Free Trade Agreements and Special Trade Programs Rick O’Connell Assistant Area Director, Trade JFK International Airport Thursday, November 13, 2008

Free Trade Agreements and Special Trade Programs

Rick O’Connell

Assistant Area Director, Trade

JFK International Airport

Thursday, November 13, 2008

Reference Material - Websites www.ustr.gov – U.S. Trade Representative

www.usitc.gov – International Trade Commission

www.cbp.gov – U.S. Customs and Border Protection (click “Trade”, “Trade Programs”, then “International Agreements”

www.tradeagreements.gov – U.S. Government (Departments of Agriculture, Commerce, State, Treasury and the Office of the United States Trade Representative) interagency effort

www.otexa.itc.doc.gov – Office of Textiles and Apparel

http://www.ustr.gov/

http://www.usitc.gov/

http://www.cbp.gov/

http://www.tradeagreements.gov/

http://www.otexa.itc.doc.gov/

Trade Agreement vs. Trade ProgramFree Trade Agreement

A reciprocal agreement between two or more parties

Broader provisions beyond Customs issues

Israel, Jordan, NAFTA, Chile, Singapore, Australia, Morocco, CAFTA-DR, Bahrain

Special Trade Program

A unilateral action on the part of the United States

US exporters do not receive benefits

GSP, ATPA/ATPDEA, CBERA/CBI, CBPTA, AGOA

FREE TRADE AGREEMENTS / SPECIAL TRADE PROGRAMS GENERAL NOTE SPI

African Growth and Opportunity Act (AGOA)GN 16 D

Andean Trade Preferences Act (ATPA) & Andean Trade Promotion and Drug Eradication Act (ATPDEA)

GN 11 J, J*, J+

Australia Free Trade Agreement (AFTA)GN 28 AU

Bahrain Free Trade Agreement (BFTA)GN 30 BH

Caribbean Basin Economic Recovery Act (CBERA) and Caribbean Basin Trade Partnership Act (CBTPA)

GN 7/ GN 17 E, E* & R

Central America – Dominican Republic Free Trade Agreement (CAFTA-DR)

GN 29 P, P+

Chile Free Trade Agreement (CFTA)GN 26 CL

Generalized System of Preferences (GSP)GN 4 A, A+, A*

Israel Free Trade Area, West Bank, Gaza Strip, Qualified Industrial Zones (ILFTA)

GN 8 IL, N (QIZ)

Jordan Free Trade Area (JFTA)GN 18 JO

Morocco Free Trade Agreement (MFTA)GN 27 MA

North American Free Trade Agreement (NAFTA)GN 12 CA, MX

Oman Free Trade Agreement None yet None yet

Singapore Free Trade Agreement (SFTA)GN 25 SG, 9999.00.84

(ISI provision)

1. Israel 9/1/85

The United States–Israel Free Trade Area Agreement (US-ILFTA) also affords preferential tariff treatment to goods manufactured by eligible companies in the Egyptian Qualifying Industrial Zones (QIZs) and the Jordanian QIZs.

a) Jordan QIZ 11/21/96 b) Egypt QIZ 12/29/04

2. NAFTA 1/1/94

3. Jordan 12/17/01

4. Chile 1/1/04

5. Singapore 1/1/04

6. Australia 1/1/05

7. Morocco 1/1/06

8. CAFTA-DR 3/1/06 El Salvador; 4/1/06 Honduras, Nicaragua; 7/1/06 Guatemala; 3/1/07 Dominican Republic

9. Bahrain 8/1/06

Current Free Trade Agreements (FTAs)

CAFTA-DR (Costa Rica)

Peru

Oman

Colombia

Panama

South Korea

Ecuador

Malaysia

Thailand

United Arab Emirates

Free Trade Area of the Americas (FTAA) - Efforts to integrate the Western Hemisphere into a free trade area of the region’s 34 democracies

Southern African Customs Union (SACU) – Botswana, Lesotho, Namibia, South Africa and Swaziland

Egypt

Vietnam

Potential &/or Future FTAs

New FTAs based on NAFTA and GSP – each has a dedicated note in the HTS

FTAs not “free” but preferential

Concrete obligations for the importer regarding customs procedures

Commitment to publish laws and regulations on the Internet

The rules are not identical and can only be applied to the respective agreements.

Free Trade Agreement Overview

What is a Rule of Origin?

Wholly Obtained

Product Specific Rules of Origin Tariff Shift (based on international nomenclature,

transparent and not subjective)

Regional Value Content (RVC)

Exclusively from Originating Materials

De Minimis

Current Agreements based on the NAFTA model: Singapore, Chile, Australia and CAFTA-DR

Rules of OriginThe NAFTA Model

Preference Criterion

A good must be “more than” a product of a Party country, it must meet a preference rule of origin

The general rules incorporate different methods for determining origin

An imported good must be “originating” per the general rules of the agreement in order to receive preferential treatment

General Rules of Origin

A good must be “more than” a product of a Party country, it must meet the rules of origin

Wholly Obtained (same principle as found in NAFTA model)

Substantial Transformation + 35% Value Added

Tariff Shift (same principle as found in NAFTA model) Present only in new trade agreements

Imported Directly

Deemed Certification and Declaration Current Agreements based on the GSP model: Israel FTA, Egypt QIZ,

Jordan QIZ, Jordan FTA, Morocco FTA, Bahrain FTA

Rules of OriginThe GSP Model

Objectives

An importer making a claim for preference is deemed to have certified that the goods qualify

Importer must be prepared to submit a signed declaration Description of the good, invoice numbers, quantity Description of operations performed identifying direct cost

of processing Description of materials and value Description of any applicable change in tariff classification

* The concept is not found in NAFTA

Deemed Certification & Declaration

A claim is essentially an assertion by the importer that the good is originating according to the rules of the agreement, based on: Certification, Supporting Statement or Declaration in the

importer’s possession; or Importer Knowledge

Claim is made by placing the Special Program Indicator field “SPI” on the entry summary

Making an FTA ClaimBasis for a Claim

Correspondence is with the importer

Importer should coordinate with the exporter/producer for submission of business confidential information directly to CBP

*NAFTA is an exporter focused agreement

Importer Focus

Certification, Supporting Statement or Declaration

Documents supporting production process, cost data, materials used in production

Information concerning the growth, production or manufacture

Affect of a Claim Based on Importer Knowledge CBP retains authority through the agreement to request

the necessary information to conduct a verification and make a determination

CBP may be required to ask specific detailed questions What preference criteria was used to qualify the good as

originating?

Requesting InformationWhat will CBP ask for?

Can be in any format

CBP requires certain data elements

Must be submitted upon request

May be submitted electronically

Certification/Statement/DeclarationImporter Requirement

Importer

Exporter

Producer

Description of Good

Classification

Data ElementsData Elements

Preference Criteria or Rule of Origin

Single Shipment

Multiple Shipment

Authorized Signature

Certification

For Wholly Obtained Evidence of origin of good and/or all materials used in production.

For Tariff Shift Qualifications Bill of Materials Affidavits of origin for originating materials Production records of finished goods Classification of all non-originating materials Demonstration of tariff shift

For RVC Requirements: Bill of Materials Invoices for all materials Affidavits of origin for originating materials Production records of finished goods Cost breakdown of all expenses related to the production of the good RVC calculation

Supporting Documentation Needed:

Post Entry

Supplemental Information Letters/Post Entry Amendments

19 USC 1514 for liquidated entries in which the entry date of the merchandise is after Dec. 18, 2004

Post Importation

19 USC 1520 (d) post-importation Only method available if provision is present in the

agreement

NAFTA, Chile, CAFTA-DR

Post-Entry Procedures

Comparison Chart Available on CBP.gov

Preferential Trade Agreements & Trade Programs Synopsis

(Non-Textile)

Trade Agreements Branch

Special Enforcement Division

Commercial Targeting and Enforcement

May 2007

General Notes Reference African Growth and Opportunity Act GN 16

Andean Trade Preferences Act & Andean Trade Promotion and Drug Eradication Act (ATPA/ATPDEA)

GN 11

Australia Free Trade Agreement (AFTA) GN 28

Bahrain Free Trade Agreement (BFTA) GN 30

Caribbean Basin Economic Recovery Act (CBERA) GN 7

Caribbean Basin Trade Partnership Act (CBTPA) GN 17

Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) GN 29

Chile Free Trade Agreement (CFTA) GN 26

Generalized System of Preferences (GSP) GN 4

Israel Free Trade Agreement (IFTA) GN 8

Jordan Free Trade Agreement (JFTA) GN 18

Morocco Free Trade Agreement (MFTA) GN 27

North American Free Trade Agreement (NAFTA) GN 12

Singapore Free Trade Agreement (SFTA) GN 25

Effective Date: 10/2/00

Expiration Date: 9/30/15

General Note in HTS: GN 16

Special Indicator in HTS: D

Regulation Cite: 19 CFR 10.178a

US Code: 19 USC 3706

Public Law: 106-200

AGOA References

AGOA SummaryReference General Note 16

SPI D

General Rules of Origin Wholly Obtained, 35% Value Added + Substantial Transformation

Value Content 15% of US cost & value may count towards 35%

Level of Documentation at Importation

Knowledge

Verification Notification Importer

Determination Notification Importer, Exporter if provided documentation to CBP

Transit/Transshipment Imported Directly

Post-Importations SIL/PEA, 19 USC 1514

MPF No exemption (but products of least-developed beneficiary developing countries General Note 4 (b)(i) are exempt )



Special Indicator in HTS: J, J*, J+

Regulation Cite: 19 CFR 10.201 – 207 & 10.241 - 248

US Code: 19 USC 3201 - 3206

Public Law: 102-182

ATPA/ATPDEA References

ATPA/ATPDEA SummaryReference General Note 11

SPI J, J*, J+

General Rules of Origin (Preference Criteria)

Wholly Growth, 35% Value Added + Substantial Transformation

Regional Value Content 15% of US cost or value can be counted towards 35%


Knowledge (ATPA); CPB Form 449, Signed by the exporter (ATPDEA)





MPF No exemption

Australia Free Trade Agreement


Expiration Date: None


Special Indicator in HTS: AU


Public Law: 108-286

Australia FTA SummaryReference General Note 28

SPI AU


Wholly Obtained, Tariff Shift &/or RVC, Exclusively from Originating Materials, Other Qualifying Method

Regional Value Content Build-up, Build-down, Net Cost


Freeform Statement (10 data elements); Importer Knowledge

Verification Notification Importer, At discretion may contact exporter


Transit/Transshipment Must support no further production occurred in a 3rd country

Post-Importations SIL/PEA or 19 USC 1514

MPF Exempt for Originating Goods

Effective Date: August 1, 2006



Special Indicator in HTS: BH

US Code: 19 USC 3805 note

Public Law: 109-169

Bahrain Free Trade Agreement

Bahrain FTA SummaryReference General Note 30

SPI BH


Wholly Growth, 35% Value Added + Substantial Transformation; Tariff Shift for specific goods

Value Content Unlimited US content towards meeting 35%


Supporting Declaration; Importer Knowledge





MPF Exempt for originating goods


Expiration Date: N/A


Special Indicator in HTS: E, E*

Regulation Cite: 19 CFR 10.191 - 199

US Code: 19 USC 2701 - 2706

Public Law: 98-67

Caribbean Basin Economic Recovery Act

CBERA SummaryReference General Note 7

SPI E, E*



Value Content 15% of US cost or value can be counted towards 35%


Knowledge





MPF Exempt for all goods, whether or not they are originating



Special Indicator in HTS: R

Regulation Cite: 19 CFR 10.231 - 237

US Code: 19 USC 2701 - 2707

Public Law: 106-200

Caribbean Basin Trade Preferences Act

CBTPA SummaryReference General Note 17

SPI R


Wholly Obtained, Good originates according to the NAFTA rules of origin

Regional Value Content If applicable per GN 12


CPB Form 450, Signed by the exporter





MPF Exempt for all goods, whether or not they are originating

Central America-Dominican Republic Free Trade Agreement

Effective Dates: 3/1/06 (El Salvador)

4/1/06 (Nicaragua & Honduras)

7/1/06 (Guatemala)



Special Indicator in HTS: P, P+


Public Law: 109-53

CBI/CBERA/CBTPA/CAFTA-DR Comparison

Caribbean Basin Initiative (CBI)

Caribbean Basin Economic Recovery Act (CBERA)

Caribbean Basin Trade Partnership Act (CBTPA)

Central America-Dom. Rep. Free Trade Agreement (CAFTA-DR)*

Program providing duty free treatment of certain goods

Act that implemented CBI

Expands CBERA benefits to previously excluded articles applying NAFTA rules of origin & tariffs

Reciprocal trade agreement between the US and Central American countries

Countries listed in GN 7(a)

Countries listed in GN 17(a)

Costa Rica, Guatemala, Honduras, El Salvador, Nicaragua, Dominican Republic

SPI “E” or “E*” SPI “R” SPI “P” or “P+”

* CAFTA amends certain provisions of CBERA/CBTPA

CAFTA-DR SummaryReference General Note 29

SPI P, P+


Wholly Obtained, Tariff Shift &/or RVC, Exclusively from Originating Materials; [Qualifying Goods]

Regional Value Content Build-up, Build-down, Net Cost


Freeform Certification (10 data elements); Importer Knowledge



Transit/Transshipment No further production; must stay under Customs control

Post-Importations 19 USC 1520(d)

MPF Exempt for Originating Goods & Qualifying Goods

* Imports from CAFTA countries will lose GSP, CBERA & CBTPA eligibility upon implementation of FTA

Chile Free Trade AgreementEffective Date: 1/1/04



Special Indicator in HTS: CL

Regulation Cite: 19 CFR 10.400 et. seq.

US Code: 19 USC 3805 Note

Public Law: 108-77

Chile FTA SummaryReference General Note 26

SPI CL


Wholly Obtained, Tariff Shift &/or RVC, Exclusively of Originating Materials

Regional Value Content Build-up, Build-down


Freeform Certification (10 data elements); Sufficient Knowledge






* Imports from Chile lost GSP eligibility upon implementation of FTA (Jan 1, 2004)




Special Indicator in HTS: A, A+, A*

Regulation Cite: 19 CFR 10.171 – 178a

US Code: 19 USC 2461 - 2467

Generalized System of Preferences

GSP SummaryReference General Note 4

SPI A, A+, A*


Wholly Obtained, 35% Value Added + Substantial Transformation

Value Content US cost and value may NOT count towards 35%


Knowledge (Form A no longer required)





MPF Exempt for products of least-developed beneficiary developing countries regardless of whether a claim is made

Israel Free Trade AgreementEffective Date: 9/1/85



Special Indicator in HTS: IL


Public Law: 99-47

Israel FTA SummaryReference General Note 8

SPI IL





Knowledge, Form A (optional)





MPF Exempt for all products, whether or not originating

Qualified Industrial Zone (QIZ)

Extension of ILFTA benefits to goods produced in designated regions outside of Israel

Company must be approved by Joint Committees

Separate requirements for inputs regulated by Joint Committees

Imported goods must meet the 35% value added + substantial transformation and imported directly requirement to receive benefits

QIZ General Information

Jordan Qualified Industrial Zone (QIZ)



General Note in HTS: GN 3(a)(v) & GSN 3(d)

Special Indicator in HTS: IL in HTS, N on 7501

Jordan QIZ SummaryReference General Note 8 and 3(a)(v), General Statistical Note 3(d)

SPI IL in HTS, but N on 7501





Knowledge



Transit/Transshipment Direct Shipment


MPF No exemption

Egypt Qualified Industrial Zone (QIZ)



General Note in HTS: GN 3(a)(v) & GN 3(d)

Special Indicator in HTS: IL in HTS, N on 7501

US-Israel Free Trade Area Implementation Act: 69 FR 78094

Eligible company list at: Egypt Ministry of Foreign Trade and Industry Website (www.qizegypt.gov.eg)

Egypt QIZ SummaryReference General Note 8 and 3(a)(v), General Statistical Note 3(d)

SPI IL in HTS, but N on 7501





Knowledge



Transit/Transshipment Direct Shipment


MPF No exemption




Special Indicator in HTS: JO


Public Law: 107-43

Jordan Free Trade Agreement

Jordan FTA SummaryReference General Note 18

SPI JO





Knowledge





MPF No exemption




Special Indicator in HTS: MA


Public Law: 108-302

Morocco Free Trade Agreement

Morocco FTA SummaryReference General Note 27

SPI MA


Wholly Obtained, Substantial Transformation + 35% Valued Added, Tariff Shift

Value Content Unlimited US content towards meeting 35%


Freeform Declaration (10 data elements); Deemed Certification





MPF No Exemption

* Imports from Morocco lost GSP eligibility upon implementation of FTA

North American Free Trade Agreement




Special Indicator in HTS: CA / MX

Regulation Cite: 19 CFR 181

US Code: 19 USC 3301 - 3473

Public Law: 103-182

NAFTA SummaryReference General Note 12

SPI MX, CA


Wholly Obtained, Tariff Shift &/or RVC, Wholly of Originating Materials, Exception to Tariff Shift, IT goods

Regional Value Content Transaction Value, Net Cost


Certificate of Origin, CBP Form 434; Alternate CBP Form 434; Computer Generated CBP Form 434

Verification Notification Exporter (Importer must provide C/O prior to verification)

Determination Notification Exporter, Negative Determination issued to Importer



Singapore Free Trade Agreement




Special Indicator in HTS: SG

US Code: 19 USC 3805 Note

Public Law: 108-78

Singapore FTA SummaryReference General Note 25

SPI SG

General Rules of Origin Wholly Obtained, Tariff Shift &/or RVC, Integrated Sourcing Initiative

Regional Value Content Build-up, Build-down


Freeform Statement (10 data elements); Importer Knowledge





MPF Exempt for Originating Goods and ISI Goods