WT/TPR/S/126 Trade Policy Review 
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III. TRADE POLICIES AND PRACTICES BY MEASURE 
(1) INTRODUCTION  
1. The United States maintains a transparent and largely open trade regime, although in a few 
important areas significant barriers to market acce ss and other potentially distorting measures are 
maintained.  The United States systematically makes available information on the objectives and 
nature of its policy measures, and various inde pendent bodies evaluate and report on their economic 
effectiveness. 
2. Significant changes to U.S. import procedur es have resulted from the security measures 
enacted in 2002.  New regulations require the el ectronic transmission to the U.S. authorities of 
information pertaining to U.S.-bound cargo prior to de parture;  agreements have been concluded with 
several foreign seaports to screen U.S.-bound containe rs.  Also, the Bioterrorism Act of 2002 requires 
the registration of most food manufacturing and ha ndling facilities, and prior notice to FDA of all 
food shipments destined to the United States. 
3. The United States maintains a tr ansparent system to establish technical regulations and SPS 
measures.  Compliance is largely the responsibility of  suppliers and enforced through product liability 
laws.  Import bans are in place to enforce domes tic environmental provisi ons governing the use of 
marine resources.  In the WTO, although a number of  specific trade concerns have been raised about 
U.S. technical and SPS measures, none has resulte d in a formal dispute during the period under 
review. 
4. The United States accords MFN tariff treatment to all but one WTO Member (Cuba).  Most 
imports either enter the United States duty free or are subject to low tariffs;  all tariffs except two are 
bound.  In 2002, the average MFN tariff was just over 5% while the average for agriculture products 
(WTO definition) was nearly twice as high;  both averages were marginally lower than in 2000.  
Some 7% of all tariffs exceed 15%;  these tend to  be "sensitive" products, such as tobacco, certain 
dairy products, peanuts, cotton fibres, certain foot wear, textiles and clothing products.  About 12% of 
tariffs consist of specific or compound rates;  these apply mainly to agricultural products, footwear 
and headgear, as well as watches and certain precision instruments.  The Unit ed States maintains an 
ad valorem  tax on port use. 
5. The United States extends tariff preferences unilaterally to numerous countries (Chapter II).  
Many preferences granted on textile and clothing products are subject to content requirements on 
U.S.-produced inputs.  The number of different rul es of origin has increased with the number of 
preferential tariff schemes, thus adding complexity to the U.S. trade regime. 
6. Quantitative import restrictions for commerc ial purposes are currently in place under the 
provisions of the WTO Agreement on Textiles and Clothing, and pursuant to trade remedy laws.  Non-tariff border measures also include trade pr ohibitions for national security, health, and foreign 
policy reasons. 
7. The United States considers trade remedies an integr al part of the rules-based trading system.  
Its active use of anti-dumping (AD) and counte rvailing duty (CVD) measures has continued to 
generate uncertainty for foreign e xporters.  In 2001, the total number of AD investigation initiations 
reached its highest level since 1992, but initiations d ecreased substantially in 2002.  Initiations of 
investigations may affect exporters' trade performance , with preliminary duties applied in most cases.  
In the WTO, trading partners have questioned th e rules and methods used by the United States 
concerning AD and CV measures, including the continued application of the Byrd Amendment.  The United States WT/TPR/S/126 
 Page 33 
 
 
latter has resulted in disbursements to affect ed domestic producers totaling US$840 million since 
FY 2001. 
8. There has been only one safeguard investig ation initiated under Section 201 since 2000 but 
the scope of the resulting measure was wide, affectin g a relatively large number of steel products, and 
adding to the protection already afforded to these products through AD and CV or ders.  At the request 
of several WTO Members, the safeguard measure was examined by the DSB;  the panel report 
concluded that the United States had acted inconsistently with some WTO provisions. 
9. Imports are affected by U.S. measures that restrict foreign involvement in public 
procurement.  For procurement not covered by the plurilateral Agreement on Government 
Procurement or other international agreements, the Federal Government maintains "Buy American" 
restrictions.  Federal Government  programmes to enhance small business participation are in place;  
preferences are also applied by a number of Stat es.  A "Balance-of-Payments" programme applies to 
certain Department of Defense procurement;  in 2001 , this programme's application to civilian agency 
acquisitions was eliminated. 
10. A central objective of U.S. trade policy is to expand markets for U.S. exporters.  With this 
objective, the Export-Import Bank provides officially  supported loans, guarantees, and insurance.  
Legislation has yet to be enacted to implement the recommendations of the DSB in respect of the 
Foreign Sales Corporation Repeal and Extraterrito rial Income Exclusion Act of 2000, which was 
found to provide prohibited export subsidies.  A la rge number of foreign trade zones operate in the 
United States, and a duty drawback programme is in place. 
11. The United States views the relationship betw een trade and competition policy as of great 
importance.  U.S. federal antitrust legislation covers  all types of activities, including foreign trade, as 
well as a wide range of business practices.  Enforcem ent during the 2001-03 pe riod continued to focus 
on the activities of international cartels.  New regul ations to implement highe r merger and acquisition 
notification thresholds have resulted in  a lower number of notified mergers. 
12. Assistance to domestic producers includes tax exemptions, financial outlays and credit 
programmes.  Many States offer investment incenti ves to attract businesses locally.  In 1995, the 
United States notified 13 state-trading entities to th e WTO;  no notification has been made since 1997. 
13. The United States considers that public policy ai med at protecting intellectual property rights 
(IPRs) helps to ensure a diverse and competitiv e marketplace, and it uses both bilateral and 
multilateral policy tools to enforce IPRs in the inte rnational arena.  Since 2001, the United States has 
implemented the Madrid Protocol, and adopted statutes to grant compensation for delays in 
processing patent applications, and to enhanced th ird-party participation in the re-examination of 
patents. 
(2) MEASURES DIRECTLY AFFECTING IMPORTS  
(i) Customs procedures 
14. The Customs and Border Protection (CBP), under the Directorate of Border and Transport 
Security in the Department of Homeland Security , is in charge of administering and enforcing 
customs regulations.  Until January 2003, the CBP was known as the U.S. Customs Service, and was 
part of the Department of Treasury.  These chang es were brought about by the enactment of the 
Homeland Security Act in 2002 (Chapter II(2)). WT/TPR/S/126 Trade Policy Review 
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15. Importers of goods into the United States are required to present entry documents as specified 
in the Customs Regulations.  Any amendment to these regulations is pub lished in the Federal 
Register.1  Additional information regarding customs issues is also published in the Customs Bulletin 
and Decisions  publication.  The principle underpinning U.S. customs policy is that of "informed 
compliance", whereby the CBP and the import co mmunity share the responsibility for ensuring 
compliance:  CBP commits to effectively communi cate its requirements to the trading community;  
and the people and businesses subject to those require ments are expected to conduct their regulated 
activities in accordance with U.S. laws and regulations .  This approach aims at an efficient use of 
limited customs resources, and allows the CBP to focus on areas of highest risk, in particular anti-
terrorism. 
16. The CBP strongly encourages operators to file import data electronically.  The Automated 
Commercial System (ACS) is used by the CBP to  track, control, and process all commercial goods 
imported into the United States, although important ch anges in the system are under way (see below).  
The Automated Broker Interface (ABI) is an integral part of ACS that permits participants to file 
import data electronically with the CBP.  Partic ipants can be licensed customs brokers, importers 
acting on their own behalf, carriers, port authorities, or independent service centres.  In order to 
participate in the ABI, a letter of intent must be filed with CBP giving a brief description of the filer's 
current or planned computer systems and software, and the date of anticipated participation.  The 
company headquarters must be identified, as well as all participating offices.  Over 96% of all imports are filed through ABI. 
17. According to the authorities, under the current 24- hour system (see below), some products are 
more apt to be examined than others.  While CBP maintains a programme of random examination 
throughout its automated systems, enforcement and security concerns based on country of origin and 
identity of companies involved, may also result in ex amination.  In addition, goods considered to be 
trade-sensitive, such as textiles and clothing pr oducts, are subject to a higher percentage of 
examinations than other commodities.  Examinati on can vary from an X-ray check of an entire sea 
container to X-ray and opening of individual boxes in a shipment. 
18. Interested parties may appeal decisions related to customs issues to the United States Court of 
International Trade (CIT).  A ppeals regarding customs duties ar e governed by the provisions of 
Section 516 of the Tariff Act of 1930 as amended (19 U.S.C. 1516).
2 
19. A Customs Modernization Program has been under way since 2001.  It began with the 
introduction of the Automated Commercial Environmen t (ACE), which is due to replace the ACS for 
cargo imports.  It also introduced the Internati onal Trade Data System (ITDS), focusing on export 
operations.  ACE and ITDS will form a single Intern et portal to provide a single electronic interface 
for the international business community to inte ract not only with CBP but also with other 
government agencies involved in import, export,  and passenger movement through U.S. border 
crossings.3 
20. ACS and ACE will initially operate in parallel.  The ACE cargo processing system was 
initially scheduled to start operations in the spri ng of 2004 and continue in phases extending through 
                                                      
1 A list of Federal Register notices relating to Cu stoms is available online at:  http://www.cbp.gov. 
2 United States Court of International Trade informa tion is available online a t:  http://www.cit.uscourts. 
gov. 
3 See "ACE & Modernization:  Overview of Key Features for the Trade", available online at:  
http://www. customs.gov. United States WT/TPR/S/126 
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2006.4  In the wake of the September 2001 attacks, however, implementation was accelerated and the 
programme was redesigned towards enhanced security;  a number of measures taken to that effect have already resulted in important practical chang es in customs operations, as described below.  ACE 
will now encompass both the Container Security Initiative (CSI) and Customs-Trade Partnership 
Against Terrorism initiative (C-TPAT). 
(a) The Container Security Initiative (CSI) 
21. In January 2002, the U.S. Customs (now CBP ) launched the Container Security Initiative 
(CSI), whose objective is to prevent containe rized cargo from being exploited by terrorists.
5  Under 
the initiative, each participating country signs a "bilat eral Declaration of Principle";  subsequently,  
the CBP posts U.S. inspectors in foreign seaports to screen containers destined for the United States 
before they depart rather than after they arrive on  U.S. shores.  According to the authorities, there is 
no government regulation establishing the CSI requirements. 
22. The CSI uses intelligence and automated inform ation to identify and target high-risk 
containers;  pre-screens containers identified as high -risk at the port of departure;  and uses tamper-
evident containers.  The screening involves the ope ration of non-intrusive inspection (NII) equipment, 
such as large X-ray-type systems and radiation de tection equipment.  The CBP pays for personnel 
overseas to implement the CSI (e.g., travel, offices, and computers equipment), but ports that do not have the NII equipment must purchase it before CBP deploys to the port.  Although most large ports 
already have this equipment it for their own import and compliance processes, many commercial ports world-wide do not. 
23. The first phase of the CSI involved the selection by  the U.S. Customs of the 20 largest foreign 
seaports, from which two thirds of cargo containers arriving in  the United States originate.  Fifteen 
ports participate in the CSI (as at June 2003).
6 
24. According to the CBP, no complaints have been  received of cargo being delayed due to CSI 
implementation in any overseas port, and the posting of U.S. Customs officials in foreign ports that 
participate in CSI should make the movement of car go containers more efficient.  The authorities  
noted that cargo typically sits on the pier for several days waiting to be exported.  CSI targets 
containers and screens them before they depart during the waiting time at the port of export, so that 
when the container arrives in the U.S. it can be  released immediately unless additional information 
has been received subsequently that would raise the level of concern about the container, or if the 
container has been tampered with. 
25. Infringement proceedings were launched by th e European Commission against the EU ports 
that participated in the CSI.7  The European Union expressed concern, in particular, about the trade 
distortion that may be caused by CSI among the ports that do and do not have such a programme in place, noting that such a bilatera l approach may penalize smaller EU ports that have not signed 
                                                     
 
4 Information on the Customs Modernization Progra m is available online at:  http://www.customs. 
gov/xp. 
5 U.S. Customs online information.  Available at:  http://www.customs.gov/xp/cgov/import/cargo_ 
control/csi. 
6 Antwerp (Belgium), Bremerhaven (Germany), Felixstowe (U.K.), Genoa (Italy), Gothenburg 
(Sweden), Halifax (Canada), Hamburg (Germany), Hong Kong, Montreal (Canada), La Spezia (Italy), Le Havre (France), Rotterdam (Netherlands), Singapor e, Vancouver (Canada), Yokohama (Japan). 
7 EU online information.  Available at:  http://www.eurunion.org/news/press/2003/2003020.htm.  Eight 
EU member States – United Kingdom, France, Germany, the Neth erlands, Belgium, Italy,  Spain, and Sweden – 
signed the bilateral CSI agreement with the United States. WT/TPR/S/126 Trade Policy Review 
Page 36 
 
 
agreements with the United States.  The Europ ean Commission is seeking a U.S.-EU agreement to 
replace the eight bilateral agreements; the author ities noted that negotiations are under way between 
the CBP and the Commission (in October 2003). 
(b) The 24-hour Advance Vessel Manifest Rule 
26. The 24-hour Advance Vessel Manifest Rule was introduced by the CBP in December 2002 
following the passage of the Trade Act of 2002.8  The Trade Act of 2002 (Section 343) required the 
CBP to promulgate regulations providing for elec tronic transmission to customs of information 
pertaining to cargo destined for and from the United St ates prior to arrival or departure of such cargo.  
Some of these requirements were further modified by the passage of the Maritime Port Security Act 
of 2002. 
27. The 24-hour rule, as first published in the Federal Register  on 8 August 2002, requires that 
the vessel's cargo declaration (form 1302 or its electronic equivalent), including 14 specific mandatory informational elements, mu st be notified to the CBP 24 hour s before the cargo is loaded in 
a foreign port, and that the data be provided in electronic form.
9  This rule is effective since 
December 2002, and applies both to CSI and non-CSI ports.  The mandatory specific information is 
shown in Box III.1.  The new data requirements br ought by the 24-hour rule to the cargo declaration 
include the last foreign port before the vessel de parts for the United States;  in addition, the data 
element "Place of Receipt" became mandatory for a ll carriers.  Also, information on the shipper, 
consignee, and products must now  be provided in more detail. 
28. According to a CBP press release, CBP reviewed  more than 2.4 million bills of lading in the 
period 2 February to 29 April 2003.10  About 260 containers with inadequate cargo descriptions were 
denied loading for violation of the 24-hour rule.  Most of these violations were resolved in time for 
the shipment to make its planned voyage.  Effec tive 4 May 2003, CBP started to issue "Do Not Load" 
messages for any containerized cargo with invalid  or incomplete cargo description.  Until then, 
enforcement efforts had focused only on significant vi olations of the cargo description requirements.  
CBP also issues monetary penalties for late submission of cargo declarations:  carriers may be 
assessed a US$5,000 penalty for first violation and US$10,000 for any sub sequent violation. 
29. The 24-hour rule also applies to cargo passing thr ough the United States that is not destined to 
be unloaded in a U.S. port;  U.S. seaports will also have the authority to issue monetary penalties for 
foreign cargo remaining on board (FROB) that doe s not conform to the Rule upon arrival in the 
United States.11  Non-vessel-operating common carriers (NVOCCs) may also be assessed damages. 
(c) The Customs-Trade Partnership Against Terrorism and other security initiatives 
30. The Customs-Trade Partnership Against Te rrorism (C-TPAT), which was launched in 
May 2002, is a joint government/business initiativ e to strengthen security throughout the overall 
supply chain and at the border.  Under th is programme, businesses undertake to conduct 
comprehensive self-assessments of th eir supply chain using the security guidelines developed jointly 
with the CBP, and they must familiarize companies in their supply chain with the guidelines and the 
                                                      
8 Federal Register  (66318), Vol. 67, No. 211, 31 October 2002. 
9 Federal Register , 67 FR 51519, 8 August 2002. 
10 "CBP Expands Enforcement Of Th e 24-Hour Rule", Pre ss Release of 1 May 2003, available at:  
http://www.customs.gov/xp/cgov/im port/carriers/24hour_rule/. 
11 Foreign cargo remaining on board refers to foreign cargo passing through the U.S.  It is considered 
by the United States to be as potentially dangerous as cargo that is destined for discharge in its seaports. United States WT/TPR/S/126 
 Page 37 
 
 
programme.  Participating businesses must provide th e CBP with specific and relevant information 
about their trucks, drivers, cargo, suppliers, and routes.12 
Box III.1  Information required under the 24-hour rule 
Information to be provided to the CBP 24 hours before a cargo is loaded in a foreign port: 
- The name of the last foreign port before the vessel departs for the United States; 
- The unique Standard Carrier Alpha Code assigned for each carrier; 
- The carrier-assigned voyage number; 
- The date the vessel is scheduled to arrive at the first U.S. port in customs territory; 
- The numbers and quantities of th e lowest external packaging unit from the carrier's ocean 
 bills of lading; 
- The first foreign port where the carrier takes posse ssion of the cargo destined to the United States; 
- A precise description (or the Harmonized Tariff Schedule (HTS) numbers to the 6-digit level under 
 which the cargo is classified if that informati on is received from the shipper) and weight of the 
 cargo or, for a sealed container, the shipper' s declared description and weight of the cargo; 
- The shipper's complete name and address, or iden tification number, from all bills of lading (this 
 identification number will be a unique number a ssigned by the CBP upon the implementation of the 
 ACE); 
- The complete name and address of the consignee or the owner or owner's representative, or 
identification number, from all bills of lading (this identification number will also be used under the 
ACE); 
- The vessel name, country of documentation, and official vessel number (the vessel number is the 
International Maritime Organization number assigned to the vessel); 
- The foreign port where the cargo is loaded; 
- Internationally recognized hazardous material code when such materials are being shipped; 
- Container numbers (for containerized shipments);  and 
- The seal numbers for all seals affixed to containers. 
Source:  Department of the Treasury, United States Customs Service, 19 Cfr Parts 4, 113 and 178, 
 "Presentation of Vessel Cargo Declaration to Cu stoms Before Cargo is Laden Aboard Vessel At 
 Foreign Port for Transport to the United States.  Available at http://www.cbp.gov/ImageCache/ 
 cgov/content/laws/federal_5fregulations/20 02/adv_5fmanifest_2epdf/v 1/adv_5fmanifest.pdf. 
 
31. All importers, carriers (air, rail, and sea), custom s brokers, and forwarders are encouraged to 
become participants.  Under the C-TPAT valid ation process, the CBP meets with company 
representatives and may visit selected domestic and fo reign sites to verify that the supply chain 
security measures contained in the C-TPAT participan t's security profile are accurate and are being 
followed. 
32. As part of the Shared Border Accord, the U.S.  and Canadian governments agreed to align, to 
the maximum extent possible, their customs commerc ial programmes along their shared border.  This 
agreement marked the creation of the Free and Secure Trade (FAST) programme, which became 
operational for selected U.S.-bound shipments in December 2002.  FAST seeks to harmonize 
                                                      
12 See U.S. Customs Today , May 2002 [online].  Available at:  http://www.customs.ustreas.gov/xp/ 
CustomsToday/2002 /May/ctpat.xml. WT/TPR/S/126 Trade Policy Review 
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clearance procedures at the border for drivers, carrier s, and importers, and offe rs expedited clearance.  
To qualify for FAST expedited clearance the commercial shipment must be entered by a C-TPAT approved importer using C-TPAT approved highway ca rriers.  The Department of Homeland Security 
has also entered into a partnership with Mexico  called the U.S./Mexico Border Partnership Plan 
(BPP).  This plan consists of a 22-point action plan  for which the CBP serves as the lead agency for 
11 items:  these include a programme similar to the FAST programme. 
(ii) Rules of origin 
33. Rules of origin are applied by the CBP to dete rmine the origin of products.  On the basis of 
this determination, products may qualify for count ry-specific tariff preferences, or be considered 
eligible for government procurement contracts.  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 differen t criteria than those used by the 
CBP.  Country of origin marking and labelling regula tions are also used to provide consumers with 
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).  The 
determination of origin relies on self-certificati on, whereby the onus is on the importer to declare 
origin. 
34. The United States applies preferential and non-preferential rules of origin.
13  While the 
substantial transformation criterion is central to all U.S. rules of origin, its definition varies according 
to the product and the preferential arrangement.  The basic non-preferential U.S. rule of origin is that 
the product is considered to have been produced in a country when (1) the goods are wholly the 
growth, product, or manufacture of that country , or (2) the goods have been, in that country, 
"substantially transformed into a new or different ar ticle of commerce" with a name, character, or use 
distinct from that of the article or articles from wh ich it was so transformed.  Special rules apply to 
textiles and clothing products.14  In addition, the United States ma intains several sets of preferential 
rules under free-trade agreements (FTAs) and unilate ral tariff concessions (Table AIII.1);  these rules 
are based on the principle of substantial transf ormation, implying a combination of local-content 
criteria, a tariff-shift system, or specific requi rements applicable to a given product or group of 
products. 
35. Under NAFTA rules of origin, detailed regulati ons for goods that are not wholly obtained 
from the NAFTA region are based on a combination of  a tariff-shift method or regional value-content 
method.  In general, a good incorporating non-origin ating materials originates in the NAFTA territory 
if each of these components undergoes an applicable change in tariff classification, specified for each 
good in an annex of 168 pages (Annex 401).  For tex tiles and clothing the "yarn forward" determines 
in most cases that the only textiles and clothing ite ms to fully benefit from the free trade between the 
signatories are items produced from inputs originating in the respective FTA partner, starting with 
yarn/fibre and including all tr ansformations (Table AIII.1). 
36. The NAFTA also introduced stricter rules of or igin in the automotive sector.  While under the 
Auto Pact and the former U.S.-Canada FTA, duty-free trade between participants was contingent on a 
50% U.S. or Canadian content, the threshold un der the NAFTA increased to 56% on 1 January 1998 
and to 62.5% on 1 January 2002 for passenger cars, light  trucks, small buses (transport of 15 or fewer 
persons), their engines and transmissions.  The corresponding level for heavy-duty vehicles, large 
buses and all other parts is 60% since 1 January 2002.  Thus, companies operating in Canada or 
                                                      
13 These are described in detail in U.S. Customs and Border Protection (1998). 
14 See U.S. Customs and Border Protection (2000). United States WT/TPR/S/126 
 Page 39 
 
 
Mexico are required to meet these increased regi onal content levels in order to export to the 
United States at preferential rates of duty. 
37. On 1 January 2003, following requests from indus try, 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.15 
38. The Generalized System of Preferences (GSP) rules of origin generally require substantial 
transformation with a 35% regional-value content re quirement.  The rules of origin adopted under the 
CBERA and ATPA programmes are based on the GSP rules.  Special rules of origin have been 
adopted under the AGOA and CBTPA programmes for clot hing products, reflecting the fact that these 
products are granted duty-free access subject to requir ements on the origin of the yarn and the fabric 
(see Chapter IV(3)(iii)).  On 11 January 2002, India requested consultations with the United States in 
respect of its rules of origin applicable to im ports of textiles and apparel products.  A panel was 
established and it found in favour of the United Stat es;  the panel report was adopted in July 2003.16 
(iii) Tariffs 
39. The United States levies customs duties on imports on the basis of their f.o.b. value at the 
point of export.  The tariff consists of 10,297 ta riff lines in Chapters 1 to 97 at the Harmonized 
Commodity Description and Coding System (HS) 8-digit level.17  The 8-digit provisions may be 
subdivided to distinguish products  for non-tariff purposes (e.g. to monitoring import quotas on textiles 
and clothing), and such subdivisions are given two additional digits. 
40. The tariff is presented in two columns.  "G eneral", most-favoured-nation (MFN) rates, 
referred to in U.S. provisions as normal trade rela tions tariff treatment, are in Column 1, as are the 
"special" rates applicable to imports under most  preferential programmes.  Column 2 lists the 
statutory rates enacted by the Smoot-Hawley Tari ff of 1930, which are applied to imports from 
countries to which the United States does not grant MFN treatment (see below). 
41. Chapter 98 contains 172 tariff lines of special classification provisions, including eligibility 
conditions for duty-free treatment of otherwise dutiable items.  Among other things, Chapter 98 
contains the recently enacted tariff provisions fo r African and Caribbean countries under the African 
Growth Opportunity Act (AGOA) and Caribbean Basin Partnership Act (CBTPA).  Temporary modifications to import duties (e.g. duty suspensions, sanctions pursuant to trade disputes) and safeguard measures (section (ii) below) are contained in Chapter 99. 
(a) MFN trading partners 
42. The United States applies MFN tariff treatment  to all but one WTO Member – Cuba.  In 
addition, the Democratic People's Republic of Ko rea, Laos, and Serbia and Montenegro do not to 
receive MFN tariff treatment from the United States;  however there is legislation pending to grant MFN status to Serbia and Montenegro.  MFN Status for Afghanistan was restored on 2 June 2002.
18 
                                                      
15 U.S. Department of the Treasury online informati on.  Available at:  http://www.customs.ustreas.gov/ 
nafta/docs/us/amendments_annex_401.doc. 
16 WTO documents WT/DS243/R, 20 June 2003 and Corr.1. 
17 Tariff and trade data are accessible from the United States International Trade Commission online 
information.  Available at:  http://dataweb.usitc.gov. 
18 67 Federal Register 30535. WT/TPR/S/126 Trade Policy Review 
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43. Under the provisions of Title IV of the Trade Act of 1974, also known as the Jackson-Vanik 
amendment, the President is required to deny MF N tariff treatment to any non-market economy that 
was not eligible for such treatment in 1974 and that  he determines denies or seriously restricts or 
burdens its citizens’ right to emigrate.  Termin ating the application of Title IV, and accordingly 
granting MFN treatment to a given country, requires th e enactment of a law.  Accordingly, pursuant to 
Public Law 106-286, on 27 December 2001 the U.S.  President issued a proclamation extending 
permanent MFN status to China, effective 1 January 2002.19 
44. The President may also grant an annual waiver  from Title IV provisions if the waiver is 
deemed to substantially promote the legislation’s objectives.  In June 2001, following the signing of a 
trade agreement with Viet Nam, a waiver was gran ted resulting in conditional MFN tariff treatment to 
products from Viet Nam, effective 10 December 2001.  Belarus, Turkmenistan, and Viet Nam currently receive MFN tariff treatment under an annual waiver. 
(b) Applied MFN tariff rates 
45. The main features of U.S. MFN tariffs are repor ted in Table III.1.  The analysis is based on 
the 2002 Harmonized Tariff Schedule of the United Stat es (the Tariff);  although the 2003 Tariff was 
available at the time of preparing this report, ad valorem  equivalents of non- ad valorem  tariff rates 
were available only for 2002. 
Table III.1 
Structure of applied MFN tariffs in the United States, 1996-02 
(Per cent) 
Indicators 1996a1998b1999b 2000 2002 
1. Bound tariff lines (share of all lines) 100.0c100.0c100.0c 100.0c 100.0c 
2. Duty-free tariff lines (share of all lines) 21.4 13.8 29.7 31.0 31.2 
3. Non- ad valorem  tariffs (NAV - share of a ll lines) 24.4 14.3 12.9 12.6 12.2 
4. Lines covered by tariff quotas (sha re of all lines) 1.9 1.9 1.9 1.9 1.9 
5. Non- ad valorem  tariff lines with no ad valorem  equivalent 3.1 0.2 0.2 0.0 0.0 
 (share of all lines)    
6. Simple average bound tariff rated .. 5.9 5.7 .. .. 
7. Simple average applied tariff rated 6.4 5.9 5.7 5.4 5.1 
 Agricultural products (WTO definition)e 10.0 10.3 10.7 10.4 9.8 
 Non-agricultural products (WTO definition) 5.7 5 .0 4.7 4.5 4.2 
8. Lines exceeding 15% (share of  all lines) 8.9 7.7 7.4 7.0 6.6 
9. Overall standard deviation 13.4 12.9 13.3 13.1 12.3 
10. Coefficient of variation (CV) 2.1 2.2 2.3 2.4 2.4 
.. Not available. 
a Calculated on the basis of data provided by the U.S. authorities for the 1996 TPR. 
b Calculated on the basis of data provided by the U.S. authorities for the 1999 TPR. 
c Two lines applying to crude petroleum are not bound. 
d Excludes in-quota tariff lines. 
e Covers HS Chapters 1 to 24 less fish and fish products plus HS codes 2905.43, 2905.43-5, 3809.10, 3823.60, 3823.11-13, 19, 
 3823.70, 3824.60 and HS headings 3301, 3501-05, 4101-03, 4301, 5001-03, 5101-03, 5201-03, 5301-03. 
Note: Total number of lines is 10,297. 
Source:  WTO estimates, based on US ITC online information.  Ad valorem  equivalents provided by the U.S. authorities. 
46. The simple average applied MFN tariff, including the ad valorem  equivalents (AVEs) of 
specific and compound rates, was 5.1% in 2002, down from 5.4% in 2000.  The average applied tariff 
                                                      
19 China formally acceded to the WTO on 11 December 2001. United States WT/TPR/S/126 
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for agriculture in 2002 was 9.8%, down from 10. 4% in 2000;  the average for non-agricultural 
products was 4.2% in 2002, down from 4.5% in 2000.20  Since the last Review of the United States, in 
2001, no new autonomous measures have been introdu ced to decrease U.S. MFN tariffs.  Hence, the 
decline in the average of non-agricultural ta riffs since 2000 mainly reflects the ongoing 
implementation of WTO tariff reduction commitments in textiles and clothing  and other products, as 
applied rates are being reduced in line with the staged reductions in bound rates  (see section (d) 
below).  Some 31% of all tariff items enter the United States duty-free. 
47. Some 12% of tariffs are non- ad valorem  (NAV), although this share is continuously 
declining.  Most NAV tariffs are specific or compound (i.e an ad valorem  duty plus a specific duty).  
The United States has submitted AVEs for applied NAV duties to the Integrated Data Base (IDB).  
The United States also posts its AVEs on the U.S. International Trade Commission (USITC) website.
.21 
48. In general, the non- ad valorem  tariffs applied by the United States result in higher protection 
than the ad valorem  duties:  in 2002, the average of AVEs was estimated at 11.2%, compared with 
4.3% for ad valorem  duties.  Specific and compound duties accounted for 77 of the 100 highest rates 
in 2002.  Specific and compound tariff rates apply mainly to agricultural products, footwear and 
headgear, as well as watches and certain precision inst ruments;  a number of specific duties are also 
applied on chemicals and chemical products, textiles, and base metals. 
49. The use of NAV duties makes it possible for tari ff protection to increase when import prices 
decline, and vice versa.  In 1997, the average of the AVEs provided by the U.S. authorities was about 
14%;  by 2002, that average had declined to about 11% (see above).  However, the data reveal very 
wide variations in AVEs:  about 70% of the lin es that are comparable between the two periods 
recorded declines with falls of over 100 percenta ge points for several dairy, tobacco, and sugar 
products.22  AVEs increased or stayed unchanged for th e remainder, with large increases recorded on 
certain (other) tobacco and dairy products, on certa in cotton, and on certain clothing items.  For 
example in the case of men's ensembles (HS 6203. 23.00), the rate increased from 11% to 28%.23 
50. In 2002, some 6.6% of all tariff lines bore tari ffs exceeding 15%, in some cases estimated on 
an AVE basis.  These tariffs tend to be concentrated  in a few "sensitive" sectors, which are often also 
of particular interest to exporters from deve loping countries.  For example, tariffs reach ad valorem  
or ad valorem  equivalent rates of 350% for tobacco, 164%  for peanuts, and 132% for peanut butter 
(although in some cases tariff quotas are not filled and the much lower in-quota rates may apply rather 
than these out-of-quota tariff rates).  In the non-ag ricultural sectors, tariff protection peaks at 58.5% 
for certain footwear (AVE).  Protection for tex tiles and clothing products is mainly in the 15-30% 
range. 
51. The United States maintains tariff quotas on various types of product, including broomcorn 
brooms (HS 9603.10), tuna, and agricultural products.  Tariff quotas cover 1.9% of the U.S. tariff.  
High out-of-quota tariffs on agricultural products constitute one of the main forms of import 
protection for these products (see Chapter IV(2)).  In the case of tuna in airtight containers 
(HS1604.14.30), tariffs are 35% when the tuna is in oil, and 12.5% otherwise.  For the latter however, 
a tariff quota is set annually at up to 4.8% of U. S. apparent consumption during the preceding year, as 
reported by the National Marine Fisheries Service;  imports within that volume are allowed at a 6% 
duty (instead of 12.5%). 
                                                      
20 These averages are based on the WTO definition of agriculture, including out-of-quota rates only. 
21 USITC online information.  Available at:  http://dataweb.usitc.gov/. 
22 For example, the AVE on sour cream (HS 0403 90 78) fell from 716% in 1997 to 94% in 2002. 
23 AVEs are available online at:  http://rep ortweb.usitc.gov/tariff/tariff_form.jsp. WT/TPR/S/126 Trade Policy Review 
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(c) WTO bindings 
52. Following the Uruguay Round, the United States bound all tariff lines in Chapters 1-97, 
except two lines covering crude petroleum.  In the context of the Consolidated Tariff Schedule (CTS) 
Database Project, in September 2000 the United St ates provided the WTO with its Consolidated 
Schedule of final bound rates resulting from all WT O Agreements, including the Uruguay Round, the 
Information Technology Agreement, and the Agreement on Pharmaceuticals.  The CTS specifies the base and final rates, and the implementation periods. 
53. The staged annual reductions in bound MFN ta riffs were implemented over five years for 
most industrial products (i.e. 1995-99), over six y ears (i.e. 1995-00) for most agricultural products, 
leaving about 12% of all CTS tariff lines to be re duced over a ten-year period, with the final bound 
rate applying as of 1 January 200 4.  Products whose final bound ra te is reached in 2004 include 
mostly textiles and clothing (HS 50-65), but also so me chemicals, paints, pl astics, leather products, 
ceramics, glass products, and steel products.  The reductions are specified on a line by line basis. 
54. At the time of its previous Review, the United States had provided the WTO with the final 
revisions resulting from the introduction of the HS96 nomenclature;  the documents for formal 
certification were being prepared in Septembe r 2003.  The United States has also amended its 
Schedule of Concessions to implement the results of the 2002 revision of the Harmonized System, adopted by the World Customs Organization in June  1999 with effect from 10 January 2002.  In line 
with the procedure agreed to by WTO Members for HS2002 changes
24, the United States submitted its 
revised Schedule to the WTO for preliminary verification. 
(d) Preferential tariffs 
55. This analysis is based on tariffs provided elect ronically by the United States to the WTO. 
Tariff preferences may be granted by the United States either unilaterally, or in the context of free-trade agreements (FTAs).  As indicated in Chapte r II, the United States grants unilateral preferential 
tariff treatment to countries qualifying under the U.S.  Generalized System of Preferences (GSP);  the 
Caribbean Basin Economic Recovery Act (CBERA ), which implemented the Caribbean Basin 
Initiative (CBI);  the United States-Caribbean Basin Trade Partnership Act (CBTPA), which builds on 
the CBERA;  the Andean Trade Preference Act (ATP A) as amended by the Andean Trade Preference 
and Drug Eradication Act (ATPDEA);  and the African Growth and Opportunity Act (AGOA). 
56. Average tariffs for the main product groups, taking into account these preferential 
arrangements, are described in Table III.2.  These averages combine the duty-free rates eligible under 
a given arrangement with the next lowest rate ava ilable to exporters when the product is not eligible 
under the particular arrangement.  For example, mo st imports from Israel enter the United States free 
of duty, reflecting the two preferential trade agr eements between the two countries; however as some 
lines are excluded from both agreements with Israel , the overall average tariff on imports from Israel 
is 0.7%.  Further, the average tariff rates for CBPTA, ATPDEA, and AGOA do not include the 
provisions of chapter 98 of the United States Tariff  Schedule wherein, after meeting certain input 
requirements (described in Chapter IV(3)), textile and clothing articles are eligible for additional tariff 
preferences. 
57. Average tariffs under unilateral U.S. preference schemes are lower than the average MFN rate 
but still substantially higher than the averag e under the FTAs that are in force between the 
United States and Canada, Israel, Jordan, and Mexi co;  moreover they are, in general, conditional 
upon statutory criteria (e.g. protection of labour  rights, intellectual property, see Chapter II). 
                                                     
 
24 WTO document WT/L/407, 26 July 2001. United States WT/TPR/S/126 
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Table III.2 
Tariffs according to U.S. preferential agreements, 2002  
Average tariffs (%) 
MFN IsraelaCanadaaMexicobJordanb CBERAb CBTPAb 
Total 5.1 0.7 0.7 0.6 2.7 2.4 2.3 
By WTO category        
Agriculture 9.8 4.4 4.3 2.7 6.2 5.9 5.9 
Non-agriculture (excl petroleum) 4.2 0.0 0.0 0.2 2.1 1.8 1.6 
By ISIC sector        
Agriculture and fisheries 5.6 0.4 0.5 0.4 4.0 3.3 3.3 
Mining 0.4 0.0 0.0 0.0 0.1 0.0 0.0 
Manufacturing 5.1 0.8 0.7 0.6 2.7 2.4  2.2 
Textiles (321) 9.3 0.1 0.1 0.3 5. 9 8.1 8.1 
Clothing (322) 10.8 0.0 0.0 0.7 6.9 7.6 7.5 
By HS section       
01 Live animals & prod. 11.4 8.4 8.0 2.7 7.3 8.4 8.4 
02 Vegetable products 4.0 0.6 0.6 0.6 1.4 0.6 0.6 
03 Fats & oils 3.9 0.2 0.2 0.2 1.3 0.2 0.2 
04 Prepared food etc. 13.2 4.7 4.7 4.5 9.3 8.6 8.5 
05 Minerals 0.7 0.0 0.0  0.0 0.2 0.2 0.1 
06 Chemical & prod. 3.9 0.0 0.0 0.1 1.7 0.0 0.0 
07 Plastics & rubber 3.7 0.0 0.0 0.0 1.1 0.0 0.0 
08 Hides & skins 4.3 0.0 0.0 0.3 1.5 1.3 0.7 
09 Wood & articles 2.2 0.0 0.0 0.0 0.8 0.2 0.0 
10 Pulp, paper etc. 0.5 0.0 0.0 0.0 0.0 0.0 0.0 
11 Textile & articles 9.6 0.1 0.1 0.4 6.2 8.1 8.1 
12 Footwear, headgear 13.5 0.0 0.0 1.8 9.2 12.0 3.7 
13 Articles of stone 5.1 0.0 0.0 1.0 2.3 0.3 0.3 
14 Precious stones, etc. 3.0 0.0 0.0 0.0 0.6 0.0 0.0 
15 Base metals & prod. 2.3 0.0 0.0 0.2 0.8 0.0 0.0 
16 Machinery 1.6 0.0 0.0 0.0 0.1 0.0 0.0 
17 Transport equipment 2.6 0.0 0.0  0.1 1.0 0.0 0.0 
18 Precision equipment 3.1 0.0 0.0 0.1 1.3 0.0 0.0 
19 Arms and ammunition 1.5 0.0 0.0 0.0 0.4 0.0 0.0 
20 Miscellaneous manuf. 3.2 0.0 0.0 0.1 1.2 0.0 0.0 
21 Works of art, etc. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 
  MFNATPA 
ATPDEAb AGOAcLDCa GSPa  
Total   5.1 2.6 2.4 2.7 3.7  
By WTO category        
Agriculture  9.8 6.0 6.0 6.2 8.4  
Non-agriculture (excl. 
petroleum)  4.2 1.9 1.8 2.1 2.8  
By ISIC sector        
Agriculture and fisheries  5.6 3.3 3.4 3.6 4.8  
Mining  0.4 0.0 0.0 0.0 0.1  
Manufacturing  5.1 2.5 2.4 2.7 3.6  
Textiles (321)  9. 3 8.6 9.0 9.0 9.0 
Clothing (322)  10.8 9.6 10.1 10.4 10.4 
By HS section        
01 Live animals & prod.  11.4 8.4 8.4 8.4 11.0  
02 Vegetable products  4.0 0.6 0.7 1.0 2.6  
03 Fats & oils  3.9 0.2 0.2 0.2 2.7  
Table III.2 (cont'd)WT/TPR/S/126 Trade Policy Review 
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  MFN ATPA 
ATPDEAb AGOAcLDCa GSPa  
04 Prepared food etc.  13.2 8.7  8.5 8.8 11.3  
05 Minerals  0.7 0.2  0.0 0.0 0.3  
06 Chemical & prod.  3.9 0.0  0.0 0.0 1.7  
07 Plastics & rubber  3.7 0.1  0.1 0.1 0.4  
08 Hides & skins  4.3 1.3  0.7 2.1 2.5  
09 Wood & articles  2.2 0.2  0.0 0.2 0.4  
10 Pulp, paper etc.  0.5 0.0  0.0 0.0 0.0  
11 Textile & articles  9. 6 9.0  9.4 9.4 9.4  
12 Footwear, headgear  13.5 12.1  0.9 12.4 12.4  
13 Articles of stone  5.1 0.3  0.3 0.5 2.7  
14 Precious stones, etc.  3.0 0.0  0.0 0.0 0.1  
15 Base metals & prod.  2.3 0.0  0.0 0.1 0.7  
16 Machinery  1.6 0.0  0.0 0.0 0.3  
17 Transport equipment  2.6 0.0  0.0 0.0 1.3  
18 Precision equipment  3.1 0.0  0.0 0.8 1.7  
19 Arms and ammunition  1.5 0.0  0.1 0.0 0.2  
20 Miscellaneous manuf.  3.2 0.1  0.4 0.1 0.8  
21 Works of art, etc.  0.0 0.0  0.0 0.0 0.0  
a If a tariff line is not eligible for this  preferential programme, the ra te used in the calculation of  averages is the MFN rat e. 
b If a tariff line is not eligible for this  preferential programme, the ra te used in the calculation of  averages is the GSP or MFN 
 rate, whichever is the lowest rate generally applicable to that product.  
c The calculations were made for LDC AGOA beneficiaries, as they constitute the majority of beneficiaries.  If a tariff line is  not 
 eligible for this preferential programme , the rate used in the calculation of av erages is the LDC, GSP or MFN rate, 
 whichever is the lowest rate gene rally applicable to that product. 
Source:  WTO Secretariat estimates, based on data from U.S. authorities. 
NAFTA preferences 
58. Under the North American Free Trade Agreemen t (NAFTA) tariffs were eliminated in 1998 
on all goods imported from Canada, except certain ag ricultural products, which remain indefinitely 
under tariff quotas.  In 2002, the average rate of duty on imports from Canada was 0.7%, down from 
0.8% in 2000;  tariffs on 214 items that  were not duty-free were mostly non- ad valorem,  and were 
applied principally to dairy products, coco a products, peanuts, sugar, and syrups. 
59. In 2002, the average tariff applied to impor ts from Mexico was 0.6%, down from 1.1% in 
2000; these reductions are primarily due to accelerated tariff reductions agreed to in January 2002.  
Some 1,152 items were not duty-free when imported from Mexico into the United States in 2002, principally dairy products, cocoa products, peanut s, sugar, and syrups, as well as certain types of 
clothing such as suits.  Some rates ranged to well over 100%, including on certain fats and oils, 
peanuts, sugar, certain fructose and blended syrups, and low-fat chocolate crumb. 
60. Under the NAFTA, tariffs on goods traded between  the United States and Mexico were either 
eliminated immediately or were to be phased out  over five, ten or 15 y ears, depending on product 
areas.  The ten-year phase-out period ended on 1 Janua ry 2003.  U.S. duties remain to be phased out 
under the NAFTA on imports of rubber footwear, suga r, brooms, frozen concentrated orange juice, 
ceramic tile, and glassware. 
61. All originating textiles and clothing products  from Canada and Mexico were duty-free in 
2003.  In addition, specific products that do not m eet NAFTA rules of origin can still qualify for 
preferential treatment up to a fixed import volume or  "tariff preference level" (TPL) negotiated among 
the three NAFTA countries.  Access is provided up to  certain annual quantities for cotton, wool, and 
man-made fibre clothing that is manufactured (i.e . substantially transformed) in a NAFTA country United States WT/TPR/S/126 
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from non-originating components.  In certain cases,  notably woollen, cotton or man-made apparel, 
these tariff quotas are just about filled, suggesting th at exports of such products to the United States 
are restrained.25 
Preferences to Israel, Jordan and Palestine 
62. Tariffs on imports from Israel averaged 0.7% in 2002, as a result of the U.S.-Israel FTA.  
Tariffs remain on some 219 lines, including on  butte r, fresh and sour cream, certain cheeses, peanuts, 
and ice cream.  In 2002, these tariffs were at about  half of the MFN level (Table III.2), reflecting the 
bilateral agreement on agricultu ral products (Chapter II). 
63. Under the new FTA with Jordan, the average ta riff on imports was 2.7% in 2002.  The tariff 
reductions are in four stages:  tariffs of less than  5% are to be phased out in two years, i.e. by 
1 January 2003;  tariffs between 5%  and 10% will be eliminated in four years, by 1 January 2005;  
those between 10% and 20% will be eliminated in five  years;  and tariffs currently over 20% will be 
phased out in ten years, i.e. by 1 January 2011.  Some items (in category "E") are not subject to 
reduction commitments under the FTA;  for items under category "F", the base duty is to remain 
unchanged for ten years, after which it becomes dut y-free.  New tariff quotas were created on imports 
from Jordan under the FTA;  according to the U.S.  authorities, they provide additional access to the 
U.S. market for certain agricultural products from Jordan. 
GSP preferences 
64. The U.S. GSP programme provides for the duty-free importation of designated articles when 
imported from beneficiary developing countries.  Some  tariff lines are GSP-eligible only for imports 
from the developing countries identified by the United States as least developed countries (LDCs).  In 
its Annual Review, the GSP Subcommittee of the Trade Policy Staff Committee at USTR reviews 
petitions to change either the product covera ge or the country coverage of the GSP.26  Products can be 
removed from GSP benefits when imported from a pa rticular country if imports from that country 
exceed a given threshold (competitive need limitation) .  The country can be redesignated if the share 
decreases subsequently.  In 2002, Arge ntina was readmitted as a beneficiary.27  Afghanistan was 
admitted as a GSP beneficiary in 2003.28 
65. In 2002, imports from the 144 beneficiaries under th e GSP were subject to an average tariff of 
3.7%, which was 1.5% percentage points below th e average MFN tariff rate.  Imports from GSP-
eligible countries amounted to about  14% of total U.S. imports: 76%  of these imports entered under 
MFN conditions, and 11% under GSP.  The remai nder entered under specific regional programmes 
described below. 
Caribbean preferences 
66. Since 1984, as part of the Caribbean Basin Initiative (CBI), the CBERA provides duty-free 
access to most products imported from 24 Caribbean countries.  The major product exclusions from duty-free treatment are classified under the followi ng sections:  out-of-quota agricultural products;  
canned tuna;  textiles and textile articles;  petrol eum;  and footwear and headgear.  The CBI was 
                                                     
 
25 For information on utilization levels see Canada's Department of Foreign Affairs and International 
Trade online information.  Availabl e at:  http://www.dfait-maeci.gc.ca. 
26 USTR online information.  Available at:  http://www.ustr.gov/fr/2003/2003-07-01-gsp.pdf. 
27 USTR online information.  Available at:  http ://www.ustr.gov/fr/2002/2002- 09-03-gsp-proclamation. 
pdf. 
28 Presidential Proclamation 7637 of 10 January;  FR Vol. 68 No. 9 of 14 January 2003. WT/TPR/S/126 Trade Policy Review 
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extended in May 2000 through the enactment of the CBTPA.  The CBTPA extended duty-free tariff 
treatment to a number of other products previous ly excluded from CBI trade preferences, including 
footwear, canned tuna, petroleum pr oducts, and watches and watch part s. In June 2003, 14 Caribbean 
countries were eligible for CBTPA treatment.  In  2002, the average CBERA and CBTPA tariff rates 
were 2.4% and 2.3% respectively. 
67. In addition, the CBTPA expanded duty-free (and quota-free) treatment to certain clothing 
manufactured in the CBI region from U.S.-origin fa bric, as well as limited quantities of apparel made 
from fabric knit in the CBI region from U.S. yarns (Cha pter IV(3)(iii)).   Such apparel was previously 
excluded from preferential tariff treatment. 
AGOA preferences 
68. The AGOA, implemented in December 2000 as pa rt of the Trade and Development Act, 
enhanced market access for sub-Saharan Afri can countries by making over 1,800 new products 
eligible for duty-free treatment until 30 September 2008,  including such previous ly excluded items as 
footwear, luggage, handbags, watches.  Sub-Sahara n African beneficiary countries are also exempted 
from competitive need limitations, which cap the GSP benefits available to beneficiaries in other 
regions.  Non-eligible products consist essentially of  agricultural and food pr oducts, and textiles and 
clothing products, as well as certain steel products , canned peaches and apricots, and dehydrated 
garlic.29  In addition, the AGOA provides duty-free and quota-free access to imports of clothing made 
locally from U.S. inputs, and to a lesser extent to clothing produced locally using regional or third country fabrics and yarns (Chapter IV(3)(iii)). 
Andean preferences
 
69. Concessions granted under the ATPA to Bolivia, Colombia, Ecuador, and Peru are similar in 
magnitude and coverage to those available under the CBERA.  The ATPA provides reduced-duty or 
duty-free treatment for most imports from qualifying countries, resulting in an average applied tariff 
of 2.6% (Table III.2).  The major exclusions from preferential treatment are classified under the following sections:  out-of-quota agricultural products , canned tuna;  textile and textiles articles;  
petroleum;  and footwear and headgear.  The ATPD EA (see Chapter II) extended preferential tariff 
rates to additional products not eligible for preferen ces under ATPA, if certain criteria are met.  These 
products include certain footwear, petroleum a nd petroleum products, watches and watch parts, 
handbags, luggage, and certain othe r leather goods, tuna in pouches, and certain clothing and textile 
articles (for the latter, see Chapter IV(3)). 
(iv) Customs fees and other charges affecting imports 
70. Detailed provisions on fees for customs services ar e provided in Title 19 of the U.S. Code.
30  
The Trade Act of 2002 mandated the Comptroller Ge neral to conduct a study on the extent to which 
the amount of each customs user fee is commensurate with the level of services provided. 
71. The Harbor Maintenance Tax (HMT), introduced in 1986, is an ad valorem  levy of 0.125% 
collected by the CBP (formerly the U. S. Customs Service) on port use.31  The authorities indicated 
that the HMT applies to imports, admissions into foreign trade zones, domestic cargo shipped through 
                                                      
29 A list of products eligible for duty-free treatment under AGOA if exported to the United States from 
an AGOA beneficiary country is available online a t:  http://www.ustr.gov/regions/africa/ annex2a.pdf. 
30 See 19USC58 [online].  Available at:  http ://frwebgate6.access.gpo.gov/ cgi-bin/waisgate.cgi? 
WAISdocID=8505301 8581+0+0+0&WAISaction=retrieve. 
31 Title 26, Internal Revenue Code, Section 4461 (26 U.S.C. 4461). United States WT/TPR/S/126 
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a port, as well as passengers.  The tax has not been  collected on exports since 1998, when the U.S. 
Supreme Court ruled that the portion of the HMT le vied on exported cargo violated the Export Clause 
of the Constitution, which bans ta xes on exports, but not user fees. 
72. In the FY 2000 Budget, proposals were made to replace the remaining portions of the HMT as 
well as the previous export portion with a harbour ma intenance fee more closel y tailored to the cost 
incurred.  Unlike the HMT, the fee would be char ged to vessel owners and operators and assessed on 
the basis of ship size, sailing frequency, and other fact ors, instead of the value of shipments, to ensure 
that the fee corresponded more closely to the use of port services and facilities.  Currently, however, 
there are no plans to eliminate or modify the HMT. 
73. On 20 March 2002, Brazil requested consulta tions with the United States concerning the 
Equalizing Excise Tax imposed by the State of Fl orida on processed orange and grapefruit products 
produced from citrus fruit grown outside the United States (Section 601.155 Florida Statutes).  In the 
view of Brazil the incidence of this tax on impor ted processed citrus products and not on domestic 
products constituted a violation of  its obligations under GATT 1994.  Brazil subsequently requested 
the establishment of a panel.32  According to the U.S. authorities, Florida provisions have been 
amended to address Brazil's concerns and panel procedures were on hold. 
(v) Anti-dumping, countervailing, and safeguards actions 
(a) Anti-dumping and countervailing measures 
Legislation and administration 
74. The administration of laws and agreements on AD and CVD measures in the United States is 
the responsibility of the International Trade Admi nistration (ITA) in the Department of Commerce 
(DOC) and of the United States International Trade Commission (USITC).  In AD and CVD investigations, the ITA is responsible for the dete rmination of the existence and margin of dumping 
and subsidy.  The USITC is responsible for the de termination of material injury to the domestic 
industry as a result of the imports of the dumped or subsidized products. 
75. The DOC generally initiates AD and CVD investig ations at the request of petitioners, based 
on written applications;  it has the authority to sel f-initiate investigations but seldom does.  Petitions 
must be filed simultaneously with the ITA and th e USITC.  Once the ITA determines that the petition 
contains sufficient information suppor ting the allegations, an investiga tion is formally initiated.  The 
USITC subsequently makes a preliminary injury dete rmination:  if negative, the investigation is 
terminated, if affirmative, the ITA issues a prelim inary determination of dumping or subsidization.  
Whether the ITA's preliminary determination is affirm ative or negative, the investigation continues.  
If this determination is affirma tive, provisional measures may be applied for four months in CVD 
cases or up to six months in AD cases.  Provisional measures are in the form of a cash deposit or bond 
in an amount equivalent to the estimated margin of dumping or subsidization.  If the ITA's final 
determination finds a margin of dum ping or a subsidy rate above the de minimis , then the USITC 
issues a final injury determination:  if affirm ative, the ITA issues an order imposing AD or CVD 
duties, if negative, the investigation is termin ated, no order is issued, provisional measures are 
terminated and bond and cash deposits are returned. 
76. The main U.S. AD and CVD laws are contained primarily in Title VII of the Tariff Act of 
1930, as amended by the Trade Agreements Act of  1979.  The Trade and Tariff Act of 1984, the 
Omnibus Trade and Competitiveness Act of 1988, a nd the Uruguay Agreements Act of 1994 (URAA) 
                                                     
 
32 WTO document WT/DS/250/2, 19 August 2002. WT/TPR/S/126 Trade Policy Review 
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introduced further modifications to AD and CVD le gislation.  The Unfair Competition Act, better 
known as the Anti-Dumping Act of 1916, also contains  provisions pertaining to international price 
discrimination remedies. 
77. More recently, the Continued Dumping and Su bsidy Offset Act of 2000 (CDSOA), also 
known as the Byrd Amendment, introduced a sy stem under which AD and CV duties assessed are 
distributed to members of the affected U.S. industry who supported the petition for investigation.33  
Under the CDSOA, "affected domestic producers"  may receive a portion of the assessed AD or CVD 
duties to cover certain qualifying expenditures.  The CDSOA defines "affected domestic producer" as 
any manufacturer, producer, farm er, rancher, or worker representative who was a petitioner or 
interested party in support of the petition with respect to which an anti-dumping duty order or a 
countervailing duty order has been entered;  qualif ying expenditures encompass most fixed and some 
variable costs.  Allocations under the CDSOA are distributed on an annual basis. 
78. The proposed budget appropriation for the CD SOA in FY 2002 was US$200 million.  The 
distribution of the offset proceeds is assigned to the Commissioner of Customs, and is proportional to 
producers' new and remaining "qualifying" expenditures, as defined by the CDSOA.34  T h e  
Commissioner of Customs must establish special  accounts in the Treasury for each AD and CVD 
order, and deposit in them all anti-dumping or co untervailing duties assessed.  In this respect, a 
Clearing Account has been established via regulation for the deposit of all AD and CV duties at the 
time of importation.  These duties remain in the Cl earing Account until liquidation.  At liquidation, 
the funds are transferred to the CDSOA Special Ac count for disbursement.  CDSOA deposits in the 
Clearing Account were US$2.6 billion on 1 October 2003, of which US$1.4 billion from the AD and 
CVD cases on softwood lumber from Canada.  In FY  2003, the estimated value of disbursements was 
US$280 million (Table III.3). 
Table III.3 
CDSOA disbursements from the Special Account 
Year Amount (US$ million) Number of claims 
FY 2001 230 900 
FY 2002 330 1,200 
FY 2003 280a 2,100 
 
a Estimate. 
Source : Information provided by the U.S. authorities. 
79. Aspects of the legal framework, as well as the procedures under which AD and CVD 
investigations take place, continued to be challenge d in the WTO during the period under review.  In a 
prominent case various WTO Members challenged the CDSOA and in July 2001 requested the establishment of a Panel.
35  A Panel Report was issued in September 200236;  the United States 
appealed the case, and in January 2003 the Appella te Body affirmed the Panel's findings that the 
CDSOA was inconsistent with cer tain provisions of the AD Agreement, the SCM Agreement, the 
GATT 1994, and the WTO Agreement, namely th at the "offsets" under the CDSOA were a non-
permissible specific action against dumping or a subs idy and that they nullified or impaired benefits 
accruing to the complaining parties, but reversed the fi nding with respect to their being an incentive to 
                                                      
33 Formally, Title X of the Agriculture, Rural Development, Food and Drug Administration, and 
Related Agencies Appropriations Act of 2001 (Public Law No:  106-387).  The full text of the Act is available online at:  http://thomas.loc.gov/cgi-bi n/query/C?c106:./temp/~c106SarzKu. 
34 WTO (2001). 
35 WTO document WT/DS217/1, 9 January 20013. 
36 WTO document WT/DS217/R and WT/DS234/R, 16 September 2002. United States WT/TPR/S/126 
 Page 49 
 
 
file petitions.37  The "reasonable period of time" for implem entation was determined by arbitration to 
expire on 27 December 2003.38 
80. Other cases leading to DSB rulings and still ac tive since 2001 include Canada's claim that, in 
certain cases, the URAA prevented the United St ates from complying fully with the DSB ruling39;  the 
Panel concluded in July 2002 that  Canada had failed to establish that the U.S. legislation was 
inconsistent with the relevant WTO provisions and made no recommendations.40  An earlier challenge 
of the Anti-Dumping Act of 1916, resulted in the Panels finding the Act inconsistent with multilateral 
rules.41  An Appellate Body report recommended that  the United States bring the 1916 Act into 
conformity with its WTO obligations.  On 4 Marc h 2003, legislation repealing the 1916 Act (but not 
any action commenced before the date of the en actment of the Bill or pending on such date) was 
introduced in the U.S. House of Representatives (H.R. 1073).42  A similar bill was introduced in the 
Senate.  A third bill was introduced in the Senate  in May 2003, S 1080 IS, repealing the AD Act of 
1916 (Title VIII of the Act of 8 September 1916)  and any case pending on the date of enactment.43 
81. In the context of the Negotiating Group on Rules (NGR), the United States has noted that it 
considers trade remedies as an integral part of th e current rules-based international trading system.44  
The United States has suggested i ssues under the AD and SCM Agreements that may be appropriate 
for clarification and improvement as part of the negotiations.45 
82. Chapter 19 (Dispute Settlement) of the NAFTA, cont ains provisions to deal with complaints 
between members with respect to AD or CVD actions or legislation.  Under Article 1903, a party may 
request that an amendment to the other Party's AD or  CVD statute be referred to a bi-national panel 
for a declaratory opinion on whether the amendment is consistent with the WTO and the NAFTA.  
Article 1904, provides for the establishment of bi-nati onal panels to review AD, CVD and injury final 
determinations, replacing judicial review in the party's domestic courts.  Under the NAFTA Article 
1904 panel rules, panels apply the domestic law of th e investigating party and are expected to issue a 
decision within 315 days of the date on which a request for a panel is made. 
Anti-dumping 
83. In 2001, in response to petitions from some domestic industries facing intense foreign 
competition, particularly in steel, the number of AD investigation initiations increased by over two-
thirds compared with 2000.  In 2002, the number of  investigation initiations decreased considerably.  
On average, 56 AD investigations were initiated per year during 2001-02, compared with 45 in 
1999-00 (Table III.4).  The 112 inves tigations initiated in 2001 and 2002 covered an import value of 
some 0.5% of total imports. 
                                                      
37 WTO document WT/DS217/AB/R and WT/DS234/AB/R, 16 January 2003. 
38 WTO document WT/DS217/14, WT/DS234/22, 13 June 2003. 
39 WTO document WT/DS221/1, G/L/434, G/SC M/D41/1, G/ADP/D41/1, 20 December 2000. 
40 WTO document WT/DS221/R, 15 July 2002. 
41 WTO documents WT/DS136/R, 31 March 2000 and WT/DS136/RC1, 25 April 2000;  and 
WT/DS162/R, 29 May 2000 and WT/DS162/R/Add.1, 25 September 2000. 
42  WTO document WT/DS136/14/Add.15, WT/DS162/17/Add.15, 9 May 2003. 
43 WTO document WT/DS136/14/Add.16, WT/DS162/17/Add.16, 13 June 2003. 
44 WTO document TN/RL/W/27, 22 October 2002:  Basic Concepts and Principles of the Trade 
Remedy Rules:  Communication by the United States.  See also WTO document WT/MIN(01)/DEC/W/1, 
14 November 2001. 
45 WTO documents TN/RL/W/21, 15 October 2002, TN/RL/W/27, 22 October 2002, TN/RL/W/33, 
2 December 2002, TN/RL/W/35, 3 December 2002 , TN/RL/W/49, 4 February 2003, TN/RL/W/50, 
4 February 2003, TN/RL/W/72, 19 March 2003, TN/RL/W/77, 19 March 2003, TN/RL/W/78, 19 March 2003, 
TN/RL/W/95, 5 May 2003, TN/RL/W/98 , 6 May 2003, and TN/RL/W/130, 20 June 2003. WT/TPR/S/126 Trade Policy Review 
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Table III.4 
Anti-dumping investigations, 1980-02 
Year 1980-90 91 92 93 94 95 96 97 98 99 2000 2001 2002 
Initiations 418 66 84 37 51 14 21 15 36 46 45 77 35 
Preliminary determinations 336 43 54 67 46 23 16 16 28 34 22 61 44 
Final determinations 283 28 28 80 31 38 12 15 17 37 35 34 58 
Duty orders 188 19 16 42 16 24 9 7 9 19 20 30 25 
Revocations 69 7 1 3 28 12 6 4 25 48 57 8 9 
Source : U.S. Department of Commerce. 
84. Some 76% of the investigations initiated in  2001 and 2002 for whic h a determination had 
been made by June 2003 resulted in th e imposition of provisional measures.46  Although not all 
provisional measures are followed by the impositi on of final measures, provisional measures 
themselves are likely to affect expor ters' trade performance.  In this  respect, the authorities consider 
that any such effect would be at most temporary if final measures are not imposed.  In their view, 
since the United States has a bonding system, during the provisional period while investigations are 
under way "up front" cash requirements are minimal, and the time-period between the preliminary and final determinations is statutorily limited.
47 
85. Over 2000-02, initiations led to final duty orde rs in 46% of the cases for which a final 
determination had been made by end June 2003;  this is below the 1987-00 initiation/duty order ratio 
of 53%.  One initiation during this period resulted in  a suspension agreement on steel products with a 
non-WTO member, the Russian Federation (see belo w), though this agreement was terminated upon a 
negative final determination.48  Final AD orders are applied to  imports from 48 countries (as at 
30 June 2003) (Chart III.1):  279 AD duty orders a nd suspension agreements are in effect, compared 
with 242 in December 2000.  Excluding orde rs suspended 271 orders are in effect.49  The higher 
number of duty orders in effect is linked to the substantial incr ease of initiations in 2001, mainly 
related to the steel sector (see below).  The au thorities noted that in FY 2001 (the most recently 
available data), imports subject to AD/CVD measu res (orders and investigations with provisional 
measures) accounted for less than 0.5% of total U.S. imports. 
86. Aspects of investigations, procedures and findings of U.S. anti-dumping measures were 
challenged in the WTO during the period under review .  India challenged the application of adverse 
facts available in determining the dumping margin fo r the Indian exporter in an investigation on cut-
to-length carbon quality steel plate.  A panel established in July 2001 concluded that the United States had acted inconsistently with the WTO Anti-dumping Agreement in refusing to take into account U.S. 
sales price information without a valid justification,  and basing its determination of the margin of 
dumping entirely on the facts available in the AD inves tigation at issue in this dispute, but that U.S. 
statutory provisions governing the use of fact s available were not inconsistent with the 
AD Agreement.
50  In September 2002, Canada requested consultations regarding the final AD 
measure on softwood lumber and the methodologies adopted by the DOC for this investigation.51  
                                                      
46 Data provided by the authorities. 
47 If both the ITA and the USITC make affirmative preliminary determinations within 190 days of 
initiation of an investigation, importers are required to  post a bond or cash to cover the estimated amount of 
duties to be collected in the event a final order is issued. 
48 Cold Rolled Carbon Steel Flat products-A-821-815, Federal Register Vol. 62, 10 October 2002. 
49 The number of AD orders in effect in June 2003 was notified to the WTO in document 
G/ADP/N/105/USA, 12 September 2003.  This number corresponds to the ITA investigation cases. 
50 WTO documents WT/DS206/3, 31 October 2001, and WT/DS206/R, 28 June 2002. 
51 WTO document WT/DS264/1,G/L/566, G/ADP/D42/1, 19 September 2002. United States WT/TPR/S/126 
 Page 51 
 
 
Canada has also challenged the C VD determination on imports of so ftwood lumber (see below);  a 
panel was established in January 2003.52  Also with respect to AD and CVD measures on softwood 
lumber, Canada requested consulta tions regarding procedural aspects of the USITC investigation and 
a panel was established in March 2003.53 
 
87. A total of 18 disputes regarding Title VII inv estigations were brought to the NAFTA in 2001, 
2002 and the first half of 2003;  most referred to AD investigations.  The majority (14) of the cases 
were still active in June 20 03;  four had been terminated with no decision issued. 
Countervailing duties  
88. There were 21 CVD investigation initiations in  the United States between 2001 and 2002, of 
which 18 in 2001;  some two thirds resulted in the imposition of provisional measures.  During the 
same period, 16 final CVD orders were issued;  half  of the products covered were also subject to AD 
measures.54  No CVD orders were issued in the first ha lf of 2003.  The number of initiations increased 
only slightly in 2001-02 over the 1999-00 period (Table III.5). 
89. Duty orders issued in 2000-02 affected imports  from:  Argentina, Brazil, Canada, France, 
Germany, Hungary, India, Indonesia, Italy, Korea, the Netherlands, South Africa, Thailand and the 
United Kingdom.  Overall, there were 57 final CVD or ders in place as of 30 June 2003;  almost half 
involved an EU member, while Asian countries accounted for almost one third of the number of orders in effect.  Two thirds of CVD orders in place related to steel products. 
 
                                                     
 
52 WTO document WT/DS264/3, 5 March 2003. 
53 WTO documents WT/DS/277/1, 7 January 2003 and WT/DS/277/2, 4 April 2003. 
54 ITA online information.  Available at:  http://www.ita.doc.gov. Chart III.1
Anti-dumping duty orders in effect, 30 June 2003
Per cent
Total: 279 casesBy country By product category
Source: WTO Secretariat, based on information from the ITA and the USITC.Canada
 2.9
Other
Europe
14.0European
Union
19.7Other America
1.1Brazil  5.4Argentina  2.2Mexico
3.2
India  3.6
Chinese Taipei
6.1
Korea  6.5
Japan
10.8
China
16.8Thailand  1.8
Indonesia 2.2Other Asia  2.2Africa 2.1
America
14.7
Europe
33.7Asia
49.8Agricultural, 
forest and  food 
products
7.5
Chemicals and 
pharmaceuticals
17.2
Electronics and 
communication 
products
0.4
Iron and steel
55.6Machinery and 
equipment 1.1Minerals and 
metals   9.3Miscelaneous
 products 7.2Transportation 
products 0.7Textile and 
apparel
1.1WT/TPR/S/126 Trade Policy Review 
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Table III.5 
Countervailing duty investigations, 1980-02  
Year 1980-90 91 92 93 94 95 96 97 98 99 2000 2001 2002 
Initiations 240 11 22 5 7 2 1 6 11 10 7 18 3 
Preliminary determinations 210 9 26 1 7 3 0 3 7 9 0 15 6 
Final determinations 176 5 7 20 2 6 2 0 2 15 7 11 14 
Duty orders 107 2 4 16 1 2 2 0 1 6 6 6 10 
Revocations 84 6 0 1 5 35 1 1 4 19 21 0 0 
Source : Information provided by the U.S. Department of Commerce. 
90. Complaints have been brought to the WT O regarding aspects of investigation and 
determination of U.S. countervailing duty measures.   They include challenges to the DOC's "change-
in-ownership" methodologies in cases of CVD duti es applied with respect to pre-privatization 
subsidies.  A WTO panel, established at the re quest of the EU, found the DOC's two change-of-
ownership methodologies inconsistent with WTO rules.55  The United States ap pealed the case, and 
the Appellate Body upheld the Panel's findings that the United States had acted inconsistently with the 
SCM Agreement by imposing and maintaining counte rvailing duties without determining whether a 
"benefit" continued to exist, but reversed the Panel' s conclusion that the U.S. statute was inconsistent 
with the SCM Agreement.56  The Appellate Body recommended that the DSB request the United 
States to bring its measures and administrative practice (the "same person" methodology) into 
conformity with the SCM Agreement.  In January 2003, the United States and the EU informed the 
WTO that they had mutually agreed that the reasonable period of time to implement the 
recommendations and rulings of the DSB woul d be ten months, from 8 January 2003 to 
8 November 2003.57  Another complaint with respect to "change-in-ownership" methodologies was 
lodged by Mexico in January 2003;  this case w as still at the consultation level in June 2003.58 
91. Canada has filed several challenges concerning an  investigation on certain softwood lumber.  
Canada challenged the preliminary CVD and critical  circumstances determinations in August 2001, 
and the consistency of certain provisions of U. S. law and regulations concerning expedited and 
administrative reviews.59  The Panel found that the DOC's preliminary CVD determination ruling and 
the challenged U.S. rules were not inconsistent with U.S. WTO obligations.  However, the Panel 
found that the DOC's imposition of provisional measures was inconsiste nt with U.S. obligations under 
the SCM Agreement, because the DOC had failed to de termine the existence and amount of benefit to 
the Canadian producers based on the prevailing market conditions.60  Canada subsequently challenged 
the final CVD imposed on imports of lumber in May 2002.61  In October 2002, a Panel was 
established and its report was issued in August 2003, finding that the DOC's determinations regarding 
specificity and financial contribution were consiste nt with U.S. WTO obligations, but that the DOC's 
methodology for measuring the benefits was not.62 
                                                      
55 The Panel Report is contained in WTO document WT/DS212/R, 31 July 2002. 
56 WTO document WT/DS212/AB/R, 9 December 2002. 
57 WTO document WT/DS212/12, 15 April 2003. 
58 WTO document WT/DS280/1, G/L/603, G/SCM/D52/1, 27 January 2003. 
59 WTO document WT/DS236/1, G/L/468, G/SCM/D44/1, 27 August 2001. 
60 WTO document WT/DS236/R, 27 September 2002. 
61 WTO document WT/DS257/1, G/L/539, G/SCM/D45/1, 13 May 2002. 
62 WTO document WT/DS257/R, 29 August 2003. United States WT/TPR/S/126 
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92. In August 2003, Mexico requested the establishmen t of a panel to consider its challenge to 
CVDs on steel plate;  consultations  had been requested in January.63  In July 2003, Korea requested 
consultations concerning CVD investigations on dynamic random access memory semiconductors.64 
Suspension agreements 
93. AD and CVD investigations may be suspende d under some circumstances (i.e., when the 
suspension will be more beneficial to the domestic  industry than an investigation) based on an 
agreement with the exporter to eliminate the injuri ous effect.  Under suspension agreements, exporters 
accounting for substantially all of the imports of th e merchandise under investigation, or in the case of 
a subsidy, the Government alleged to be providing the subsidy, agree to eliminate the subsidy or 
dumping, to completely offset the net subsidy,  or to cease exports of the merchandise to the 
United States through export limits or price undertakings by firms.65  An agreement with a WTO 
Member to suspend an AD investigation may invo lve only price undertakings;  agreements with 
respect to CVD investigations may also involve quantitative restrictions. 
94. Nine suspension agreements are in place between  the United States and six countries (Brazil, 
China, Mexico, the Russian Federation, South Africa, and Ukraine);  six of these agreements relate to 
steel (Table III.6). 
Table III.6 
Suspension agreements in ef fect on 31 December 2002 
Country Products Date of order 
Brazil Hot-rolled flat-rolled carbon- quality steel products (C) 19.07.99 
China  Cut to length carbon steel plate (A) 19.11.97 
Mexico Tomatoes (A) 01.11.96;  amended 16.12.02 
Russian Federation Uranium (A) 30.10.92;  amended 15.07.97 
Russian Federation Cut to length carbon st eel plate (A) 19.11.97; amended 23.01.03 
Russian Federation Hot-rolled flat-rolled  carbon-quality steel products (A) 19.07.99 
Russian Federation Ammonium nitrate (A)  16.06.00 
South Africa Cut to length carbon steel plate (A) 19.11.97 
Ukraine Cut to length carbon steel plate (A) 19.11.97 
 
(A) Anti-dumping investigation;  (C) Countervailing measure investigation. 
 
Source : U.S. Department of Commerce, In ternational Trade Administration. 
95. During the 2001-02 period, four new suspension agreements were concl uded, all leading to 
the suspension of AD investigations.  However, in  two of these cases, the investigations were 
continued and the agreements were  terminated upon negative final USITC determinations.  In the case 
of tomatoes from Mexico, the suspended investig ation was resumed following termination of a 
suspension agreement, and a new suspension agreem ent was subsequently concluded.  During the 
same period, an agreement with respect to the im portation of cut-to-length carbon steel plate with the 
Russian Federation was amended..66 
                                                      
63 WTO documents WT/DS/280/1, 27 January 2003, and WT/DS/280/2, 8 August 2003. 
64 WTO document WT/DS296/1, G/L/633, G/SCM/D55/1, 8 July 2003. 
65 19 U.S.C. 1673c(d) and 1673c(d). 
66 In Suspension of Investigation A-821-808, Russian CTL steel plate producers agreed, starting 
23 January 2003, to eliminate completely sales at less than fair value, Federal Register Vol. 68 FR 3859, 27 January 2003. WT/TPR/S/126 Trade Policy Review 
Page 54 
 
 
Administrative reviews 
96. There are two aspects to administrative reviews of anti-dumping and countervailing duty 
orders:  to determine the amount of duty to be finally assessed on imports during the review period;  
and to re-calculate the amount of net countervailable subsidy or  dumping margin for merchandise 
under the outstanding CV or AD duty order, to est ablish the deposit rate for ensuing periods.  
Administrative reviews may be requested by interested parties every 12 months.  If no review is requested for a particular 12-month period, final du ties are assessed in the amount deposited for that 
period.  In 2000-02, 241 administrative reviews of AD duties were completed and 29 involving CV duty orders (Table III.7). 
Table III.7 
Anti-dumping and countervailing duty admi nistrative reviews completed, 1980-02  
Year 1980-90 91 92 93 94 95 96 97 98 99 2000 2001 2002 
Anti-dumping reviews 536 85 81 69 49 96 126 104 111 92 86 74 81 
Countervailing reviews 291 53 21 9 14 25 34 12 14 12 5 13 11 
Source : U.S. Department of Commerce, In ternational Trade Administration. 
Sunset reviews 
97. The sunset provisions embodied in Section 751 (c) of the U.S. Tariff Act of 1930, as amended 
by the URAA, require that the DOC and the USITC conduct "sunset reviews" no later than five years 
after an AD or CV duty order is issued, to determin e whether its revocation would be likely to lead to 
continuation or recurrence of dumpi ng or countervailable subsidies (DOC) and of material injury to 
the industry (USITC).  Sunset reviews are order-specific (country- and product-specific).  Suspension 
agreements are also subject to sunset review.  Re views are initiated by the DOC not later than 30 days 
before the fifth anniversary of the date of publicatio n of an order,  they are usually completed within 
240 days of initiation for full reviews and within 120 days for expedited reviews.67  Under the Sunset 
Regulations, the United States treats as de minimis  any countervailable subsidy rate that is less than 
0.5%;  for initial investigations the rate is 1% (following Article 11.9 of the SCM Agreement). 
98. All AD and CV duty orders in existence on 1 Ja nuary 1995 were reviewed starting July 1998, 
at the initiation of a three-year transition period finalized on 30 June 2001.  All reviews of orders 
issued after 1 January 1995 are conducted five year s after they become effective.  All 309 transition-
period reviews were initiated before 31 December 19 99 and were terminated and completed in 2001;  
duties were revoked in 150 cases, 75 by the DOC due to no domestic interest response, three due to a 
negative determination, and 72 due to a USITC nega tive determination.  Out of 52 orders reviewed 
from January 2000 to July 2003 under normal proce dures, in 20 cases duties were revoked:  16 cases  
were due to no domestic interest (in the DOC sunset  proceedings);  one case was revoked by the DOC 
because of a suspended investigation;  and th ree were revoked by the USITC (Table III.8).68 
99. Most of the revocations in both transition and normal reviews were due to no domestic 
interest in the continued application of duties.  However, as noted, although the USITC made negative 
likelihood of injury findings in 72 transition orde rs (over 20% of the total), it has made negative 
likelihood of injury findings in only two normal orders since 2000 through July 2003.  This implies 
                                                      
67 Both the DOC and the USITC have the authority to extend these deadlines by up to 90 days in all 
transition reviews and other extraordin arily complicated cases.  For further information on procedures and rules 
of sunset reviews see Federal Register Vol. 63, 5 Ju ne 1998, or ftp://ftp.usitc .gov/pub/notices/sunrules.pdf. 
68 For a complete list of cases terminated by the ITA see "Sunset Review Schedule and Disposition" 
[online].  Available at:  http://www.usitc.gov/ussunset.htm. United States WT/TPR/S/126 
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that the majority of normal sunset reviews (32 out of 52) conducted between 2000 and July 2003 
resulted in a continuation of the application of  duties.  Products for which the USITC issued 
affirmative determinations (to c ontinue the duty order) during the period include principally iron and 
steel related products, but also some chemical and in dustrial products.  In some cases (e.g. solid urea, 
and brass sheet and strip), duty orders were revoked fo r some countries, but not for others;  in others 
(e.g. frozen concentrated orange juice from Brazil) the countervailing duty order was revoked, but the 
anti-dumping order was continued.69  A study shows that the ratio of revocations to orders reviewed 
due to lack of domestic interest was lowest in st eel and chemicals industries (10% to 12%);  it was 
highest for electronics and other manufactured products (40% to over 50%).70 
Table III.8 
Five-year sunset review status, as of July 2003a 
Institution period Number instituted Number revoked by the DOC 
because of no domestic responseb USITC expedited/full decision 
Expedited                      Full  
Transition reviews 
July 1998- December 1999 309 (105) 75 (37) 51 (28)c 182 (40)d 
Normal reviews 
January 2000-July 2003 52 (25) 16 (9) 10 (7)e 26 (10)f 
a Numbers in parentheses are on a grouped basis.  Grouped number s for revocations mean that all orders in a group were revoked.  
b Does not include 75 transition orders or four normal orders revoked for other reasons by the DOC or USITC. 
c The USITC’s determinations in these reviews were:  determina tion to revoke:  3 (2);  determin ation not to revoke:  48 (26). 
d The determinations in these reviews were :  USITC determination to revoke: 64 (11);  USITC determination not to revoke:  115 
(28);  negative DOC determination:  3 (1). 
e USITC determination to revoke:  0 (0);  USITC determination not to revoke: 10 (7);   pending USITC determination:  0 (0). 
f USITC determination to revoke:  3 (0);  USITC determination not to revoke:  22 (9);  terminated by the DOC: 1 (1). 
Source : United States International Tr ade Commission online information.  Available at:  www.usitc.gov. 
100. U.S. sunset reviews procedures and regulations have been challenged on several occasions in 
the WTO.  The EU requested a panel to consider  the sunset review CVD orders on certain steel 
products from Germany.71  The Panel's conclusions were released in July 200272;  following appeals 
by the EU and the United States, the Appellate Body reversed some of the Panel's findings but upheld 
the finding that the United States had failed to ma ke the proper determination of the likelihood of 
continuation or recurrence of subsidiza tion in the sunset review in dispute.73 
101. In January 2002, Japan challenged the final de terminations of DOC and the USITC in the 
sunset review concerning corrosion-resistant carbon steel flat products.74  In its report, the Panel 
upheld all aspects of the determination that Japan challenged.75  Japan appealed the Panel's findings.76  
A panel was established in April 2003 to consid er Argentina's complaint regarding the final 
determinations in sunset reviews of  imports of oil country tubular goods.77  In August 2003, Mexico 
                                                      
69 Further information on sunset reviews is availabl e online at:  http://ia.ita.doc.gov/sunset/ssy2krev. 
htm and http://ia.ita.doc.gov/sunset/ssy2kcon.htm. 
70 Moore (2002). 
71 WTO document WT/DS213/3, 8 August 2001. 
72 WTO document WT/DS213/R, 3 July 2002. 
73 WTO document WT/DS213/AB/R, 28 November 2002. 
74 WTO document WT/DS244/1, G/L/508, G/ADP/D39/1, 4 February 2002. 
75 WTO document WT/DS244/R, 14 August 2003. 
76 WTO document WT/DS244/7, 19 September 2003. 
77 WTO document WT/DS268/2, 4 April 2003. WT/TPR/S/126 Trade Policy Review 
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requested the establishment of a panel to consider its  challenge to the sunset review of anti-dumping 
measures on oil country tubular goods.78 
(b) Safeguards 
102. Safeguard investigations are carried out under Sections 201-204 of the U.S. Trade Act of 
1974, as amended by the URAA.  Under Section 201(Global Safeguard Inv estigations), domestic 
industries seriously injured or threatened with serious injury by increased imports may petition the 
USITC for import relief.  The USITC determines whether an article is being imported in such 
increased quantities that it is a substantial cause of ser ious injury, or threat thereof, to the U.S. 
industry producing an article like or directly co mpetitive with the imported article.  If the USITC 
makes an affirmative determination, it recommends  to the President relief that would address the 
serious injury or threat thereof, and facilitate the adjustment of the domestic industry to import 
competition.  The President makes the final decisi on whether to provide relief and the form and 
amount of relief within 60 days from receipt of an USITC report.  Since a safeguard measure requires 
Presidential action, an affirmative determination of  injury is a necessary but not sufficient condition 
for its application. 
103. Safeguard measures may be applied for a period of  four years, and renewed for another four.  
However, in practice, the United States has applie d measures for a maximum of three years.  Under 
U.S. law, safeguard measures may include tariffs , quantitative restrictions, or tariff quotas, import 
licensing and other measures as listed in Section 203 of the Trade Act of 1974.  In the case of tariffs, 
the maximum applicable tariff is limited by law to no more than 50% ad valorem  above the rate 
(if any) existing at the time the action is taken;  qua ntitative restrictions must not limit imports to less 
than their average level in the last  three years that the President finds representative of U.S. imports 
from that country.79  Of the cases where an affirmative determ ination of injury was made in the 1998-
2002 period, quantitative restrictions were used in one case (wheat gluten), tariff quotas in two (lamb 
meat and steel wire rod), and tariff increases in one (circular welded carbon quality line pipe);  for the 
steel investigation tariff rate quotas were imposed on imports for certain products, and an increase in 
duties on imports for others. 
104. NAFTA countries are excluded from the application of safeguard measures, unless they 
individually account for a substantial share of tota l imports, and it is shown that they make an 
important contribution to serious injury. 
105. Although the number of safeguard investigations  and measures remains limited, their scope 
has been broad in recent years, particularly in th e case of the steel investigation (see below).  Between 
1998 and 2001, six safeguard investigations we re initiated and notified to the WTO by the 
United States, two of them (regarding crabmeat and extruded rubber thread) in 2000, and one in 2001 
(steel products).  The USITC made a negative inju ry determination in the crabmeat and extruded 
rubber thread cases.80 
106. A safeguard measure on wheat gluten applied in 1998 expired in June 2001, while another 
one on lamb meat ended in November 2001.81  In the case of wheat gluten, the safeguard measure was 
                                                      
78 WTO document WT/DS281/2, 8 August 2003. 
79 Online information available at:  ftp://ftp .usitc.gov/pub/reports/studies/PUB3125.pdf. 
80 WTO documents G/SG/N/6/USA/8, 22 March 2000 and G/SG/N/9/USA/2, 25 August 2000 
(crabmeat);  G/SG/N/6/USA/9, 23 June 2000 and G/SG/N/9/USA/3, 23 October 2000 (extruded rubber thread). 
81 These terminations were notified in WTO documents G/SG/N/10/USA/2/Suppl.4, 
G/SG/N/11/USA/2/Suppl.4, 20 September 2001, and G/SG/N/10/USA/3/Suppl.2, G/SG/N/11/USA/3/Suppl.2, 30 November 2001. United States WT/TPR/S/126 
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allowed to expire after three years despite a reco mmendation by the USITC in April 2001 to extend 
the action by two years (expanding the import quota by an additional 6% in each of those years).82  In 
2003, safeguard measures on line pipe and steel wire rod were also allowed to expire after three years. 
107. The most prominent case during the period under review was the investigation and 
application of safeguard measures with respect to certain steel products.  In June 2001, the President 
called for the initiation of a Section 201 investigati on with respect to the importation of steel products, 
as part of the announced Multilateral Initiative on Steel  (Chapter IV(3)(ii)).  In October 2001, the 
USITC issued affirmative determinations of serio us injury with respect to eight steel product 
categories and negative determinati ons with respect to 17 products.83  In December 2001, the USITC 
transmitted to the President its report on the invest igation.  In March 2002, the President announced 
the decision to impose safeguard measures with regard to ten products on which there were 
affirmative determinations.84  The President decided to resolve the ties on four products for which the 
USITC commissioners' vote had been equally divide d, finding two affirmativ e determinations and 
two negative ones. In all, there were ten affirm ative determinations and 19 negative ones.  The 
complete list of products subject to safeguard me asures was notified to the WTO, and subsequently 
modified.85  In addition to the safeguard measures, a temporary licensing system was introduced for 
the duration of the measures (Chapter IV(3)(ii)). 
108. The measures announced by the President consiste d of tariffs ranging from 8% to 30%, or a 
tariff rate quota.86  In some cases, the tariff imposed was higher than recommended by the USITC;  
for stainless steel rod it was lower.  The tariff levels were adjusted downward in March 2003, while 
the tariff quota was expanded.87  The safeguard measures on steel products adopted in 2002 apply to 
all countries, except Israel and Jordan, and fo llowing NAFTA rules, products from Canada and 
Mexico were also excluded;  products from developing countries with a market share of less than 3% for each product, were also excluded.  Some countries were only partially exempted, with some products subject to the safeguard measure:  Brazil (flat steel, except for tin mill products);  India (carbon fittings);  Moldova (rebar);  Romania (car bon fittings);  Thailand (welded pipe);  Turkey 
(rebar);  and Venezuela (rebar). 
109. In considering the application of safeguards, account is taken of requests by domestic users 
for particular products to be excluded.  At the time of the March 2002 Proclamation imposing the 
safeguard measures, the President in structed the USTR to complete by 3 July 2002 its deliberation on 
the exclusion requests then pending;  this date w as later extended to 31 August 2002.  Between June 
and August 2002, the USTR made se veral announcements with respect to  product exclusions;  in all, 
727 steel products within the categories affected by  the measures were excluded.  Exclusion are made 
on the basis of product, not country, and are all on an MFN basis;  however, exclusions may benefit 
                                                     
 
82  USITC Publication 3407, TA-204-4, "Determination and Views of the Commission", April, 2001. 
83 Notified to the WTO.  WTO documents G/SG/N/8 /USA/8 and G/SG/N/9/USA/4, 1 November 2001. 
84 Proclamation 7529 of 5 March 2002, To Facilitate Positive Adjustment of Competition From Imports 
od Certain Steel Products, Federal Register Vol. 67, p. 10553, 7 March 2002. 
85 WTO documents G/SG/N/10/USA/6/Suppl.1, G/SG/N/11/USA/5/Suppl.1, 15 March 2002, and 
G/SG/N/10/USA/6/Suppl.7, G/SG/N/11/USA/5/Suppl.7, 17 September 2002, respectively. 
86 A tariff of 30% was imposed on flat products, tin mill products, hot rolled bar and cold-finished bar;  
a 15% tariff on rebar, certain tubular products, stainless steel bar and stainless steel rod;  a 13% tariff on carbon 
and alloy fittings and flanges;  a tariff of 8% for stainless steel;  and a tariff rate quota for slab, with the in-quota 
volume set at 5.4 million short tons and an out-of-quota tariff of 30% (in-quota rates are generally between 
0 and 1%). 
87 USTR online information.  Available at:  http ://www.ustr.gov/sectors/indu stry/steel201/2003-03-21-
exlcusions-factsheet.pdf. WT/TPR/S/126 Trade Policy Review 
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producers from some countries more than others, de pending on the composition of their exports to the 
United States. 
110. The President also instructed the USTR to  consider new exclusion requests each year 
thereafter to help ensure that U.S. consumers ha d access to needed products, without undermining the 
safeguard's relief.88  The exclusion requests are open to foreign producers:  for the March 2003 
exclusion, over 50% of the request s were presented by foreign companies from a number of countries, 
including China, Chinese Taipei, some EU members (Germany, Italy, the Netherlands, Sweden, and 
the United Kingdom), India, and Japan.  On 31 March 2003, the USTR announced the exclusion of 295 products from the scope of the safeguard measu res.  The decision to exclude these products was 
based upon a consideration of information submitted by U.S. steel consumers, U.S. steel producers, 
and foreign steel producers.
89  A total of 208 of those requests did not receive any objections from the 
domestic steel industry and many of the exclusions  granted were for small-volume niche products.  
The exclusions may be subject to volume caps,  in general corresponding to import volumes below 
2001 levels.  The process for the March 2004 exclusions will start in November 2003. 
111. Reports filed with the CBP indicate that the total value of all exclusions is over 
US$1.39 billion, and the volume was 3.08 million tonn es.  The ten countries that benefited most by 
value from the exclusions originating in 2002 (727  steel products) were Korea, Japan, Germany, 
United Kingdom, Australia, Netherlands, France, Brazil,  Sweden, and Belgium.  The total value of all 
exclusions originating in 2002 was US$1.34 billion and the tonnage was 2.99 million tonnes.  The ten 
countries that benefited most by value from the ex clusions originating in 2003 (295 steel products) 
were Germany, Japan, Belgium, Netherlands, France, United Kingdom, Korea, Chinese Taipei, 
Austria, and Spain.  The total value of all excl usions originating in 2003 was US$53.9 million and the 
tonnage was 88,528.67 tonnes. 
112. In a report published in September 2003, the USITC estimated a small GDP net loss, of 
US$30.4 million, due to the safeguard measures, and that direct steel purchases from domestic producers increased from 65% to 73% of the total.  The effect of the safeguard measures on U.S. 
welfare ranged from a welfare gain of US$65.6 mill ion to a welfare loss of US$110 million, with a 
central estimate of a welfare loss of US$41.6 million.
90 
113. All the cases in which safeguard measures were applied by the United States since 1998 have 
been challenged in the WTO.  Among the procedural  aspects of safeguard investigations challenged 
by other WTO Members feature:  the basis for th e exclusion of imports from NAFTA countries from 
the application of some safeguard measures;  the timely notification of investigation initiations and 
application of safeguard measures;  the cons ideration of "unforeseen developments";  the 
determination of serious injury, and of causation;  and the definition of domestic industry in USITC 
investigations. 
114. Two cases brought to the WTO on safeguard meas ures adopted between 1998 and 2000 were 
concluded in 2001;  they concerned lamb meat and line pipe products.  In the case relating to lamb 
meat, the Appellate Body upheld the Panel's finding that the United States had failed to demonstrate 
the existence of "unforeseen devel opments", and that the USITC definition of domestic industry to 
include sheep farmers in the domestic industry producing the like product of lamb meat was 
                                                      
88 USTR Press Release, 22 August 2002 [online].  Av ailable at:  http://www.ustr.gov/releases/2002/08/ 
2002-08-22-steel.PDF 
89 USTR Press Release, 21 March 2003 [online].  Av ailable at:  http://www.ustr.gov/releases/2003/03/ 
2003-03-21-steel.PDF 
90 USITC (2003a) and (2003b). United States WT/TPR/S/126 
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inconsistent with the Agreement on Safeguards.91  In the challenge by Korea of the safeguard measure 
on line pipe products, the Panel's fi ndings were released in October 200192;  the Appellate Body 
reversed some of the Panel's finding but upheld others, including that the United States acted inconsistently with its obligati on under the Agreement on Safeguar ds by failing to establish a causal 
link between the increased imports and th e serious injury or threat thereof.
93 
115. The U.S. safeguard measures applied in March 2002 as a result of the steel investigation were 
challenged at WTO by the EU, Japan, Korea, China,  Switzerland, Norway, New Zealand, and Brazil;  
it was agreed to refer all the complaints to a single panel.94  The Panel Report, issued in July 2003, 
concluded that the safeguard measures imposed by the United States on the imports of certain steel 
products as of 20 March 2002 were inconsistent with the Agreem ent on Safeguards and GATT 1994.  
In particular, the United States had acted inconsistent ly with the previously mentioned provisions:  by 
failing to demonstrate that "unforeseen developm ents" had resulted in increased imports causing 
serious injury to the relevant domestic producer s;  with respect to the facts supporting its 
determination of "increased impor ts" for five of the ten products  on which safeguard measures had 
been imposed;  by failing to provide a reasoned a nd adequate explanation for most products that a 
"causal link" existed between any increased imports  and serious injury to the relevant domestic 
producers;  and by failing to comply with the requ irement of "parallelism" between the imports for 
which the conditions for safeguard measures had been established, and the imports which were 
subjected to the safeguard measure.95 
(vi) Quantitative restrictions and controls 
116. Quantitative restrictions (QRs) on imports are in place for commercial purposes in only a few 
sectors, mostly textiles and clothing (Chapter IV (3)(iii)).  QRs are also in place on imports of a 
number of products pursuant to suspension agreemen ts following anti-dumping investigations, namely 
on cut-to-length carbon steel plate from China and Russia, and on ammonium nitrate and uranium 
from Russia.  In the context of countervailing meas ures, QRs are applied to hot-rolled steel products 
from Brazil (see (v) above).  In addition, the United States has an agreement with Russia that provides 
for QRs on imports into the United States of certain steel products. 
117. Quantitative restrictions on imports of agri-f ood products covered by the WTO Agreement on 
Agriculture were converted into tariff quotas in 199 5 as a result of the Uruguay Round.  For several 
sensitive products, such as sugar and dairy product s, prohibitive out-of-quota tariffs may act as 
de facto quantitative restrictions  on imports (Chapter IV(2)). 
118. In general, however, most U.S. quantitative rest rictions and controls on trade are designed to 
ensure national security, safeguard consumer health , protect public morals, or are maintained for 
environmental purposes.  In the WTO, many of these measures are notified to the Committee on 
Technical Barriers to Trade, or the Committee on  Sanitary and Phytosanitary Measures, or are 
discussed in the Committee on Trade and the Environment (see section (vii)). 
                                                      
91 WTO document WT/DS177/AB/R, WT/DS178/AB/R, 1 May 2001. 
92 WTO document WT/DS202/R, 29 October 2001. 
93 WTO document WT/DS202/ABR, 15 February 2002. 
94 The Panel was established in June 2002:  WTO document WT/DS248/14, WT/DS249/8, 
WT/DS251/9, WT/DS252/7, WT/DS253/7, WT/D S254/7, WT/DS258/11, 29 July 2002. 
95 WTO document WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, 
WT/DS254/R, WT/DS258/R, WT/DS259/R, 11 July 2003, pages A1-A4, B1-B4, C1-C4, D1-D4, E1-E4, F1-F4, G1-G4, H1-H4. WT/TPR/S/126 Trade Policy Review 
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119. The United States also maintains bans on imports from certain countries for foreign policy 
purposes.  The Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury administers and enforces economic and trade san ctions against targeted foreign countries.
96  W T O  
Members affected by these measures include Cuba and Sierra Leone (see (3)(iv)). 
120. U.S. import controls are implemented through a system of licences.  The latest U.S. 
notification to the WTO on import licensing was made in November 2000;  it describes the procedures to follow in order to import the followi ng products:  plants and an imals and their products, 
natural gas, fish and wildlife, narcotic drugs, al cohol, tobacco and firearms, and nuclear facilities.
97  
As noted in this notification, imports of natural gas are authorized only if they are consistent with the 
public interest, except for imports originating in a country with which the United States has a free-
trade agreement.  According to th e authorities, there are about 120 applications per year for licences 
to export liquefied natural gas to the United States,  and none has been denied since the early 1980s. 
121. Pursuant to Articles 1.4(a) and 5 of the Agreement on Import Licensing Procedures, in 
April 2003, the United States notified the Decembe r 2002 final regulations implementing the Steel 
Import Licensing and Surge Monitoring programme in place for certain steel products, which took 
effect on 1 February 2003.98  The authorities indicated that th ese licences are automatic and used for 
monitoring purposes only. 
(vii) Technical regulations and sanita ry and phytosanitary measures 
(a) Introduction and regulatory framework 
122. In the United States, both technical regula tions and sanitary and phytosanitary (SPS) 
measures can be established at the federal or sub-fe deral level;  they cover mostly products, but can 
also concern processes or services.  The underlying legislation for the federal rulemaking process is 
the Administrative Procedure Act (APA).99  While Congress can establish product regulations 
legislatively, it usually delegates enabling legisla tion to regulatory agencies, generally pursuant to 
broad guidance as to the factors to be c onsidered and policy goals to be achieved.100 
123. In the United States, technical regulations ( as defined in Annex I of the WTO Agreement on 
Technical Barriers to Trade (TBT Agreement)) a nd SPS measures (as described in Annex I of the 
Agreement on the Application of Sanitary and Ph ytosanitary Measures (SPS Agreement)) can be 
initiated on an agency's initiative, as directed by Co ngress, or in response to a request by the public.  
Private citizens, industry, and organizations, both dom estic and foreign, can participate in an agency’s 
rulemaking activities in a variety of ways.  In addition to the opportunity to submit comments and 
petitions, persons can directly contact the agencies , in accordance with th e agencies' particular 
procedural requirements;  participate in advisory co mmittees formed by the agencies;  or participate in 
negotiated rulemaking.  The vast majority of rulema king involves three steps:  issuance of a notice of 
proposed rulemaking soliciting public comment;  agency  consideration of all relevant information;  
and the issuance of a final rule after consideration of the relevant information.  The public can submit 
petitions for reconsideration after final rules have been issued.  All final rules may be judicially 
                                                      
96 For a list of countries and measures, see the Offi ce of Foreign Assets Control online information.  
Available at:  http://www.treas.gov/offices/enforcement/ofac/. 
97 WTO document G/LIC/N/3/USA/3, 9 November 2000. 
98 WTO documents G/LIC/N/2/USA/1 and 2, 29 April 2003. 
99 United States Code, Title 5, Section 551 et seq. (5USC551), available online at:  http://frwebgate 
6.access.gpo.gov/cgibin/w aisgate.cgi?WAISdocID =376846390574+0+0 +0&WAISaction =retrieve. 
100 See USTR (2002b). United States WT/TPR/S/126 
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reviewed.  Technical regulations and SPS measures issued by agencies as final rules are subject to 
Congressional review under the Congressional Review Act (CRA).101 
124. In addition to enabling legislation, various other requirements govern the development and 
issuance of technical regulations and SPS  measure s by the Federal Government. These include other 
statutes and Presidential Executive Orders that im pose procedural requirements intended to ensure 
reasoned and fair decision-making.  Agencies may adopt technical and SPS regulations only after 
thoroughly analysing their potential impact, typical ly by means of an assessment and comparison of 
either the benefits and costs or the cost-effectivenes s of alternative regulatory approaches or levels of 
stringency.  The Office of Management and Budge t (OMB) oversees and coordinates agency activity 
concerning technical and SPS regulations, and revi ews draft regulations and makes recommendations 
under Presidential Executive Order 12866.102 
125. Technical regulations or SPS measures that are classified as "major rules" are those found by 
the OMB to result in an "annual effect on the econo my of US$100 million or more or that adversely 
affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State,  local, or tribal governments or communities".103  I n  
October 2003, the implementing rules pursuant to the Bioterrorism Act (see below) were issued as 
"major rules". 
126. In developing technical regulations or SPS me asures, federal agencies are also required to 
take into consideration relevant international standards and, if ap propriate, base their regulations on 
those international standards.  Title IV of the Trade Agreements Act of 1979 as amended (see below) 
expressly provides that the reasons for which it ma y not be appropriate to base a U.S. technical 
regulation on an international standard include, but are not limited to, the protection of human health 
or safety, animal or plant life or health, or the environment.104 
127. All technical regulations and SPS measures are published in the Federal Register , and 
codified in the Code of Federal Regulations.105  In addition, the OMB publishes the Unified Agenda 
of Federal Regulatory and Deregulatory Actions in the Federal Register  each April and October.106  
This publication contains a brief description of an d schedule for each new rule  that each agency is 
likely to issue in the subsequent twelve months.  The National Institute of Standards and Technology 
(NIST), which is part of the Department of Commerce, maintains a reference collection of technical regulations, specifications, test methods, codes, and recommended practices.
107  The NIST provides 
interested parties with specific regulatory inform ation or contacts in response to requests received. 
128. According to the authorities, to meet the C onstitutional requirements of due process, most 
States have enacted statutes containing transparency  procedures.  For example, most States have 
enacted administrative procedure acts whose procedur es 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. 
                                                      
101 United States Code, Title 5, Section 801 et seq. (5USC801). 
102 For more information see OMB online inform ation.  Available a t:  http://www.whitehouse. 
gov/omb/i nforeg/ regpol.html#gi. 
103 See the Congressional Review Act at 5USC801. 
104 19USC2531. 
105 See online information.  Available a t:  http://www.g poaccess.gov/fr/index.html. 
106 The Agenda is available online at:  http://reginfo.gov/. 
107 NIST online information.  Available at:  http://www.nist.gov/. WT/TPR/S/126 Trade Policy Review 
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129. In the United States, (voluntary) standards ar e generally developed through private-sector 
cooperation that may be organized around a given indus try, profession or academic discipline.  The 
American National Standards Institute (ANSI) is  a non-profit federation of about 200 standards-
setting organizations;  it coordinates (in a non-ma ndatory manner) the development of private 
standards.  ANSI signifies that the standard h as been developed using procedures that meet ANSI 
criteria for openness, balance, consensus, and ot her due process safeguards.  ANSI adheres to the 
WTO TBT Code of Good Practice for the Preparation, Adoption, and Application of Standards on behalf of its member organizations, and is the U.S.  member body to the International Electrotechnical 
Commission (IEC) and the International Organization for Standardization (ISO).
108 
130. The National Technology Transfer and Advanc ement Act (NTTAA) of 1995 directs federal 
agencies to use voluntary consensus standards, both domestic and international, in lieu of 
government-developed regulations, as a means to carry  out policy objectives or activities except when 
doing so would be inconsistent with the law or otherwise impractical.109  The Act further directs the 
agencies to participate in the development of su ch standards to minimize government regulations, 
recognizing that many standards are appropriate or  adaptable for the Government's procurement and 
regulatory purposes. 
(b) Conformity assessment 
131. The U.S. conformity assessment system for sta ndards, and technical and SPS regulations is 
unique in that assessment of conformity mostly r ests on supplier's self-declaration, and is to a large 
extent enforced through product-liability laws.  It is  most frequently the responsibility of the supplier 
(producer or importer) to ensure compliance with existing technical regulations, or with standards 
when such compliance is required by the purchaser .  In the case of imports, it is primarily the 
responsibility of importers representing foreign manufact urers to meet technical regulations – such as 
proper marking and safety standards – and to ensure th at permits, if required, have been obtained in 
advance of the goods arriving in the United States.110  For some products, a declaration or proof of 
conformity or compliance must be submitted by th e manufacturer or the importer upon or prior to 
importation. 
132. However, assessing conformity with technical regul ations is also in certain cases done by the 
Federal Government (e.g. by the Food and Drug Administration), State or local governments, or by an 
independent testing authority.  To assess compliance,  the Government may give official recognition to 
an independent testing authority through accreditation or similar measures.  The U.S. Bureau of 
Customs and Border Protection, in cooperation with  other agencies responsib le for regulated products, 
such as the Consumer Product Safety Commission (CPSC)111, is responsible for enforcing technical 
regulations at the border, and taking enforcemen t actions when such regulations are violated, 
including refusing admission.  Assessment of conform ity with SPS requirements, especially for plants 
and animal products, is generally carried out by APHIS and FSIS inspectors located at the borders 
(see below). 
                                                      
108 ANSI online information.  Ava ilable at:  http://www.ansi.org. 
109 15USC272. 
110 Further information on U. S. import requiremen ts is available online at:  http://www. customs. 
ustreas.gov/ImageCache/cgov/content/publications/usimportrequirements_2edoc/v2/usimportrequirements.doc. 
111 CPSC online information.  Available at:  http://www.cpsc.gov. United States WT/TPR/S/126 
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(c) International cooperation on  technical regulations 
133. Title IV of the Trade Agreements Act of 1979 as amended provides the legal basis on which 
the WTO TBT Agreement and the SPS Agreement are im plemented.  The U.S. TBT enquiry point is 
the NIST. 
134. The United States participates actively in the WTO TBT Committee;  it made 45 notifications 
between January 2001 and end-June 2003, a ll under Article 2.9 of the TBT Agreement.112  The largest 
number of notifications were from the Nati onal Highway Traffic Safety Administration 
(24 notifications), the Food and Drug Administration,  FDA, (24), and the Department of Agriculture 
(17).  No notifications of proposed U.S. sub-fe deral measures have been received by the WTO. 
135. Between January 1995 and June 2003, the United States submitted 83 notifications related to 
labelling.113  Of these, 14 have been received since 2001.  In general, since 1995, six of the 83 U.S. 
notifications on labelling raised specific trade concerns by other WTO Members.114  One instance 
involved a requirement to clarify the definition of "United States cattle" and "United States fresh beef 
products" for labelling purposes.115  In October 2002, the United States notified the WTO that the 
Farm Security and Rural Investment Act of 2002  (see also Chapter IV(2)) amended the Agricultural 
Marketing Act of 1946 to require the USDA to i ssue country of origin labelling guidelines for 
voluntary use by retailers who wish to notify their customers of the country of origin of beef (including veal), lamb, pork, fish, perishable agricultural commodities, and peanuts.
116  This measure 
raised concerns from Canada, jo ined by Argentina and Brazil.117 
136. Chapter Nine of the NAFTA covers standards and technical regulations.  Article 906 requires 
the parties to the agreement, to the greatest extent possible, to make compatible their standards-related 
measures so as to facilitate trade and promote the co mpatibility of a specific standard or conformity 
assessment procedure.  The authorities noted that  Article 908.2 goes beyond the requirements of 
Article 6.4 of the WTO TBT Agreement in that it promotes the recognition of other parties' 
conformity assessment bodies.  Particular provisions, including specific committees are in place for telecommunications equipment and services, land trans port, motor vehicles,  and textiles and clothing 
products.  The authorities noted that in the NAFTA the United States has focussed on improving 
transparency, national treatment, and exchange of information. 
137. The authorities indicated that other FTAs in force in October 2003, with Israel and with 
Jordan, do not go beyond the WTO TBT Agreement in terms of disciplines in the area of technical 
regulations. 
138. In addition, the United States participates in a number of mutual recognition agreements in 
which foreign conformity assessments of U.S. regul ations are accepted on a bilateral product-specific 
basis.  Four such agreements involving the United States have been notified to the WTO.
118  Also, on 
a case-by-case basis, some author ities in the United States have accr edited selected foreign testing 
agencies. 
                                                      
112 WTO documents G/TBT/11, 13 March 2002, G/TBT/12, 21 February 2003, and G/TBT/USA29-45. 
8 January to 30 June 2003. 
113 See WTO document G/TBT/W/183, 8 October 2002. 
114 WTO document G/TBT/W/184, 4 October 2002. 
115 WTO document G/TBT/USA/N/10, 20 August 2001. 
116 WTO document G/TBT/USA/ N/25, 23 October 2002. 
117 WTO documents G/TBT/W/184, 4 October 2002, and G/TBT/M/28, 19 November 2002. 
118 WTO documents G/TBT/10.7/N/20, 1 March 1999, G/TBT/10.7/N/36, 18 April 2002, 
G/TBT/10.7/N/41, 12 Decem ber 2002, and G/TBT/10.7 /N/42, 8 January 2003. WT/TPR/S/126 Trade Policy Review 
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(d) Sanitary and phytosanitary measures 
WTO participation 
139. The United States systematically notifies to  the WTO all proposed changes in domestic 
sanitary and phytosanitary measures.  It has made the most WTO SPS notifications:  760 notifications 
from January 1995 to October  2003;  about one thir d of these since 2001.  The notifications mostly 
concern the establishment of residue tolerance levels  for various chemicals used in food; some also 
concerned U.S. import restrictions taken as a respon se to risks posed by FMD and Bovine Spongiform 
Encephalopathy (BSE). 
140. Under the WTO Agreement on Sanitary and Ph ytosanitary Measures, Members have the 
possibility to raise concerns regarding SPS measure s maintained by other Members.  An explanation 
of the reasons for such measures may be requ ested and should be provided by the Member 
maintaining the measure.  Since 1995, 24 specific trade concerns have been raised concerning 
measures maintained by the United States;  six of  these have been raised since 2001, covering meat 
products, fruit, and potted plants.119  None of the cases has been followed by formal dispute 
settlement, including consultations. 
Regulatory framework 
141. In addition to the laws and regulations described  in section (a), above, the key legal bases for 
establishing SPS measures in the United States are th e Federal Food, Drug, and Cosmetic Act;  the 
Animal Welfare Act, together with the Federal In secticide, Fungicide, and Rodenticide Act (FIFRA); 
and the Federal Plant Pest Act.  These are implemented by four different federal agencies that have 
SPS responsibilities:  the FDA;  the Department of Agriculture's Food Safety and Inspection Service 
(FSIS);  the Department of Agriculture's Animal and Plant Health Inspection Service (APHIS);  and 
the Environmental Protection Agency (EPA see below).  The U.S. enquiry point for requests for information on SPS issues is the Office of Food Safety and Technical Services at the USDA.
120  
USTR is responsible for monitoring compliance with WTO provisions. 
142. APHIS has regulatory responsibility to safeguard U.S. animal and plant resources from exotic 
pests and diseases.121  Its Import Authorization System (IAS) allows importers to submit applications 
for permits to import fruits and vegetables, and anim al products and organisms.  It publishes a list of 
USDA-recognized animal health status of countri es/areas regarding specific livestock, poultry, and 
meat diseases.122 
143. FSIS has specific responsibility for the safety of meat, poultry, and certain egg products.123  
An equivalence determination is required before meat and poultry products can be imported into the 
United States.  Once granted, FSIS lists the country as eligible to export to the United States.  FSIS 
has developed and published a process for evaluati ng whether a foreign country’s meat and poultry 
regulatory system and individual sanitary measures ar e equivalent to the system and measures of the 
United States;  this involves an annual audit. 
                                                      
119 WTO document G/SPS/GEN/204/Rev.3, 26 March 2003. 
120 Available online at:  http://www.fas.usda.gov /itp/Contacts.htm (E-mail:  ofsts@fas.usda.gov). 
121 APHIS online information.  Available at:  http://www.aphis.usda.gov. 
122 The updated list is available online at: http://www.aphis.usda.g ov/NCIE/country.html. 
123 FSIS information is available online at: http://www.fsis.usda.gov. United States WT/TPR/S/126 
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144. Thirty-three countries are recognized as having meat and poultry inspection systems 
equivalent to the United States.124  Importing these products also requires the prior approval of 
individual slaughtering or processing plants.125  Certificates are then issued by the government of the 
exporting country to identify products by country and factories of origin.  Meat and poultry products 
are subsequently re-inspected at U.S. ports-of-e ntry by FSIS, which randomly selects samples of 
imported meat and poultry pr oducts and performs appropria te product examinations.126 
145. The FDA has primary responsibility for the safety of all other foods and of veterinary drugs, 
to enforce the Federal Food, Drug, and Cosmetic Act and other related fe deral laws to protect 
consumers' health and safety,  and to prevent economic fraud.127 
The Bioterrorism Act  
146. The passage of the Public Health Security an d Bioterrorism Preparedness and Response Act 
of 2002128, Title III – Protecting Safety and Security of  Food and Drug Supply, represented one of the 
most significant changes in U.S. food import requirement s in recent years.  Its aim is to enhance the 
security of the United States with respect to its food supply.  The Act requires, as of 12 December 2003:  (1) registration of most f ood manufacturing and handling facilities (except, in 
general, farms and restaurants);  (2) prior notice to FDA of all food consi gnments intended for import 
into the United States;  (3) establishment and mainte nance of certain records pertaining to the receipt 
and distribution of foods;  and (4) administrative detention of any food found to present a threat of 
adverse health consequences to humans or animals.
129 
147. Section 305 of the Act (Registration of Food Fac ilities) requires the owner, operator, or agent 
in charge of a domestic or foreign facility to re gister with the FDA no later than 12 December 2003.  
Facilities are defined as any factory, warehouse,  or establishment, including importers.  The 
Bioterrorism Act exempts from the requirement to re gister:  farms, restaurants, other retail food 
establishments, non-profit food establishments in which food is prepared for or served directly to the 
consumer, and fishing vessels.  Also, foreign fac ilities subject to the registration requirement are 
limited to those that manufacture, process, pack , or hold food, only if food from such facility is 
exported to the United States without further processing or packaging outside the United States. 
148. Section 307 of the Act (Prior Notice of Imported Food Shipments) requires that prior notice 
of imported food shipments be given to FDA.  The notice must include a description of the article, the manufacturer and shipper, the grower (if known), the country of origin, the country from which the article is shipped, and the anticipated port of entry. 
149. The United States first notified the WTO of th e proposed new registration and prior import 
notice requirements in February 2003.
130  On 2-3 April 2003, in the WTO Committee on Sanitary and 
                                                      
124 Argentina;  Australia;  Austria;  Belgium;  Brazil;  Canada;  Costa Rica;  Croatia;  Czech Republic;  
Denmark;  Finland;  France;  Germany;  Honduras;  Hong Kong, China;  Hungary;  Icel and;  Ireland;  Israel;  
Italy;  Japan;  Mexico;  Netherlands;  New Zealand;  Nicaragua;  Poland;  Ro mania;  Slovenia;  Spain;  Sweden;  
Switzerland;  United Kingdom and Northern Ireland;  and Uruguay. 
125 A current list of plants is available online at:  http://www.fsis.usda.gov/ofo/faim/argentin.htm. 
126 The import process is described at:  http ://www.fsis.usda.gov/OPPDE/op/IIM/TOCIIM.htm. 
127 FDA information is available online at:  http://www.fda.gov. 
128 Available online at:  http://nattie.eh.doe.gov/biosafety/library/PL107-188.pdf. 
129 Additional information on the implementation of the Bioterrrorism Act is available online at:  
http://www.fda.gov/oc/bioterrorism/bioact.html. 
130 WTO documents G/SPS/N/USA/690 and G/SPS/N/USA/691, 6 February  2003.  The Act was also 
notified to the TBT Committee, where it was also actively debated. WT/TPR/S/126 Trade Policy Review 
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Phytosanitary Measures, 16 Members expressed various concerns over the proposed measures.131  
Discussion of the Bioterrorism Act took place again at the WTO SPS Committee meeting on 24-25 June 2003, when nine countries raised ques tions and made comments on two additional draft 
implementing regulations:  the first concerns the requirement to establish and maintain records of 
imported food, and  the second provides for th e detention of suspicious articles of food.
132  I n  
October 2003, two "interim final" regulations were issued by the FDA, on registration and on prior 
import notice.  The authorities have pointed out that these rules are of an interim nature so as to allow consultations with trading partners before they are finalized. 
Products of modern biotechnology 
150. In 1999, a third of the corn, half the soybeans,  and almost 60% of the cotton grown in the 
United States were genetically engineered.
133  Products of biotechnology are regulated according to 
their intended use by the same authorities as thei r conventional counterparts, namely the USDA, the 
EPA, and the FDA.  Each new modification ("event" ) must be approved.  According to the FDA, 
many of the food crops currently on the market  do not contain substances that are significantly 
different from those already in the diet a nd thus do not require pre-market approval.134 
151. In August 2002, the report on Environmental Effe cts of Transgenic Plants, produced jointly 
by the National Academy of Sciences and the Na tional Academy of Engineering, advised the USDA 
to conduct more rigorous review of the potential e nvironmental effects of new transgenic plants 
before approving them for commercial use.135  In response, the USDA created a new unit within 
APHIS called Biotechnology Regulatory Services (BRS ) to focus on USDA's key role in regulating 
and facilitating biotechnology.  The new programme  focuses on regulation of biotechnology, risk 
assessments, and the granting of permissions.  Am ong other responsibilities, BRS works with foreign 
governments to harmonize biotechnology standards.136 
152. In May 2003, the United States requested consu ltations with the European Union regarding 
measures affecting the approval and marketing of biotech products.137  The request reflects the 
opinion of the United States that these measures  are covered by the SPS Agreement and therefore 
subject to the requirements of scientific justification and risk assessment.  A WTO panel was 
subsequently established. 
(e) Environmental regulations related to trade 
153. EPA is responsible for ensuring compliance with environmental regulations in the 
United States.138  EPA's role in international trade is to ensure that trade agreements are negotiated 
and implemented to protect domestic interests and e nvironmental standards.  Within its Import-Export 
Program (IEP), EPA works with regional and progra mme offices, the states, other federal agencies, 
and foreign governments to ensure compliance w ith and the development of laws governing the 
                                                      
131 WTO document G/SPS/R/29, 17 June 2003. 
132 WTO documents G/SPS/N/USA/703 and 704, 15 and 14 May 2003. 
133 Animal and Plant Health Inspection Service (2001). 
134 For further information see Animal and Plant Health Inspection Service (2003). 
135 National Academies' National Research Council (2003). 
136 Previously, APHIS' biotechnology programmes were divided between APHIS' Plant Protection and 
Quarantine and Veterinary Services programmes. 
137 Subsequently, the United States alleged violation of Articles I, III, X, and XI of GATT 94, Article 4 
of the Agreement on Agriculture, and Articles 2 and 5 of the TBT Agreem ent (WT/DS291 series). 
138 EPA information is available online at http://www.epa.gov. United States WT/TPR/S/126 
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importation and exportation of materials that may po se a risk to human health and the environment, 
including hazardous waste, toxic chemicals139, pesticides, and ozone-depleting substances. 
154. Regarding trade in hazardous waste, the United St ates has agreements with several countries 
that provide for prior notification of shipment of wastes (both importing and exporting).  The United 
States has not ratified the Basel Convention on the Control of Transboundary Movements of 
Hazardous Waste and their Disposal.140  The United States adheres to the OECD Council Decision 
governing trade in recyclable waste with other OECD  countries;  accordingly, exports of waste have 
to be notified by the exporter to the Environmen tal Protection Agency (EPA), which informs the 
importing country. 
155. Many of the U.S. notifications to the WTO TBT and SPS Committees described above were 
submitted by the EPA and concerned pesticides, chem ical content, and labelling guidelines.  EPA sets 
limits on the amount of pesticides that may remain in/ on food;  the FDA is then in charge of enforcing 
them.  Tolerances notices are published in the Federal Register  and notified to WTO.  EPA is 
constantly updating its list of auth orized pesticides and tolerances lim its;  these can be consulted in 
the Code of Federal Regulations.141 
156. The United States in some instances applies tr ade measures to enforce U.S. environmental 
provisions, notably those governing the use of ma rine resources.  The enforcement of these 
environmental regulations is the task of two U.S. agencies:  the Bureau of Oceans and International 
Environmental and Scientific Affairs (OES), part of the U.S. Department of State142;  and the National 
Oceanic and Atmospheric Administration (NOA), part  of the U.S. Department of Commerce.  The 
latter enforces both the Marine Mammal Protect ion Act (MMPA), to protect marine mammals, 
including whales, dolphins, seals, and sea lions, and the Endangered Species Act (ESA), which 
protects all six species of sea turtles in the U.S.143 
157. In 1991, under the MMPA, an import ban was placed on tuna from countries failing to protect 
dolphins when fishing in the eastern tropical Pacifi c Ocean.  The ban was initially challenged in the 
GATT in 1991, but the panel report was not adopted.  Since 1997, pursuant to the signing of the 
Agreement on the International Dolphin Conser vation Program (AIDCP), the United States has 
removed its ban on imports of tuna from countries that have the "Dolphin-safe" certification.  To 
obtain such certification, countries must:  be a me mber of the AIDCP;  provide evidence that the 
limits permitted on dolphin mortality have not been  exceeded;  and be a member, or applying for 
membership, of the Inter-American Tropical Tuna Commission (IATTC).144  The Dolphin-safe 
certification and labelling requirements have been identified as a non-tariff barrier, and raised as a 
specific trade concern by Brazil, Egypt, Mexico, and Thailand. 
                                                      
139 The Toxic Substances Control Act § 12(b) and 40 CFR Part 707 requires EPA to notify importing 
countries of the export of chemicals or mixtures that are subject to  certain rules and orders.  Approximately 
1,100 chemicals come under this requirement. 
140 WTO document WT/CTE/W/160/Rev.2, 25 April 2003. 
141 For further information see EPA online informati on.  Available at:  http://www.epa.gov/pesticides/ 
regulating/tolerances.htm. 
142 Information available online at:  http://www.state.gov/g/oes/. 
143 Information available online at:  http://www.noaa.gov/fisheries.html. 
144 Procedures for "Dolphin-safe" tuna certificati on are available online at:  http://www.iattc.org/ 
HomeENG.htm. WT/TPR/S/126 Trade Policy Review 
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158. The import ban in May 2002 applied to Belize, Bolivia, Colombia, El Salvador, Guatemala, 
Honduras, Nicaragua, Panama, Spain, Vanuatu, and Venezuela, although some of these countries are 
in the process of completing the requirements for lifting the ban.145 
159. On 21 January 2003, the NOAA announced that the tuna purse-seine industry practice of 
encircling dolphins to catch tuna has no significan tly adverse impact on dolphin populations in the 
Eastern Tropical Pacific Ocean (ETP).  This allowed tuna fishing under Dolphin-safe certification even if dolphins are encircled or chased, as long as no dolphins are injured in the fishing process.
146  
The IATTC must nevertheless place inspectors on ev ery boat and no tuna from catches in which a 
dolphin is killed qualifies for the label. 
160. Since 1989, importation of shrimp is prohibited unless harvested in a way considered by the 
United States not to pose a danger to sea turtles, unl ess the shrimp was harvested by aquaculture or in 
cold waters.  The corresponding legislation, Sec tion 609 of Public Law 101-162, referring to the 
Protection of Sea Turtles in Shrimp Trawl Fishing Operations, enacted in 1998, had been the subject 
of a WTO panel;  the Appellate Body found in 1998 that Section 609 was provisionally justified under 
Article XX(g) of GATT 1994, but was applied in a discriminatory manner.147  Revised Section 609 
guidelines  were published in 1999, setting forth crite ria to certify nations as effectively protecting sea 
turtles.  The Department of State in April 200 3 certified 39 nations and one economy as meeting the 
requirements for continued export of shrimp to th e United States (down from 41 countries in April 
2002), and noted that Honduras and Venezuela remain uncertified.148 
161. The Pelly Amendment to the Fisherman's Pr otective Act of 1967 authorizes the U.S. 
Secretary of Commerce to certify a country for ac tivities that diminish the effectiveness of an 
international fishery conservation programme.  Certif ication triggers a process for the President to 
consider the imposition of import restrictions agains t the country.  In September 2000, the Secretary 
of Commerce certified Japan under the Pelly Amendm ent for undermining international efforts to 
protect whales.  Certification was based on Japan's decision to kill two additional species of whales 
under its research programme in the North Pacific. 
(3) MEASURES DIRECTLY AFFECTING EXPORTS  
(i) Export finance, insurance and guarantees149 
162. The Export-Import Bank (Ex-Im Bank) is the official export credit agency of the 
United States.  Pursuant to its Charter (the E xport Import Bank Act of 1945, as amended), it is 
mandated to provide U.S. exporters  with financing terms and conditio ns that are competitive with 
those made available by foreign governments to their exporters.150  The United States participates in 
the OECD Arrangement on Guidelines for Officially  Supported Export Credits, designed to minimize 
the use of government subsidies in  export finance, which is referred to in the WTO Agreement on 
Subsidies and Countervailing Measures.151  Ex-Im Bank activities are subject to periodic review under 
U.S. law;  the re-authorization Act, signed in to law in June 2002, extended the Ex-Im Bank 
                                                      
145 See WTO document WT/CTE/EDB/1, 31 May 2002. 
146 Federal Register: Volume 68, Number 19, page 4449;  29 January 2003.  Further information is 
available online at:  http://swr.ucsd.edu/news/168tdfinal.htm. 
147 See WTO document WT/DS58/AB/RW, 22 October 2001. 
148 Information available online at:  http:// www.state.gov/r/pa/prs/ps/2003/20152.htm. 
149 This section reviews export finance, insurance, or guarantee mechanisms operated by the Federal 
Government.  Those specifically targeting agricu ltural exports are discussed in Chapter IV(2). 
150 Export-Import Bank of the United States (2003). 
151 Annex I, Illustrative List of Export Subsidies, item (k). United States WT/TPR/S/126 
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authorization to September 2006 and increased its financing capacity.  The Bank's activities are 
included in the United States' most recent WTO subsidy notification.152 
163. Ex-Im Bank provides  loans, guarantees, and insurance through a variety of programmes that 
include:  export credit insurance (post-export financ ing);  working capital loan guarantees to exporters 
(pre-export financing);  and medium-and long-term  loan guarantees and direct loans to overseas 
buyers (buyer financing).153 All borrowings by Ex-Im Bank to finance its operations are fully 
guaranteed by the U.S. Government.  Ex-Im Bank's mandate is to supplement, not compete with, the 
private sector.154 
164. Ex-Im Bank grants support only to the parts of an export transaction that meet local-content 
requirements.  To be eligible for Ex-Im Bank fina ncing, goods and services in a U.S. supply contract 
must be shipped from the United States.  For transac tions with repayment periods of up to 180 days, 
Ex-Im Bank normally requires that at least 50% of the value of the transaction be of U.S. origin.  For transactions with medium-term and long-term repa yment periods, the total level of support for a 
supply contract will be the lesser of:  85% of the value of all eligible goods  and services, or 100% of 
the U.S. content in all eligible goods and services in the contract. 
165. In addition, to be eligible for Ex-Im Bank loans and long-term guarantee financing, goods 
must be shipped aboard U.S. flagged ships.  Further, U.S. insurers should be given a "non-
discriminatory opportunity" to bid for insuran ce on all shipments financed by Ex-Im Bank. 
166. In FY 2003, Ex-Im Bank authorized a total of US$10.5 billion in support for its export 
activities (Table III.9), slightly more than the previ ous year but still below the average recorded since 
1996 (US$11.1 billion).  Support in  FY 2003 was in the form of loans (US$58 million), guarantees 
(US$7.8 billion), and export credit insurance (US$2. 7 billion).  This supported 2,703 U.S. export sales 
and US$13.8 billion in U.S exports world-wide.
155  In FY 2003, more than US$4.6 billion was used to 
finance the export of 74 U.S.-manufactured, large commercial aircraft.  Small business benefited from 
about US$2 billion in FY 2003, approximately 20% of total authorizations.  The largest export markets were, in decreasing order of importa nce, Mexico, China, Brazil, and Turkey. 
167. Every year, Ex-Im Bank also receives an appropriation for its programme budget (the 
"subsidy" or Program Budget Authority), which is used  as a reserve to cover both the possible losses 
of providing new direct loans, guarantees and insu rance, and the associated administrative costs 
(Table III.9);  if the amount is not spent, it is rolled over to the next year's appropriation.  As expected 
losses have decreased in recent years, the Program Budget Authority has declined to an estimated 
US$334 million in FY 2003.  The budget request for FY 2004 was announced as "zero", also because unused funds from the four previous fiscal years we re expected to suffice to meet possible losses. 
168. Since the last Review of the United States in 2001, Ex-Im Bank has initiated various 
programmes including:  financing sales of U.S expo rts to take advantage of the African Growth 
Opportunity Act;  providing finance for the export of equipment and services to support direct air 
cargo service between Africa and the United States ;  approving a Transportation Security Exports 
Program (T-SEP); issuing guarantees through th e Foreign Currency Guarantee programme in 
currencies that were not previously eligible (e.g. CFA franc, Egyptian pound, Mexican peso, and 
South African rand);  hosting training seminars in various African countries; providing US$1 billion 
to finance sub-Saharan African purchases of HIV/AI DS medicines;  and insuring short-term export 
                                                     
 
152 WTO document G/SCM/N/71/USA, 2 July 2002. 
153 These programmes are described in the Ex-Im Ba nk's online information at:  http://www.exim.gov. 
154 Title 12, Export-Import Bank of the United States, (12USC635). 
155 See Ex-Im Bank Annual Report FY 2002  [online].  Available at:  http://www.exim.gov/about/ 
reports/ar/ar2002/index.htm. WT/TPR/S/126 Trade Policy Review 
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credit transactions under the pilot programme te rmed "short-term Africa pilot program", which 
facilitates the purchase of U.S agricultural commodities,  raw materials, spare parts, and other items. 
Table III.9 
Ex-Im bank loan, guarantee, and insurance activities, 1996-04 
(US$ million) 
Fiscal year Financed export  value Amount s authorized Program budget authority 
(reserve for default) 
1996 14,597 11,518 870 
1999 16,709 13,068 656 
2000 15,548 12,637 902 
2001 12,526 9,242 824 
2002 12,950 10,119 727 
2003 14,151 10,533 334 
2004 15,479 11,557 366 
Source : WTO document G/SCM/N/ 71/USA, 2 July 2002, and informa tion provided by the authorities.  
(ii) Other export assistance 
(a) Foreign-trade zones 
169. Foreign-trade zones (FTZ) have been author ized by the Foreign-Trade Zones Act of 1934.156  
Under this legislation, foreign goods may be ad mitted to an FTZ without being subject to customs 
duties, inventory taxes, or excise taxes.  Domesti cally produced merchandise may also be brought into 
an FTZ free of these taxes, and stored or processed i ndividually or together with other domestic or 
foreign merchandise;  about 62% of shipments into  FTZs consisted of domes tic products in 2001.  
Customs duty and federal excise tax are paid when merchandise is transferred to the U.S. customs territory;  customs duty is also levied by the Un ited States when merchandise is shipped from a zone 
to a NAFTA member.  The authorities have indicated that there are no income tax advantages related 
to FTZ operations, and that zones are subject to all othe r federal, state, and local regulations and taxes. 
170. The Foreign-Trade Zones Board is in charge  of authorizing FTZs;  it consists of the 
secretaries of the Department of the Treasury a nd the Department of Commerce.  The authorities 
noted that the cost for zone development and opera tion, including infrastructure, is the responsibility 
of zone grantees, operators, and users.  The zone grantees (i.e. the parties granted authority by the 
FTZ Board to establish zones) are public or quasi -public entities, such as cities, counties, port 
authorities, economic development agencies or other non-profit entities.  These parties often contract with private parties for the operation of the zone .  The FTZ Board itself provides no funds for zone 
development or operation. 
171. FTZs operate under U.S. customs supervision an d are generally located at or near U.S. 
Customs ports of entry.  There are two types of FTZ:  general purpose zones, and subzones.  Some 
256 general-purpose zones are registered.
157  They are usually located in industrial parks or in seaport 
or airport complexes, with facilities available fo r use by the general public.  Subzones consist of 
single-purpose sites for operations that cannot be accommodated in a general-purpose zone (for 
instance, oil refining and automobile manufacturing);  some 444 subzones are currently registered. 
                                                      
156 See Title 19 of the United States Code (19U.S.C.8 1a-81u).  The regulations of the Foreign-Trade 
Zones Board are published in 15 CFR Part 400.  The regulations of the U.S. Customs Service governing the 
transfer of merchandise to and from zones are published in 19 CFR Part 146. 
157 A list of FTZs is available online at:  h ttp://ia.ita.doc.gov/ftzpa ge/letters/ftzlist.html. United States WT/TPR/S/126 
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172. The combined value of shipments of domestic  and imported goods into general-purpose zones 
and subzones totalled US$225 billion in 2001, the latest year for which data are available.  Subzones 
received 87% of these shipments.  The oil refini ng industry accounted for 69% of foreign shipments 
into FTZs.  Other industries that import sizeable foreign shipments into FTZs include motor vehicle 
and parts manufacturers, and companies pr oducing electronic products and parts. 
173. In FY 2001, exports from the FTZs were sizeably  less than shipments entering the zones, at 
US$15.4 billion.  This is because most sales by FTZs are destined for the domestic market.  
According to the authorities, a significant benefit of FTZs is related to "inverted tariffs":  if 
manufacturing in the zone results in a product subject to a lower customs duty than the duty 
applicable to its foreign inputs, the finished product may be entered at the duty rate that applies to its 
condition as it leaves the zone.  There is no special  legislation authorizing the inverted tariff 
procedure; authorization is granted on a case-by-case b asis, subject to public interest considerations. 
(b) Duty drawback system 
174. Under the duty drawback programme, customs du ties, as well as certain internal taxes and 
fees that have been collected at importation ar e refunded following the exportation of either the 
imported product or the article that has been manufactured from the imported product.158 
175. In its FTAs, the United States seeks to restri ct the use of duty drawback programmes,  
considering that they can distort investment decisi ons by creating an incentiv e 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.159  The NAFTA restricts drawback to  the lesser of duties paid on the 
imported input or import duties paid on the pr ocessed good exported to a NAFTA trading partner.160  
According to the authorities, the United States-Ch ile FTA provides for a gradual phase-out of these 
programmes for shipments between the parties, and U.S. proposals in ongoing FTA negotiations (e.g. 
FTAA) are modelled on the U.S.-Chile provision.  However, there are no restrictions on the use of 
drawback in the FTAs with Jordan or Israel. 
(c) Tax exemptions on extraterritorial income 
176. Various U.S. tax provisions c onferring export incentives have given rise to a WTO dispute 
settlement case on the tax treatment for foreign sales  corporations.  This was the only instance of 
prohibited export subsidies granted by the U.S. Gove rnment since the inception of the WTO in 1995.  
These U.S. tax provisions have been under scrutiny si nce 1998, first by a panel, then by an Article 
21.5 implementation panel since November 2000.161 
177. The issue under scrutiny in the original dispute was the tax exemption of certain "foreign 
trade" income of foreign sales corporations (FSCs) .  Foreign trade income was generally defined as 
export property held for sale or lease, produced in the United States and sold abroad, with no more 
                                                      
158 See 19 U.S.C. Section 1313.  A description of th e system is available in Border Protection (2003) 
U.S. Customs. 
159 See, for example, 39614 Federal Register Vol. 68, No. 127, Wednesday, July 2, 2003 "Request For 
Public Comment On Duty Drawback And Defe rral In Free Trade Ag reement Negotiations". 
160 Article 303:  "Restriction on Drawback and Duty Deferral Programs".  Annex 303.6 lists a number 
of products (including sugar, citrus and cotton  quilts) that are not subject to Article 303. 
161 WTO documents WT/DS108/1, 28 November 1997, and WT/DS108/Add.1, 12 March 1998.  
Article 21.5 provides for the resort to the origin al panel where there is disagreement regarding the 
implementation of the panel's original rulings and recommendations. WT/TPR/S/126 Trade Policy Review 
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than 50% of its value attributable to imports.162  A domestic corporation was generally not subject to 
U.S. income tax on dividends distributed from the FSC out of earnings attributable to this income.  
Thus, there was no U.S. income tax imposed on a portion of the FSC's income from exports.  The tax revenue forgone as a result of the FSC provi sions was around US$2.55 billion according to the 
FY 2000 Budget;  it was expected to be US$4.16 billion in the FY 2001 Budget.
163  About 6,000 U.S. 
corporations used FSCs. 
178. In October 1999, a WTO panel found that th e FSC scheme constituted a prohibited export 
subsidy under the Agreements on Subsidies and Countervailing Measu res (SCM) and on Agriculture.  
In February 2000, the Appellate Body confirmed the findings of the panel with respect to the 
violations of the SCM Agreement and modifi ed the findings concerning the Agreement on 
Agriculture.  In March 2000, the DSB recommended  that the United States withdraw the export 
subsidies. 
179. On 15 November 2000, the U.S. President signed into law H.R. 4986, the FSC Repeal and 
Extraterritorial Income Exclusion Act of 2000, which, in the view of the United States, implemented the DSB recommendations.  On 29 January 2002, the Appellate Body issued its conclusions to the 
Article 21.5 Recourse
164:  they found the new Law to be inconsistent with the GATT 1994 and the 
Agreements on Subsidies and Countervailing Measur es and on Agriculture.  In April 2003, the DSB 
authorized the European Union to take counter measures at the level of US$4,043 million, as 
authorized by the Arbitrator's report.165 
(iii) Section 301 and related actions 
180. Section 301, which encompasses Section 301-310 of the Trade Act of 1974, is implemented 
by the USTR to investigate forei gn trade practices that are considered to affect U.S. exports of goods 
and services or impair U.S. rights under internationa l trade agreements.  Section 301 may be used to 
"enforce U.S. rights under bilatera l and multilateral trade agreements and also may be used to respond 
to unreasonable, unjustifiable, or discriminatory fore ign government practices that burden or restrict 
U.S. commerce.  For example, Section 301 may be  used to obtain increased market access for U.S. 
goods and services, to provide more equitable conditi ons for U.S. investment abroad, and to obtain 
more effective protection world-wide for U.S. intellectual property."166 
181. Actions that may be taken under Section 301 by  the USTR include the suspension of trade 
agreement concessions;  the imposition of duties or other import restrictions;  and the imposition of 
fees or restrictions on services.  However, prior to taking any action unde r Section 301, the USTR 
must request consultations with the foreign gove rnment involved and follow the dispute settlement 
provisions of any applicable trad e agreement, including the WTO. 
182. One WTO panel found that, in the light of the U.S. undertakings articulated in the Statement 
of Administrative Action approved by the U.S. Congress at the time it implemented the Uruguay Round Agreements, the use of Section 301 is not inconsistent with U.S. obligations under the 
                                                     
 
162 WTO document WT/DS108/R, 8 October 1999, p. 2. 
163 FY 2000 Budget, p. 354, Table 34-4;  and FY 2001 Budget, p. 382, Table 32-4 [online].  Available 
at:  http://w3. access.gpo.gov. 
164 WTO document WT/DS108/AB/RW, 14 January 2002. 
165 WTO document WT/DS108/26, 25 April 2003.  The Arbitrator's report is contained in document 
WTO document WT/DS108 /ARB, 30 August 2002. 
166 See USTR Annual Report 2003  [online].  Available at:  http://www.ustr.gov/reports/2003Annual/ 
VI-trade_enforcement .pdf United States WT/TPR/S/126 
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WTO.167  A second WTO dispute was initiated by the European Union in 2000 regarding Section 306 
of the Trade Act of 1974, as amended (the Carousel  amendment – see Chapter II(3)).  In recent years, 
Section 301 provisions have been used sparingly against WTO Members, and disputes related to 
Section 301 investigations have a ll been brought to the WTO Dispute Settlement Body.  Nevertheless, 
some WTO Members have continued to question th e investigations, as well as the publication of 
"reports" and "lists", notably under the Special  301 provisions regarding intellectual property 
protection (section (4)(v)).168 
183. No new cases have been initiated under Secti on 301 since the previous review of the 
United States, although various deve lopments have affected previous ly initiated investigations.  An 
agreement was reached with the European Union in the dispute regarding the EU banana import 
regime (Chapter II(3)).  The investigation initiate d under Section 301 in October 2000, regarding the 
Canadian Wheat Board (CWB), was scheduled to end in October 2001 but was extended to 
February 2002.  As a result of the investigation, the USTR announced that it would examine a possible WTO case against the CWB, and would inv estigate Canadian measures  regarding its imports 
of U.S. wheat.  In December 2002, the United St ates initiated a WTO dispute settlement proceeding 
on this issue.
169 
(iv) Export restrictions and controls 
184. The United States maintains export restrictions and controls for national security, foreign 
policy purposes, or to ensure sufficient domestic s upply.  Exports can be c ontrolled unilaterally or 
multilaterally.  The authorities have indicated that in many cases controls are based at least in part on 
U.S. participation in non-binding export contro l regimes (e.g. the Wassenaar Arrangement, which 
focuses on controls of conventional arms and dua l-use exports, the Missile Technology Control 
Regime, the Nuclear Suppliers Group, and the Australia Group, as well as in the context of 
United Nations embargoes).  The c ontrols are implemented through a licensing system.  Re-exports 
are also covered:  companies located outside the United States must obtain authorization in order to 
re-export many items subject to U.S. export controls. In December 2002, members of the Wassenaar 
Arrangement agreed to decontrol general purpose microprocessors. 
185. In April 2002, the U.S. Department of Co mmerce's Bureau of Export Administration was 
renamed the Bureau of Industry and Security (BIS).   One of the Bureau's core responsibilities is to 
administer and enforce U.S. export controls on dual-use items (those with commercial and possible 
military use) as well as on the export and re-export of certain other commercial items for foreign 
policy purposes.  The BIS attempts to balance  U.S. national security and commercial interests, 
providing facilitation of legitimate civil transactions  while preventing the spread of weapons of mass 
destruction, of ballistic missiles and associated t echnologies, and of potentially destabilizing transfers 
of dual-use technologies to militarily unstable regions. 
186. The primary authority to control exports was governed by the Export Administration Act 
(EAA) of 1979, as amended, which expired in Augu st 2001.  Although the EEA authority has lapsed, 
the U.S. export control regime remains in place unde r the authority of the International Emergency 
Economic Powers Act (IEEPA), which is renewed annually. 
187. The EAA authorized the President to prohibit or  curtail the export of goods "where necessary 
to protect the domestic economy from the excessive drain of scarce materials";  and to monitor 
                                                      
167 WTO document WT/DS152/-series. 
168 See for example the written questions by Japan and India in the context of the 2001 Trade Policy 
Review of the United States, in WTO document WT/TPR/M/88/Add.1, 8 January 2002. 
169 WT/DS276/-series. WT/TPR/S/126 Trade Policy Review 
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exports of certain goods to determine the impact of  such exports on domestic supply and to evaluate 
whether this impact has an adverse effect on the U.S. economy.  This authority has been continued 
under the IEEPA.  During FY 2002, the BIS controlled the export of domestically produced crude oil 
and certain unprocessed timber harvested from federal and state lands;  BIS approved 14 licences for 
the export of crude oil amounting to 38 million barre ls.  No licences were approved for the export of 
unprocessed timber.  Agricultural products that are monitored include wheat, corn, rice, soybeans and 
products, and cotton. 
188. Some items that may have dual uses are listed on the Commerce Control List (CCL), and are 
controlled under the Export Administration Regulatio ns (EARs).  The export of these items requires a 
licence, based upon the item classification, the destin ation, the end-user, and the end-use.  The EARs 
include a country chart, which lists the reasons st ated for control of a given item, and specifies 
whether exports of certain items to a given count ry require a licence.  Among recent developments, 
special controls on the export and re-export of ar ms-related items to the Federal Republic of 
Yugoslavia (Serbia and Montenegro), that ha d been imposed in 1998, were removed in 
November 2002.170  The EARs have been revised to reflect  new signatories to the Chemical Weapons 
Convention in September 2001, and new members of  the Missile Technology Control Regime in 
March 2003. 
189. In addition, the BIS maintains "catch all" cont rols for items that are not specifically listed on 
the CCL but are being shipped to a sensitive recipient,  such as a nuclear facility.  Exporters in these 
cases must apply for a licence for all items shipped, regardless of their classification or whether the 
items are on the CCL.  Export enforcement investiga tions of unauthorized exports may result in fines 
or imprisonment of exporters found to have made unlawful exports.  In FY 2002, the BIS completed 
the review of 10,767 license applications, w ith an average processing time of 39 days.171  It approved 
8,735 applications, returned 1,826 without action, and denied 206. 
190. The BIS engages in various bilateral a nd regional export control activities.  Its 
Nonproliferation and Export Control (NEC) coope ration programme, establis hed in 1994, aims to 
strengthen foreign national export control systems for sensitive items.172  NEC manages BIS 
cooperative technical assistance programmes, and coor dinating efforts with the inter-agency Export 
Control and Border Security (EXBS) Progra mme, which the State Department oversees. 
191. The Transhipment Country Export Control In itiative (TECI), another BIS initiative launched 
in 2002, seeks to strengthen compliance with internat ional export norms and with U.S. export control 
laws in global transshipment hubs by counteri ng illegal diversion of controlled goods.  TECI 
complements other trade security initiatives incl uding the EXBS Program, the Container Security 
Initiative, and the Customs-Trade Partnership Against Terrorism. 
192. The Department of State controls the export of defence articles, services, and related 
technological data under the authority of the Arms Export Control Act.173  These are specified on the 
U.S. Munitions List, which was subs tantially reviewed in 2002, especially in areas of propellants and 
explosives, nuclear and chemical-related commodities,  and technology.  There are no plans to change 
the sharing of responsibility for export contro l between the State Department and the BIS. 
                                                      
170 New rules affecting the EARs are published in th e Federal Register, and are available online at:  
http://w3. access.gpo.g ov/bis/fedreg/ear_fedreg.html. 
171 BIS Annual Report 2002 .  Available online at:  http://www.bis.doc.gov/news/2003/AnnualReport/ 
index.htm. 
172 NEC online information.  Available at:  http://nec.bis.doc.gov. 
173 22 U.S.C. 2751. United States WT/TPR/S/126 
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193. Under the authority of the IEEPA, the Trading with the Enemy Act, the United Nations 
Participation Act, and under anti-terrorism measures,  the Department of Treasury's Office of Foreign 
Assets Control (OFAC) administers economic and trad e sanctions, and may in this capacity restrict 
exports to countries, entities, and individuals facing sanctions.174  WTO Members facing export 
sanctions include Cuba, Myanmar, and Sierra Le one.  Sanctions differ from country to country.175  
According to the authorities, exports of agricultura l goods, medicines, and medical equipment to Cuba 
are allowed subject to a BIS export licensing requireme nt; and export restrictions to Sierra Leone are 
limited to arms. IEEPA sanctions against Angola were lifted in May 2003.  In July 2003, the 
Government imposed sanctions on Myanmar in res ponse to its continued lack of progress on human 
rights and democracy;  they included a ban on exports of financial services. 
(4) OTHER MEASURES AFFECTING PRODUCTION AND TRADE  
(i) Competition policies 
(a) Antitrust legislation and administration 
194. U.S. antitrust legislation at the federal level is included in three main acts:  the Sherman 
Antitrust Act (15 U.S.C. Sections 1-7), the Clayton Act (15 U.S.C. Section 12 et seq), and the Federal 
Trade Commission Act; provisions with respect to the trade aspects of competition policy are also 
included in other Acts.176  Federal antitrust legislation covers a ll types of activities, including those 
related to foreign commerce of the United States, and a wide range of business practices;  it is 
enforced by the Antitrust Division of the Department  of Justice (criminal and civil enforcement), and 
by the Federal Trade Commission (FTC) (civil en forcement).  U.S. antitrust law provides for 
enforcement actions by aggrieved private parties as well as by the Department of Justice and the FTC.  
Such private actions may be for treble damages a nd/or, where appropriate, injunctive relief, and have 
long been a major part of U.S. antitrust practice.  Ther e is also antitrust legislation in most States.  The 
authorities noted that the bulk of U.S. comme rce is subject to anti-trust legislation. 
195. The Sherman Antitrust Act outlaws all contracts, combinations, and conspiracies that restrain 
trade among the states or with foreign countries, including price-fixing agreements, bid rigging, and 
agreements between competitors to allocate cust omers, as well as the monopolization of trade among 
the states or with foreign countries.  The Sherman Act and FTC Act do not appl y to conduct involving 
trade or commerce, other than import trade or co mmerce, with foreign nations unless the conduct has 
a direct, substantial, and reasonably foreseeable e ffect on domestic or import commerce or on export 
trade or commerce.  Where jurisd iction is based on export trade or commerce the antitrust laws apply 
to that conduct "only for injury to export busin ess in the United States." (15 U.S.C. Section 6a (1) 
(1994). 
196. The Clayton Act prohibits mergers and acquisiti ons and other types of conduct that may be 
likely to lessen competition substantially.  Section 2 of the Clayton Act, also known as the Robinson-
Patman Act, outlaws certain domestic price discrimination for goods (except for non-profit 
institutions).  Section 3 of the Act prohibits th e lease or sale of goods or commodities conditioned 
upon the purchaser's agreement not to use the produc ts of a competitor, if this activity leads to 
lessening competition or to creating a monopoly.  Sec tion 7 of the Clayton Act prohibits any merger 
or acquisition of stock or assets that lessens competition substantially, or tends to create a monopoly.  
                                                      
174 OFAC online information.  Available at:  h ttp://www.treas.gov/offices/ enforcement/ofac/index. 
html. 
175 The Sanctions programme and the List of countr ies are available online at   http:// www.treas.gov/ 
offices/eotffc/ofac/sanctions/index.html. 
176 U.S. anti-trust legislation is presented in  detail in WTO (1999), Chapter III(4)(vii). WT/TPR/S/126 Trade Policy Review 
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Section 7A of the Clayton Act, called the Hart -Scott-Rodino Antitrust Improvements Act of 1976 
(15 U.S.C. 18a), contains provisions to facilitate en forcement of antitrust laws with respect to anti-
competitive mergers and acquisitions.  Lawsuits under the Clayton Act ma y be brought in  any district 
court of the United States in which the defendant is found or transacts business (15 U.S.C. 12);  the 
Act allows for the recovery of threefold the damage inflicted to the aggravated party plus the cost of 
the suit.  Foreign individuals or companies are gr anted national treatment and may sue for the same 
amount;  foreign states, however, may recover only an  amount equal to the damage inflicted plus the 
cost of the lawsuit. 
197. The Federal Trade Commission Act gives the FTC the authority to define and prohibit unfair 
methods of competition;  generally, th is refers to violations of the Sherman or the Clayton Act or of 
any other antitrust law.  The Act also includes consumer protection as part of FTC’s mission.  
Pursuant to its consumer protection  mission, the FTC has the power to prescribe trade regulations 
defining unfair or deceptive acts or practices and to establish requirements to prevent them, as well as to challenge unfair or deceptive acts or practices  by foreign companies deemed to harm U.S. 
consumers. 
198. A number of U.S. statutes provide limited immunity from antitrust laws in specified cases.  
Immunity is provided to certain activities in the agriculture sector under the Capper-Volstead 
Agricultural Producers' Associations Act, which a llows collective action in the processing, preparing 
for market, handling, and marketing of agricu ltural products, and the Agricultural Marketing 
Agreement Act of 1937, which authorizes the Secret ary of Agriculture to enter into marketing 
agreements exempted from the application of antitrust laws with producers and processors of
 
agricultural commodities.  The Act al so allows the Secretary of Agri culture to enter into marketing 
orders, except for milk, to control the quantity of an agricultural product to increase the price.  The 
Fishermen's Collective Marketing Act has simila r provisions to the Capper-Volstead Agricultural 
Producers' Associations Act.  The McCarran- Ferguson Insurance Regul ation Act exempts the 
insurance business from antitrust laws to the extent "regulated by state law".177  The Need-Based 
Educational Aid Act of 2001 extended until 2008 the antitrust exemption on institutional student aid 
under section 568 of the Improving Am erica's Schools Act of 1994. 
199. The Hart-Scott-Rodino Antitrust Improvement s Act of 1976 (HSR Act, 15 U.S.C. 18a) 
requires parties to notify the FTC and DOJ, and ob serve a waiting period before undertaking certain 
acquisitions of voting securities or assets, in orde r to give those agencies the opportunity to obtain 
effective preliminary relief against anti-competitive mergers and thereby prevent harm to competition 
and consumers.  The Gramm-Leach Bliley Act, en acted in 1999, allows for the combination of 
banking, securities, and insurance activities through ne wly created financial holding companies.  It 
also amended the HSR Act to provide the FTC and the Justice Department with the authority to 
review non-bank acquisitions by financial holding co mpanies, and directs designated federal banking 
agencies to make data deemed n ecessary by FTC and DOJ for antitr ust review available to them 
(see also Chapter IV(8)). 
200. The most significant amendments to the HSR Ac t to date were enacte d in December 2000 and 
took effect in February 2001.178  These statutory amendments increased the size-of-transaction 
threshold from US$15 million to US$50 million and el iminated the 15% size-of-transaction test, thus 
making US$50 million an absolute floor for reportab ility, and made other changes to the filing and 
waiting requirements.  The increase in reporting th resholds, combined with the overall decline in 
merger activity from that of recent years, resulted in 1,187 transactions being reported under the HSR 
                                                      
177 For further details see WTO (1999), Box III.4. 
178 Section 630 of Pub. L. No. 106-553, 114 Stat. 2762. United States WT/TPR/S/126 
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Act in fiscal year 2002, a decrease of approximately 76%, from 4,926 in fiscal year 2000, the last full 
fiscal year under the previous reporting thresholds. 
201. During 2001 and 2002, the FTC and DOJ adopted several changes in the regulations 
implementing the HSR Act (16 CFR 801 et. seq.);  some were made in order to implement the 
changes enacted in December 2000, while others were  intended to improve particular provisions of 
the regulations.  In that latter category, several cha nges were made to the regulations that provide pre-
merger reporting exemptions for certain acquis itions of foreign assets and voting securities of a 
foreign issuer.  These changes included raising the ne xus-with-the-United States level that triggers a 
filing obligation to US$50 million, essentially to mi rror the new threshold for reporting of domestic 
acquisitions, and extending reportability to certain acquisitions of foreign assets by foreign persons, 
which are now subject to the same US$50 million ne xus-with-the-United States test as acquisitions of 
foreign voting securities. 
202. The United States has antitrust cooperation agreem ents with Australia, Brazil, Canada, the 
European Union, Germany, Israel, Japan, and Me xico.  The details of the cooperation that has 
occurred pursuant to these agreements are frequently confidential.  However, the authorities have 
noted that one recent example of cooperation involves General Electric's acquisition of 
Instrumentarium, in which the DOJ and the Eur opean Commission cooperated closely during their 
respective investigations.179  Similarly, the FTC cooperated closely with the Canadian Competition 
Bureau and the European Commission in the inve stigation of Bayer AG's acquisition of Aventis 
CropSciences, the settlement of which required the c oordination of divestitures of related agricultural 
crop protection products in both Europe and North America.180 
203. Under the Regulatory Reform Initiative, signed in June 2001 as a component of the U.S.-
Japan Economic Partnership for Growth, the United States and Japan exchange reform 
recommendations in the autumn, that serve as a basi s for annual reports, specifying reform measures 
to be taken by each Government.  The USTR is th e lead agency for the U.S. Government for this 
Initiative, while the Ministry of Foreign Affairs takes the lead for the Jap anese Government.  The 
First Report to the Leaders on the U.S.-Japan Re gulatory Reform and Competition Policy Initiative, 
was issued in June 2002;  the second was in May 2003.181  On competition policy, the United States 
noted that its antitrust agencies were continuing to review the appropriate scope and reach of various 
limitations on and exemptions to the app licability of the U.S. federal antitrust laws. 
204. With respect to the decision to be taken at the Fifth Session of the Ministerial Conference on 
modalities of negotiations on the in teraction between trade and competition policy, the United States 
made a submission to the Working Group on the Interaction between Trade and Competition Policy, 
to suggest the negotiation of a peer review system.182 
                                                      
179 United States Department of Justice Press Release, 16 September 2003, available at:  
www.usdoj.gov/atr/public/press release/2003. 
180 Federal Trade Commission Press Release, 30 May 2002 [online].  Available at:  http://www.ftc. 
gov/opa/2002/05/bayeraventis.htm. 
181 The reports are available online at:  h ttp://www.ustr.gov/regions/japan/2002-06-25-
report_to_leaders.PDF and http://www.ustr.gov/regions/japan/2003-05-23-report.pdf. 
182 WTO document WT/WGTCP/W/233, 26 June 2003. WT/TPR/S/126 Trade Policy Review 
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(b) Implementation and enforcement activities 
Antitrust Division of the Department of Justice 
205. During the 2001-03 period, competition policy enfo rcement by the Department of Justice has 
continued to focus on the activities of internationa l cartels.  After record fines in FY 1999, fines 
imposed declined to US$103 million in FY 2002 (Table III.10). 
206. Cases that resulted in fines during FY 2001 and 2002 included Bilhar International 
Establishment of Liechtenstein, which pleaded guilty and agreed to pay US$54 million for its role in 
the bid-rigging conspiracy on U.S.-funded construction contracts in Egypt.183  In a case initiated in 
parallel with the FTC (see below), the Hearst Co rporation was imposed a US$4 million civil penalty, 
the largest ever, for violating antitrust pre-merger notification requirements. 
Table III.10 
Antitrust statistics and case results 1993-02 (fiscal years) 
Investigation 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 
Sherman Act Sect 1:  Restraint of 
Trade 110 136 98 93 73 80 55 82 80 94 
Sherman Act Sect. 2: Monopoly 7 22 16 14 8 5 5 8  13 
Clayton Act Sect. 7:  Mergers 
of which:  Hart-Scott-Rodino 102 
72 102
57 134
88 237
186 276
220 228
176 230 
175 177 
137 175 
106 129
76 
Case results           
Number of corporations fined 64 59 32 31 30 18 25 26 14 17 
Amount of fines to corporations 
(US$ million)  40.4 39.0 40.2 25.2 203.9 241.6 959.9 303.2 270.8 93.8 
Amount of fines to individuals 
(US$ million) 1.9 1.2 1.2 1.6 1.2 2.5 12.3 5.2 2.0 8.7 
Total fines imposed (US$ million) 42.3 40.2 41.4 26.8 205.2 244. 1 972.1 308.4 272.8 102.5 
Source : Department of Justic e, Antitrust Division.  
207. In FY 2003, several large fines were applie d for international cartel activity, including a 
US$10 million fine imposed on Morganite, Inc., a U.S.  company, charged with participating in an 
international cartel to fix the price of various types of electrical carbon products sold in the 
United States and elsewhere.184  A US$28.5 million fine was imposed on Arteva Specialties, S.a.r.l., 
d/b/a KoSa, a Luxembourg-based manufacturer of polyester staple, with its principal place of business in Charlotte, North Carolina, for participating in a conspiracy to fix prices and allocate customers in 
the polyester staple industry.
185  In March 2003, the German chemical company Hoechst 
Aktiengesellschaft was imposed a US$12 million fine for its participation in a conspiracy that 
suppressed competition in the world markets for an industrial chemical used in the production of 
                                                      
183 United States Department of Justice Press Rel ease, 12 February 2002.  Available online at:  
www.usdoj.gov/ atr/public/press_releases/2002. 
184 The statutory maximum penalty for a corporation convicted of price fixing, a violation of the 
Sherman Act, is a US$10 million fine.  The fine may be increased to twice the gain derived from the crime or 
twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory 
maximum fine.  The statutory maximum penalty for a corporation convicted of attempting to obstruct justice is a US$500,000 fine for each count of conviction.  United States De partment of Justice Press Release, 
4 November 2002.  Available online at:  www.usdoj.gov/atr/public/press_releases/2002. 
185 United States Department of Justice Press Re lease, 31 October 2002.  Available online at: 
www.usdoj.gov/ atr/public/press_releases/2002. United States WT/TPR/S/126 
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commercial and consumer products, including pharma ceuticals, herbicides, and plastic additives.186  
This follows fines previously applied on two other companies participating in this conspiracy, Akzo 
Nobel Chemicals BV, of the Netherlands, fined US$12 million in July 2001, and Elf Atochem of 
France fined US$5 million in April 2002. 
208. In the Microsoft investigation, discussed in the Secretariat reports for the previous two 
Reviews of the United States, a Consent Decree was approved and entered by the Court as a Final Judgment on 12 November 2002.
187 
Federal Trade Commission 
209. The number of transactions reported to the FTC  increased substantially during the decade to 
2000, reflecting the rising number of mergers and acquisitions.  Many of these mergers involved 
international operations, and therefore decisions aff ecting international trade and investment.  In the 
view of the authorities, this made antitrust revi ew necessary, to identify and stop associations that 
could diminish competition in specific markets aff ecting the United States.  In FY 2001, however, 
reported transactions declined substantially (Table III.11).  The FTC attributes this, in part, to the 
increase in the reporting thresholds resulting fro m the enactment and implementation of the HSR 
legislation changes.188 
Table III.11 
Summary of mergers reported and ac tions taken (fiscal years 1992-02) 
 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 
Transactions reported 1,846 2,305 2,816 3,087 3,702 4,728 4,642 4,926 2,376 1,187 
Filings receiveda 3,559 4,403 5,439 6,001 7,199 9,264 9,151 9,941 4,800 2,369 
Transactions in which a second 
request could have been issued 1,745 2,128 2,612 2,864 3,438 4,575 4,340 4,749 2,237 1,142 
Investigations in which second 
requests were issued 71 73 101 99 122 125 113 98 70 49 
Federal Trade Commission 40 46 58 36 45 46 45 43 27 27 
Department of Justice 31 27 43 63 77 79 68 55 43 22 
a Two filings are usually received for each transaction; on e from the acquirer and one from the acquired company. 
Source: Federal Trade Commission (2002).  
210. Most FTC cases are resolved through the nego tiation of consent agreements placed on the 
record for public comment, after which the FTC issu es a consent order that carries the force of law 
with respect to future actions.  Such orders apply to U.S. and foreign companies on a national 
treatment basis.  FTC antitrust orders may remain in place for a maximum of 20 years.  In FY 2001, the FTC challenged 23 transactions that it conclude d would lessen competition if allowed to proceed 
as proposed.  Of these, 18 cases resulted in consen t agreements, four cases were withdrawn and one 
resulted in the FTC seeking injunctive relief in a district court. 
                                                     
 
186 United States Department of Justice Press Release, 6 February 2003.  Available online at:  
http://www. usdoj.gov/atr/public/press_releases/2003/200738.htm. 
187 United States Department of Justice online inform ation.  Available at:  http://www.usdoj.gov/atr/ 
cases/f200400/200457.htm. 
188 Federal Trade Commission and Department of Justice (2002). WT/TPR/S/126 Trade Policy Review 
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(ii) Government subsidies and other assistance189 
(a) WTO participation 
211. In international fora, the Federal Governme nt has continued to advocate reductions in 
subsidies affecting competition in international markets.  The Subsidies Enforcement Annual Report 
to the Congress, produced jointly by the USTR and the U.S. Department of Commerce, describes U.S. 
policy and participation in the WTO on issues relating to subsidies. 
212. The United States notified the WTO in 2002 of about 220 programmes providing subsidies to 
businesses under Article XVI:1 of the GATT 1994 and Article 25 of the Agreement on Subsidies and 
Countervailing Measures, including both  federal and sub-federal assistance.190  Most federal subsidies 
described in the notification are provided in the form of an income tax concession, but some 
programmes provide for grants, contracts, or other cooperative-type agreements with private sector 
partners. 
213. Nine of the 50 programmes notified at federal le vel are in favour of agri culture;  five federal 
programmes are in favour of the aerospace and ae ronautic sectors.  The energy sector was the 
recipient of the largest number of notified pr ogrammes (14), mostly geared towards energy 
conservation, although measures to encourage th e development of domestic coal, oil, and gas 
resources were also notified.  Six programmes app lied to fisheries, including subsidies for fishing 
vessels, research and development in management of U.S. fisheries, and conservation of marine 
resources.  Assistance to lumber and timber was also notified, as were five programmes to encourage the extraction and processing of mineral resources, including iron ore and steel.  The subsidy 
notification also contains a description of the Emergency Steel Loan Guarantee Act of 1999. 
214. In addition, the WTO notification contains about  170 programmes maintained at state level, 
providing aid to rural and under-developed regions, a nd enterprise zones, as well as support to various 
activities.  Steel accounted for the largest number of notified state programmes (six) and the highest 
amount of notified subsidies (ranging from US$6 m illion to US$107 million).  Subsidies generally 
take the form of tax credits, although loans and grants are also provided. 
215. The notification was completed by a question- and-answer process in the WTO Committee on 
Subsidies and Countervailing Measures.
191  Exchanges focused on assista nce to aerospace, energy and 
fuel, fisheries, and the steel sector.192 
(b) Measures and types of assistance 
216. Government assistance to businesses can be granted at federal level as well as by state and 
local governments.  The main instruments of suppor t include tax expenditures, financial outlays, and 
credit programmes.  According to a study carried  out by the Congressional Budget Office in 1995, 
                                                      
189 This section describes the main forms of governme nt assistance extended to businesses.  Assistance 
to agriculture is described in Chapter IV, as  is financial support granted to airlines. 
190 WTO document G/SCM/N/71/USA/Suppl.1, 29 October 2002. 
191 Article 6 of the Agreement on Subsidies and Countervailing Measures provides for written requests 
for information on notified subsidies, and on programmes that are alleged not to have been notified. 
192 U.S. responses are reproduced in WTO documents G/SCM/Q2/USA/25, 29 October 2002 and 
G/SCM/Q2/USA/26, 20 November 2002;  a separate answer was provided regarding assistance to the fisheries sector (G/SCM/Q2/USA/27, 8 August 2003). United States WT/TPR/S/126 
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federal government support to business relies mostly on tax expenditure;  financial outlays and credit 
programmes account for a smaller share of federal assistance.193 
217. There is a considerable degree of transpar ency concerning assistance programmes although, 
like in other countries with federal systems, assistan ce is granted at several levels of government and 
may be difficult to document at sub-federal levels .  The United States notifies regularly to the WTO 
subsidies to businesses.  Related information may al so be found in the Catalog of Federal Assistance 
Programmes, a government-wide compendium of federal programmes, projects, services, and activities that provide assistance or benefits to th e U.S. public (and which, thus, encompasses much 
more than assistance to businesses).
194  Grants available from the Federal Government are also 
documented.195  In addition, all federal grants are published in the Federal Register  when they are 
announced.  An inventory of state incentives is available from the National Association of State Development Agencies, a private entity.
196 
218. The Federal Budget contains a list of all inco me tax expenditures, defined as revenue losses 
from tax exemptions, incentives or concessi ons that benefit individuals or businesses.197  The largest 
corporate tax expenditures by function relate to acc elerated depreciation, estimated  at US$26 billion 
in FY 2003, down from US$40.7 billio n in FY 2002.  Tax expenditur es under the title of international 
affairs include extra-territorial income exclusions (in replacement of the former exclusion of income 
of foreign sales corporations), amounting to US$5  billion;  and deferral of income from U.S.-
controlled foreign corporations, estimated at US $7.5 billion in FY 2003.  Tax credit for research 
activity constituted nearly US$6 billio n in tax expenditure in FY 2003.198 
219. The Federal Budget, as well as state budgets, al so contain cost estimates of net financial 
outlays.  The Federal Budget's historical tables s uggest an increasing trend since 1999 in non-defence 
grants other than to individuals.199  In FY 2002, these grants amounted to US$119 billion, equivalent 
to 1.1% of GDP.  They were estimated at US$133 bi llion for 2003, an increase of 11%.  Outlays have 
increased most for transportation, natural resources a nd the environment, and international affairs;  in 
contrast, outlays on agriculture have declined.200 
220. The 2002 Federal Budget had as one of its priorities the reduction of corporate subsidies, but 
no specific measures were actually proposed or take n.  In the 2003 and 2004 Budgets, a number of 
proposals were made to reduce funding to the fo llowing specific programmes described as providing 
corporate subsidies:201  the Advanced Technology Program (A TP), created in 1988 to bolster high-
technology research and development;  the Manufact uring Extension Partnership, which aimed to 
assist manufacturing companies to operate more efficiently or to adopt new technologies;  the 
Technology Opportunities Program, which provides grants to test the usefulness of telecommunications technologies;  R&D expenditure by the Office of Fossil Energy at the Department of Energy;  and federal subsidies to  U.S. shipyards and shipbuilding companies to 
encourage private financing.  According to in formation available in October 2003, financial 
obligations under the ATP ha ve dropped from US$163 million in FY 2003 to US$13.6 million in 
                                                     
 
193 Congressional Budget Office (1995). 
194 Catalog of Federal Domestic Assistance [Online].  Available at:  http://www.cfda.gov/default.htm. 
195 See online information.  Available at:  http://www.grants.gov/index.html. 
196 NASDA online information.  Ava ilable at:  http://www.nasda.com. 
197 See Budget of the United States Government , available online at:  http://w3.access.gpo.gov. 
198 The Budget for Fiscal Year 2004, An alytical Perspectives, Table 6.2. 
199 The Budget for Fiscal Year 2004 , Historical Tables, Table 6.1. 
200 The Budget for Fiscal Year 2004 , Historical Tables, Table 3.1. 
201 Fiscal Year 2003 Federal Bu dget available online at:  http ://w3.access.gpo.gov/u sbudget/fy2003/ 
budget.html. WT/TPR/S/126 Trade Policy Review 
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FY 2004;  budgeted financial oblig ations under the Technology Oppor tunities Program were reduced 
to zero for FY 2003 and FY 2004.202 
221. States offer a variety of investment incentiv es including loan guarantees, grants, and tax 
credits.  There is no federal legislation in place that would limit state aid that distorts or threatens to 
distort competition and trade between states.  Several  states allow investment tax credits, whereby a 
percentage of new investment can  be deducted from corporate income tax.  States may apply these 
credits state-wide, or limit them  to specific geographic locations (enterprise zones or industrial 
recovery sites).203  Some tax incentives are specifically target ed towards particular industrial ventures. 
(c) Trade adjustment assistance 
222. In August 2002, under the Trade Act of 2002, the Trade Adjustment  Assistance Program 
(TAA) was reauthorized until 30 September 2007, and expanded.204  The TAA consists of three sub-
programmes in favour of work ers, firms, and farmers.205  Of the US$1.3 billion available over the 
whole period for trade adjustment assistance (i ncreased from US$400 million by the Trade Act of 
2002), US$259 million will be used to provide tr aining and associated job search and relocation 
allowances to TAA eligible workers dislocated as a result of foreign trade.  The remaining funds will 
be used to provide income support to in dividuals certified under the TAA programme. 
223. The TAA programme provides retraining, allowances, job search, relocation, a health 
insurance tax credit, for workers affected by foreign trade.  Pe titions for assistance can be presented 
by groups of workers, unions, or state employment agencies.  Eligibility is conditional on a determination by the U.S. Department of Labor th at an increase in imports of a product contributed 
importantly to the workers' separation or threat of separation, and to a decline in sales or production of 
such firms, or that there has been a shift in pro duction to another country that contributed to worker 
dislocation.  The new legislation also raised the statutory cap on funds that may be allocated to the 
states for training under the T AA for workers, from U$110 million to US$220 million per year.  In 
FY 2002, 1,614 eligibility certifications were is sued covering an estimated 232,898 workers;  993 
petitions covering an estimated 96,197 workers were denied. 
224. The Department of Commerce's Economic Deve lopment Administration (EDA) administers 
the TAA programme for firms and industries.  U nder this programme, EDA funds a network of 12 
Trade Adjustment Assistance Centers (TAACs).  TAACs assist firms in completing petitions for 
certification of eligibility.  To be certified as elig ible to apply for TAA, a firm must show that 
increased imports of competing articles contributed importantly to declines in its sales or production, 
and to the separation or threat thereof of a signi ficant portion of the firm's workers.  Once EDA has 
certified a firm, the TAAC assists the firm in assessi ng its competitive situation and in developing an 
adjustment proposal.  The firm must typically pay 50 % of the cost of each consultant contract, and the 
maximum amount of technical assistance availa ble to a firm under the TAA programme is 
US$75,000.  In FY 2002, EDA certified 170 firms under the TAA programme and provided 
US$10.5 million in funding to the TAACs. 
                                                     
 
202 Catalog of Federal Domestic Assistance [online] .  Available at:  http://www.cfda.gov/default.htm. 
203 A review of the tax incentives provided by stat es is contained in New Yo rk State Department of 
Taxation and Finance (1996), p. 16. 
204 Public Law 107-210, 116 STAT. 933, available online at: http://www.tpa.gov/ pl107_210.pdf (see 
Chapter II for information on the Trade Act of 2002). 
205 Information on trade adjustment for farmers is available online at:  http ://www.doleta.gov/tradeact. United States WT/TPR/S/126 
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(iii) Government procurement 
(a) Overview 
225. In 2002 the value of U.S. government consum ption expenditure and gross investment was 
US$1.98 trillion, or some 19% of GDP, up from 17.5% of GDP in 2000.  At the federal level, defence 
consumption expenditure on goods and services to talled US$390 billion in 2002;  non-defence 
expenditure totalled US$200 billion at  the federal level and US$1.04 trillion at the state and local 
level.  Gross investment expe nditure (structures and equipmen t) totalled US$108 billion for the 
Federal Government and US$244 billi on for state and local governments.206 
226. The United States is a party to the WTO Agreem ent on Government Proc urement (GPA).  In 
January 2002, the United States submitted to th e WTO the statistical information required under 
Article XIX:5 of the Government Procurement Ag reement for the year 1999.  The submission 
reported 56,598 contracts with a value of more than US$205 billion.207 
227. The authorities noted that one important trend in  the United States procurement market is the 
substantial shift from the purchase of goods to th e purchase of services.  Supplies and equipment 
decreased from 56% of contracting dollars in 1985 to 35% in 1999, while services increased from 
23% of contracting dollars to 43% over the same time frame.  This trend is partly the result of 
outsourcing as well as a shift in the needs of the Federal Government. 
228. For more recent figures, the United States' Federal Procurement Data System publishes an 
annual report with "snapshot" statistics on th e procurement activities of over 60 agencies.208  I n  
FY 2002, the total procurement of these agencies  was US$234.9 billion, of which some 67% from the 
Department of Defense.209  In value terms, almost 23% of the contracts reported were awarded to 
small businesses;  about a third of these were to small disadvantaged businesses.210  Procurement by 
U.S. agencies outside the United States totalled US $11 billion, of which some 44% in Asia and 38% 
in Europe.  Among the 100 top federal contractors, th e vast majority are U.S. and large multinational 
companies. 
(b) Institutional and legal framework 
229. U.S. procurement legislation has been notified to the WTO.211  The GPA is implemented in 
U.S. law at the federal level primarily through the Trade Agreements Act of 1979, as amended.  There 
are also laws and regulations at the state level fo r the implementation of the GPA in each of the 37 
States listed in Annex 2 of the United States' GPA Schedule. 
230. Federal level procurement takes place through the various executive ag encies' decentralized 
procurement systems, consisting of procurement ad ministrations, offices, and councils.  The Office of 
Management and Budget (OMB) oversees and coor dinates federal procurement, as well as its 
                                                      
206 Online information available at:  http://w3.access. gpo.gov/usbudge t/fy2004/sheets/b20.xls. 
207 WTO document GPA/40/Add.4, 30 January 2002. 
208 Federal Procurement Data System, Federal Procurement Report  [online].  Available at:  
http://www.fpdc. gov/fpdc/FPR2002a.pdf. 
209 Four agencies comprise almost 85% of the total:  the Department of Defense, the Department of 
Energy, the General Services Administration, and the National Aeronautics and Space Administration. 
210 Small Disadvantaged Business Participation Program, Federal Acquisition Regulation, FAC-2001-
14 23 June 2003, Subpart 19.12. 
211 WTO document GPA/W/23, 17 July 1996. WT/TPR/S/126 Trade Policy Review 
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financial management, informa tion, and regulatory policies.212  The OMB recommends and monitors 
programmes and funding levels for programmes, in cluding procurement.  Through the Office of 
Federal Procurement Policy (OFPP), the OMB devel ops and issues procurement policy guidance, if 
necessary, and reviews proposed regulations for compliance with policy guidance.213  There are also 
two acquisition regulatory councils:  the Defense Acquisition Regulations Council and the Civilian 
Agency Acquisition Council. 
231. The Federal Acquisition Regulation (FAR), in force since 1984, regulates all federal 
executive agencies' acquisitions of supplies and se rvices with appropriated funds.  Agency-specific 
procurement regulations supplement the FAR.  The FAR system allows individual executive agencies 
and their sub-agencies to develop specific internal guid elines that they are authorized to use.  Part 25 
of the FAR covers all issues regarding Government 's foreign acquisitions, and provides policies and 
procedures for acquiring foreign supplies,  services, and construction materials. 
232. Several changes to the FAR have been introduced since mid 2001.214  Some include aspects of 
implementation of electronic procurement.215  Several of the amendments are related to the 
implementation of preferential access conditions granted to small businesses216;  some are intended to 
simplify and clarify procedures, while othe rs propose changes in the bidding process and 
thresholds.217 
233. The procurement processes is guided in detail by the FAR.  The FAR requires federal 
government agencies to publish notices of pr oposed procurement opportunities in excess of 
US$25,000 in the Federal Business Opportunities (FedBizOpps) website, which replaced the 
Commerce Business Daily (CBD);  there are certain exceptions, such as, if perishable subsistence 
supplies are being purchased or when the publication of a notice could result in serious injury to the 
Government.218  FedBizOpps is the  single government point-of-entry for federal government 
procurement opportunities over US$25,000.   FedBizOpps also lists notices of contract awards, sales 
of government property, and other proc urement information for federal agencies.219  A notice of 
proposed procurement must be published in the FedB izOpps at least 15 days before a solicitation for 
bids is issued;  from that date, prospective suppliers  must be given at least 30 days to submit bids.  
State governments that are covered by the GPA are al so required to publish invitations to tender. 
234. Lists of suppliers may be prepared by a federal government agency, provided the agency 
prepares a written justification explaining the circum stances for the need of  such a list.  These non-
exhaustive lists may include both na tional suppliers and potential foreign suppliers from countries that 
are parties to the GPA or other international agreemen ts.  Lists of qualified or registered suppliers are 
made public. A number of the 37 States covered by the GPA use lists of qualified suppliers when 
tendering for certain types of procurement. 
235. Among legislative changes with an effect on pr ocurement procedures, the E-Government Act 
of 2002 (P.L. No. 107-347) established an Office of El ectronic Government in the OMB.  This Office 
                                                      
212 Information on the OMB is available online at:   http://www.whitehouse.gov/omb/. 
213 Information on the OFPP is available at:   http://www.whitehouse.gov/omb/procurement/ index.html. 
214 Information on the FAR is available onlin e at:  http://www.arnet.gov/far/facsframe.html 
215 For example, electronic signature (FAR 2.101), late bids (FAR 14.304[b]), and garbled 
transmissions (FAR 14.406).  Federal Register Vol. 68, No. 99, 22 May 2003. 
216 Federal Register Vol. 66, No. 204; 22 October 2001. 
217 Federal Register Vol. 67, No 27; 8 February 2002;  Federal Register Vol. 67 No. 169; 
30 August 2002;  and Federal Register Vol. 67, No. 251; 31 December 2002. 
218 FedBizOpps online information.  Available at:  http://www.fedbizopps.gov/. 
219 This information is available online at:  http://cbdnet.access.gpo.gov/index.html  United States WT/TPR/S/126 
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administers a government-wide programme to enha nce access to, and delivery of, government 
information and services and to impr ove government procurement operations .  The Act requires the 
maintenance of a publicly accessible government website and the acceptance of procurement 
submissions by electronic means.  The E-Government Act of 2002 has resulted in a number of 
initiatives, including the Integrated Acquisition En vironment (IAE), aimed at creating a single web-
based portal for government acquisitions and e xpected to be in operation in October 2003.220 
236. The General Services Administration (GSA) ha s launched two programmes to increase the 
efficiency of the government procurement pr ocess:  the GSA Global Supply (GGS), and GSA 
Advantage.  The GSA Global Supply provides a selec tion of supplies that comply with government 
acquisition policies and so cio economic regulations.221  The new GSA Advantage is an electronic 
online shopping and ordering syst em, that provides online access to authorized contractors.222 
237. Prospective contractors are required to register  on-line in the Central Contracting Registration 
(CCR).223  There are currently 5,298 foreign firms registered in the CCR (October 2003).  PRO-Net is 
a U.S. national directory of small businesses, a ccessible through the Internet.  PRO-Net offers a 
search tool for contracting officers and a link to  government procurement opportunities.  There are 
197,040 small businesses listed in PRO-Net. 
238. At the sub-federal level, procurement is govern ed by state or other sub-federal government 
laws and procurement regulations.  In some cases, where procurement is funded with federal money, 
states must comply with certain federal statutor y requirements.  Local governments have their own 
procurement agencies and thresholds, as well as thei r own procurement policies.  In some states, 
preferences are granted to local suppliers, and lo cal-content requirements are applied under certain 
conditions (Table AIII.2).  Recipro cal preferences among states are used. 
(c) Access conditions 
239. The policy of the United States with respect to  government procurement market access is to 
grant national treatment to any country willing to grant reciprocal treatment.  The United States 
maintains a number of "Buy American" restricti ons 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. 
240. Thresholds for procurement contracts have remained unchanged in SDR since the GPA 
entered into effect on 1 January 1996.  Thresholds in U.S. dollars are, however, revised periodically 
(generally every two years) by the USTR.224 
241. Acquisitions of supplies subject to the NAFTA  have a threshold values of:  US$25,000 for 
Canadian supplies;  US$56,190 for Mexican supp lies;  US$56,190 for services;  and US$7,304,733 
                                                      
220 See online information.  Available at:  http ://www.cio.gov/documents/ac quistion_white_paperv2. 
pdf. 
221 See online information.  Available at:  https://www.gsaglobalsupply.gsa.gov/advgsa/main_pages/ 
start_page.jsp?store=FSS. 
222 See online information.  Available at:  https://www.gsaadvantage.gov/advgsa/main_pages/start_ 
page.jsp. 
223 See online information.  Available at:  http ://www.ccr.gov and http://www .acqnet.gov/far/FAC/ 
fac01016.pdf. 
224 For the period 2002-03, the thresholds notified to the WTO were US$169,000 for supplies and 
services at the federal level;  US$460,000 for state supplies and services;  and US$250,000 and US$518,000 for  
government enterprises' supplies and services;  and US$6,481,000 for construction.  WTO document GPA/W/168/Add.6, 5 August 2002. WT/TPR/S/126 Trade Policy Review 
Page 86 
 
 
for construction services.  NAFTA does not include sub-central coverage.  The Israeli Trade Act 
applies to acquisitions of supplies from Israel w ith a value between US$50,000 and the threshold set 
by the GPA.  The thresholds under the free-trade agreements with Chile and Singapore are US$56,190 
for goods and services and US$6,481,000 for constructi on services, to be adjusted through a formula.  
Chile's procurement suppliers were  granted national treatment for procurement of 79 entities at the 
federal level, 37 states, and 10 other  U.S. government entities.225 
242. The Buy American Act of 1933 restricts the pur chase of supplies and construction materials 
by government agencies to those defined as "domes tic end-products", in accordance with a two-part 
test that must establish that the article is manufact ured in the United States, and that the cost of 
domestic components exceeds 50% of the cost of all the components.  The Act does not apply to 
services.  Exceptions to the Buy American Act can be granted if it is determined that domestic 
preference is inconsistent with the public inter est, in case of U.S. non-availability of a supply or 
material, or for reasonableness of cost.  The cost of the domestic offer is considered unreasonable if the cost of the foreign (non-eligible) product, in clusive of import duty and a 6% added margin, is 
below the lowest domestic offer when this offe r is from a large business concern.  If the lowest 
domestic offer is from a small business concern, the added margin considered is 12%.  For purchases 
by the Defense Department the price difference mu st be of at least 50%.  National preferences for 
defence are also allowed under the Department of Defense Appropriations Act of 1992.  Some states 
also apply Buy American or Buy State preferences. 
243. The Balance of Payments Program, a non-statut ory programme, applies provisions similar to 
those of the Buy American Act to contracts fo r the purchase of supplies for use by government 
agencies or bodies outside the United States and contract s for construction, altera tion, or repair of any 
public building or public work outside the United States.   Since the last Review of the United States, 
in 2001, the Balance-of-Payments Program has been eliminated for civilian agency acquisitions.  It 
applies only to purchases by the Department of Defense
 of end-products for use outside the United 
States over US$100,000.226 
244. The Trade Agreements Act of 1979 waives the a pplication of the Buy American Act to the 
end-products, including construction materials, of d esignated or eligible countries, which include the 
parties to the GPA, NAFTA and other bilatera l procurement agreements, and least-developed 
countries.227  End-products granted duty-free entry under the CBERA (except from Panama)  are also 
treated as eligible products.228  For designated countries, other than Canada, Israel, Chile, and 
Singapore, and for CBERA countries, the thresholds are those of the GPA.  For NAFTA countries, 
Israel, Chile, and Singapore, the thresholds are those stipulated in each agreement.  Eligible products 
are granted non-discriminatory treatment.  The provisions of the Buy American Act are also waived for civil aircraft and related articles that meet the substantial transformation test of the Act and 
originate in countries that are parties to th e WTO Agreement on Trade in Civil Aircraft. 
                                                     
 
225 Information available at:  http://www.ustr.gov/n ew/fta/Chile/final/09.procurement.PDF;  and 
http://www.ustr.gov/new/fta/Singapore/final/text%20final.PDF. 
226 Federal Register Vol. 67, No. 83;  30 April 2002. FAC 01-07 [online]. Available at:  
http://www.acqnet.gov/fa r/FAC/fac2001-07.pdf 
227 Apart from GPA parties, the following are designated countries:  Bangladesh, Benin, Bhutan, 
Botswana, Burkina Faso, Burundi, Cape Verde, Central African Republic, Chad, Comoros, Djibouti, Equatorial 
Guinea, Gambia, Guinea, Guinea-Bissau, Haiti, Kiri bati, Lesotho, Malawi, Maldives, Mali, Mozambique, 
Nepal, Niger, Rwanda, Sao Tome and Principe, Sierra  Leone, Somalia, Tanzania, Togo, Tuvalu; Uganda, 
Vanuatu, Western Samoa, and Yemen. 
228 The suspension of the eligibility of products from Honduras was reinstated in November 2002.  
FAC 2001-10; 22 November 2002.  Online information available at:  http://www.acqnet.gov/far/FAC/fac2001-10.pdf. United States WT/TPR/S/126 
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245. For purchases from the Department of Defense,  the restrictions of the Buy American 
Act/Balance of Payments Program have been wa ived for the acquisition of defence equipment 
produced in any "qualifying country" (countries with which there is a reciprocal procurement agreement or Memorandum  of Understanding).
229  This does not limit, however, the authority of the 
Secretary of Defense to restrict acquisitions to domestic sources or reject an otherwise acceptable 
offer from a qualifying country source in instan ces considered necessary for national defence 
reasons.230 
246. In certain cases imported supplies for use in government contracts may be exempted from 
customs duties.  These goods are listed in sub-chapte rs VIII and X of Chapter 98 of the U.S. tariff 
schedule.  Other supplies may also be granted duty-free entry;  in this case, the contract price must be 
reduced by the amount of duty that would be payable if the supplies did not enter duty free.  Supplies (excluding equipment) for government-operated v essels or aircraft may be imported duty free.
231 
247. Procurement policy also seeks to increase the participation of small businesses, veteran-
owned small businesses, small disadvantaged busin ess (SDBs), and women-owned small businesses.  
The Small Business Act (P.L. 85-536), as amended, requires that each contract with an anticipated 
value greater than US$2,500 but less than US$100,000 be reserved exclusively for small business 
concerns unless the contracting officer is unable to obtain offers from two or more small businesses that are competitive with market prices and with the quality of the goods or services to be purchased.  
Agencies are allowed to establish business set-asides fo r procurements of architectural and engineer 
services, R&D, and test and evaluation. 
248. The Small Business Administration (SBA) manages a number of programmes intended to 
promote the ability of small business to compete for federal contracts.  To implement and monitor  the 
programmes, the SBA negotiates goals with each federal agency.  The SBA encourages small enterprises to register online in the Central Contracting Registration (CCR).
232  The SBA also offers a 
new website called "SUB-Net" where prime c ontractors post subcontracting opportunities. 
249. As a part of the promotion of small business pa rticipation in procurement, a number of set-
asides and pricing preferences are in place, including the Very Small Business Program, expected to 
terminate on 30 September 2003, which grants preferen ces to very small suppliers  in acquisitions with 
an estimated value exceeding US$2,500 but not greater  than US$50,000, when the contracting office 
is located or the contract performed within a designated SBA district.  The HUBZone Empowerment 
Contracting Program provides for federal contracts preferences, including set-asides, sole source 
awards, and price evaluations in unrestricted procurements for qualified small businesses located in 
historically underutilized business zones in an e ffort to increase employment opportunities, 
investment, and economic development in those areas.  Agencies must consider HUBZone small 
business concerns before any other suppliers, betw een certain thresholds.  For acquisitions beyond 
thresholds and open to competition, price preferences may be granted, calculated by adding a factor of 
10% to all offers.  The Small Business Compe titiveness Demonstration Program, established by the 
Small Business Competitiveness Demonstration Program  Act of 1988 (P.L. 100- 656), consists of two 
major components:  unrestricted competition in four designated industry groups, in which small 
                                                      
229 Australia, Belgium, Canada, Denmark, Egypt, Fr ance, Germany, Greece, Israel, Italy, Luxembourg, 
the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, and the United Kingdom.  Products 
from Austria and Finland may, on a purchase-by-purchase basis, be also exempted. 
230 FAR, Subp. 225-872.  Available online at:  http://www.acq.osd.mil/dp/dars/dfars/html/r20020531/ 
225_8.htm#225.872-1. 
231 FAR Subpart 25.9.  Available online at:  http ://www.arnet.gov/far/curre nt/pdf/FAR.book.pdf. 
232 Available online at:  http://www.ccr.gov. WT/TPR/S/126 Trade Policy Review 
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business set asides are not applied;  and enhanced small business participation in ten agency-targeted 
industry categories.233 
250. The SBA administers two business assistance programmes for small disadvantaged 
businesses (SDBs):  the 8(a) Business Development Pr ogram;  and the Small Disadvantaged Business 
Certification Program.  The 8(a) Program offers a broad scope of assistance to socially and 
economically disadvantaged firms.  The 8a Progr am helps federal agencies achieve a government-
wide goal of 5% SDB participation in prime contract ing by authorizing either sole-source contracts to 
8(a) firms or restrictively competed contracts among 8(a) firms.234  The primary benefit of SDB 
certification is to provide evaluation credits for prime contractors that achieve SDB subcontracting 
targets.  To be certified by the SBA as an SDB, a small business must be at least 51% owned and 
controlled by an individual determined as socially  and economically disadvantaged.  States also 
conduct their own set-aside programmes (Table AIII.2). 
251. The Department of Commerce determines  annually by North American Industry 
Classification System (NAICS) Industry Subsector and Region, if any, the authorized small disadvantaged business (SDB) procurement mechanisms  and application factors (percentages).  The 
Department of Commerce determination must incl ude the applicable factors, by NAICS Industry 
Subsector, to be used in the price ev aluation adjustment for SDB concerns.
235 
252. In FY 2001, the value of contracts awarded th rough preferential or set-aside programmes was 
8.1% of total federal pr ime procurement awards.236  Prime contracts awarded to all small businesses 
reached 22.8% of the total, slightly below the 23% goal. 
253. Under the Surety Bond Guarantee Program, the SB A is authorized to issue bond guarantees to 
surety companies for construction, service, and s upply contracts that do not exceed US$2 million, and 
to reimburse these sureties up to 90% of the losses sust ained if the contractor defaults.  The bonds are 
delivered through surety and insurance companies.  Both the surety company and the contractor pay a 
fee for an SBA surety bond guarantee.  The number of bonds issued to contractors was 7,372 in FY 2002;  resources in the Surety Bond Guarantee Fund were US$4.2 billion. 
(d) Enforcement and monitoring 
254. The "Title VII" process, initially established under Title VII of the Omnibus Trade and 
Competitiveness Act of 1988, as amended, provided a vehicle for identifying discriminatory foreign government procurement practices and for monito ring and enforcing existing international 
agreements.  After the Title VII legislation expi red in 1996, the process was re-instituted by Executive 
Order 13116 in March 1999 for three years, 1999-01.
237  These reports were discontinued in 2001. 
                                                      
233 Federal Acquisition Regulations, Sub-Part 19.10.  For the four designated industry groups for which 
there is unrestricted competition, solicitations must be set aside for emerging small businesses if contracts are 
below the reserve amount of US$25,000 for construction, refuse systems and related services, and non-nuclear 
ship repair, and US$50,000 for architectural and engin eering services.  Information available online at:  
http://www.arnet.gov/far/ loadmainre.html. 
234 Federal Acquisition Regulations, Sub-Part 19.8.  Available online at:  http://www.arnet.gov/far/ 
participation loadmainre.html. 
235 Federal Acquisition Regulations, Sub-Part 19.201 . Available online at:  http://www.arnet.gov/far/ 
loadmainre.html. 
236 Small Business Administration (2003), pp. 81-84;  the figures for FY 2002 were not available at the 
time the report was issued. 
237 Online information available at:  http ://www.ustr.gov/enforce ment/report.pdf. United States WT/TPR/S/126 
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255. Under Section 305(g) (1) of the Trade Agreem ents Act of 1979, the United States has applied 
sanctions, since May 1993, to certain Member Stat es of the EU considered to discriminate against 
U.S. products and services in their government pr ocurement practices.  The sanctions apply to end-
products and construction material s not covered by the GPA, to all service contracts below GPA 
thresholds, and to a range of service contracts of  any value.  The scope of the sanctions excludes 
Department of Defense contracts or contracts awarded and performed outside the United States. 
(iv) State trading 
256. The following 13 entities were included in the first U.S. notification of state-trading 
enterprises to the WTO Working Party on State Tr ading Enterprises, in 1995:  the Commodity Credit 
Corporation;  the Federal Helium Program, the Is otope Production and Distribution Program;  the 
United States Enrichment Corporation;  the Naval Petroleum and Oil Shale Reserves;  the Strategic Petroleum Reserves; the National Stockpile of Stra tegic and Critical Materials;  the Tennessee Valley 
Authority;  and the Alaska, Bonneville, South eastern, Southwestern, and Western Area Power 
Marketing Administrations.
238  The 1996 notification contained updated information regarding the 
Commodity Credit Corporation (CCC).239  According to this notification, the CCC was created to 
stabilize, support, and protect farm income and prices, and is authorized to promote the export of U.S. 
agricultural commodities and products through sales, payments to exporters, direct credits, and the 
conduct of other activities related to  the exportation of commodities (s ee Chapter IV(2) for details).  
There has been no notification of state trading activities since 1997.240 
257. According to information provided by the authorities in the context of this Review, the 
Isotope Production and Distributi on Program produces and sells radioactive and stable isotopes, by-
products, surplus materials, and related isotope services. 
258. The Bonneville Power Administration, Southeastern Power Administration, Southwestern 
Power Administration, and Western Area Power Ad ministration each market wholesale electricity 
generated at publicly owned and managed hydroelectric dams.  Th e Southeastern and Southwestern 
Power Administrations engage onl y in domestic purchases for resale or consumption and sales to 
domestic preference customers (i.e., utilities, coope ratives, and large industrial users within their 
respective regions) and to other customers within  and outside of their respective regions.  The 
Bonneville Power Administration and the Western Area Power Administration engage in such domestic transactions as well as international purchases and sales of electric power.  Bonneville also 
sells transmission services to U.S. and foreign-owned en tities.  The Secretary of Energy is directed by 
the Flood Control Act of 1944 to "transmit and dispo se" of power and energy from the Army Corps of 
Engineers projects "in such manner as to encourage the most widespread use thereof at the lowest 
possible rates to consumers consistent with sound business principles."  The Act states that 
"[p]reference in the sale of such power and energy shall be given to public bodies and cooperatives."  
Additional specific legal provisions apply to preference and non-preference sales by Bonneville. 
259. The Strategic Petroleum Reserve is a crude o il stockpile, managed by the Department of 
Energy to supplement U.S. oil supplies.  The pr imary purpose of the SPR is to replace crude oil 
imports in the event of an "energy emergency," as defined in the Energy Policy and Conservation Act 
(EPCA).  If the President declares an energy em ergency and orders a "drawdown", oil from the 
Strategic Petroleum Reserve would be distribut ed in the United States by competitive sale. 
                                                     
 
238 WTO document G/STR/N/1/USA, 29 September 1995. 
239 WTO document G/STR/N/2/USA, 18 July 1996. 
240 WTO document G/STR/N/3/USA, 12 August 1997. WT/TPR/S/126 Trade Policy Review 
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260. The Naval Petroleum and Oil Shale Reserves (NPOSR) extracts crude oil and petroleum 
gases and other hydrocarbons from government-owned oil fields and sells it on the open market.  The 
primary purpose of the NPOSR is to provide crude  oil and petroleum produc ts for national defence 
purposes. 
261. No information was available regarding the ac tivities of the Tennessee Valley Authority, the 
Federal Helium Program;  and th e National Stockpile of Strategic and Critical Materials.  The 
United States Enrichment Corporation was priv atized in 1998 under Public Law 104-134. 
(v) Intellectual property rights 
(a) Overview 
262. The United States notified to the WTO its laws  and regulations on trade-related aspects of 
intellectual property rights in 1996.241  These notifications were supplemented in 1998242  T h e  
United States is a member of the World Intellect ual Property Organization (WIPO), and participates, 
inter alia,  in the Paris Convention for the Protection of  Industrial Property, and the Berne Convention 
for the Protection of Literary and Artistic Works.  It is also a party to the Patent Cooperation Treaty 
(PCT);  the Trademark Law Treaty (TLT);  the Protocol to the Madrid Agreement Concerning the 
International Registration of Marks (Madrid Protocol);  and the WIPO Copyright Treaty and 
Performances and Phonograms Treaty.  The United States is a member of the Convention for the 
Protection of Producers of Phonograms Against Unauthorized Duplication of Their Phonograms (Geneva Convention), but is not a member of th e International Convention for the Protection of 
Performers, Producers of Phonograms and Broa dcasting Organizations (Rome Convention). 
263. The United States traditionally post a considerable  balance-of-payments su rplus in intellectual 
property-related trade, as measured by royalties and licence fees .  Net receipts in 2002 were 
US$23.1 billion, up from US$22.3 billion in 2001:  receipts totalled US$43 billion, and payments were US$20 billion  (Table III.12). 
264. The United States considers that public policy ai med at protecting intellectual property rights 
(IPRs) helps to foster a competitive marketplace  The United States uses both civil and criminal 
means to enforce IPRs and seeks enforcement by  its trading partners through its Special 301 
investigations, as well as regional and multilateral tr ade initiatives.  Multilatera lly, the United States 
considers its participation in institutions such  as the WTO and the World Intellectual Property 
Organization (WIPO) as an important tool to promote the effective protection of IPRs and ensure that 
measures and procedures to enforce such rights do not themselves become barriers to trade. 
265. Under U.S. law, parallel impor ts of goods containing protected intellectual property may be 
restricted by the holder of the right.  In certain  instances, parallel imports of goods bearing trade 
marks or trade names may be stopped at the border by Customs.  An exception to parallel import protection exists in the case of trade marks for sa me or similar goods, manufactured abroad, where the 
U.S. holder of the right owns the mark abroad or  the U.S. and foreign right holder are under common 
ownership or control. 
                                                     
 
241 WTO document IP/N/1/USA/1, 21 January 1997. 
242 WTO document IP/N/1/USA/U/2, 6 October 1998. United States WT/TPR/S/126 
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Table III.12 
Royalties and licence fees, 1995-02 
(US$ million) 
 1995 1996 1997 1998 1999 2000 2001 2002a
Receipts 
Total 30,289  32,470  33,228  35,626  36,902  39,607  38,668 42,959 
Affiliated 22,859 24,556 24,465 26,313 26, 507 26,816 25,874 29,397 
Unaffiliated 7,430 7,915 8, 763 9,314 10,395 12, 791 12,795 13,562 
Payments  
Total  6,920 7,837 9,161 11,235 12,609 16,115 16,359 19,899 
Affiliated 5,257 5,406 6,749 8,547 9,876 12,180 13,008 15,404 
Unaffiliated 1,663 2,431 2,412 2,688 2,733 3,935 3,351 4,495 
Net 
payments  23,369 24,634 24,067 24,392 24,293 23,492 22,310 23,060 
a Preliminary (May 2003). 
Source : U.S. Department of Co mmerce, Bureau of Economic Analys is,  International Accounts Data.  U.S. International 
Services;  Cross-Border Trade & Sales Through Affiliates, 1986-2001  (Table4-16.02: Royalties and license fees, 
1986-2001). 
266. The United States has signed a relatively large number of bilateral intellectual property 
agreements.  In general terms, these agreements are based, as a minimum, on the WTO TRIPS 
Agreement and may not provide transition periods .  On 2 August 2003, the United States deposited 
with WIPO its instrument of accession for the Madrid Protocol, which had effect in the United States from 2 November 2003.  Further, IPR protection i ssues were included in the FTAs signed with Chile 
and Singapore, in Chapter 17 and Chapter 16, respectively.
243 
267. In the context of negotiations under the TRIPS Ag reement to complete the work started in the 
Council for TRIPS on the implementation of Article 23.4, the United States, together with other 
countries submitted a proposal for a multilateral system for notification and registration of geographical indications for wines and spirits.
244 
(b) Patents 
268. In FY 2002, 353,394 patent applica tions were filed, and 177,317 patents were granted;  the 
average pendency period for patent applications with the USPTO was 24 months (Table III.13).  The 
number of patent applications received by the USPTO in FY 2002 was 2.5% higher than in the 
previous FY and some 55% higher than in FY 1995.  More patent applications  were submitted in FY 
2002 than in any previous year despite the downtur n in the economy;  however, the number of patents 
granted was lower than in the previous FY, but some 55% higher than in FY 1995. 
269. The share of patents issued by the USPTO to  non-residents has been increasing in recent 
years.  In FY 2001, U.S.-resident inventors accounted  for 53.6% of all patents that were issued, down 
from the 55.1% in FY 2000.  Non-residents (mostly corporations) were granted 46.4% of the patents, 
with Japan (19.0% of total patents issued) and Germany (6.5%) on top .  Among the top ten countries, 
residents of Chinese Taipei, Sweden, and Germany have displayed substantial increases in recent 
years (Table III.14).  The top ten private sector patent recipients in calendar year 2002 were U.S. four 
and Japanese six corporations.245 
                                                      
243 Online information available a t:  http://www.ustr.gov/new/fta/. 
244 WTO document IP/C/W/386, 8 November 2002. 
245 The ten corporations were:  International Business Machines Corporation (IBM) with 3,288 patents 
granted;  Canon Kabushiki Kaisha, (1,893);  Micron Technology, Inc. (1,833);  NEC Corporation (1,821);  WT/TPR/S/126 Trade Policy Review 
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Table III.13 
Summary of patent examining activities, FY 1995- 02 (as of 30 September of each fiscal year) 
Patent examining activity 1995 1996 1997 1998 1999 2000 2001 2002 
Total applications fileda 228,238 211,013 232,424 256,666 278,268 311,807 344,717 353,394 
Utilityb 212,377 195,187 215,257 238,850 259,618 291,653 324,211 331,580 
Plant 452 665 621 658 759 786 914 1,134 
Design 15,409 15,161 16,546 16,576 17,227 18,563 18,636 19,706 
Foreign share of total 
applications  41.6 45.2 44.0 44.3 44.5 44.3 .. .. 
Patents granted 114,241 116,875 122,977 154,579 159,166 182,223 187,822 177,317 
Utility 101,895 104,900 111,979 139,298 142,856 164,490 169,576 160,843 
Re-issue 294 191 267 284 393 561 504 466 
Plant 390 338 400 577 437 453 563 912 
Design 11,662 11,346 10,331 14,420 15,480 16,719 17,179 15,096 
Foreign share of total patents 
granted 43 43 44 44 44 45 46 .. 
Average pendency timec 19.2 20.8 22.2 23.8 25.0 25.0 24.7 24.0 
U.S. resident inventors share of 
all the patents issued 56.6 57 56.3 55.6 55.6 55.1 53.6 .. 
.. Not available. 
a Excludes reissues. 
b Utility patents include chemical, electrical and mechanical applications. c Average time (in months) between filing and issuance or aba ndonment of utility, plant, and re-issue applications, but excludi ng 
design patents. 
Source : United States Patent and Trademark Office. 
Table III.14  
U.S. patent applications by no n-U.S. residents, and patents issu ed, ten main countries, FY 1999-02 
 1999 2000 2001 2002 
Country  (1) (2) (1) (2) (1) (2) (1) (2) 
Japan 47,413 32,514 54,365 32,923 62,676 34,890 57,214 .. 
Germany 17,446 9,895 17,858 10,822 19,776 11,894 18,424 .. 
Chinese Taipei 11,392 4,526 10,308 5,806  12,403 6,545 12,806 .. 
United 
Kingdom 7,128 3,900 7,613 4,090 8,464 4,356 7,678 .. 
Canada 7,006 3,678 7,146 3,925 7,802 4,063 7,379 .. 
France 6,398 4,097 6,859 4,173 7,154 4,456 6,414 .. 
Korea 5,634 3,679 5,882 3,472 6,792 3,763 7,210 .. 
Italy 2,835 1,686 3,031 1,967 3,185 1,978 2,952 .. 
Sweden 2,770 1,542 2,840 1,738 3,001 1,935 2,231 .. 
Switzerland 2,245 1,390 2,318 1,458 2,494 1,557 2,253 .. 
Netherlands 2,158 1,396 2,446 1,410 2,822 1,494 2,637 .. 
Total foreign 
origin  125,423 75,056 136,102 79,070 154,205 85,388 156,824 .. 
.. Not available. 
Note: (1) = Number of patent applicati ons;  (2) = Number of patents granted. 
Source : United States Patents and Trademark Office.  General Statistical Reports ;  TAF Special Report All Patents All  
 Types (April 2002) ;  and Performance and Accountability  Report:  Fiscal Year 2002 . 
270. Patent law in the United States is codified in Title 35 of the U.S. Code (35 U.S.C.), as 
amended.  Inventions considered patentable s ubject-matter are those corresponding to one of the 
statutory categories of 35 U.S.C. 101.  Patents are granted by the United States Patent and Trademark 
Office (USPTO) using a first-to-invent rule;  the Un ited States is the only WTO Member to use this 
                                                                                                                                                                     
Hitachi, Ltd. (1,602);  Matsushita Electric Industrial Co., Ltd. (1,544);  Sony Corporation (1,434);  General 
Electric Company (1,416);  Hewlett- Packard Company (1,385);  and Mitsubishi Denki Kabushiki Kaisha 
(1,184).  Information available online at:  http://www.u spto.gov/web/offcies/co m/speeches/03-01.htm. United States WT/TPR/S/126 
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rule.  Patents of invention (utility patents) have a te rm of protection of 20 years from the date the first 
U.S. non-provisional patent applicatio n was filed.  For patent applica tions filed before and patents in 
force on 8 June 1995, the term of protection is 20 years from the filing date, or 17 years from the date of grant, whichever is longer.  The term of pate nt protection may be extended to fully compensate 
applicants for any amount of USPTO-caused delays ;  the period of extension is determined by 
formula.  Design patents have a term of protection of 14 years from the date of grant.  Patents are 
valid from the day of issuance.  With some exceptio ns, applications are published after a period of 18 
months from the earliest filing date.  The United States participates in WIPO's Patent Cooperation 
Treaty (PCT). 
271. Patent applications filed in a foreign country that is a WTO Member or a signatory to the 
Paris Convention are granted a priority period of up to 12-months counted from the date of 
application to the USPTO .  For international applications from participants of the PCT, the priority 
period is 30 months.  Internationa l applications under the PCT may be  submitted by U.S. nationals to 
the USPTO or to the WIPO's International Bureau, if  the national security provisions pertaining to the 
patent allow a filing abroad.  All applicants mu st be inventors.  The USPTO has been actively 
participating with agencies from other countries in the Committee on Reform of the PCT, in the 
preparation of a new blueprint for enhancing th e quality of searches and examination for patent 
applications filed under the PCT.  The USPTO  supports patent law harmonization and the 
convergence of national and international practices.
246  The USPTO's view is that the PCT process 
helps to promote U.S. commerce globally.247  In FY 2002, some 42,000 (out of 114,000 world-wide) 
international patent applications were file d in the United States using the PCT process. 
272. The Patent and Trademark Office Authorization Act of 2002 (Title III, Subtitle A of P.L. 107-
273)248, enacted in November 2002, introduced chan ges and technical corrections to the American  
Inventors Protection Act of 1999 (AIPA), which, among other things, had introduced  compensation 
for delays in processing patent applications, guaranteed a minimum 17-year patent term, and 
enhanced third-party participation for the re-examination of patents.249  The 2002 Act introduced a 
number of administrative requirements and guidelines, as well as amendments to federal patent law.  
For example, it amended federal patent law to provide that third-party requesters may invoke 
inter partes  re-examination of a patent in light of new ev idence (prior art) affecting its patentability.  
The Act makes this retroactive to the enactment of the Intellectual Property and Communications 
Omnibus Reform Act of 1999.  The Act also amended 35 U.S.C. by adding the provision that the 
existence of a substantial new question of patentability  is not precluded by the fact that a patent was 
considered by the USPTO. 
273. The Intellectual Property and High Technology T echnical Amendments Act of 2002 (Title III, 
Subtitle B of P.L. 107-273) amended the AIPA by el iminating the limitations to recourse to civil 
action, allowing, in re-examination proceedings, a thir d-party to appeal to the U.S. Court of Appeals 
for the Federal Circuit, or to be a party to any a ppeal undertaken by the patent owner.  The Act also 
introduced provisions to allow a third-party requester  to appeal a decision of the Board of Patent 
Appeals and Interferences.  The Act amended the AIPA to make the 18-month publication period by 
the USPTO, granted to patent app lications published abroad, applicable to the international phase of 
an international application, a nd not just to the national phase. 
                                                      
246 U.S. Patent and Trademark Office (2003). 
247 U.S. Patent and Trademark Office online inform ation.  Available at:  http://www.uspto.gov/ 
web/offices/com/speeches/03-14.htm. 
248 P.L. 107-273, 116 Stat. 1758, 1899-1906 (2002), also known as the 21st Century Department of 
Justice Appropriations Authorization Ac t, Title III:  Intellectual Property – Subtitle A:  Patent and Trademark 
Office Authorization - Patent and Tradem ark Office Authorization Act of 2002. 
249 P.L. 106-113, 113 Stat. 1501, 1501A-552 (1999) available online at:  http://www.thomas.gov. WT/TPR/S/126 Trade Policy Review 
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274. The USPTO devised the 21st Century Strategic Plan, in 2002, a five-year plan to enhance the 
electronic processing of patent applications and stre amline the patent application process, reducing the 
pendency time of applications.  The USPTO issued rules of practice in June 2003 to implement the plan as of 30 July 2003 and to ha ve an operational system to process patent applications electronically 
in place by 1 October 2004.  The public will be able to view the patent records electronically through 
the Patent Application Information Retrieval (PAIR) system.  The plan was accompanied by fee changes, establishing a single patent filing, search, and examination fee. 
275. The USPTO is leading the negotiations for th e United States in the Standing Committee on 
the Law of Patents (SCP), an international effort to harmonize patent laws a nd the subsequent changes 
to United States law and practice.
250  Some of the issues under discussion could lead to a revision of 
U.S. legislation in areas such as priority of inventio n, patentable subject matter, the "useful arts" test, 
disclosure requirements, multiple inventions in a single application, utility requirements for 
patentability, and the treatment of disclosures that may invalidate a patent claim. 
276. For Federal Government-owned inven tions, under the Technology Transfer 
Commercialization Act of 2000 (P.L. No: 106-404), a federal agency may grant an exclusive or 
partially exclusive licence if it is a necessary incentiv e to attract the investment needed to bring the 
invention to practical application, or promote the invention's utilization by the public.  The granting of 
the licence must be found to be in the public inter est and must not substantially lessen competition or 
violate federal antitrust laws.  Also, a federal ag ency may normally grant a licence only to a licensee 
who agrees that any products embodying the invention or produced through the use of the invention 
will be manufactured substantially in the United St ates, as these inventions were federally-funded by 
the U.S. Government. 
277. The U.S. Government can allow use of the subject  matter of a patent without the authorization 
of the rightholder; it has specific statutory authority in some cases, such as the Atomic Energy Act 
and the Clean Air Act.  These provisions have not been used for over 20 years. 
278. Under the Doha Declaration on the TRIPS Agre ement and Public Health, in November 2001, 
Ministers from WTO Members recognized the gravity of the public health problems afflicting many 
developing and least developed countries, especi ally those resulting from HIV/AIDS, tuberculosis, 
malaria, and other epidemics.  The Declaration, inter alia , contains clarifications of some of the 
flexibilities contained in the TRIPS Agreement, while maintaining Members' commitments in the Agreement.  Under paragraph 6 of the Declarati on, Ministers recognized that WTO Members with 
insufficient or no manufacturing capacities in the pharmaceutical sector could face difficulties in 
making effective use of compulsory licensing under the Agreement, and instructed the TRIPS Council 
to find an expeditious solution to this problem and report before the end of 2002.
251  
279. In January 2003, the United States notified a mo ratorium on recourse to dispute settlement to 
address the needs of developing and least developed country Members with no or insufficient 
manufacturing capacities in the pharmaceutical sector.252  In August 2003, the United States joined 
other WTO Members in a decision on the implementa tion of paragraph 6 of the Declaration, which 
makes it easier for poor countries to import cheaper generic drugs, made under compulsory licensing, if they are unable to manufacture the medicines th emselves.  In the context of the adoption of the 
Decision, the Chairman of the General Council stated  that there was a shared understanding that the 
decision will be used in good faith  to address public health problems, and not for industrial and 
                                                     
 
250 Information is available online at:  http://w ww.uspto.gov/web/offices/c om/strat21/stratplan_ 
03feb2003.pdf. 
251 WTO document WT/MIN(01)/DEC/2, 20 November 2001. 
252 WTO document IP/C/W/396, 14 January 2003. United States WT/TPR/S/126 
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commercial policy objectives, and that it is important  to ensure that the medicines supplied under the 
decision are not diverted from the ma rkets for which they are intended.253 
(c) Trade marks 
280. In FY 2002, the USPTO granted a record num ber of trade mark registrations (164,457, 
Table III.15).  During FY 2002 the number of app lications filed with the USPTO declined 
substantially (207,827 trade mark applications file d, versus 232,939 filed in FY 2001), with a 
concurrent decline in the number of first-actions  issued.  Average total pendency time increased from 
16.4 months in FY 2001 to 18.3 months in FY 2002  due to a significant (approximately one third) 
reduction in trade mark examination personnel during FY 2002. 
Table III.15 
Summary of trade mark examining activities, 1997-02 
 1997 1998 1999 2000 2001 2002 
Applications for registration       
Applications fileda 188,080 193,034 240,308 296,490 232,939 207,827 
App. including additional classes 224, 355 232,384 295,165 375,428 296,388 258,873 
Disposal of trade mark applications       
Registrations 112,509 106,279 104,324 127,794 124,502 164,457 
Abandonments 64,409 71,838 77,184 101,099 142,973 120,102 
Trade mark first actions  226,651 238,191 338,937 352,325 464,618 253,187 
App. approved for publication 149,72 1 145,209 181,366 203,251 235,419 217,487 
Certificates of registration issued 97,294 89,634 87,774 106,383 102,314 133,225 
Total active certificates of registrationb 839,071 901,805 931,273 1,020,126 1,063,164 1,116,200 
Renewal of registration       
Applications filed 6,720 7,413 7,944 24,435 24,174 34,325 
Registrations renewed 7,389 6,504 6,280 8,821 31,477 29,957 
Notices of Allowance (NOAs) issued 80,693 78,072 82,940 120,177 120,166 158,868 
Average pendency timec (months) 16.3 17.8 18.9 16.0 16.4 18.3 
a Refers to individual trade mark applications submitted to the PTO. 
b Refers to applications for all the 47 cla sses of trade marks.  Applications can be submitted to several classes at the same t ime. 
c Between filing and issuing a NOA. 
Source : United States Patent and Trademark Office. 
281. Trade mark rights in the United States are protected by federal and state laws.  With limited 
exceptions, protection arises from the actual use of the mark.  Federal registration is not required to 
establish rights to a mark, or to use it, but grants the holder additional rights in the mark, such as the 
legal presumption of ownership and the entitlement to  use the mark in connection with the goods or 
services identified in the registration. 
282. The federal registration of marks, which include  trade marks, service marks, collective marks, 
and certification marks (trade marks), is governed by  the Trademark Act of 1946, as amended, and its 
implementing regulations.  Applicati ons for federal trade mark registration are filed with the USPTO.  
Federal trademark registrations have  an initial term of ten years, renewable indefinitely for ten-year 
periods, as long as statutory and regulatory requirements are met.  It is not required that a trade mark 
be used commercially before an application for federa l registration is filed.  However, a federal trade 
mark registration will be cancelled unless an affi davit of use or acceptable non-use is provided 
between the fifth and sixth year following the date of registration of the mark.  Applications for 
                                                      
253 WTO document WT/L/540, 2 September 2003. WT/TPR/S/126 Trade Policy Review 
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registration filed with the USPTO are examined on the basis of the filing date, taking into account 
claims of priority under the Paris Convention or  other agreements.  Foreigners applying for 
registration of a mark with the USPTO no longe r have to designate a U.S. representative. 
283. Important changes to U.S. legislation with respect to trade marks took place in 2002.  The 
Madrid Protocol Implementation Act of 2002 (Title III, Subtitle C of P.L. 107-273), in force since 
November 2002, amended the Trademark Act of 1946  to implement the provisions of the Madrid 
Protocol in the United States.254  Upon implementation of the Madrid  Protocol in the United States, on 
2 November 2003, the owner of either a pending trade mark application or of a trade mark registration 
granted by the USPTO, who is either a U.S. national,  is domiciled in the United States, or who has an 
industrial or commercial establishment in the United St ates, is authorized to file an international 
application with the USPTO.  Also as a result of the implementation of the Madrid Protocol, holders 
of international registrations based on U.S. registra tions may request extensions  of protection in other 
Madrid Protocol Member States from the Intern ational Bureau of the WIPO or the USPTO. 
284. Section 211 of the U.S. Omnibus Appropriations Ac t of 1998, which refers to the registration, 
renewal or enforcement in the United States of trade marks, trade names, and commercial names 
associated with confiscated assets in Cuba, was ch allenged in the WTO by the EU in July 1999.255  
The WTO Dispute Settlement Body adopted the Appe llate Body and panel re ports, which found that 
parts of Section 211 were inconsistent with th e national treatment and MFN obligations of the 
United States under the TRIPS Agreement, but rejected most of the EU's other claims.256  T h e  
United States has until 31 December 2003, to im plement the WTO's recommendations and rulings.257 
(d) Geographical indications 
285. The United States offers protection for geographical indications, generally through 
registration as a certification mark, pursuant to th e Trademark Act of 1946, as amended (15 U.S.C. § 
1051 et seq .).  Protection for geographical indications, wh ether of domestic or foreign origin, is 
provided for all classes of goods.  Information regarding these and all other U.S. trademark registrations is available from the USPTO's Internet website. 
286. In addition, the United States protects geographical  indications that are not registered.  The 
authorities noted, for example, that the Trademark Trial and Appeal Board (TTAB), an administrative 
appeal body within the USPTO, has held that "Cog nac" is protected as a common-law (unregistered) 
certification mark in the United States.  
(e) Copyright 
287. Copyright is protected in the United States through federal law, under the Copyright Act of 
1976, as amended (17 U.S.C.).  The United States gran ts automatic protection to copyrighted works, 
including software, from all WTO Members, Berne C onvention signatories, and others.  As of 1998, 
the term of copyright protection for works created after 1 January 1978 is the life of the author plus 
70 years;  for anonymous works, pseudonymous wo rks, and works made for hire, protection is 
95 years after publication, or 120 years from creation, whichever is the shorter. 
288. The 1976 Copyright Act generally gives the copyright owner the exclusive right to reproduce 
the copyrighted work, to prepare derivative work s, to distribute copies or phono records of the 
                                                     
 
254 P.L. 107-273 is available online at:  h ttp://thomas.loc.gov/cgi-bin/bdquery/D?d107:1:./. 
255 WTO document WT/DS176/1, IP/D/20, 15 July 1999. 
256 WTO documents WT/DS176/R, 6 August 2001 and WT/DS176/ABR, 2 January 2002. 
257 WTO documents WT/DS176/12, 7 January 2003, and WT/DS176/13, 3 July 2003. United States WT/TPR/S/126 
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copyrighted work, to perform the copyrighted work  publicly, or to display the copyrighted work 
publicly.  The copyright protects the form of expressi on rather than the underlying ideas in a protected 
work.  Computer programs and original compilations  of data are treated as literary works and thus 
subject to copyright protection.  Claims for copyright may be registered in the United States at the 
U.S. Copyright Office. 
289. The United States is a member of the WIPO Copyright Treaty and WIPO Performance and 
Phonograms Treaty, and a party to the Geneva Phonograms Convention.  The Digital Millennium 
Copyright Act of 1998 (P.L. 105-304), implemented the WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonograms Treaty (WPPT).
258  This Act extended protection under U.S. 
law to works from foreign countries that have ra tified the WCT and the WPPT, once those treaties 
came into force, namely on 6 March 2002, and 20 May 2002, respectively. 
290. The United States is not a party to the Rome Convention.  U.S. copyright law does not use the 
term "neighbouring rights" (the rights of performer s, producers of sound recordings and broadcasters) 
separate from copyright.  Instead, these rights are pr otected domestically thr ough the application of 
the U.S. Copyright Act.  For example, sound record ings are considered to be works of authorship 
under the Copyright Act;  public performance right s for sound recordings are limited, generally 
applying only to digital transmis sions other than digital, over-the-air broadcasts.  Live musical 
performances are protected against una uthorized fixation by federal law. 
291. The U.S. Copyright Act provides for several statutory licences and other remuneration for 
right-holders in the areas of cable and satellite re transmissions, mechanical reproductions of musical 
works, digital audio transmission services, and digi tal recording devices and media.  Rates and terms 
for the statutory licences and distribution of funds collected under them are set by voluntary negotiations between the interested parties or by  a Copyright Arbitration Royalty Panel (CARP). 
292. During the period 2001 to mid 2003 a number of Ac ts amending copyright  legislation were 
passed, including the Small Webcaster Settlement Act of 2002 (P.L. 107-321), which amended U.S.C. 17 with respect to the statutory licence for webcast ing.  The Technology, Education, and Copyright 
Harmonization Act of 2002 (Title III, Subtitle D of P.L. 107-273) updates certain provisions of the 
Copyright Act to facilitate the growth and developm ent of distance education, while introducing new 
safeguards to limit the additional risks to copyright owners that are inherent in exploiting works in a 
digital format.
259  Among other changes in regulations introduced since 2001, the Copyright Office 
adopted in April 2003 a final rule governing the form, content, and manner of service of notices of 
termination of transfers and licences granted by authors on or after 1978, in compliance with the 
Sonny Bono Copyright Term Extens ion Act of 1998 (P.L. 105-298).260  As from 1 January 2003, 
copyright owners have been able to serve no tices of termination on certain post-1977 copyright 
transferees and licensees pursuant to section 203 of the Copyright Act. 
293. In 1999, the EU challenged, at the WTO, the provisions contained in Section 110(5) of the 
U.S. Copyright Act, as amended by the Fair ness in Music Licensing Act (P.L. 105-298).261  T h e  
dispute centered on the compatibility of the "business"  and "homestyle" exemptions in Section 110(5) 
allowing the public performance of music broadcasts without an authorization and payment of a fee by certain food, drinking, and retail establishments, with some aspects of the TRIPS Agreement.  A 
panel was convened and found that the "business"  exemption did not meet the requirements of 
                                                     
 
258 The Digital Millennium Copyright Act of 1998, U.S. Copyright Office Summary, December 1998. 
259 The text of these acts is available online at:  http://thomas.loc.gov/cgi-bin/bdquery. 
260 Federal Register Vol. 68, Number 67, 8 April 2003. 
261 WTO document WT/DS160/1, 4 February 1999. WT/TPR/S/126 Trade Policy Review 
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Article 13 of the TRIPS Agreement;  its report was adopted in July 2000.262  A reasonable period of 
time for implementation of the pane l recommendations and the level of impairment of benefits to the 
EU, estimated at US$1.1 million per year, was determined by arbitrators.263  On 23 June 2003, the 
United States and the EU notified to the WTO a mutually satisfactory temporary arrangement 
regarding the dispute.  Pursuant to this arrange ment, the United States made a lump-sum payment of 
US$3.3 million to the EU, 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 networ k.  The arrangement covers the three-year period 
ending 21 December 2004. 
(f) Enforcement activities 
Special 301 
294. Under Section 182 of the Omnibus Trade and Competitiveness Act of 1988, 19 U.S.C. § 2242 
(Special 301) the USTR conducts annual reviews ex amining in detail the adequacy and effectiveness 
of intellectual property protection in foreign count ries, and their effect on market access for U.S. 
persons. 
295. The 2003 Special 301 exercise reviewed 74 countries.  The USTR identified 11 trading 
partners on the Priority Watch List  for intellectual property protection.264  In addition, 36 countries 
were placed on the Watch List.  Ukraine was id entified again as a Priority Foreign Country in 
May 2003.  The U.S. Government withdrew GSP benefits from Ukraine in August 2001, and imposed 
US$75 million worth of sanctions on Ukrainian imports in January 2002, in th e form of 100% duties 
on metals, footwear, and other imports, based on the re peated failure of Ukraine to comply with the 
June 2000 Joint Action Plan.  China and Paraguay were designated for Section 306 monitoring to 
ensure compliance with the commitments of bilateral intellectual property agreements. 
Section 337 investigations 
296. Section 337 of the Tariff Act of 1930 declares as unlawful practices certain unfair practices 
related to IPRs, unfair methods of competition, a nd unfair acts in the importation and sale of products 
in the United States.265  Section 337 investigations are initiated by the USITC.  If the USITC 
determines that a Section 337 violation exists, it can issue exclusion orders or cease and desist orders, 
or both.  If the USITC issues an excl usion order, the U.S. Customs Service is directed to bar entry into 
the United States of infringing goods from whatever  source (general exclusion orders) or from 
specifically identified manufacturers, importers, and producers (limited exclusion orders).  The 
President may disapprove an USITC order within 60 days of its issuance. 
297. Between 1 January 2001 and 30 September 2003, 56 new Section 337 investigations were 
initiated.  Forty-seven investigations involved alle gations of patent infringeme nt;  four involved trade 
mark/trade dress infringement;  two involved trade mark infringement and other unfair acts;  one 
involved misappropriation of trade secrets and othe r unfair acts;  one involved patent infringement, 
                                                      
262 WTO document WT/DS160/R, 15 June 2000. 
263 WTO document WT/DS160/19, 11 January 2002. 
264 Argentina, the Bahamas, Brazil, Chinese Taipei, the EU, India, Indonesia, Lebanon, the Philippines, 
Poland, and Russia. 
265 Section 337 specifically declares the infringement of the following statutory rights to be unlawful 
import practices:  a U.S. patent or a U.S. copyright regi stered under Title 17, a registered trade mark, a mask 
work registered under Chapter 9 of Title 17, or a boat hull design protected under Chapter 13 of Title 17.  In cases involving infringement of these intellectual pr operty rights, there is no injury requirement. United States WT/TPR/S/126 
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trade mark infringement, and other unfair acts;  a nd one involved patent infri ngement and other unfair 
acts.  Investigations covered products from (num ber of cases in parentheses):  Chinese Taipei (17);  
China (13);  Hong Kong, China (10);  Japan (9);  Canada (8); Germany (6); France (4);  Singapore 
(4);  Israel (3);  Korea (3);  Mexico (3);  Nether lands (3);  Belgium (2);  Indonesia (2);  Italy (2);  
Philippines (2);  Thailand (2);  Austria (1);  Belize (1);  Denmark (1);  India (1);  Nicaragua (1);  
Sweden (1);  Switzerland (1);  Syria (1);  and United Kingdom (1).266  As of 30 September 2003, 41 of 
these cases had been completed and 15 were pending. 
298. From 1 January through 30 September 2003, the USITC issued three limited exclusion orders 
covering imports;  during 2002, it issued five limi ted exclusion orders and four cease and desist 
orders;  and during 2001, the USITC issued two limi ted exclusion orders.  The President permitted all 
limited exclusion orders and cease and desist orders issued since 1 January 2001 to become final. 
                                                      
266 These numbers reflect the countr ies where the foreign respondents in the investigations were 
located, except where there were no foreign respondents, in which case the numbers reflect the country of origin 
of the imports at issue as alleged in the complaints.  Many investigations involved more than one country.  Further information is available online at:  http://info.usitc.gov/ouii/public/337inv.nsf.