizing the FDA's and U.S. Customs'
electronic systems?
Answer
With regard to prior notice, the systems have been synchronized: For those who import food and who
file with Customs and Border Protection (CBP) for entry, the FDA prior notice submission may be
prepared in conjunction with the CBP filing. However, the reverse is not true; persons submitting
prior notice using the FDA's Prior Notice System Interface (PNSI) may not use PNSI to file CBP
entry information. A separate entry must be filed with CBP.
Question: (Chinese Taipei Page 2, II-C)
Given the time difference between the U.S. and other area, it may be difficult to contact the
manufacturer and receive necessary records and document within the given time frame. With this in
mind we would ask that the deadline for prior notification to the FDA be extended, preferably to 24
hours, in order to avoid creating unnecessary burden on trade.
Answer
Prior notice must be received and confirmed electronically by FDA no more than 5 days before arrival
and, as specified by the mode of transportation below, no fewer than:



2 hours before arrival by land by road
4 hours before arrival by air or by land by rail
8 hours before arrival by water.
The time consistent with the time frame established for the mode of transportation for an article of
food carried by or otherwise accompanying an individual if it is subject to prior notice (The food must
also be accompanied by the FDA confirmation.) In addition, prior notice must be received and
WT/TPR/M/126/Add.3
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confirmed electronically by FDA before food is mailed by international mail. (The parcel must be
accompanied by confirmation of FDA receipt of prior notice.)
Question: (Japan #32)
The Public Health Security and Bioterrorism Preparedness and Response Act, which was signed by
President Bush in June 2003 and comes into effect as of December 12, 2003, sets out the following
measures; registration of food manufacturing and handling facilities; (b) prior notice of all food
consignments intended for import into the U.S.; (c) maintenance of certain records pertaining to the
receipt and distribution of foods; and (d) administrative detention of any illegal food found.
Although recognizing the importance of taking necessary measures for combating terrorism, Japan
asks the U.S. to implement these measures in consistency with the WTO agreements and not to hinder
a smooth distribution more than it is necessary.
When implementing measures, the SPS Agreement requires that "these measures only be developed
within necessary scope based on sufficient scientific findings". With regard to the Bioterrorism Act,
please explain what scientific findings for implementing the measure were used, and whether this was
a necessary measure for achieving its objective.
The TBT Agreement requires that technical regulations shall not be more trade restrictive than
necessary to fulfill a legitimate objective, taking account of the risks that non-fulfillment would
create. Japan would like to have an explanation as to what kind of evaluations the U.S. took account
of these risks?
Answer
Though the likelihood of a biological or chemical attack on the U.S. food supply is uncertain,
significant scientific evidence documents the risk to public health of food that has been inadvertently
contaminated. After performing a risk assessment which describes uncertainties, and noting the broad
range of agents that may contaminate the food supply that FDA regulates, the agency concluded that
there is a high likelihood, over the course of a year, that a significant number of people will be
affected by an act of food terrorism or by an incident of unintentional food contamination that results
in serious food borne illness. FDA has determined that this qualitative risk assessment, which
discusses prior incidents of food contamination and available unclassified information on prior acts of
food sabotage, is appropriate to the circumstances. The scientific risk assessment can be found at:
http://www.cfsan.fda.gov/~dms/rabtact. html#iii.
The United States Food and Drug Administration (FDA) and the U.S. Bureau of Customs and Border
Protection (CBP) issued a compliance policy guide which is available on the FDA website that
describes their strategy for maintaining an uninterrupted flow of food imports while improving their
safety in accordance with the Public Health Security and Bioterrorism Preparedness and Response Act
of 2002 (Bioterrorism Act) requirements which became effective on December 12, 2003. FDA and
CBP expect a "good faith" effort at compliance with the requirement that FDA receive a prior
notification of all human and animal food, drinks and dietary supplements imported or offered for
import to the U.S. and the requirement that all facilities that manufacture, process, pack or hold food
intended for consumption in the U.S. must be registered with FDA. During the 8-month phase-in
period, the two agencies will primarily rely on educating the affected firms and individuals. During
this period, the agencies will utilize communication and education initiatives, escalating imposition of
civil monetary penalties, and ultimately refusal of shipments. This phase-in period will end on
August 12, 2004. FDA and CBP personnel have already begun an extensive campaign to educate with
written material, briefings, and seminars with other government officials, domestic and foreign food
WT/TPR/M/126/Add.3
Page 84
importers, brokers, transporters, and other affected industry representatives on compliance with the
Bioterrorism Act.
In addition, during the 8-month transitional period, the two agencies have taken the following steps:




Gather data to track compliance with the prior notice requirements and to determine how to best
use FDA's and CBP's resources to educate industry and the public to achieve full compliance with
the Bioterrorism Act.
Provided industry and the public with summary information about the level of compliance with
the prior notice rules, including data on the types of errors in submitted prior notices.
Posted the summary information on FDA's website at www.fda.gov.
Developed a joint plan to achieve the goal of a uniform, integrated system and to coordinate
timeframes for import prior notice information while fulfilling the Bioterrorism Act mandates for
air and truck modes of transportation with timeframes promulgated by the Bureau of Customs and
Border Protection (CBP) when it finalizes its rule entitled "Required Advance Electronic
Presentation of Cargo Information.”
As always, both agencies will continue to ensure that imported products are safe for human or animal
consumption.
Question: (Thailand #2)
We would like to address our deep concern on the decision of the Southern Shrimp Alliance to file an
anti-dumping petition on imported shrimp from developing countries. We hope that the U.S.
Government will give careful consideration on the matter, since such action will only result in trade
disruption and could end up hurting the interests of American consumers. Moreover, it could
jeopardize our shrimp exports and eventually send negative repercussions to our low income farmers.
Answer
We take note of the concerns of the Government of Thailand.
Question: (Argentina #3)
Paragraph 146 refers to the Public Health Security and Bioterrorism Preparedness and Response Act
of 2002, also known as the Bioterrorism Act. While it is known that this Act apply to foods and
agricultural products, we request additional clarification on the scope of this law in terms of its
application to other products.
Answer
In terms of products, the Public Health Security and Bioterrorism Preparedness and Response Act of
2002 contains the following five titles:

Title I - National Preparedness for Bioterrorism and Other Public Health Emergencies;

Title II - Enhancing Controls on Dangerous Biological Agents and Toxins;

Title IIII - Protecting Safety and Security of Food and Drug Supply;

Title IV - Drinking Water Security and Safety; and
WT/TPR/M/126/Add.3
Page 85

Title V - Additional Provisions.
These titles contain provisions that relate to developing and maintaining medical countermeasures
(drugs, biologics and other products) for use in the event of a Bioterrorism attack, the tracking of
select agents and toxins, and enhancing emergency preparedness. In particular, section 121 b) covers
smallpox vaccine, section 122 addresses approval of priority countermeasures, section 126 examines
new and emerging technologies and section 127 covers potassium iodide. Title II - Enhancing
Controls On Dangerous Biological Agents And Toxins, Subtitle A - Department of Health and Human
Services, section 201 addresses the regulation of certain biological agents and toxins. In Title III
section 321 covers annual registration of foreign manufacturers, shipping information and drug and
device listing and section 322 requires additional information regarding import components of all
FDA regulated products intended for use in products intended for export products. For more
information on the Bioterrorism Act, please see the Food and Drug Administration website at
http://www.fda.gov/oc/bioterrorism/bioact.html.
Question: (Mexico II.A)
With respect to paragraph 122, could the United States confirm that the rules of the Administrative
Procedure Act apply to services-related technical regulations?
Answer
The referenced technical regulations and sanitary and phytosanitary measures are covered by the
Administrative Procedure Act.
Question: (Mexico II.B)
Also, regarding the third sentence in paragraph 122, could the United States explain what orders
govern the issuance of technical regulations and sanitary and phytosanitary measures by the U.S.
Congress? Also, could the U.S. confirm whether, in its opinion, the Congress is required to comply
with the provisions of the TBT and the SPS Agreements, respectively, if it decides to issue a technical
regulation or a sanitary and phytosanitary measure?
Answer
The U.S. Congress does not issue technical regulations. Rather, it delegates the authority to Federal
agencies within the Executive Branch.
Question: (Mexico II.C)
As indicated in paragraph 123, in accordance with the Congressional Review Act, Congress reviews
technical regulations and sanitary and phytosanitary measures issued by the various government
agencies. Could the U.S. tell us whether, based on such review, the Congress can amend the
provisions of those regulations and measures?
Answer
Under the Congressional Review Act, Congress cannot amend provisions of a regulation issued by a
Federal agency. It may only overturn the entire regulation.
WT/TPR/M/126/Add.3
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Question: (Mexico II.D)
With regard to the final part of paragraph 124, could the United Sates confirm whether the issuance of
a technical regulation or sanitary and phytosanitary measure by the Congress involves the drafting of
a regulatory impact analysis as a prerequisite and, if so, whether said analysis can be consulted by
nationals of WTO member countries.
Answer
Again, the U.S. Congress does not issue technical regulations.
regulations.
Federal agencies issue these
Question: (Mexico II.E)
As concerns paragraph 126, could the United States explain what it considers to be an international
standard? Also, could the U.S. indicate the percentage of current technical regulations that are
equivalent to international standards?
Answer
In general, the United States considers international standards to be those which emanate from bodies
with procedures which allow for participation by all interested parties, ensure consensus, and provide
a mechanism for appeal. The United States has not prescribed the use of standards from any
particular standardizing body, instead, the emphasis has been on considering whether such criteria has
been met in the development of a particular standard. The United States does not compile centralized
data on the percentage of technical regulations that are "equivalent" to (or based upon, as foreseen in
Article 2.4 of the TBT Agreement) international standards.
Question: (Mexico II.F)
Paragraph 127 indicates that the National Institute of Standards and Technology maintains a
collection of technical regulations, specifications, test methods, codes, and recommended practices.
In this regard, could the United States describe the substance and provide the definition and legal
framework of these specifications, test methods, codes, and recommended practices?
Answer
The National Center for Standards and Certification Information (NCSCI), which is part of NIST, is a
central repository for standards-related information in the United States and has access to U.S.,
foreign and international documents and contact points through its role as the U.S. national inquiry
point under the TBT Agreement. The NCSCI reference collection of standards and standards-related
documents includes: microform, hard copy and CD-ROM of military and Federal specifications,
selected U.S. industry and national standards, and international and selected foreign national
standards; the United States Code of Federal Regulations (CFR) and Federal Register; reference
books, including directories, technical and scientific dictionaries, encyclopedias and handbooks;
articles, pamphlets, reports and handbooks on standardization and conformity assessment; and
standards-related periodicals and newsletters. NCSCI maintains a database on NIST and Department
of Commerce staff participation in standards developing activities. For more information, please visit
NCSCI's website at http://ts.nist.gov/ts/htdocs/210/ncsci/ncsci.htm.
WT/TPR/M/126/Add.3
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Question: (Mexico II.G)
As concerns paragraph 128, Mexico would like the United States to explain why some states have still
not enacted statutes regulating the process for issuing technical standards and regulations. Mexico
also requests the United States to describe the measures taken to ensure that local public institutions
and non-governmental institutions comply with the obligations under Articles 3, 4, 7, and 8 of the
TBT Agreement.
Answer
We are unaware of any states that do not have in place the necessary infrastructure to fulfill the
transparency and other obligations under the WTO Agreement on Technical Barriers to Trade. Title
IV of the Trade Agreements Act of 1979 (Public Law 96-39), as amended by the Uruguay Round
Agreements Act (Public Law 103-465), prohibits U.S. agencies from employing standards, technical
regulations or conformity assessment procedures as unnecessary obstacles to trade. This legislation
includes the Administration's commitment to promote state agencies' and non-governmental bodies
compliance with U.S. obligations under the WTO through reasonable measures including through
state-federal consultation and cooperation. The Administration publicized the results of these
Agreements and has ongoing consultations through intra-governmental and private sector advisory
committees. Should specific questions regarding the WTO consistency of state or local government
regulations or procedures, or non-governmental bodies' standards or procedures, be brought to our
attention, USTR would engage in consultations with interested state authorities to ascertain whether
there is in fact a compliance issue and, if so, how best to proceed.
Question: (Mexico II.I)
As regards paragraph 130, could the United States explain what voluntary consensus standards consist
of? Also, could the U.S. confirm that this type of standard can only be developed by standardization
organizations that belong to ANSI (and, therefore, organizations that have accepted the Code of
Conduct annexed to the TBT Agreement)?
Answer
Revised OMB Circular A-119 establishes policies on Federal use and development of voluntary
consensus standards and on conformity assessment activities. For purposes of the policy, "voluntary
consensus standards" are standards developed or adopted by voluntary consensus standards bodies,
both domestic and international.
A voluntary consensus standards body is defined by the following attributes: (i) Openness; (ii)
Balance of interest; (iii) Due process; (vi) An appeals process; and, (v) Consensus. Consensus is
defined as general agreement, but not necessarily unanimity, and includes a process for attempting to
resolve objections by interested parties and giving all comments fair consideration. Each objector is
advised of the disposition of his or her objection(s), the reasons why, and the consensus body
members are given an opportunity to change their votes after reviewing the comments. For further
information, please see: http://www.whitehouse.gov/omb/circulars/a119/a119.html.
Question: (Mexico II.J)
Would the United States describe the procedure for recognizing the equivalency of a foreign standard
or a foreign conformity assessment procedure and, if found equivalent, how many standards or
conformity assessment procedures have been recognized as such?
WT/TPR/M/126/Add.3
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Answer
The recognition of equivalent technical regulations is determined by the relevant regulatory authority.
We would note that the TBT Agreement does not oblige Members to recognize "foreign standards."
The U.S. government does not attempt to compile centralized data on the extent to which either
regulators or voluntary standardizing bodies have recognized foreign standards or conformity
assessment procedures.
Question: (Mexico II.K)
As concerns paragraph 132, could the United States indicate how many conformity assessment
procedures are in effect in U.S. territory, how many products they cover, and under what legal
system(s) they are established? In addition, could the U.S. indicate in what cases the assessment of
conformity with technical regulations can be carried out by private organizations?
Answer
The United States does not have a single approach to conformity assurance. To the extent that
conformity assessment is required to ensure compliance with a technical regulation, it would be
specified in the technical regulation and published in the Code of Federal Regulations. Information
on specific technical regulations and conformity assessment requirements is available through the
U.S. inquiry point. In addition, NIST has published a directory of private sector certifiers and a
directory of private sector laboratory accreditation bodies as well as government directories. To view
these directories and access further information on the United States conformity assessment
procedures, please visit the NIST website at: http://ts.nist.gov/ts/htdocs/210/gsig/cainfo.htm.
Question: (Mexico II.L)
Paragraph 134 indicates that the United States has not notified the WTO of any technical regulations
or sanitary and phytosanitary measures. In this regard, Mexico would like to know the reasons why
the United States has not issued such notifications and whether it is planning to do so in the future.
Answer
Para. 134 states that no notifications of proposed U.S. sub-federal measures have been received by the
WTO. The U.S. federal government has assumed responsibility for making notification of proposed
state-level technical regulations and conformity assessment procedures (as foreseen under Articles 3
and 7). Notification obligations relate only to proposals for which (a) a relevant international standard
does not exist or the technical content of a proposed technical regulation is not in accordance with the
technical content of relevant international standards; (b) there may be a significant effect on trade of
other Members; and, (c) the technical content is not substantially the same as that of previously
notified technical regulations of central government bodies. The United States has not identified a
state-level proposal meeting the criteria for notification.
Question: (Japan #16)
Considering the world trend and the impact of the U.S. market on world trade, Japan strongly requests
that the metric system (the SI Unit), which is a global standard, be adopted to its full extent by the
U.S. and American businesses. Japan would like to know of any specific action that the U.S. intends
to take for promoting the metric system in the country.
WT/TPR/M/126/Add.3
Page 89
Answer
The transition to the metric system is voluntary but the federal government currently has an effort
underway to remove regulatory barriers to the use of the metric system. There is also an effort to
amend the Federal Fair Packaging and Labeling Act that would give manufacturers the option to
continue to label the products covered by the Act in dual units (that is, in inch-pound and metric units
as they are doing now) or to label products in only metric units. For information regarding the U.S.
metric
system
activities,
please
visit
NIST's
website
at
http://ts.nist.gov/ts/htdocs/200/202/mpo_home.html.
Question: (Indonesia #3)
In 1989 the U.S. Congress passed a law to complement the Endangered Species Act. The new law,
Section 609 of Public Law 101-162, authorizes the U.S. Department of State to annually certify
whether a country is allowed to export sea-harvested shrimp to the U.S. The certification process
involves an on-site inspection to find whether the host country has adopted and effectively
implemented a shrimp-harvesting program that prevents the accidental drowning of endangered sea
turtles. At the heart of this program is the requirement to install a Turtle Excluder Device (TED) on a
shrimp trawl with a precise design, operability and use as set forth by the U.S. In 2001 Indonesia
failed to have the certification on the ground that seven shrimp fishing vessels being inspected at two
separate local ports could not satisfy the requirements for proper design, installation and use of TEDs.
In 2002, another inspection was conduction involving 45 shrimp fishing vessels at several local ports
but Indonesia once again failed the verification. The inspection team concluded that not only did the
inspected vessels fail to meet the TED requirements, but also there was a lack of comprehensive sea
turtle protection program that is comparable in effectiveness to that of the U.S. Indonesia is of the
view that the inspections were made in a very arbitrary manner since the inspections were done
without prior notice and allowing reasonable time for preparation.
Indonesia wishes to have a clear explanation on this situation.
Answer
The United States can only inspect a country's fishing vessels for certification at the invitation of the
host country. The inspections referred to in this question were conducted by invitation of, and in
coordination with, the Government of Indonesia.
Question: (China #54-55)
Reference: p. 65, para. 146
On June 12 2002, the U.S. released "Public Health Security and Bioterrorism Preparedness and
Response Act of 2002". According to chapter 3 of the Act, FDA worked out and notified successively
to WTO in 2003: "Registration of Food Facilities Under the Public Health Security and Bioterrorism
Preparedness and Response Act of 2002" (G/SPS/N/USA/691),"Prior Notice of Imported Food Under
the Public Health Security and Bioterrorism Preparedness and Response Act of 2002"
(G/SPS/N/USA/690)," Establishment and Maintenance of Records Under the Public Health Security
and Bioterrorism Preparedness and Response Act of 2002"(G/SPS/N/USA/703) and "Administrative
Detention of Food for Human or Animal Consumption Under the Public Health Security and
Bioterrorism Preparedness and Response Act of 2002 (Draft) " (G/SPS/N/USA/704), On October 10,
2003, "Registration of Food Facilities Under the Public Health Security and Bioterrorism
Preparedness and Response Act of 2002" and "Prior Notice of Imported Food Under the Public Health
Security and Bioterrorism Preparedness and Response Act of 2002" were formally released as
temporary final rules, and entered into force on December 12 , 2003.
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With regard to the Registration of Food Facilities, the U.S. officials clearly expressed that they would
not extend the comments period, and all comments should be proposed before April 4, 2003. The
provision of article 26 of para. E on handling of Comments on Notifications of the "Recommended
Procedures for Implementing the Transparency Obligations of the SPS Agreement (Article 7)"
(G/SPS/7/Rev.2) of WTO/SPS committee provides "Members should grant requests for extension of
the comment period wherever practicable, in particular with regard to notifications relating to
products of particular interest to developing country members, where there have been delays in
receiving and translating the relevant documents or where there is a need for further clarification of
the measure notified. A 30-day extension should normally be provided". Please elaborate how the
U.S. implements this provision.
Answer
FDA did not consider any comments submitted after the 60-day comment period closes and did not
intend to grant any requests for extension of the comment period due to the Bioterrorism Act's
requirements to have final regulation in effect by December 12, 2003. This required publication on or
before October 12, 2003. This question is addressed in the proposed Registration rule (see 68 Fed.
Reg. 5378, at page 5416, Feb. 3, 2003).
FDA has posted on its website additional fact sheets, guidance documents, presentations, videos,
tutorials, and other materials to explain the requirements of these rules and FDA's implementation of
them. The preambles to the interim final rules describe how FDA intends to implement the
provisions. See 68 Fed. Reg. 58894 and 68 Fed. Reg. 58974, Oct. 10, 2003.
Question: (China #56)
Both Article 2.12 of TBT Agreement and article 10.2 of SPS Agreement provided that the developing
country member should be given "longer time-frames" from the adoption and entry into force of a
regulation.
Have the special interests and difficulties of the developing country members been seriously
considered by the U.S. in this regard and what specific measures have been taken to fulfill these
obligations?
Answer
FDA has encouraged public comment at every stage of the Bioterrorism regulations' development.
FDA developed and published proposed regulations which were open to public comment from both
domestic and foreign parties. We also conducted numerous outreach meetings directed at foreign
stakeholders, both within the U.S. to foreign embassy officials in Washington and via
videoconference. We received numerous comments from foreign governments, industries, and trade
associations on both rules. We reviewed the comments submitted during the comment period and
developed the final rule, taking the comments into account. In the case of the prior notice and
registration regulations, we are allowing for several opportunities for interested individuals to provide
comments even as we begin implementing the interim final rules to make sure that we minimized any
negative effect on trade while ensuring our food safety and security.
Please also refer to the responses to China’s Questions 54 and 55.
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Question: (China #57)
Could the U.S. indicate whether the above-mentioned WTO rules and provisions have been .followed
when the Establishment and Maintenance of Records. Under the Public Health Security and
Bioterrorism Preparedness and Response Act of 2002 is implemented?
Answer
We are in the process of considering the comments and preparing the final rule, which we plan to
issue shortly. We will comply with all of our WTO obligations as part of this rule making process.
While the proposed rule applied only to foreign facilities that were subject to the registration rule,
numerous foreign commentators stated that they believed the Bioterrorism Act was not intended to
cover foreign entities. FDA will address this comment in the final rule.
Question: (China #58)
Has the U.S. conducted the risk assessments before the adoption of the above-mentioned legislation
and regulations, according to Article 5.1 of the SPS agreement? If so, could the U.S. provide the
details?
Answer
FDA has published the risk assessment with the interim final rule. Under the U.S. system, legislation
is not normally put into effect until the final regulations take effect. The risk assessment may be
found on the FDA Website at http://www.cfsan.fda.gov/~dms/rabtact.html
Question: (China #59)
What measures has the U.S. taken to ensure that the enforcement of the legislation will not increase
the cost of food export and prolong the time of the exportation?
Answer
The Bioterrorism Act directs FDA to implement certain regulations to protect the safety and security
of the U.S. food supply. As part of the rule making effort, FDA sought ways to implement the
requirements of the Act in a way that minimize impacts on trade. We included an economic impact
analysis in the proposed rules for affected entities to review and provide comment, and made
revisions to the rules based on the comments we received to further minimize the impact to trade
consistent with the requirements in the Act. Both the registration and prior notice interim final rules
and the administrative detention final rule that FDA issued on June 4, 2004 (69 FR 31659) include
regulatory impact analyses.
Question: (China #60)
How will Article 5.4 of the SPS agreement be followed by the U.S. to ensure that the efforts in antiterrorism will not constitute new trade barriers and restrict normal trade?
Answer
FDA develops and published proposals for regulations which are open to public comment from both
domestic and foreign parties. We also conducted numerous outreach meetings directed at foreign
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stakeholders, both within the U.S. to foreign embassy officials in Washington and via video
conference and in-country visits by senior FDA officials. We received numerous comments from
foreign governments, industries, and trade associations on both rules. We reviewed each comment
that was submitted during the comment period and developed the final rule taking in account the
comments. In the case of the Bioterrorism regulations, we are allowing for several opportunities for
interested individuals to provide comments even as we begin implementing the interim final rule to
make sure that we minimized any negative effect on trade while ensuring our food safety and security.
We have published a compliance policy guide that describes the U.S. strategy for maintaining an
uninterrupted flow of food imports while improving their safety in accordance with the Public Health
Security and Bioterrorism Preparedness and Response Act of 2002 (Bioterrorism Act) requirements.
Question: (China #61)
Reference: (p. 65, paras. 146-149)
Registration of Food Facilities and Prior Notice of Imported Food under the Public Health Security
and Bioterrorism Preparedness and Response Act of 2002 has taken effect. Up to now there have been
uncertainties which will influence the transportation of these cargoes. As to the food that is imported
or offered for import into the U.S., after the facilities are registered and prior notice on the importation
is given to the FDA, what kind of documentation should accompany with the carrier when the vessel
arrives at a U.S. port?
Answer
For food offered for import to the U.S. after facilities are registered and prior notice is given, it would
be prudent for the carrier to have the Prior Notice Confirmation number when the vessel arrives at
port.
Question: (China #62)
The food is subject to refusal and detention for lack of registration or without prior notice. If all the
food in one container is refused, how will the container be treated?
Answer
As stated in the interim final rule (see 68 Fed. Reg. at page 58976 ): if adequate notice is not
provided, section 801(m) of the FD&C Act provides that the food is subject to refusal, and that
refused food must be held until adequate notice is given and may not be delivered to the importer,
owner, or consignee. The stated purpose of requiring notice of imported food shipments before
arrival in the United States is to enable FDA to conduct inspections of imported food at U.S. ports
(see section 801(m)(1) of the FD&C Act). Thus, FDA intends to use prior notice information to make
decisions about which inspections to conduct at the time of arrival. Currently, we intend to focus on
conducting these inspections when our information suggests the potential for a significant risk to
public health. FDA and CBP are coordinating FDA's new prior notice requirements with CBP's and
FDA's existing entry requirements to the greatest extent possible. Thus, the interim final rule allows
prior notice to be submitted electronically to FDA through either ABI/ACS or the FDA Prior Notice
(P.N.) System Interface.
If none of the food in a container is covered by adequate prior notice, each of those foods would be
refused and held until adequate notice is provide. Foods that have not been put under hold can be
segregated from foods refused for inadequate prior notice at no cost to the government. See 21 CFR
1.283(a)(3) and (4).
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Question: (China #63)
The Public Health Security and Bioterrorism Preparedness and Response Act (for short as the
Bioterrorism Act below) is not clear under what circumstances the carrier shall provide the prior
notice to the FDA. What information must be included in a prior notice?
Answer
Any individual with knowledge of the required information may submit the prior notice, including,
but not limited to, brokers, importers, and U.S. agents (see 21 CFR 1.278). Please refer to 21 CFR
1.281 to determine the information that must be included in a prior notice. Please also refer to the
FDA website provided (see answer to question #58.). The prior notice must be submitted
electronically and contain the following information:
 Identification of the submitter, including name, telephone and fax numbers, email address,
and firm name and address
 Identification of the transmitter (if different from the submitter), including name, telephone
and fax numbers, email address, and firm name and address
 Entry type and CBP identifier
 The identification of the article of food, including complete FDA product code, the common
or usual name or market name, the estimated quantity described from the smallest package
size to the largest container, and the lot or code numbers or other identifier (if applicable)
 The identification of the manufacturer
 The identification of the grower, if known
 The FDA Country of Production
 The identification of the shipper, except for food imported by international mail
 The country from which the article of food is shipped or, if the food is imported by
international mail, the anticipated date of mailing and country from which the food is mailed
 The anticipated arrival information (location, date, and time) or, if the food is imported by
international mail, the U.S. recipient (name and address)
 The identification of the importer, owner, and ultimate consignee, except for food imported
by international mail or transshipped through the United States
 The identification of the carrier and mode of transportation, except for food imported by
international mail
 Planned shipment information, except for food imported by international mail
Question: (China #64)
Most of the food and drug that are imported or offered for importing into the U.S. by water are carried
in containers. Under what circumstances are the containers subject to registration?
Answer
Neither the registration nor the prior notice interim final rules apply to drugs. Containers are not
subject to registration, but one or more prior notices must be submitted for its contents, depending on
how many different food products are included within the container, unless the food is exempt from
prior notice under the rule. Prior notices must be received and confirmed electronically by FDA no
more than 5 days before arrival and, as specified by the mode of transportation below, no fewer than:
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-
2 hours before arrival by land by road
4 hours before arrival by air or by land by rail
8 hours before arrival by water
The time consistent with the time frame established for the mode of transportation for an article of
food carried by or otherwise accompanying an individual if it is subject to prior notice (The food must
also be accompanied by the FDA confirmation.)
Question: (China #65)
If an ocean carrier cancels the Canadian port by reason of weather or other reasons and arrives at a
U.S port directly and if the prior notice submitter or transmitter does not know the temporary change
and miss the proper time to provide the prior notice, the Bioterrorism Act does not provide what to do
with this case, which will bring inconvenience to the food, drug exporters and the carrier.
Is there any regulation in the U.S. to deal with such circumstances? If not, does the U.S. intend to
make any arrangement in this regard?
Answer
FDA addresses this in section 1.283(a)(1)(iii) of the interim final rule. If the article of food is refused
due to untimely prior notice, unless CBP concurrence is obtained for export and the article is
immediately exported from the port of arrival under CBP supervision, it must be held within the port
of entry for the article unless directed by CBP or FDA.
Question: (China #66)
How would the U.S. deal with the food which should arrive at Canada but for some reasons finally
arrives at a U.S. port and needs to be transported to Canada from the U.S. by rail or by road? Does
the carrier need to give prior notice to the FDA?
Answer
Under the circumstances, as described, prior notice would be required, because the food would be
imported into the U.S. before being placed on a truck for transport to Canada. If, however, the food
was imported, then exported without leaving the port of arrival until export (e.g., the food arrives by
plane in the U.S. and is transferred to another plane at the same port bound for Canada), then prior
notice would not be required. See section 1.277(b)(3) of the interim final rule.
Question: (China #67)
(p. 65, para. 147)
According to the Registration of Food Facilities, foreign establishments should apply for registration
through U.S. agencies, and have to pay thousands of U.S. dollars to the U.S. agencies. In the mean
time, in order to meet the requirements set in the Establishment and Maintenance of Records, foreign
food and feedstuffs processing establishments and transportation and trade-related establishments
should establish and maintain relevant records. Some of the small and medium enterprises are
considering abandoning the U.S. market due to these requirements. Hence, FDA's requirements are
do not comply with the WTO Principle of least trade restriction and create trade barriers to the
exportation of Chinese products.
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Is FDA seeking other alternative measures which will minimize the impact on trade while preventing
Bioterrorism and tracing terrorists?
Answer
The WTO SPS obligation is "not more trade restrictive than necessary." "Least trade restrictive" is
not the WTO SPS obligation. There is no registration fee to register with FDA. Both the
Bioterrorism Act and the Registration interim final rule implementing it require foreign facilities to
have a U.S. Agent. FDA specifies minimal requirements for the U.S. Agent. Accordingly, owners,
operators, or agents in charge of foreign facilities may select persons who will not charge a fee to
serve as their U.S. agent (e.g., family members residing in the U.S., brokers, sister facilities or parent
corporations in the U.S. or other persons with whom they do business who agree to serve as the U.S.
agent without any cost), or enter into a business relationship with persons for a fee. FDA is aware that
various firms may be offering their services to assist domestic and/or foreign facilities to register with
FDA. These firms are not affiliated with FDA, nor has the agency contracted with any firms to
register facilities.
Regarding the record keeping requirements, FDA will comment on those provisions once they are
finalized and stakeholders have an opportunity to assess the impact of the final rule as it may apply to
them. The proposed rule imposes no requirements, and FDA will be issuing a final rule after fully
considering the timely comments we have received.
FDA has published a proposed rule and an interim final rule to give ample opportunity for interested
parties to provide comments on how the FDA can minimize any negative impact on trade while
meeting the requirements of the Public Health Security and Bioterrorism Preparedness and Response
Act of 2002.
FDA and the U.S. Bureau of Customs and Border Protection (CBP) issued a compliance policy guide
which is available on the FDA website that describes their strategy for maintaining an uninterrupted
flow of food imports while improving their safety in accordance with the Public Health Security and
Bioterrorism Preparedness and Response Act of 2002 (Bioterrorism Act) requirements which became
effective on December 12, 2003. FDA and CBP expect a "good faith" effort at compliance with the
requirement that FDA receive a prior notification of all human and animal food, drinks and dietary
supplements imported or offered for import to the U.S. and the requirement that all facilities that
manufacture, process, pack or hold food intended for consumption in the U.S. must be registered with
FDA. During the next 8 months, the two agencies will primarily rely on educating the affected firms
and individuals. During this period, the agencies will utilize communication and education initiatives,
escalating imposition of civil monetary penalties, and ultimately refusal of shipments. This phase-in
period will end on August 12, 2004.
Question: (China #68)
What kind of measures will the U.S. take to ensure that the implementation of Bioterrorism Act will
not increase the export cost of food trade and prolong the time of exportation?
Answer
Please refer to the response to China’s Question #67.
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Question: (China #69-71)
Reference: p. 65, para. 149
The Chinese government made comments in a serious manner on the "Registration of Food Facilities"
(G/SPS/N/USA/691), "Prior Notice of Imported Food" (G/SPS/N/USA/690), the "Establishment and
Maintenance of Records" (G/SPS/N/USA/703) and the "Administrative Detention of Food for Human
or Animal Consumption Under the Public Health Security and Bioterrorism Preparedness and
Response Act of 2002 (Draft)" (G/SPS/N/USA/704) notified by FDA, provided with the U.S. the
comments before the final date and requested the U.S. to provide answers in written form and clarify
some related questions. However, so far China has not received any formal reply, clarification and
explanation from the U.S.
For food and feedstuffs establishments, the relevant record is made based on the General Food
Sanitation of 1997 and RACCP system and Application Rules of 1997 developed by CAC, a
standardization body which is recognized by TBT/SPS Agreement, and the food establishments which
have exported food to the U.S. have also I net the requirements set out in FDA 21 CFR PART 110,
FDA 21 CFR PART 120. These records should have met the requirements set out in the
Establishment and maintenance of Records, and there is no need to repeat them anyway.
Please explain whether the requirements set out in the "Establishment and Maintenance of Records
Under the Public Health Security and Bioterrorism Preparedness and Response Act of 2002" are
based on "CAC General requirements for Food Sanitation "of 1997, "CAC HACCP System and
Application Rules" of 1997, and its relationship with the requirements set out in FDA 21 CFR PART
110, FDA 21 CFR PART 120.
Answer
Under the Administrative Procedure Act, U.S. agencies are required to respond to significant and
relevant comments from all parties that were submitted within the comment period. The comments
are not reviewed and answered individually since many interested parties ask similar questions or
forward similar concerns, but each issue raised is analyzed and responded to within the body of the
final regulation. Thus, any timely comments submitted by any stakeholder are addressed in the
preambles to the final rules.
Regarding the record keeping requirements, FDA will comment on those provisions once they are
finalized and stakeholders have an opportunity to assess the impact of the final rule as it may apply to
them. The proposed rule imposes no requirements, and FDA will be issuing a final rule after fully
considering the timely comments we have received. FDA notes, however, that proposed Sec. 1.330
states that the proposed record keeping regulation does not require duplication of existing records if
those records contain all of the information required by this subpart. If a person subject to the
regulations keeps records of all of the information as required by this subpart in compliance with
other Federal, State, or local regulations, or for any other reason, e.g., as a result of its own business
practices, then those records may be used to meet these requirements.
Question: (Columbia #1.C2)
Paragraph 128 of the Secretariat's report states that in order to meet the Constitutional requirements of
due process, most States have enacted statutes containing transparency procedures. For example,
most States have enacted administrative procedure acts whose procedures are similar to those of the
federal APA. The majority of States have also enacted statutes that provide for public access to
information and judicial procedures.
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As regards Technical Regulations applied to products, what progress has been made in standardizing
requirements at the state and federal level?
Answer
Title IV of the Trade Agreements Act of 1979 (Public Law 96-39), as amended by the Uruguay
Round Agreements Act (Public Law 103-465), prohibits U.S. agencies from employing standards,
technical regulations or conformity assessment procedures as unnecessary obstacles to trade. This
legislation includes the Administration's commitment to promote state agencies' compliance with U.S.
obligations under the WTO through reasonable measures including through state-federal consultation
and cooperation. Should specific questions regarding the WTO consistency of state or local
regulations or procedures be brought to our attention, USTR would engage in consultations with
interested state authorities to ascertain whether there is in fact a compliance issue and, if so, how best
to proceed.
Question: (Colombia #I.C2)
United States requirements regarding technical standards do not seem to reflect international
standards, and there is a proliferation of standards for each state. This can make exporting companies
less competitive. Some sectors in Colombia have noted this difficulty, for example those with
products such as doors and windows, safety footwear, leather products and auto parts.
Is the United States notifying the WTO of draft measures at the sub-federal level?
Answer
The United States has yet to identify and notify any proposed technical regulations or mandatory
conformity assessment procedures at the state level that would require notification under the TBT
Agreement.
Question: (Colombia #I.C3)
There are certain products for which the United States requests third-party certification of conformity
assessment, that is, a certifier accredited and recognized through some mechanism of the agency
enforcing regulations at the border. Bearing in mind that the Government of the United States may
give official recognition to an independent testing authority through accreditation or similar measures,
what mechanisms are in place to facilitate Mutual Recognition Agreements (MRA) aimed at easing
access for these types of products from developing countries? (paragraph 132).
Answer
We are unclear as to the specific concern/question raised by Colombia. The United States does not
have a single approach to conformity assurance. In some cases, U.S. regulatory authorities rely on
third-party conformity assessment bodies. In those cases, the regulatory authority usually specifies
criteria for competence, and, any body that qualifies as competent according to those criteria
(regardless of location) may be recognized to perform the conformity assessment. Developing
country suppliers benefit from this approach and minimize costs and resources to the extent that they
have qualified conformity assessment bodies. U.S. regulators have confidence in this type of
approach as they rely on our own domestic infrastructure (including penalties for non-compliance and
other enforcement mechanisms) to ensure the integrity of the bodies they have recognized. An
additional agreement (mutual or other recognition agreement) with a developing or other country may
not be necessary or desirable to facilitate trade. Such an agreement would require the U.S. authority
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to understand and confirm that the procedures in place in the other country are sufficient to assess
compliance with U.S. regulations. In our experience, such understanding is not easily established.
Question: (Colombia #I.C4)
We are interested in knowing the findings and experiences gained from the application of the Mutual
Recognition Agreements for which foreign verification of conformity is accepted in accordance with
United States regulations. What are the authorities that, on a case-by-case basis, have accredited
selected foreign testing agencies? Which agencies have been accredited? (paragraph138).
Answer
The United States is party to a limited number of agreements which may or may not fit within
Colombia's definition of "mutual recognition agreements." Our experiences with such agreements
have been varied. For example, agreements which require a counterpart authority to demonstrate the
competence of its bodies to assess conformity to the other Party's technical regulations tend to require
a significant amount of resources and commitment (e.g., negotiations, confidence-building,
implementation) on both sides. Many of the observations made by Canada in its paper submitted to
the WTO Committee on Technical Barriers to Trade on its experience with mutual recognition
agreements (G/TBT/W/167) are reflective of our own experience. The United States believes that
MRAs are only one option of many for achieving the acceptance of conformity assessment results
when those are required by regulation.
The United States government does not have a centralized data base of regulatory authorities which
rely on accreditation or other recognition criteria for bodies conducting conformity assessment to
technical regulations. For further information on United States conformity assessment procedures
please visit the NIST website at http://ts.nist.gov/ts/htdocs/210/gsig/cainfo.htm. This link includes a
"Directory of State and Local Government Laboratory Accreditation/Designation Programs" (NIST
SP 815: 2002 Edition); and a Directory of Federal Government Certification and Related Programs
(NIST SP 739: 1999 Edition). NIST SP 808, "Directory of Federal Government Laboratory
Accreditation/Designation Programs" is out of-date and is currently being updated. For information
on specific regulations and whether they specify conformity assessment requirements, including
accreditation, please contact the U.S. inquiry point.
Question: (Colombia I.C6)
Reference: WT/TPR/S/126
Is it possible to obtain from the regulatory authorities enforcing the environmental provisions
governing the use of marine resources, the automatic lifting of the embargo prohibiting the export of
tuna to countries fishing in the eastern tropical Pacific Ocean, if those countries are signatories to the
Agreement on the International Dolphin Conservation Program (AIDCP)?
Answer
Only one process exists through which an embargo that prohibits a nation from exporting to the
United States yellowfin tuna and yellowfin tuna products harvested in the eastern tropical Pacific
Ocean (ETP) by purse seine vessels greater than 400 short tons (362.8 metric tons) carrying capacity
may be lifted. That process is known as an "affirmative finding." The affirmative finding process is
described fully in the U.S. Code of Federal Regulations (CFR) at 50 CFR 216.24(f); however, a
summary of the requirements is provided in the following paragraph.
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To attain an affirmative finding, the harvesting nation must submit the following:
(1) Evidence of membership in the IATTC;
(2) Evidence that a nation is meeting its obligations to the IATTC, including financial obligations;
(3) Evidence that a nation is complying with the IDCP;
(4) Evidence of a tuna tracking and verification program comparable to the U.S. tracking and
verification
regulations at 50 CFR 216.94;
(5) Evidence that the national fleet DMLs and national fleet per-stock per-year mortality limits, if
they are allocated to countries, were not exceeded; and
(6) Authorization for the IATTC to provide or release information, or a commitment from the
harvesting
nation to provide directly to the Assistant Administrator, complete, accurate,
and timely information necessary to verify information on TTFs.
It is the United States' understanding that, to date, Colombia has not ratified the IATTC or submitted
an affirmative finding package to National Marine Fisheries Service (NOAA Fisheries).
Question: (Hong Kong #1)
We note that apart from mutual recognition agreements, which accept foreign conformity assessment
on a bilateral product-specific basis, the U.S. has also accredited selected foreign testing agencies on a
case-by-case basis. We are interested in getting more details on the accreditation arrangements for
foreign testing agencies, noting the trade facilitation effects that might be brought about by
accreditation arrangements. (WT/TPR/S/126, para. 138)
Answer
The United States government does not have a centralized database of regulatory authorities that rely
on accreditation of bodies that conduct conformity assessment to technical regulations. For further
information on United States conformity assessment procedures please visit the NIST website at
http://ts.nist.gov/ts/htdocs/210/gsig/cainfo.htm. This link includes a "Directory of State and Local
Government Laboratory Accreditation/Designation Programs" (NIST SP 815: 2002 Edition); and a
"Directory of Federal Government Certification and Related Programs" (NIST SP 739: 1999
Edition). NIST SP 808, "Directory of Federal Government Laboratory Accreditation/Designation
Programs" is out-of-date and is currently being updated. For information on specific regulations and
whether they specify conformity assessment requirements, including accreditation, please contact the
U.S. inquiry point.
Question: (India #16)
Exports of shrimps to the U.S. are embargoed unless exporting nations can provide evidence that their
shrimp trawlers match U.S. efforts to protect sea turtles. In 1996, the U.S. banned the import of
marine products from India on the grounds that Indian fishermen were not using turtle excluder
devices while harvesting shrimp and other marine products. By the DSB ruling of December 1999,
the Appellate Body agreed that the measure as applied by the U.S. constitutes an arbitrary and
unjustifiable discrimination between members of the WTO and recommended that the U.S. authorities
should bring this measure into conformity with the obligations under WTO. In view of the ruling
given by the DSB, the U.S. delegation is requested for information on whether action has been
initiated to amend Section 609 of Public Law 101-162 which has been found to be WTO inconsistent.
WT/TPR/M/126/Add.3
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Answer
The Appellate Body report found that the underlying law, Section 609, in fact, did fall under the
measures covered by Article XX(g), but stated the import ban was not justified because of the manner
in which it was implemented by the United States. The Appellate Body listed six specific points
regarding the USG's implementation of the law that, on the whole, contributed to its decision that such
implementation was inconsistent with the United States' WTO obligations.
In response to the WTO findings, the United States revised the implementing guidelines to bring the
process for implementing the law into line with the recommendations and rulings of the DSB. No
changes were made to the text of Section 609. In June 2001, a subsequent WTO dispute settlement
panel found that the revised guidelines and their application were fully consistent with the United
States obligations under the WTO Agreement. The appellate body confirmed this result.
Question: (India #20)
Would the U.S. authorities clarify how these new regulations meet the requirements of GATT Article
VIII 1 (c), and of the WTO SPS Agreement, particularly the 'necessity test' and the 'least trade
restriction test'? ....how can these measures be made less trade restrictive?
Answer
Though the likelihood of a biological or chemical attack on the U.S. food supply is uncertain,
significant scientific evidence documents the risk to public health of food that has been inadvertently
contaminated. After performing a risk assessment which describes uncertainties, and noting the broad
range of agents that may contaminate the food supply that FDA regulates, the agency concluded that
there is a high likelihood, over the course of a year, that a significant number of people will be
affected by an act of food terrorism or by an incident of unintentional food contamination that results
in serious food borne illness. FDA has determined that this qualitative risk assessment, which
discusses prior incidents of food contamination and available unclassified information on prior acts of
food sabotage, is appropriate to the circumstances. The scientific risk assessment can be found at:
http://www.cfsan.fda.gov/~dms/ rabtact.html#iii.
The United States Food and Drug Administration (FDA) and the U.S. Bureau of Customs and Border
Protection (CBP) issued a compliance policy guide which is available on the FDA website that
describes their strategy for maintaining an uninterrupted flow of food imports while improving their
safety in accordance with the Public Health Security and Bioterrorism Preparedness and Response Act
of 2002 (Bioterrorism Act) requirements which became effective on December 12, 2003. FDA and
CBP expect a "good faith" effort at compliance with the requirement that FDA receive a prior
notification of all human and animal food, drinks and dietary supplements imported or offered for
import to the U.S. and the requirement that all facilities that manufacture, process, pack or hold food
intended for consumption in the U.S. must be registered with FDA.

During the 8 month transition period, the two agencies are relying on educating the affected firms
and individuals. During this period, the agencies are utilizing communication and education
initiatives, escalating imposition of civil monetary penalties, and ultimately refusal of shipments.
This phase-in period will end on August 12, 2004. FDA and CBP personnel have already begun
an extensive campaign to educate with written material, briefings, and seminars with other
government officials, domestic and foreign food importers, brokers, transporters, and other
affected industry representatives on compliance with the Bioterrorism Act.
In addition, during the 8-month transitional period, the two agencies have taken the following steps:
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



Gathered data to track compliance with the prior notice requirements and to determine how to
best use FDA's and CBP's resources to educate industry and the public to achieve full compliance
with the Bioterrorism Act.
Provided industry and the public with summary information about the level of compliance with
the prior notice rules, including data on the types of errors in submitted prior notices.
Posted the summary information on FDA's website at www.fda.gov.
Developed a joint plan to achieve the goal of a uniform, integrated system and to coordinate
timeframes for import prior notice information while fulfilling the Bioterrorism Act mandates for
air and truck modes of transportation with timeframes promulgated by the Bureau of Customs and
Border Protection (CBP) when it finalizes its rule entitled "Required Advance Electronic
Presentation of Cargo Information"
As always, both agencies will continue to ensure that imported products are safe for human or animal
consumption.
Question: (Indonesia #2)
One aspect of the [Bio terrorism Act] registration that concerns Indonesia is the requirement for a
food facility to have a U.S. agent in the registering facility. Indonesia finds that this requirement is
basically unnecessary and could have been accommodated in a more cost-effective way. Please
comment.
Answer
The purpose of the U.S. agent is to serve as a communications link between FDA and an individual
facility for a number of purposes, including both emergency situations and day-to-day registration
issues. These routine issues may include FDA's need for information about that facility and arranging
both routine inspections and inspections or communications with the facility due to a potential
Bioterrorism threat or other public health emergency.
The rule sets out only two qualifications for a U.S. agent: The agent is required to reside or maintain a
place of business in the United States and to be physically present in the United States. Therefore,
many foreign facilities are able to use existing contacts in the United States as their U.S. agents.
Moreover, FDA has clarified in the interim final rule that the requirement of a single U.S. agent for
FDA registration purposes does not preclude facilities from having multiple agents (such as foreign
suppliers) for other business purposes.
The requirement for the U.S. agent and the underlying rationale for its importance in addressing
Bioterrorism threats is explained in detail in the Interim Final Rule, 68 Fed. Reg. 58894. The
extensive discussion is covered on pages 58915-58916 in the Responses to Comments 84-93. The
Interim
Final
Rule
can
be
accessed
on
the
FDA
web
site
at:
http://www.fda.gov/oc/bioterrorism/bioact.html by clicking on the Interim Final Rule under Section
305. Additional information including a Fact Sheet and Questions and Answers can be accessed by
clicking on Fact Sheet under Section 305.
Question: (Indonesia #4)
It is apparent that in the U.S. products are increasingly being subject to a growing number of
regulations regarding consumer and environmental protection. While it may legally be nondiscriminatory in nature, the intricacy of the U.S. regulatory system tends to become a major
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impediment to market access. There is also a lack of clear distinction in the U.S. between what is
essentially required for safety, security, health and environmental reasons on the one hand, and what
is basically option requirement for quality, on the other hand. The situation is even worse since in the
fact that there are more than 2,700 state and municipal authorities in the U.S. that call for specific
requirements for products to be sold or installed in their jurisdictions. These requirements are not
necessarily consistent with each other, or even in line with requirements provided for at the federal
level. Could the U.S. provide a justification in relation to U.S. obligations under the TBT and SPS
Agreements?
Answer
The TBT and SPS Agreements establish certain disciplines and obligations which must be followed in
the development and application of measures, including regulations. We believe that the U.S. system,
albeit complex, is consistent with these disciplines and obligations, and achieves the WTO objectives
of preventing the creation of unnecessary or arbitrary barriers to trade. The U.S. system ensures that
standards and regulations are developed through open and transparent procedures.
Question: (Indonesia #5)
Electrical machinery and electronics represent the second most important Indonesia's export products
to the U.S. In 2002, Indonesia's export to the U.S. of electrical machinery and equipment and parts
thereof, sound recorders and reproducers, television image and sound recorders and reproducers, and
parts and accessories of such articles that all together are classified under the HS Number 85 was
valued at $1.61 billion, amounted to 16.69 percent of total Indonesia's export to the United States.
However, marketing these products in the U.S. market is not at all an easy task for Indonesian
companies. The U.S. market for these products is split up by different federal, state, and sectoral
technical regulations, procurement specifications and standard requirements. Complying with federal
regulations and being cleared by U.S Customs is not sufficient to market electrical machinery and
electrical products in the U.S. How can this situation be justified under the TBT Agreement?
Answer
We agree with Indonesia that it takes more than clearing Customs and meeting U.S. regulatory
requirements to gain acceptance in the U.S., or for that matter, any market. There are many other
factors that affect marketing of a product, including consumer preference and choice. The fact that
the U.S. is federated and de-centralized does not, per se, raise a question of compliance with WTO
rules. As noted in the response to Indonesia’s Question #4, we believe the U.S. system is consistent
with obligations under the TBT Agreement.
Question: (Japan #21)
Automobiles weighing less than 8,500 pounds, which are sold in the U.S., are obliged to label
elements, such as the percentage of U.S. or Canadian parts, the final assembling ratio, the final place
of assembly and the place of manufacture of the engine and transmission. This is aimed at stimulating
the U.S. consumers' spirit of "buy American", while placing much burden on the auto manufacturers
by creating various kinds of labels based on its dates and types. In addition, the real state of the
procurement rate is not properly calculated for example, the procurement ratio does not reflect the
labor cost of the assembly lines.
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Answer
The American Automobile Labeling Act (AALA) requires passenger motor vehicles to be labeled
with information about the country of origin of the vehicle and its parts. The requirements are solely
informational; they apply in the same way and to the same extent, regardless of where a vehicle is
manufactured. While there are costs associated with calculating country-of-origin information, the
National Highway Traffic Safety Administration, in implementing the AALA, has sought to minimize
cost impacts to the extent consistent with ensuring that consumers are provided with the information
required by the Congress. We do not believe these informational requirements are burdensome.
While the calculation of U.S./Canadian parts content does not, per the AALA, include final assembly,
this fact is explained in a note included on the label. Moreover, the final assembly point of the vehicle
is included separately on the label.
Question: (Japan #22)
The Energy Policy and Conservation Act of 1975 requires auto manufacturers to calculate the
corporate average fuel economy (CAFÉ), which should clear certain thresholds for the purpose of
environmental protection. When calculating CAFÉ figures, it is necessary to compute the rate of
domestic manufacturing for each line, and to obtain the standards of fuel consumption for domestic
and imported automobiles respectively. However, as automobiles obtain standards in their own
category, the division between domestic and imported vehicles sometimes brings out negative effects
on the improvement of fuel efficiency itself, which was the initial goal. Companies specializing in
imported and fuel inefficient large-sized cars and sports-type cars experience disadvantages.
Answer
NHTSA is examining what CAFÉ reforms it could make within its existing legislative authority under
the Energy Policy and Conservation Act. To that end, NHTSA published an advance notice of
proposed rule making in December 2003 requesting comments on possible reforms.
Comments on the ANPRM closed on April 27, 2004.
Additional Background
Statutory requirement:
49 U.S.C. 32904 requires that the CAFÉ of a manufacturer's fleet of domestically manufactured
passenger automobiles be calculated separately from the CAFÉ of a manufacturer's fleet of nondomestically manufactured passenger automobiles. For any model year, each of the two fleets must
separately meet that year's CAFÉ standard for passenger automobiles.
Recent events
The conference report for the Department of Transportation and Related Agencies Appropriations Act
for FY 2001 Public Law 106-346 directed that NHTSA fund a study by the National Academy of
Sciences (NAS) to evaluate the effectiveness and impacts of CAFÉ standards (H.R. Conf. Rep. No.
106-940, at 117-118). In July 2001, the National Academy of Sciences released its report entitled,
"Effectiveness and Impact of Corporate Average Fuel Economy (CAFÉ) Standards."
In February 2002, Secretary Mineta asked Congress "to provide the Department of Transportation
with the necessary authority to reform the CAFÉ program, guided by the NAS report's suggestions."
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In February 2002, NHTSA published a request for comments entitled "National Academy of Science
Study and Future Fuel Economy Improvements" (67 Fed. Reg. 5767).
In December 2003, NHTSA published an advance notice of proposed rule making entitled
"Reforming the Automobile Fuel Economy Standards Program."
Question: (Korea, ref. page 68 para. 161)
The Pelly Amendment to the Fisherman's Protective Act of 1967 authorizes the U.S. Secretary of
Commerce to certify a country for activities that diminish the effectiveness of an international fishery
conservation program.
Does the U.S. have a clear set of criteria for determining what activities diminish the effectiveness of
an international fishery conservation program? If, so, is there any possibility that the above criteria
would act as a non-tariff barrier?
Answer
In applying the Pelly Amendment, the U.S. uses the Amendment language, "diminish the
effectiveness of an international fishery conservation program" as the criteria. We review activities
on a case-by-case basis examining the facts and scientific evidence. The U.S. has endeavored to
ensure that any decision made under the Pelly Amendment is WTO consistent.
Question: (Japan #36)
Japan's research program on whales under special permit is not only based on the legitimate right of a
contracting government to the International Convention on the Regulation of Whales (Article 8), of
which the U.S. is also a member, but is also carefully designed so as not to undermine the health of
the targeted species of the research. Therefore, it is regrettable that the U.S. certified the research
under the Pelly Amendment in 2000.
Please provide the U.S. position on the matter.
Answer
See the response to Korea’s Question (ref. page 68 para. 161).
Question: (Switzerland #2)
Could the U.S. elaborate on their intentions to ratify the Convention on Biological Diversity and the
Cartagena Protocol on Biosafety?
Answer
The United States is committed to protecting and maintaining biological diversity. While the
United States has no current plans to ratify the Convention on Biological Diversity, we actively
participate in Convention meetings as observers and serve on a number of its technical and expert
groups. As only Parties to the Convention may sign or ratify the Cartagena Protocol, we are unable to
sign or ratify the Protocol at this time.
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Question: (Turkey, Section III #3)
Since the last TPR, the United States has introduced new procedures and rules regarding import
regulations such as the Container Security Initiative and "Operation Safe Commerce" Project. In
addition, the new Bioterrorism Act of 2002 requires the registration of food manufacturing and
handling facilities, and prior notice to FDA of all food shipments destined to the U.S.
Would the U.S. kindly inform us of the conformity of the new rules and procedures with the WTO
system and the measures being taken to assure the new system will not create any kind of technical
barriers.
Answer
FDA is aware of the international trade obligations of the United States, including those under the
World Trade Organization and the North American Free Trade Agreement, and has considered these
obligations throughout the rule making process for these regulations. FDA believes that the
registration and prior notice interim final rules are fully consistent with these international obligations.
FDA also is developing the record keeping and administrative detention final rules to be fully
consistent with these international obligations.
FDA has encouraged public comment at every stage of developing the four Bioterrorism regulations.
Although not required by law, FDA began with an early outreach and public comment period, and
considered all comments the agency received by August 30, 2002, in developing each of the four
proposed rules. The four proposed regulations that FDA published were open to public comment
from both domestic and foreign parties. We also conducted numerous outreach meetings directed at
foreign stakeholders after publication of the four proposed rules and two interim final rules, both
within the U.S. to foreign embassy officials in Washington, and by sending senior FDA officials
abroad to meet with foreign government officials and foreign industry members. In addition, FDA
held satellite downlink meetings for each proposed rule and the two interim final rules that were
broadcast around the world. We posted both a copy of the downlink and transcripts of the downlink
in English, French, and Spanish (the three official WTO languages) on our website. Moreover, FDA
held live video conference meetings with numerous other foreign entities around the world. We
received numerous comments from foreign governments, industries, and trade associations on all four
proposed rules, which the agency considered as we developed the interim final and final rules.
In the case of the prior notice and registration regulations, even though not required by either the
Bioterrorism Act specifically, or our rule making procedures (e.g., the Administrative Procedure Act)
or international obligations generally, FDA issued these rules as interim final rules and provided
interested individuals two additional opportunities to provide comments even as we begin
implementing the interim final rules. This is to ensure that we minimize any negative impact on trade
to the extent feasible while ensuring the safety and security of our food supply. We have published a
compliance policy guide that describes the U.S. strategy for maintaining an uninterrupted flow of food
imports while improving their safety in accordance with the Public Health Security and Bioterrorism
Preparedness and Response Act of 2002 (Bioterrorism Act) requirements.
See
http://www.cfsan.fda.gov/~pn/cpgpn.html.

In order to help countries become more accustomed to the new rules and to minimize any
negative impact on trade from the new requirements, during the first 8 months following the
rules’ effective date of December 12, 2003, FDA and U.S. Bureau of Customs and Border
Protection (CBP) will primarily rely on educating the affected firms and individuals. During this
period, the agencies will utilize communication and education initiatives, escalating imposition of
civil monetary penalties, and ultimately refusal of shipments. This phase-in period generally will
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end on August 12, 2004, although as noted in the compliance policy guide, FDA will continue to
exercise enforcement discretion for certain shipments, such as certain food shipments arriving by
international mail. FDA and CBP personnel have already begun an extensive campaign to
educate with written material, briefings, and seminars with other government officials, domestic
and foreign food importers, brokers, transporters, and other affected industry representatives on
compliance with the Bioterrorism Act.
In addition, during the 8-month transitional period, the two agencies have taken the following steps:




Gathered data to track compliance with the prior notice requirements and to determine how to
best use FDA's and CBP's resources to educate industry and the public to achieve full compliance
with the Bioterrorism Act.
Provided industry and the public with summary information about the level of compliance with
the prior notice rules, including data on the types of errors in submitted prior notices.
Posted the summary information on FDA's website at www.fda.gov.
Developed a joint plan to achieve the goal of a uniform, integrated system and to coordinate
timeframes for import prior notice information while fulfilling the Bioterrorism Act mandates for
air and truck modes of transportation with timeframes promulgated by the Bureau of Customs and
Border Protection (CBP) when it finalizes its rule entitled "Required Advance Electronic
Presentation of Cargo Information.
Question: (Venezuela #2)
Could you comment on how the bilateral trade agreements concluded by the United States in recent
years ensure the transparency and harmonization of importation standards for third parties: what
efforts have been made to ensure that all parties involved in importations are apprized of the
applicable import rules?
Answer
The United States continues to apply its standards and regulations on a non-discriminatory basis. The
Administrative Procedure Act requires U.S. agencies to publish proposals and seek comment from all
interested persons on proposed regulations - whether foreign or domestic - before they are finalized.
In addition, for technical regulations and sanitary and phytosanitary measures within the scope of the
TBT and SPS Agreements, notification of proposals are made to WTO members, and inquiry points
for information are established as required by these Agreements.
Question: (Venezuela #3)
Could the United States provide a detailed explanation of how the FDA will apply the procedures
provided for in the Bioterrorism Act in a transparent and non-discriminatory manner?
Answer
FDA is aware of the international trade obligations of the United States, including those under the
World Trade Organization, and has considered these obligations throughout the rule making process
for these regulations. FDA believes that the final regulation is fully consistent with international
obligations.
FDA encouraged public comment at every stage of the Bioterrorism regulations' development. FDA
developed and published proposed regulations that were open to public comment from both domestic
and foreign parties, and conducted numerous outreach meetings directed at foreign stakeholders. The
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FDA received numerous comments from foreign governments, industries, and trade associations on
both rules. They reviewed each comment that was submitted during the comment period and
developed the interim final rules, taking the comments into account. In the case of the prior notice
and registration regulations, the FDA is allowing interested individuals to provide comments even as
the FDA begins implementing the interim final rule.
Question: (Venezuela #4)
With respect to the exceptions contained in the Bioterrorism Act, can the United States furnish more
details about facilities that would be exempt from the registration requirement? This information
could avoid misunderstandings that might hamper trade.
Answer
Facilities that are exempt from registration requirements are:








Private residences of individuals, even though food may be manufactured/processed, packed,
or held there.
Non-bottled water drinking water collection and distribution establishments and structures,
such as municipal water systems.
Transport vehicles that hold food only in the usual course of their business as carriers.
Farms, which are facilities in one general physical location devoted to the growing and
harvesting of crops, the raising of animals (including seafood), or both. Washing, trimming
of outer leaves, and cooling of produce are considered part of harvesting. The term "farm"
also includes facilities that pack or hold food, provided that all food used in such activities is
grown, raised, or consumed on that farm or another farm under the same ownership, and
facilities that manufacture/process food, provided that all food used in such activities is
consumed on that farm or another farm under the same ownership. A farm-operated roadside
stand that sells food directly to consumers as its primary function would be exempt from
registration as a retail food establishment.
Restaurants, which are facilities that prepare and sell food directly to consumers for
immediate consumption. Entities in which food is provided to humans, such as cafeterias,
lunchrooms, cafes, bistros, fast food establishments, food stands, saloons, taverns, bars,
lounges, catering facilities, hospital kitchens, day care kitchens, and nursing home kitchens,
are restaurants. Pet shelters, kennels, and veterinary facilities that provide food directly to
animals are also restaurants. Facilities that provide food to interstate conveyances, such as
commercial aircraft, or central kitchens that do not prepare and serve food directly to
consumers are not restaurants for purposes of the rule.
Retail food establishments, which are establishments that sell food products directly to
consumers as their primary function, meaning that annual sales directly to consumers are of
greater monetary value than annual sales to all other buyers. A retail establishment may
manufacture/process, pack, or hold food if its primary function is to sell food directly to
consumers, including food that the establishment manufactures/processes, packs, or holds.
The term “consumers” does not include businesses. Examples of retail food establishments
include groceries, delis, convenience stores, and vending machine locations.
Non-profit food establishments, which are charitable entities that meet the terms of §501(c)(3)
of the Internal Revenue Code and that prepare or serve food directly to the consumer or
otherwise provide food or meals for consumption by humans or animals in the U.S. Central
food banks, soup kitchens, and non-profit food delivery services are examples of non-profit
food establishments.
Fishing vessels that harvest and transport fish. Such vessels may engage in practices such as
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

heading, eviscerating, or freezing fish solely to prepare the fish for holding on board the
vessel and remain exempt.
Facilities regulated exclusively and throughout the entire facility by the U.S. Department of
Agriculture, under the Federal Meat Inspection Act, the Poultry Products Inspection Act, or
the Egg Products Inspection Act.
Foreign facilities, if food from such facilities undergoes further manufacturing/processing
(including packaging) by another facility outside the U.S. However, a facility is not exempt if
the further manufacturing/processing conducted by the subsequent facility consists of adding
labeling or any similar activity of a de minimis nature. In that case, both facilities are
required to register. Also, any foreign facility that packs or holds food after the last foreign
manufacturer/processor of the food must register.
Facilities that are exempt from registration requirements are listed in the Act. Please refer to the
website (www.fda.gov).
Question: (Japan #1)
Are there any examples of domestic environmental policy which the U.S. amends in order to enhance
coordination between trade policy and environmental protection during the process for accelerating
trade liberalization?
Answer
U.S. environmental and trade agencies coordinate closely in order to ensure that environmental and
trade policies are mutually compatible, which avoids a situation in which an environmental policy
needs to be "amended" during the process for accelerating trade liberalization.
Question: (Japan #2)
According to paragraph 108, the U.S. has established "an effective system of environmental reviews
of trade negotiations". Specifically, how has the system been implemented? What kind of outcome
has the U.S. obtained so far from these reviews? How does the U.S. utilize the outcome in terms of
trade negotiations?
Answer
The United States has a long-standing commitment to a policy of conducting written environmental
reviews of major trade agreements that dates back to 1992. In 1999, the President of the United States
issued an Executive Order requiring careful assessment of the potential environmental impacts of
major trade agreements. Guidelines for implementing this Executive Order were developed and
finalized in 2000 and included numerous opportunities for public review and comment. The Trade
Act of 2002 requires environmental reviews of future trade agreements, consistent with the Executive
Order and guidelines, and reports to Congress on the results of these reviews.
Our environmental reviews provide information concerning potentially significant environmental
implications of trade agreements, and a framework for discussing these implications within the
government and with the public. Reviews are conducted by an inter-agency committee composed of
federal agencies with environmental and trade expertise. The review begins early in the process of
negotiating a trade agreement, and there is close coordination between the negotiation and review
processes.
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Public involvement is a prominent feature of our environmental reviews. This includes inviting the
public to identify important concerns and advise us on methods, data and scope for reviews. We also
invite the public to comment on an interim review that is prepared and released in the course of
ongoing trade negotiations.
The environmental review process has contributed to U.S. efforts to ensure that trade and
environmental policies are mutually supportive. Reviews also have contributed to our ability to
identify opportunities and priorities for cooperative activities that seek to enhance positive
environmental benefits from trade agreements and mitigate possible negative effects.
Question: (Mexico Set III, #3)
Does the paragraph 159 means that any country, member of the AIDCP, can currently export "dolphin
safe" canned tuna to U.S. as long as no dolphins were injured in the fishing process, even if dolphins
were encircled or chased when tuna was captured? If not, could the U.S. explain why?
Answer
Pursuant to U.S. Public Law 105-42 from August 15, 1997, the labeling standards for Dolphin Safe
Tuna have been defined as tuna which has been captured without the intentional netting of dolphins.
Subsection 5 states that it is a violation of section 5 of the Federal Trade Commission Act (15 U.S.C.
45) to offer to sell tuna as dolphin safe which has been caught with a purse seine net intentionally
deployed on or used to encircle dolphins during the particular voyage on which the tuna was
harvested. Although the legislation foresees a possible change in the definition, that change is subject
to a finding by the Secretary of Commerce that the tuna purse seine fishery in the eastern Pacific
Ocean is not having a "significant adverse impact" on any depleted dolphin stock. On December 31,
2002, the Secretary found that the fishery is not having any such significant adverse impact.
However, the decision has been challenged in U.S. courts and any potential change in the definition
has been enjoined by the courts until this case is resolved.
Question: (Venezuela #5)
Since the 1990s, U.S. market access for certain Venezuelan fisheries and/or aquaculture exports
(yellowfin tuna and yellowfin-tuna products) has been blocked as the result of an embargo imposed
by the U.S. Government on Venezuelan exports not meeting the requirements of U.S. domestic
regulations connected with an ecological labeling scheme relating to the implementation of
international fisheries regulations (International Dolphin Conservation Program Act).
Since that time, Venezuela has made a series of efforts (officially and privately), incurring great
financial cost, to achieve compliance with the provisions of the U.S. legislation in question and thus
have the embargo lifted. Via these efforts, Venezuela has achieved compliance with the International
Dolphin Conservation Program; nonetheless the restriction continues, a circumstance that might
suggest that this measure is being used as a non-tariff barrier of a technical and financial nature.
Could the United States explain why this measure remains in effect?
Answer
Venezuela cannot currently export yellowfin tuna and yellowfin-tuna products to the United States
because it has not yet submitted a completed package for an "affirmative finding." The affirmative
finding is required for any country fishing for yellowfin tuna in the Eastern Pacific Ocean with purse
seine vessels greater than 400 short tons (362.8 metric tons) and seeking to export that tuna to the
United States. According to the National Marine Fisheries Service, while Venezuela submitted an
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affirmative finding application on March 23, 2001, the original application has been supplemented by
additional information, but it is not yet complete. The affirmative finding would allow Venezuela to
export yellowfin tuna and yellowfin-tuna products to the U.S. as either non-dolphin safe or dolphinsafe depending on whether or not intentional sets on dolphins had been made during that particular
voyage.
The affirmative finding process is described fully in the U.S. Code of Federal Regulations (CFR) at
50 CFR 216.24(f); however, a summary of the requirements is provided in the following paragraph.
To attain an affirmative finding, the harvesting nation must submit the following:
(1) Evidence of membership in the Inter-American Tropical Tuna Commission (IATTC);
(2) Evidence that a nation is meeting its obligations to the IATTC, including financial obligations;
(3) Evidence that a nation is complying with the International Dolphin Conservation Program
(IDCP);
(4) Evidence of a tuna tracking and verification program comparable to the U.S. tracking and
verification regulations at 50 CFR 216.94;
(5) Evidence that the national fleet dolphin mortality limits and national fleet per-stock per-year
mortality limits, if they are allocated to countries, were not exceeded; and
(6) Authorization for the IATTC to provide or release information, or a commitment from the
harvesting
nation to provide directly to the Assistant Administrator, complete, accurate, and
timely information
necessary to verify information on tuna tracking forms.
Question: (Venezuela #6)
Again with respect to labeling, could the United States provide information about existing regulations
under U.S. law regarding genetically modified products?
Answer
Legal authority for food labeling rests with the U.S. Food and Drug Administration (FDA), which
operates under the Federal Food, Drug, and Cosmetic Act (FFDCA). Under the FFDCA, foods
derived from biotechnology are required to be labeled if they differ significantly from their
conventional counterparts - i.e., if their nutritional content is altered, if they contain an allergen, or if
they require special handling or preparation. If a product is determined to be substantially equivalent
to its conventional counterpart - as all of the biotech products currently on the market have been
determined to be - then labeling is not required.
FDA is not aware of any information indicating that foods developed through biotechnology differ as
a class in quality, safety, or any other attribute from foods developed through conventional means this is why there has been no requirement to add a special label saying that they are bioengineered.
However, the United States supports consumers' desire for information about the products they
purchase. For example, some consumers may wish to have biotech products labeled (as either
"biotech" or "non-biotech") for ethical, religious, or other personal reasons. In this regard, FDA is
working on guidelines for voluntary labeling of biotech products to ensure that any such labeling is
truthful and not misleading to consumers, and generally conforms to U.S. food labeling regulations.
FDA developed draft guidance for industry on labeling of genetically modified products in January
2001. It can be accessed via FDA's website at www.cfsan.fda.gov/~dms/biolabgu.html.
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Question: (Venezuela #7)
Could the United States supply information on the following: (1) What are the maximum permitted
levels of additives, contaminants, and pesticide residues? (2) What regulations are expected to be
issued by the United States concerning foods for veterinary use and risk analyses?
Answer
This request is very extensive. Each additive, contaminant, and pesticide residue and its effects on
health are reviewed on an individual basis. Pesticide tolerances can be found in the Code of Federal
Regulations (CFR), 40, Parts 180 - 186. Food additive tolerances can be found CFR, 21, Parts
172,173,180,181,182, and 184. Color additive tolerances can be found in CFR, 21, Parts 73 and 74.
The website for searching the CFR is http://www.gpoaccess.gov/cfr/index.html. The maximum
permitted levels for contaminants are not necessarily found in regulations but may be found on FDA's
website
at
http://www.cfsan.fda.gov/~lrd/fdaact.html
and
at
http://www.cfsan.fda.gov/~lrd/pestadd.html.
The U.S. publishes a document called the Unified Agenda that describes what new regulations U.S.
federal agencies have committed to work on in the next six months. The Unified Agenda can be
accessed at http://www.gpoaccess.gov/ua/index.html.
Question: (Japan #40)
The U.S. provided Japan with an explanation that this export prohibition measure aims to protect
spotted owls. Japan, however, regards this measure as a quantitative export restriction for protecting
domestic saw millers because, first of all, the protection of spotted owls must be done by regulating
log-cuts and not through export bans. Secondly, only export restrictions have been introduced, while
no regulations have been established for the domestic transactions of logs. Japan would, therefore,
like to request the U.S, once again, to amend this measure in accordance with the WTO Agreement as
requested at the last Trade Policy Review of the U.S.
Answer
The United States takes note of Japan's views.
Question: (India #18)
In agriculture and fisheries, U.S. standards and regulations governing the entry of certain products
seem arbitrary and unscientific in nature. For the export of certain fruit items, the U.S. asks for
preclearance inspection to ensure that goods are free from certain specified pests and "other insect
pests that do not exist in the U.S. or that are not widespread in the U.S." Regulations on the basis of
such an open ended list of unspecified pest do not appear to be scientific and lead to lack of
transparency and hence hinder market access. We would request the U.S. authorities to address the
problem and review the legislation to make it more definitive and less open ended. We would also
request the U.S. authorities to indicate as to whether the list of specific pests refers to the pests that
exist in the USA and also whether this list of specific pests is reviewed by the authorities.
Answer
U.S. standards and regulations are based on transparent scientific and analytic assessments of pest
risk. The United States bases its import requirements for fresh fruits and vegetables on an assessment
of the phytosanitary risk posed by the particular product originating from a particular region. The
WT/TPR/M/126/Add.3
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measures are appropriate to the risk and may range from inspection upon importation to a mitigation
treatment such as fumigation to a requirement for area pest-freedom. Preclearance inspection is a
measure that is agreed between the parties as appropriate to the circumstances, and is not necessarily
or even normally required. The United States follows the definition of the International Plant
Protection Convention for quarantine pests, namely a pest of potential economic importance to the
area endangered thereby and not yet present there, or present but not widely distributed and under
official control. This is consistent with the obligations under the WTO Agreement on the Application
of Sanitary and Phytosanitary Measures and with international quarantine practice.
Inspection and quarantine standards are developed based upon an analysis of the pest risk associated
with the imported commodity in accordance with international standards. Our regulations are based
upon an evaluation of risk. We recognize that not all pests present a risk. However, that is not the
case for all pests. Those pests that present a risk must be prevented from entering the United States.
The U.S. pest risk evaluation is an open and transparent one. The Animal and Plant Health Inspection
Service (USDA) posts all pest risk assessments (PRAS) on its website (www.aphis.usda.gov),
including draft P.R.A.S. for the commodities seeking access. All P.R.A.S. are prepared and reviewed
and approved by U.S. scientists.
CHAPTER 3 - TRADE POLICIES BY MEASURE
(4) Export Finance, Export Restrictions & Controls, Section 301
Question: (EU #12)
The WTO Secretariat report (WT/TPR/S/126, paragraph 164) describes the terms in which export
transactions in the U.S. can be eligible for Ex-Im Bank financing grant. How is the term 'export'
defined and how is the local content being assessed for services when the Ex-Im Bank grants support
to an export transaction?
Answer
Definition of Export
The United States defines the term "export" to be those goods and services that affect its balance of
payments. To distinguish the export of goods from the export of services, Ex-Im Bank follows the
definition of service exports as defined by the World Trade Organization's General Agreement on
Trade in Services (GATS). GATS defines trading of services in four modes:
cross-border supply:
consumption abroad:
commercial presence:
presence of natural persons:
services supplied from one country to another (e.g.
international telephone calls)
consumers or firms making use of a service in another
country (e.g. tourism)
foreign company setting up subsidiaries or branches to
provide services in another country (e.g. foreign banks
setting up operations in a country)
individuals traveling from their own country to supply
services in another (e.g. consultants).
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Assessing Local Content for Services
Ex-Im Bank is assuming that the term "local content", as asked in this question, refers to U.S. content.
To be eligible for Ex-Im Bank support, local (i.e. U.S.) services must be included in the U.S.
exporter's scope of work. Ex-Im Bank may support the lesser of (i) 85% of the U.S. Net Contract
Price; or (ii) 100% of the U.S. content.
Question: (EU #13)
What kinds of services have been granted support for exports? Are these mainly transportation
services as illustrated in the report (paragraph 168) or are there other kinds of services?
Answer
Ex-Im Bank's Charter was amended by Congress in 1983 to explicitly include services as an industry
sector eligible for support on the same terms and conditions as support for goods. Ex-Im Bank has
established numerous services initiatives over the years including an engineering multiplier program
to facilitate the export of U.S. architectural, industrial design, and engineering services; a mediumterm credit program in 1996 for environmental services such as feasibility studies, energy services
contracts, and environmental assessment services; a Y2K initiative in 1999; and a film production
loan guarantee program in 2000 to back the production of exported U.S. independent films.
While Ex-Im Bank can provide support for stand alone services, its support for services has typically
been for those that are included as part of the capital costs of an infrastructure project and other goods.
Examples include services related to feasibility studies and the maintenance of a facility such as
product transportation services and training for plant personnel, respectively. Ex-Im Bank's support
for services that have been tied to the export of goods has been due largely to the fundamental fact
that a service, unlike a capital good, is not a tangible item with a physical location. Intangibility
means that foreign content is not readily quantifiable, which makes determining eligibility for Ex-Im
Bank support an onerous task (e.g. content, tenor, economic impact). Furthermore, lack of a physical
location means that the documentation normally required by Ex-Im Bank is difficult to produce.
Question: (Japan #37)
The U.S. requires export licenses on the re-export of U.S.-origin items, even if they have already
received export licenses from the exporting countries. Such a regulation could be recognized as an
extraterritorial application of U.S. domestic law, which is impermissible under general international
law. The U.S. re-export control should, therefore be abolished. Especially, countries such as Japan,
control their exports most effectively by, for instance, taking part in all export control regimes and
introducing the Catch-all system for weapons of mass destruction and their delivery means. Thus,
Japan is convinced that there is little reason to control re-export items from these countries.
Answer
The Governments of the United States and Japan have had extensive discussions regarding reexport
controls. The U.S. Government recognizes that the Government of Japan considers U.S. re-export
controls to be an extraterritorial application of domestic law. However, U.S. reexport controls are
required under federal law and reflect a long-standing Congressional requirement. Further, the
United States is convinced that both export and reexport controls are necessary to protect U.S.
national security and foreign policy interests. The United States would be pleased to continue
discussions on this issue.
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Question: (Japan #38)
Besides, the scope of the U.S. re-export control also covers export items which are incorporated in
U.S.-origin items or software, etc. It is thus difficult for foreign exporters to judge whether or not an
export item falls under the U.S. regulation. Therefore, the U.S. re-export control is a barrier for the
re-export U.S.-origin items or the items which are incorporated in U.S.-origin items. Therefore, Japan
requests the U.S. to at least enable exporters to judge whether or not the item falls under re-export
control in order to enhance the transparency of the contents and the implementation of the re-export
control. Please provide the U.S. position on the matter. In this regard, as a transitional measure until
the U.S. re-export control is abolished, the U.S. should oblige its exporters to provide their customers
with enough information on the product to be re-exported, including the Export Control Classification
Number (ECCN), so that they can judge whether or not the imported item falls under re-export
control. Please provide the U.S. position on this matter
Answer
The U.S. Government has recently taken steps to assist foreign exporters in understanding their
obligations under the U.S. export control system. The Department of Commerce's Bureau of Industry
and Security (BIS) recently revised and posted on its website "Guidance on Re-exports and Other
Offshore Transactions Involving U.S.-Origin Items."
This guidance is available at
http://www.bis.doc.gov/ Licensing/ReExportGuidance.htm.
BIS has also translated this guidance into Japanese, and posted the translated text of the guidance on
its
web
site
at
http://www.bis.doc.gov/InternationalPrograms/Foreign_Language/DOC042203_Japanese.htm.
BIS also offers seminars to explain U.S. regulations and provides extensive telephone, email, and oneon-one counseling. BIS held an export control outreach seminar in Japan in June 2003 in which BIS
discussed the responsibility of foreign parties to comply with U.S. export controls when re-exporting
U.S.-origin goods.
The U.S. Government appreciates the Government of Japan's suggestion to require an exporter to
share certain information with re-exporters to assist in complying with their obligations under U.S.
export control regulations. We are willing to discuss this suggestion, as the United States encourages
exporters to communicate with their customers. We note one concern is that the original
classification of an export may not be accurate for re-export transaction. In addition, the classification
of the product may change if a U.S.-origin item is altered after receipt. Thus, if a re-exporter used the
original classification supplied by the exporter, it may be incorrect.
Question: (Japan #39)
Japan understands that exports of unprocessed timber originating from federal and state-owned
forests, which are located on the west-hand side of the 100-degree Longitude in the continental United
States, are prohibited. Is this understanding correct?
Answer
Yes. The Forest Resources Conservation and Shortage Relief Amendments Act of 1993 prohibits the
export of unprocessed timber originating from Federal, state and other public lands, west of the 48th
meridian in the contiguous 48 states.
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Question: (Japan #41 & 42)
Reference: p. 75, para. 193 and p. 59, para. 119
The sanctions measures taken by the U.S. based on related acts (the Iran and Libya Sanctions Act, the
Cuban Liberty and Democratic Solidarity Act, the Burmese Freedom and Democracy Act as well as
local and municipal sanctions acts) discourage, significantly and unreasonably, investment into, and
the establishment of economic relations with, the countries targeted by those laws, which affects not
only U.S. private enterprises, but also those world-wide. In legal terms, they constitute an
extraterritorial application of domestic laws, which is not permissible under general international law
and may cause a problem of inconsistency with the WTO agreements. Moreover, fairness,
transparency and predictability have not been observed in their applications. Particularly regarding
the Iran and Libya Sanctions Act, Japan has taken every opportunity, including those available under
the Japan-U.S. Regulatory Reform and Competition Policy Initiative, to urge the U.S. not to apply the
Act in a manner that may constitute a double standard.
Japan, therefore, strongly requests the U.S. to ensure the consistency of these acts with international
laws, and to implement them prudently. The application of these acts to enterprises of third countries
is especially discouraged. What is the U.S. view on these points?
Answer
We appreciate the views of all our trading partners in this matter. However, The United States
remains bound by sanctions laws such as the Iran and Libya Sanctions Act (ILSA). As you have
noted, in August 2001, the Act was extended for a further five years, until 2006, with amendments.
By its terms, ILSA applies to those who engage in activities covered by the statute, without distinction
by nationality. The legislative history of the Act indicates a concern by Congress that the law be
applied in a manner consistent with the international obligations of the United States.
Question: (Japan #104)
We urge the U.S. to ensure that immigration measures relating to terrorism do not hinder the
movement of persons, that there are no negative effects on trade and investment, and that consistency
is maintained with WTO agreements
Answer
The United States shares the goal of other countries in striving to achieve a transparent, reliable
system for admission of natural persons to provide services. We have recently initiated changes to
our immigration law that revise admission procedures in response to national security concerns.
Applicants affected by these procedures are informed of the need and the importance for additional
screening at the time they submit their applications and are being advised to expect delays.
We recognize that these delays may impact visa applicants, and we have already had success
streamlining the process, consistent with our security and legal responsibilities. U.S. government
agencies are working to rationalize clearance procedures in ways that continue to protect U.S. borders,
while facilitating legitimate travel. With regard to the programs cited in Japan's question 104(a) (i)(vi), the United States would encourage economies to review the internet links below:
- Visa waiver program, http://travel.state.gov/vwp.html
- Transit without Visa (TWOV) and International in-Transit (ITI),
http://travel.state.gov/twov.release.html and http://travel.state.gov/twov.faq.html
- U.S.-VISIT, http://www.dhs.gov/dhspublic/interapp/editorial/editorial_0333.xml
- Biometrics, http://www.dhs.gov/interweb/assetlibrary/veryFINALRevised_FAQs12-31-2003.pdf
WT/TPR/M/126/Add.3
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The U.S. Citizenship and Immigration Services (BCIS) offers quick e-mail notification of new Web
content on visa-related issues. Subscribers may choose from a number of different categories,
including Immigration Policy and Procedure Memoranda, Updated Immigration Forms and Forms
Information, What's New in Laws and Regulations, and more.
To subscribe, go to
http://uscis.gov/graphics/exec/ cns/index.asp.
Question: (Chile #5)
Under the provisions of the Export Administration Act of 1979, 50 U.S.C. app. 2401-2420, the
International Emergency Economic Powers Act, 50 U.S.C. 1701-1706, and the Export Administration
Regulation, 15 C.F.R. (730-774), the exportation and reexportation of computer programs requires
that an application for an export license be submitted to the Bureau of Industry and Security (BIS).
Chile would like to know what criteria are used in granting this license?
Answer
The Department of Commerce, Bureau of Industry and Security (BIS) is the primary licensing agency
for dual use exports (commercial items which could have military applications). Computer software is
considered a dual-use item. If an item is subject to the Export Administration Regulations (EAR),
which is the case with U.S. origin computer software, the item may require a license for export or reexport. Whether a license is required will depend on the item's technical characteristics, the
destination, the end-use, and the end-user. Even if a license is required, license exceptions may be
available in certain situations. There are also special rules for exporting encryption software. In
addition, there may be no license requirement if the software is published and publicly available.
Where a license is required, the license application for computer software will be reviewed on a caseby-case basis. Most of these applications are approved. Reasons for denial would include concerns
that the end-user may utilize the computer software for conventional military uses or the development
of weapons of mass destruction. The risk of diversion of computer software to a country or end-user
of concern is also a consideration in determining whether to approve a license. For more information
on the licensing process, please see the following internet site: http://www.bis.doc.gov/.
Question: (Chinese Taipei #4)
We would therefore like to see the above-mentioned factors (i.e., the economic development status,
and the policy-making and enforcement efforts of each country concerned) being taken into account
by the U.S. in its Special 301 review.
Answer
The United States engages in a comprehensive and careful review of its trading partners efforts to
provide adequate and effective protection of intellectual property rights. We consult closely with our
trading partners throughout the year and intensively during the special 301 review process. As
indicated in USTR's annual report on special 301, we take into account all relevant factors, including
a government's IPR policy, in order to provide effective enforcement of IPRs and the success in those
efforts.
Question: (Japan #57)
Since the Special 301 provisions may cause concern as to their compatibility with the WTO
agreements, Japan requests the U.S. to implement them in a proper and prudent manner. Please
provide the U.S. view on Japans comment.
WT/TPR/M/126/Add.3
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Answer
The United States administers the Special 301 provisions and all of its other trade laws in a manner
consistent with its obligations under the WTO Agreement.
Question: (Switzerland #5)
The new U.S. visa regime causes serious difficulties for travels to the U.S. Taking into account the
impact of these new measures on business, would the U.S. be ready to consider introducing flexibility
in the procedures to obtain the visa in particular for the business community?
Answer
We recognize that these delays may impact visa applicants, and we have already had success
streamlining the process, consistent with our security and legal responsibilities. U.S. government
agencies are working to rationalize clearance procedures in ways that continue to protect U.S. borders,
while facilitating legitimate travel.
Question: (Cuba #1)
When does the United States plan to comply with the 12 U.N. General Assembly resolutions that
have, since 1992, overwhelmingly condemned the blockade against Cuba, which constitutes a system
of economic, financial, and commercial sanctions that violate the principles and specific provisions
governing international trade endorsed by the WTO, the United Nations, and various international
agencies?
Answer
The embargo is only one part of the United States' multifaceted Cuba policy, intended to bring about a
peaceful transition to democracy on the island. The United States maintains that the embargo is a
bilateral issue that has no place in multilateral fora. The embargo is not a blockade; embargo
regulations apply only to persons or entities subject to U.S. jurisdiction. We note Article XXI (b) in
the GATT/WTO and other trade agreements that allow states to exempt actions taken for purposes of
national security. (“Nothing in this Agreement shall be construed . . . to prevent any contracting party
from taking any action which it considers necessary for the protection of its essential security
interests.”)
Question: (Cuba #2)
When and how does the United States of America plan to comply with the decision of the WTO
Appeal Organ concerning Section 211 of the 1998 Omnibus Budget Appropriations Act?
Answer
The United States has informed the WTO Dispute Settlement Body that it intends to implement the
DSB's recommendations and rulings in this dispute. Consistent with the rules of the WTO, the parties
to the dispute, the United States and the European Union, have agreed that the deadline for
implementation is December 31, 2004.
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Question: (India #34)
It has been noticed that businessmen and exporters wanting to participate in jewellery exhibitions and
trade fairs are facing problems in getting a U.S. visa. Even recommendation letters of national export
promotion council such as the Gen and Jewellery Export Promotion Council of India (GJEPC) are not
given any weightage and Council officials have also not got a visa when they are selected to represent
GJEPC at these exhibitions. This operated as a market access barrier. We would request the U.S.
authorities to address the problem and ensure that bonafide business visits are not hindered.
Answer
We thank India for its comments. We would note that while letters of support may be helpful they
cannot guarantee visa issuance to a foreign national. Visa applicants must qualify for the visa
according to their own circumstances. Questions on visa application procedures and visa
ineligibilities should be made to the American consular office abroad by the applicant. Information on
visa denials can be found at, http://travel.state.gov/visa;ineligible.html. The U.S. has also developed a
guide
for
obtaining
visas,
which
can
be
found
at
http://unitedstatesvisas.gov/pdfs/gettingavisa.02.03.pdf.
The United States is in the process of considering various policy proposals concerning temporary
entry as it relates to trade in services. However, these policy considerations are at an early stage of
development and thus it is not possible at this time to speculate.
Question: (Korea Ch. IV, para. 118)
According to para 118, the U.S. maintains an MFN exemption covering restrictions on performance of
longshore work when making U.S. port calls by crews of foreign vessels owned and flagged in
countries that similarly restrict U.S. crews on U.S.-flag vessels from longshore work. Please provide
us with information about which countries are subject to such reciprocity exceptions from the U.S.
and whether or not the conditions that had created the need for the MFN exemptions still prevail.
Answer
In accordance with the Immigration and Nationality Act of 1952 (INA), the Department of State
annually updates the list of countries in which performance of one or more specified activities of
longshore work by crewmembers aboard United States vessels is prohibited by law, regulation, or in
practice in the country. Among certain other exceptions, section 258(e) of the INA, entitled the
"Reciprocity exception", allows the performance of activities constituting longshore work by alien
crewmen aboard vessels flagged and owned in countries where such activities are permitted by crews
aboard U.S. ships.
The Secretary of State is directed to compile and annually maintain a list, of longshore work by
particular activity, of countries where performance of such a particular activity by crewmembers
aboard United States vessels is prohibited by law, regulation, or in practice in the country. The
Attorney General uses the list to determine whether to permit an alien crewmember to perform an
activity constituting longshore work in the United States or its coastal waters, in accordance with the
conditions set forth in the Act. Crews of ships either registered in or owned by nationals of countries
on the list may not perform the longshore activities listed for that country.
The Department bases the list on reports from U.S. diplomatic posts’ reports abroad and submissions
from interested parties in response to the notice-and comment process. On the basis of this
information, the Department amended the 2003 list. Effective January 14, 2004, the list includes 24
WT/TPR/M/126/Add.3
Page 119
countries not previously listed: Albania, Antigua, Barbados, Brunei, Chile, Cook Islands, Grenada,
Kazakhstan, Latvia, Lebanon, Macau, Namibia, Nigeria, Oman, Russia, St. Christopher and Nevis,
Singapore, Sudan, Syria, Tonga, Turkey, Tuvalu, United Arab Emirates and Viet Nam. Two
countries were dropped from the list because the most recent information indicates that they do not
restrict longshore activities by crewmembers of U.S. vessels: Estonia and Micronesia.
For more information on the country-specific regulations, laws or practices that prohibit
crewmembers aboard U.S. vessels from longshore work, please see Federal Register Notice 4556,
RIN 1400-AA34 found in Federal Register Vol. 68, No. 240.
Question: (China #73)
Trade Assistance and Aid (p. 82, para. 222)
Please list actual outlays to date, including actual payments obtained by various sectors, such as
agriculture, textiles and apparels.
Answer
The U.S. calculates the aggregate annual figures for the Trade Adjustment Assistance Program, both
expenditures and participants (see chart below). Expenditures on a sector or industry basis are not
available.
TRADE ADJUSTMENT ASSISTANCE PROGRAM ACTIVITIES
Fiscal Years 1997-2002
Number of Participants, Except Where Noted
ACTIVITY
Program Services:
Entered training
1997
1998
1999
2000
2001
2002
22,839
21,333
28,113
22,657
24,843
34,255
Job search allowances
481
243
255
351
236
251
Relocation allowances
706
330
398
641
363
375
$84.80
$96.70
$94.30
$92.70
$94.30
$94.40
31,565
24,133
35,766
32,808
31,459
36,124
$193.43
$191.12
$202.47
$217.45
Total allocations for TAA (mil$) 1/
Trade Readjustment Allowances
Number of new recipients
Average weekly benefit
$221.26 $232.51
1/ TAA (trade adjustment assistance) includes training and training-related expenses (tuition, supplies,
travel and subsistence where necessary), job search allowances, relocation allowances, and allocations
for State administrative expenses.
Prepared June 5, 2003.
Question: (Argentina #4)
Reference is made in paragraphs 222-224 to a federal program called the Trade Adjustment
Assistance Program (TAA), the key aim of which is to provide assistance and other support to
workers displaced and firms whose sales have declined as a result of foreign trade.
(a) We ask for additional clarification regarding the distribution of the benefits under the TAA by
branch of domestic industry.
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(b) In addition, it is not clear whether the groups of workers and companies benefiting from the TAA
must belong to branches of domestic production that have submitted requests for dumping
investigations or subsidies to the Department of Commerce.
Answer
(a) Please refer to the response to China's Question #73.
(b) The existence of an Anti-Dumping/Countervailing Duty petition is not an element in the
Department of Labor's eligibility criteria for the Trade Adjustment Assistance Program (TAA). Any
party filing an application for certification for TAA eligibility must claim either loss of sales due to
import competition or a shift of production abroad.
Chapter 3 - BY MEASURE
(5) Competition
Question: (Japan #43)
The U.S. gives the immunity from antitrust laws regarding the agriculture sector (certain activities
under the Capper-Volstead Agricultural Producers' Association Act). Japan is in a view that the
immunity from antitrust laws has to be minimum in order to ensure fair trade. Does the U.S. have any
plans to review immunity from antitrust laws regarding the agricultural sector? If not, please explain
the necessity of maintaining the immunity.
Answer
The vast bulk of the U.S. economy is subject to standard antitrust enforcement. Any exceptions to the
application of the antitrust laws, including those applied to the agriculture sector, are narrow and
strictly construed, exempting specific activities or entities for important public policy or constitutional
reasons.
In addition, in some cases, specialized regulatory agencies with sector-specific
responsibilities apply competition rules analogous to the federal antitrust laws, and the antitrust
agencies retain an advisory, competition-advocacy role. There is a wealth of public information
available relating to antitrust exemptions and the reasons for maintaining them. See e.g., ABA Section
of Antitrust Law, Antitrust Law Developments (5th ed. 2002). With respect to the Capper Volstead
Act specifically, the U.S. Supreme Court, in concluding that an agricultural cooperative is not
protected by the Act when it monopolizes or attempts to monopolize by engaging in predatory or
otherwise anticompetitive practices, stated that the general philosophy behind the Act "was simply
that individual farmers should be given, through agricultural cooperatives acting as entities, the same
unified competitive advantage - and responsibility - available to businessmen acting through
corporations as entities." Maryland & Virginia Milk Producers Ass'n v. United States, 362 U.S. 458,
466 (1996).
The United States has relatively few exemptions from the antitrust laws, and, as noted in our response
to question 44 below, the Department of Justice and the Federal Trade Commission (FTC) monitor
the scope of such exemptions closely. For example, the FTC has taken a number of steps since the
last TPR to ensure that the scope of the state action doctrine (whereby conduct of the states is shielded
from the antitrust laws if such conduct is clearly articulated state policy that is actively supervised by
the state) remains appropriately limited to the doctrine's original intent. To this end, the FTC
established the State Action Task Force to examine the doctrine's scope and to make any necessary
recommendations to ensure that the application of the doctrine remain narrowly construed. The FTC
is taking similar actions with respect to the Noerr - Pennington doctrine, which provides immunity
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from the antitrust laws to private parties petitioning the government, to ensure that the scope of this
doctrine is limited to the doctrine's underlying rationale.
Question: (Japan #44)
Japan understands that in sectors which contain exemptions from the application of antitrust laws,
there are regulatory authorities and, for some sectors, independent organizations (e.g. FMC). The
laws which allow immunity from antitrust laws are implemented by the above-mentioned
organizations, and thus the authorities competent for providing immunity from antitrust laws are
sectionalized. In order to continue systematically lessening the scope of exemption from the
application of antitrust laws, does there exist any leading administrative organization to coordinate the
progress? How are the FTC and the Antitrust Division of the Department of Justice able to cooperate
with the regulatory authorities and/or independent organizations?
Answer
The question raises broad issues concerning antitrust exemptions, the interface between competition
and regulation, and competition advocacy by antitrust agencies; we will try to address each of these
areas. Industry-specific regulators, such as the Federal Communications Commission ("FCC"), and
antitrust authorities, the Antitrust Division of the Department of Justice (hereinafter "DOJ") and the
Federal Trade Commission ("FTC"), have their genesis in different statutes enacted at different times
in the United States. Traditionally, regulatory programs were established for, and have had as their
objectives, goals other than just competition (e.g., universal access, diversity of information sources)
whereas the antitrust agencies have been focused solely on competition. However, deregulation
initiatives in many industry sectors in the United States over the past several decades have led to
greater regulatory emphasis on competition analysis and respect for free market forces. This shift, in
turn, has affected the dynamic between the industry-specific regulator and the antitrust agencies.
In general, business conduct in regulated industries is addressed in one of three ways in the United
States. First, as noted in the answer to the previous question, in a few limited instances, conduct is
statutorily exempt from the antitrust laws. In such cases, the regulated company is said to be
expressly exempt from the antitrust laws, or immunity is implied. Antitrust immunity may be implied
when there is a "clear repugnancy between the antitrust laws and the regulatory system."1 Second,
certain categories of conduct are subject only to the antitrust laws. For example, while the industryspecific regulators may have jurisdiction to set prices, they do not have jurisdiction to criminally
prosecute allegations of price-fixing. Finally, there are categories of conduct over which the antitrust
agencies and the industry-specific regulator have concurrent or shared jurisdiction. Concurrent or
shared jurisdiction is observed most frequently in the area of merger enforcement but can occur in
non-merger situations as well.
While there is no single, formal administrative organization dedicated exclusively to lessening the
scope of exemptions from the antitrust laws, this is something that the DOJ and FTC monitor closely
pursuant to their consumer advocacy role in the U.S. government. (See response to Question 43
describing the FTC's current efforts in this regard.) In fact, both the FTC and DOJ have active
competition advocacy programs. The aim of these programs is to promote competition and to
encourage other agencies, and state and local governments, to adopt pro-competitive rules and
regulations. Thus, the stated goals of DOJ's advocacy program are to: eliminate existing regulation
that is unnecessary or too costly; discourage unnecessary new regulation; minimize competitive
distortions where regulations are needed by encouraging use of the least anticompetitive regulatory
1
United States v. Nat'l Ass'n of Securities Dealers, Inc., 422 U.S. 694, 719 (1975).
WT/TPR/M/126/Add.3
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methods; and ensure that regulation is designed to meet legitimate objectives. The goals of the FTC's
advocacy program, which are similar though more general (and also cover its consumer protection
mission), are to prevent or lessen injury to consumers and competition that may be caused by
government activities that interfere with the proper functioning of the marketplace, and by advising
appropriate government and self-regulatory bodies on the potential effects, both positive and negative,
of proposed legislation, rules, or industry guides or codes. Consistent with these purposes, both DOJ
and FTC have established effective relationships with many of the regulatory bodies in the United
States. Even when the specific advice of the antitrust agencies is not accepted, advocacy is valuable
in a broader context because it allows the agencies to share their expertise with regulators and
legislators and to bring to their and the public's attention the potential costs to consumers of proposed
laws and regulations.
Question: (Brazil Set III Competition #1)
Antitrust review is mentioned in paragraph 209 of document WT/TPR/S/126. Could USA further
explain its policies towards such practices? Which are the main issues taken into account under U.S.
antitrust review mechanism?
Answer
The Federal Trade Commission and the Department of Justice issued the current Horizontal Merger
Guidelines (Guidelines) in 1992, and revised the section on efficiencies in 1997. These Guidelines,
which are available at http://www.ftc.gov/bc/docs/horizmer.htm, discuss the basic factors considered
by the Agencies in their review of horizontal mergers. These Agencies held a three-day workshop in
February 2004 aimed at seeking input on a range of topics addressed in the Guidelines, from the
application of the hypothetical monopolist test, to unilateral effects and efficiencies, in an ongoing
effort to improve understanding of issues arising in horizontal merger investigations.
Question: (Brazil Set III Competition #2)
Are there any other criteria other than public interest and accordance with American antitrust law that
applicants must comply with in order to obtain an exclusive or partial exclusive license under the
Technology Transfer Commercialization Act of 2000? How is "substantially manufactured in the
United States" defined under such law?
Answer
Applicants must comply with several other statutory requirements in order to obtain an exclusive
license under the Technology Transfer Commercialization Act of 2000. These requirements are set
forth in 35 USC 209(a)(1)-(5), (b) and (c). For example, under subparagraph (a)(1), an agency may
only grant an exclusive license if the license is necessary to call forth risk capital to commercialize the
invention or otherwise promote utilization of the invention by the public; (a)(2) if the exclusivity is
not greater than necessary; (a)(3) if the licensee makes a commitment to commercialize within a
reasonable time; (a)(4) if granting the license will not tend to substantially lessen competition or
create or maintain a violation of the Federal antitrust laws; or (a)(5) in the case of an invention
covered by a foreign patent application or patent, the interests of the Federal Government or United
States industry in foreign commerce will be enhanced.
Section 209(b) states that "a Federal agency shall normally grant a license under section 207(a)(2) to
use or sell any federally owned invention in the United States only to a licensee who agrees that any
products embodying the invention or produced through the use of the invention will be manufactured
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substantially in the United States. "Substantially manufactured in the United States" is not defined in
the statute nor in the implementing regulation in 37 CFR Part 404.
Section 209 (c) states that "first preference for the granting of any exclusive or partially exclusive
licenses under section 207(a)(2) shall be given to small business firms having equal or greater
likelihood as other applicants to bring the invention to practical application within a reasonable time.
Question: (Chile #1)
Does the United States believe that firms or conglomerates that export to other WTO member
countries should be subject to the laws and regulations on competition of the country of origin, just as
companies that sell on the domestic market?
Answer
This question appears to deal with export commerce, which is governed by the Foreign Trade
Antitrust Improvements Act, 15 U.S.C. §6(a) and §45(a)(3). Specifically, where the alleged conduct
does not have the requisite effects on U.S. commerce, U.S. antitrust laws would not apply. See
Paragraph 195 of the Secretariat's Report (WT/TPR/S/126), which summarizes the jurisdictional
scope of U.S. a laws.
Chapter 3 - BY SECTOR
(6) Government Procurement and State Trading
Question: (Brazil, Set 1-section VI)
In paragraph 239, page 85, WT/TPR/S/126, it is written that: "The United States maintains a number
of "Buy American" restrictions for procurement not covered by the GPA, NAFTA, the WTO
plurilateral Agreement on Trade in Civil Aircraft, and bilateral procurement agreements with Chile,
Singapore, and Israel." What are those?
Answer
The Buy American Act of 1933 is described in paragraph 242 of the Report of the WTO Secretariat.
As described in paragraph 244 of that Report, the United States waives "buy American" restrictions
for procurements covered by the GPA, NAFTA and other government procurement agreements.
Question: (Brazil Set III Services #3)
In Paragraph 234 it is stated that, "...The absence of a uniform regulatory regime at the national level
means that different market access conditions apply at the state level, with reciprocal treatment being
widely used;... Most states apply special rules and thresholds for the procurement of professional
services (Chapter III(4)(iii). Which States apply Special rules? What kind of special rules and
thresholds are applied?
Answer
A number of U.S. states have agreed to cover procurement under the Government Procurement
Agreement (GPA). That information can be found in Annex 2 of the U.S. Appendix to the GPA on
the WTO website at: www.wto.org/English/traptop_e/gproc_e.
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Question: (Canada #13)
The Report notes the exceptions to the Buy American Act, specifically; "if it is determined that
domestic preference is inconsistent with the public interest; in case of U.S. non-availability of a
supply or material; or for reasonableness of cost." What percentage of federal procurement contracts,
for which the Buy America Act applies, is affected by one of the three exemptions noted above?
Answer
The United States does not maintain government-wide information as to the percentage of federal
procurement contracts affected by the specific Buy American exemptions.
Question: (China #74)
Please indicate the specific legislations applicable to government procurement in services sector.
Answer
The Federal Acquisition Regulations (FAR) (found at http://www.acqnet.gov/far/), as supplemented
and implemented by agency regulations, govern the U.S. federal procurement system for both goods
and services.
Question: (EU #9)
In the report of the WTO Secretariat (WT/TPR/S/126, paragraph 229), it is written that U.S.
commitments at sub-central level under the GPA are limited to 37 States. When does the U.S.
administration expect to extend the coverage at sub-central level both in terms of inclusion of all
States and improved substantial coverage?
Answer
Coverage at the sub-central level is based on the voluntary commitment of the individual states.
Thus, the United States is not able to indicate whether it will be able to extend coverage to additional
states.
Question: (EU #10)
Is the single web-based portal for government acquisitions, resulting from the E-Government Act of
2002 (paragraph 235), operational by now?
Answer
The official website for U.S. government acquisitions (www.FedBizOpps.gov) has been operational
for three years, beginning January 2, 2001. Procurement notices of all the agencies subject to the
Federal Acquisition Regulations are posted on that site.
Question: (EU #11)
In the report of the WTO Secretariat it is mentioned (paragraph 239) that the U.S. maintains a number
of 'buy American' restrictions for procurement not covered by the Agreement on Government
Procurement, NAFTA, the WTO plurilateral agreement on Trade in Civil Aircraft and bilateral
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procurement agreements. What is the extent of these restrictions and what is the reason for continuing
this restriction?
Answer
The Buy American Act of 1933 is described in paragraph 242 of the Report of the WTO Secretariat.
As described in paragraph 244 of that Report, the United States waives "buy American" restrictions
for procurements covered by the GPA, NAFTA and other government procurement agreements.
Question: (Indonesia #6)
Authorities at the state level apply some restrictions that make the BAA even more discriminatory
against foreign products. In New Jersey, for instance, State legislation that for the construction of
public work projects funded by the State, the materials used must be of domestic origin. In the States
of Connecticut, Louisiana, Maine, Michigan, Illinois, Maryland, New York, Pennsylvania, Rhode
Island and West Virginia there are legislations that, in effect, require the use of locally produced steel
for public works and other government procurement contracts involving steel and steel products.
Legislation in West Virginia and Ohio makes it even clearer of the discriminatory nature of the BAA
at the state level by introducing procurement restrictions on steel imports. These restrictions have
clearly affected the interests of many countries including Indonesia. Therefore, Indonesia would like
to have further clarification on this policy.
Answer
States that have agreed to be covered by the WTO Agreement on Government Procurement (GPA)
carry out their procurement in a manner that is consistent with that Agreement. In certain cases, they
have taken reservations for certain types of procurements. For those states that are not covered by the
GPA, they are under no international obligations with regard to their procurement.
Question: (New Zealand #6)
(1)
What criteria does the United States use to assess whether a country accords its national
treatment and therefore should be granted reciprocity vis-a-vis government procurement?
(2)
In what way(s) does the United States perceive New Zealand does not fulfill the criteria set
out in the answer to the question above?
Answer
(1)
The Trade Agreements Act of 1979, as amended, authorizes the President to waive
discriminatory purchasing requirements with respect to countries that have become a Party to the
WTO Agreement on Government Procurement or another government procurement agreement that
provides for reciprocal competitive government procurement opportunities for U.S. products and
suppliers of such products.
(2)
New Zealand has not become a Party to the GPA or another agreement that covers
government procurement.
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Question: (Switzerland #10)
Will the web-based portal for government acquisitions (III, §235) cover all entities under the GPA at
the federal level for tender notices? Will it include also award notices and notices referring to lists of
qualified suppliers? When will it be fully operational?
Answer
The official website for U.S. government acquisitions (www.FedBizOpps.gov) has been operational
for three years, beginning January 2, 2001. Procurement notices of all the agencies subject to the
Federal Acquisition Regulations are posted on that site, including award notices and notices relating
to qualified supplier lists.
Question: (Switzerland #11)
What potential do the United States see in improving market access and eliminating discriminatory
provisions in the current negotiations under the GPA?
Answer
The United States has been an active participant in the ongoing negotiations on reexamining the GPA
text. We look forward to participating in the market access negotiations under the GPA.
Question: (Switzerland #12)
What flexibility could the United States envisage in terms of rules and market access in order to make
the GPA more accessible to the developing countries who have taken commitments to join it in their
WTO accession protocol and to other developing and the least developed countries?
Answer
The United States supports the use of transition periods for developing and least developed countries
to facilitate their accession to the GPA. It is also prepared to consider other measures that would
further facilitate their accession to the GPA.
Chapter 3 - BY MEASURE
(7) Intellectual Property Rights
Question: (Japan #45)
Reference: p. 90, para. 265
Please explain how many cases have been judged as having infringing importation (right to control
the imports of copyright products) under Article 602 of the Copyright Act? Are there any other cases
of having infringing importation, except for the musical CDs? Please provide some statistics on these
infringing importation cases. In addition, please explain the relation between controlling the imports
of a copyright product and the anti-trust law.
Answer
Section 602(a) of the U.S. Copyright Act makes the unauthorized importation into the United States
of "lawfully made" copies or phonorecords "acquired outside of the United States" an infringement of
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the distribution right. Section 602 (b) of the Act prohibits the importation of unlawfully made, or
piratical, copies or phonorecords. Section 602 is not limited to a specific category of protected work
(such as sound recordings in the CD format), but rather covers all protected subject matter, including
literary works, works of visual art, and audiovisual works. Under sections 602 and 603, U.S. Customs
is authorized to seize imports at the border of articles that are made without authorization (i.e., were
unlawfully made) and does so on a regular basis. U.S. Customs has no authority to stop the
importation of products lawfully made outside the U.S., so it cannot seize parallel imports at the
border (i.e., articles that infringe only Section 602(a)). Rightsholders, however, have a private right of
action under Section 602 to stop infringing parallel imports.
Customs does not break down its statistics concerning infringing imports in such a way that we can
determine the total number of infringing "parallel" imports seized. Here is the link to the Customs
Rulings
Online
Search
System
(CROSS):
http://www.cbp.gov/xp/cgov/import/commercial_enforcement/ ipr/seizure
A search of U.S. federal case law reveals approximately thirty cases in which a U.S. federal court has
cited Section 602 of the United States Copyright Act. The cases represented many categories of
works, including video games, toys, works embodied in consumer products, sound recordings, and
books.
U.S. courts have held that the mere exercise of one of the copyright owner's exclusive rights does not
create an antitrust violation. If the alleged infringer believes that the exercise of the importation right
creates an antitrust violation, then the defendant may raise antitrust or "copyright misuse" defenses.
Question: (Japan #46)
Reference: p. 91, para. 266, p. 92, para. 270 and p. 93, para. 272
Japan has faithfully implemented the "Japanese Actions to be taken by the Patent Office", confirmed
by the Japan Patent Office (JPO) and the United States Patent and Trademark Office (USPTO) during
the 1994 intellectual property rights working group of the Framework Talks. However, the U.S. has
never entirely implemented the introduction of an early publication system without exceptions, nor
the improvement of re-examination. Japan strongly requests the U.S. to implement these items in
accordance with the agreed actions promptly.
Answer
The provisions for the adoption of an "early publication" system in the United States that were
originally sent to the U.S. Congress (in the 104th Congress) were fully consistent with the obligations
of the 1994 United States-Japan patent accords.
U.S. obligations in those 1994 patent accords were satisfied by the timely introduction of the relevant
bill in the 104th Congress. The United States made every effort to have legislation passed that was
consistent with the 1994 patent accords, and Congress enacted Public Law 106-113 on November 29,
1999. This law contains a provision to publish, within 18 months, most patent applications filed in
the United States. The law also added new opportunities for third parties to participate in
reexaminations, including determinations made by the patent examiner to the Board of Patent Appeals
and Interferences, in accordance with the understanding reached as part of the Framework Talks. The
U.S. Congress more recently passed legislation that would provide for third party appeals to the
Federal Circuit in inter partes reexamination. (See Section 13106 of 5P.L. 107-273.)
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Question: (Japan #47)
In particular, in order to tackle the following issues, Japan requests the U.S. to promptly implement
these items in accordance with the agreed actions of the Framework Agreement in order to abolish the
early publication systems with exceptions, and to disclose all applications, excluding those nonpending and those under secret order, within 18 months after the first filing date of the patent
application.
(a)
The early publication system in the U.S., which was introduced in November 2000, provides
exceptions whereby patent applications filed in the U.S., but not filed overseas, or matters included in
a patent application filed in the U.S., but not included in the corresponding application filed overseas,
cannot be laid open at the request of the applicant. It might be, therefore, possible that a patent will be
granted after a long undisclosed period ("Submarine Patent"). Without knowing whether or not
another application is already on file for the same invention, it is unavoidable to invest in R&D in
duplication; thus, we are concerned that this system causes serious social and economic loss.
(b)
Furthermore, USPTO provides that patent protection may be extended to compensate for any
amount of processing delays and USPTO-caused delays. Japan would like to point out that there is a
possibility of deliberate delays being caused, and that under the current U.S. system of not having an
adequate early publication system, there would be other opportunities to create a submarine patent
through the extension of patent terms.
Answer
Because most patent applications filed in the United States are published within 18 months, we
believe that experience with our publication system will demonstrate over time that the need for
exceptions will be proven to be unwarranted. Moreover, continuing efforts to further reduce patent
pendency in the United States will help to alleviate any problems that these exceptions may cause.
Extensions of patent term are not available for delays caused by a patent applicant.
Question: (Japan #48)
In addition, any pending applications, already filed with the USPTO at the time of the amendment of
the law (before June 8, 1995), continue to benefit from the former patent terms (i.e. a 17-year patent
term from the date of the patent grant); the amended patent law not being applicable. There is still,
therefore, the possibility that additional submarine patents occur.
Answer
Because average patent pendency in the United States is approximately two years, the possibility of
submarine patents occurring based on applications pending on June 8, 1995, has greatly diminished
over time and will continue to do so.
Question: (Japan #49)
Reference: pp. 91-94, paras. 268-279
Regarding the Plant Breeder's Right, Japan understand that the U.S. is a member of the 1991 Act of
the UPOV Convention and that it protects new plant varieties through the Plant Variety Protection
(PVP) law and the patent law.
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(a)
Please explain the acts that will cause loss of "novelty" under both the PVP law and the patent
law as a plant patent.
Answer
Under 7 U.S.C. 2402 of the Plant Variety Protection Act (PVPA), a plant variety is deemed new if on
the date of filing of the application for plant variety protection, propagating or harvested material of
the variety has not been sold or otherwise disposed of to other persons, by or with the consent of the
breeder, or the successor in interest of the breeder, for purposes of exploitation of the variety (1) in the
United States, more than 1 year prior to the date of filing, or (2) in any area outside of the United
States, more than 4 years prior to the filing of the application or in the case of a tree or vine, more
than 6 years prior to the date of filing. Under the PVPA, therefore, acts that do not meet these
conditions would result in a loss of novelty. Any sexually reproduced or tuber propagated plant
variety (other than fungi or bacteria) are covered under the PVPA. (See Section 3 of Public Law 103349, 108 Stat. 3138, and Sec. 913(a) of Public Law 104-127, 110 Stat. 1186.)
Under the Plant Patent Act, a plant variety is deemed new unless:
(a)
the invention was known or used by others in this country, or patented or described in a
printed publication in this or a foreign country, before the invention thereof by the applicant for
patent, or
(b)
the invention was patented or described in a printed publication in this or a foreign country or
in public use or on sale in this country, more than one year prior to the date of the application for
patent in the United States, or
(c)
he has abandoned the invention, or
(d)
the invention was first patented or caused to be patented, or was the subject of an inventor's
certificate, by the applicant or his legal representatives or assigns in a foreign country prior to the date
of the application for patent in this country on an application for patent or inventor's certificate filed
more than twelve months before the filing of the application in the United States, or
(e)
the invention was described in - (1) an application for patent, published under section 122(b),
by another filed in the United States before the invention by the applicant for patent or (2) a patent
granted on an application for patent by another filed in the United States before the invention by the
applicant for patent, except that an international application filed under the treaty defined in section
351(a) shall have the effects for the purposes of this subsection of an application filed in the United
States only if the international application designated the United States and was published under
Article 21(2) of such treaty in the English language; or
(f)
he did not himself invent the subject matter sought to be patented, or
(g)(1) during the course of an interference conducted under section 135 or section 291, another
inventor involved therein establishes, to the extent permitted in section 104, that before such person's
invention thereof the invention was made by such other inventor and not abandoned, suppressed, or
concealed, or (2) before such person's invention thereof, the invention was made in this country by
another inventor who had not abandoned, suppressed, or concealed it. In determining priority of
invention under this subsection, there shall be considered not only the respective dates of conception
and reduction to practice of the invention, but also the reasonable diligence of one who was first to
conceive and last to reduce to practice, from a time prior to conception by the other.
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The Plant Patent Act 35 U.S.C. 161, applies to asexually reproduced varieties, other than a tuber
propagated plant or a plant found in an uncultivated state. With respect to novelty, this Act
incorporates the requirements of 35 USC 102 in the Patent Act. See Public Law 92-358, sec. 2, 86
Stat. 501; Public Law 94-131, sec. 5, 89 Stat. 691; Public Law 106-113, sec. 1000(a)(9), 113 Stat.
1501A-565 (S. 1948 sec. 4505); Public Law 106-113, sec. 1000(a)(9), 113 Stat. 1501A-590 (S. 1948
sec. 4806); Public Law 107-273, sec. 13205, 116 Stat. 1903.) Under United States law, however, in
order for a publication to defeat novelty, the publication must be an enabling publication under 35
U.S.C. 112, 1st paragraph. Any acts consistent with the above, will defeat novelty under the Plant
Patent Act.
Question: (Japan #49, i)
Do the acts of publication, such as the publication of catalogues, the publication of the application in
other countries, or the publication of papers on a certain variety, cause a loss of "novelty" of the
variety in question?
Answer
A printed publication can serve as a statutory bar under 35 USC §102(b) of the Plant Patent Act if the
reference, combined with knowledge in the prior art, would enable one of ordinary skill in the art to
reproduce the claimed invention, see In re LeGrice, 301 F.2d 929 (CCPA 1962). Therefore, if the
plant in question was publicly available, then the granted PBR certificate, combined with knowledge
in the prior art, would enable one of ordinary skill in the art to reproduce the claimed plant, and would
therefore constitute an enabling disclosure under 35 USC §102(b), see Ex Parte Thomson, 24
USPQ2d 1618 (Bd. Pat. App. & Int. 1992). The public availability referred to here may include
availability to the public in a foreign country. For example, a foreign Plant Breeder's Right (PBR)
certificate may be considered a "printed publication," and may therefore be prior art against an
invention under 35 USC §102(b), if it constitutes an "enabling disclosure".
This availability must not be confused with the statutory bar of prior use or sale, also contained in
section 102(b), as foreign prior use or sale, as such, is not a bar to patentability in the United States.
Question: (Japan #49, ii)
According to the UPOV Act, "the variety shall be deemed to be new if, at the date of filing of the
application for a breeder's right, propagating or harvested material of the variety has not been sold or
otherwise disposed to others, by or with the consent of the breeder, for purposes of exploitation of the
variety". However, the cases described above are acts of publication of the variety, and no act relating
to sale or otherwise disposed to others for propagating material or for harvested material are involved.
If the cases described above suffer a loss of "novelty" for a variety in the U.S., please explain why. In
addition, please provide the U.S.'s interpretation of Article 6 of the 1991 Act of the UPOV
Convention.
Answer
With the exception of tuber propagated plants (which are subject to the PVPA), asexually reproduced
plant varieties are not subject to the PVPA under United States law. Additionally, the United States
made a reservation pursuant to Article 35(2) of the 1991 UPOV Convention when it ratified the
Convention, and therefore, asexually reproduced plants are not subject to the 1991 UPOV Convention
(with the exception of tuber propagated plants). Thus, if an asexually reproduced variety loses
novelty based on a publication, this is because 7 USC 2402 (which is consistent with Article 6 of
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UPOV) is not the controlling law; 35 USC 102 is the law that is applied to asexually reproduced plant
varieties.
Some situations which would result in a loss of novelty under Article 6 of the 1991 UPOV
Convention would include sale of a variety in United States more than 1 year prior to filing for a plant
breeder's certificate in the United States, sale of a variety in a foreign country more than 4 years (or 6
years for trees or vines) prior to filing for a plant breeder's certificate in the United States, or giving
away a variety for exploitation within the prescribed time periods, for example.
Question: (Japan #49, iii)
The 1991 Act of the UPOV Convention states that there are certain grace periods for novelty: one
year for that taking place within the territory of the Contracting Party and four years (six years for
trees and vines) for that outside the territory. Please provide information on the relevant provisions of
the grace periods in the U.S., both under the PVP law and the patent law.
Answer
7 U.S.C. 2402 describes the circumstances for which novelty is defeated under the Plant Variety
Protection Act.
35 U.S.C. 102 describes the circumstances for which novelty is defeated under the patent law. A
prima facie case is made out under 35 U.S.C. 102(a) if, within 1 year of the filing date, the invention,
or an obvious variant thereof, is described in a "printed publication" whose authorship differs in any
way from the inventive entity unless it is stated within the publication itself that the publication is
describing the applicant's work. In re Katz, 687 F.2d 450, 215 USPQ 14 (CCPA 1982). The term
"others" in 35 U.S.C. 102(a) refers to any entity which is different from the inventive entity. The
entity need only differ by one person to be "by others." This holds true for all types of references
eligible as prior art under 35 U.S.C. 102(a) including publications as well as public knowledge and
use. Any other interpretation of 35 U.S.C. 102(a) "would negate the one year [grace] period afforded
under §102(b)." In re Katz, 687 F.2d 450, 215 USPQ 14 (CCPA 1982).
Question: (Japan #49(b))
Is there any plan to change the provisions for "novelty" in the U.S. laws in the future? If so, please
indicate the details of the changes and the timetable.
Answer
A bill has been introduced before the 108th Congress, but when or if this Congress will take action on
this bill is unknown.
Question: (Japan #50)
Reference: p. 92, para. 270
The U.S. is the only country to use a "first-to-invent" system, which, with regard to the patent system,
makes the U.S. rather unique. Moreover, this system lacks certainty and predictability in the sense
that a patentee's status can be overturned by the appearance of a subsequent prior inventor. This
involves additional burden to inventors, who are thus required to prepare and keep documentary
evidence to prove the date of invention. Many countries, including Japan, have pointed out that this
issue creates a barrier for foreign companies when trying to penetrate the U.S. business community.
Although the practice of maintaining the first-to-invent system is not necessarily against the TRIPS
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Agreement, Japan again requests the U.S. to adopt the first-to-file system. This is due to the necessity
to maintain a transparent and stable system, as well as to reduce the burdens borne by users through
the differing systems.
Answer
Although the U.S. first-to-invent patent system is unique, it is clearly compatible with the TRIPS
Agreement, it has worked well and, indeed, has certain advantages. For example, our system is fairer
than first-to-file systems in that it rewards the first inventor who files a patent application rather than
the first-to-file an application, regardless of whether that first applicant to file an application was,
indeed, the first inventor.
From a purely statistical viewpoint there would seem to be little difference in result between a first-toinvent patent system and a first-to-file patent system. More than 99.9% of patent applications filed in
the U.S. raise no dispute as to priority of invention. Even when such disputes arise, the inventor who
filed first prevails in a significant majority of these cases. The actual effect of a switch to first-to-file
system, thus, is likely to have little or no actual significance based upon these statistical findings.
With regard to the alleged burden imposed by a first-to-invent system with regard to documentary
evidence to prove the date of invention, it should be kept in mind that inventors in most first-to-file
systems also maintain such evidence in order to be able to assert "prior user rights" or derivation.
Documentary and other objective evidence is required to establish prior user rights in cases where an
earlier inventor wishes to continue using an invention that was patented by another party that filed
first, and obtained, a patent on that invention. Such evidence is also required prove inventorship
where the first person to file derived the invention from the true inventor and is not entitled to the
patent.
Question: (Japan #51)
Reference: p. 93, para. 271
The "Hilmer" doctrine, which exists in the United States, is an application which has a prior art effect
only up to the date of the application in the United States. Foreign applicants usually file applications,
first in their own country and then in the U.S., thereby claiming priority under the Paris Convention.
Due to the "Hilmer" doctrine, such foreign applicants cannot prevent the patent grant from conflicting
with applications filed before the actual filing date of any subsequent applications in the U.S., even
during the priority period, and therefore may suffer a disadvantage.
Answer
The concerns of the Hilmer Doctrine, if any, were mitigated to a large extent by changes to the U.S.
patent law that went into effect on June 8, 1995. These changes permit all patent applicants, including
those from Japan, to file provisional patent applications that will give them the earliest possible prior
art date for subsequently filed non-provisional applications. It should also be noted that this issue is
under discussion in the ongoing substantive patent law harmonization talks in WIPO.
Question: (Japan #52)
This might be against Article 4B of the Paris Convention, which stresses that acts by a third-party in
the priority period "cannot give rise to any third-party right or any right of personal possession" and
Article 2.1 of the TRIPS Agreement, which requires compliance with Article 4 of the Paris
Convention. Japan therefore requests the U.S. to revise its system.
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Answer
The effective date of a patent application as a prior art reference under the so-called "Hilmer" doctrine
is not inconsistent with the obligations of Article 4B of the Paris Convention, as it does not affect the
ability of an applicant to obtain a patent where the applicant has made a priority claim that establishes
an effective filing date prior to the effective prior art date of the patent. Note that WIPO's Patent
Cooperation Treaty explicitly allows countries to apply the Hilmer doctrine in Article 64.4.
Question: (Japan #53)
Reference: p. 94, para. 275
Japan understands that the USPTO implemented a public comment procedure, and is trying to
harmonize its patent system with the international system of Patent Law. However, with regard to the
unity of invention, under the current U.S. patent system, the scope of inventions that can be included
in a single application is, according to what we have been requested so far, narrower than that under
the systems of the JPO and the European Patent Office (EPO). Thus, a patentee is obliged to submit
multiple applications, thereby increasing the burden. Japan repeats its request to the U.S. to adopt the
same criterion for its unity of invention as that of Japan and Europe.
Answer
The U.S. Patent and Trademark Office has been studying the implementation of unity of invention for
national applications for many years. There are serious implementation concerns including revenue,
resource allocation and labor management. These concerns must be viewed in the context of the
difficulties in coping with application filings that continue to increase year-to-year, especially in hightechnology areas. There are also concerns that the current unity standard may not be the best
approach to the issue of limiting the claiming of multiple inventions in single applications, especially
in those emerging technologies. To that end, the United States, in the ongoing discussions of WIPO's
Standing Committee on the Law of Patents (SCP), has supported the formation of a Working Group to
further study this issue.
Question: (Japan #54)
Reference: p. 97, para. 289
The Secretariat's Report describes that the Digital Millennium Copyright Act of 1998 implemented
the WCT and the WPPT. However, Japan is of the view that the U.S. Copyright Law does not fully
protect the moral rights stipulated in Article 6 (2) of the Berne Convention applied to the WCT, the
moral rights of performers stated in Article 5 of the WPPT, the right of making available expressed in
Article 8 of the WCT and in Articles 10 and 14 of the WPPT, and the economic rights of performers
in their unfixed performances mentioned in Article 6 of the WPPT. Please explain, with the specific
provisions of legislation, how these rights are protected in the U.S.
Answer
Moral rights are protected in the United States not under a single law, but rather through a
combination of federal copyright law, state common law, and other federal and state laws. Moral
rights are protected in the Copyright Act, not only through section 106A, but also through the
application of the author's economic rights in section 106, such as the right to prepare derivative
works under section 106(2). For instance, the protection of the right of integrity will almost always
implicate the author's (or other copyright owner's) right to reproduce the work or to prepare a
derivative work. These are rights that would be involved in preparing a modification of an author's
work that could violate the right of integrity (which is probably the moral right most likely to be
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violated in the digital manipulation of images or text). Protections for the right of attribution are
provided under a combination of state, federal and common laws.
The U.S. provides full rights of making available as required by the WCT and WPPT in Section 106
(4)-(6) of the Copyright Act, as further clarified by the definitions in Article 101 of the Act, as further
clarified by the definitions in Article 101 of the Act, as well as through case law.
The United States protects unfixed or live performances under section 1101 of the Copyright Act.
Section 1101 was adopted as part of the Uruguay Round Agreements Act in order to comply with
certain portions of Article 14 of the TRIPS Agreement. All of the various remedies for copyright
infringement are made available to those who are injured by violations of section 1101.
Question (Japan #55)
Reference: p. 97, para. 292
Regarding Articles 203 and 304 of the Copyright Act, which enables the right holders to terminate
transfers and licenses, Japan wishes to have concrete explanations on the following points: (a) the
purpose of this system; (b)the basis of the termination period, which is effective for 5 years after
expiration of the 35-year period from the date of execution of the grant; and (c) in the case where
someone doing business by using the transferred right notices the termination of a grant by the author,
how is the safety of the business assured?
Answer
Purpose of Sections 203 and 304 of the Copyright Act
In general, the purpose of Section 203 of the Copyright Act, which permits the termination of
transfers and licenses in copyrighted works made on or after January 1, 1978, is to allow the author, or
the author's heirs, to recapture the value of the work. The purpose of Section 304(c), which permits
the termination of transfers and licenses of renewal rights in copyrighted works made before January
1, 1978, is to allow the author, or the author's heirs, to recapture the 19-year extension of the renewal
term under the 1976 Copyright Act.
Basis of the Termination Period
Under Section 203, termination may be effected at any time during a five-year window, which begins
at the end of 35 years from the date of executions of the grant. Under Section 304(c), termination
may be effected during the five-year window that begins 56 years from the date copyright protection
was originally secured (in the usual case, upon notification with proper notice).
Business Safety
Under both Sections 203 and 304, there are exceptions to termination that help to assure what the U.S.
understands as "business safety". Under Section 203, for example, the owner of a derivative work
made under a grant before termination may continue to use the derivative work after termination,
subject to a duty to continue to comply with the terms of the original grant (such as the payment of
royalties). There is a similar provision for the use of derivative works under Section 304. In addition,
works made for hire (such as works made by an employee of a business) are not subject to termination
under Sections 203 and 304.
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Question: (Japan #56)
Reference: p. 97, para. 293
As the U.S. was unable to implement the recommendations of the WTO panel on the U.S. Copyright
Act, in a reasonable period of the time, which is in violation of TRIPS obligations, the U.S. made a
lump-sum payment of US$3.3 million to the EU over a three-year period ending in December 2004
US$1.1 million per year as compensation for the EU's loss of benefit. Japan would like to ask the
U.S. for an explanation on the legal process of this matter in the U.S.
Answer
Consistent with the Understanding on Rules and Procedures Governing the Settlement of Disputes,
the United States and the European Communities reached a mutually satisfactory temporary
arrangement with respect to the dispute United States - Section 110(5) of the U.S. Copyright Act (DS
160). The arrangement, which the United States and the European Communities have notified to
WTO Members, covers the period commencing at the end of the "reasonable period of time" for
implementation in this dispute and ending December 21, 2004.
Pursuant to this arrangement, the United States made a lump-sum payment of $3.3 million to the
European Communities, to a fund established to finance activities of general interest to music
copyright holders, in particular awareness-raising campaigns at the national and international level
and activities to combat piracy in the digital network. The funds were appropriated by the U.S.
Congress.
The mutually satisfactory temporary arrangement addresses the dispute for a three-year period.
Question: (Brazil #1)
In paragraph 266, it is stated that bilateral intellectual property agreements "are based, as a minimum,
on the WTO TRIPS Agreement." Please explain if this statement also refers to IPR provisions in
bilateral free trade agreements (FTAs).
Answer
Yes, the statement also applies to bilateral free trade agreements concluded after the establishment of
the WTO that include intellectual property provisions.
Question: (Brazil #2)
Has the United States already evaluated the possible impact of the extension of the protection of
geographical indications under article 23.4 of the TRIPS Agreement to products other than wines and
spirits? If so, please provide information on the methods used to assess such impact and on the results
of such evaluation. Please also identify which American products could benefit from such extension.
Answer
Please refer to WTO Document No. IP/C/W/386, entitled "Implications of Article 23 Extension," a
joint communication from the governments of Argentina, Australia, Canada, Chile, the Dominican
Republic, El Salvador, Guatemala, New Zealand, Paraguay, the Philippines, Chinese Taipei and the
United States. Contained therein is a detailed explanation of the impact of Article 23.4 protection,
including the costs to governments, producers and manufacturers, and consumers.
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Question: (Brazil #3)
Is there any geographical indication for U.S. products recognized and protected in other countries?
Please provide examples. Has this protection caused any impact on the export performance of such
products?
Answer
Under the TRIPS Agreement, geographical indications are intellectual property rights, and therefore
are private rights. Accordingly, it is the responsibility of the private right holder to obtain, maintain
and enforce those rights. As these are private rights, the U.S. does not track their individual status in
other countries. The U.S. does have interest in foreign protection for geographical indications where
systemic problems exist in the availability of protection for U.S. geographical indications.
Question: (Brazil #4)
Is there any geographical indication registered for a U.S. product covering all the national territory,
and not only a specific region? Please explain and provide examples.
Answer
Geographical indications covering all of the national territory, including country names, are eligible
subject matter for geographical indication protection in the United States. Examples of such
geographical indications include the terms SWISS, for chocolate from Switzerland (U.S. Certification
Mark Registration No. 1,570,455), and COLOMBIAN, for coffee from Colombia (U.S. Certification
Mark Registration No. 1,160,492).
Question: (Brazil #5)
Are PCT applications re-examined by the USPTO in cases where another International Authority
under the PCT has issued a positive search and examination report? Please explain if it is possible to
have patents granted in the United States based on the reports of other countries' intellectual property
offices. Please provide examples.
Answer
Following receipt of a positive International Search Report and International Preliminary Examination
Report (IPER) for a patent application filed under the PCT, the United States Patent and Trademark
Office (USPTO) examines the application before granting a patent. The USPTO does not grant
patents based upon reports of foreign intellectual property offices, although USPTO examiners
consider IPERs when examining patent applications. A thorough review of nationally filed patent
applications is currently required because these applications may differ from the corresponding
internationally filed applications. The USPTO is exploring ways in which it could grant patents based
upon the work of other offices. The USPTO is also interested in continuing to discuss options that
patent offices may use to maximize the use and benefits of the work done by foreign PCT authorities.
Several options are presented in WIPO document PCT/R/WG/5/9.
Question: (Brazil #6)
Is the USPTO the only authority in the United States to examine patent applications and to grant
patents? According to U.S. law on this matter, is it possible that other institutions examine such
applications or, at least, assist the USPTO during the examination? If so, please provide details on the
relevant legal provisions.
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Answer
The USPTO is the only authority in the United States to examine patent applications and to grant
patents. Please note, however, that 35 U.S.C. 2 authorizes the USPTO to outsource patent searching
and examination. While we have not done so to date, our 21st Century Strategic plan contemplates the
outsourcing of patent searching and examination to foreign patent offices. More information on this
topic is available at www.USPTO.gov.
Question: (Brazil #7)
Please inform what measures have been taken recently, if any, to reduce the average pendency period
for patent applications.
Answer
Please refer to the response to Brazil’s questions 5 and 6. In addition, the USPTO's revised Strategic
Plan, which was submitted to the U.S. Congress in March 2003, calls for the hiring of almost 3,000
new patent examiners over the next five years.
Question: (Brazil #8)
How is exhaustion of intellectual property rights ruled in the U.S. legislation? What is its impact on
industrial policies in the United States?
Answer
Under U.S. laws, the authorized sale of a patented product within the United States exhausts the
patent right, allowing the purchaser to resell the product (Intel Corp. v. USLI Corp., 27 USPQ2d,
1136, 1138 (Fed. Cir 1993)). If a patented product is sold abroad by the patent holder or others, then
35 U.S.C. 154 allows the patent holder to exclude others, who lack the consent of the patent holder,
from importing the product into the United States.
Under Section 106(3) of the U.S. Copyright Act, the copyright owner has the exclusive right "to
distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of
ownership, or by rental, lease, or lending." The copyright owner's distribution right, however, is
limited by the "first sale doctrine," which is roughly comparable to the Aexhaustion doctrine" in the
copyright laws of many countries. Under the U.S. first sale doctrine, which is codified at 17 U.S.C.
Section 109(a), the owner of a lawfully-made copy or phonorecord is free to sell or otherwise
physically dispose of that particular copy or phonorecord. Under Section 602 of the U.S. Copyright
Act, it is an infringement of copyright to import piratical or unauthorized copies or phonorecords.
However, where the copies or phonorecords were lawfully made in the United States, shipped abroad,
and later reimported into the United States, the Supreme Court has ruled that the Section 602
importation right is limited by the first sale doctrine.
These laws further U.S. industrial policies by promoting innovation and creativity without restricting
the domestic sale of patented products and lawful copies by authorized purchasers.
Question: (Brazil #9)
How are genetic resources protected in the United States? Can you provide further information and
statistics on the protection of inventions related to genetic resources? In paragraph 270, there are
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references only to patents of invention and design patents. Are patents of any kind available for
plants? If so, how do they comply with the three conditions of patentability established in article 27.1
of the TRIPS Agreement?
Answer
An explanation of various United States systems for protection of genetic resources and plants can be
found in documents IP/C/W/393, IP/C/W/209 and WIPO/GRTKF/IC/Q.3. It is difficult to provide
statistics on the protection of inventions "related to genetic resources," since the phrase "related to
genetic resources" does not have a specific meaning. The United States has been actively
participating in the WIPO IGC meetings, which are working to delineate internationally recognized
definitions relating to genetic resources. However, the USPTO website (www.uspto.gov) has a
searchable database for all issued United States Patents, so any statistics of interest on issued United
States patents to the Government of Brazil based on their understanding of this phrase may be
determined.
In the United States, two types of patents are available for plant varieties. The first is our utility
patent, which is a patent for invention. The statutory provisions for the utility patent can be found in
35 U.S.C. 101 et. seq. All varieties of plants are eligible for protection by a utility patent if they meet
the statutory requirements for this type of patent. A plant patent is also available in the United States
for asexually reproduced plants (excluding tuber propagated plants). The statutory provisions for a
plant patent can be found in 35 U.S.C. 161 et. seq. Both a utility patent to a plant and a plant patent
require that an invention be new (35 U.S.C. 102), involve an inventive step (35 U.S.C. 103) and be
capable of industrial applicability (35 U.S.C. 101), i.e., the 3 patentability requirements of TRIPS
Article 27.1. Protection for sexually reproduced plants and tuber propagated plants are also available
in the United States under our Plant Variety Protection Act (PVPA) (7 USC 2321 et. seq). Please
refer to the response to Japan’s Question #49 for more information regarding the PVPA and our plant
patents.
Question: (Brazil #10)
How are traditional knowledge and folklore protected in the United States? Is there a specific
category of protection for such subject matter or are they protected by any of the existing categories
(e.g., patents, copyright, etc.)? If so, are there specific requirements for the protection of such subject
matter?
Answer
The United States, like many delegations, actively participates in the WIPO Intergovernmental
Committee on Intellectual Property and Genetic Resources, Traditional Knowledge and Folklore
(IGC). As part of the work of the IGC, the United States and many others, submitted comprehensive
answers on their legal and policy framework with respect to genetic resources, traditional knowledge
and folklore. Accordingly, with an eye towards efficiency, we encourage delegations to review the
answers of the United States in documents WIPO/GRTKF/IC/Q.3, the Questionnaire on various
requirements for Disclosure relating to Genetic Resources and Traditional Knowledge in Patent
Applications and WIPO/GRTKF/IC/2/7, the Questionnaire on National Experiences with the Legal
Protection of Expressions of Folklore.
Question: (Brazil #11)
In paragraph 279, there is a clear reference to the fact that the decision on the implementation of
paragraph 6 of the Doha Declaration on TRIPS and Public Health would make it easier to import
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generic drugs, "made under compulsory licensing." In paragraph 277, however, it is stated that,
although the U.S. Government can allow use of the subject matter of a patent without the
authorization of the right holder - which is, in other words, compulsory license - the relevant
provisions on this matter have not been used for over 20 years. Please explain if there are provision in
the U.S. legislation that could allow compulsory licenses to be granted in the United States so as to
enable drugs to be exported under the mechanism created for the implementation of paragraph 6 of
the Doha Declaration on TRIPS and Public Health.
Answer
U.S. legislation provides very limited statutory authority for the grant of compulsory licenses (e.g., the
Atomic Energy Act and the Clean Air Act noted in paragraph 277). No such authority exists to grant
compulsory licenses to manufacture patented drugs in the United States (for export or otherwise).
Question: (Chile #1)
Please specify the term of protection for works and performances created or published for the first
time abroad prior to 1978.
Answer
Before January 1, 1978, the term of protection under the U.S. Copyright Act (1909 Act) was 28 years
from the date of first publication of a work with proper notice, renewable for an additional 28 years,
for a total of 56 years. Because of the numerous variables involved, the exact determination of term
of protection for a particular work created prior to 1978 is a fact-based inquiry. The question asked
by Chile does not provide the United States the necessary facts to make a specific determination of
term for a particular work. In order to make such a determination, the rightholder may consult the
U.S. Copyright Office Circular 15, which provides a general summary of the statutory provisions
dealing with duration of copyright under the current act, the Copyright Act of 1976, as amended. The
Circular also provides information about duration under the law in effect prior to the current act,
which would be the case for works and performances created prior to 1978. This circular is available
at http://www. copyright.gov/circs/circ15a.pdf.
Question: (Chile #2)
Please specify the categories of works to which the exception under Section 110(5)(A) of the
Copyright Act applies. Does it also apply to both dramatic and non-dramatic musical works?
Answer
Section 110(5)(A) contains an exception for transmission on a single "home-style" apparatus of a
performance or display of a work. Section 110(5)(A) applies to all categories of works that are
capable of being publicly performed or displayed. Under Section 106(4), a copyright owner has the
exclusive right to publicly perform literary, musical, dramatic, and choreographic works, pantomimes,
and motion pictures and other audiovisual works. Under Section 106(5), a copyright owner has the
exclusive right to publicly display literary, musical, dramatic, and choreographic works, pantomimes,
and pictorial, graphic, or sculptural works, including the individual images of a motion picture or
other audiovisual work.
Section 110(5)(A) does not distinguish between dramatic and non-dramatic musical works (as, for
instance, Section 110(5)(B) does).
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Question: (Chile #3)
Please describe the amendments the Copyright Act being formulated or to be formulated in order to
amend Section 110(5)(B) with a view to granting full protection to the right-holders of non-dramatic
musical works that are adversely affected by the exception contained in that paragraph.
Answer
Please refer to the response to Japan's Question #56.
Question: (Chile #4)
In what cases do performers of works have exclusive rights in or receive payment for communication
to the public and broadcasting of their performances fixed on phonograms, and in what cases do they
have such rights or receive such payment for their performances fixed on audiovisual media such as
videos or DVDs?
Answer
To the extent that a performer is an author, that performer is a copyright owner under U.S. law and
therefore has the exclusive rights provided under Section 106, which include the exclusive rights to do
and to authorize any of the following:
(1)
(2)
to reproduce the copyrighted work in copies or phonorecords;
to prepare derivative works based upon the copyrighted work;
(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other
transfer
of ownership, or by rental, lease, or lending;
(4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion
pictures and other audiovisual works, to perform the copyrighted work publicly;
(5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial,
graphic, or sculptural works, including the individual images of a motion picture or other
audiovisual work, to display the copyrighted work publicly; and
(6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital
audio transmission.
Copyright owners have a right to communication to the public of their works, by wire or wireless
means. This right includes the making available to the public of their works in such a way that
members of the public may access these works from a place and at a time individually chosen by
them. This obligation is satisfied through sections 106(1), 106(3), 106(4), 106(5) and 106(6) of the
U.S. copyright law, which provide exclusive right of reproduction, public distribution, public
performance, display and for performance of sound recordings by means of digital audio transmission
for all copyright owners, and through case law.
With respect to performances fixed on audiovisual media, the Copyright Law is not the exclusive act
protecting audiovisual performers. Certain other federal laws, state laws, case law and private
agreements also provide protection to audiovisual performers and can be controlling authorities.
Question: (Chile #5)
In what provision of U.S. law is the right of performers to broadcast their non-fixed performances
recognized?
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Answer
Please refer to the final paragraph of the response to Japan's Question #54.
Question: (Chile #6)
Please inform us whether temporary copies which are technically required to visualize an image on a
computer screen or to listen to a work transmitted over the Internet require specific authorization from
the owner of the right to reproduce such work. If not, under what provision of the Copyright Act are
such copies excepted.
Answer
It is well established under U.S. law that activities that require the making of temporary copies may
implicate one or more of the exclusive rights of the copyright owner. For example, in MAI Sys. Corp.
v. Peak Computer, Inc., 991 F.2d 511 (9th Cir. 1993), the court found that the loading of operating
system software into random access memory (RAM) creates a copy of software, thereby implicating
the reproduction right. More recently, the U.S. Copyright Office concluded that "the making of
temporary copies of a work in RAM implicates the reproduction right so long as the reproduction
persists long enough to be perceived, copied, or communicated." (See A Report of the Register of
Copyrights Pursuant to Section 104 of the Digital Millennium Copyright Act available at:
www.loc.gov/copyright/reports/ studies/dmca/dmca_study.html).
Although there is no general exemption from liability for the making of temporary copies, the U.S.
Copyright Act contains a number of provisions that limit liability for such conduct under specific
circumstances, so-called "safe harbors." See e.g., 17 U.S.C. Section 512(a)(2); 17 U.S.C. Section
110(2).
Question: (Chile #7)
Please inform us whether those who are licensed to broadcast to the public copyright-protected works
and phonograms (webcasters) also require a license for the temporary copies that are technically
required for the transmission process. Please describe under what U.S. legal provision said copies are
excepted.
Answer
Under section 112(e) of the U.S. Copyright Act, which was enacted as part of the Digital Millennium
Copyright Act (DMCA), webcasters that are otherwise qualified to publicly perform a sound
recording by means of a digital audio transmission are also permitted to make one ephemeral copy of
the sound recording in connection with the transmission. Ephemeral recordings are copies that are
made and used by a transmitting organization to facilitate its transmitting activities. Such ephemeral
recordings, among other conditions, must be destroyed within six months of the date of transmission.
Question: (Chile #8)
Please indicate the legal or administrative provisions that actively regulate the acquisition and
administration of computer programs for government use by federal or central agencies of the U.S.
Government.
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Answer
Pursuant to Executive Order 13,103-Computer Software Piracy (September 20, 1998), each executive
agency was required to adopt procedures to ensure that the agency does not acquire, reproduce,
distribute, or transmit computer software in violation of applicable copyright laws. Exec. Order No.
13,103, 63 Fed. Reg. 53,273 (1998).
Question: (Chile #9a)
While the subject of exhaustion of rights with respect to copyright and patents seems clear, such is
not the case with regard to manufacturing marks or trademarks. Could you specify the rules that
apply to the exhaustion of rights for manufacturing marks or trademarks and the applicable norms or
case law? Do the same legal provisions apply to geographic indications?
Answer
Current U.S. law provides owners of U.S. registered trademarks with the legal basis to stop parallel
imports. The underlying law that establishes U.S. national exhaustion can be found in the U.S.
Customs provision 19 U.S.C. 1526(a)-(c). Under 15 U.S.C. §1054, registered certification marks and
collective marks are afforded the same protection afforded to trademarks; therefore, the owner of a
registered geographical indication certification mark also has the legal basis to stop parallel
importation. See also, K Mart Corp. v. Cartier, Inc., 486 U.S. 281 (U.S. 1988) and Lever Bros. Co. v.
United States, 796 F. Supp. 1 (D.C. Cir. 1992).
Question: (Chile #9b)
Is there any recent case law regarding Title 28 USC 1498? Please indicate to what cases the pertinent
legal decisions refer.
Answer
Yes, there are several recent cases cited in the 2003 "Cumulative Annual Pocket Part (on pages 153158) of the United States Code Annotated (© 1994, West Publishing Co., St. Paul, Minnesota),
dealing with a variety of issues, including what is "reasonable and entire compensation",
infringement, jurisdiction, etc. Because of the number and variety of cases, no attempt is made to
summarize them here.
Question: (Chile #10)
Once a drug has been registered in the Orange Book, the owner of a patent can prevent the entry on
the market of a generic competitor by filing a lawsuit. This stays the entry of the generic product on
the market for a period of 30 months or until the suit is settled. Does U.S. law provide for the
possibility that the generic drug can be put on the market if the patent expires during the 30-month
period or before the suit is settled? Are there any statistics available as to how long these lawsuits
take?
Answer
If the patent expires before the 30 -month period or before the law suit is settled, the generic is
permitted to enter the market. On average the time between the filing of a patent infringement lawsuit
and a district court decision in each case was 25 months and 13 days.
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Question: (Canada #18)
Reference: (v) Intellectual Property Rights; Section 337 investigations; Paragraph 297
In 1989, a GATT panel found that Section 337 of the United States Tariff Act of 1930 violated GATT
obligations and yet, as noted in paragraph 297, 47 new Section 337 investigations involving unfair
practices related to intellectual property rights were initiated against foreign companies. What steps
are being taken by the United States to ensure that non-American companies do not face additional
procedural burdens in defending against allegations of intellectual property infringement, contrary to
international trade obligations?
Answer
The United States amended section 337 of the Tariff Act of 1930, 19 U.S.C. para. 1337, as part of
U.S. implementation of the Uruguay Round results.
These amendments addressed the
recommendations of the GATT panel cited in the question.
Specifically, inter alia, the amendments:

Eliminated the requirement that the USITC issue a final determination within a fixed period
of time. Instead, the amendment provides that the ITC must complete its investigation "at the
earliest practicable time" and requires the USITC, within 45 days of initiating an
investigation, to establish a "target date" for its completion. See 19 U.S.C. para. 1337(b)(1).
These requirements are consistent with federal district court rules and district court efforts to
avoid delay, such as by establishing a schedule for the completion of various stages of
litigation;

Provide a means to prevent subjecting imported goods to infringement proceedings in two
fora simultaneously. A district court hearing an infringement case is required to stay its
proceedings, at the request of a respondent in a section 337 proceeding, in respect of any
claim involving the same issues as those pending before the ITC. In addition, to eliminate
any duplication of effort or expense, the statute provides for the record in an ITC proceeding
to be transferred to the federal district court for its use; and

Provide that a respondent in a section 337 action may file with the USITC any counterclaim
that may be filed with a federal court. If the claim is of the form of a defense to the alleged
violation of section 337, the USITC will consider the matter; otherwise the counterclaim is
removed to a federal district court. See 19 U.S.C. para. 1337(c).
Question: (China #75)
Reference: p. 92, para. 270
The U.S. is the only country in the world that adopts the "first invent" system in judging the novelty
of patents. The "first invent" system prima facie conforms to National Treatment and MFN rule,
however it has caused many inconveniences to national of WTO Members. For example, Article 102
of the Patent Act of the U.S. states that criteria of novelty for inventions created in the U.S. are
different from those for invention completed out of the U.S. Comparing with the U.S. applicants, the
above provision is obviously unfavorable to foreign applicants filing applications for patents in the
U.S.
Please elaborate what actions the U.S. intends to take to make foreign applicants in an equal position
with the U.S. applicants.
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Answer
Please refer to the response to Japan's Question #50 regarding the first-to-invent system. The
suggestion is made in the question that the operation of Section 102 of U.S. patent law produces an
effect that favors nationals of the United States. There is no basis for this suggestion. Section 102(a)
of the United States patent statute does limit the patent-defeating effect of prior public knowledge or
use to knowledge or use of the invention in the United States. The effect of section 102(a) is that an
invention claimed in an application for a United States patent will not be treated as being novel if the
invention has been disclosed or known to others in the United States. Section 102(a), however, does
not distinguish between applications claiming inventions made in the United States versus those made
outside the United States; any application for patent that fails to possess novelty through operation of
section 102(a) is treated as unpatentable subject matter. Application of section 102(a) is made in an
identical fashion to applications for inventions developed in the United States and those that are made
outside the United States.
Question: (China #76)
Reference: p. 94, para. 277
Section 1498 of the U.S. Code states that when products manufactured and used by the U.S.
Government or manufactured or used upon a request by the U.S. Government involve a patent, the
patentee has no right to prevent the manufacturing and use of the products by the U.S. Government.
This situation is akin to compulsory licensing system without the permission of the patentees as
stipulated in Article 31 of TRIPS, but protections to the patentees provided in relevant act of the U.S.
is much weaker than those provided in Article 31 of TRIPS.
Please explain the consistency of this act with Article 31 of TRIPS.
Answer
Section 1498 of Title 28, United States Code, concerns a limitation on remedies that can be obtained
from the United States Government for public non-commercial use of a patented invention by it or a
party authorized by it. The United States routinely seeks licenses or permission to use the patented
invention from the patentee. In the unlikely event a patentee believes the United States is using the
patented invention without permission of the patentee, the United States has waived its sovereign
immunity to suits against the United States for infringement of patents. Section 1498 codifies the
explicit waiver. Article 44.2 of the TRIPS Agreement authorizes Members to limit the remedies
available against non-commercial use of a right by the government to payment of remuneration in
accordance with paragraph (h) of Article 31. The United States does limit remedies in this manner;
however, Section 1498 does provide for reasonable compensation for use or manufacture of a
patented invention by or for the United States. In any event, to the extent applicable, all of the
relevant provisions of Article 31 are still complied with. The U.S. Federal Acquisition Regulations -codified uniform policies used by government agencies when acquiring goods or services -- call
Article 31(b) of TRIPS to the attention of the agencies. FAR 27.209 notifies contracting officers of
U.S. agencies that Article 31 of TRIPS applies where the law of a member country allows for the use
of patents without authorization and advises the contracting officers to consult with legal counsel
regarding questions under this section.
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Question: (China #77)
Reference: p. 95, para. 281
Please provide information on the implementation of the obligation to protect well-known trademark
under the TRIPS Agreement in the U.S. domestic legislation and judicial practices.
Answer
The United States fully implements its obligations under both the Paris Convention and the WTO
Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) with regard to wellknown marks. The United States protects registered as well as unregistered well-known marks, of
both domestic and foreign origin, from use and/or registration through the operation of Lanham Act
§43(a), §44(b) and §44(h) and under the Lanham Act §2(a) and 2(d). (15 U.S.C., §1125(a), §1126(b)
and (h), and §1052(a) and (d)). In cases where there is no use in commerce of the well-known mark
in the United States, but the mark is still well-known in the relevant sector of the public, the mark will
receive U.S. federal unfair competition protection under the Lanham Act §43(a), §44(b) and §44(h).
Lanham Act §44 grants "national treatment" to foreigners entitled to the benefits of the Paris
Convention with regard to protection against unfair competition.
U.S. federal law protects a mark against infringement or registration by another, whether the mark is
registered or not, for goods or services that are the same, similar, related or even unrelated if there is a
likelihood of confusion. When making a determination of likelihood of confusion at the United States
Patent and Trademark Office (USPTO) or in an infringement action in U.S. federal court, U.S. case
law outlines a variety of non-exclusive and non-exhaustive factors that can be used in the analysis.
These factors include, but are not limited to, the similarity of the marks, the relatedness or proximity
of the goods and/or services, the strength of the plaintiff's mark including the level of commercial
recognition, marketing channels used including the similarity or dissimilarity between the consumers
of the parties' goods and/or services, the degree of care likely to be exercised by purchasers in
selecting goods and/or services, the defendant's intent in selecting its mark, the evidence of actual
confusion, the likelihood of expansion in product lines, etc.
USPTO Examining Attorneys may refuse to register marks that conflict with unregistered well-known
marks, foreign or domestic, whether used or not in the United States, under Lanham Act §2(a) and (d).
(15 USC §1052(a) and (d)). The USPTO does not make a specific determination in examination as to
whether a mark is well-known. USPTO evaluates the strength of the mark in determining the scope
of protection to afford a previously registered or unregistered mark against a pending application.
Under U.S. law, strong or well-known marks have a wider scope of protection than weaker marks
against use of the mark on similar goods or services or even against use on unrelated goods or
services.
Question: (China #78)
Reference: p. 97, para. 293
The exceptions to copyright protection (Limitations on exclusive rights: Exemption of certain
performances and displays) as specified in Article 110.5 of U.S. Copyright Act is inconsistent with
Article 13 of TRIPS.
Is the U.S. going to make any amendment to such provision so as to make it consistent with the
TRIPS Agreement?
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Answer
Please refer to the response to Japan's Question #56.
Question: (China #79)
Does the U.S. Government have any plan for such amendment? If yes, please provide the detailed
information.
Answer
Please refer to the response to Japan's Question #56.
Question: (Colombia #1)
Paragraph 270 of the Report establishes that, in the case of USPTO-caused delays in the granting of
patents, there are formulas to calculate the extension of the term of patent protection. Could you
explain how the formula works and give examples of its application?
Answer
35 U.S.C. §154(a) (2) sets the term of a granted U.S. patent at 20 years from the effective U.S. filing
date. 35 U.S.C. §154(b) sets forth conditions under which the patent applicant may extend the patent
term to recoup time lost due to administrative delays caused by the PTO. There are five categories of
administrative delay for which patent term adjustment may be sought:
(1)
(2)
(3)
(4)
(5)
Failure by the PTO to take certain actions within a specified time;
Failure by the PTO to issue a patent within 3 years of the application filing date;
Delays due to successful appellate review;
Delays due to interference proceedings; and
Delays due to secrecy orders.
The total period of term extension is the sum of the delays attributable to each of the above-listed
categories to the extent that they do not overlap. Thus, the term cannot be extended beyond the actual
length of the delay caused, i.e., the same delay, though attributable to more than one category, is
counted only once. The statute also allows for a reduction in the patent term restoration to the extent
of delays caused by the applicant's failure to engage in reasonable efforts to prosecute the application.
The net restoration term is therefore the difference between the amount of the delay caused by the
PTO minus the amount of delay caused by the applicant.
Once an application has been allowed, the PTO calculates what it considers the proper term of
adjustment, extending the term one day for each day of the pendency of the delays described above,
and provides the applicant with one opportunity to request reconsideration. If, upon reconsideration,
the applicant is dissatisfied with the PTO's determination of adjustment, the applicant may appeal by
way of a civil suit against the Director in D.C. District Court.
Question: (Colombia #2)
Is there a similar extension period for delays in the approval for marketing products undergoing the
permit process with regulatory agencies like the FDA or the EPA?
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Answer
Yes. The decision of the length of the patent term extension (PTE) is a decision made by the
United States Patent and Trademark Office, with input as to the length of the regulatory review
period, the approval date, and any prior approvals from the Food and Drug Administration (or the
Department of Agriculture, if appropriate). 35 USC 156 provides that a patent owner may file an
application for PTE to the USPTO within 60 days of approval of the product by the Food and Drug
Administration (FDA). Upon receipt of the application, the USPTO reviews the application for
completeness, and forwards a copy of the application to FDA, and requests FDA to confirm the
approval date of the product, and that the approval of the product was the first permitted use or
commercial marketing of the product under the pertinent section of the Federal Food, Drug and
Cosmetic Act.
If the application is found to be eligible for extension, the USPTO requests that FDA determine the
regulatory review period of the product. FDA notifies the USPTO of the determination, and publishes
the determination of the regulatory review period in the Federal Register. For a drug product, the
"testing phase" is the period from the beginning of testing (defined in the statute as the date an
exception under subsection (i) of section 505 of the Federal Food, Drug, and Cosmetic Act (FFDCA)
became effective, and ending on the date an application was initially submitted for the drug product
under section 351 or 505 of the FFDCA (i.e., the filing of the new drug application (NDA)). For a
drug product, the "approval phase" is the period beginning with the filing of the NDA and ending with
the approval of the NDA. See 35 USC 156(g) (1) (A). The time the marketing applicant takes to
reply to FDA queries is not taken out of this period.
The USPTO then determines the patent term extension. The statute permits a patent owner who has
lost patent term due to regulatory review by the FDA to be compensated for the lost term that is no
longer than one half of the "testing phase" of the regulatory review plus all of the "approval phase" of
the regulatory review. If the number of days in the expression (½("testing phase") plus all of the
"approval phase") when added to the original expiration date of the patent would extend the patent to
more than 14 years after the approval date of the product by FDA, then the patent term extension is
shortened to the difference in time between the original expiration date of the patent and the date that
is fourteen years after the approval date of the product. Finally, if the patent term extension according
to the earlier calculations would be longer than 5 years, then the PTE is capped at five years.
However, if the patent issued before September 24, 1984, and testing began before September 24,
1984, then the cap would be two years, or, if the patent is to an animal drug product, if the patent
issued, and testing began, before November 16, 1988, then the cap would be three years.
Question: (Colombia #3)
We have learned that the United States Congress passed the "Fairness in Music Licensing Act of
1998," thereby amending article 110 (5) regarding limitations to exclusive rights. We understand this
law allows some uses without prior and express consent from the right-holder and without
remuneration. This situation affects Colombian authors, as we understand it allows for the use, under
the conditions described above, of a wide array of Colombian musical works and performances
having a large audience in the United States.
Has the United States considered amending article 110(5) (A), given the harm this limitation causes
copyright-holders from other countries?
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Answer
Please refer to the response to Japan's Question #56.
Question: (EU #45)
U.S. law stipulates that the U.S. Government can allow use of the subject matter of a patent without
the authorization of the right holder. Does U.S. law provide that the right holder will be notified of
such decision as soon as reasonably possible, and does it foresee the payment of adequate
remuneration to the right holder?
Answer
Yes. Please refer to the response to China's Question #76.
Question: (EU #50)
According to U.S. government information, CAFTA would include a provision regarding trade marks
and geographical indications based on a "first in time, first in right" principle. Could the U.S.
elaborate about these provisions?
Answer
The United States views the concept of "first in time, first in right" as confirming the appropriate
balance between trademarks and geographical indications and ensuring that trademarks are fully
protected against later established geographical indications. The U.S.-CAFTA FTA draft text is
available at: <http://www.ustr.gov/new/fta/cafta.htm>.
CHAPTER 3: BY MEASURE
(1a) Textiles
Question: (China #90)
China would like to know what steps the U.S. will take to comply with the TMB recommendation.
Answer
The United States continues to believe that the methodology used is consistent with Paragraph 241 of
the Working Party Report and that, therefore, it would not be appropriate to make any adjustment to
the methodology applied. The United States has asked that the TMB reconsider its recommendation.
Question: (China #91)
How does the United States ensure that interested parties will be informed of the petition promptly?
Answer
On May 21, 2003 the Committee for the Implementation of Textile Agreements (CITA) published a
notice in the Federal Register setting forth procedures it would follow in considering requests from
the public for textile safeguard actions on imports from China under Paragraph 242 of the Protocol of
Accession. On August 18, 2003, CITA published another notice in the Federal Register clarifying
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those procedures. That notice specifies, inter alia, that with respect to any request for a safeguard that
CITA has accepted for consideration, CITA will publish a Federal Register notice requesting public
comments and commencing a 30 day comment period. The Federal Register notice and the request,
with the exception of information marked "business confidential", are posted by the Department of
Commerce's Office of Textiles and Apparel on the internet.
Question: (China #92)
How does it ensure that interested parties will get sufficient information?
Answer
The procedures set forth in the May 21, 2003 Federal Register notice provide that comments received
in response to a request, with the exception of information marked "business confidential", will be
available for review by interested parties.
Question: (China #93)
How does it ensure that interested parties will have enough time to defend themselves?
Answer
The procedures ensure that interested parties have a 30-day period during which such parties may
comment on any request for a safeguard that CITA has accepted for consideration. With respect to
China, the procedures set forth in the May 21, 2003 Federal Register notice provide that, following an
affirmative determination on a request, CITA will request consultations with China within 30 days of
the receipt for request for consultations, and every effort will be made to reach agreement on a
mutually satisfactory solution within 90 days of receipt of the request for consultations.
Question: (India #5)
Although India is a beneficiary of the GSP, it has been noticed that inappropriate customs duty is
being imposed by U.S. authorities on imports of Jute Yarn, Net Leon, Wave Fabric and Jute Bags.
Further, the U.S. authorities insist upon production of VISA for export of Jute Bag, which is normally
applicable to textiles under quota. Would the U.S. authorities take steps to remove this anomaly.
Answer
Jute yarn and bags are bound at a zero rate effective 1/1/2004. We do not have a textile visa
requirement for jute bags. We are unfamiliar with the terms "Net Leon" and "Wave Fabric" and do
not know what they reference.
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Question: (India #9)
Burdensome customs procedures in textiles, clothing and footwear: For these products, customs
formalities require providing excessively detailed and voluminous information. Some of the
information asked for seems irrelevant for customs or statistical purposes. For example, in the case of
garments with an outer shell of more than one construction or material, it is necessary to give the
relative weight, percentage values and surface area of each component; for outer shell components
which are blends of different materials, it is also necessary to include the relative weights of each
component material. Would the U.S. authorities give the underlying reason for seeking such
voluminous information?
Answer
The Bureau of Customs and Border Protection requires sufficient documentation in order to properly
classify products upon entry. Proper classification is important for duty and quota purposes.
Documentary requirements are transparent as they are provided in published circulars and on the
website for the Bureau of Customs and Border Protection.
Question: (India #15)
There are extensive product description requirements for textiles, clothing & footwear. There are
particular rules for marking and labeling of retail packages to clarify the country of origin, the
ultimate purchaser in the U.S. and the name of the country in which the article was manufactured or
produced. Could the U.S. authorities clarify why such burdensome marking requirements are
maintained for certain selected product categories?
Answer
Textile labeling requirements are the result of specific statutes, enacted by Congress, as described
below:
Two agencies are involved in the enforcement of general textile and wool labeling regulations. One is
the U.S. Bureau of Customs and Border Protection, which enforces duty assessments and import
quotas and requires proper country-of-origin marking of imported textile, wool, and various other
products before such goods are allowed into the United States. The other is the Federal Trade
Commission ("Commission"), which administers and enforces several laws pertaining to labeling,
including the Textile Fiber Products Identification Act ("Textile Act") 15 U.S.C. §70, and the Rules
promulgated thereunder, 16 C.F.R. Part 303, and the Wool Products Labeling Act ("Wool Act"), 15
U.S.C. §68, and the Rules promulgated thereunder, 16 C.F.R. Part 300. The U.S. Customs Service
enforces the Textile Act and Wool Act as imported products enter the United States.
The Textile Act and Wool Act require that a label be attached to imported or domestic textile or wool
products, and disclose: (1) the fiber content, (2) the business name or registered identification number
(RN) of the product manufacturer, importer, or distributor, and (3) the country of origin. Generally
speaking, most household textile products should be labeled in accordance with the Textile Act or
Wool Act. In addition, the Bureau of Customs administers the Tariff Act of 1930, and Section 1304
of the Tariff Act (19 U.S.C. §1304) states that imported products must be marked with their foreign
origin as "permanently as the nature of the article (or container) will permit."
Congress passed the Textile Act "To protect producers and consumers against misbranding and false
advertising of the fiber content of textile fiber products, and for other purposes." In fact, a Senate
Report on the issue notes that "while the Government should not seek to set product quality standards,
the purchaser should be protected to the extent of a label containing basic information about items, the
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composition of which is not readily apparent. In other words, it is a disclosure bill, for the protection
of the consumer. Clothes, draperies, floor coverings, bedding, and other household goods would be
subject to this act."2
Non-textile consumer commodities are also subject to packaging and labeling requirements. "The
Fair Packaging and Labeling Act (FPLA or Act), enacted in 1967, directs the Federal Trade
Commission and the Food and Drug Administration to issue regulations requiring that all 'consumer
commodities' be labeled to disclose net contents, identity of commodity, and name and place of
business of the product's manufacturer, packer, or distributor."3 The Fair Packaging and Labeling Act
does not apply to textiles, but like the textile-specific labeling rules discussed above, aims to assist the
consumer in making informed decisions about consumer goods.4 The Commission's Rules and
Regulations under the Fair Packaging and Labeling Act, set forth some of the parameters to be
identified. For example, "[t]he net quantity of contents shall be expressed in terms of weight or mass,
measure, numerical count, or a combination of numerical count and weight or mass, size, or measure
so as to give accurate information regarding the net quantity of contents thereof, and thereby facilitate
value comparisons by consumers."5
Question: (India #27)
Unilateral changes in Rules of Origin by U.S.A have affected trade in textiles and clothing. As part of
its legislation implementing the results of the Uruguay Round, the U.S. substantially altered its rules
for determining the origin of textiles and clothing products. The modified rules, put into effect July
1996, have resulted in changes disadvantageous to developing countries. As the process of
harmonization of Rules of Origin is in progress, India requests that no unilateral changes are made in
the Rules of Origin in detriment of developing countries. Could the U.S. delegation offer its response
to this?
Answer
The United States fully explained its rules of origin in the WTO dispute brought by India. In DS243,
the Panel found that India failed to establish that Sec. 334 of the URAA, Sec. 405 of the Trade &
Development Act of 2000, and the Customs Regulations contained in 19 C.F.R. 102.21, are
inconsistent with the Uruguay Round Agreement on Rules of Origin.
Question: (India #28)
The Integration Programme for Stage 3: The U.S. integration programme for stage 3, being
implemented from 1 January 2002, continues the trend witnessed in stages 1 and 2. Thus, although it
would result in integration of the minimum of 18 percent required under the ATC, it has contributed
little to liberalization of quota restrictions. The process of integration of items has been very reluctant
and tardy. In effect, commercially meaningful integration has not been done. Canada & Norway, on
the other hand, who are also operating quotas under the ATC have significantly reduced the restraints
under the phase-out programme during the first two stages. On the contrary, the U.S. appears to have
adhered to the strictly 'legal' requirements of the integration process, without taking into account
2
Senate Report 1658, 1958 USCCAN 5165-66 (June 6, 1958).
See http://www.ftc.gov/os/statutes/fpla/outline.html.
4
"Informed consumers are essential to the fair and efficient functioning of a free market economy.
Packages and their labels should enable consumers to obtain accurate information as to the quantity of the
contents and should facilitate value comparisons. Therefore, it is hereby declared to be the policy of the
Congress to assist consumers and manufacturers in reaching these goals in the marketing of consumer goods."
From the Fair Packaging and Labeling Act, 15 U.S.C. at §1451.
5
16 C.F.R. Part 500.7.
3
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commercial considerations. We would like to have a clarification from the U.S. authorities on the
rationale behind the items selected for integration and whether the U.S. authorities are planning to
take steps to make the phase-out programme commercially more meaningful to textile exporting
developing countries.
Answer
At the request of importers for certainty and clarity, the U.S. published its complete integration
schedule in 1995 and fully met its obligations under the WTO Agreement on Textiles and Clothing.
Question: (India #29)
Adverse Conversion factor for export of yarn: The U.S. quota for yarn is indicated in Square Meter
Equivalent (SME) whereas yarn is exported in kilogrammes. U.S. authorities use a standard
conversion factor from kgs to SME for yarn which is reportedly without any scientific basis. This
creates an artificial barrier as quota utilisation is shown to be higher than it should be in such cases.
Can the U.S. delegation indicate how this anomaly is to proposed to be addressed.
Answer
The SME (square meter equivalent) factors in our bilateral agreement with India were developed in
close consultation with our industry and are standard in our textile agreements, and have been notified
and continued under the WTO Agreement on Textiles and Clothing (ATC).
Question: (Indonesia #8)
Paragraph 80 of the Secretariat Report notes that the 48.7 percent of import quotas would be
integrated in January 2005. Indonesia would be interested to know the U.S. policy on the possibility
to provide flexibility in the form of carry forward quota for 2004.
Answer
The U.S. will not allow carryforward to be applied to 2004 limits for WTO Members, because
carryforward is not available in the last year of any of our bilateral agreements, as specified in the
paragraphs which were notified to the WTO Textile Monitoring Body. The U.S. has faithfully
implemented the ATC provisions from its onset in 1995 and has no intention of taking unilateral
action that would violate our commitments to our domestic textile and apparel industry.
Under the ATC, with its provision for accelerated growth rates, cotton and man-made fiber textile
and apparel quotas have more than doubled since 1994. Quotas which had a six percent growth rate
in 1994 now have annual growth rates of more than 11 percent. As a result of the accelerated growth
rates in 2004, the great majority of the 2004 adjusted quotas will be higher than the 2003 adjusted
quotas, even though no carryforward will be available.
ATC growth provisions increase market access. The carryforward provision allows for the utilization
of that increased access in an earlier year.
Question: (Brazil #3)
The United States extends tariff preferences to numerous countries. Many preferences granted on
textile and clothing products, for instance, are subject to content requirements on regional produced
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inputs. Is there any clause in the U.S. tariff preferential schemes that allows to import the inputs, in
case there are not enough regional inputs?
Answer
The African Growth and Opportunity Act (AGOA), the Caribbean Basin Trade Partnership Act
(CBTPA), and the Andean Trade Promotion and Drug Eradication Act (ATPDEA) contain provisions
to address commercial availability of yarns and fabrics. If an interested party believes that a particular
yarn or fabric is not available in commercial quantities in a timely manner in the United States, it can
petition the Committee for the Implementation of Textiles Agreements (CITA) for a review of the
matter. If CITA finds that the questioned yarn or fabric is not available, it will issue a notice to the
public allowing use of the particular product in apparel articles under these programs.
Question: (Brazil #6)
Concerning the ATPDEA, preferential treatment is also extended to yarn or fabrics that cannot be
supplied by the U.S. in commercial quantities in a timely manner. How is it controlled by the U.S.
authorities?
Answer
Petitions for a determination that a particular yarn or fabric is not available from the United States in
commercial quantities in a timely manner are submitted to CITA. CITA published in the Federal
Register procedures it follows in accepting and processing such petitions. CITA seeks public
comments and advice from industry and Congress on each case. If CITA determines that a particular
yarn or fabric is not available, it will issue a notice to the public allowing use of the particular product
in apparel articles under the ATPDEA. CITA maintains a website containing copies of petitions,
public comments, and its determinations for viewing by the public.
Question: (Turkey #2, #IV.3.iii)
ATC will come to an end at the end of this year. The U.S. is committed to abolishing all quantitative
import restrictions in textile and clothing sector by the end of 2004. Regarding the role of textile and
clothing in manufacturing sector, what kind of strategy does the U.S. have for the post-ATC period?
Answer
The entry into force of the ATC was a watershed event for production and trade in textiles and
apparel, as it established an irreversible schedule for the phased elimination of the quota regime that
regulates a significant portion of world trade in the sector. Equally important, it established binding
commitments requiring all WTO Member countries to open their own markets to increased
competition. The ATC is a very important agreement for the United States, and the United States has
taken very seriously its commitment to ensure that the provisions of the ATC, in their entirety, are
fully and faithfully implemented.
The ATC has allowed imports from restrained markets to grow extremely rapidly and attain
significant volumes. In the U.S. market, the increase in imports has led to intense structural
adjustment for the textile and apparel sectors throughout the transition period, as anticipated by the
Agreement. Structural adjustment in the U.S. textile and apparel sector is strikingly evident in data on
employment. Textile employment in 2003, at 440,100 workers, was 37 percent below the 1994 level.
Apparel employment has fallen even more precipitously. Apparel employment in 2003, at 312,700
workers, was 64 percent below the 1994 level. Textile and apparel employment declined 52 percent
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between 1994 and 2003, for a total job loss of 799,700. Textile and apparel employment declined 42
percent between 1994 and 2002, for a total job loss of 697,800.
The U.S. Government places a high priority on measures to ensure a level playing field, creating a
healthy, competitive economic environment for the U.S. textile and apparel industry. The U.S.
Government will continue to focus on ways in which conditions in the textile and apparel industry
may be effectively addressed.
Question: (Hong Kong, China #2)
We note that for various product groups, the average tariff rate under the U.S.' preference schemes are
much lower that the average MFN rates. Economies which are not parties to the U.S.' preferential
tariff schemes would thus be disadvantaged by the relatively high import duties. The impact would be
particularly significant for products such as T&C which are subject to a relatively high tariff rate
(MFN import duties can reach 33 percent, with an average of 10.8 percent for clothing in 2002, and
9.3 percent for textiles) or jewelry wares which have high raw material costs. Would the U.S.
Government consider reducing tariffs in the sectors concerned in the DDA negotiations so as to
provide better market access opportunities to all Members alike?
Answer
The U.S. Government supports significant movement toward the harmonization and/or elimination of
textile and apparel tariffs and elimination of non-tariff barriers. Given the sensitivity of these
products for a large number of WTO members, clearly progress in this area can only be achieved in
the context of broad participation encompassing key players, both developed and developing. This
most likely would be facilitated through a sectoral approach.
Question: (Hong Kong, China #3)
We are pleased to find that the U.S. has eliminated the visa requirement for T&C products integrated
under Stages 2 and 3 of the Agreement on Textiles and Clothing. We believe that the same should
apply to all the remaining products to be integrated in 2005 but would nevertheless wish to have the
confirmation of the U.S. Administration in this respect. We are also interested in knowing whether
additional documentation requirements would be imposed for import of T&C products in the quotafree environment.
Answer
Article 2.17 of the ATC (which addresses administrative arrangements), along with the other
provisions of the ATC, will terminate on January 1, 2005. Thus, Article 2.17 would not justify any
restrictions on trade that are inconsistent with the WTO Agreements, including GATT 1994, after that
date. However, to the extent agreed administrative arrangements are consistent with other obligations
under the WTO Agreements, including GATT 1994, the United States does not believe that the
termination of the ATC requires their termination. Nothing in the ATC requires Members to remove
measures that are consistent with the WTO Agreements.
Question: (Hong Kong, China #4)
We note that effective liberalization of most sensitive T&C products particularly clothing have been
deferred until the very end of the ten-year transition period. Such back-loading will only exacerbate
the adjustment shock of the U.S. industry upon full liberalization of the T&C sector in 2005, sparking
domestic pressure for recourse to alternate forms of protection. We therefore would like to know
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what specific measures have been undertaken by the U.S. authorities to facilitate the integration of its
T&C sector into GATT 1994 on 1 January 2005, in particular, those relating to continuous
autonomous industrial adjustment and increased competition in the U.S. market as provided in Article
1.5 of the ATC.
Answer
The entry into force of the ATC was a watershed event for production and trade in textiles and
apparel, as it established an irreversible schedule for the phased elimination of the quota regime that
regulates a significant portion of world trade in the sector. Equally important, it established binding
commitments requiring all WTO Member countries to open their own markets to increased
competition. The ATC is a very important agreement for the United States, and the United States has
taken very seriously its commitment to ensure that the provisions of the ATC, in their entirety, are
fully and faithfully implemented.
The ATC has allowed imports from restrained markets to grow extremely rapidly and attain
significant volumes. In the U.S. market, the increase in imports has led to intense structural
adjustment for the textile and apparel sectors throughout the transition period, as anticipated by the
Agreement. Structural adjustment in the U.S. textile and apparel sector is strikingly evident in data on
employment. Textile employment in 2003, at 440,100 workers, was 37 percent below the 1994 level.
Apparel employment has fallen even more precipitously. Apparel employment in 2003, at 312,700
workers, was 64 percent below the 1994 level. Textile and apparel employment declined 52 percent
between 1994 and 2003, for a total job loss of 799,700. Textile and apparel employment declined 42
percent between 1994 and 2002, for a total job loss of 697,800.
The U.S. Government places a high priority on measures to ensure a level playing field, creating a
healthy, competitive economic environment for the U.S. textile and apparel industry. The U.S.
Government will continue to focus on ways in which conditions in the textile and apparel industry
may be effectively addressed.
CHAPTER 4: DEVELOPMENTS BY SECTOR
Chapter 4 - BY SECTOR
(1) Agriculture
Question: (Brazil #1)
In document WT/TPR/S/126, Item III (Trade Policies and Practices by Measure), paragraph 46 states
that "The simple average applied MFN tariff, including the ad valorem equivalents (AVEs) of specific
and compound rates, was 5.1 percent in 2002, down from 5.4 percent in 2000. The average applied
tariff for agriculture in 2002 was 9.8 percent down from 10.4 percent in 2002; the average for nonagricultural products was 4.2 percent in 2002, down from 4.5 percent in 2000." In paragraph 50,
however, it is found that "In 2002, some 6.6 percent of all tariff lines bore tariffs exceeding 15
percent, in some cases estimated on AVE basis. These tariffs tend to be concentrated in a few
sensitive sectors, which are often also of particular interest to exporters from developing countries.
For example, tariffs reach ad valorem or ad valorem equivalent rates of 350 percent for tobacco, 164
percent for peanuts...". Since the most protected products in the USA are agricultural, which
constitute the major exports from developing countries, how does the U.S. expect to accomplish its
stated goal of fostering development through trade?
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Answer
The strong U.S. commitment to free trade is reflected in the very statistics cited by the report. The
U.S. has a low overall tariff structure, which fosters trade and development. This commitment to free
trade is also reflected in our agricultural tariffs. The average U.S. tariff on agricultural products is 12
percent, much lower than the worldwide average of 62 percent. Our proposal for the agricultural
negotiations would further slash tariffs for agricultural products, bringing increased opportunity for all
countries to access the U.S. market.
Question: (Brazil #2)
Paragraph 12 of Item IV (Trade Policies by Sector), in WT/TPR/126, expresses that "The six-year
Farm Act (2002-2007) increases reliance on price-dependent support, thus departing from the
objectives of gradually reducing production-distorting support in favor of income supplements
established in the Federal Agriculture Improvement and Reform Act of 1996 (FAIR Act)." How does
the USA intend to make compatible the increased reliance on price-dependent support with American
liberalizing goals for the Doha Round?
Answer
The United States is on record in every forum and on every occasion that we will honor our Uruguay
Round commitment on agriculture. The 2002 Farm Act allows us to meet these commitments, and we
will honor all of them. For the reasons we have explained, the 2002 Farm Act does not increase
support; the USDA net outlays show trade-distorting domestic support trending downward; and our
farm programs are still oriented toward fewer trade-distorting forms of support. Finally, with full
knowledge and understanding of the potential implications for U.S. farm policy, U.S. farmers and
ranchers have expressed their willingness to reform further and liberalize by supporting and
developing with the Administration the U.S. agriculture negotiating proposal, which calls for
elimination of export subsidies, reductions in trade-distorting domestic support and a significant
increase in market access.
Question: (Brazil #3)
The adoption of the Direct Payments (DP) - Paragraphs 24 and 25 of item IV, WT/TPR/S/126 - in the
Farm Bill of 2002, whose principle is similar to those of the 1996 Production Flexibility Contract
Payments (PFC), was aimed to substitute internal support measures that distort trade by those that do
not cause this effect. However, these Direct Payments were adopted with no reduction in the amber
box measures. In this context, irrespective of the fact that "direct payments" are considered to be
"decoupled from production", their final effect continues to be distorting. Why do the payments
accomplished by the PFC, besides the Market Loan Programmes (MLP), were considered "nonspecific" if they were limited to a list of seven products in 1999 (wheat, maize, barley, cotton, oats,
rice, and sorghum)?
Answer
Both the Production Flexibility Contract (PFC) payments, in effect between 1996 - 2002, and the
Direct Payments program, which came into effect during 2002, are green box programs. The basis for
the payment is historical area for traditional program crops (as noted in the last sentence of the
question). Historical oilseed area was added as a program crop for the Direct Payments program. The
programs are consistent with green box criteria because the payments are not tied to current
production or price of any crop, and no production is required to receive a payment. In addition,
farmers with historical base acres can choose not to plant a crop at all. The Market Loss Assistance
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payments for 1998 and 1999 were notified as non-product specific amber box. Even though the actual
payments were fully decoupled from current production (the area basis was identical to the PFC
payments), the U.S. chose to notify the MLA payments as amber because they were intended to offset
the effects of low prices and other marketing losses. But the payments were non-product specific
because they were not tied to the production of a particular crop. Payments under the marketing loan
program (loan deficiency payments and marketing loan gains) have always been notified as productspecific amber box.
Question: (Brazil #4)
The calculation methodology of the Loan Deficiency Payments (LDP) for rice and cotton presents a
difference in relation to the other products (Paragraph 29 of Item IV of WT/TPR/S/126). Besides
that, it takes the principle of "Adjusted World Price (AWP)", which incorporates in the calculation of
the LDP for these two products an alignment for such a differentiation? Can this difference in
methodology be construed as operating as indirect export subsidies?
Answer
The marketing loan program operates for various commodities, and benefits are based on the
difference between the loan rate and a loan repayment rate. The loan repayment rate for rice and
cotton, as noted in the question, is an adjusted world price, as calculated by the Department of
Agriculture. The programs for rice and cotton are conceptually no different from the other eligible
commodities. Benefits are not tied to export of the commodity, and have always been notified as
product-specific amber box.
For details, please see the USDA Farm Bill website:
http://www.usda.gov/farmbill/.
Question: (Brazil #5)
The adoption of the counter-cyclical payments (CCP) by the Farm Bill of 2002 was meant to make
permanent the so-called "emergency payments" made to U.S. farmers during the Asian crisis in 1998,
which brought the fall in international prices of major agricultural products. So, why were the target
prices set at so high values (Table IV.3, page 109, WT/TPR/126)? Can such payments be seen as
reinforcing the effects of the LDPs, aiming to artificially guarantee income to the American
producers, and thus isolating them even more from market signs?
Answer
The target prices were set in legislation and generally reflect levels from previous farm legislation (for
example, the 1990 farm bill). Counter-cyclical payments are decoupled from current production,
unlike LDPs. It is an income safety net program, providing farmers with some income support if
prices fall beneath a certain level. But the amount of counter-cyclical payments is not dependent on
recipients’ current production.
Question: (Brazil #6)
In paragraph 33, page 109, WT/TPR/S/126, it is mentioned that "authorities have noted that the high
levels of government outlays in recent years have been caused by the collapse in world prices". Once
USA is the major cotton exporter and it exports about 40 percent of its production, how do the high
levels of support granted by the American government to producers affect cotton world prices?
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Answer
U.S. Government support to cotton producers is not responsible for the level of world cotton prices.
The structure of U.S. farm programs has been substantially similar since the reforms introduced in the
1996 Farm Act. For example, that Act eliminated traditional deficiency payments, which were linked
to cotton production and set high target prices, and introduced decoupled income support payments
not tied to production of cotton or any other crop. The 2002 Farm Act established new decoupled
income support payments again not tied to production of cotton or any other crop. During the period
since the 1996 Act, cotton prices have swung from 78 cents per pound in marketing year (MY) 1996
to a low of 42 cents in MY 2001 (as measured by the A-index, a commonly-used price indicator).
The A-index in MY 2003, to date, is 71 cents per pound. These wide swings, in the context of two
substantially similar U.S. farm programs, demonstrate that U.S. support payments are not responsible
for the level of world prices.
Question: (Brazil #7)
The Market Loss Payments (MLPs) can be regarded as one of the support programmes mentioned in
paragraph 35, page 110, WT/TPR/S/126. In the notification G/AG/N/USA/43, it is stated that, in
1999, the producers that had received payments through Production Flexibility Contract (PFC) had
also been benefited by payments through Market Loss Payments (MLPs) according to the sum
received through PFC. Since the payments were made directly to the same producers and in the same
ratio, even if through different internal support programmes, why was one as amber box (MLP)?
Since the payments made through the MLP were limited to a list of only seven products in 1999
(wheat, maize, barley, cotton, oats, rice, and sorghum), why was the total agricultural production
considered in the calculation for the "de minimis"?
Answer
The Market Loss Assistance payments for 1998 and 1999 were notified as non-product specific amber
box. Even though the actual payments were fully decoupled from current production (the historical
area basis was identical to the PFC payments), the U.S. chose to notify the MLA payments as amber
because they were intended to offset the effects of low prices and other marketing losses. But the
payments were non-product specific because they were not tied to the production of a particular crop.
Question: (Brazil #8)
Paragraph 36, page 110, WT/TPR/S/126, mentions that Export subsidies were scheduled by the
United States under the WTO Agreement on Agriculture for 13 product groups comprising cereals,
oilseeds, dairy products, and vegetables, and were made subject to distinct reduction commitments
over 1995-00 period. Therefore, it is clear that cotton is not part of this list and, for this reason,
cannot receive any kind of export subsidy. On the other hand, one of the benefits of the "Step 2
programme", which is specifically channeled to cotton, is conditioned to the export of the product. Is
not such practice and indirect export subsidy? What is the understanding of the USA about it?
Answer
A recipient does not have to export cotton in order to receive a payment under the Step 2 program.
Since the payment is not contingent on export of a product, it is not an export subsidy.
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Question: (Brazil #13 & 14)
Section 10816 of the 2002 Farm Act established a mandatory requirement for "country-of-origin"
labeling applicable to beef, lamb, pork, including ground, wild, and farm-raised fish, perishable
agricultural commodities and peanuts at the retail level in force as of September 30, 2004. Even
USDA is against the measure, deemed to be too costly and provide no visible benefit to consumers.
This labeling requirement may lead to protectionist side effects such as encourage "Buy American"
sentiment through allegations that the domestic agricultural products are "better" in terms of intrinsic
qualities and of sanitary and phytosanitary concerns. Such concerns are, obviously, unfounded, since
any plant or animal, live or processed that enters the U.S. does so only after being cleared in the
stringent risk analysis procedures conducted by either the USDA or FDA. Is the U.S. reconsidering
this redundant provision?
Country-of-origin labeling is obviously not an SPS issue. It is not related to the protection of human,
animal or plant life or health. Assuming that it is a TBT issue, can the U.S. explain what is the
legitimate goal the COOL is expected to promote?
Answer
The effects of country of origin labeling (COOL) requirements on consumer behavior cannot be
determined at this time because much depends on how industry implements the regulation. In a
nation of brand conscious consumers, the 2002 Farm Act COOL provision is Congress' response to
consumer stated preferences for country of origin labeling. USDA will be paying close attention to
ensure that the implementation of mandatory COOL regulations will be consistent with U.S. trade
obligations. Currently, the COOL compliance is only voluntary and it is not known when the
mandatory regulations will be fully implemented.
Question: (Argentina #5)
Regarding paragraph 10, don't you think that the increase in payments as described in that paragraph
does nothing more than increase the developing countries' disbelief in the genuine commitment of the
United States to the Doha Declaration? Could you specify the amounts, specific recipients, and
distribution of each of such payments? Doesn't the United States believe that the bound level has
been exceeded?
Answer
The total amount to be paid to farmers through the direct payment and counter-cyclical payment
programs are calculated using data on historical crop yields and acreages. Unlike direct payments,
counter-cyclical payments will be made only if certain crop prices drop below predetermined levels.
Since future prices are unknown, average spending levels for these programs is also unknown. What
is known is that the United States will not exceed its $19.1 billion AMS ceiling as agreed to in the
Uruguay Round Agreement on Agriculture.
In the current agricultural negotiations, the United States is committed to reaching substantial
reductions in trade-distorting support and export subsidies, coupled with substantial increases in
market access. As stated above, the United States is bound by the Uruguay Round agreement to limit
AMS spending to an agreed-upon level. The United States will continue to abide by its Uruguay
Round commitments while continuing to push other countries to liberalize trade.
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Question: (Argentina #6)
Regarding paragraphs 21 and 22, it is noteworthy that failure by the United States to provide
notification (as stipulated in Article 18.2 of the Agreement on Agriculture very greatly damages the
credibility of the multilateral system and the current negotiations.
Answer
The United States is pleased to draw Argentina's attention to our DS: 1 notification
(G/AG/N/USA/51) dated March 11, 2004. The notification contains two years of data for marketing
years 2000 and 2001. Of all countries with large AMS levels, the United States has the most current
notification on file. We note that many other countries are not current with their domestic support
notifications.
Question: (Argentina #7)
Concerning paragraph 40(b), "Export Financing, Insurance, and Guarantees," it is observed that these
provisions are aimed primarily at developing countries (South America) and OECD countries
(Mexico, Korea), all of which have easy access to international lines of credit. They are not geared
towards the LDCs, which are the countries that need support in order to be able to secure financing.
Is this because the aim is to displace the competition?
Answer
U.S. programs are designed to work as commercial programs in countries with a relatively established
financial infrastructure but require a guarantee to facilitate the sale. LDCs typically do not meet these
criteria. In order to help improve access to these countries the United States has allowed many to
participate via a third country, whereby the LDC importer uses an approved bank in another ("third")
country to finance the purchase of agricultural commodities. In FY 02, $1.3 billion was made
available to LDCs and NFIDCs through the GSM-102, GSM-103 and supplier credit guarantee
program.
Question: (Canada #6)
Canada notes that the FY 2004 Consolidated Appropriations bill (H.R. 2673), recently passed by the
House of Representatives and still before the Senate, delays funding for the implementation of
mandatory COOL until 2006 for all products, except fish and seafood (for which implementation is
still slated to occur in 2004). Canada welcomes the implementation delay as it will allow the U.S.
Government and stakeholders alike more time to study effective alternatives to mandatory COOL.
However, could the U.S. clarify why fish and seafood products are being singled out for separate
treatment and are not included in the implementation delay?
Answer
Programmatically, fish and seafood labelling are separate from traditional agricultural commodities
and are therefore handled differently.
Question: (Canada #10)
Reference is made to U.S. duty drawback systems, but it should be noted that at least one important
such system has been established to encourage the refining of foreign sugar in the U.S., as well as the
manufacture of sugar-containing products destined for export, based on the importation of foreign
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sugar. Please explain how the U.S. sugar drawback system affects the export of sugar and sugarcontaining products refined or produced in the U.S. from foreign sugar.
Answer
The United States Department of Agriculture operates a Sugar Containing Products and a Refined
Sugar Re-export Program. Participants in the Sugar-Containing Products Re-Export Program may
buy imported sugar from any of the refiner participants or their agents for use in products that will be
exported. The Refined Sugar Re-Export Program establishes a license against which a refiner can:
export domestically produced refined sugar and later import raw sugar; import raw sugar for refining
and distribution in the domestic market and later export refined sugar; or import raw sugar, refine it
and export it. Further detail about these programs can be found on the Foreign Agricultural Service
website at: http://www.fas.usda.gov/itp//imports/ussugar.html.
Question: (Canada #12)
These paragraphs refer to Trade Adjustment Assistance (TAA), but fail to note that a new TAA
program for agricultural producers was introduced when the TAA was amended in 2002. Please
supplement the Secretariat's description of the TAA with an elaboration of how TAA is being
implemented in support of agricultural producers. Please include in your response how much money
is allocated to TAA for agriculture, and whether it is expected that all of the funds appropriated for
2003 will be spent.
Answer
The Trade Act of 2002 contains a provision for Trade Adjustment Assistance for Farmers, with an
appropriation of not more than $90 million for each fiscal year 2003 through 2007 to be administered
by the U.S. Department of Agriculture. The Secretary of Agriculture delegated authority for this
program to the Administrator of the Foreign Agricultural Service.
The regulation to implement Trade Adjustment Assistance for Farmers was published in the Federal
Register on August 20, 2003 (7 CFR 1580). No cash benefits were expended under this program in
FY 2003.
Question: (Canada #15)
Paragraph 22 refers to the delays in the U.S. notifications to the Agriculture Committee of the level of
its domestic support for the years following 1999.
Comment: Canada is concerned that the extensive delay in U.S. notifications of "new" or modified
domestic support programs for agriculture, enacted in May 2002 and in effect since then, mean that
the WTO notification and surveillance provisions related to domestic support are not being respected.
Answer
The United States is pleased to draw Canada's attention to our DS: 1 notification (G/AG/N/USA/51)
dated March 11, 2004. The notification contains two years of data for marketing years 2000 and
2001. Of all countries with large AMS levels, the United States has the most current notification on
file. We note that many other countries are not current with their domestic support notifications.
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The United States domestic support notification G/AG/N/USA/51 includes support up to, but not
including programs in 2002 Farm Act, which will be included in the next domestic support
notification. Most programs of the 2002 Farm act were applicable for the 2003 commodity year.
Question: (Canada #25)
This paragraph refers to legislative changes in Trade Adjustment Assistance (TAA) and argues that
TAA is an essential component to maintaining support for trade liberalization in the U.S. However, it
fails to note that TAA is now available to the agricultural sector. Please comment on how much
money has been allocated to agricultural TAA, and how much it expects will be spent and on which
commodities. Please also comment on the extent to which, so far, TAA has lessened protectionist
pressures in U.S. agriculture.
Answer
The Trade Act of 2002 contains a provision for Trade Adjustment Assistance for Farmers, with an
appropriation of not more than $90 million for each fiscal year 2003 through 2007 to be administered
by the U.S. Department of Agriculture. The Secretary of Agriculture delegated authority for this
program to the Administrator of the Foreign Agricultural Service.
The regulation to implement Trade Adjustment Assistance for Farmers was published in the Federal
Register on August 20, 2003 (7 CFR 1580). No cash benefits were expended under this program in
FY2003.
TAA announcements, including decisions regarding benefits, are posted on the TAA Website. As of
early January 2004, petitions for TAA benefits have been approved for producers of wild blueberries,
salmon, shrimp, and catfish. The FY2004 deadline for petitions is January 31, 2004, and no estimate
of program outlays for FY2004 will be available until later in the year after all petitions and producer
applications have been processed and reviewed.
Question: (China #Add 1)
How does the U.S. delegation explain the difference of its positions with regard to the negotiations on
agriculture as reflected in the EU-U.S. joint proposal, which is considered by most WTO Members as
a big step backward and discontinuation of leadership in comparison with its original position as
contained in its own proposal submitted in the middle of 2002?
Answer
The suggestion that U.S. policy toward agricultural reform in the WTO has been inconsistent is
simply not the case. We have been clear from the outset of the DDA that agricultural reform is to us
the lynchpin of the negotiations. The U.S. negotiating proposal on agriculture calls for fundamental
reform in all three pillars. This proposal reflects in depth consultations with our Congress and
agricultural community. Last August we were called upon by many WTO Members to work with the
EU to bridge the substantial differences in our positions. The result was not put before WTO
Members as a take it or leave it proposition but rather as a framework on which to build. While WTO
Members raised concerns with the joint text, it nevertheless stimulated engagement. The United
States has had, and will continue to have, a high level of ambition for the DDA negotiations on
agriculture on all three pillars.
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Question: (Mexico #I-4)
In the "technical regulations" section, it is indicated that such regulations may be issued by Congress.
Mexico wants to know, in this regard, if a technical regulation may be issued by Congress without
regard for the regulatory analyses conducted and the international commitments of the United States.
We are asking this question in light of the fact that the country-of-origin labelling regulations
provided for in the Farm Bill have been repeatedly described as excessive and difficult to comply
with, both by U.S. producers and by exporters.
Answer
The effects of country of origin labelling (COOL) requirements on consumer behaviour cannot be
determined at this time because much depends on how industry implements the regulation. In a
nation of brand conscious consumers, the 2002 Farm Act COOL provision is Congress' response to
consumer stated preferences for country of origin labelling. USDA will be paying close attention to
ensure that the implementation of mandatory COOL regulations will be consistent with U.S. trade
obligations. Currently, the COOL compliance is only voluntary and it is not known when the
mandatory regulations will be fully implemented.
Question: (Mexico II-H.1)
(h)
Mexico would like to obtain additional information from the United States on what is termed
"marketing orders." In this regard, Mexico requests the U.S. to:
h.1
Indicate the legal framework governing the adoption of marketing orders;
Answer
Marketing agreements and orders are legal instruments authorized by the Agricultural Marketing
Agreement Act of 1937 and in subsequent amendments. The Secretary of Agriculture is vested with
the power to exercise the use of these instruments to regulate the marketing of eligible commodities -fruits, vegetables, specialty crops, and milk -- in certain clearly specified ways.
Question: (Mexico II-H.2)
h.2
Describe the legal effects resulting from the adoption of marketing orders;
Answer
Marketing orders are binding on all individuals and businesses who are classified as "handlers" in the
geographic area covered by the order. Marketing orders are distinguished from marketing agreements,
which are binding only on handlers who are signatories of the agreements. The definition of handler
and handling depends on the particular program. As defined in most agreements and orders, a handler
is anyone who receives the commodity from producers, grades and packs it, transports, or places the
commodity in commercial channels. Handlers must comply with the grade, size, quality, volume, or
other requirements established under the program.
Question: (Mexico II-H.3)
h.3
Confirm that the issuance of marketing orders is regulated and allowed under the TBT and
SPS Agreements or, if not, explain why this is not the case;
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Answer
The issuance of marketing orders is not linked to food safety criteria, and as such, the SPS Agreement
would not apply to issuance of such orders. The rules under the TBT agreement may apply in certain
situations. It is the responsibility of the federal government to ensure that marketing orders are issued
in a WTO-consistent manner.
Question: (Mexico II-H.4)
h.4
Indicate how one can participate in the drafting of marketing orders;
Answer
All marketing orders are initiated by producers. Please refer to the following website for more
information on marketing orders: www.ams.usda.gov/fv/moabsteps.html.
Question: (Mexico II-H.5)
Explain the process for evaluating product-conformity with the corresponding marketing orders.
Answer
The U.S. believes that these regulations fully comply with World Trade Organization requirements.
The grade, size, quality and maturity requirements specify minimums only, do not limit the volumes
of such commodities which may be imported, do not apply a tariff or quota to such imports, and are in
effect only during the same periods of time as domestic production is regulated. These requirements
are limited to grade, size, quality and maturity. Domestic production is often required to meet
additional requirements related to pack and container, container marking, volume controls, and
assessments to fund administrative costs for marketing order operations.
Question: (Mexico II-M)
(m)
Paragraph 134 indicates that the United States has not notified the WTO of any technical
regulations or sanitary and phytosanitary measures. In this regard, Mexico would like to know the
reasons why the United States has not issued such notifications and whether it is planning to do so in
the future.
Answer
Mexico is incorrect. Of all WTO members, the United States has made the most SPS notifications.
The United States systematically notifies to the WTO all proposed changes in domestic sanitary and
phytosanitary measures. It has made 760 WTO SPS notifications from January 1995 to October
2003; about one third of these since 2001.
Question: (Brazil #18)
Regarding GMOs and the Biotechnology Regulatory Services (BRS), it is stated (paragraph 151, page
66, WT/TPR/S/126) that "The new programme focuses on regulation of biotechnology, risk
assessments, and the granting of permissions. Among other responsibilities, BRS works with foreign
governments to harmonize biotechnology standards." With which countries had the BRS worked so
far to harmonize biotechnology standards? What has been achieved in this work?
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Answer
APHIS/BRS participates in efforts to harmonize regulatory and risk assessment procedures related to
agricultural biotechnology in both bilateral and multilateral discussions, and in international
organizations such as the International Plant Protection Convention (IPPC) and Cartagena Protocol on
Biosafety. BRS is participating in the development of a regional standard for environmental release
of living modified organisms (LMOs) under the North American Plant Protection Organization
(NAPPO), and has coordinated with COSAVE in providing input for development of an LMO
standard under the IPPC. BRS regularly meets with officials from other countries, including Brazil,
to provide information about the U.S. regulatory process. In addition, APHIS experts have provided
biotechnology risk assessment training for regulatory officials from a number of countries including
the Philippines, China, and in the APEC forum. BRS also shares its agricultural biotechnology
regulatory experience with foreign governments upon request.
More specifically, BRS has been working closely with the Canadian Government to coordinate
regulatory information and to develop environmental risk assessment criteria. Canada and the United
States have enjoyed a long history of cooperation in the area of agricultural biotechnology, both in
bilateral and in international fora. In simultaneous reviews of transgenic plants prior to their
commercialization and during the recent bilateral discussions, the CFIA, Health Canada, and APHIS
have discussed the types of data that each office reviews before making a regulatory decision. The
two Governments conduct ongoing bilateral discussions to compare and harmonize where possible,
the molecular genetic characterization components of the regulatory review process for transgenic
plants. Argentina and Mexico have participated in these discussions as well.
The results of these meetings, and other activities, may lead to mutual acceptance of assessments in
the future. In the near term, the continued exchange of information between USDA/APHIS and
regulatory agencies in other countries that are responsible for oversight of biotechnology, further
enhances the understanding of regulatory systems and requirements, and should help to expedite
review processes and safe adoption and use of products of agricultural biotechnology.
Question: (China #69)
The Chinese government made comments in a serious manner on the "Registration of Food Facilities"
(G/SPS/N/USA/691), "Prior Notice of Imported Food" (G/SPS/N/USA/690), the "Establishment and
Maintenance of Records" (G/SPS/N/USA/703) and the "Administrative Detention of Food for Human
or Animal Consumption Under Public Health Security and Bioterrorism Preparedness and Response
Act (Draft0" (G/SPS/N/USA/704) notified by FDA, provided with the U.S. comment before the final
date and requested the U.S. to provide answers in written form and clarify some related questions.
However, so far China has not received any formal reply, clarification and explanation from the U.S.
Does the U.S. plan to respond to the comments made by China? If so, when?
Answer
Under the Administrative Procedure Act, U.S. agencies are required to respond to significant and
relevant comments from all parties that were submitted within the comment period. The comments
are not reviewed and answered individually since many interested parties ask similar questions or
forward similar concerns, but each issue raised is analyzed and responded to within the body of the
final regulation. Thus, any timely comments submitted by any stakeholder are addressed in the
preambles to the final rules.
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Question: (Colombia #1)
Paragraph 128 of the Secretariat's report states that in order to meet the Constitutional requirements of
due process, most States have enacted statutes containing transparency procedures. For example,
most States have enacted administrative procedure acts whose procedures are similar to those of the
federal APA. The majority of States have also enacted statutes that provide for public access to As
regards Technical Regulations applied to products, what progress has been made in standardizing
requirements at the state and federal level?
Answer
Title IV of the Trade Agreements Act of 1979 (Public Law 96-39), as amended by the Uruguay
Round Agreements Act (Public Law 103-465), prohibits U.S. agencies from employing standards,
technical regulations or conformity assessment procedures as unnecessary obstacles to trade. This
legislation includes the Administration's commitment to promote state agencies' compliance with U.S.
obligations under the WTO through reasonable measures including through state-federal consultation
and cooperation. Should specific questions regarding the WTO consistency of state or local
regulations or procedures be brought to our attention, USTR would engage in consultations with
interested state authorities to ascertain whether there is in fact a compliance issue and, if so, how best
to proceed.
Question: (Colombia I-C.5)
Paragraph 142 of the report explains that APHIS has regulatory responsibility to safeguard U.S.
animal and plant resources from exotic pests and diseases. In the case of risk analysis specifically,
where there are delays in the approval process, have measures been taken to expedite the process?
Answer
USDA has substantially increased staffing to perform and review risk assessments over the past few
years.
Question: (Colombia III-A.1)
Has the United States defined any parameters for making headway in its agricultural policy, both in
terms of access and domestic aid, and export subsidies?
Answer
In January, United States Trade Representative Zoellick has sent a letter to your trade minister
suggesting options for negotiations. We look forward to engaging in ambitious multilateral trade
negotiations in 2004.
Question: (Colombia III-A.2)
What is planned for tariff quotas on various types of products, including broomcorn brooms
(HS 9603.10), tuna, and agricultural products? High out-of-quota tariffs on agricultural products do
not allow for exports from developing countries in important sectors such as the sugar industry.
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Answer
The United States takes note of Colombia's comment and acknowledges that the current U.S. tariff
structure reflects some domestic sensitivities. We note that this is true for many of our WTO partners
as well. We also point out that the average U.S. tariff on either agricultural or non-agricultural
products is quite low (the average bound U.S. tariff on non-agricultural products is 3.2 percent and on
agricultural products is approximately 12 percent) compared to those of many of our WTO partners.
Finally, we invite our WTO partners, including Colombia, to advance free trade and complete the
tariff-cutting work begun more than 50 years ago with the creation of the GATT by working towards
an ambitious market access outcome in the DDA. As the U.S. agriculture and NAMA proposals
tabled in 2002 indicate, the United States is willing to move forward with tariff reduction or
elimination as long as our WTO partners are willing to do the same.
Question: (Chile #19)
Paragraph 12 indicates that the Farm Act does not include a budget ceiling, although there are a
number of mechanisms that impose limits on spending. One of such measures is the "circuit breaker"
clause under which domestic supports would not exceed WTO limits. How are the domestic supports
reviewed under this clause? Has it been necessary to invoke this clause during this period?
Answer
The United States Department of Agriculture continually monitors actual spending in each of its
programs. If actual spending levels approach commitment levels, the Secretary of Agriculture is
notified, and further spending is closely watched in case the "circuit breaker" provision of the 2002
Farm Act, which stops spending to ensure AMS commitment levels are not exceeded, needs to be
invoked. This provision has not been used.
Question: (Chile #20)
With respect to the agricultural notifications that must be made to the WTO, for what reason were
support programs for the period 1999-2000 not notified? Does the failure to provide notification
affect the monitoring system of the "circuit-breaker" clause?
Answer
The United States is pleased to draw Chile’s attention to our new DS: 1 notification
(G/AG/N/USA/51) dated March 17, 2004. We will submit the notifications for programs under the
2002 Farm Act for which exemption will be claimed as soon as possible. The United States remains
committed to the notification process and will work to fulfil all its WTO obligations. No, a lack of
notification does not affect the monitoring system of the "circuit-breaker" clause. The USDA
continually monitors spending for each of its programs. If actual spending levels approach
commitment levels, the Secretary of Agriculture is notified, and further spending is watch in case the
provision of the 2002 Farm Act, which stops spending to ensure AMS commitment levels are not
exceeded, needs to be invoked. This provision has not been used.
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Question: (New Zealand #1)
What is the U.S. justification for maintaining high tariff protection in sectors such as agricultural food
products? What program does the U.S. have for the reduction and eventual elimination of such
tariffs? When does the U.S. intend to reduce or eliminate tariff peaks?
Answer
The U.S. tariff rates for agricultural products are low, particularly compared to most WTO members.
The average rate for food products coming in to the United States is 12 percent, not counting the
many products that benefit from duty-free treatment under the GSP. To address the problems of high
agricultural tariffs worldwide, the United States has submitted a very ambitious and aggressive
proposal for reducing tariffs in the WTO negotiations. In addition, the United States has proposed the
elimination of all tariffs by a date certain. The United States is fully committed to further reform in
world agricultural trade.
Question: (New Zealand #2)
How does the United States justify the long-standing delay in resolving New Zealand's request for
access to the United States for live honeybee and honeybee semen? In particular when, in view of
New Zealand's honey bee health (New Zealand has superior honey bee status than Australia, Burma,
France, Great Britain, and Sweden) and there is no specific scientific basis for further denying such
access on SPS grounds? When will USDA publish the Proposed Rule and associated Risk
Assessment for New Zealand honeybees?
Answer
Inspection and quarantine standards are developed through analysis of the pest risk associated with
the imported commodity in accordance with international standards. Time requirements for
inspection at the port-of-entry are based on a variety of factors including clearance of documentation
through U.S. Customs and available time for agricultural inspection. Every effort is made to expedite
these risk assessments.
Please refer to the APHIS website: http://www.aphis.usda.gov/ppq/pra/ and the U.S. Embassy
website: www.usembassy.org.nz/ for more information on the United States risk assessment process.
The final rule on New Zealand honeybees is currently under review in the Office of General Counsel.
The most recent risk assessment was published in August 2002 and can be found at can be found in
the following location: http://www.aphis.usda.gov/ppq/pra/honeybees/nzealandbee_pra.pdf
Question: (New Zealand #5)
To what extent does USDA expect food aid donations to continue and to what volume? What has
been undertaken since the last U.S. Trade Policy Review to minimize the potential disruptions on
trade caused by food aid? Is the USDA notifying these donations through the CSSD mechanism of
the FAO?
Answer
The United States is currently planning to donate 3.5 - 4.0 million metric tons of food aid in U.S.
fiscal year 2004 (Oct. 1, 2003 - Sept. 30, 2004). This is a decrease from the fiscal year 2003
donations of approximately 4.5 million metric tons. This fiscal year 2004 tonnage is only an estimate,
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however, and may change during the fiscal year depending on whether or not any emergency food aid
needs arise.
The United States adheres to the "Principles of Surplus Disposal and Consultative Obligations" as laid
out by the Consultative Subcommittee on Surplus Disposal (CSSD). The primary discipline under the
CSSD is the usual marketing requirement (UMR). The UMR is an average of the preceding five
years of commercial imports for the particular recipient country and commodity in question. The
maximum level of food aid to avoid commercial disruption is the difference between the country's
consumption needs and the UMR plus domestic supplies (production and stocks). The United States
uses the UMR as a tool to determine whether food aid will displace normal commercial imports or
adversely affect domestic production. The United States notifies its food aid donations through the
CSSD. We are currently up-to-date with the required notifications.
Question: (China #6)
Could the U.S. Delegation please explain the reason why the notification obligations were not
implemented? Please inform us of the plan on the earliest implementation of these obligations.
Answer
The United States is pleased to draw China's attention to our DS: 1 notification (G/AG/N/USA/51)
dated March 11, 2004. The notification contains two years of data for marketing years 2000 and
2001. Of all countries with large AMS levels, the United States has the most current notification on
file. We note that many WTO Members are not current with their domestic support notifications.
The U.S. domestic support notification G/AG/N/USA/51 includes support up to, but not including
programs in 2002 Farm Act, which will be included in the next domestic support notification. Most
programs of the 2002 Farm act were applicable for the 2003 commodity year.
The United States is in the process of preparing Domestic Support notifications to the Committee on
Agriculture for programs under the 2002 Farm Bill for which exemption will be claimed and will
submit these notifications as soon as possible. The United States remains committed to the
notification process and will work to fulfil all its WTO obligations.
Question: (China #16 & #17)
Could the U.S. explain the consistency of this measure (peanut TRQ) with WTO principle of national
treatment?
Does the U.S. intend to modify the regime for peanut imports and enhance its transparency in
accordance with the WTO rules?
Answer
The U.S. peanut import tariff rate quota (TRQ) was implemented following the Uruguay Round. The
TRQ set a maximum quantity of peanuts permitted into the U.S. each year at a reduced tariff rate of
9.35 cents/kg (6.6 cents/kg for shelled peanuts). The total quantity permitted under the TRQ
provision is 52,906 MT (shelled weight) and allocated between Argentina (43,901 mt) and other
(9,005 MT). These amounts have remained unchanged since 2000. Additional provisions under bilateral free trade agreements (FTA) allow for peanut imports at zero duty for select countries (Mexico,
Israel, Chile). Duty rates and TRQ limits are published in the Harmonized Tariff Schedule of the
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United States. Provisions of the TRQ are provided in note 2 to the Chapter 12 duty rates and in
general note 15 to the tariff schedule concerning bi-lateral free trade agreements.
The peanut TRQ was developed and set during WTO negotiations. There does not appear to be a
connection between the operation and administration of the TRQ and national treatment obligations.
The TRQ was designed to provide access for foreign suppliers to the U.S. market, replacing previous
market access provisions that effectively barred access for foreign peanuts into the U.S. market. All
importers are given equal access into the U.S. market within their respective quota allotments.
Question: (China #42)
The burdensome SPS requirements of the U.S. have always been a focus of complaints and concerns
of Members. During previous review, the U.S. government indicated that the Federal Register was in
the process of soliciting public comments and seeking measures to improve the SPS requirements that
had impeded normal trade.
Please provide information on what measures the U.S. has taken in this respect since then.
Answer
The U.S. Administrative Procedures Act requires the publication of proposed rules and comment
periods that conform to SPS obligations.
See Part I, Chapter 5, paragraph 553 at
www.fda.gov/opacom/laws/ adminpro.htm. Through this public rulemaking process, a foreign
country has an opportunity to provide written comments to a U.S. regulatory agency before
regulations are implemented. All significant new SPS measures that may impact trade are notified to
the WTO SPS Committee, which also provides a foreign country with an avenue for comments.
Question: (China #43, #44, and #45)
What domestic legislation prevents the U.S. from doing so? We would appreciate it if the U.S. could
provide us the full text of the relevant legislation.
How would the U.S. justify the situation of a high percentage of inconsistency in terms of comment
period provided by the U.S. for the SPS notifications, for example 57.3 percent of the U.S. SPS
notifications were less than or equal to 30 days, 92.3 percent less than 60 days for the year 2002?
What measures will the U.S. take in order to abide by the recommendations of the SPS committee and
the TBT Committee on the no less than 60 day comment period?
Answer
At any time any contracting party finds the comment period insufficient in length, they are
encouraged to contact the WTO inquiry point.
Question: (China #46 & 47)
Is it the consideration of the U.S. behind this legislation that consumers would more likely choose
products originating in the U.S. when they are labeled with the country of origin? If not, what is the
consideration behind the measure?
Since imported meat products have already undergone relevant inspection and quarantine, how does
the U.S. consider the impact of this practice on equitable competition between foreign and U.S.
products?
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Answer
The effects of country of origin labeling (COOL) requirements on consumer behavior cannot be
determined at this time because much depends on how industry implements the regulation. In a
nation of brand conscious consumers, the 2002 Farm Act COOL provision is Congress' response to
consumer stated preferences for country of origin labeling. USDA will be paying close attention to
ensure that the implementation of mandatory COOL regulations will be consistent with U.S. trade
obligations. Currently, the COOL compliance is only voluntary and it is not known when the
mandatory regulations will be fully implemented.
Question: (China #48)
What are the inspection and quarantine standards adopted by the U.S. for Asian pears and apples from
China? Are such standards different from international quarantine standards?
Answer
Inspection and quarantine standards are developed through analysis of the pest risk associated with
the imported commodity in accordance with international standards.
Question: (China #49)
Is there a time limit for inspection and quarantine of imported goods in the U.S.? Has such time limit
been respected in the inspections of Asian Pears and apples from China?
Answer
Time requirements for inspection at the port-of-entry are based on a variety of factors including
clearance of documentation through U.S. Customs and available time for agricultural inspection.
Every effort is made to expedite perishable commodities. All imported fruit is subject to some level
of inspection. In the event that pests are found on shipments of a specific commodity, the shipment in
question may be subject to quarantine and additional scrutiny is given to subsequent shipments.
China-origin apples have never been authorized to be imported into the United States. Recent issues
involving China-origin Asian pears centered on problems in retail fruit markets, rather than at the port
of entry.
Question: (China #50)
Could the U.S. please clarify the scientific justification in terms of SPS for refusing the importance of
Chinese bergamot pears?
Answer
The U.S. is not familiar with a market access request for China-origin bergamot pears. However, we
are familiar with a market access request for fragrant pears. Are fragrant pears and bergamot pears
the same commodity?
The proposed rule to authorize importation of China-origin fragrant pears was published for public
comment during the summer of 2003. Public comments are currently being reviewed and addressed
in preparation for publication of a final rule.
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Question: (China #51)
Why did the U.S. refuse to conduct the pest risk analysis?
Answer
Again, the U.S. is not familiar with a market access request for China-origin bergamot pears. If this is
the same commodity as fragrant pears a pest risk analysis was conducted.
Question: (China #52)
Could the U.S. explain the necessity of these practices and their consistency with the rule of
harmonization and the principle of least trade restrictiveness contained in the WTO Agreement on
TBT and SPS?
Answer
These inspections are performed upon arrival to ensure that any peanuts imported into the United
States meet our standards, as applied to both imported and domestic product.
Question: (China #80)
Why has the U.S. not yet notified WTO of this 2002 Farm Bill?
Answer
The United States is pleased to draw China's attention to our DS: 1 notification (G/AG/N/USA/51)
dated March 11, 2004. The notification contains two years of data for marketing years 2000 and
2001. Of all countries with large AMS levels, the United States has the most current notification on
file. We note that many other WTO Members are not current with their domestic support
notifications.
The United States domestic support notification G/AG/N/USA/51 includes support up to, but not
including programs in 2002 Farm Act, which will be included in the next domestic support
notification. Most programs of the 2002 Farm act were applicable for the 2003 commodity year.
Question: (China #81)
What is the annual average amount of direct payment and counter-cyclical payments provided
according to the new Farm Bill?
Answer
The total amount to be paid to farmers through the direct payment and counter-cyclical payment
programs are calculated using data on historical crop yields and acreages. Unlike direct payments,
counter-cyclical payments will be made only if certain crop prices drop below predetermined levels.
Since future prices are unknown, average spending levels for these programs is also unknown. What
is known is that the United States will not exceed its $19.1 billion AMS ceiling as agreed to in the
Uruguay Round Agreement on Agriculture.
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Question: (China #82)
Please clarify the impact of such Bill on the prospect of the on-going multilateral agricultural
negotiation.
Answer
In the current agricultural negotiations, the United States is committed to reaching substantial
reductions in trade-distorting support and export subsidies, coupled with substantial increases in
market access. As stated above, the United States is bound by the Uruguay Round agreement to limit
AMS spending to an agreed-upon level.
Question: (China #83)
Is such a bill contradictory to the stated attitude of the U.S.on the agricultural negotiations in the
"Doha Round" as appeared in the Report by the U.S. Government?
Answer
In the current agricultural negotiations, the United States is committed to reaching substantial
reductions in trade-distorting support and export subsidies, coupled with substantial increases in
market access. As stated above, the United States is bound by the Uruguay Round agreement to limit
AMS spending to an agreed-upon level. The United States will continue to abide by its Uruguay
Round commitments while continuing to push for trade liberalization.
Question: (China #84)
The increase of subsidies to agriculture by the U.S. is contrary to the negotiation objective of
"reductions of, with a view to phasing out, all forms of export subsidies" as set out in Para. 13 of the
Doha Ministerial Declaration. What is the U.S. opinion on this issue?
Answer
The United States remains committed to the Doha objective of reducing with a view to phasing out
export subsidies. The 2002 Farm Act does not authorize increased use of export subsidies.
Question: (China #85)
Does the U.S. plan to make an amendment to this bill so as to reduce the subsidies to agriculture
substantially?
Answer
The 2002 Farm Act will be in place through 2007. If the Doha round of negotiations finishes on
schedule, reductions commitments will begin at the same time as the negotiations for the new farm
bill. Therefore no amendments to the current bill are planned.
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Question: (China #86)
When will the U.S. notify its domestic support data since 2000, including data of "Amber Box" and
de minimis?
Answer
The Farm Security and Rural Investment Act of 2002 (i.e. the 2002 Farm Act) itself is not a program
to be notified, but instead encompasses a wide variety of agricultural programs. The 2002 Farm Act
extends many ongoing programs, thus only a few notifications of new programs are required. As
regulations for new programs are put into place and the new programs get up and running, the United
States will submit the required DS-2 notifications to the WTO.
Question: (China #87)
What is the U.S. intention to expand offset loan price for its agricultural products and include more
products under its loan coverage? Is the increase of loan by the U.S. contrary to its initiative of
reducing trade-distorting domestic support to agricultural products at the multilateral since such loan
falls into the Amber Box?
Answer
While the 2002 Farm Act continues past programs such as loan deficiency payments to support
agricultural prices and farm incomes, we expect to fully meet our obligations under the Uruguay
Round Agreement on Agriculture. The United States will not exceed our WTO limits. Again, the
United States remains committed to an ambitious outcome of reducing global trade distortions in
agriculture through the WTO. We strongly encourage other countries to move forward in the
negotiations to achieve substantial reform.
Question: (China #88)
How does the U.S. determine the target price of the counter-cyclical subsidy?
Answer
The target prices for determining the amount of counter-cyclical payments for base acreages are set
out in the 2002 Farm Act. National average prices will be used to determine final counter-cyclical
payment rates. USDA's National Agricultural Statistics Service (NASS) determines the annual
average prices for the marketing year. NASS collects monthly data on prices paid to farmers.
Question: (EU #1)
What are the reasons for the continuing lack of U.S. recognition of the principle of regionalization, as
incorporated in the WTO SPS Agreement, in cases of the outbreak of an animal disease?
Answer
USDA's Animal and Plant Health Inspection Service (APHIS) has demonstrated recognition of the
principle of regionalization in the case of animal disease outbreaks. For example, on April 7, 2003,
APHIS published a final rule recognizing Austria, Belgium, Greece, Portugal, the Netherlands, and
certain regions of Germany and Italy as free of Classical Swine Fever (CSF). France, Spain, and
Luxembourg had been included in the original proposed rule (published in June 1999), but they were
not included in the final rule because of subsequent CSF outbreaks. On November 24, 2003, APHIS
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published in the Federal Register a completed risk analysis for CSF covering France and Spain. After
the public comment period has closed in late January 2004 and depending on the nature of the
comments, APHIS would then proceed to publish a final rule to declare these two Member States free
of CSF. On October 16, 2003, APHIS published a final rule recognizing the CSF-free status of East
Anglia. APHIS is also working on a draft novel rule that contains a new approach to the EU, which
will involve recognition of all 15 current EU member states as low risk for (not free of) CSF to allow
for more flexible response options in the case of future outbreaks.
Question: (EU #7)
The EC notes that U.S. continues to use food aid and export credits to reduce government stocks of
agricultural commodities. Is the U.S. ready to consider helping the DDA-process move forward by
accepting to classify as export subsidies all measures used for subsidizing exports?
Answer
The U.S. averages approximately $3.4 billion in credit guarantees annually. Export credits and export
subsidies are not interchangeable as they have different policy objectives and different impacts on
global markets. Direct export subsidies are clearly among the most trade-distorting measures in
agricultural trade, designed to lower prices and displace commercial competition. On the other hand,
export credit guarantee programs have a minimal impact on trade and are used to assist importing
countries in financing commodity imports. In recognition of the importance of the elimination of
export subsidies, the USG is willing to support a parallel reduction of any trade-distorting component
of export credits and guarantees. Once established, disciplines will ensure that export credit and
guarantee programs are not applied so as to circumvent export subsidy commitments while allowing
developing countries to access affordable credit to address food security and economic development
needs.
Almost all of the food aid provided by the United States is purchased from the open market and all
food aid is provided in response to an identified need. The United States does not agree that food aid
is an export subsidy. However, in the WTO agricultural negotiations, the United States is working
with other Members on multilateral disciplines for food aid programs with the goal of continuing
necessary, humanitarian assistance.
Question: (EU #8)
The main agriculture and industry lobbies in the U.S. have been arguing for some years that the
strength of the dollar was hurting their export competitiveness. At the same time, the position of the
agriculture groups towards Congress and the U.S government has been to "max out" the trade
distorting agriculture support allowed to the U.S. under the WTO. Now that the U.S. government and
Federal Reserve are no longer pursuing a strong dollar, can the world look forward to a substantial
reduction in U.S. domestic subsidies as well?
Answer
The United States is well within its WTO commitments in its support to farmers. However, in the
negotiations of the DDA, we have called for substantial reductions in trade-distorting domestic
support and have made consecutive proposals to achieve that goal, including the U.S./EU framework
mentioned in the previous question. We look forward to working with the EU and other WTO
members towards a bold, ambitious, comprehensive package of reforms for global agriculture.
Question: (India #2)
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Sugar Tariffs: The sugar industry is protected by high tariffs (to the extent of 32.8 percent MFN
tariffs on raw sugar and 42.5 percent on refined sugar). These tariffs, in addition to providing
protection to domestic sugar producers, have also increased the use of alternative sweeteners such as
high fructose corn syrup, eroding the natural sugar market in the U.S. In the long run, the high tariffs
will lead to a permanent change in the sugar demand patterns in the U.S. Please provide the U.S.
view on this point and on the unintended effects of high tariffs.
Answer
The U.S. government closely monitors all commodity markets and is always alert to changes in these
markets. U.S. policy is created through numerous means and with extensive consultation with all
stakeholders in an effort to create and administer programs that serve the interest of the American
people. Further information about the U.S. sugar program can be found at several United States
Department
of
Agriculture
websitesh,
ttp://www.fas.usda.gov/htp/sugar/sugar.html,
http://www.fas.usda.gov/import. html, and http://www.fsa.usda.gov/ao/epas/dsa.htm.
Question: (India #3)
Seasonal tariffs: The U.S. operates a complex system of seasonal duties, quotas and entry prices to
regulate fruit and vegetables imports. We would like to have a clarification from the U.S. authorities
on the reasoning behind such seasonal duties and on the method of customs valuation for imposing
such duties.
Answer
There may be a misunderstanding regarding the United States' import tariffs for fruits and vegetables.
The United States does not employ quotas or entry prices for fruits and vegetables. The United States
does, in some cases, employ seasonal tariffs. However, these seasonal tariffs are clearly specified in
the U.S. tariff schedule (both applied schedule and schedule bound in the WTO). That is, for the
cases where a tariff only applies for certain months of the year, the time frame is given in the tariff
line description along with the appropriate tariff rate. Unlike the situation in many other countries, an
importer does not have to look any further than the line-by-line U.S. tariff schedule to clearly
understand what tariff rate applies for a particular season. Our tariff structure for fruits and vegetables
is transparent and WTO-consistent.
Question: (India #6)
TRQ on leaf tobacco: Imports of leaf tobacco into USA are subject to TRQs from September 1995.
Of a total quota of under TRQ for 2002/2003 of 1,50,700 (sic) tons (both Flue cured and light air
cured tobacco including Burley), the bulk of the quota is allocated to 9 designated quota recipient
countries. A residual TRQ of 3,000 tons is available to all other countries including India, although
India is the second largest producer of tobacco in the world. The out of quota tariff rate is 360
percent. Prior to 1995 India could export any volume of tobacco at MFN duty rates to USA. After
introduction of TRQ Regime in 1995, Indian exports of tobacco to the U.S. are rendered
uneconomical. In view of this, the U.S. delegation is requested for information on whether they
propose to take action to review TRQ regime in tobacco and enhance the residual quota from its
present level of 3000 tons. The U.S. authorities are also requested to provide information on the
mechanism for allocating unfilled TRQs in tobacco.
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Answer
The tobacco TRQ was based on historical shipments of leaf tobacco to the United States. The top
9 countries were given quota allotments. According to the TRQ rules, a country is not required to fill
its quota in any given year and the unused quota is not reallocated. If a quota country does not fill its
quota, it does not lose its allotment. A non-country specific quota is set at 3,000 metric tons on a first
come/first-serve basis. Only Congress can change TRQ allotments.
Question: (India #7)
Delays in testing export consignments of processed food to the United States: It has been noticed that
processed food consignments exported to the United States are delayed by the long time taken to test
these consignments at various laboratories. In the case of mangoes, it took over a year to send a
report while the approval for export of egg powder into the U.S. is still awaited. We would request
the U.S. authorities to address the problem and take remedial action to speed up the processes.
Answer
Inspection and quarantine standards are developed through analysis of the pest risk associated with
the imported commodity, in accordance with international standards. Time requirements for
inspection at the port-of-entry are based on a variety of factors, including clearance of documentation
through U.S. Customs and available time for agricultural inspection. Every effort is made to expedite
perishable commodities.
We assume that this question concerns the risk assessment process for importation of fresh products.
All imported fresh products are subject to some level of inspection. Please refer to the APHIS
website:
http://www.aphis.usda.gov/ppq/pra/
and
the
U.S.
Embassy
website:
http://usembassy.state.gov/posts/ in1/wwwhmain.html for more information on the United States risk
assessment process.
Question: (India #11)
Payments into Escrow account on Bidi (tobacco) exports: The U.S. requires tobacco product
manufacturers and importers who are non-participating in the Master Settlement Agreement (MSA) to
pay a specified amount into a qualified Escrow account for products sold in the U.S. The amount to
be paid on this account works out to nearly four times the cost of manufacturing one Bidi. This has
acted as a severe barrier for Bidi exporters from India and consequently, there have been no Bidi
exports from India to the U.S. during this year. We would like to have a clarification from the U.S.
authorities on the reasoning behind the requirement to pay specified amounts into an Escrow account
and the basis for calculation of such amounts? Given the severe market access problem faced by
India on this account, we are interested in knowing whether there is any move to dispense with the
above requirement to remedy this problem?
Answer
There are 46 MSA states and 4 non-participating states. Any non-participating company that sells a
cigarette product in a MSA state is required to pay a fee in escrow. The escrow was set up in order to
cover any cost arising from tobacco litigation. The fee is based on the number of cigarettes sold.
Each State has a specified fee for the escrow. For example, a State may require a company to pay a
fee of .39 cents per cigarette. If the company sells a million cigarettes in a State in a year, the
company is required to pay $390,000 in fees in escrow for that State. After 25 years, any unspent
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money in the escrow will be returned to the company. This fee is required for both domestic and
international manufacturers that sell a cigarette product in a MSA State.
States will continue to collect fees for these escrow accounts in the future. The United States goal is
to reduce cigarette smoking. Most cigarette companies are raising prices in order to pay the fee.
Health advocates feel that increased cost for cigarettes will deter some consumers from buying the
product.
Question: (India #14)
Prohibition on imports of uncooked meat products: Uncooked meat products such as sausage, ham,
and bacon have been subject to a long-standing prohibition on imports despite the fact that meat
products may come from disease free regions and that the processing involved should render any risk
negligible. Would the U.S. authorities clarify the reasons for continuing with this prohibition and
whether there is any move to review this prohibition.
Answer
The United States does not have a prohibition on imports of uncooked meat products, but does have
food safety regulations for all meat sold in the United States. To date, India has not petitioned for
certification of its meat inspection system (equivalence). To petition for equivalence, please contact
the United States Embassy or the United States Department of Agriculture Food Safety and Inspection
Service. For more information on the equivalence process, please visit the following website:
http://www.fsis.usda. gov/oppde/ips/EQ/EQProcess.htm.
Question: (India #19)
SPS measures on egg products: Import of egg products into the U.S. is allowed only under a regime
requiring continuous inspection of the production process whereas a system of periodic inspection of
the production process could also be acceptable from the point of view of safety of human health.
Continuous inspection is expensive, and thus has a negative effect on prices and competitiveness.
Please provide the U.S. view on this point. Is there a possibility of review of the existing system?
Answer
The United States does not have a prohibition on imports of eggs and products, but does have food
safety regulations for all eggs and products sold in the United States. To date, India has not petitioned
for certification of its egg inspection system. To petition for certification, please contact the United
States Embassy or the United States Department of Agriculture Food Safety and Inspection Service.
For more information on this process, please visit the following website:
http://www.fsis.usda.gov/oppde/ips/.
Question: (India #23)
Subsidies on agricultural products: The U.S. operates a range of programmes which appear to be
designed to subsidize and/or promote export of U.S. agricultural products. Some such programmes
are (i) the Export Enhancement Program which allows U.S. exporters to apply for a cash subsidy
designed to make U.S. products competitive with subsidized exports from other countries; (ii) the
Market Access Program which offers a share of costs for promotion campaigns for agricultural
products; and (iii) the Export Credit Guarantee Program which offers U.S. Government guarantees
targeted at countries which need guarantees to secure financing but show a reasonable ability to repay
(The program includes a specific list of commodities per country allocation. It has recently become
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the main export policy tool of USDA, with annual allocations exceeding US$5 billion and declared
annual subsidy levels of over US$400 million. The program has a default rate of over 10 percent
historically, and is reported to be characterized by uncertainty and lack of transparency with respect to
the implicit subsidy component stemming from rescheduling of payments.) Would the U.S.
delegation comment upon consistency of these schemes with various WTO Agreements including on
Subsidies and Agriculture. The U.S. delegation is requested for information on whether they propose
to review these subsidy programmes.
Answer
The U.S. averages approximately $3.4 billion in credit guarantees. Export credits and export
subsidies are not interchangeable as they have different policy objectives and different impacts on
global markets. Direct export subsidies are clearly among the most trade-distorting measures in
agricultural trade, designed to lower prices and displace commercial competition. On the other hand,
export credit guarantee programs have a minimal impact on trade and are used to assist importing
countries in financing commodity imports. In recognition of the importance of the elimination of
export subsidies, the USG is willing to support a parallel reduction of any trade-distorting component
of export credits and guarantees. Once established, disciplines will ensure that export credit and
guarantee programs are not applied so as to circumvent export subsidy commitments while allowing
developing countries to access affordable credit to address food security and economic development
needs.
Question: (India #24)
Producer support to sugar in the U.S. amounted to well over US$1.3 billion per year during 19992001. The sugar programme supports in the USA depend on a tariff rate quota (TRQ) based on
domestic output. Production increases have reduced import quota volume. This decline and price
erosion have adversely affected market access to the U.S. sugar market. Please provide the U.S. view
on this point.
Answer
The U.S. sugar tariff rate quota (TRQ) is allocated consistent with WTO rules. Changes in U.S.
domestic sugar production cannot reduce sugar access below this minimum. India's fiscal year (FY)
2004 allocation is 8,424 metric tons raw value, which is the same access level as FY 2003. Further
information about the U.S. sugar program can be found on the United States Department of
Agriculture's sugar commodity page http://www.fas.usda.gov/import.html. Also the official United
States Trade Representative press release concerning the FY 2004 sugar allocations is available on
their website, www.ustr.gov.
Question: (India #1 Annexure)
We welcome the U.S. assertion in the Government's Report that the U.S. remains firmly committed to
the WTO-based multilateral trading system, and that consistent with the objectives agreed in Doha,
the U.S shares a common purpose with WTO partners towards expanding economic opportunities to
the world's citizens by reducing trade barriers. We also note that as a part of its broader efforts to
liberalize trade, the U.S. states that it is pursuing several regional and bilateral initiatives for free trade
areas, in respect of some of which the U.S. exports exceed its exports to "Russia, India, and Indonesia
combined" [paragraph 47]. It is our hope and expectation that the U.S. regional initiatives will be
consistent with WTO rules, and will be nurtured in a manner that promotes the complementarity of
regional and bilateral initiatives with the multilateral Doha Development Agenda. In paragraphs 110
through 113 of the Government Report, the U.S. has drawn attention to its domestic support to
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farmers as well as export subsidies, including credits, envisaged in the 2002 Farm Bill. The U.S.
asserts that it has been making very limited use of export subsidies, and that the trends in outlays, as
well the nature of new programmes, suggests that the U.S. will continue to meet its Agreement on
Agriculture domestic support obligations. We note with concern that the 2002 Farm Bill has a
provision by which the AMS ceiling can be exceeded.
Moreover, we note from paragraph 6 of the Secretariat Report that the U.S. has not fulfilled its
notification obligations with respect to various agriculture notifications including on domestic support
and special safeguards applied in agriculture. The U.S. is well aware of the apprehensions of the bulk
of the WTO membership as regards the provisions in the 2002 Farm Bill in furthering distortions in
agricultural trade. It would be highly desirable therefore for the U.S. to make its notifications
expeditiously to that there is greater clarity and certainty as regards various proposals, including the
U.S. proposals, on the modalities for negotiations on agriculture under the DDA. We support the
apprehensions expressed, in paragraph 22 of the Secretariat Report on domestic support, regarding
monitoring of the domestic support levels under the 2002 Farm Bill and would like to know what
steps are proposed to be taken in this regard.
Answer
The statement above is incorrect. The 2002 Farm Act does not have a provision by which the AMS
ceiling can be exceeded. The 2002 Farm Act has a provision called the circuit breaker, which calls on
the United States Secretary of Agriculture to ensure that U.S. AMS commitment levels are not
exceeded. The United States Department of Agriculture continually monitors actual spending in each
of its programs. If actual spending levels approach commitment levels, the Secretary of Agriculture is
notified, and further spending is closely watched in case the "circuit breaker" provision of the 2002
Farm Act, which stops spending to ensure AMS commitment levels are not exceeded, needs to be
invoked. This provision has not been used.
The United States is pleased to draw India's attention to our DS: 1 notification (G/AG/N/USA/51)
dated March 11, 2004. The notification contains two years of data for marketing years 2000 and
2001. Of all countries with large AMS levels, the United States has the most current notification on
file. We note that many other countries are not current with their domestic support notifications.
Question: (India Annexure #2)
In its Government Report, paragraphs 123 through 126, the U.S. inter alia outlines that the U.S. will
continue to work within the Doha Agenda to reduce poverty and raise the living standard across the
globe and that "an ambitious result in market access will be the greatest legacy of our work in the
DDA". As the U.S. is aware, expanding market access in agricultural products alone will not serve to
reduce poverty and raise living standards. Economist and agricultural experts have widely
documented that the largest welfare gains for the poor residing in the developing countries will stern
from elimination of all forms of distorting subsidies, both domestic and on exports. It is our hope that
they U.S. will be able to factor in this harsh reality into its approach towards the successful conclusion
of the Doha Round.
Answer
The United States is seeking substantial reform in each of the three pillars of market access, export
subsidies and trade-distorting domestic support in the Doha Round. We believe ambition is required
in all three pillars to create a balanced and workable package. We hope India will join us in seeking
an ambitious and successful conclusion to this Round.
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Question: (India Annexure #3)
Paragraphs 1 and 11 of the Secretariat Report draw attention to market access in the U.S., applied
inter alia through non-ad valorem duties, prohibitive TRQs, tariff protection in the range of 50 - 350
percent and tariff escalation across a number of agricultural products. We would like to understand
how the U.S. reconciles these barriers, which deny market access opportunities to developing country
exports in particular, with its call for trade liberalization under the Doha Development Agenda and the
spirit and objectives of the Agreement on Agriculture?
Answer
During the recent U.S. TPR discussions several developing countries expressed appreciation that the
United States has maintained its markets largely open during the recent global economic slowdown.
In fact, despite the U.S. recession and moderate recovery until recently, U.S. real imports have grown
by nearly 5 percent since 2000. While we do not seek to deny certain barriers to trade cited by the
Secretariat, the United States maintains among the most open economies in the world. The United
States continues to be a leader in seeking multilateral trade liberalisation, and is fully committed to the
reform of world agricultural trade in the DDA. We hope India will join us in contributing to a
successful result of ambitious agricultural reforms in the DDA.
Question: (India Annexure #4)
(Para 45) It is observed that non-ad-valorem tariffs still cover 12.2 percent of the tariff lines and that
these result in higher protection on low cost imports from developing countries. It is also observed
that specific and compound duties accounted for 77 of the 100 highest rates in 2002. Most of these
tariff rates are applicable in the case of agricultural products, footwear, etc. What is the rationale for
maintaining such a complex tariff structure when the same purpose can also be served by applying ad
valorem duties?
Answer
The U.S. schedule contains a few remaining lines with non-ad valorem rates, reflecting historical
factors, product sensitivities and changing interests of trading partners in our market. While we
acknowledge these and the few remaining bound U.S. industrial tariffs that are higher than our
average tariffs, the 2002 U.S. NAMA proposal makes clear that we are prepared to eliminate all our
tariffs, on every line of non-agricultural goods, if others - including developing countries - will
undertake a similar degree of liberalization and ensure that our exporters can gain access opportunities
to new markets.
Question: (India Annexure #5)
It is observed from the Part IV Para 10 of the Report by the Secretariat that the total direct payment
has increased to US$19.6 billion in 2003 from US$11 billion in 2002. Can the U.S. explain the
reasons for this sudden increase in the direct payments to farmers?
Answer
The figures cited in the report are from the USDA's Economic Research Service. These estimates are
on a calendar-year basis, and 2002 was a transition year between two farm legislations. Therefore, the
forecasted figure for 2003 includes 2 years of the AMTA direct payments, and it was the first year
that included counter-cyclical payments. Other payments that increased in 2003 over 2002 include
the new dairy payments, conservation payments, and disaster assistance. Many of these programs fall
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into the green box category. Since the United States notifies AMS by crop year, the notified AMS
figures will differ from those that are reported on a calendar year basis.
Question: (India #6 Annexure)
It is observed that the direct government payments constitute a major part of the direct payments and
these payments account for more than 33 percent of the net farm income. This type of productiondistorting support artificially depresses prices in the international market thereby effectively restricts
market access opportunities for the developing countries exports not only into the U.S. market but
also many other countries. Will the U.S. consider reducing such type of support in view of its adverse
impact on the international prices?
Answer
The United States is fully committed to further reform in world agricultural trade in each of the three
pillars of market access, export subsidies and trade-distorting domestic support in the Doha Round.
We believe ambition is required in all three pillars to create a balanced and workable package. We
hope India will join us in contributing to a successful result of ambitious agricultural reforms in the
DDA.
Question: (India #7 Annexure)
Para 26: While supporting the observation made in the Secretariat Report we would like to know
what steps are being taken by the U.S. to ensure that subsidized output is not sold in the world
market?
Answer
The United States is on record in every forum and on every occasion that we will honor our
Uruguay Round commitment on agriculture. The 2002 Farm Act allows us to meet these
commitments, and we will honor all of them. For the reasons we have explained, the 2002 Farm Act
does not increase support; the USDA net outlays show trade-distorting domestic support trending
downward; and our farm programs are still oriented toward fewer trade-distorting forms of support.
Finally, with full knowledge and understanding of the potential implications for U.S. farm policy,
U.S. farmers and ranchers have expressed their willingness to reform further and liberalize by
supporting and developing with the Administration the U.S. agriculture negotiating proposal, which
calls for elimination of export subsidies, reductions in trade-distorting domestic support and a
significant increase in market access.
Question: (Japan #33)
What measures has the U.S. taken to prevent the exportation of GMOs which are unauthorized by the
relevant regulations in importing countries? What measures does the U.S. intend to take if
unapproved GMOs are found in agricultural products exported from the U.S. to importing countries?
Answer
Once a biotech event is approved in the United States, it can legally circulate in interstate commerce
and be legally exported. It is the responsibility of commercial interests to ensure that exports to a
particular country meet all import regulations, and the responsibility of the importing country to
implement and apply its import regulations.
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Civil and legal penalties exist in the United States for cases where the regulatory requirements
regarding the development, testing, and release of biotech events are not respected. The United States
takes seriously its biotech regulatory and food safety responsibilities to U.S. consumers and customers
around the world, and is committed to working closely with other governments on these issues.
Question: (India #25)
Cotton subsidies: U.S. domestic support to cotton farmers is leading to higher production of cotton
even when it is non-competitive and consequently, to higher exports which depress global prices. As
a result, producers and exporters in developing countries, including India, face restricted export
markets. We would like to hear the response of the U.S. delegation on this matter and whether there
is any action proposed to remove this distortion.
Answer
Our view is that the best way to move ahead on the cotton agenda is to pursue comprehensive
agricultural reform in the DDA. We have always made clear that cotton needs to be dealt with in all
three pillars of the agriculture negotiations, along with other agricultural commodities. With respect
to current and past levels of U.S. domestic support, we believe the United States remains in full
compliance with its WTO commitments. The United States has submitted an ambitious, balanced,
and reform-focused proposal focused on all three "pillars" for the WTO negotiations. We hope India
will join us in supporting an ambitious outcome in all three pillars. With respect to the relationship
between U.S. domestic support and the global price of cotton, please refer to the response to Question
Brazil #6.
Question: (Japan #35)
Is the U.S. ready to provide the necessary information for detecting GMOs, unapproved in importing
countries, which are released into the environment in the U.S. and/or which have the possibility of
being exported?
Answer
USDA's Grain Inspection, Packer, and Stockyards Administration (GIPSA) maintains a biotechnology
reference laboratory which works with grain handlers, test manufacturers, and life science
organizations around the world to help ensure the availability of reliable tests. GIPSA's reference lab
also offers a Proficiency Program to organizations testing for biotechnology-derived grains and
oilseeds. A number of testing laboratories in Japan and other countries have participated in this
program. In addition, officials from many countries, including Japan, have toured the reference lab,
and are welcome to visit at any time.
Question: (Japan #58)
After abolishing its deficiency payments under the Federal Agriculture Improvement and Reform Act
of 1996 (FAIR Act), the U.S. has been providing emergency assistance since 1998 as an additional
protection measure under production flexibility contract payments, which was introduced instead, and
has introduced Counter Cyclical Payments under the Farm Security and Rural Investment Act (FSRI)
of 2002. Please explain why the U.S. has established these payment systems and the background
(including why the production limitation is no longer a requisite for deficiency payments under the
2002 Act, while it was a requisite under the 1990 Act). Measures and programs introduced under the
Farm Security and Rural Investment Act (FSRI) have already entered into the phase of
implementation. Does the U.S. intend to notify some of those measures or programs as new or
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modified domestic support measures exempt from the reduction commitment? If so, the U.S. should
submit a notification as soon as possible in order to ensure transparency and to expand the discussions
by Members on the U.S. relevant support measures.
Answer
Counter-cyclical payments were designed as an income support program that, although linked to
prices, would have minimal or no trade-distorting effects than traditional price support mechanisms.
There is no requirement to limit production because these programs were phased out, as no production
is required to receive these payments. The counter-cyclical payments are completely decoupled from
production, as no production is required to receive these payments.
USDA rulemaking is an open, transparent process. The process and progress for the Farm Act
programs is documented on the USDA webpage. As regulations for new programs outlined in the
2002 Farm Act are put into place and the new programs get up and running, the United States will
submit the required DS-2 notifications to the WTO.
Question: (Japan #59)
The U.S. is proposing a drastic reduction in or even the elimination of, trade distorting measures in
the agriculture negotiations, while increasing its direct government payments (Report by the
Secretariat, p. 102, Chart. 1). These two points are incompatible with each other. In particular, it is
rational to understand that the U.S. price-related direct government payments and emergency
assistance for certain products, such as wheat, rice, soybean and cotton, have export enhancing effects
since a sizeable amount of those products is exported. According to the Report by the Secretariat (p.
101), the share of exports in terms of value of production was 48 percent for wheat, 42 percent for
rice, 37 percent for soybeans, and 39 percent for cotton. Under the FSRI, the U.S. has
institutionalized export enhancing payments by introducing counter cyclical payments for such
products and has increased actual payments since 2002. Can the U.S. explain how this policy, and the
increase of such payments, are consistent with the U.S. position in the agriculture negotiations, i.e. to
phase-out export subsidies?
Answer
The 2002 Farm Act does not authorize the increased use of export subsidies. The United States
remains committed to the Doha Development Agenda objective of reducing, with a view to phasing
out, export subsidies.
Question: (Japan #61)
Does the U.S. AMS in 2003 exceed its commitment level?
Answer
No. Based on preliminary estimates, in 2003 the United States did not exceed its Uruguay Round
commitment level of AMS spending.
Question: (Japan #62)
If the increase in direct government payments and emergency assistance in 2003 results from lower
market prices, it is thus possible that the increase in government payments cannot be controlled and
that the AMS level exceeds its commitment level when the market price falls ever further. The U.S.
commented that no decision had been made as to whether regulations are needed to implement
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Section 1601(e) of the FSRI (Report by the Secretariat, p. 107). With what kind of measures can the
U.S. properly monitor the increase in direct payments and ensure that its AMS level does not exceed
its commitment level?
Answer
The United Stated Department of Agriculture continually monitors actual spending in each of its
programs. If actual spending levels approach commitment levels, the Secretary of Agriculture is
notified and further spending is closely watched in case the "circuit breaker" provision of the 2002
Farm Act, which stops spending to ensure AMS commitment levels are not exceeded, needs to be
invoked.
Question: (Switzerland #8 & #9)
According to §139 some U.S. import restrictions are taken as a response to risks posed by FMD and
BSE. In this context meat products are allowed to be directly imported into the U.S. from a non-FMDfree country if certain measures (as described in the Code of Federal Regulations Title 9 Part 94.4) are
taken in the exporting country. However if these measures on products originating in a non-FMD
country have taken place in a third country, the products are banned to be imported to the U.S.
What is the scientifically-based justification, including an assessment of the public health risk, of
these additional U.S. import restrictions?
According to §142 APHIS has regulatory responsibility to safeguard U.S. animal resources from
exotic pests and diseases. According to §143 FSIS has specific responsibility for the safety of meat,
poultry and certain egg products.
How does the U.S. government ensure the cooperation of these two agencies, in order that various
regulations and different control systems by these two agencies do not become an unduly
administrative burden?
Answer
Inspections by APHIS and FSIS are required before equivalence determinations can be made.
Consistent with the WTO SPS agreement, we welcome products that comply with United States'
scientifically based food safety requirements. For more information on the United States process for
evaluating the equivalence of foreign meat and poultry food regulatory systems, please visit the
following website: http://www.fsis.usda.gov/oppde/ips/EQ/EQProcess.htm.
The United States has very serious restrictions on FMD, because it is an extraordinarily devastating
disease, as the European continent has experienced.
Question: (Switzerland #13)
As mentioned in para 12, page 102, the six-year Farm Act (2002-07) increases reliance on pricedependent support. Such type of measures are known as production-distorting. Could you explain the
reasons for the re-orientation (compared with the FAIR Act of 1996 reducing production-distorting
support in favour of income supplements) of the package of U.S. support measures in favour of
production-distorting measures?
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Answer
The United States has fully complied with WTO commitments. However, to address the distortion
affecting the agricultural sector, the United States has submitted an ambitious, balanced, and reformfocused proposal focused on all three "pillars" for the WTO negotiations.
Question: (Switzerland #14)
The new programme of counter-cyclical payments (CCPs) uses a target price as a reference. As it
appears in the Table IV.3 on page 109, this target price is set rather higher than the average prices
recorded during 1999-02. Could you explain the mechanism allowing to set the target price at the
level established for the period 2004-07? What is the basis for the calculation and which kind of
prevision model allows to determine this target price ?
Answer
The target prices are set in legislation. For additional information, please refer to the following
website: http://www.usda.gov/farmbill/index.html.
Question: (Switzerland #15)
As mentioned in §33 on page 110, federal milk marketing orders establish minimum prices for milk
depending on its use by processors. Could you please describe the types of use and how the priorities
are set to support one or the other type? Is it possible that some type of milk supported by these
measures is purchased by a processing plant at a lower price and therefore represents a form of
processing plant support?
Answer
The Federal Milk Market Order (FMMO) system is based on milk classes which in turn are based on
use. Class I is beverage milk and cream-basically what one buys at the store. Class 2 is for soft
products which include such things as ice cream and yogurt. Class 3, the largest class is milk used for
cheese, while Class 4 is for making non-fat dry milk and butter. In general, prices for class 3 and 4
are set by the markets for the respective products while prices for Classes 1 and 2 are set by the higher
of Class 3 or Class 4. Again, as a general rule, Class 2 is 70 cents/cwt higher while Class 1 has
regional differentials compared to Class 3 or 4. (Timing and component prices significantly
complicates these general rules) The system mainly regulates the first handler of milk after it leaves
the farm, plus most milk is delivered to farmer-owned cooperative so its unlikely significant quantities
are sold at discount prices. More info can be obtained from http://www.ams.usda.gov/dairy/.
Question: (Switzerland #16)
According to §40 on page 111, the largest U.S. agricultural export promotion programmes are the
Export Credit Guarantee Programme (GSM-102) and the Intermediate Export Guarantee Programme
(GSM-103). What is the share of these two programmes in the U.S. total annual export volume and
value and for which kind of commodities are they allocated?
Answer
In FY 2003, based on value, 6.04 percent of U.S. agricultural exports were traded using USDA's
Export Credit Guarantee Programs. The Commodity Credit Corporation selects agricultural
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commodities and products according to program criteria.
http://www.fas.usda.gov/excredits for a list of eligible commodities.
Please
reference
Question: (Switzerland #17)
According to table IV.2 (p. 104) some products covered by tariff quotas have reserved access for
distinct suppliers. Some of these quotas show fill rates below two third like low fat cheese or even 0
percent for low-fat chocolate crumb. How do the United States intend to reallocate unused quotas?
Answer
There are numerous quotas that are administered by the United States and many of these quotas differ
on how to reallocate unused portions. It is the policy of the U.S. government to administer each quota
as effectively as possible within each individual set of requirements. For more information, see the
following United States WTO notification: G/AG/N/USA/48.
Question: (Japan #34)
Does the U.S. become a party to the Cartagena Protocol? If not, please explain why.
Answer
The United States is not a party to the Cartagena Protocol by virtue of the fact that it is not a party to
the original treaty - the Convention on Bio-Diversity.
Chapter 4 - BY SECTOR
(3) Maritime Transport
Question: (European Union #18)
The report of the Secretariat (Paragraphs 99 and 100) states that total international water-borne trade
(in volume) was 1.137 million tonnes in 2002 and that domestic water-borne trade was around 946
million tonnes. Can the U.S. indicate the share of domestic water-borne trade that relates to preonward carriage of international cargo ("feeder transport") between U.S. seaports? Can the U.S.
indicate the share of domestic water-borne trade that relates to inland waterway transport?
Answer
The information on pre-onward carriage of international cargo is not available. The inland waterway
share of domestic waterborne trade is 562.2 million metric tons or 59.4 percent of the domestic
waterborne trade.
Question: (European Union #19)
The report of the Secretariat (paragraph 2) focuses on initiatives to upgrade and develop maritime
transport services in the U.S. The U.S. restrictions on domestic water-borne transport (paragraphs
104-107) and the restrictions and nationality requirements in U.S. ports (paragraphs 117-119) limits
the choice available to operators in terms of optimizing the transportation services they can offer to
their customers (e.g. by having to rely more on road transport in stead of coastal shipping). Does the
U.S. have any estimation on the additional transportation cost that results from these restrictions?
Does the U.S. have an assessment of the environmental implications of using more road transport
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rather that coastal shipping (by a rough estimation, trucks pollutes 3-4 times more than ships, causes
congestions etc.)?
Answer
The restriction of domestic trades to national–flag vessels, or cabotage, is practiced by most maritime
nations, including EU-member countries. We also recognize that the EU has focused considerable
attention on relieving congestion on its roads by promoting short sea shipping through monetary
incentives or subsidies. Although our major congested domestic trade corridors (such as I-95 on the
East Coast) appear to parallel E.U.’s surface transport traffic, we are only at the beginning stages of
promoting this segment of our maritime sector. With respect to the environmental benefits of short
sea shipping, we have no empirical data to provide and we would view this question as outside the
scope of the TPR. We would agree that the maritime sector offers an efficient alternative or
supplement to land transport. For example, one barge can carry the equivalent load of 58 tractortrailers.
Question: (European Union #20)
The report of the WTO Secretariat describes the 'Merchant Marine Act' (Jones Act) and its
implications.
How many ships have been produced in the last years under the ruling of the Jones Act, kindly specify
type of ship, purchasing-price and the tonnage of the ships?
Answer
This information (except for ship purchase price) is reported annually to the WTO Secretariat.
Question (EU #21 and #22)
The report of the Secretariat (paragraphs 133 and 145) relates to aspects of services in airports. With
regard to security services, the Aviation and Transportation Security Act nationalized certain activities
(such as passenger screening). After a period of nationalized operation of the sector, the Aviation and
Transportation Security Act permits private companies to undertake security screening at airports on
the condition that "the private screening company is owned and controlled by a citizen of the United
States. Under its commitment to opening world markets in the General Agreement on Trade in
Services (GATS) the United States has signed up to full market access in the field of security services
(with specific exceptions for the states of Maine and New York). If applied this legislation appears to
conflict with the commitments taken by the U.S. under the auspices of the WTO. Can the U.S.
indicate if there are currently any plans to re-privatise airport security services and related activities?
Answer
The Aviation and Transportation Security Act (ATSA) requires TSA to establish a 1-year pilot
program under which the screening of passengers and property is carried out by personnel from
qualified private screening companies under a contract with TSA. The pilot program is currently
underway at 5 airports. The participating airports are San Francisco, Kansas City, Tupelo, Rochester,
and Jackson Hole. The ATSA also established a "security screening opt-out program" which will
allow an airport operator apply to have passenger and property screening carried out by personnel
from private screening companies, while under supervision of the Federal Government. Airport
operators will be able to apply for Opt-Out beginning in November 2004.
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Question: (Norway #2)
In the Secretariat report, paragraph 98, it is stated that the U.S. recorded a deficit of US$10.2 billion in
freight and port services. We would like to know if the incomes from vessels registered under foreign
flag and owned by U.S. shipping companies have been included when calculating these figures.
Answer
Balance of payments calculations are based upon whether the company is domiciled in the U.S. (for
tax purposes) and not whether the vessels owned by these companies are registered under foreign or
U.S. flags.
Question: (Norway #3)
In the Secretariat report, paragraph 104, it is stated that the Jones Act does not prevent foreign
companies from establishing shipping companies in the U.S. as long as they meet the requirements
with respect to U.S. employees. Does this imply that foreign owned shipping companies established
in the U.S. may own and register vessels under U.S. flag operating in U.S. cabotage trades?
Answer
With respect to foreign ownership of Jones Act vessels, U.S. law permits bona fide non-citizen
leasing companies to own Jones Act vessels if those vessels are demise chartered to U.S. citizens for a
period of 3 years or shorter. For detailed information on this subject please refer to 46 USC 12106(e).
Question: (Norway #4)
In the Secretariat report, paragraph 108, it is stated that the U.S. international maritime transport
market is generally open to foreign participation, and para 114-116 describes the exemptions. We
would like to know if this implies that no cargo sharing agreements/requirements exist with foreign
countries or if such clauses are merely dormant.
Answer
We have no such agreements.
Question: (Norway #5)
In the Secretariat report, paragraph 116, it is explained that the last Alaskan crude oil was exported in
April 2000. Since then all Alaskan crude oil production has moved to the United States. The existing
requirement of Alaskan crude oil exports to be carried by U.S.-flagged vessels seems therefore to
have become obsolete. Is the United States considering to remove the requirement that Alaska crude
oil exports shall be carried by U.S.-flagged vessels?
Answer
No consideration is being given to removing this requirement.
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Question: (Japan #63)
Reference: p. 127, para. 102
The Federal Maritime Commission (FMC) is authorized by Section 19 (1) (b) of the Merchant Marine
Act of 1920 (the Jones Act) to make rules and regulations affecting shipping in foreign trade. The
FMC imposed a unilateral sanction against Japanese carriers in September 1997. Although the
sanction was removed in May 1999, the FMC still requires carriers to report to it on the situation of
the ports in Japan. The rule (repealed in May 1999), which provided grounds for unilateral sanctions,
was a violation of the Treaty of Friendship, Commerce and Navigation between Japan and the United
States, which provides each other's ships with national treatment and most-favored-nation treatment.
Japan, therefore, requests the U.S. to work more closely with the FMC to ensure that such unilateral
measures will no longer be taken. Japan is concerned about the impact of the Jones Act and any other
related legislation on shipping trade, and submitted a list of questions (WT/GC/W/520) at the Review
of the General Council last December. Japan would appreciate if the U.S. could provide information
about the current situation regarding the responses to the questions.
Answer
The United States Government takes seriously its treaty obligations. As we have stated before, the
Government of the United States believes the FMC's actions with respect to Japan are fully consistent
with the Treaty of Friendship, Commerce and Navigation. In our view, Japan's actions with regard to
the previous licensing requirements and prior consultation system raised substantial issues concerning
Japan's conformity with its obligations under the treaty. We believe, therefore, that the action taken
by the FMC, in response to Japan's actions, was in conformance with international law.
The U.S. reply to Japan’s questions (WT/GC/W/520) was circulated to Members on 4 February 2004
in document WT/GC/W/524.
Question: (Japan #64)
Since the repeal of the above-mentioned rule, the FMC requires Japanese and U.S. carriers to report to
it on the progress of port situations in Japan. Efforts have been made and signs of progress have been
seen in various aspects. The "prior consultation system" has improved significantly (and the
improved system has been implemented steadily); the Port Transportation Business Law was revised
to abolish the supply-demand adjustment restriction and thus has realized new entries into port
transport business; progress has also been made toward the introduction of port terminal service
operation on the 24-hour/364-day basis. Japan strongly urges the FMC to fully understand these
positive developments. Despite significant improvement in the port situation of Japan, the FMC
introduced in August 2001 a new order, which not only increased the number of items to be reported,
but also expanded the scope of the carriers subject to the reporting requirements. The order includes
requirements which go beyond the extent deemed appropriate to impose upon carriers, such as
directly requiring Japanese carriers to submit translated copies of the Japanese laws and instructions
concerned. Thus, the order has been causing unfair and excessive burdens on carriers. Should it be
the case that the FMC decided to expand the range of the reporting requirements in order to judge
whether or not it should impose unilateral sanctions, this would violate the Treaty of Friendship,
Commerce and Navigation between the United States and Japan, and Japan would recognize it as a
regrettable and serious abuse of the FMC's mandate. Japan, therefore, strongly requests the U.S. to
withdraw the order.
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Answer
The Government of the United States remains concerned that the progress in improvement of the port
situation has not extended to any meaningful opening of Japanese port services to foreign companies.
In particular, the port operations of foreign liner carriers remain subject to the non-transparent aims of
the Japan Harbor Transport Association (JHTA) and costly and inefficient legal requirements for
levels of labor and equipment to be used by stevedoring companies are maintained by the Ministry of
Land, Infrastructure and Transport (MLIT). The effects of these practices on our mutual trade and the
degree to which the Government of Japan has acted to improve conditions pursuant to commitments
made in the government-to-government agreement reached in 1997 remain a matter of concern to be
addressed by the FMC.
The August 9, 2001 FMC order required a limited number of carriers serving the U.S. trades with
Japan to report only once on their experiences in using Japanese ports; except for the Japanese and
U.S carriers, the named carriers are not currently required to report. The Japanese and U.S. carriers
continue to file periodic reports. The requirement that such reports be filed in the English language is
not extraordinary.
Question: (Japan #65)
Reference: Initial offer in Maritime Transport Services sector, p. 127, para. 103
Please explain the reason why the U.S. has not submitted its initial offer in the Maritime Transport
Services sector and the Maritime Auxiliary Services sector during the on-going round of negotiations.
Japan is of the view that submitting MFN exemption list at the last phase of negotiation is against the
rules of negotiation. Please provide the U.S. view on this point.
Answer
The United States has submitted offers and requests covering a number of sectors. With respect to
offers, we have consulted with our domestic constituencies, and our offers reflect our commercial and
economic interests in the WTO negotiations. As specified in the Doha Ministerial Declaration, these
are initial offers and may be supplemented or changed at any time in the course of the negotiations.
We do not believe that this prevents the United States from participating in bilateral consultations
with other countries, should other countries wish to raise questions with respect to U.S. measures in
this or any other sector. We must note that there are several countries that have not submitted
comprehensive requests or offers covering all sectors in this round of GATS negotiations.
Question: (Japan #66)
Reference: Ocean Shipping Reform Act of 1998, p. 128, para. 108
The Ocean Shipping Reform Act of 1998 includes a provision allowing the discriminatory treatment
of Japanese and other foreign shipping firms, by making it possible to impose unilateral regulations
on pricing and other practices. As the pricing practice is the foundation of a free shipping activity on
a commercial basis, unilateral regulations by the FMC on the pricing practice obviously intervenes in
such free shipping activity, thereby, discriminating foreign firms. Furthermore, an amendment to the
Act in 1998 explicitly stipulates the right of the Federal Government to make this intervention. Japan
requests the U.S. to confirm that in the future the FMC shall not impose unilateral regulations on
shipping activities on a commercial basis, conducted by Japanese and other foreign shipping firms,
which do not reflect the reality of the market.
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Answer
The Government of the United States has in the past pointed out that the language added in 1998 to
the Merchant Marine Act of 1920 did not add new authority over the commercial practices of carriers
or the setting of rates in foreign commerce, but merely clarified the pre-existing authority of the FMC
to address discriminatory and unfair competitive practices of carriers in U.S. trades. The Government
of the United States will not change this policy mandated by U.S. law.
Question: (Japan #67)
Reference: Marine Security Program, p. 128, para. 109
Japan requests the U.S. to abolish the Maritime Security Program, under which as much as 100
million dollars of maritime subsidy is provided annually over a ten-year period. It is obvious that a
provision of such an enormous amount of subsidy distorts conditions for free and fair competition in
the international maritime market.
Answer
The enactment of the Maritime Security Program (MSP) in 1996 was driven by the knowledge that in
national emergencies, no reliable ocean transportation alternative exists as a replacement for U.S.-flag
ships with U.S. citizen crews. The MSP is intended to ensure that an active U.S. merchant fleet and
the trained personnel needed to operate both active and reserve vessels will be available to meet our
national security requirements for sealift capacity. The MSP has been highly successful in meeting
this important national priority and remains key to our ability to meet global security contingencies.
The MSP has proved its utility once again by providing U.S.-flag vessels in support of recent U.S.
military operations in Iraq. As we have stated before, the MSP supports are national security
requirements, therefore, it will not be abolished.
Question: (Japan #68)
Reference: Cargo Preference Measures, p. 130, para. 116
Japan requests the U.S. to abolish the Cargo Preference Measures, such as the requirement to use the
U.S. vessels for the export of Alaskan oil, which is nevertheless commercial cargo. These
protectionist measures are inconsistent with the principle of national treatment, and are also against
the Ministerial Decision on the Negotiations on Maritime Transport Services of the WTO, which
prescribes that participants should not apply any protectionist measures during the negotiations.
Answer
It should first be noted that roughly 97 percent of all oceanborne foreign-bound cargo to and from the
United States is carried by foreign flag vessels. Only 3 percent of our oceanborne foreign trade is
carried by U.S.-flag vessels. U.S. Government-owned cargoes covered by cargo preference laws,
including the transport of U.S. military cargo, represent less than 1 percent of the United States total
oceanborne foreign trades. This program thus affects only a tiny fraction of outbound cargo from the
United States. As we have stated before, with respect to cargo preference, U.S. Government policy is
clear: we will not abolish it.
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Question: (Japan #69)
Reference: Shipbuilding and ship repairs, p. 132, para. 127
The Capital Construction Fund (CCF) program includes fishing fleets of the U.S. Please provide the
amount allocated to the fishing fleets through the Fund, as well as the amount of tax-deferral benefits
for fishing fleets, over recent years.
Answer
This information is not available.
Question: (China #99)
Reference: p. 128, para. 107
Para. 30 of the Summary observations states that "Domestic cargo restrictions under the Jones Act
remain in place but a legislation to facilitate the granting of waivers to the Act was passed in 2002."
Please explain to what extent it facilitates the granting of waivers to the Jones Act as well as its
impact on foreign services providers.
Answer
The recently enacted legislation permits the Secretary of Transportation to issue a certificate of
documentation with appropriate endorsement for employment in the coastwise trade as a small
passenger vessel authorized to carry no more than 12 passengers for hire. The Secretary is required to
provide notice and opportunity for public comment that such employment in the coastwise trade will
not adversely affect domestic shipbuilders or the business of operators of vessels built in U.S.
shipyards employed in the U.S. coastwise trades.
The measure is consistent with the requirements of paragraph 3 of the GATT 1994.
Question: (China #100)
Reference: p. 131, para. 125
Will the United States kindly explain how the measures it has taken could effectively serve the
objectives of its waiver under paragraph 3 of the GATT 1994?
Answer
Please refer to the response to China's Question #99.
Question: (China #101)
Reference: p. 127, para. 102; p. 128, para. 108
The U.S. has not made any commitment in the maritime transport sector. Please explain the reasons
for not undertaking commitments in this sector, since this sector plays a significant role in facilitating
and expanding international trade among WTO Members.
Answer
There has been no change in the U.S. position with respect to its decision not to make a commitment
in this sector. This decision was made in consultation with our domestic constituencies. We do not
believe that this prevents the United States from participating in bilateral consultations with other
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countries in this current round of trade negotiations, should other countries wish to raise questions
with respect to U.S. measures in this or any other sector.
Question: (China #102)
Reference: p. 127, para. 103
As demonstrated at the CTS special session by the joint statement from over 50 members of this
organization, liberalization of maritime transport services has been given considerable attention in the
current round of GATS negotiations. Does the United States have any plans to undertake
commitments in this sector during the current round of negotiations?
Answer
Please refer to the response to China's Question #101.
Question: (China #103)
Reference: p. 130, paras. 120 and 121
According to the Shipping Act of 1984, the Federal Maritime Commission established a category of
so-called "controlled carriers" which was defined as "an ocean common carrier that is, or whose
operating assets are, directly or indirectly owned or controlled by a government." Compared with
other carriers, these carriers are not granted fair treatment, e.g. their freight rates only take effect 30
days after being submitted to the FMC. Please specify the criteria and procedures for the
determination of "controlled carriers."
Answer
The question asserts that the "Federal Maritime Commission established . . ." This is incorrect; it was
the Controlled Carrier Act (1978) (now contained in section 9 of the Shipping Act of 1984), amended
by the Ocean Shipping Reform Act of 1998, which has established and defined "controlled carriers."
The Federal Maritime Commission is the federal administrative agency which has been authorized by
U.S. law to carry out the provisions of that Act.
The question also asserts that controlled carrier "freight rates only take effect 30 days after being
submitted to the FMC." This statement is incorrect in the following respects: (1) service contract
rates may be changed by a controlled carrier at any time; (2) service contract rates may be
implemented simultaneously with their filing with the Federal Maritime Commission; and (3) tariff
matters are not "submitted" or filed with the Federal Maritime Commission at all, but rather must be
available for public inspection. The only difference in the treatment of controlled and non-controlled
carriers by U.S. law in terms of effectiveness of tariff rates is that controlled carriers may not
implement reductions in their tariff rates upon less than 30 days from the date of publication. Under
U.S. law, no ocean common carrier, whether a controlled carrier or otherwise, may implement an
increase in its tariff rate upon less than 30 days from the date of publication. 46 U.S.C. app. §1707
(d). Since the enactment of the amendments to the Shipping Act of 1984 made by the Ocean Shipping
Reform Act of 1998, tariff matters are no longer filed or submitted to the Federal Maritime
Commission. Rather, tariff matters must only be "kept open to public inspection in an automated
tariff system." 46 U.S.C. app. §1707 (a). Controlled carriers are also prohibited from implementing
any decrease in tariff rates upon less than 30 days from the date of publication. Section 9 of the
Shipping Act of 1984, 46 U.S.C. app. §1708. The Federal Maritime Commission is authorized to
"prescribe rules and regulations as necessary to carry out this Act" (46 U.S.C. app. §1716(a)) and has
therefore issued regulations to carry out the requirements of the Controlled Carrier Act.
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1a. The criteria for the classification of controlled carriers are established in the Shipping Act of
1984, which states that:
"controlled carrier" means an ocean common carrier that is, or whose operating assets are,
directly or indirectly, owned or controlled by a government; ownership or control by a
government shall be deemed to exist with respect to any carrier if:
(A) a majority portion of the interest in the carrier is owned or controlled in any manner by
that government, by any agency thereof, or by any public or private person controlled by that
government; or
(B) that government has the right to appoint or disapprove the appointment of a majority of
the directors, the chief operating officer, or the chief executive officer of the carrier.
46 U.S.C. app. §1702(8).
The criteria, specifically described in the statutory language quoted above, are those used by the
Federal Maritime Commission to determine whether an ocean common carrier should be classified as
a controlled carrier and therefore subject to the requirements of section 9 of the Shipping Act of 1984.
1b. Procedure for the classification of controlled carriers.
Classification of controlled carriers in the first instance is delegated to the Office of the
General Counsel (46 C.F.R. §501.23). However, when a carrier notified of its designation as
a controlled carrier elects to submit a rebuttal statement pursuant to 46 C.F.R. §565.3 (b), the
Federal Maritime Commission makes a final determination of the carrier's status.
The procedures for classification of controlled carriers are set forth in the Commission's regulations,
which state:
46 C.F.R. §565.3 Classification as controlled carrier.
(A) Notification. The Commission will periodically review the ocean common carriers
operating in the foreign commerce of the United States and will notify any ocean common
carrier of any change in its classification as a controlled carrier.
(B) Rebuttal of classification. (1) Any ocean common carrier contesting such a classification
may, within 30 days after the date of the Commission's notice, submit a rebuttal statement.
(2) The Commission shall review the rebuttal and notify the ocean common carrier of its final
decision.
When the General Counsel has information indicating a particular carrier may meet the criteria laid
out in the Shipping Act of 1984, he or she generally sends a letter directly to the carrier requesting
information regarding the control and operation of the carrier, as well as any reasons why the carrier
believes the requirements of Section 9 of the Shipping Act of 1984 should not apply to it. The
General Counsel then reviews the response and makes a determination on the classification of that
carrier. The carrier is notified of the classification and, from time to time, the list of all such classified
controlled carriers is published in the Federal Register.
Question: (China #104)
Reference: p. 130, paras. 120 and 121
Do carriers which are determined as controlled carriers have an opportunity to appeal?
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Answer
Carriers classified by the Federal Maritime Commission as controlled carriers have the opportunity to
appeal:
A carrier which has been classified as a controlled carrier by the General Counsel under authority
delegated to it by the Federal Maritime Commission may file a "rebuttal statement" with the Federal
Maritime Commission. 46 C.F.R. 565.3(b). If the Federal Maritime Commission affirms the General
Counsel's action or if no such "rebuttal statement" is made within 30 days of the notice of
classification, the determination of the General Counsel is considered a "final agency action" for
purposes of judicial appeal. A carrier may petition the agency for reconsideration under 46 C.F.R.
502.261; or appeal this final administrative action to a federal Court of Appeals.
Question: (India #32)
Bonding charges for Maritime Freight Forwarding Services
Insofar as Maritime Freight Forwarding Services are concerned, discriminatory charges are levied for
Foreign (non-resident) NVOCC or Freight Forwarding company in respect of "Individual Bonding" to
the Maritime Commission in which such company has to pay US$150,000 as compared to a company
which has a Joint Venture or branch presence in USA which has to pay only US$75,000. There is a
requirement to work through a U.S. Resident Agent in case the place of business is not in USA. Such
a requirement does not appear to be reasonable. Please provide U.S. view on this point and the reason
for such discrimination. Will the U.S. delegation clarify whether there is any proposal to review this
requirement.
Answer
The bonding requirement established by Section 19 of the Shipping Act of 1984, 46 U.S.C. app.
§1718, requires that any person doing business as an ocean transportation intermediary ("OTI") in the
U.S. foreign trade must have a bond, proof of insurance, or other surety to insure its financial
responsibility to pay reparations or damages arising from its transportation-related activities described
in section 3(17) of the Act, and any penalties assessed for violation of the Act.
The Ocean Shipping Reform Act of 1998 ("OSRA") amendments to the Shipping Act of 1984
changed the Shipping Act of 1984 to require that NVOCCs for the first time obtain a license. On
February 26, 1999, the FMC adopted new regulations at 46 CFR part 515 to implement changes made
by OSRA relating to ocean freight forwarders and NVOCCs. 64 FR 11155-11183, March 8, 1999.
As part of the final rule, the FMC published as an interim final rule a provision to allow foreign
NVOCCs the opportunity to seek to obtain a license under the provisions of 46 CFR part 515. The
FMC explained that pursuant to the definition of "in the United States" in 46 CFR 515.3 adopted by
the FMC, a foreign NVOCC could choose to establish a presence in the United States for licensing
purposes in accordance with §515.3 and secure financial responsibility applicable to NVOCCs in the
United States. To establish a presence in the United States necessary to obtain a license under this
part, a foreign NVOCC must set up an unincorporated office that is resident in the United States that
meets the requirements of the state in which it is located. The FMC does not consider the foreign
NVOCC's primary location in the United States to be a separate branch office subject to additional
licensing and financial responsibility requirements.
See FMC website, frequently asked questions, found at http://www.fmc.gov/Help/OTI.htm.
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The FMC is not aware of any legislative proposals to revise this requirement, which was first
instituted with the enactment of OSRA. Nor are there any proposals to revise the FMC's regulations
with respect to these requirements.
(4) AIR TRANSPORT SERVICES
Question: (Argentina #8)
Reference: Chapter IV- 5. Air Transport Services, para. 149
We would like to know why, under paragraph 149, services for the leasing or chartering of aircraft
without operators are classified under the category of services to firms (along with services for the
leasing of other industrial equipment without operators), thereby differentiating from aircraft leasing
or chartering services with operators, which are excluded from the scope of the GATS because they
are considered part of traffic rights.
Answer
The paragraph of the report to which this question refers (para. 149) pertains solely to aircraft leasing
services, which are both from an economic and regulatory perspective distinct from charter services.
With regard to aircraft leasing services, the distinction between "wet" and "dry" leases, or operating
and non-operating leases, respectively, is recognized in various classification schemes, including the
United Nations Central Product Classifications. The Council for Trade in Services Secretariat has
also assessed this distinction in the classification of aircraft rental and leasing services in several
studies (see, inter alia, S/C/W/163, paragraphs 146-147 and S/C/W/59, paragraph 65.) This
classification recognizes the fact that in a "dry" or non-operating lease the service supplier (the lessor)
does not provide an air transportation service and hence does not exercise traffic rights.
Question: (Canada #20)
Reference: para. 137
The Fly America Act requires U.S. government-financed transportation and cargo to be on U.S.-flag
air carriers. What percentage of U.S. government funding is required for Fly America provisions to
kick in (10 percent, >50 percent)? The act allows for the U.S. to negotiate agreements with other
countries providing an exchange of Fly America type rights. Has the U.S. negotiated any such rights?
Answer
Fly America applies to any transportation of passengers or cargo that is U.S. Governmentfunded/procured. The statute does not cite a threshold percentage of funding that must be met for the
provisions to kick in.
Two agreements have been concluded. Under one, Saudi Arabian carriers may transport personnel or
cargo for contractors being paid with USG funds. Under the second, Brazilian carriers may carry
non-military cargo. U.S. carriers sought this agreement to obtain reciprocal access to Brazilian
government/parastatal cargo carriage.
Under the current interpretation of U.S. law, the carriage of U.S. Government-financed air
transportation by a U.S. carrier may include transportation sold pursuant to a codeshare arrangement
with a U.S. carrier, but carried on an aircraft operated by a foreign carrier
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Chapter 4 - BY SECTOR
(5) TELECOMMUNICATION SERVICES
Question: (Brazil #37) (Services #1)
WT/TPR/S/126 Para. 164
Please provide further clarification on how the mechanism of granting new license to foreign telecom
carriers wishing to operate in the U.S. works, pursuant to Sections 214 and 310 of the Act, especially
in cases when the FCC undertakes the Public Interest Analysis test through consultations with the
DOS, DOD and FBI. Please also provide clarification on the compatibility of such test with Art XVII
of the GATS (national treatment) since U.S. telecommunications carriers are not subject to the test.
Answer
The following is an FCC website link providing filing guidelines for section 214 applications and
providing information on the process or "mechanism" on 214 licensing including section 310
http://www.fcc.gov/ib/pd/pf/214guide.html. The FCC places license applications on public notice
which provides the opportunity for public comment on all issues, including national security, law
enforcement, foreign policy, or trade concerns. The FCC takes into account the entire record when
considering such a license application, and affords the appropriate level of deference to Executive
Branch expertise on national security, law enforcement, foreign policy and trade matters. In addition,
we note that to date, the FCC has not denied any license based on any of these types of concerns.
We also note that all carriers seeking application of grant for a 214 license are subject to review
pursuant to the public interest.
Question: (Brazil #40) (Services)
WT/TPR/S/126 Para. 161
Could the U.S. specify whether the taxes relating to the Universal Service Fund affect foreign
consumers of telecommunications services through Modes 1 and 2? Can this be considered a
mechanism whereby foreign consumers subsidize the universal services in the U.S.?
Question: (Thailand #4) (Service #1)
How are private companies encouraged to invest in areas where operational costs are high?
Answer
Generally investment decisions in the United States are made by the private sector based on many
factors, including whether a country has an open market and meaningful trade commitments. The
United States encourages open markets in this sector at home and abroad.
Question: (EU #23)
The report of the Secretariat (paragraph 161), describes the finance of the U.S. universal
telecommunications service, whereas companies must pay a percentage of their interstate end-user
revenues to the Universal Service Fund. What are those services to which access must be granted
under the Universal service provisions? What does "reasonable and affordable rates throughout the
country" mean? How is the Universal Service fund money granted to operators?
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Answer
Universal service provides support to eligible carriers serving high-cost areas and low income
consumers, as well as discounts to eligible schools and libraries, and rural healthcare providers. For
the high-cost and low income mechanisms, the following telecommunications services are supported
by federal universal service: single-party service; voice grade access to the public switched
telephone network; Dual Tone Multifrequency (DTMF) signalling or its functional equivalent; access
to emergency services; access to operator services; access to interexchange service; access to
directory assistance; and toll limitation services for qualifying low-income consumers.
Telecommunications carriers that receive universal service high-cost support must provide all of these
services throughout their service areas. Eligible schools and libraries may receive discounts on
eligible telecommunications services, internal connections, and/or internet access. Eligible rural
healthcare providers may receive discounts on eligible telecommunications services and/or internet
access. Additional information on each program is available at: http://www.universalservice.org and
http://www.universalservice.org/Reports (USAC Annual Reports).
The Commission has not specifically identified national reasonable or affordable rates, per se, because
various factors, many of which are local in nature, affect rate affordability. States exercise primary
responsibility for determining the affordability of rates. Support provided by the high-cost
mechanism goes to carriers to offset their costs. Through the provision of high-cost support to offset
costs, however, the Commission ensures that states are able to set rates in rural areas that are
reasonably comparable to those in urban areas. Support provided through the other universal service
mechanisms enables consumers, who would otherwise not be able, to afford the services provided by
service providers.
The support amount is calculated and distributed by the Universal Service Administrative Company
(USAC), the universal service fund administrator. USAC calculates the support amounts based on the
operation of the relevant mechanism (i.e., High-Cost, Low Income, Rural Healthcare, Schools and
Libraries), as outlined in Part 54 of the FCC's rules (47 C.F.R. §54).
Additional information on each program is available at: http://www.universalservice.org and
http://www.universalservice.org/Reports (USAC Annual Reports).
Also as noted in footnote 30 of the Secretariat’s report, an explanation of the U.S. universal service
regime is available online at: http://www.fcc.gov/wcb/universal_service/welcome/html.
Question: (EU #24)
The Secretariat report (paragraphs 162, 177 and 178) describe the FCC's Benchmark Order in the U.S.
How does the U.S. justify the maintenance of a benchmark system in its International Settlements
Policy? How is this system compatible with the obligations of non-discrimination of the GATS and
the commitments of market access made by the United States in 1997?
Answer
The FCC is obligated under Section 201 of the Communications Act of 1934, as amended, to ensure
that rates for U.S.-international services are not unjust and unreasonable. As a result, the FCC
implemented the benchmarks policy in 1997 in order to curb excessive accounting rates U.S. carriers
were paying, and U.S. consumers absorbed through retail rates, for international termination.
Similarly, the International Telecommunication Union also recognized the benefits of achieving more
cost-oriented accounting rates through its ITU-T Recommendation D.140.
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All WTO Members retain the right under the GATS to maintain laws or regulations to protect
competition in their markets, as long as the laws or regulations are applied in a manner consistent with
the provisions of the GATS. See paras. 260-267 of the Benchmarks Order for discussion
(http://www.fcc.gov/ Bureaus/International/Orders/1997/fcc97280.txt).
Question (EU #25)
The report points out (paragraph 164) that the FCC considers various factors when considering a
licence application from a foreign operator. What kind of "trade policy concerns" can affect a licence
application from a foreign operator? What are the criterias for assessing "security concerns" for a
licence application from a foreign operator?
Answer
The Commission takes into account the entire record and affords the appropriate level of deference to
Executive Branch expertise on national security, law enforcement, foreign policy and trade matters.
We expect that concerns of trade concerns and foreign policy would be raised only in very rare
circumstances. In addition, we note that to date, we have not denied any license based on any of these
types of concerns.
Question: (EU #26)
The report (paragraph 173) says that the ORBIT act imposes criteria on entry into the U.S. market of
Inmarsat and New Skies, in particular statutory privatisation criteria which the FCC must apply in
order to determine whether to grant market access to these entities. However, since these criteria
apply to no other competitor, foreign or domestic and could lead the FCC to limit these entities' access
to the U.S. market (thus preventing an increase in the number of players in the market), could the U.S.
explain how this conforms with the intent of the Act to promote competition? Also, one criterion for
allowing market entry by these entities conditions market access on the place of registration of the
company6 even for WTO members' territories: can the U.S. explains how this complies with its WTO
obligations on market access, Most Favoured Nation (MFN) and National Treatment?
Answer
Paragraph 173 of the report actually addresses FCC actions under the ORBIT Act to facilitate
privatization of INTELSAT (now a U.S. licensee) and of New Skies (an INTELSAT spinoff and
Netherlands licensee) and authorize service of both in the U.S. market. Paragraph 175 of the report
addresses FCC authorization of Inmarsat's (a U.K. licensee) access to the U.S. market for mobile
satellite services in 2001. The privatization criteria in the ORBIT Act for successor entities are
generally the same for both INTELSAT and Inmarsat, contrary to the premise of your questions and
therefore apply to both a U.S. and foreign licensee. The intent of the criteria is to ensure that both
INTELSAT and Inmarsat are privatized in a manner that will not be harmful to competition.
6
"Any successor entity or separated entity shall be subject to the jurisdiction of a nation or nations that:
(A) have effective laws and regulations that secure competition in telecommunications services; (B) are
signatories of the World Trade Organization Basic Telecommunications Services Agreement; and (C) have a
schedule of commitments in such Agreement that includes non-discriminatory market access to their satellite
markets."
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Question: (EU #27)
As pointed out in the report by the Secretariat (paragraph 175), EU-based Inmarsat Ventures plc was
indeed granted access to the U.S. market, but this grant is subject to further review after Inmarsat
conducts an IPO, or revocation of its authorization to provide non-core services to the U.S. if it fails to
conduct an IPO, or if substantial dilution of the aggregate ownership of the company by its former
Signatories is not achieved through an IPO. Can the U.S. explain why such conditions are imposed
on Inmarsat (i.e. why the ORBIT act requires such conditions) given that the U.S. has granted market
access to any satellite operator based in a WTO member under the GATS?
Answer
The conditions were imposed upon both INTESAT and Inmarsat as required by the ORBIT Act. The
ORBIT Act requirement that these former intergovernmental organizations dilute former signatory
ownership through an IPO is based upon Congress' view that such dilution is necessary to complete
their transformation into independent commercial entities.
Question: (EU #28)
The EU takes good note that "the FCC endeavours to follow technology-neutral policies" (paragraph
179 of the Secretariat report). However, for digital terrestrial television, the U.S. has mandated an
exclusive transmission standard in the U.S. (the ATSC developed in the U.S.), which prevents a
technology (DVB-T) developed in Europe and adopted in several countries around the world from
entering into the U.S. market. Could the U.S. explain why it does not "follow a technology-neutral
policy" in this case?
Answer
The EU is taking the FCC's endeavouring to follow technology-neutral policies somewhat out of
context. Para. 179 of the Secretariat report deals with telecom services, which is distinct from the
audio/video services section that covers broadcasting and, in particular, digital terrestrial television
(DTV). In establishing its rules for DTV, the FCC relied on an extensive public notice and comment
process before deciding to adopt a single DTV standard. See Fourth Report and Order in MM Docket
No. 87-268 (adopted December 24, 1996, FCC 96-493) for specific rationale behind the decision. We
note that Europe has adopted DVB-T as its terrestrial broadcast standard and there isn't any
opportunity for the ATSC DTV standard to compete there either. The FCC is currently considering
steps that would permit parties to operate with DVB-T, and other terrestrial TV transmission
technologies, in the commercial spectrum being reclaimed from TV channels 52-62 and 65-67.
Question: (Canada #21 and #22)
Canada understands that when considering a license application, the Commission defers to the
Executive Branch on other considerations such as national security, law enforcement, foreign policy,
or trade concerns. To what extent does the regulator have discretion in deciding on license
applications that raise such concerns?
Is the FCC, for example, obliged to follow the
recommendations of the executive agencies in this respect, or does the FCC simply required take their
consideration into account?
Though the GATS allows countries to take measures that are essential to protect security interests,
there is no explicit exception for foreign policy or trade concerns. Please comment on whether the
denial of licences on these grounds would fit within: (i) the GATS exceptions; and (ii) the U.S.
GATS commitments?
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Answer
The FCC places license applications on public notice which provides the opportunity for public
comment on all issues, including national security, law enforcement, foreign policy, or trade concerns.
The FCC takes into account the entire record when considering such a license application, and affords
the appropriate level of deference to Executive Branch expertise on national security, law
enforcement, foreign policy and trade matters.
We note that to date, the FCC has not denied any license based on any of these types of concerns.
Question: (Canada #23)
The U.S. notes that in reviewing proposed foreign investment pursuant to Section 310 of the
Communications Act of 1934, the FCC relies on principles set forth in the 1997 Foreign Participation
Order, including a presumption that foreign investment in the U.S. market by entities from WTO
member countries is consistent with the public interest. Does the U.S. intend to legislate to reflect in
law the "practical" removal of barriers to investment by WTO members, thus providing the full
security of law to foreign firms of WTO Member-countries.
Answer
It is unclear what Canada is proposing, and what barriers Canada is suggesting be removed. Since
late 2000, well over 500 carriers with foreign participation have been granted authority to provide
global facilities-based or resale services in the United States, including over 60 with some level of
Canadian interest.
Question: (Korea para. 169)
Is it correct to understand that entities from WTO member countries are exempt from the public
interest review?
Answer
No. As stated in the Secretariat's report, in reviewing petitions for proposed foreign investment as
required pursuant to Section 310, the Commission relies on principles set forth in the 1997 Foreign
Participation Order, including a presumption that foreign investment in the U.S. market by entities
from the WTO member countries is consistent with the public interest.
Question: (Korea para. 172)
Provide information explaining the reasons for the U.S. classification of DBS/DTH services as
telecommunications services.
Answer
One-way satellite transmission of DBS/DTH services does not have the characteristics of traditional
free-to-air broadcast services. Thus, they are classified in the United States as telecommunications
services as opposed to broadcast services.
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Question: (Korea para. 179)
Reference: para. 179
Does the U.S. feel that adopting a single standard would not help enhance the mobile penetration rate
in the U.S.?
Answer
No. Having multiple competing standards has not proven to be a deterrent to wide-spread adoption of
mobile services in the United States. In fact, without adopting a single standard, 6 wireless operators
have nation-wide coverage, and are competing on the basis of innovation and price.
Question: (Korea para. 179 Part #2)
How does the U.S. government interpret the concept and scope of "legitimate public policy objectives
in telecommunications services?"
Answer
While the concept and scope of public policy objectives are not predefined, they have typically
included issues common to governmental oversight everywhere, such as safety, consumer protection,
competition, and national security.
Question: (Japan #70)
According to the Report by the Secretariat, the FCC has authority to adjudicate disputes. Please
explain what kinds of disputes the FCC adjudicates, in what way and through which procedures they
are adjudicated, and how many disputes a year are treated by the FCC?
Answer
The FCC adjudicates formal and informal complaints against common carriers, and also reviews
informal complaints against other entities regulated by the FCC. Formal complaints are roughly the
equivalent of a civil lawsuit. Much of the FCC's work on formal complaints involves providing
structured mediation to the parties. Indeed, many cases are settled before a complaint is ever filed.
More information is available on the Enforcement Bureas web site at www.fcc.gov/eb, including lists
of formal complaints that have been resolved.
Question: (Japan #71)
How long does it usually take the FCC to resolve a dispute?
Answer
In cases where a formal complaint is filed and we have to write a decision, the FCC tries to resolve
the case within a year. But as noted above, many cases are settled without the need for a written
decision.
Question: (Japan #72)
How does the FCC ensure the transparency of its procedures including information disclosure?
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Answer
All procedures followed in complaint cases are set out in the Commission's rules.
Question: (Japan #73)
Is there situation where the FCC's individual dispute resolution is fed back to the rule-making or
policy-making process? If so, in what way?
Answer
FCC decisions in complaint cases may resolve unanswered questions arising out of the rule-making
process, so in that sense, individual cases do relate back to the policy-making process. Also,
information on the adjudicatory decisions made by the FCC's Enforcement Bureau and by the
Commission itself is available throughout the agency and to the public. This enforcement experience
can be taken into consideration in the development of proposals for FCC rules designed to encourage
compliance with existing regulations and laws.
Question: (Japan #74)
What is the legal effect of a judgment by the FCC regarding dispute resolution? What procedures can
the parties to the dispute take if they are dissatisfied with the judgment of the FCC.
Answer
Like other decisions of the FCC, a judgment by the FCC, including any sanctions ordered by the FCC,
takes effect without further legal action. A party subject to a judgment regarding dispute resolution
may, however, request review by a court. Parties can appeal decisions to a Federal Court of Appeals.
Question: (Japan #75)
How is the responsibility regarding dispute resolution divided between the FCC and the State Public
Utility Commissions?
Answer
Where the Communications Act of FCC rules are at issue, the FCC has responsibility - except to the
extent that our local competition rules give states authority to resolve certain disputes (e.g., pricing of
unbundled network elements). Generally, states resolve only intrastate issues, although with
exceptions, and the FCC resolves interstate issues.
Question: (Japan #76)
(p. 138, para. 160)
There are three different kinds of access charges in the U.S.: reciprocal compensation, intra-state
access charges and inter-state access charges, which are imposed, for instance, depending on the type
of accessing carrier. Japan requests that the FCC eliminate, or at least reduce, the disparity and
inconsistencies among the access charges. What is the U.S. view on these points ?
Answer
Access and reciprocal compensation charges in the United States have evolved under different legal
frameworks. Access charges, in particular, address goals that had to be addressed following the
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break-up of AT&T with respect to recovering fixed costs of the local exchange network. Since
disparate compensation arrangements may not be sustainable given arbitrage opportunities and the
advent of new technologies, the United States has an interest in examining whether more uniform
compensation arrangements are feasible. This is the subject of an ongoing rulemaking: FCC Docket
01-92, Developing a Unified Intercarrier Compensation Regime, accessible through the Electronic
Comment Filing System at www.fcc.gov. Japan is welcome to comment in this proceeding. The fact
that there are disparate rates in the United States, however, should not obscure the fact that unlike in
Japan, all these rates have systematically trended downward, and are typically one third to one half
the levels that Japan has approved for its dominant, government-owned company.
Question: (Japan #77)
(p. 139, para. 162 and p. 140, para. 168)
Japan abolished the restriction of foreign investment on the licensing of radio stations for the purpose
of conducting telecommunications activities, and has further, been requesting the U.S. to take the
same action regarding the restriction of foreign investment, as stipulated in Section 310 of the
Communications Act 1934. In addition, the "Second Report to the Leaders on the U.S.-Japan
Regulatory Reform and Competition Policy Initiative" states that, "the Government of the United
States will continue a dialogue with the Government of Japan on restrictions on direct investment in
the U.S. wireless market". On the other hand, the Report by the Secretariat relates that, "the
restrictions on direct investment are statutory requirements that the FCC cannot waive". Please
explain the position of the U.S. on these restrictions. In particular, please explain the grounds for
maintaining the restriction on direct investment, despite the fact that indirect investment has been
fully liberalized.
Answer
Restrictions on direct investment in radio stations are a statutory requirement that cannot be waived.
The United States is pleased to continue its dialogue with Japan explaining why this does not impose
a meaningful restriction on market access.
The origin of this restriction can be traced, in part, to the Russo-Japanese War, where Japan's
successful use of radio technology for military purposes raised the awareness in the United States of
the national security implications of direct control over spectrum, which resulted in legislation that
remains in force.
Question: Japan #78)
(p. 139, para. 163)
A foreign carrier providing international telecommunications services, which has "market power" in
its own market, is regulated more strictly than other carriers, being imposed additional rules. Such
regulations have no rationale and may result in unjustified discriminatory treatment against foreign
carriers. These regulations may also have the effect of unfairly restricting foreign direct investment.
What is the U.S. view on our comments?
Answer
The United States is surprised and disappointed that Japan does not appear to understand the
importance of dominant carrier regulation, particularly in light of its own WTO obligations. The
United States cannot always be assured that a foreign regulator will prevent its carriers from abusing
their position to the market to the detriment of U.S. consumers. The United States has a legitimate
interest in ensuring that is domestic rules adequately protect its consumers.
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Question: (Japan #79)
Japan further requests the U.S. to make clear the guidelines, which are applied when the dominant
carrier regulation in Section 63, Title 47 of the Code of Federal Regulations (47CFR63), is
implemented to those carriers providing international communications services.
Answer
The United States invites Japan to specify which aspects of this rule it does not understand. In the
Foreign Participation Order, the Commission adopted a narrowly-tailored dominant carrier framework
designed to address specific concerns of anticompetitive behavior. A U.S.-licensed carrier is
classified as dominant on a particular route if it is affiliated with a foreign carrier that possesses
market power in a relevant market on the foreign end of that route. The safeguards include separation
requirements, filing requirements, and the benchmark condition. A carrier may seek to modify its
regulatory status from dominant to non-dominant on a particular route by submitting information, as
specified under Part 63 of the Commission's rules, demonstrating that it qualifies for non-dominant
treatment.
Question: (Japan #79, Part 2)
Japan further requests the U.S. to make clear the guidelines, which are applied when the dominant
carrier regulation in Section 63, Title 47 of the Code of Federal Regulations (47CFR63), is
implemented to those carriers providing international communications services.
Answer
The United States invites Japan to specify which aspects of this rule it does not understand.
In the Foreign Participation Order, the Commission adopted a narrowly-tailored dominant carrier
framework designed to address specific concerns of anticompetitive behavior. A U.S.-licensed carrier
is classified as dominant on a particular route if it is affiliated with a foreign carrier that possesses
market power in a relevant market on the foreign end of that route. The safeguards include separation
requirements, filing requirements, and the benchmark condition. A carrier may seek to modify its
regulatory status from dominant to non-dominant on a particular route by submitting information, as
specified under Part 63 of the Commission's rules, demonstrating that it qualifies for non-dominant
treatment.
Question: (Japan #80)
Sections 214 and 310(b)(4) of the 1934 Act provide several certification and licensing criteria for a
foreign carriers entry into the U.S. telecommunications market. Among them, the criteria of trade
concerns and foreign policy could be applied to refuse the issuance of a certification or licenses by
using reasons that are irrelevant to telecommunications policy. The existence of such criteria is
regarded by foreign carriers, including those from Japan, as a de facto barrier to entry. There are
actually cases where certificates to subsidiaries of Japanese companies have been delayed, a situation
causing long-term concern. Japan, therefore, requests the U.S. to abolish the criteria.
Answer
Sections 214 and 310 of the Communications Act mandates that the Commission determine that grant
of an application to provide communications services in the United States or to hold a radio license
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will serve the public interest. The public interest standard is broad, and under this standard the FCC
must consider many factors that may be raised in connection with an application, including national
security, law enforcement, foreign policy and trade concerns. The Commission takes into account the
entire record and affords the appropriate level of deference to Executive Branch expertise on national
security, law enforcement, foreign policy and trade matters. The requirement of Sections 214 and
310(b)(4) to make a public interest determination can only be changed by an act of Congress and
cannot be changed unilaterally by the FCC in the context of a rulemaking.
The Commission expects that concerns of trade concerns and foreign policy would be raised only in
very rare circumstances. In addition, we note that to date, the Commission has not denied any license
based on any of these types of concerns.
The United States would note that it is not unusual for governments, in the responsible exercise of
their authority, to take into consideration a range of public interest factors in a licensing proceeding.
In Japan, for example, telecommunications firms seeking to land submarine landing cable stations are
typically instructed by MPHPT to negotiate with representatives of fishing interests. It is unclear
whether Japan considers fishing interests to be relevant to telecommunications policy.
Responsible governments typically address a range of issues in the context of a licensing process. We
understand that Japan, for example, requires that telecommunications carriers seeking to land
submarine cables address the concerns of fishing interests. Does Japan believe that fishing is relevant
to telecommunications policy?
Question: (Japan #81)
Japan also requests the U.S. to clarify and publish the guidelines according to which the criteria of
very high risk to competition will be applied.
Answer
A very high risk to competition would be a very fact-specific determination, for which specific
criteria would be inappropriate.
The Commission has stated that the very high risk to competition standard would apply only in
exceptional cases in which the facts of the particular case demonstrate that Commission safeguards
and conditions would be ineffective at preventing anticompetitive conduct. An applicant would have
to possess the ability to harm competition in the U.S. market in addition to the ability to exercise its
foreign market power. The Commission has not found a very high risk to competition in connection
with any application to date.
Question: (Japan #82)
(p. 140, para. 165)
The U.S. should refrain from examining the regulatory policies and market trends of other member
countries in the field of telecommunications, solely from a U.S. own point of view, by using the threat
of countervailing measures under Section 1377 of the Omnibus Trade and Competitiveness Act of
1988. Such an approach gives rise to problems: (a) for easily raising individual issues around an
intergovernmental table without using formal procedures, such as dispute resolution procedure and
submission of opinions established by respective member countries, and (b) discouraging, possibly
and unreasonably, foreign telecommunications carriers from expanding business operations. What
would be the U.S. view on the abolition of this approach?
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Answer
In countries with a truly independent regulator, with the will and ability to enforce decisions, resort to
trade remedies to ensure meaningful market access should not be necessary. In countries like Japan,
however, where the regulator is subject to direct political control and the major suppliers are both
politically influential and government-owned, it is not prudent to assume that the regulator will be
willing or able to ensure competitive access to its market.
Question: (Japan #83)
(p. 140, para. 166)
In the U.S., telecommunication service carriers are obliged to file reports on business information,
including their earnings, to all individual states where they are providing services. As there is no
standard filing form common among all states, excessive burden has been placed on carriers for
reporting purposes. Japan, therefore, requests the U.S. to abolish them. What is the U.S. view on this
point?
Answer
Japan is invited to work with state regulatory officials to submit an appropriate proposal in the
appropriate forum.
Question: (Japan #84)
On August 21, 2003, the FCC published the "Review of the Section 251 Unbundling Obligations of
Incumbent Local Exchange Carriers (ILECs)" (Triennial review). This order grants states the
authority to determine whether an ILEC has an unbundling duty regarding a certain network element,
and to define the geographical scope of the market in which the same duty is applied. Japan is
concerned that the authority given to states will delay the implementation of the connecting rule and,
by fragmenting the market, will impose undue burdens and inefficiency on related companies.
Therefore, Japan requests the FCC to ensure uniformity, efficiency and promptness in the state-level
application of federal rules. What is the U.S. view on the matter?
Answer
Current rates remain in effect until new rates, if any, are determined. There is an inevitable trade-off
between the benefits uniformity and region-specific cost determinations. In this regard, we are
disappointed that Japan has failed to institute region-specific interconnection rates, the failure of
which appears to have resulted in NTT East maintaining above-cost interconnection rates.
Question: (Japan #87)
(p. 142, para. 177)
Japan requests the U.S. to abolish its benchmark rules as there exist certain problems regarding, for
example, the followings:
(a)
(b)
its
(c)
such
These could be a de facto barrier to entry into the U.S. market;
These allow the U.S. Government to set down one-sided settlement rates in connection with
policy of regulation on new entry, whereas the settlement rate should be determined
commercially; and
There is doubt about their consistency with the various principles of the WTO Agreement,
as the MFN treatment.
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Please explain the view of the U.S. on these points.
Answer
Japan's views on this matter appear inconsistent with the goals of liberalized telecommunications
markets. This is particularly surprising, given the fact that Japanese companies have been major
beneficiaries of U.S. efforts to curb abuses of the settlement rate system.
Question: (China #96)
How does the U.S. ensure that licensing requirements and procedures, qualification requirements and
procedures and standards do not become unnecessary barriers to trade?
Answer
As a general matter, our federal system of governance and the Interstate Commerce Clause of our
Constitution require state and local regulatory authorities to ensure that policy measures provide
equivalent access and treatment to service suppliers from all 50 states. A practical consequence of
this requirement is that state and local authorities develop licensing requirements and procedures
based upon objective, non-discriminatory criteria. Thus, for example, the licensing requirements to
practice law in Florida must be drafted in such a way as to permit a lawyer from New York to have an
equal opportunity for receiving a license. In most cases, the inherent principles of non-discrimination
contained in this system also serve to benefit Foreign Service suppliers.
In addition, our national professional organizations have been increasingly active in developing model
rules, which state and local authorities then draw upon in developing their regulatory policies. These
model rules have fostered a great deal of convergence among the states toward a common set of
practices and principles in sectors such as architectural, engineering, accounting, and legal services.
This effort toward harmonization and best practices serves to encourage competition and trade.
The United States also encourages representatives of the professions and the competent authorities to
actively engage their foreign counterparts to address issues that may impede trade and to pursue the
negotiation of agreements regarding mutual recognition.
Question: (China #105)
(p. 138, para. 160)
In the Reference Paper attached to the U.S. Services Schedule, note 29 to Article 2.2 provided that
Rural Local Exchange Carriers may be exempted by a state regulatory authority for a limited period
of time from the obligations of section 2.2. with regard to interconnection with competing local
exchange carriers. Rural telephone companies do not have to provide interconnection to competing
local exchange carriers in the manner specified in Section 2.2 until ordered to do so by a state
regulatory authority? What is the reason for retaining this kind of measures and how does it fulfil its
purpose and objectives?
Answer
Rural carriers face unique challenges. Generally, these carriers have higher operating and equipment
costs, which are attributable to lower subscriber density, small exchanges, and a lack of economies of
scale. Thus, the Commission has historically not adopted a one-size-fits-all policy that might impede
rather than support the provision of affordable service by rural carriers.
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Question: (China #106, follow up to #105)
Under which circumstances will the state regulatory authority order interconnection to be provided by
rural telephone companies?
Answer
Under the Section 251(f)(2) of the Telecommunications Act of 1996, a rural carrier may petition a
state regulatory authority to suspend or modify the requirement to provide interconnection as an
incumbent operator.
Question: (China #107, follow up to #105)
Has the U.S. considered alternative approaches to address its policy concerns?
Answer
The FCC is always open to consider policy concerns through its open and transparent processes.
(6) AUDIOVISUAL SERVICES
Question: (EU #29)
The U.S. has made commitments in 1994 for "2.D.b Motion Pictures Projection Services". The EC
would like to know whether the U.S. is implementing in full these commitments, or whether it has
been facing difficulties to implement them, notably as regards non-profit and publicly funded entities.
Answer
The United States faces no difficulty in fulfilling its 1994 commitments. As we have noted in the
introductory clarification of our current offer, our commitments apply only to services open to private
sector participants.
Question: (EU #30)
The U.S. has made commitments in 1994 for "2.D.a Motion Pictures Production and Distribution
Services", which include film dubbing, film title printing, editing, cutting, etc. The U.S. has made
commitments in 1994 for "2.D.c Radio and Television Services". In addition, the U.S. has made
commitments in 1994 for "2.D.f Other Audiovisual Services". The EC would like the U.S. to indicate
the specific services that it considers as being covered by its commitments under "2.D.f Other
Audiovisual Services".
Answer
The United States scheduled a commitment for Other Audiovisual Services to ensure that new
services, developing as a result of technological advances, would be included in its offer for
audiovisual services. The U.S. offer of Other Audiovisual Services does not, however, extend to
infrastructure services, such as DTH satellite or cable services, which are found elsewhere in
W/GNS/120. The United States acknowledges the EC's interest in audiovisual classification issues
and welcomes the opportunity to discuss these, and related issues, in the services negotiations.
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Question: (Thailand #5)
Please describe the U.S.'s policy, structure, and regulations, classified by each type of entertainment
and every process of audiovisual services sector.
Answer
A.
Policy
1.
With the exception of regulations prohibiting obscenity, the Federal Government does not
regulate the production, distribution or import of films. Nor does the Federal Government restrict or
limit television programming, or home video entertainment that is produced and distributed by
foreign-owned entities. Due to First Amendment protections, the FCC regulates video content only to
a very limited degree. Specifically, broadcast media are subject to statutory political advertising
requirements; commercial television stations must provide minimum quantities of children's
programming, and so-called indecent programming on broadcast media is relegated to the 10:00 PM6:00 AM time period.
2.
Obscene speech is not protected by the First Amendment and cannot be broadcast at any time.
With the exception of obscenity, the federal government does not regulate or limit films imported into
the United States, and is not in the business of distributing or exhibiting cinematic films.
B.
Structure
3.
Audiovisual services consist of the production and distribution of entertainment, including
films, home video entertainment, and television programmes. The transmission of this entertainment
can be carried out through different transmission mechanisms, including through terrestrial, over-theair broadcasting or by cable or satellite. With technological progress, the mechanisms used to
transmit audiovisual content and telecommunication services have become increasingly
indistinguishable.7
4.
The U.S. audiovisual sector produces feature films as well as television series for broadcast,
cable, and DBS distribution. After theatrical release, feature films are frequently distributed via pay
television distribution platforms such as cable and DTH satellite TV, and then via broadcast TV. The
audiovisual sector includes several large broadcast networks which provide programming to many of
the over 1,700 local television stations.8 They compete with non-broadcast distribution networks,
which include approximately 230 national cable programming networks and more than 50 "premium
networks".9 In the United States, 44 percent of audiovisual revenues are derived from the home video
entertainment market, 40 percent from TV markets, and 18 percent from theatrical. In 2003, over 85
percent of households received their video programming via satellite or cable.10 During the 20012002 TV season, broadcast stations had a 47 percent share compared to the non-broadcast networks'
53 percent share of viewing.11
7
For example, the authorities have noted that in the classification used for GATS services, cable and
satellite services are not included in the audiovisual subcategory; however, these constitute a support that is
widely used to transmit entertainment services.
8
Local TV stations distribute network programming and other programming from local, regional or
national sources. Broadcast Station Totals as of June 30, 2003, FCC News Release, 22 July 2003,
http://www.fcc.gov/Daily_Releases/Daily Digest/2003/dd030722.html.
9
2002 Competition Report, FCC 02-338.
10
2002 Competition Report, FCC 02-338.
11
Nielsen Media Research data reported in Cable Developments 2003, National Cable and
Telecommunications Association.
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C.
Regulations
5.
In the case of telecommunications services, under Section 310 of the Communications Act,
radio and television broadcast licenses may not be owned by a foreign corporation or a company of
which more than 20 percent of the capital stock is owned or voted by non-U.S. citizens; by a
corporation chartered under the laws of the United States that is directly or indirectly controlled by a
corporation more than 25 percent of whose capital stock is owned by non-U.S. citizens; or by a
foreign government or a corporation of which any officer or more than 25 percent of the directors are
non-U.S. citizens.
6.
Six ownership restrictions were in place in October 2003, with the objective of promoting
competition, diversity, and localism in media production. The Dual Network Rule permits an entity
to own a maximum of two broadcast networks as long as one of the networks is not ABC, CBS, NBC
or Fox. The National Television Ownership Rule limits the viewing audience which one entity can
control to 35 percent. The Broadcast-Newspaper Cross-Ownership Rule bans a company from
owning a newspaper and broadcast stations in the same local area.12 The Local Television Multiple
Ownership Rule permits ownership of two TV stations in a market, with some limited restrictions.
The Local Radio Ownership Rule limits the number of radio stations a company may own depending
on market size. The Television-Radio Cross-Ownership Rule limits the number of television and
radio stations an entity may commonly own in a local market.
7.
In 2001, the FCC began a Media Ownership Policy Re-examination of these rules, in the
context of the biennial review of regulations that is mandated under the Telecommunications Act.
The resulting Report and Order adopted on 2 June 2003 retained the Dual Network Ownership Rule.13
The Order relaxed the limits on ownership of local TV stations by a single company. The FCC
incrementally increased the 35 percent limit contained in the National Television Ownership Rule to a
45 percent limit on national ownership. The FCC found that the limits on local radio ownership
contained in the Local Radio Ownership Rule continue to be necessary in the public interest, but
changed the methodology for defining a radio market. Changes were also made to both the
Television-Radio Cross-Ownership Rule and the Broadcast-Newspaper Cross-Ownership Rule which,
among other things, eliminated the newspaper-broadcast cross-ownership ban and the television-radio
cross-ownership ban in markets with nine or more TV stations. The new ownership rules were stayed
by an appellate court before they could become effective.14 The existing six ownership rules remain
in place during judicial review of the FCC's ownership rules adopted on 2 June 2003.
8.
At the state level, a number of states have enacted legislation that regulates information
motion picture distributors must provide to exhibitors in the conclusion of exhibition contracts and
prohibits specified contract practices. Further, common law doctrines regarding defamation, privacy
and publicity (the right to exploit the name and likeness of a public figure in a wide variety of
commercial uses) may affect the marketing of copyrighted works by enforcing the rights of certain
individuals that may be violated by exhibition of the work. Finally, in April 1978, the Supreme Court
upheld the constitutional power of states and cities to prevent the exposure of children to books and
films which could not be denied to adults.
12
Report and Order, para. 328.
See FCC News Release, 2 June 2003, at: http://www.fcc.gov/Daily_Releases/Daily_Business/2003
/db0602/DOC-235047A1.pdf.
14
Prometheus Radio Project v. Federal Communications Commission, No. 03-3388 (3rd Cir. Sept.
3, 2003) (per curiam)(order granting motion to stay effective date of FCC's new ownership rules).
13
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Question: (Thailand #5, Part #2)
Please provide the details of government/non-government authorities in this service sector.
Answer
Please refer to the response to Thailand #1 above under "Policy" and "Regulations."
Question: (Thailand #5, Part #3)
Please indicate the countries that U.S. has included audiovisual services sector for engaging in
bilateral agreement.
Answer
The United States has included audiovisual services in all its bilateral agreements.
Question: (Hong Kong #5)
We are pleased to note that during the biennial review in 2001 of the existing six regulations
restricting ownership of TV and radio stations, some changes have been proposed to relax certain
limits and eliminate certain cross-ownership bans. Yet, it is stated that the new ownership rules were
stayed by an appellate court before they could become effective. We would like to know when these
changes would be effective and whether the U.S. would consider reflecting such improvements in its
next offer.
Answer
Provisions of the new multiple ownership rules have also been raised in the context of pending
legislation. Thus, it is not clear when our "new" multiple ownership rules will take effect. Pursuant
to court order (as indicated below), the prior ownership rules remain in effect. On September 3, 2003
the U.S. 3rd Circuit Court of Appeals stayed the effective date of the rule changes contained in the
Biennial Report and Order. In its order, the Court stated that "the prior ownership rules [will] remain
in effect pending resolution of these proceedings." Prometheus Radio Project v. FCC, No. 03-3388,
at 3 (3rd Cir. Sept. 3, 2003) (per curiam) (order granting motion to stay effective date of the
Commission's new ownership rules).
Chapter 4 - BY SECTOR
(7) Financial Services
Question: (Canada #24)
Under the Gramm-Leach-Bliley (GLB) Act introduced in 1999, U.S. banks continue to have little
freedom to own and be owned by non-financial companies. The issue of whether banks would be
permitted to own non-bank companies as merchant banking investment may be reviewed five years
after the enactment of the GLB Act (2004). Does the U.S. foresee more liberalization of the banking
sector to permit banks to be owned and to own non-financial companies?
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Answer
The United States does not foresee any changes at this time to the U.S. policy separating banking and
non-financial activities in the United States. The Gramm-Leach-Bliley Act (GLBA) continued the
longstanding U.S. policy of separation of banking and non-financial activities, generally prohibiting
non-financial companies from owning banks. Companies that own banks (bank holding companies)
may, however, own non-financial companies through the merchant banking provisions of the GLBA.
Such investments are subject to the limitations set forth in the GLBA and the implementing
regulations. There is no current proposal to authorize banks directly to own non-financial entities
through the merchant banking provisions of the GLBA.
Question: (Canada #19)
While the United States has undertaken national treatment commitments, some restrictions remain in
the banking and insurance sub-sectors (e.g., registration requirements for foreign banks, certain
federal excise taxes on life and non-life insurance premiums). In addition, at the state level, market
access restrictions remain in the banking and insurance sub-sectors (e.g., establishment, acquisition,
licensing). Does the U.S. contemplate a relaxation of these restrictions by state-level governments?
Answer
The U.S. believes that U.S. state treatment of foreign financial services providers is, in general, very
liberal. That said, our initial GATS offer reflects some improvements undertaken by the states, for
example, in the area of insurance. The U.S. will continue to consult with the states for the purpose of
the negotiations.
Question: (China #98)
What concrete measures has the U.S. taken to implement Article 4 of the GATS to increase the
participation of developing countries in world trade of financial services?
Answer
The United States supports the goal of increasing the participation of developing countries under the
GATS more generally in addition to financial services. Under the GATS framework for trade in
financial services, we have encouraged a large number of developing countries to negotiate and make
broad commitments in financial services.
Liberalization of trade in financial services, when undertaken in conjunction with transparent and
strong regulatory regimes, benefits countries in many ways, some specific to the financial services
sector and others related to the overall health of their economies. For developing countries, in
particular, financial sector liberalization can be important not only for improving domestic
intermediation and competitiveness, but also for increasing participation in global trade in financial
services. In particular, mode 3 commitments in banking can foster an environment for greater trade in
goods and services and promote economic growth and stability through less distorted and volatile
capital flows. Further, developing Members could especially benefit from mode 3 commitments by
attracting foreign direct investment and expertise in areas beyond banking (e.g., securities, insurance,
funds management, and credit reporting agencies), which tend to be underdeveloped in such
economies. Liberalization of cross-border access is also important for areas such as insurance. In
December of 2000, the United States submitted a proposal to the Council on Trade in Services
(S/CSS/W/27) in which we outlined these and other views on financial services trade and the special
interest we hold in this sector.
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Question: (China #108)
How many licensing applications have been approved to foreign bankers and insurers since the
previous U.S. trade policy review?
Answer
Over 70 foreign bank applications have been approved by the Federal Reserve since April 1, 2001.
However, since the Federal Reserve is not the licensing authority for offices of foreign banks in the
United States, in most cases the relevant state or federal licensing authority also must approve the
application. We are not aware of any instances during this time period where the Federal Reserve
approved an application by a foreign bank that was not also approved by the licensing authority.
In general, we note that there are a very large number of foreign banking organizations operating in
the United States. These foreign banking organizations own approximately 18 percent of all U.S.
banking assets.
Question: (China #109)
Have there been any applications rejected by the licensing authorities in the United States during the
same period? If so, how many and why? How many licensing applications are pending for approval?
Answer
No applications by foreign banks have been rejected by the Federal Reserve during the period since
April 1, 2001. Currently, there are five applications by foreign banks pending at the Federal Reserve.
Question: (China #110)
Please provide total number and turnover of foreign insurers in operation in the United States and
their respective share in relation to the whole insurance sector in the United States.
Answer
SUMMARY TABLE
2002 Foreign Share
U.S. Insurance Market
(Millions of Dollars)
Life
All companies
Foreign companies
Foreign share (%)
441,242
121,147
27.41%
Non-Life (not incl.
Acc./Health)
417,055
58,991
14.14%
Accident & Health
313,903
9,294
2.82%
Total
1,172,200
189,432
16.16%
Number of Companies with "non-zero premiums" (actively providing insurance) - 4,325.
Number of Foreign15 Companies with "non-zero premiums" (actively providing insurance) - 474.
Source: National Association of Insurance Commissioners (NAIC).
15
Foreign insurance companies defined as companies with 50 percent or more ownership by foreign
shareholders and branches.
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Question: (China #111)
Will the U.S. kindly confirm whether a foreign insurance company branch present in one of the U.S.
cities (say Los Angeles) can set up a sub-branch in another U.S. city (say New York)?
Answer
Yes, in the United States, it is possible for a foreign insurance company branch in one state
(California in the case of Los Angeles) to establish a branch in another U.S. state (New York for the
case of New York City), assuming that the branch meets all the normal prudential requirements of that
second state.
Question: (China #112)
(p. 149, Paras. 203, 204, and 205) Various market access restrictions exist in the U.S. banking sector,
in particular on the establishment of branches by foreign commercial banks. Complicated approval
procedures and prolonged pending period are two common concerns of foreign banks. Up till now,
all the applications by Chinese banks to establish branches or representative offices have been
pending for a long time with the only exception of Bank of China's New York branch. For example,
the application by Bank of China to set up a branch in San Francisco was filed 10 years ago but the
approval is still pending by now. The reasons given by the U.S. competent authorities are not
convincing since Bank of China has been approved to set up branches in several other countries in
addition to the branch already existed in New York City of the U.S.
Please specify the criteria for approving the establishment of branches of foreign banks.
Answer
The discussion on an individual application for a branch would seem outside the scope of the Trade
Policy Review Process. The United States maintains a general policy of national treatment towards
the U.S. branches, agencies, securities affiliates, and other operations of foreign banks. We welcome
any foreign bank that meets internationally accepted standards on capital adequacy and consolidated
supervision. The general criteria for the establishment of branches of foreign banks are set forth in
the Foreign Bank Supervision Enhancement Act, as implemented by Regulation K, whether or not an
interstate expansion is involved.
The following are criteria reviewed by the Federal Reserve in assessing applications by foreign banks
to establish branches in the United States. In general, a foreign bank seeking to establish a branch in
the United States must be subject to comprehensive and consolidated supervision by its home country
supervisor. In certain circumstances, approval may be granted if the home country supervisor is
actively working to establish arrangements for consolidated comprehensive supervision. The foreign
bank also must have capital that is equivalent to the capital required of a U.S. bank in comparable
circumstances. The asset quality of the foreign bank is reviewed in making the capital assessment.
The Federal Reserve must determine that it will have access to necessary information to determine
and enforce compliance with applicable laws. The Federal Reserve also reviews whether the foreign
bank has adopted and implemented procedures to combat money laundering, whether there is a legal
regime in place in the home country to address money laundering, and whether the home country is
participating in multilateral efforts to combat money laundering. Other criteria include whether the
home country supervisor shares supervisory information with other supervisory authorities and
whether the home country supervisor has consented to the establishment of the U.S. branch. [Form
FR K-2 outlines the required information for an application. It is available on the web at:
http://www.federalreserve.gov/boarddocs/reportforms/forms/ FR_K-220021010_f.pdf.]
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The federal or state licensing authority may have additional requirements, although such requirements
generally are similar to those mentioned above.
All of these standards are consistent with international norms.
Question: (Chinese Taipei #1, page 5)
In addition to corporate income tax, foreign bank branches in the U.S. are required to pay a 30 percent
"Branch Profit Tax" if the earnings of the foreign bank are not reinvested in the U.S. Furthermore, the
rates of the Branch Profit Tax vary, according to whether or not the home country of the foreign bank
has signed a tax treaty with the U.S. My delegation is of the view that this measure does not conform
to the principle of non-discrimination and has placed an excessive burden on Chinese Taipei banks
operating in the U.S. We would therefore like to see the U.S. review this measure in due course.
Answer
The United States believes that "branch profit taxes" are fully consistent with our GATS obligations.
We note Chinese Taipei's statement of interest.
Question: (Chinese Taipei #2, page 5)
(Secretariat Report: p. 149, para. 205). As indicated, a foreign bank is required to establish an
insured banking subsidiary in order to accept or maintain retail deposits of less than US$100,000.
These restrictions, effective since 1991, have placed foreign banks operating in the form of branches
in a disadvantageous position, which seriously hampers their funding capability.
We recommend that the U.S. affords the same treatment to foreign bank subsidiaries as it does to
branches whose parent banking institutions are properly insured in their domestic market.
Answer
We would highlight that foreign bank branches engaged in insured deposit-taking activities as of
19 December, 1991, were exempted from this requirement. We would note that even before 1991,
when they were permitted to accept retail deposits in branches, foreign banks were primarily involved
in wholesale banking. The preference of foreign banks for branches may also be because, in some
cases where states allow branches, and for federal branches, foreign branches are generally not
required to commit organizational capital. The treatment of capital varies by state, however.
Question: (EU #31)
Could the U.S. specify which are the 18 States allowing inter-state branching by de novo
establishment, and whether more States contemplate to allow such a possibility? (Reference is made
to paragraph 201 of the Secretariat report).
Answer
Connecticut, Hawaii, Indiana, Maine, Maryland, Massachusetts, Michigan, Nevada, North Carolina,
North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, Texas, Utah, Virginia, and West
Virginia, (plus Puerto Rico and the District of Columbia).
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We do not have further information as to what other states might move to permit this type of interstate
branching.
Question: (EU #32)
Under U.S. law foreign banks branches may not be required to commit organizational capital omits
that they may be required to pledge a certain amount of their assets, computed as a percentage of their
third-party liabilities. Could the U.S. explain the current state-of-play of the asset pledge
requirements, and possible improvements contemplated, especially in the State of New York?
(Reference is made to paragraph 205 of the Secretariats report).
Answer
Federal and state law require that as a condition of opening a branch or agency, a foreign bank must
maintain a pledge of high grade liquid assets in the state where that branch or agency is located. This
condition is referred to as the "asset pledge" requirement or "capital equivalency deposit". The asset
pledge is intended to serve as a capital-like cushion for U.S. branches and agencies of foreign banks,
as well as to protect creditors and cover liquidation costs in the event of a failure of the branch or
agency or foreign banking organization. The United States considers federal and state asset pledge
requirements to be prudential and therefore does not list them in its reservations to market access or
national treatment.
Many states have recently modified their asset pledge requirements to reduce the economic costs
imposed on foreign banks. For example, in Illinois, state legislation was amended to grant
discretionary authority to the state banking commissioner to apply asset-pledge requirements based on
a risk-focused assessment of safety and soundness for individual banks. In New York, legislation
recently reduced the pledge requirement from 5 percent of third party liabilities to 1 percent of third
party liabilities; capped the pledge amount to $400 million for well rated institutions; expanded the
type of assets that may be pledged, including more flexibility for well rated institutions; and allowed
the pledge to be calculated on a monthly basis.
In 2002, the Office of the Comptroller of the Currency (OCC) implemented more flexible capital
equivalency requirements for federal branches of foreign banks to reduce costs for institutions that
present low levels of risk. Under U.S. law, federal branches of foreign banks maintain a Capital
Equivalency Deposit (CED) equal to 5 percent of their liabilities in trust accounts at other banks. The
OCC reduced administrative burdens for low risk branches, as they may now withdraw excess
deposits without seeking prior OCC approval. Additionally, the liability base over which the CEDs
are calculated has been redefined to exclude liabilities booked on a federal branch's International
Banking Facility, or IBF. An IBF may only accept deposits and extend credits to foreign companies
and individuals and to other IBFs.
The OCC has recommended legislation that would give the Comptroller the same flexibility that
states now have to adjust the 5 per cent CED requirement to take account of the particular
circumstances of an individual institution.
Question: (Hong Kong #6)
We note with appreciation that interstate expansion by a foreign bank through the establishment of
branches by merger with a bank located outside the "home state" of a foreign bank is granted national
treatment. Citizenship requirements are however still maintained in U.S. GATS initial offer and so
are the residency requirements (without specification of exact requirements and state coverage) for
directors, incorporators, organizers, or executive committee members of depository financial
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institutions. We would appreciate it if the U.S. could share with us some more details of the exact
requirements and the states included.
Answer
Citizenship, and in some cases residency, is required for incorporators or organizers of depository
financial institutions organized under state law, as listed in the U.S. GATS schedule. In the case of
boards of directors, the U.S. GATS schedule contains a list of state specific limitations on citizenship
requirements of which some would be eased under our latest offer. For example, Louisiana has
removed citizenship requirements for board of directors, allowing residents to serve on boards as well
and Georgia has reduced their requirement from all to 3/4. If Hong Kong has a more specific area of
interest we would be pleased to learn of it.
Question: (Hong Kong #7)
We note that the U.S. has inscribed registration requirements for foreign banks in the provision of
securities advisory and investment management services in its GATS schedule. Apart from the
registration requirement, we understand that some other discriminatory requirements also exist in U.S.
laws, such as citizenship/residency requirements for the majority of the directors and officers,
maintenance of assets in the U.S. with a U.S. bank, having a U.S. entity as a principal underwriter and
have a U.S. auditor for the company. We would appreciate it if the U.S. could advise us on the
compatibility of these restrictions with the U.S. GATS commitments.
Answer
We are not aware of any practices, including the ones mentioned and listed above by Hong Kong,
which are inconsistent with our GATS commitments.
Question: (Japan #88)
Discriminatory measures against foreign banks for raising funds within the United States (p.
147, para. 197) In order for banks to enter a securities business through an affiliates, it is necessary
for them to obtain the status of Financial Holding Companies (FHCs), based on the Gramm-LeachBliley-Act enacted in November 1999. The Act provides that foreign banks are required to meet wellcapitalized and well-managed standards, comparable to those applied to U.S. banks. Japan requests
the United States to clarify the criteria of FRB's judgment regarding these standards.
Answer
Banks may enter the securities business without obtaining FHC status. So-called "section 20"
companies may conduct general securities activities, subject to certain limitations. In order to
establish "section 20" companies, the foreign bank must meet capital and management standards as
applied on a national treatment basis.
With respect to the well-capitalized and well-managed standards for becoming an FHC, the GrammLeach-Bliley ("GLB") Act requires capital and management standards for a foreign bank that are
comparable to the standards applied to a U.S. bank owned by a FHC, giving due regard to the
principle of national treatment and equality of competitive opportunity. In assessing a foreign bank's
capital, the Federal Reserve Board (Board) uses a capital screening test referencing tier 1 and total
capital levels calculated under the Basel Capital Accord. The Board also believes, however, that
review of a non-U.S. bank's leverage ratio in particular cases may serve as an indicator that the bank's
capital should receive further scrutiny in determining whether the bank has capital comparable to a
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well-capitalized U.S. bank. Consequently, a foreign bank's leverage ratio will be considered by the
Board as one of the factors that can be taken into account for purposes of the comparability review.
Under this approach, the Board may consider whether the level of a foreign bank's leverage ratio is
such that it indicates that additional analysis should be undertaken in assessing comparability. Such
assessments would in all cases be based on all relevant factors, and not merely on the leverage ratio.
The foreign bank's qualification for FHC status would not be dependent upon the leverage ratio.
Instead, qualification would depend on the overall capital strength of the foreign bank. Moreover, the
Board expects that staff would consult with the foreign bank's home country supervisor on issues
relating to capital.
The Board' requirements are applied to banks on a consolidated basis. This is the internationally
accepted method of assessing bank capital. U.S. banks have non-depository subsidiaries and those
subsidiaries are consolidated into the U.S. bank's balance sheet for purposes of assessing capital.
Moreover, as noted above, a foreign bank would have the opportunity to submit a pre-clearance
request to the Board for a determination on capital status, and would be able to make arguments that it
believes demonstrate why its capital should be considered acceptable under the tests.
The Board takes into account a foreign bank's reliance on government support to meet capital
requirements in determining whether the foreign bank is well capitalized. In order to assure equality
of competitive opportunity, the Board must be able to consider the impact of any assistance a foreign
banking organization receives from its home country for purposes of meeting capital requirements. A
bank operating with government assistance is not competing on market terms.
With respect to management standards, the Board assesses the foreign bank's U.S. operations and
requires the same rating that U.S. banks must achieve. The Board also consults with the home
country supervisor to ensure that the supervisor believes the foreign bank has the capacity to engage
in the expanded activities of an FHC.
Question: (Japan #89)
Discriminatory measures against foreign banks for raising funds within the United States (p.
149, para. 203) When a foreign bank raises funds within the United States, it is necessary to deposit
a certain amount of collateral with the authorities as a guarantee. Under the New York State Banking
Law, for instance, the authorities demand bonds of high liquidity as eligible collateral, mainly CDs
and CPs. Complying with the requirement causes a substantial opportunity cost, since a much higher
return could be expected if invested in other assets. There are also other problems, such as the heavy
burden related to administrative procedures and price fluctuation risk of the collateral bonds.
Furthermore, according to a research conducted by the Institute of International Bankers (IIB), United
States and Canada are the only countries among over 40 countries surveyed, that oblige 'fund
collateral posting' by foreign banks' as business guarantee. Therefore, Japan requests that such action
be abolished. Should this not be possible, the qualifications for eligible collateral should be expanded
to include, for example, standard loan assets in order to provide flexibility for foreign banks. Japan
notes that the OCC has been reviewing this issue. What is the current situation surrounding this
review?
Answer
Federal and state law require that as a condition of opening a branch or agency, a foreign bank must
maintain a pledge of high grade liquid assets in the state where that branch or agency is located. This
condition is referred to as the "asset pledge" requirement or "capital equivalency deposit". The asset
pledge is intended to serve as a capital-like cushion for U.S. branches and agencies of foreign banks,
as well as to protect creditors and cover liquidation costs in the event of a failure of the branch or
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agency or foreign banking organization. The United States considers federal and state asset pledge
requirements that may exist to be prudential and therefore does not list them in its reservations to
market access or national treatment.
Many states have recently modified their asset pledge requirements to reduce the economic costs
imposed on foreign banks. For example, in Illinois, state legislation was amended to grant
discretionary authority to the state banking commissioner to apply asset-pledge requirements based on
a risk-focused assessment of safety and soundness for individual banks. In New York, legislation
recently reduced the pledge requirement from 5 percent of third party liabilities to 1 percent of third
party liabilities; capped the pledge amount to $400 million for well rated institutions; expanded the
type of assets that may be pledged, including more flexibility for well rated institutions; and allowed
the pledge to be calculated on a monthly basis.
In 2002, the Office of the Comptroller of the Currency (OCC) implemented more flexible capital
equivalency requirements for federal branches of foreign banks to reduce costs for institutions that
present low levels of risk. Under U.S. law, federal branches of foreign banks maintain a Capital
Equivalency Deposit (CED) equal to 5 percent of their liabilities in trust accounts at other banks. The
OCC reduced administrative burdens for low risk branches, as they may now withdraw excess
deposits without seeking prior OCC approval. Additionally, the liability base over which the CEDs
are calculated has been redefined to exclude liabilities booked on a federal branch's International
Banking Facility, or IBF. An IBF may only accept deposits and extend credits to foreign companies
and individuals and to other IBFs.
On January 20, 2004, revised regulations governing Federal branches and agencies of foreign banks
will go into effect. Among the changes is a provision permitting a foreign bank with Federal branches
and agencies in more than one state to consolidate some or all of its CEDs into one depository bank.
A depository bank is considered to be located, under the revised regulations, in those states in which it
has its main office or a branch. The revised regulations mark another way in which the OCC is
seeking to reduce any regulatory burden associated with the CED requirement.
Question: (Japan #90)
Investment Company Act of 1940 (p. 150, para. 209) According to the Investment Company Act
of 1940, an 'investment company', which is defined as a company that holds more than 40 percent of
its assets in the form of investment securities and engages primarily in securities investment, is
subject to regulations, such as the registration and disclosure requirement under the supervision of the
SEC. In this context, it should be noted that there are many cases where Japanese companies, that
have a large amount of cross-holding stocks through their business practices, are recognized as
'investment companies' under the Act and, therefore, are required to comply with the relevant
regulations. Although there are exemption clauses in the Act, Article 3(b)2 stipulates that companies
applying for such exemption should be declared by the SEC to be primarily engaged in other
businesses, which gives a room for discretion by the SEC. Japan, therefore, requests the United States
to clarify and relax the criteria of the SEC decisions under Article 3 (b) 2, by introducing objective
criteria, such as the composition of their sales or profit dependency ratio based on financial
statements. What are the U.S. views on this point?
Answer
There are a number of exclusions from the definition of "investment company" available under the
Investment Company Act of 1940. Specific exclusions from the definition of investment company are
given in sections 3(b)(1), 3(b)(3) and 3(c). In addition, if a company does not qualify for one of the
exclusions, section 3(b)(2) provides an exemptive application procedure for issuers to seek a
determination of their non-investment company status from the SEC on the basis that they are
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primarily engaged (directly or through majority-owned subsidiaries or through controlled companies
conducting similar types of businesses) in a business other than investing, reinvesting, owning,
holding or trading in securities. When the SEC determines whether a company is primarily engaged
in a non-investment company business pursuant to section 3(b)(2), it looks principally at the
composition of the company's assets and the sources of its income, and also considers the company's
historical development, its public representations and the activities of its officers and directors.
Question: (Japan #91)
Different insurance regulatory regimes in States (pp. 153-55, paras. 220-23, 227-230) Since
regimes of insurance supervision and regulation differ from one State to another, insurance companies
wishing to engage in inter-state business, need to apply for a license in each State and also to comply
with the supervisory regulations set down by each State's authorities. While Japan notes the NAIC's
efforts toward achieving uniformity among the States' regulatory regimes, it requests further
deregulation regarding inter-state insurance businesses. What are the U.S. views on this point?
Answer
We take note of the points you raise but we do not find that the existence of state level regulation in
and of itself poses a barrier to trade. The U.S. states are very welcoming towards foreign investment
in insurance and cross-border supply of many types of insurance.
Question: (Japan #92)
Discriminatory measures against foreign insurers (p. 153, para. 220)
Japan requests the elimination of discriminatory regulations as mentioned below.
(a)
Requirements for foreign insurers to participate in trust funds or to submit a letter of credit
issued
by a primary insurer in the reinsurance business.
When a foreign insurer without a branch in the United States underwrites reinsurance
products in
the United States, it is required, either to have a trust account, or to submit a L/C
from the original underwriter. Japan requests the elimination of this system, since it discriminates
against foreign insurers.
(b)
Compulsory trust of assets for foreign insurers
Branches of foreign insurance companies are required to trust a larger amount of assets than
liabilities in American banks or trust companies. Since this system prevents foreign insurance
companies from making investments with flexibility, thereby missing investment
opportunities,
Japan requests the elimination of this system, since it discriminates against foreign
insurers.
their
(c)
Citizenship requirement for foreign insurance companies
that
this
Many States' regulatory authorities impose on foreign insurance companies the requirement
all or part of their board members should be U.S. citizens. Japan requests the elimination of
system, since it discriminates against foreign insurance companies.
What are the U.S. views on these points?
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Answer
Please note that U.S. reinsurance regulatory requirements pertain to any company (U.S. licensed or
not) not meeting or choosing to meet the licensing requirements of the state in which the ceding
company is located and are maintained to ensure sound regulation. We do not believe that the
citizenship requirements have been perceived as a major barrier to trade as the U.S. is home to a
number of foreign insurance companies.
Question: (Japan #93)
Disclosure requirement in the issuance of new stocks as the reorganization. If the U.S. investors
own 10 percent or more of an equity of a Japanese company, the company must file a registration
form to SEC for the reclassification of securities, mergers, consolidations and the acquisitions of
assets, in accordance with Article 145 of the General Rules and Regulations promulgated under the
Securities Act of 1933. As foreign investors increasingly own Japanese stocks, the above-mentioned
requirement is unreasonably burdensome to Japanese companies, which are forced to disclose relevant
information by U.S. standards. Japan requests to increase a 10 percent threshold by about 30 percent.
Answer
We note Japan's concern and statement on this matter.
Question: (Japan #94)
Regulations regarding foreign mutual funds sold in the U.S. (p. 151. para. 213) While
approximately 20 U.S. mutual funds are publicly offered in Japan, no Japanese funds have been
offered in the U.S. This imbalance results, in part, from the SEC Rule 7d-1. Whereby the
requirements prevent Japanese mutual funds from being offered in the U.S. markets. Japan, therefore,
requests the U.S. to relax these requirements.
Answer
All funds that seek to sell their shares publicly in the United States generally must register with the
SEC as investment companies under the Investment Company Act of 1940 ("Company Act"). Section
7(d) of the Company Act requires that any non-U.S. fund that wishes to register as an investment
company and publicly offer its securities in the United States must first obtain an order from the SEC.
To issue such an order, the SEC must find that "by reason of special circumstances or arrangements, it
is both legally and practically feasible to enforce the provisions of [the Act against the non-U.S. fund],
and that the issuance of [the] order is otherwise consistent with the public interest and the protection
of investors." Section 7(d) represents a prudential standard that generally ensures that U.S. investors
receive the same essential investor protections, whether they acquire shares in a non-U.S. fund or in a
U.S. fund. The section provides non-discriminatory, national treatment for non-U.S. funds; that is,
any non-U.S. fund that can provide the investor protections required by the Company Act may legally
access the U.S. market to the same extent as any U.S. fund. Further, non-U.S. investment advisers
may easily register in the United States as investment advisers and offer their services to U.S. funds or
establish funds that are organized in the United States.
Question: (Japan #95)
Free participation of U.S. investors in foreign ETF markets (p. 151, para. 213) It is unclear how
the ETFs publicly available in foreign markets are regulated under U.S. law. ETFs are treated in Japan
similarly to stocks, but because the exemption clauses applicable to stocks in the U.S. do not apply to
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ETFs, U.S. investors face difficulty in investing in Japanese ETFs. Japan, therefore, requests the U.S.
to exempt ETFs from the process of the filing of registration forms and prospectuses.
Answer
The regulation of foreign ETFs under the U.S. federal securities laws will depend on the particular
structure and characteristics of the ETF. In general, however, the SEC would treat the offer and sale
of non-U.S. ETF securities to U.S. investors in the same manner that it treats the offer and sale of any
non-U.S. fund securities to U.S. investors, which is on a national treatment basis. As described above,
all non-U.S. funds that seek to sell their shares publicly in the United States must register with the
SEC as investment companies under the Company Act. In addition, because ETFs operate differently
from traditional investment companies, U.S. ETFs have had to seek exemptive relief from certain
provisions of the Company Act. Non-U.S. ETFs likely would also have to seek exemptive relief to
register under the Company Act.
Question: (Japan #96)
Securities services (p. 152, para. 218) Corporate governance takes place in a variety of forms based
on regulatory and other differences. Indeed, it seems that, there is no one-size-fit-all standard for
corporate governance, as proclaimed in the OECD Principle of Corporate Governance, which was
agreed by the OECD members including the U.S. While recognizing the necessity of avoiding
conflicts with foreign legal systems, the Sarbanes-Oxley Act nonetheless requires that the foreign
companies listed in the U.S. markets comply with the corporate governance standards. For example,
while the Act allows the exemption of a board of corporate statutory auditor system, there exists no
similar exemption of the committee system. The Act also puts a burden on foreign companies
through such requirements as having to report and evaluate internal control. The U.S. should refrain
from applying its corporate governance to foreign companies. It risks inhibiting access unduly to its
securities markets by foreign companies. It is not enough to avoid conflicts of various legal systems.
Japan would like to seek the U.S. views on this matter.
Answer
While the Sarbanes-Oxley Act generally makes no distinction between U.S. issuers and foreign
private issuers listed in the United States, the SEC is cognizant of the fact that U.S. requirements and
foreign requirements could come into conflict. During implementation of the Act, the Commission
and its staff sought to learn from foreign regulators and market participants about how the
requirements of the Act conflict with local law or local stock exchange requirements, and how foreign
laws and regulations address in alternative ways the same issues as the Act. The SEC engaged the
foreign community through public roundtables, bilateral and multilateral meetings, and an analysis of
foreign comment letters.
Where appropriate, the SEC has made accommodations for foreign market participants, including in
the two areas raised by the Japanese: audit committee requirements and internal controls reporting.
Regarding audit committee requirements, foreign private issuers will have additional time to comply
with new listing requirements (by 31 July 2005, rather than by 31 October 2004). In addition, the
accommodations will, among other things, allow for alternative structures such as statutory auditors or
boards of auditors to perform auditor oversight functions where such structures are provided for under
local law, such as in Japan. These accommodations take into account foreign corporate governance
schemes while preserving the intended result of the Act to ensure that those with oversight
responsibility for a company's outside auditors be independent of management.
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Regarding internal controls reporting, the SEC's rules include the following accommodations for
foreign private issuers:
Foreign private issuers are not required to begin reporting on internal controls over financial reporting
on an annual basis until the first fiscal year ending on or after April 15, 2005. Also, disclosure of
changes in internal controls over financial reporting will be made on an annual basis rather than a
quarterly basis.
Foreign private issuers must use a suitable framework for evaluating internal controls, but are not
required to use a U.S. framework.
Question: (Korea Para. 205)
Reference: pp. 148-149, paras. 205, 207
Paragraph 205 indicates that foreign branches and agencies are involved primarily in wholesale
banking and seldom in retail banking and this is partly because a foreign bank is required to establish
an insured banking subsidiary in order to accept or maintain domestic retail deposits of less than
US$100,000.
With regard to paragraph 205, please give us specific examples where a branch or an agency can
accept domestic retail deposits of less than US$100,000. And please provide us with detailed
information on "insured deposits."
Answer
Foreign bank branches engaged in insured deposit-taking activities as of 19 December 1991 can
accept domestic retail deposits of less than US$100,000.
Please consult www.FDIC.gov for detailed information about "insured deposits".
According to paragraph 207, the United States maintains commercial presence limitations on market
access and national treatment for foreign banks at the state level, with respect to the type of business
establishment coverage of business (i.e. restriction on retail deposits) and requirements of citizenship
or residence.
Question: (Korea Para. 210, Part #1)
Does the U.S. government have any plan to address these restrictions at the Federal level?
Answer
Under the U.S. federal system, states retain significant rights to regulate within their borders.
Moreover, in light of the dual banking system, foreign banks have the alternative to establish offices
at the federal level. Accordingly, the U.S. government has no current plans to address the cited
restrictions at the state level.
Question: (Korea Para. 210, Part #2)
According to paragraph 210, "foreign investment advisers registered with the SEC are not required to
have a U.S. place of business or set up a U.S. subsidiary or branch."
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Please clarify whether or not this means that cross-border supply (mode 1) and consumption abroad
are permitted by the foreign investment advisers registered with the SEC?
If so, since the United States has already adopted the Understanding on Commitments in Financial
Services whose paragraph B.3 (c) includes investment advisory services, is it correct to understand
that the United States has made such a commitment?
With regard to this issue, could the U.S. government explain the meaning of the following statement
in the note on financial services as included in the initial U.S. offer: "the United States will consider,
pending on the other Members' willingness to do likewise, adopting additional mode 1 commitments
for certain other activities where the consumer is deemed sufficiently sophisticated to manage any
attendant risk, such as allowing mutual funds located in the United States to obtain certain investment
advice and portfolio management services from financial services suppliers located outside its
territory."
Answer
As is the case for many members, actual practice in the U.S. is occasionally, more liberal than our
commitments, including in the area mentioned by the Korean delegation. The U.S. stands ready to
negotiate reciprocal removal of such "binding gaps." With respect to Korea’s question on the U.S.
initial GATS offer, the United States would be pleased to respond to any questions in the in the course
of the bilateral request-offer process.
Question: (Korea Para. 250)
What is the difference between "branch" and "agency" in terms of the conditions of establishment,
boundary of business and prudential regulation?
Answer
The requirements for establishment of branches and agencies are generally the same. The prudential
regulation of such offices generally is the same as well. However, agencies are more limited than
branches in that deposits may only be accepted from persons and entities that are not citizens or
residents of the United States.
Question: (Norway #1)
Foreign reinsurers that do not hold a U.S. license must place in the trust fund 100 percent of the gross
outstanding gross liabilities as collateral, as opposed to U.S. licensed companies. Please explain the
background for this requirement for foreign reinsurers.
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Answer
Please note that U.S. reinsurance regulatory requirements pertain to any company (U.S. licensed or
not) not meeting or choosing to meet the licensing requirements of the state in which the ceding
company is located and are maintained to ensure sound regulation.
Chapter 4 - BY SECTOR
(9) SELECTED PROFESSIONAL SERVICES
Question: (India #31)
There is a requirement of paying compensation to US$1 million as severance compensation to
longshoremen in the event of termination of a liner service due to lack of cargo or any other reason.
This appears to be excessively stringent. We would like to have a clarification from the U.S.
authorities on the reasoning behind such a stringent requirement.
Answer
We are unable to identify the relevant law or measure that is the subject of India's question. The
situation appears to be related to a private contract with a Stevedore services company where a
penalty was assessed under the terms of that contract. We would need to know the specifics of this
case, including the basis in U.S. law, to address this question in a more detailed manner.
The Department of Labor authority over longshore work is limited to worker safety issues. The
situation of concern to India may be related to a collective bargaining agreement between a Stevedore
services company and the longshore union. The company would make this stipulation in its
Stevedore service contract with the shipping company.
Question: (India #33)
It has been reported that the U.S. government has decided to lower the cap on H-1B Visa from
195,000 to 65,000 per annum. In the context of the recent growth in the U.S. economy, there will be a
rising demand for IT professionals and computer hardware engineers. We are interested in knowing
the details of the cap on the issuance of H-1B visas and any plans to raise the cap.
Answer
The H-1B cap is congressionally mandated. Section 214(g) of the Immigration and Nationality Act
(Act) provides that the total number of aliens who may be issued H-1B visas or otherwise granted H1B status during FY2004 may not exceed 65,000. The cap for FY2004 was returned to 65,000 after
statutory authority for a temporary increase to 195,000 for FY2001, FY2002, and FY2003 expired.
The cap applies only to H-1B petitions filed for beneficiaries who will be engaged in "new
employment," to commence on or before September 30, 2004. A petition for new employment
includes a petition where the alien beneficiary is outside the U.S. when the H-1B petition is approved
or where the alien is already in the U.S. in another status and is seeking H-1B status, either through a
change of non-immigrant status from within the U.S. or a notice to the Consulate of the eligibility for
the new status. Petitions for beneficiaries exempt from the H-1B numerical limitations, amended
petitions, and petitions for the extension of stay are not affected because these petitions do not count
against the cap. Likewise, petitions for aliens in the U.S. who already hold H-1B status, i.e. petitions
filed on behalf of an H-1B alien by a new or additional employer, are also not affected. Once the cap
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is reached, Citizenship and Immigration Services will return any petitions requesting employment
prior to October 1, 2004.
Question: (China #97)
Despite its relatively small share in international trade in services, Mode 4 is considered to be of great
importance for China and many other developing members. The United States is one of the major
markets for mode 4 services. However, lack of regulatory transparency, in particular with respect to
obtaining, extending, renewing and denying visas and work permits, has created significant obstacles
to the development of mode 4.
Will the United States kindly indicate whether and how it plans to improve transparency in this area to
facilitate services trade under mode 4?
Answer
As a general matter, the United States believes that it provides full regulatory transparency with
respect to the operation of our mode 4 commitments. It you have specific cases where you believe
that our measures and their application, as related to admissions under Mode 4 of the GATS raise
questions, we would be happy to clarify these matters.
Question: (Japan #97)
(pp. 156-62, paras. 233-262)
As the Secretariat report points out in the following quotation, the different regulations on
professional services in each state have proven to be obstacles to trade in professional services.
"The regulation of professional services is mainly under the responsibility of the individual States.
Foreign market access in some States is affected by local presence, domicile, nationality, or legal
form of entry requirements. The lack of a uniform regulatory regime at the national level also
complicates market access." (paragraph 33 of page xii, Secretariat report.)
According to GATS Article VI, WTO Members are obliged to ensure that measures relating to
qualification requirements and procedures, as well as licensing requirements and procedures, do not
constitute unnecessary barriers to trade in services. In the case of measures taken by each State, the
federal government shall take such reasonable measures as may be available to it to ensure their
observance by regional and local governments. (GATS Article I. 3(a))
Because the following concrete problems are identified in legal, accounting, architectural and
engineering services, Japan seeks clarification as to what measures are taken by the federal
government in order to ensure the obligations by the state governments.
Answer
The Federal government continues to work with all states to encourage the elimination of any
remaining measures that are inconsistent with GATS disciplines. This process includes regular
interaction with designated state points of contact, participation in statutory intergovernmental
committees, as well as direct correspondence with state regulatory authorities.
However, the fact that less than half of WTO members have scheduled any commitments on
accounting, architectural, engineering, and legal services presents a major difficulty in persuading
state authorities to eliminate those few remaining measures identified by Japan. In this as well as
other areas, the federal government would be able to make a much stronger case for the elimination of
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such measures if other WTO members were more forthcoming in making meaningful offers on
professional services in the current negotiations.
Question: (Japan #98)
Accounting services (p. 158, para. 243)
It is identified that U.S. citizenship is required for CPA (Certified Public Accountant) licensing only
in North Carolina. This requirement should be eliminated in common with all other States, because it
constitutes a discriminatory measure to the foreign citizens.
Answer
Please refer to the response to Japan's Question #97.
Question: (Japan #99)
Legal Services (pp. 159-60, paras. 249-53)
Japan seeks information as to what measures are taken by the federal government in order to
encourage all States to accord market access and national treatment for foreign legal consultancy
services. In addition to the 16 States which have already made commitments under the GATS for
accepting FLCs (foreign legal consultants), 8 other States, according to our information, have also
introduced the FLC system. Are there any other further initiatives to liberalize foreign legal
consultancy in other States?
Answer
The federal government continues to work closely with the American Bar Association to encourage
all states to adopt appropriate regulatory measures for foreign legal consultancy services and provide
the necessary framework for scheduling market access and national treatment commitments. Our
efforts have been directed at informing the relevant regulatory authorities of the value of such
commitments in supporting a liberal trading regime.
These efforts have included direct
correspondence to all state supreme court justices, the development and distribution of briefing
materials, and delivering presentations at regulatory conferences.
Question: (Japan #100 & 101)
Japan also seeks clarification as to whether the experience requirements for FLCs have been abolished
in the District of Columbia. Japan, among others, reiterates its request that FLC activities should be
allowed in all States and Districts.
Answer
Yes, the experience requirement was eliminated as of December 2001. We note Japan's concern and
statement on this matter.
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Question: (Japan #102)
Architectural services (p. 161, para. 255)
It has been identified that there is a commercial presence limitation for architectural services in
Michigan, whereby two-thirds of the officers, partners and/or directors of an architectural firm must
be licensed in the State as architects, professional engineers and/or land surveyors. This limitation
should be removed, because it is discriminatory to the foreign service suppliers.
Answer
The federal government continues to work with all states to encourage the elimination of any
remaining measures that are inconsistent with GATS disciplines. This process includes regular
interaction with designated state points of contact, participation in statutory intergovernmental
committees, as well as direct correspondence with state regulatory authorities.
Question: (Japan #103)
Engineering and integrated engineering services (p. 162, para. 259)
It has been identified that the United States makes reservations as an exception to the GATS
commitments on the citizenship requirements for licensing of professional engineers in the District of
Columbia and on in-state residency requirements in 12 States. These requirements should be
eliminated, because they constitute discriminatory measures for foreign service suppliers.
Answer
Please refer to the response to Japan's Question #102.
Question: (Japan #105)
Although they do not necessarily connect directly to reinforcing counter-terrorism measures, the
following measures have the possibility of negatively affecting the movement of persons, as well as
certain economic activities, such as trade and investment. (i) Reduction of the annual quota of H-1B
visas. Since October 1st, 2003, the annual quota for H-1B visas, which is issued to those who will
engage for a short period of time in jobs requiring expertise, was reduced from 195 thousand to 65
thousand (the former number was effective only for years 2001 to 2003). Japan requests the U.S. to
expand the quota again to avoid the movement of persons being hindered.
Answer
The ceiling for admission of Specialty Occupation Aliens and Fashion Models of Distinguished Merit
and Ability (H-1B) was permitted to return from its temporary level of 195,000 admissions to its
historical level of 65,000.
Members of Congress and Administration officials are consulting with all interested parties to
determine the appropriate level for admissions under the H-1B category for the future. No decision
has been made at this time.
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Question: (Japan #106)
(ii) Social security numbers (SSN's): A SSN is virtually the sole means of identification in the U.S. (it
is required in daily life, such as for opening a bank account, signing a lease contract for housing, etc.).
Therefore, Japan requests the U.S. Social Security Administration to issue SSN for all legal foreign
residents, or to instruct all relevant authorities not to oblige foreign nationals to present a SSN for
purposes that do not concern social security or retirement.
In March 2003, the U.S. Social Security Administration announced a change in regulations to restrict
the issuing requirements of a SSN for foreign residents with non-employment visas and to stop the
issuing of a SSN when only applied for the purpose of identification for obtaining a drivers license.
Due to this rule, Japanese and other foreign residents have been facing unreasonable restrictions when
acquiring a driver's license in States like Illinois, which requires applicants of a driver's license to
present a SSN with no alternative measure for identification being accepted.
Answer
Only non-nationals who are not authorized to either take up employment or otherwise receive income
in the United States would be impacted by the March 2003 decision of the U.S. Social Security
Administration. This is a question of immigration policy and not one of trade.
Question: (Argentina #9)
Concerning paragraph 234, we share the concern of the Secretariat regarding the lack of a uniform
regulatory procedure at the national level for the performance of specific professional services
activities. The U.S. authorities indicate that they are developing certain "model rules" to be applied
by U.S. professional organizations to promote greater uniformity or standardization of regulations at
the state level. In this regard, Argentina would like to know what professions would be included,
what the features of these "model rules" would be, and what the primary characteristics of the
"uniformity" and "standardization" process would be. Finally, please indicate whether these
initiatives have been implemented on the regional level.
Answer
In the United States, private professional organizations operate at both the state and national level.
Traditionally, professional standards are developed by state-level professional organizations and
subsequently adopted by the relevant state licensing bodies. Because both the standards and the
measures necessary to implement those standards are determined at the state level, policies often vary
from one state to another. This situation presents an inconvenience to all professional service
providers who wish to operate in more than one jurisdiction, regardless of nationality.
To promote greater harmonization of standards across jurisdictions, nationwide professional
organizations often develop "model rules" or "model laws." The national organizations then
encourage state professional organizations and licensing bodies to use these as a basis for developing
their own standards and implementing legislation. Since this effort is driven by the private sector,
there is no centralized list of which of the approximately 180 licensed professions have developed
model rules, nor is there a list of which jurisdictions have adopted the model rules in their
implementing legislation. However, model rules are widely used by those professions that are most
frequently the subject of trade negotiations, including accounting, architecture, engineering, and legal
services.
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Question: (Brazil, Services #2)
How can information about restrictions in the states be obtained? Is there any central agency or
department responsible for maintaining such information?
Answer
Information on state licensing policies may be obtained from a variety of sources, including national
professional associations, national organizations of state licensing bodies, state professional
associations, and of course the responsible state licensing body itself. The U.S. federal government
does not maintain a central source for such information. However, the Office of the United States
Trade Representative can facilitate the process of obtaining information concerning specific
professions and states upon request.
Question: (Brazil Services #4)
Which criteria will the United States use to start considering the implementation of the GATS
Disciplines in Regulation of the Accountancy Sector?
Answer
We believe that questions concerning the U.S. position in ongoing negotiations are more appropriately
addressed within the context of those negotiations.
Question: (Brazil, Services #5)
Regarding NCARB's policy for determining the equivalency of degrees: Are there other kinds of
work restrictions for foreign professionals?
Answer
The policy referred to by Brazil is not a restriction on foreign professionals. This policy enables
foreign professionals who have received their education from unaccredited institutions to become
eligible for NCARB certification. Without such a policy, foreign professionals would need to repeat
their education at an accredited institution.
Question: (Brazil, Services #6)
What criteria were applied to grant recognition to Canadian architects in the U.S. through the InterRecognition Agreement between NCARB and the Committee of Canadian Architectural Councils?
Can these criteria be applied at the multilateral level or just under NAFTA?
Answer
The basic requirements for an architect to receive certification from the National Council of
Architectural Boards (NCARB) include the possession of an academic degree from an accredited
institution, internship experience, and the successful completion of an examination. (Full details on
NCARB certification may be found at: http://www.ncarb.org/certification/index.html).
The Inter-Recognition Agreement between NCARB and the Committee of Canadian Architectural
Councils facilitates this process principally by (1) recognizing that the Canadian academic
accreditation is substantially equivalent to that of the United States, (2) recognizing that the 3-year
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training requirement of the Canadian Experience Record Book or the Canadian Intern Architect
Program is substantially equivalent to the NCARB training requirement, and (3) recognizing that the
Canadian Architectural Practice Examination provides substantial equivalence to part of the U.S.
examination, such that Canadian architects would not need to sit for all elements of the U.S. test in
order to satisfy the examination requirement.
Applying these criteria at the multilateral level would appear to be quite difficult because academic
accreditation standards, training requirements, and the content of professional examinations vary
widely across countries. Reaching agreement on substantial equivalence for all of these elements
presents a major challenge, as demonstrated by the fact that negotiations with Mexico over the past
decade have thus far failed to result in an agreement acceptable to all parties.
Question: (Brazil, Services #7)
Regarding the NCEES model law: Is there any kind of restrictions or additional requirements, under
the NCEES, directed at foreign professionals?
Answer
The NCEES model law and model rules can be found at the following Internet addresses:
http://www.ncees.org/introduction/about_ncees/ncees_model_law.pdf.
The model law and rules do not contain any additional substantive requirements directed at foreign
professionals. The only provisions directed at foreign professionals are policies that address how a
foreign-educated and/or licensed professional may demonstrate that he or she has obtained a level of
competence equivalent to that of U.S. professionals.
Question: (Brazil #39)
Could the U.S. indicate whether any measures are being taken in order to effectively improve market
access conditions for professional services through better transparency, harmonization of state
regulations, easing of circulation of suppliers among different states? Could the U.S. inform whether
it considers that positive discrimination measures are conveniently listed in its schedules? Could the
U.S. state its vision on whether visa requirements can in practice impair any measures to facilitate
access to professional services markets?
Answer
The requirements for state-level licensing of professionals are readily available to the public through a
variety of channels. For example, through the website of the National Council of Architectural
Registration Boards, one can find detailed information on the registration requirements for all
jurisdiction of the United States (see http://www.ncarb.org/stateboards/index.html).
Thus
transparency is generally not an issue.
With respect to the harmonization of state regulations, the most appropriate means of promoting
harmonization continues to be through the ongoing efforts of the private sector. U.S. professionals
have a strong commercial interest in improving their ability to provide services throughout the United
States. To this end, many U.S. professional organizations promote greater harmonization of standards
across jurisdictions by developing "model rules" or "model laws" that state licensing bodies may use
as a basis for developing their own standards and implementing legislation. Model rules are widely
used by those professions that are most frequently the subject of trade negotiations, including
accounting, architecture, engineering, and legal services.
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We are unsure what positive discrimination measures to which Brazil refers in the second question.
The United States considers that all measures inconsistent with GATS Articles II and XVII have been
appropriately described in our Schedule of Specific Commitments and List of Article II (MFN)
Exemptions.
In the U.S. view, visa requirements are separate and distinct from market access limitations. The
GATS Annex on Movement of Natural Persons Supplying Services Under the Agreement
appropriately captures this distinction by stating that the Agreement shall not prevent a Member from
regulating entry into its territory, including those measures necessary to protect the integrity of its
borders.
Question: (Columbia, Professional Services #1)
Paragraph 234 of the Secretariat's Report gives a brief description of United States regulations on
professional services, stating that the power to regulate professions is reserved for the states. This
paragraph acknowledges the absence of a uniform regulatory regime at the national level and the
differentiation among states in terms of the conditions for market access, which makes it difficult for
professional service providers to enter the American market.
Article VI:6 of the GATS provides that "In sectors where specific commitments regarding
professional services are undertaken, each Member shall provide for adequate procedures to verify the
competence of professionals of any other Member."
With that in mind, Colombia would like to know what procedures the United States has adopted for
verifying the competence of foreign professionals in those professional services for which specific
commitments have been undertaken in order to comply with the requirements of the above-mentioned
article.
Answer
As with U.S. professionals, verification of the competence of foreign professionals is performed by
professional licensing bodies on the basis of transparent and objective criteria. Information
concerning the procedures maintained by each professional licensing body is readily available by
contacting the relevant organization or by visiting their Internet website. For contact information
concerning relevant U.S. organizations that have participated in mutual recognition agreements, see
the U.S. communication to the Working Party on Domestic Regulation on March 10, 2003
(S/WPDR/W/23).
Question: (Columbia, Professional Services #2)
How does one reconcile USTR's authority for establishing the frameworks under which Mutual
Recognition Arrangements (MRAs) are negotiated with the states' discretionary authority to regulate
professional services? (Paragraphs 235 and 236)
Answer
Since the authority for determining qualification and licensing requirements for professional services
rests with state governments, the federal government does not have the technical competency to
conduct MRA negotiations, nor does it have the authority to compel the states to accept an agreement.
As a result, the most appropriate role for the federal government is to facilitate the process by
bringing interested foreign parties together with relevant state and private sector representatives. This
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is what is meant when we refer to establishing frameworks under which MRAs are negotiated. Such
framework agreements could include a set of broad negotiating objectives as well as a timetable for
the negotiations.
Question: (EU #33 & 34)
According to the Secretariat report (pages 156 to 162), the Federal Government has the power to
negotiate framework agreements with trading partners with respect to professional and business
services under which mutual recognition arrangements (MRAs) are negotiated, but the MRAs are
negotiated by representatives of the professions and other competent authorities (members of state
licensing boards, national associations of state boards or other such organizations). The report
mentions a number of arrangements that have already been concluded or that are being discussed.
Could the USA indicate whether, in the negotiation of such MRAs, these representatives of the
professions and other competent authorities do exercise powers delegated to them by central, regional
or local governments or authorities within the meaning of article I.3.(a)(ii) of the GATS, so that the
arrangements can be considered as mutual recognition agreements concluded by the USA as a
member of the WTO?
Answer
In the negotiation of MRAs, the U.S. delegation generally would include representatives of state
licensing bodies as well as representatives of the professional association. Once the negotiations are
concluded, the agreement must be implemented by each state. Consequently, the state representatives
would be considered the competent authority, and the professional associations do not possess
delegated authority.
Question: (EU #35)
If the answer to the preceding question is negative, could the USA indicate whether, once it notifies
those arrangements under Article VII of the GATS, the USA, by way of such notification, become, as
a WTO member, bound by those arrangements under international law?
Answer
The obligations of Article VII would apply to mutual recognition agreements that have been
implemented by competent authorities of the United States, including the obligation to provide
notification to the Council for Trade in Services.
Question: (EU #36)
If the answer to the two preceding questions is negative, taking into account that the USA are able, as
a WTO member, to undertake commitments in respect of professional and business services and in
developing disciplines on domestic regulation under article VI of the GATS, could the USA indicate
which are the reasons that prevent them from negotiating, as a WTO member, MRAs in respect of
professional and business services under article VII of the GATS?
Answer
Since the authority for determining qualification and licensing requirements for professional services
rests with state governments, the federal government does not have the competency to conduct MRA
negotiations, nor does it have the authority to compel the states to accept an agreement. As a result,
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the most appropriate role for the federal government is to facilitate the process by bringing interested
foreign parties together with relevant state and private sector representatives. This is what is meant
when we refer to establishing frameworks under which MRAs are negotiated. Such framework
agreements could include a set of broad negotiating objectives as well as a timetable for the
negotiations.
Question: (EU #37)
As reflected in the report by the Secretariat (pages 157 to 162), as part of the ongoing negotiations in
services, the USA offered to consider undertaking the implementation of the GATS Disciplines in
Regulation of the Accountancy Sector, adopted in 1998, and similar ones for other professional
services, if others did the same. Taking into account that, by decision of the Committee on Trade in
Services (CTS) taken in December 1998, the Disciplines on Domestic Regulation in the Accountancy
Sector contained in document S/WPPS/W/21 will be integrated into the GATS no later than the
conclusion of the present round of services negotiations and are to be applicable to Members who
have entered specific commitments on accountancy in their schedules, why do the USA consider
necessary the undertaking of an additional commitment to implement those disciplines?
Answer
The United States referred to the accountancy disciplines in its initial offer in order to draw
appropriate attention to these disciplines as well as to the prospect of negotiating a similar set of
disciplines for other professional services such as architecture and engineering.
Question: (EU #38 & #39)
The EC is surprised that the report does not include any section on Postal services, given that this has
been the case for a number of other WTO members.
What is the regime of trade in postal and courier services in the U.S.? In particular, what is the
current status (reserved to the Postal Office, licensing requirement, restriction on the number of
operators) in the following fields of activity:
Handling of addressed written communications on any kind of physical medium, including:
Hybrid
mail services and direct mail
Handling of addressed parcels and packages
Handling of addressed press products
Handling of items referred to in (1) to (3) above as registered or insured mail
Express delivery services
Handling of non-addressed items.
Document exchange
Other services not elsewhere specified.
Answer
The principal areas in which the U.S. Postal Service retains a monopoly are in the carriage of letters,
access to mail receptacles and post office boxes, and in the making or printing of U.S. postage stamps.
Express delivery of letters is open to competition by virtue of a suspension to the letter carriage
monopoly for the delivery of "urgent" letters. At present, letters whose carriage costs more than $3.00
or twice the rate of applicable First-Class Mail are considered to satisfy the test of urgency.
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Question: (EU #40)
Is it possible to have statistics on the level of opening of the U.S. postal-courier market to foreign
operators (in percentage of turnover, for instance)?
Answer
The United States does not maintain official statistics that would provide information on foreign
market share.
Question: (EU #41)
Does the Postal Office also operate in fields outside its monopoly (in particular, express delivery
services)? If so, do its competitors get a similar treatment in these fields of activity? How is this
ensured?
Answer
Yes, the U.S. Postal Service operates in sectors that are open to competition, including express
delivery services. Although there is no regulator of hard copy communications that directly oversees
the state of competition in U.S. postal markets, the Postal Rate Commission, an independent agency
of the federal government, helps ensure that competition is fair by setting the rates of the U.S. Postal
Service prospectively, and by selecting rates that are designed to prevent cross-subsidization of
competitive services by monopolized services.
Question: (EU #42)
Many multinational companies operate graduate training programmes, whereby university graduates
are posted to an overseas branch of that company for a period of time (usually between one and two
years) to gain experience in management techniques or in other areas. How would a company go
about transferring one of its employees on such a scheme to one of its affiliates in the U.S.? For
example:
-
Does the U.S. have a special regime to cover persons entering the U.S. to carry out remunerated
training within a company?
What sort of permits (if any) does this sort of intra-corporate transferee require.
Are there any conditions attached to this sort of transfer - e.g. age limitation, minimum
educational
requirements?
What are the procedures for applying for the permit(s) (who applies? Supporting documentation
required to be sent with the application form?)
What is the average length of time taken to process applications?
What is the maximum length of the initial period of stay? Is renewal possible?
Answer
There is presently no regime under United States law that permits foreign persons to be admitted into
its territory for exclusively for purposes of receiving training while being remunerated from a source
within the country. The United States does permit persons to be admitted for the purpose of receiving
training as Visitors for Business or as Trainees. In both cases, the persons receive remuneration from
a foreign source. Persons providing training services may be admitted into the United States, and
remunerated from a source within the country if this is the principal purpose of their admission and
their training services are considered to be highly specialized.
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Persons who are admitted into the United States as intra-company transferees are presumed to be
working in this country. They must be engaged in a capacity with the company that is Executive,
Managerial, or requires Specialized Knowledge. These persons may receive some training while
working in the positions. However, the person must already possess the qualifications necessary to
perform in these capacities as a condition for admission.
Question: (EU #43)
Over the last years, security considerations have led several Members to review their procedures on
the access of foreigners to their territory (notably visa procedures). Taking into account the provisions
of the Annex of the Movement of Natural persons providing services and in particular the requirement
that measures should not be applied in such a manner as to nullify or impair benefits accruing under
the terms of a specific commitment, how does the U.S. combine these considerations with the respect
of WTO obligations on mode 4.
Answer
The United States shares the goal of other countries in striving to achieve a transparent, reliable
system for admission of natural persons to provide services. We have recently initiated changes to our
immigration law that revise admission procedures in response to national security concerns. These
changes are consistent with our commitments under international agreements and do not nullify or
impair benefits derived from them.
We realize, however, that some of these changes are new and that persons seeking admission are not
familiar with the detailed procedures. Our government is engaged in consultations with all of the
affected parties in an effort to minimize any delays or misunderstandings that may arise from the
application of these measures in specific cases.
Question: (EU #44)
The U.S. has recently signed two agreements with Chile and Singapore providing for specific H-1B
quotas to be allocated for national of these countries on the total number of H1-B visas granted by the
U.S. How does the U.S. intend to implement these provisions while remaining in conformity with its
WTO obligations, which provide for a 65,000 H1-B quota granted on an MFN basis?
Answer
Congress created a new non-immigrant category for admission of Professionals from Chile and
Singapore that is similar in many respects to the H-1B category. The new category is the "H-1B1."
Information on this category can be found at the agency website addresses listed below. Admission of
qualifying persons under the H-1B1 is related to the admissions under the H-1B, as these categories
share a common numerical ceiling on the overall number of admissions.
The Administration is presently consulting with Members of Congress as to the final adjustments that
are necessary for both classes of admissions. We fully intend to meet the obligations for movement of
persons contained in all of our trade agreements.
Bureau of Consular Affairs http://travel.state.gov
U.S. Citizenship and Immigration Bureau http://uscis.gov
U.S. Dept of Labor, Employment and Training Administration http://workforcesecurity.doleta.gov.
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Question: (EU #51)
How does the U.S. see the relationship between the promotion of social policy and the conduct of
trade policy both at bilateral and multilateral level?
Answer
The United States believes trade policy and social policy should be mutually reinforcing, at both the
bilateral and multilateral level. In particular, coherence between social policy and trade policy should
assure that the gains from trade liberalization are equitably shared on a sustainable basis, so that
workers and their families in America and our trading partners improve their living standards. While
recognizing that social policy is predominantly a matter of domestic governance, the United States has
long advocated, and continues to advocate, linkages between trade and social policy, a position shared
with the EU at the Marrakech, Singapore, Seattle and Doha WTO Ministerials, and now demonstrated
by the inclusion of labor and environmental provisions in our bilateral trade agreements.
Question: (EU #52)
The EC notes that in line with the TPA, the U.S. includes provisions on the respect of core labour
standards in many of its bilateral agreements. Could further information be provided on the follow-up
to these provisions?
Answer
Both the U.S.-Chile and U.S.-Singapore FTAs became effective on January 1, 2004. It is thus too
early to give any definitive answer to a question as to the efficacy of the follow-up mechanisms
regarding provisions on the respect for core labor standards. From the text of the labor chapters of
those FTAs, however, it is clear that consultations and cooperation between the United States and its
trading partners, along with an obligation to effectively enforce domestic labor laws, are the long-term
means of promoting respect for labor standards which we are incorporating in our bilateral
agreements.
Question: (EU #53)
The World Commission on the Social Dimension of Globalisation will issue its final report in
February 2004. How does the U.S. see the role of the World Commission and what actions does the
U.S. foresee following the final report as far as trade policy is concerned?
Answer
The United States has been strongly supportive of the work of the ILO's World Commission on the
Social Dimension of Globalization. The United States Trade Representative has met with both the coChairperson of the Commission and the Director General of the ILO to encourage the Commission to
fully examine and report on the employment and social implications of further trade liberalization.
We have great expectations that the final report of the Commission will be fully supportive of the U.S.
position (see reply to Q 51) that trade policy and social policy can - and should - be mutually
supportive. We, of course, will carefully study the Commission's report for its full policy implications
and hope that all other WTO members will also.
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Question: (EU #54)
If this is the case to what extent is Fair Trade (which takes account of sustainability) being promoted
by the national trade policy.
Answer
As noted above, United States believes that both respect for worker rights and the protection of the
environment should be viewed as integral components of our national trade policy. Transparency,
public participation in trade policy development, anti-corruption rules, and regulatory equity are also
goals of American trade policy. Thus, although United States trade policy seldom uses the term "Fair
Trade," we believe that our trade policy regime is fully supportive of this concept.
Question: (Korea #1: page 16, para. 9)
Does the U.S. Government have any future plans to minimize the visa policy?
Answer
With respect to any future changes to the U.S. visa policy, the government must balance the desire for
free movement of travellers with significant national security concerns. New personnel are currently
being hired and trained in a constant effort to improve the entry and exit processes. A number of
developing technologies will also facilitate improved processing, in addition to enhancing the overall
effectiveness of U.S. visa policy.
Question: (Thailand #9a)
Please provide information on the NCARB measures for accreditation of foreign architects.
Answer
The National Council of Architectural Registration Boards (NCARB) provides extensive information
on policies concerning certification of foreign architects as well as registration requirements for each
state and territory through its main Internet address at http://www.ncarb.org.
More specific information can be found as indicated below:
NCARB certification information: http://www.ncarb.org/certification/index.html.
State registration board requirements: http://www.ncarb.org/stateboards/index.html.
Foreign applicant information: http://www.ncarb.org/reciprocity/foreign.html.
Frequently asked questions by foreign applicants: http://www.ncarb.org/reciprocity/intlfaq.html.
Question: (Thailand #9b)
Please provide data that may explain the degree of foreign participation in architectural and
engineering services. Please describe any bilateral or regional agreements to which the U.S. is a party
for engaging in architectural and engineering services.
Answer
Official data are available only for the aggregate category of architecture, engineering, and technical
or related services. For this category, U.S. cross-border imports measured $312 million in 2002,
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whereas U.S. purchases of such services through affiliates of foreign firms located in the United
States measured $4.9 billion in 2001.
We interpret this question as concerning mutual recognition agreements rather than free trade
agreements. The Federal Government of the United States is not a party to any bilateral or regional
mutual recognition agreements. The relevant parties to these agreements are professional associations
and state licensing bodies.
With respect to architectural services, U.S. professionals entered into a mutual recognition agreement
with Canada in 1994. This agreement, called the Inter-Recognition Agreement between NCARB and
the Committee of Canadian Architectural Councils, facilitates the process of receiving NCARB
certification principally by (1) recognizing that the Canadian academic accreditation is substantially
equivalent to that of the United States, (2) recognizing that the 3-year training requirement of the
Canadian Experience Record Book or the Canadian Intern Architect Program is substantially
equivalent to the NCARB training requirement, and (3) recognizing that the Canadian Architectural
Practice Examination provides substantial equivalence to part of the U.S. examination, such that
Canadian architects would not need to sit for all elements of the U.S. test in order to satisfy the
examination requirement.
In addition, U.S. architectural professionals have entered into "Protocols for Practice in a Host
Nation" with China, the Czech Republic, New Zealand, and Australia. These protocols establish
procedures whereby foreign architects may practice in collaboration with U.S. architects without
becoming licensed or certified in the United States.
With respect to engineering services, U.S. professionals entered into an agreement on engineering
education (the so-called "Washington Accord") with Canada, Australia, New Zealand, United
Kingdom, and Ireland in 1989. The Washington Accord was expanded to include Hong Kong and
South Africa in 1995 and 1999, respectively. This agreement recognizes the substantial equivalency
of accreditation systems of organizations holding signatory status, and the engineering education
programs accredited by them. In addition, the agreement establishes that graduates of programs
accredited by the accreditation organizations of each member nation are prepared to practice
engineering at the entry level. Detailed information on the Washington Accord can be found at:
http://www.washingtonaccord.org.
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