WT/TPR/S/16
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III. TRADE POLICIES BYMEASURE
(1) Overview
1. Following theimplementation oftheUruguay Round Agreement, U.S.trade barriers areat
anhistoric lowlevel. Almost alltariffs arebound atapplied rates. Thesimple average ofduties is
6.3percent. Advalorem tariffs range fromzeroto350percent,withthehigher levels being applied
asabove-quota ratestoagricultural, foodandtobacco products under theUruguay Round "tariffication"
process aswellasfollowing aGATT Article XXVIII consultation.1Voluntary export restrictions
administered byU.S. trading partners have been removed. Restrictions administered under the
Agreement onTextiles andClothing arethemostsignificant remaining non-tariff barrier applied to
merchandise imports andaretobephased outby2005 (Chapter IV(2)).2
2. Useoftrade remedies hasdeclined since thelastReview asaresult ofthesharp dropinnew
filings foranti-dumping andcountervailing duties andtherevocation ofoutstanding measures. Itis,
however, tooearly toassess theeffects ofthemodifications made intheframework oftheUruguay
RoundAgreementAct(section(3)(iii)).Nevertheless,292anti-dumpingand62countervailingmeasures
remained inforce asat31December 1995.3There issome evidence thatthird-party suppliers have
beenabletoexpand theirexports ofproducts subject tosuchmeasures.
3. Inthecontext ofagenerally opentrading environment, non-border measures increase inrelative
importance. Theplurilateral Government Procurement Agreement hasincreased access togovernment
procurement contracts tocompanies from itssignatories. However, liberalization didnotmove as
fastasforother measures; andimproved market access tocontracts tendered attheState andlocal
leveldraws attention toexemptions contained intheU.S.offermade under theAgreement (section (6)).4
Since thelastReview, theUnited States hasimplemented theWTO Technical Barriers toTrade
Agreementandactivelysoughttoalleviatethetradeimpactofstandardsthroughbilateralproduct-specific
mutual recognition agreements andaccreditation offoreign testing companies andagencies (section (7)).
4. TheUruguay Round Agreements Actrestored copyright andextended patent protection for
alarge number ofproducts thatwerepreviously inthepublic domain. Thecomparative strength on
international markets ofU.S.firms andcitizens intheaccumulation ofintellectual property rights is
illustrated bytheshare ofthetotalnumber ofpatents registered abroad byU.S.firms andcitizens.
Most U.S.-owned patents andother intellectual property rights registered abroad areworked through
1TheGATT Article XXVIII consultation changed theU.S.schedule asrequired toaccommodate theresults
ofaGATTdisputesettlementpanelconcerningU.S.measuresaffectingtheimportationandinternalsaleoftobacco.
Thepanel report wasadopted bytheGATT Council on4October 1994 (Table AII.2a).
2Coverage ofimport licensing hasremained unchanged since thelastReview; details areprovided inthe
U.S. notification totheWTO (document G/LIC/N/3/USA/1, 16January 1996). Products subject tolicensing
include certain agricultural products, fishandwildlife; natural gas; certain narcotic drugs; alcohol products;
firearms; andnuclear facilities andmaterials. Import licensing ismainly applied ongrounds ofconsumer and
environmentalprotection,nationalsecurityconsiderationsaswellasforagriculturalproductstowhichtariffquotas
areapplied (Chapter IV(2)).
3Excluding ninesuspended countervailing measures and13suspended anti-dumping measures.
4TheUnited States actively seeks international agreement intheWTO context tocreate greater transparency,
openness and"due process" ingovernment procurement.United States WT/TPR/S/16
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affiliates ofU.S.firms, thusdrawing attention totherôleofforeign direct investment inthecross-border
implementation ofintellectual property (section (8)).
5. International investment isalsoanimportant mode ofdelivery forinternational tradeinservices.
TheUnited States hasagenerally open environment forforeign direct investment inflows although
sector-specific restrictions oninflows, oronownership ofassets, areapplied inselected services sectors
(Chapter IV). Asnoted inthelastTrade Policy Review, thePresident isalsoauthorized torestrict
foreign direct investment inflows onthebasisofnational security considerations under theExon-Florio
amendment; according totheauthorities, thisprovision hasnotbeeninvoked todate. Outflows toa
small number oftrading partners arerestricted ongrounds ofnational security considerations
(section (3)).
(2) M.f.n. andPreferential Tariffs andCharges
(i) M.f.n. tariffs andcharges
6. TheUnitedStatesintroducedtheHarmonizedSystem(HS)tariffnomenclatureon1January1989.
Thefirstmajorrevisionofthisnomenclaturewasimplementedon1January1996,increasingthenumber
oftariff linesto10,093 covering HSchapters 01to97.5Therevision initself didnotchange any
tariff levels andthusdoesnotaffect trade-weighted tariff averages. However, assome tariff items
areregrouped, simple averages havechanged.
7. Atpresent, theUnited States applies m.f.n. treatment toallbutsixcountries: Afghanistan,
Cuba, Laos, theDemocratic People 'sRepublic ofKorea, Serbia andMontenegro, andVietNam.
AllWTO members, except Cuba, receive unconditional m.f.n. treatment.6Conditional m.f.n. status
isgranted tonon-market economies under TitleIVofthe1974Trade Act,subject tocompliance with
thefreedom ofemigration provisions oftheJackson-Vanik Amendment (Section 401)andconclusion
ofabilateral commercial agreement withtheUnited States providing reciprocal treatment (Section
405).7Currently Russia hasbeendetermined tobeinfullcompliance withJackson-Vanik, andthus
receivesconditionalm.f.n.treatment.CountriescurrentlysubjecttoJackson-VanikwaiversareAlbania,
Armenia,Azerbajian,Belarus,China,Georgia,Kazakhstan,Kyrgyzstan,Moldova,Mongolia,Tajikistan,
Turkmenistan, Ukraine andUzbekistan. Iran,Iraq,andLibya retain m.f.n. status although imports
intotheUnited States areprohibited under U.S.economic embargoes.
5This total includes 192tariff lines toadminister agricultural tariff quotas andsome 100lines covering
government, personal andvarious other defined uses(General Note 15oftheU.S. Tariff). Thechanges have
been circulated asWTO document G/MA/TAR/RS/4, dated 1December 1995. The revision was
implemented following arecommendation bytheWorld Customs Organization.
6TheWTO Agreement commits theUnited States togrant m.f.n. treatment toallWTO Members; however,
theU.S.Uruguay Round Agreements Act(URAA) states thatU.S.lawprevails overtheWTO Agreement where
thelatter isinconsistent withU.S. law(section 102ofURAA).
7ThePresident maydetermine thataTitle IVcountry isinfullcompliance withSection 401,subject toa
semi-annual report toCongress; thelatter mayremove them.f.n. treatment through ajointresolution revoking
thePresident 'sdetermination. ThePresident mayalsowaive therequirement offullJackson-Vanik compliance
subject toannual renewal byCongress, which isusually automatic unless Congress passes ajoint resolution
disapproving therenewal.WT/TPR/S/16
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(a) M.f.n. import tariffs
8. Since thelastReview theUnited States hasfullyimplemented itstariff commitments under
theUruguay Round Agreement, withstaged reductions on1January 1995and1January 1996. Only
twotariff lines, covering crude petroleum, remain unbound. Theexpansion oftariff bindings is
particularly important foragricultural andfoodproducts, inwhich previously asignificant share of
tariff lineswasunbound (Chart III.1). TheU.S.commitments willimply atrade-weighted average
tariff reduction by1999, withcertain exceptions (advanced orretarded), ofsome 35percent.8Full
tariffelimination hasbeenagreed forsteel, pharmaceuticals, paper, furniture, medical equipment, farm
equipment, construction equipment, beerandbrown distilled spirits; partial elimination forwood and
scientific equipment; participation intariff harmonization forchemicals andnon-ferrous metals; and
participation in"substantial" tariffreductions forelectronics, ceramics, photographic andcinema goods.
BytheendoftheUruguay Round phase-in, some 70percentofU.S.tariff lines, willbesubject to
m.f.n. ratesof5percentorless,while duty-free treatment willcover 40percentoftariff lines.
9. From 1January 1995, zerom.f.n. rateswere applied to18.3percentofalltariff lines, as
compared to15.3percentofalltariff linesin1992. Eighty-three percentoftariff lines(including
advalorem equivalents) havetariffratesof10percentorlessand3.8percentoftarifflinesaresubject
toratesabove 20percent.9Tariff escalation isnotamajor feature ofU.S.trade policy. However,
tariff peaks atabove 15percentareconcentrated inagricultural, foodandtobacco products, aswell
asintextiles andfootwear; above-quota tariffs ontobacco (reflecting tariffication) areashighas
350percent.
10. Theshare oftariff linessubject tospecific duties hasincreased asquantitative restrictions on
foodproducts havebeenconverted intotariffs. Since the1995 tariffication, specific duties apply to
14percentofalltarifflinesand40percentoflinescovering foodproducts. Specific duties converted
toadvalorem ratesonthebasis of1995 unitvalues suggest advalorem equivalents which areonly
slightly higher thantheaverage ofadvalorem duties (Chart IV(2)). The1996 nomenclature, which
didnotchange product-specific rates, recorded aslightly higher simple average advalorem equivalent
asaresult ofareclassification ofproducts pertariffline.Thepercentage oftarifflinessubject tospecific
duties declined under thenewnomenclature.
8Theexceptions are:1995 -fullreductions inpharmaceuticals, toys,certain fishproducts, certain machinery;
10-year phase in-textiles, paper, chemicals withpre-Uruguay Round rates of10.1- 25percent; 15-year phase
in-chemicals withpre-Uruguay Round rates over25percent(inpractice, onlyoneproduct).
9AccordingtotheHS1996nomenclature,zerodutiesareappliedto18.5percentoftarifflines;82.5percent
oftariff lines have duties of10percentorlessand3.5percentoftariff lines arehigher than20percent.United States WT/TPR/S/16
Page 47
WT/TPR/S/16
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(b) Merchandise processing andharbour maintenance fees
11. TheUruguay Round Agreements Actprovided foranincrease inthemerchandise processing
feefrom0.17to0.21percentandincreased themaximum andminimum feesfromUS$400 toUS$485
andfromUS$21 toUS$25, respectively. Italsoincreased theratesfromUS$5 toUS$6 forelectronic
entries withavalue oflessthanUS$1,250 ("informal entries") andfromUS$8 toUS$9 for"informal"
paper entries. TheNorth American Free Trade Agreement Implementation Acteliminated the
Merchandise Processing Feeasof1January 1994 forallimports fromCanada andby30June1999
forallimports from Mexico. With respect toimports from Mexico thefeecould notbeincreased
after31December 1993.10
12. Harbour maintenance feesareunchanged since thelastReview. According totheU.S.
authorities, allrevenues fromthese feesareplaced inatrustfundtobeusedforharbour maintenance
andtheadministration andmaintenance oftheU.S.portion oftheSt.Lawrence Seaway.
(c) Foreign trade zones
13. Foreign tradezones areadministered under theForeign Trade Zones Actof1934, asamended.
Thelegislation orregulations administered under thislegislation havenotbeenamended since thelast
U.S.review. TheActallows fortheestablishment ofgeneral purpose zones, hosting more thanone
company, andsub-zones hosting onlyonecompany. Asat31December 1995, over150general purpose
zones andmore than100sub-zones were inexistence. Import duties aretobepaidwithin tendays
afterthegoods leave thezone. Firms which arebased inthezones andsellintheUnited States have
achoice ofthebasisonwhich duties areassessed: duties maybelevied ontheimported rawmaterials
andintermediate inputs or,alternatively, onthefinalproduct.11Suchchoice isrelevant forproducts
where theduties onthefinalproduct arelower thanontheintermediate inputs. "This so-called inverted
tariff, which iscommonly characteristic ofhightechnology merchandise, isalsoresponsible forthe
recent growth inzone-based manufacturing andassembly ofhighvalue products, suchasmachinery,
transportation equipment, electronics andchemicals".12Itisparticularly important fortheautomobile
sector (Chapter IV(4)).
(ii) Tariff preferences andconcessions
(a) Tariff preferences
14. TheUnited States applies reciprocal tariff preferences under theCanada-U.S. FreeTrade
Agreement, U.S.-Israel FreeTrade Agreement andNorth American FreeTrade Agreement (NAFTA)
(Chapter II(3)(iii)). Unilateral preferences areadministered under theGeneralized System ofPreferences
(GSP), theCaribbean Basin Economic Recovery Act(CBERA) andtheAndean Trade Preferences
Act(ATPA).13Asof1January1995,theU.S.-IsraelFreeTradeAgreementhadbeenfullyimplemented.
Under thephase-in programme forNAFTA, in1995, some tariffs stillapplied toimports fromCanada
10Committee onWays andMeans, U.S. House ofRepresentatives (1995), pp.42-43.
11Foreign Trade Zones Actof1934 asamended, Section 3.
12Committee onWays andMeans, U.S. House ofRepresentative (1995), p.55.
13Tariff quotas applied toselected agricultural products arediscussed inChapter IV(2). Developments in
thenumber offree-trade zones arenotcovered astheyapply toasmall share ofimports andexports only.United States WT/TPR/S/16
Page 49
andMexico (Chart III.2(a)). Bytreaty theUnited States hascommitted itself tothephasing outof
these tariffs according tospecific schedules (Chapter II(3)(iii)(b)). Asubstantial share oftariff lines
from Canada andMexico were stillsubject tospecific duties on31December 1995, andmore than
halfthespecific duties applied toagricultural imports fromMexico consisted ofcomplex duties. Specific
duties onimports fromNAFTA countries weremore numerous thanATPA andCBERA preferences
because advalorem duties were converted tospecific duties before being phased-out under NAFTA
(ChartII.2.b).AccordingtotheU.S.authorities,thenextphaseoftariffreductionshasbeenimplemented
asof1January 1996. In1994, 68.9percentofimports fromCanada, 88.5percentofimports from
Mexico and43.9percentofimports from Israel entered under tariff lines withpreferential rates.
M.f.n. rateswerestillapplied toimports thatdidnotsatisfy therulesoforigin specified inthefree-trade
agreements (section (iii)).14
Table III.1
U.S.trade preferences byagreement, 1994
Trading partner Total imports Imports ortariff linesunder preferences
US$billion Asashare oftotal
imports (percent)US$billion Percentage ofimports
from thesource
Total imports 635.0 100.0 153.6 24.2
M.f.n. trading partners 365.2 57.5 - -
Canada 122.1 19.2 84.1 68.9
Mexico 46.7 7.3 41.3 88.5
Israel 5.1 0.8 2.2 43.9
GSP 79.4 12.5 21.7 27.4
CBERA 10.8 1.7 3.2 29.2
ATPA 5.7 0.9 1.1 18.8
Note: "Imports under preferences" isthesumoftotalimports ofalltarifflinescovered bypreferential treatment. Itdoesnottakeaccount
ofwhether imports actually gainpreferential treatment, ormaynotdosoforvarious reasons (e.g. rules oforigin).
Source: Table AIII.1
14"...preliminary U.S. Customs Service dataoncompliance withNAFTA-origin rules reportedly show a
veryhighlevelofcomplianceforimportsfromMexicoforwhichNAFTApreferencesareclaimed(only2percent
didnotcomply). About one-fifth oftheclaims forNAFTA preferences from Canada reviewed were notin
compliance." (U.S. International Trade Commission, 1995, p.43).WT/TPR/S/16 Trade Policy Review
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United States WT/TPR/S/16
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15. Incontrast tofree-trade agreements, tariff preferences aregranted unilaterally bytheUnited
States toimports fromselected trading partners (Chapter II(3)); theaverage levelofpreferential rates
areshown inChart III.2.15
TheGeneralized System ofPreferences (GSP)
16. TheUnited States 'GSP scheme wassuspended from September toDecember 1994 but
retroactively reinstated andextended to31July1995bytheUruguay Round Agreements Act.Itwas
again suspended asof1August 1995; retroactive renewal, andextension until31May1997wasenacted
on20August 1996(Chapter II(2)(i)).16In1993, Russia andKyrgyzstan became eligible forGSPand
benefits toMauritania weresuspended ongrounds ofnoncompliance withworkers rights provisions.
In1994,Armenia,Belarus,Kazakhstan,Romania,SouthAfrica,UkraineandUzbekistanbecameeligible
forGSP. In1995, thePresident designated theWest Bank andGaza, Armenia andMoldova asGSP
eligible. During thesame year, GSPbenefits were withdrawn from theBahamas andIsrael onthe
grounds thattheiraverage percapita income made themineligible.17Malaysia will"graduate" onthe
samegrounds asof1January 1997. Areview during 1995ledtotherestoration ofsome GSPbenefits
which Thailand hadpreviously lostduetotheperceived inadequate protection ofintellectual property.
InJuly1995, theMaldives wassuspended from thescheme as,according totheU.S.authorities, it
failed toprotect internationally recognized workers 'rights. On7March 1996theUSTR recommended
thePresident tosuspend some imports fromPakistan forperceived inadequate protection ofworkers '
rights.18Ifaccepted, thesuspension willbeannounced inaPresidential proclamation andwillbe
implemented retroactively, starting 1July1996. GSP"workers rights" consultations arebeing held
withGuatemala,PakistanandThailand.TheUnitedStateswasalsoholdingdiscussionswithElSalvador,
Honduras, Poland andTurkey toassess whether these countries protected intellectual property rights
toU.S.satisfaction soastogrant continued U.S.GSPtreatment.19
17. AccesstotheU.S.marketunderGSPconditionsmayalsobewithdrawnifabeneficiarycountry's
exports totheUnited States ofanysuchitemareworth more thanUS$25 million in1974 prices or
represent more than50percentoftotalU.S.imports ofsuchitem. The50percent"competitive need
limit" maybewaived iftotalU.S.imports ofthatitemdonotexceed ademinimis limitofUS$5 million
perannum in1974 dollars (US$13.3 million in1994 dollars).20Asof1July1996, GSPtreatment
wastobewithdrawn forsome items ifimported from Argentina (articles ofsilver), Chile (silver),
Brazil (parts ofmachinery), Indonesia (automatic typewriters), Malaysia (fatty substances, sound
apparatus, video apparatus, colour television receivers, cameras), thePhilippines (reception apparatus),
15Inaddition toGSP, goods already imported from theleast-developed countries willalsoreceive duty-free
treatment fortheproducts listed ingeneral notes 4(b)and4(c)oftheU.S. tariff schedule.
16Imports entitled toGSPtreatment under theprevious programme havebeenrecorded byCustoms andpaid
duties arerefunded retroactively.
17Federal Register, 7February 1995, Vol.60,No.25,pp.7425-7428. However, almost halfofimports
from Israel byvalue enter dutyfreeunder theU.S.-Israel Free Trade Agreement (Table III.1).
18Federal Register, 17June1996, Vol. 61,No.117, p.30646. Thelistforwhich GSP treatment might
besuspended includes surgical instruments, sporting goods andcarpets. GSPbenefits were tobesuspended
asof17June 1996.
19U.S. Trade Representative (1996).
20Trade Actof1974, Section 504(d)(2) codified as19U.S.C. 2464(d)(2).WT/TPR/S/16 Trade Policy Review
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Russia (6-hexanelactam, aluminium barsandrods, aluminium wireandnuclear reactors), Slovenia
(non-aromatic drugs), South Africa (leather ofanimals), Thailand (aluminium cooking ware and
photocopy apparatus) andTrinidad andTobago (methanol). Imports of126items exceeded the50per
centcompetitive needlimitin1994 butretained GSPstatus under deminimis limit.21
18. In1994, 27.4percentofimports fromGSPeligible countries wereclassified under tarifflines
withpreferences. Therespective shares forimports from CBERA andATPA eligible countries are
29.2and18.8percent(Table III.1). However, inorder toqualify foractual preferences imports have
tosatisfy therules oforigin (section (iii)).
(b) Outward processing
19. Since thelastReview, nochanges have been made totheoutward-processing scheme,
administered under Chapter 98(tariff lines9802.00.60 and9802.00.80) oftheU.S.tariff schedule.
Outward-processing schemes exempt imports from import duties andcustoms userfeesonthevalue
ofU.S.partsandcomponents used. According totheU.S.International Trade Commission, in1994,
39percentofimportsundertheschemesconsistedofmotorvehicles,10percentoftextilesandclothing
and14percentofcomputers. However, textiles andclothing represented 60percentoftheduty
savings, compared to9percentforautopartsandengines and5percentformotor vehicles. Savings
oncustoms userfeestendtobemoreimportant thandutysavings forthemotor vehicle imports. Imports
from Mexico represented 39percentofallimports under outward-processing provisions, followed
byJapan with18percent. Imports from Mexico hadalarger U.S.content andrepresented 60per
centofU.S.content ofgoods reimported under theschemes, compared to2.5percentforJapan.22
Following theimplementation ofNAFTA, theoutward-processing scheme isexpected tobecome less
important fortrade withCanada andMexico; however, itcontinues tobesignificant forimports of
apparel from theCaribbean (Chapter IV(3)).23
(iii) Rules oforigin andlabelling requirements
20. Rules oforigin areusedtodetermine whether products qualify forcountry-specific tariff
preferences; toadminister quantitative restrictions orother trade measures suchasanti-dumping and
countervailing duties; andprovide consumers withinformation regarding theorigin oftheproduct.
TheUnited States applies theprinciple of"substantial transformation" asabasic ruleindetermining
theorigin ofproducts. Theruleisinterpreted indifferent ways inthevarious agreements andtrade
programmes maintained bytheUnited States (Table III.2). Rules oforigin usedtoadminister trade
preferences havenotchanged significantly sincethelastTrade Policy Review, withthenotable exception
oftherulesoforigin forimports oftextile andclothing products, which weremodified asof1July1996
(Chapter IV(3)(ii)(b)).
21Federal Register, 30May 1995, Vol60,No.103, pp.28184-28187.
22U.S. International Trade Commission (1996b).
23Ahighproportion ofexports oftextiles from countries such asDominican Republic andElSalvador is
under outward processing provisions.United States WT/TPR/S/16
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Table III.2
Rules oforigin byagreement ifthefinal product contains components originating from more thanonecountry
Category Principle ofruleoforigin Accumulation principles Further conditions /
specifications
Main principle ofUSlaw
applied toimported goodsSubstantial transformationa- Substantial transformation is
defined incaselawonthe
basis of"areasonable man".
Custom considers avariety
offactors when determining
whether amanufacturing
process haschanged the
name, character oruseofan
imported article.b
FreeTrade Agreements
NAFTA Change intariff classification
(with detailed exceptions fora
number ofproducts, suchas
automobiles andtextiles and
clothing).
Alternatively, subject tothe
regional-content value ofthe
good being nolessthan
60percent (ifthetransaction
value isused), or50percent
where thenetcostmethod is
used(Article 402).Fullaccumulation forall
products originating from
NAFTA member StatesForexample, garments must
becutandsewn ina
NAFTA country; thefabric
forthegarment must have
beenmanufactured ina
NAFTA country; andthe
yarnusedtoproduce the
fabric must havebeenmade
inaNAFTA country.
U.S.-Israel FreeTrade
Agreement (modifications
related tothePalestinian
Authority notyetapproved
byCongress)Minimum 35percent
domestic contentDonor country benefit limited
to15percentofU.S.
materials, fullaccumulation
withtheterritories under
control ofthePalestinian
AuthorityDirect shipment from Israel
ortheterritories under
control ofthePalestinian
Authority
U.S. FreeTrade Agreement
withthePalestinian
Authority (notyetapproved
byCongress)Asunder theU.S.- Israel
FreeTrade AgreementAsunder theU.S.- Israel
FreeTrade AgreementAsunder theU.S.- Israel
FreeTrade Agreement
Non-reciprocal tariff concessions
GSP Value added criterion (35per
centofappraised value)
"Substantially transformed"
rawmaterials areconsidered
asthose produced inthe
beneficiary country.cLimited tomembers ofthe
Andean Group, ASEAN
(except Singapore andBrunei
Darussalam) andCARICOM
country grouping.dNodonor
country benefit.Products havetobedirectly
imported from the
beneficiary.
CBI/CBERA Asunder GSP Unlimited accumulation
among CBI/CBERA
members. Donor country
benefit limited to15percent
ofthevalue ofU.S. raw
materials.-
ATPA Value added criterion (35per
centofappraised value)Accumulation ofother
Andean Group countries,
Puerto Rico, Virgin Islands
andCBERA countries
allowed aswellas15percent
ofthevalue ofU.S. inputs.-
Table III.2 (cont'd)WT/TPR/S/16 Trade Policy Review
Page 54
Category Principle ofruleoforigin Accumulation principles Further conditions /
specifications
Insular possessions
(American Samoa, Guam,
Johnston Island, Kingman
Reef, Midway Island, the
Commonwealth ofthe
Northern Mariana Islands
andWake Island)Minimum 30percentof
value added forproducts
elidible forCBI/CEBRA
preferences, minimum 50per
centforother products
(including textiles and
clothing)Unlimited donor country
benefit subject toproducts
being U.S. materials.-
Freely Associated States
(Federal States ofMicronesia
andtheMarshall Islands)Minimum 35percentof
appraised valueNodonor country benefit or
accumulation allowed.Direct-shipment ruleapplies.
Rules oforigin applicable toother programmes
"Buy-American" programme Minimum share indomestic
value added- -
"Buy-State" programme Minimum share inState value
added- -
Textiles andclothing under
theAgreement onTextiles
andClothingSince 1July1996, theplace
ofassembly incontrast tothe
previous rules which were
based ontheplace ofcutting
oftextiles
(Chapter IV(3)(ii)(b))- -
Yellowfin tunaproducts Thecountry under whose
lawsthevessel harvesting the
fishwasregistered- -
Shrimp Thenation inwhose waters
theshrimp isharvestede- -
Export credit insurance for
agricultural products90percentofcontent by
weight.- Ruleoforigin notapplied if
itreduces totalcommodity
sales under theprogramme.
a Substantial transformation implies that"anewanddifferent article withadistinct name, character anduse"ismanufactured.
(Anheuser -Busch Brewing Association v.United States, U.S.Supreme Court, 207U.S.556(1907), quoted inPalmeter, N.D.
(1993), op.cit).
b U.S.InternationalTradeCommission(1996),Country-of-OriginMarking:ReviewofLaws,RegulationsandPractices,Investigation
No.332-366, USITC Publication 2975, July, Washington, D.C.
c Thisisreferred toas"double substantial transformation".
d Thisimplies denial ofGSPbenefits forproducts "substantially transformed" inaGSPeligible country, butwhich contain more
than65percentofmaterials andcomponents imported fromdeveloping countries notmembers oftheregional groupings towhich
thecountry belongs.
e Federal Register, 19April 1996 (Vol. 61,No.77),pp.17342-17344 (Section III(5)(ii)(b)).
Source: GATT (1994), Trade Policy Review -United States, Vol.1Secretariat 'sReport, Geneva; Committee onWays andMeans U.S.
HouseofRepresentatives(1995),OverviewandCompilationofU.S.TradeStatutes,U.S.GovernmentPrintingOffice,Washington,
D.C.; Uruguay Round Agreements Act;andStatement ofAdministrative Action (1994); Ackerman, Karen Z.,Mark E.Smith
andNidya R.Suare (1995), Agricultural Export Programs Background for1995Farm Legislation, U.S.Department ofAgriculture,
Agricultural Economic Report No.716,Washington, D.C. ;andsources cited above.
21. Country-of-origin marking ofpractically allimported manufactured goods dates backtothe
Tariff Actof1890. Since then, additional product-specific labelling requirements havebeenenacted
forimported anddomestic woolproducts, under theWool Products Labelling Actof1939; imported
anddomestic textile fibreproducts, intheTextile Fibre Products Identification Act; imported and
domestic furproducts, intheFurProducts Labelling Act; automobiles, lighttrucks, theirenginesUnited States WT/TPR/S/16
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andtransmissionsintheAmericanAutomobileLabellingAct;importedNative-Americanstylejewellery,
artsandcrafts, intheOmnibus Trade andCompetitiveness Actof1988; imported containers of
mushrooms, intheOmnibus Trade andCompetitiveness Actof1988; imported eggsoreggproducts,
intheEggProducts Inspection Act;containers ofmeatandpoultry in21U.S.C. 601-695; wine, malt
products andspirits, intheFederal Alcohol Administration Act; telecommunications equipment, in
theRadio Actof1927asamended; pharmaceutical products, intheFederal Food, Drug, andCosmetic
ActandthePublic Health Service Act;andships andboats, intheNavigation andNavigation Waters
Act.24TheFood andAlcohol Administration Actof1935 alsorequires approval bytheBureau of
Alcohol, Tobacco andFirearms oftheU.S.Treasury forlabels ofwines andspirits; suchapproval
isoneoftheinstruments usedtoenforce thecorrect marking ofthegeographical origin oftheproduct
asrequired under theTRIPS Agreement (section 8(i)(a)). TheFederal Trade Commission Actand
theLanham Trademark Actof1946 prohibit theunfair ordeceptive useofrules ororigin.
22. Inview ofthemany statutes andadministering agencies involved, "The United States is
considered tohaveoneofthemorebroad andcomplex marking regimes among industrialized nations".25
However, overtimethenumber ofcountry-of-origin violations hasdeclined fromover42,000 infiscal
year1993toalmost 30,000 infiscal year1995, although thenumber ofcustoms entries increased during
thesameperiod from10.5million to13million. Penalties forviolations ofcountry-of-origin marking
requirements areUS$100,000 forfirstviolation andnotmore thanUS$250,000 oroneyearinprison
forsubsequent violations.26ThecosttotheGovernment ofadministering andenforcing thecountry-of-
origin markings areestimated tohavebeenintherange ofUS$3.3 to3.6million during fiscal years
1993-95.27Costs oftherulesoforigin totheindustry varybysector andinthecaseofprivate costs,
among firms within aselected sector. Thecompliance costs oftheAmerican Automobile Labelling
Act(AALA) appear particularly high(Chapter IV(4)). Rules oforigin were notconsidered toadd
significantly totheproduction andregulatory costs inthepharmaceutical sector (Chapter IV(5)). In
addition todirect labelling andregulatory costs, theU.S. International Trade Commission reports
statements bycompanies noting indirect costsassociated withtheuncertainty ofmarking requirements:
"Forexample,compliancewithCustomsregulationsordecisionsthatinvolve"subjective"interpretations,
orchanges ininterpretations ofsubstantial transformation, maycause companies toconsider ashift
ininvestment orproduction toforeign operations".28TheU.S.Treasury Department isconsidering
theadoption ofuniform rulesoforigin; however, "...thatinitiative hasnotreceived widespread support
inCongress oramong industry groups".29
24U.S. International Trade Commission (1996c), Table 3.1.
25U.S. International Trade Commission (1996c).
2619U.S.C. 1304(c)(2).
27U.S. International Trade Commission (1996c), p.xii.
28U.S. International Trade Commission (1996c), p.xii.
29U.S. International Trade Commission (1996c).WT/TPR/S/16 Trade Policy Review
Page 56
(3) Trade Remedy Provisions30
(i) Overview
23. Anumber ofU.S.legalprovisions permit theintroduction oftrade remedy measures. These
maybeproduct ortrade-partner specific, asinthecaseofthe"escape clause", anti-dumping or
countervailing measures or"Section 301"action, ormore general, asinthecaseoftrade adjustment
assistance. Table III.3liststheprincipal measures available andactions taken inthepastthree years.
(ii) Escape clause
24.The "escape clause", Sections 201-204 oftheTrade Actof1974, was,according totheauthorities,
notsubstantially amended bytheUruguay Round Agreement Act.31Since thelastreview, three
investigations havebeencarried outunder Section 201-204 oftheTrade Actof1974. TheU.S.
International Trade Commission (USITC) found noinjury intwocases, while USITC found injury
inthebroom corn broom casewhich wasfiled inparallel under Section 302oftheNAFTA
Implementation Act.32Intheevent theUSITC determined that"..broom cornbrooms produced in
Mexico arebeing imported intotheUnited States insuchincreased quantities (inabsolute terms) and
under suchconditions sothatimports ofthearticle, alone, constitute asubstantial cause ofserious
injury tothedomestic industry".33Asthiscasewasinvestigated under bothSection 201-204 ofthe
Trade Actof1974 andSection 302oftheNAFTA Implementation Act,twopossible remedies were
reported tothePresident. On3September 1996, thePresident ordered theUSTR to"...seek, within
90daysanegotiated solution withappropriate foreign countries thatwould address theserious injury
tothedomestic broom cornbroom industry; promote positive adjustment; [and]strike abalance among
thevarious interests involved".34
30Trade restrictions onimports ofagricultural andtextile products arecovered inChapter IV,sections (1)
and(2).Import restrictions administered under theauthority ofenvironmental lawsarecovered insection III(7).
31"Because current U.S. lawisalready largely consistent withtheAgreement onSafeguards, onlyminor
changes arenecessary tobring U.S. lawintoconformity withtheAgreement". (Statement ofAdministrative
Action, 1994, p.959.)
32Section 311oftheNAFTA Implementation Actalsorequires theUSITC toinvestigate foreachaffirmative
casedeterminedunderSection201-204oftheTradeActof1974whether"(1)importsofthearticlefromaNAFTA
country, considered individually, account forasubstantial share oftotal imports" andwhether such imports
contributed toserious injury orthreat thereof byimports.
33U.S. International Trade Commission (1996d).
34U.S. Trade Representative, press release 3September 1996, "Presidential determinations under Section
203oftheTrade Actof1974 andSection 304oftheNorth American Free-Trade Agreement Implementation
ActConcerning Broom Corn Brooms".United States WT/TPR/S/16
Page 57
Table III.3
Actions under andstatus oftrade remedy measures andinvestigations perSection andStatute
(1October 1993 -31July1996)
Section andstatute Common name Actions under these sections during theperiod under review
Sections 201-204 ofthe
Trade Actof1974, as
amended and/or Section
302oftheNAFTA
Implementation ActEscape clause Three investigations initiated during 1October 1993 -31July1996, noinjury
wasfound intwocases (fresh winter tomatoes; tomatoes andbellpeppers),
while injury wasfound inthecaseofbroom cornbrooms.aBroom corn
brooms were theonlyproduct investigated under boththeTrade Actof1974
andSection 302oftheNAFTA Implementation Act.
Section 406oftheTrade
Actof1974Market disruption Oneinvestigation waslaunched, theITCdetermined thatinjury hadbeen
caused, however thePresident decided thatsanctions were notinthenational
interest.b
Section 1102 oftheTrade
Agreements Actof1979Public auction of
import licencesThissection hasonlybeenapplied toimport quotas foragricultural products
(Chapter IV(1))
Section 303,703,and
705oftheTariff Actof
1930Countervail Eight cases filedduring 1994 and1995, twoaffirmative, fournegative and
twooutstanding rulings during 1995, 37cases revoked; asat31December
1995, 62finalmeasures inforce and9suspensions.
Sections 733and735of
theTariff Actof1930Anti-dumping 57cases filedduring 1994 and1995, 20affirmative, 21negative, 12
outstanding and5other; during 1995, 12cases revoked; asat31December
1995, 292measures inforce and9suspensions.
Section 301oftheTrade
Actof1974- 15cases active, three were initiated prior to1October 1994, 12cases
initiated during theperiod under review, sanctions remain inforce ontwo
previous cases aspartofbilateral agreements (Table III.7).
Section 337oftheTariff
Actof1930Unfair practices in
import tradeDuring fiscal year1994, theITCinitiated sixSection 337investigations as
compared to11during fiscal year1995. Ofthe11investigations twobecame
finalexcluding orders andonewasstillunder consideration bythePresident
attheendof1995. Forty-nine exclusion orders were ineffect asat
31December 1995.
Section 232oftheTrade
Expansion Actof1962National Security
ClauseOneinvestigation initiated, theDepartment ofCommerce found thatthe
National Security wasthreatened butrecommended thatimport measures were
aninappropriate instrument toaddress thissituation. ThePresident didnot
usehisauthority tointroduce import controls.c
Section 22oftheTrade
Actof1974Balance of
Payments
AuthorityThisauthority hasnever beeninvoked.
Section 22ofthe
Agricultural Adjustment
Actof1933- Since 1January 1995 onlyavailable forimports from countries towhich the
United States doesnotapply theWTO Agreement. Theonlyaction ineffect
during 1995 concerned feesonwheat, imposed through 11September 1995,
inrecognition ofanMOU between theUnited States andCanada; voluntary
export restrictions enforced under theMeat Import Actof1979 were
terminated asthisActwasrepealed asof1January 1995.
Section 204ofthe
Agricultural Actof1956- U.S. implementation oftheUruguay Round Agreement onTextiles and
Clothing (ATC), which replaces theMFA, isadministered under thissection
(Chapter IV(2)).
Table III.3 (cont'd)WT/TPR/S/16 Trade Policy Review
Page 58
Section andstatute Common name Actions under these sections during theperiod under review
Marine Mammal
Protection Actof1972,
asamended; International
Dolphin Conservation Act
of1992; Endangered
Species Actof1973 as
amended; Section 8ofthe
Fishermen 'sProtective
Actof1967 ,as
amended; High Seas
Driftnet Fisheries
Enforcement Act;and
Wildbird Conservation
Actof1992Import restrictions
under certain
environmental
laws.Restrictions onimports oftunafrom Mexico, Vanuatu, Venezuela, Costa
Rica, France, Italy, Japan andPanama inforce since 1991 remain inplace
(section III(7))
TheUnited States requires 14Atlantic andCaribbean nations touseturtle
excluder devices ontheirshrimp trawlers. TheU.S. Court ofInternational
Trade ruled on29December 1995 thatturtle excluding devices should be
applied byallcountries exporting shrimp totheUnited States. Theruling
obliged theAdministration toimpose anembargo onshrimp imports from all
countries except those thatadopt seaturtle conservation measures fortheir
shrimp fleets by1May1996.
From April 1994 to30June1995 theUnited States barred certain fishand
wildlife products from Chinese Taipei under thePelly Amendment tothe
Fishermen 'sProtective Actof1967.
TheU.S. FishandWildlife Service banned imports ofselected endangered
species.
Drug Enforcement,
Education andControl
Actof1986- ThePresident hasnever usedtheauthority created under thisactto"take
appropriate trade actions asof1March ofeachyearagainst uncooperative
major drug-producing ordrug-transit countries". Short oftrade sanctions, on
1March 1996 thePresident listed Afghanistan, Burma, Colombia, Iran,
Nigeria andSyria asnotco-operating against illegal drugtrafficking.
Sections 2,251-253 and
265oftheTrade Actof
1974Trade Adjustment
AssistanceDuring fiscal year1994, 924projects were certified under theTAA for
workers programme, covering 72,527 workers; while during fiscal year1995
1179 project were certified covering 81,156 workers. During fiscal year
1995, 137companies were certified under theTAA forcompanies
programme, ascompared to170certified firms in1994; main industries
covered were inthemachinery andequipment, electronics, metal andtextile
sectors.
a WTO notifications G/SG/N/6/USA, 11May1995; G/SG/N/6/USA/2, 26March 1996; G/SG/N/6/USA/3, 2April 1996; U.S
International Trade Commission press release, 26July1996, "ITC announces recommendation toPresident toremedy injury
caused byimports ofbroom cornbroom".
b In1994 onepetition wasfiledconcerning honey imports fromChina. InJanuary 1994 theU.S.International Trade Commission
reached anaffirmative determination ofmarket disruption. InApril 1994 thePresident decided thatimport relief wasnotinthe
national interest butdirected theUSTR tomonitor imports from China inconsultation withtheappropriate agencies.
c OnMarch 11,1994 theIndependent Petroleum Association ofAmerica andvarious other industry associations, companies and
individuals filedapetition under thisSection alleging thattheU.S.energy security worsened since theDepartment 'slastSection
232oilimport investigation in1988because "...oilimports grewbothinabsolute terms andasapercentage ofU.S.oilconsumption,
leaving theUnited States further subject toanoilsupply disruption withtheresultant economic costs". On5April 1994, the
Department ofCommerce launched aninvestigation. InDecember 1994theinvestigation found that"petroleum imports threaten
toimpair thenational security". However, theDepartment didnotrecommend thatthePresident usehisauthority under Section
232toadjust imports. ThePresident followed therecommendation oftheDepartment anddidnotimpose measures toadjust
imports. Independently, butaffecting thesamesector, theAlaska OilAct,signed bythePresident on28November 1995, removed
export restrictions onoilfromAlaska. National Security considerations investigated under Section 232oftheTrade Expansion
Actof1962 didnotplayarôleinthedeliberations ofthismeasure.
d International Trade Reporter, Vol.13,17January 1996, pp.73-74, "CIT hands plaintiffs decision thatcould result inshrimp
embargoes".
e International Trade Reporter, Vol.12,5July1996, p.1135, "Clinton liftssanctions onTaiwan following wildlife protection
steps".
f Financial Times, 2-3March 1996, "Colombia faces USsanctions overdrugs".
Source: WTO Secretariat based oninformation provided bytheU.S. authorities; andsources listed above.United States WT/TPR/S/16
Page 59
(iii) Anti-dumping andcountervailing measures
(a) Procedures
25. Anti-dumpingandcountervailingdutyinvestigationsaregenerallyinitiatedasaresultofapetition
filedbyaninterested party. TheU.S. Government mayself-initiate aninvestigation under special
circumstances; suchauthority, however, hasrarely beenused. Petitions mayalsobefiledbyother
WTO member countries relating tothird-country dumping.35Petitions maybefiledbyanyofthe
following, onbehalf oftheaffected industry: "(1)amanufacturer, producer, orwholesaler intheUnited
States ofalikeproduct; (2)acertified orrecognized union orgroup ofworkers which isrepresentative
oftheaffected industry; (3)atrade orbusiness association withamajority ofmember sproducing a
likeproduct; (4)acoalition offirms, unions, ortrade associations thathaveindividual standing; or
(5)acoalition ontrade association representative ofprocessors, orprocessor andgrowers, incases
involving processed agricultural products".36Petitions aretobefiledsimultaneously withtheU.S.
International Trade Commission (USITC) andtheInternational Trade Administration (ITA) ofthe
Department ofCommerce.
26. TheITA,partoftheExecutive Branch ofGovernment, determines thelevelofdumping or
subsidization andwhether aminimum percentage ofthedomestic industry supports ananti-dumping
orcountervailing petition. Apetition isfiled"byoronbehalf oftheindustry" if"(1)thedomestic
producers orworkers whosupport thepetition account foratleast25percentofthetotalproduction
ofthedomestic likeproduct; and(2)thedomestic producers orworkers whosupport thepetition account
formore than50percentoftheproduction ofthedomestic likeproduct produced bythatportion of
theindustry expressing support fororopposition tothepetition".37TheUSITC, anindependent agency,
establishes whether any"material injury" hasbeencaused bythedumped orsubsidized imports. The
process forevaluating petitions bytheITAandtheUSITC hasremained unchanged sincethelastU.S.
Trade Policy Review.
27. Investigations involving Canadian orMexican firms maybeappealed byanyoftheparties
involved tobi-national panels (Chapter II(3)(iii)) ortotheU.S. Court ofInternational Trade (CIT)
ifneither party seeks apanel review.38Investigations involving firms from other countries maybe
appealed onlytotheCIT. Decisions bytheCITmaybeappealed totheCourt ofAppeals fortheFederal
Circuit andfrom there totheSupreme Court oftheUnited States.
28. Importers ofmerchandise subject toananti-dumping orcountervailing order arerequired to
deposit theestimated duties withtheU.S.Customs atthetimeofentry ofthemerchandise intothe
35Federal Register, 26June1996 pp.33148-33149. Afirstpetition under thisprovision wasfiledbyCanada
withtheU.S. Trade Representative on11March 1996, alleging dumping intheU.S. market ofsodium azide
byJapanese producers. Theoffice oftheU.S.Trade Representative invited public comment onwhether tolaunch
aninvestigation andalsoonhowtodevelop guidelines fortheprocess ingeneral.
36Committee onWays andMeans, U.S. House ofRepresentatives (1995), pp.68-69.
37Tariff Actof1930, asamended, Section 702(c)(4)(A).
38Theuseandadministrativeproceduresofanti-dumpingandcountervailingmeasuresagainstNAFTAmemb er
States ismonitored byatripartite NAFTA working group. Sofarthisgroup hasmade norecommendations
forchanges inlaws oradministrative procedures.WT/TPR/S/16 Trade Policy Review
Page 60
United States. Final duties aredetermined during areview, which isconducted attherequest ofone
ormore oftheinterested parties. Intheabsence ofarequest forareview, theestimated duties become
thefinalrates. Thedifference between thefinalandtheestimated dutyarerefunded to,orcollected
from, theimporter inretroactively. Thefinaldutyestablished during areview alsoserves asthe
estimated dutyforthefollowing period. Theanti-dumping orcountervailing order isrevoked ifthree
successive reviews reveal zerorates.
29. TheUruguay Round Agreements Actspecifies thataweighted-average dumping margin of
below 2percentbyanyproducer orexporter shallbetreated asdeminimis.39Insuchacase,noduties
arelevied. However, thedeminimis threshold applies onlytooriginal investigations andnottoreviews
ofexistingorders.Inreviewstheauthoritieswillwaivethecollectionofcashdepositswhentheestimated
margin isbelow 0.5percent.40Countervailable subsidies willberegarded asdeminimis iftheyare
lessthan1percentadvalorem inthecaseofimports fromdeveloped countries; ortheydonotexceed
2percentadvalorem inthecaseofdeveloping countries. Ademinimis levelof3percentisapplied
foraperiod ofeight years inthecaseofdeveloping countries which have"...eliminated theirexport
subsidies onanexpedited basis pursuant toArticle 27.11 oftheSubsidies Agreement".41
30. U.S.lawalsoseeks toprevent thecircumvention ofanti-dumping andcountervailing measures
through theestablishment ofassembly operations intheUnited States orthirdcountries. TheUruguay
Round Agreement sAct,revising previous circumvention provisions dating from 1988, specifies the
factors theDepartment ofCommerce should takeintoconsideration indetermining whether theassembly
process isinitsviewcircumventing theorder. These are:(i)thelevelofinvestment; (ii)thelevel
ofresearch anddevelopment; (iii)thenature oftheproduction process; (iv)theextent oftheproduction
facilities;and(v)whetherthevalueoftheprocessingperformedintheUnitedStates(orthethirdcountry)
isasmall proportion ofthevalue ofthefinished article soldintheUnited States".42The"origin"
oftheproduct thusestablished bytheanti-circumvention rulesmaydiffer fromthatestablished under
therules oforigin usedbytheCustoms Department oranyother government agency (Table III.2).
31. Inanother significant change topastU.S.practice, theUruguay Round Agreements Actrequires
that,fiveyears afterthepublication ofananti-dumping orcountervailing dutyorder, theadministering
authority andtheUSITC shallconduct areview ofthemeasure. Thereview isautomatic anddoes
notrequire arequest fromthedomestic industry.43Definitive anti-dumping orcountervailing duties
shallbeterminated (the"sunset clause"), unless itisdetermined thatremoval oftheduty"would be
likely toleadtocontinuation orrecurrence ofdumping oracountervailable subsidy (asthecasemay
be)andofmaterial injury".44TheAdministration expects that"Ifcompanies continue todump with
thediscipline ofanorder inplace, itisreasonable toassume thatdumping would continue ifthe
discipline were removed. Ifimports cease aftertheorder isissued, itisreasonable toassume that
39Tariff Actof1930, asamended, Section 773(b)(3).
40Statement ofAdministrative Action (1994), p.844.
41Statement ofAdministrative Action (1994), pp.938-939.
42Tariff Actof1930, asamended, Section 781(a)(2) andSection 781(b)(2).
43Tariff Actof1930, asamended, Section 751(c)(1).
44Tariff Actof1930, asamended, Section 751(c)(1)(C).United States WT/TPR/S/16
Page 61
theexporters could notsellintheUnited States without dumping andthat,tore-enter theU.S.market,
theywould havetoresume dumping".45According totheauthorities, theimpact ofthe"sunset" clause
canonlybeassessed afterthefirstcases areevaluated; thatisfiveyears aftertheUruguay Round
Agreement Actbecame effective.
(b) Dumping margins
32. TheInternational Trade Administration (ITA) oftheDepartment ofCommerce determines the
difference between thepriceatwhich imported products aresoldintheUnited States andthe"normal
value" ofthemerchandise. Theprice atwhich products aresoldintheUnited States maybe(i)the
export price, ifsales aremade toanunrelated party, or(ii)aconstructed export price, ifsales are
made toanaffiliated party intheUnited States. Inthelatter casetheprice willbereduced bythe
amount ofallU.S.expenses incurred, including indirect selling expenses andprofits.46Thededuction
ofprofit is,according totheStatement ofAdministrative Action, "anewadjustment inU.S. law,
consistent withthelanguage oftheAgreement".47
33. Asageneral rule,thenormal value willbebased onthepriceatwhich theforeign likeproduct
issoldintheordinary course oftrade forconsumption intheexporting country. Asprovided inthe
Anti-Dumping Agreement, salesbelow costwillbeexcluded fromthedetermination ofnormal value
ifthebelow-cost sales occurred: (i)insubstantial quantities; (ii)overanextended period oftime;
and(iii)atprices thatdonotpermit therecovery ofallcosts within areasonable period oftime.
34. Section 229(c)(1) oftheUruguay Round Agreements Actspecifies that,during theinvestigation
phase, salesatlessthanfairvalue shallbedetermined either bycomparing theaverage "normal values"
withaverageexportpricesorbycomparingtransaction-specific"normalvalues"withtransaction-specific
export prices. Exceptions totheuseofoneofthesemethods canbemade when (i)"...there isapattern
ofexport prices (orconstructed export prices) forcomparable merchandise thatdiffer significantly
among purchasers, regions, orperiods oftime", and(ii)"...theadministering authority explains why
suchdifferences cannot betaken intoaccount". Forreviews themethodology willbetocompare average
"normal values" toindividual export prices.48Comparisons ofindividual export prices intheUnited
States toaverage prices inthehome country maysignificantly increase theassessed dutymargins as
compared toindividual-to-individual oraverage-to-average comparisons (Table III.4)
45Statement ofAdministrative Action (1994), p.890.
46Tariff Actof1930, asamended, Sections 772(d)(1)(D) and772(d)(3).
47Statement ofAdministrative Action (1994), p.823.
48UruguayRoundAgreemen tsAct,Section229(d)(2)"...whencomparingexportprices(orconstructedexport
prices)orindividualtransactionstotheweightedaveragepriceofsalesoftheforeignlikeproduct,theadministering
authority shalllimit itsaveraging ofprices toaperiod notexceeding thecalendar month thatcorresponds most
closely tothecalendar month oftheindividual export sale"WT/TPR/S/16 Trade Policy Review
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Table III.4
Comparison ofdumping margins under individual-to-average andindividual-to-individual price comparison
(US$)
Domestic price
inexporting
countryExport price
ofsales inthe
United States"Normal
value" as
determined by
average price
inthe
exporting
country"Normal
value" as
determined by
individual
price inthe
exporting
country"Dumping"
under
individual-to-
average price
comparison"Dumping"
under
individual-to-
individual
price
comparison
Transaction 1 400 400 250 400 - -
Transaction 2 300 300 250 300 - -
Transaction 3 200 200 250 200 50 -
Transaction 4 100 100 250 100 150 -
Source: WTO Secretariat
(c) Countervailable subsidies
35.Asubsidy isdeemed toexistwhere agovernment oranypublic bodywithin theterritory ofacountry:
(i)"provides afinancial contribution"; (ii)"makes payments toafunding mechanism forpurposes of
providingafinancialcontribution,orentrustsordirectsaprivatebodytoprovideafinancialcontribution,
where theprovision ofsuchacontribution normally would bevested inthegovernment andthepractice
doesnotdiffer insubstance frompractices normally followed bygovernments"; or(iii)"provides any
form ofincome orprice support inthesense ofArticle XVIoftheGATT 1994; andabenefit is
conferred through oneofthese enumerated acts".49
36.TheActprovides forcompany-specific countervailable subsidy rates"tobeapplied toeachexporter
andproducer individually investigated" andan"all-others" ratetobeapplied tothose exporters and
producers whowerenotindividually investigated.50With respect toagricultural subsidies within the
scope ofArticle 13(b) and(c)oftheAgreement onAgriculture, theStatement ofAdministrative Action
states "The Administration understands thisrequirement toentail acommitment torefrain fromself-
initiating CVD investigations".51
(d) Determination ofinjury
37. Theimplementation oftheUruguay Round Agreement hasresulted inrelatively littlechange
inU.S.lawregarding determinations ofmaterial injury. TheUSITC isrequired totakeintoaccount
"allrelevant economic factors" inmaking itsdeterminations, which nowspecifically include the
magnitude ofthemargin ofdumping.52U.S. lawalsocontinues torequire theUSITC toexamine
49Statement ofAdministrative Action (1994), p.925.
50Statement ofAdministrative Action (1994), p.941.
51Statement ofAdministrative Action (1994), p.938.
52Tariff Actof1930, asamended, section 771(7)(C)(iii)(V).United States WT/TPR/S/16
Page 63
factors other thanunfairly traded imports which maybeinjuring thedomestic industry.53Thishas
beeninterpreted bytheITCandthecourts toinclude thevolume andprices ofimports notsoldat
dumping prices. TheUruguay Round Agreements Actadded aprovision concerning theITC'sinjury
determination incases involving vertically-integrated domestic producers whocaptively consume a
significant volume ofthedomestic likeproduct infurther processing.54Insuchcases theITCisto
focus primarily onthemerchant market inanalysing themarket share andfinancial performance of
thedomestic industry. U.S.lawcontains newprovisions requiring thetermination ofinvestigations
involving deminimis volumes ofimports.55
38. Inastricter application ofpractice, theUruguay Round Agreements Actprovides thattheITC
maycumulate imports from different sources initsassessment onlyifpetitions withrespect tothese
imports arefiledonthesame day.56Imports from beneficiary countries under theCaribbean Basin
EconomicRecoveryActmaybecumulatedwitheachotherandimportsfromIsraelmaynotbecumulated
withimports from other suppliers unless aspecial finding ismade.57Prior totheUruguay Round
Agreements Act,cumulation ofimports under investigation wasnotuncommon. Observers havenoted
thatimports hadpreviously beencumulated inover50percentofallanti-dumping andcountervailing
dutycases, increasing "...the probability ofanaffirmative injury determination by20to30percent
andhaschanged theITC'sdecision (from negative toaffirmative) forabout onethirdofcumulated
cases".58
(e) U.S.anti-dumping andcountervailing investigations anddeterminations, 1990-95
39. Following apeakin1992 of99cases filed, thenumber ofanti-dumping andcountervailing
dutycases fileddeclined to42and43cases filedin1993 and1994 and14cases filedin1995. The
share ofaffirmative determinations intotalcases filedremained stable overtime, although atyearend
noruling hadbeenmade onmost ofthecases filedduring 1995 (Chart III.3(a)). Thenumber of
countervailing dutycases filedhasremained below 10peryear, withtheexception of1992. In1995
twocountervailing dutycaseswerefiled(Chart III.3(b)). Inthesecond halfof1995, 33countervailing
duties were revoked; asharp increase compared tofourduties revoked during thefirstsixmonths
oftheyear.59During thewhole of1995, 12anti-dumping cases were revoked.60
5319U.S.C. 1677(7)(B)(ii) ("consider such other economic factors asarerelevant")
54Tariff Actof1930, asamended, Section 771(7)(C)(iii)(iv).
55Uruguay Round Agreements Act,Section 222(d).
56Tariff Actof1930, asamended, Section 771(G)(i)(I).
57Tariff Actof1930, asamended, Section 771(7)(G)(ii)(III) and(IV). Inaddition toaspecific reference
totheCBERA initiative thelawrefers to"...any country thatisparty toanagreement withtheUnited States
establishing afreetrade area, which entered intoforce andeffect before 1January 1987, unless theCommission
determines thatadomestic industry ismaterially injured orthreatened withmaterial injury byreason ofimports
from thatcountry." Israel istheonlycountry withwhich theUnited States entered afree-trade agreement before
1January 1987.
58Hansen andPrusa (1995).
59Revoked duties during 1995 concerned mainly imports from Argentina (9cases), Thailand (6cases), New
Zealand (5cases) andVenezuela (4cases), aswellasEcuador, Malaysia, Mexico, South Africa, SriLanka and
Zimbabwe. Revoked duties concerned abroad range ofproducts.WT/TPR/S/16 Trade Policy Review
Page 64
60(...continued)
60Anti-dumping duties onimports from China, Chinese Taipei, Georgia, Germany, Japan, Israel, Venezuela
andYugoslavia covering arange ofproducts were revoked during 1995.United States WT/TPR/S/16
Page 65
40. According totheU.S.authorities, atotalof292anti-dumping measures and62countervailing
duties were inforce (excluding suspensions) asat31December 1995.61Thetrading partners most
affected were theEuropean Union (oritsmember States) andJapan, followed byChina andKorea
(Chart III.4(a)). Steel andchemical products were mostfrequently involved (Chart III.4(b)). Steel
products fromBelgium, Brazil, France, Germany, Italy, Korea, Mexico, Spain, Sweden andtheUnited
Kingdom weresubject tobothanti-dumping andcountervailing duties. InallbuttheBelgian cases,
theanti-dumping duties were substantially higher thanthecountervailing measures.
41. In1991, about 1.8percentofU.S.imports weresubject tosuchAD/CVD orders. In1993,
lessthan0.1percentofimports were subject tonewfilings (Table AIII.2a), andnewfilings for
countervailing duties applied toUS$15.2 million ofimports, significantly down fromUS$2.9 billion
in1991(Table AIII.2b). Nevertheless, although actual flows subject toorders areasmall percentage
oftotalmerchandise trade, suchactions, ortheirpossibility, havecostsforaneconomy. Forexample,
inthecaseoftheUnited States, theUSITC hasestimated thatin1991 theremoval ofoutstanding
AD/CVD orders would haveyielded awelfare gainofUS$1.6 billion or0.03percentofU.S.GDP
inthatyear. These losses could accrue from, forinstance, higher prices thatexporters might charge
ifsubject toanAD/CVD order; orfrom trade diversion infavour ofhigher-cost suppliers whose
competitive position isimproved.62
61WTO document G/ADP/N/9/USA, 18April 1996.
62Astudy byThomas Prusa suggests that,following theuseofanti-dumping measures, sales bycompeting
non-U.S. suppliers have onaverage increased bymore than20percentinthefirstyearafter theduties were
imposed. Prusa (1995).WT/TPR/S/16 Trade Policy Review
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United States WT/TPR/S/16
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(f) Anti-dumping andcountervailing duties applied against U.S.exports
42. NocountervailingmeasureshavebeennotifiedtotheWTOasbeingappliedagainstU.S.exports.
Asat31December 1995, mostoutstanding anti-dumping cases against U.S.exports wereapplied by
CanadaandMexico(ChartIII.5).Followingaffirmativedeterminations,anti-dumpingandcountervailing
measures applied byandagainst NAFTA member States maybeappealed under NAFTA Chapter 19
tobi-nationalpanels,aswasalreadythecaseunderChapter19oftheCanada-U.S.FreeTradeAgreement
(Chapter II(3)(iii)). Between 1January 1994and5February 1996, 22anti-dumping andcountervailing
measures were appealed toChapter 19NAFTA panels (Table II.1).
43. Atend-December 1995, theUnited States wasenforcing anapproximately equal number of
anti-dumping andcountervailing dutymeasures onproducts imported fromCanada andMexico asthe
number ofmeasures inforceonU.S.exports bythesecountries. Further, anti-dumping duties enforced
byCanada andMexico often cover thesame sectors (attheISICthree-digit level) asU.S.measures
inplace onimports oftheirproducts: eight outof14ofCanada 'soutstanding anti-dumping duties,
andeightoutof16ofMexico 'soutstanding anti-dumping orders, wereimposed onU.S.exports from
sectors inwhich theirexports werehitbyU.S.measures. Other thanCanada andMexico, onlyBrazil
andtheEUapplied anti-dumping duties inthesame sector (basic chemicals) asapplied bytheUnited
States against theirexports (Chart III.6).63
63Other thanCanada andMexico, onlyBrazil andtheEUadopted anti-dumping duties onexports from a
sector (industrial chemicals) inwhich theUnited States hadadopted trade remedy measures oncertain oftheir
exports.WT/TPR/S/16 Trade Policy Review
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Box III.1: Report bytheU.S. International Trade Commission, "The economic effects of
antidumping andcountervailing duty orders andsuspension agreements"
On9June1993 theU.S. Trade Representative requested theU.S. International Trade Commission (ITC)
toconduct aninvestigation under theTariff Actof1930, Section 332(g) on"theeconomic effects of
existing anti-dumping andcountervailing dutyorders andforsuspension agreements, andtheeconomic
effects ofthedumping andsubsidy practices, astransmitted through unfair import totheUnited States,
which theorders andagreements address". TheUSITC wasasked toprovide a"comprehensive empirical
analysis" ofconditions intheU.S. domestic industries impacted byunfairly traded imports, aswellas
"formal quantitative economic estimates" oftheeffects ofthepractices andremedies using acomparative
static framework, complemented with"quantitative andother estimates ofthelabor andother domestic
adjustment costs involved". TheCommission wasalsoasked toprovide "anassessment oftheeconomy-
wide neteconomic welfare effects" oftheunfair trade practices andremedies. Thereport waspublished
inJune 1995.
Thestudy wasconducted bythestaff oftheITConthebasis ofindustry questionnaires, interviews,
public andprivate data, ITCreports onAD/CVD investigations andaU.S. Customs Service database of
imports subject toinvestigations. Theimpact ofthemeasures oneight selected industries wasanalyzed
andastatic computable general equilibrium (CGE) model wasused toestimate economy-wide effects.
Thestudy 'sprincipal conclusions were asfollows:
-TheCGE model resulted inanestimate thatremoval ofoutstanding AD/CVD orders in1991 would
have resulted inanetwelfare gainequivalent to0.03 percentofGDP inthatyear.
-Thecasestudies showed varying results, including some increases indomestic prices andshipments;
compensation ofAD/CVD measures by"aggressive" or"rapid" foreign investment intheU.S.
industries; movement away from U.S. markets; andpricing arrangements.
-Thecomparative static analysis alsoshowed differing effects among theindustries inquestion.
ITCCommissioners published avariety ofcomments onthestudy:
-Chairman Peter S.Watson andCommissioner Carol T.Crawford noted that"The study produced a
conservative estimate ofthecosts totheeconomy, asitdoes notcapture thecumulative effects of
outstanding AD/CVD orders, orders thatwere revoked, suspended, withdrawn, orterminated, orthe
effects oforders thatwere putinplace after 1991. [The study represents] abalanced, objective, and
rigorous assessment oftheeconomic effects of"unfair" trade practices andremedies." .
-Vice Chairman Janet Nuzum andCommissioner David Rohr, while approving thereport, expressed
reservations about "the adequacy ofthisreport inpresenting abalanced andcomprehensive
discussion ofrelevant issues" andidentified anumber oflimitations andareas tobeexplored further.
-Commissioner DonNewquist disapproved transmittal totheU.S. Trade Representative andrelease to
thepublic ofthisstudy. "Commissioner Newquist hasserious doubts whether thestudy sufficiently
addresses afundamental question putforth bytheU.S. Trade Representative: namely thecosts to
U.S. industries ofsubsidization anddumping byforeign governments andproducers andbenefits
from relief under theAD/CVD laws".
-Commissioner Lynn M.Bragg disapproved thestudy "after much deliberation, andwith some
regret". Shenoted "Ialsorecognize thattheacknowledged limitations ofthemodel andthedata
available may notpermit amore balanced assessment oftheeffects ofunfair trade practices and
remedies. Inmyview, asaresult ofthese limitations, thereport hasthepotential tobe
misconstrued". Sheconcluded that"...thealternative to[unfair trade] laws isnotunrestricted
competition from unfairly traded imports, butrather areturn topolitically-driven solutions totrade
disputes. Such solutions arerarely optimal".
Source: U.S. International Trade Commission (1995b).United States WT/TPR/S/16
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WT/TPR/S/16 Trade Policy Review
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(iv) Section 301oftheTrade Actof1974
(a) Overview
44. Sections 301-310 oftheTrade Actof1974(Section 301), asamended, provide "theauthority
andprocedures toenforce U.S.rights under international trade agreements andtorespond tocertain
unfair foreign practices".64Inrespect oftheWTO, Section 301provides domestic legalauthority to
suspend concessions orother obligations if,inadispute inwhich theUnited States isthecomplainant,
(an)other WTO member(s) fail(s) toimplement apanel'srecommendations within areasonable period
oftime. Section 301alsoprovides authority totakeaction withrespect topractices notcovered under
WTO Agreements. Time limits applicable toSection 301investigations havebeenmodified inthe
Uruguay Round Agreements Acttoconform withthose applicable under theWTO dispute settlement
process.
45. InvestigationsunderSection301maybeinitiatedbyeithertheU.S.TradeRepresentative(USTR)
asaresult ofapetition filedbyaffected U.S.enterprises orindividuals, orontheUSTR 'sownmotion.
Section 301investigations mayalsobetriggered asaresult ofidentifications ordeterminations made
under (i)"Super" 301,(ii)"Special" 301,(iii)TitleVIIoftheOmnibus Trade andCompetitiveness
Actof1988, or(iv)Section 1377 oftheTelecommunications Trade Actof1988. Section 301
investigations involve consultations withtherelevant trading partner. Ifconsultations areunsuccessful
andtheinvestigation involves atradeagreement suchastheWTO, thentheUSTR isrequired toresort
tothedispute settlement procedures provided forunder thatagreement. Attheconclusion ofthe
investigation, including thedispute settlement proceeding ifapplicable, theUSTR hastodetermine
64Committee ofWays andMeans U.S. House ofRepresentatives (1995), p.78.United States WT/TPR/S/16
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whether theforeign act,policy orpractice under investigation isactionable under Section 301; that
is,whether itviolates atrade agreement, denies trade agreement benefits, oris"unjustifiable" or,
"unreasonable, discriminatory andburdens orrestricts U.S.commerce". Ifthepractice violates atrade
agreement orisunjustifiable, thenaction torectify thissituation ismandatory unless either aWTO
orothertradeagreement dispute panel findsthattheU.S.tradeagreement rights havenotbeenviolated,
theUSTR findsthatagreement rights havenotbeenviolated, USTR findsthataction would damage
theU.S.economy outofproportion orthataction would impair thenational security. IftheUSTR
determines thattheforeign act,practice orpolicy is"unreasonable ordiscriminatory", heorshehas
discretionary authority totakeallappropriate orfeasible action. Inresponse toadetermination that
foreign practices areactionable under Section 301,theUSTR maytakeawiderange ofactions, including
theimposition ofincreased tariffs and/or thewithdrawal oftradeagreement benefits onselected products
fromthecountry under review "commensurate withthedamage totheUnited States". There arespecific
timelimits fortheconclusion ofSection 301investigations: 18months aftertheinvestigation isinitiated
or30daysafterthedispute settlement procedure isconcluded, whichever isearlier, iftheinvestigation
involves atradeagreement; 12months incases notcovered byatradeagreement. Section 301requires
theUSTR tosolicit public comment before determining what action should betaken under Section
301,unless anagreement isreached, andalsoimposes deadlines forimposing sanctions iftheyare
deemed tobeappropriate.
(b) "Super 301"
46. ThePresident oftheUnited States issued anExecutive Order on3March 1994, reinstating
theSuper 301provisions adopted intheOmnibus Trade andCompetitiveness Actof1988. These
provisions require theUSTR tosubmit areport toCongress onU.S.trade expansion priorities and
toidentify foreign country practices whose elimination islikely tohavethemostsignificant potential
toincrease U.S.exports orestablish beneficial precedents. TheExecutive Order differed from the
original Super 301statute inthat:(i)itprovides fortheidentification of"priority foreign country
practices" ascompared to"priority foreign countries" and"priority practices" mentioned intheoriginal
version; (ii)itpermits theUSTR tocitepractices thatmaywarrant identification aspriority foreign
country practices inthefuture ifnotaddressed orthatwould havewarranted identification iftheywere
notalready being addressed byother provisions ofU.S.tradelaw,inbilateral agreements, orincurrent
negotiations inwhich progress wasbeing made; (iii)theUSTR hassixmonths aftertheNational
Trade Estimates Report isissued inMarch toidentify priority foreign country practices, ascompared
to30daysspecified intheoriginal Super 301legislation. When issued in1994, theExecutive Order
required theSuper 301review tobeconducted incalendar years 1994and1995; theExecutive Order
wasextended inSeptember 1995forcalendar years 1996and1997. TheUSTR identified nopriority
foreign country practices inthe1995 Super 301report toCongress released on28September 1995,
andtherefore noSection 301investigations were triggered under thismechanism.
(c) "Special 301"
47. Special 301maytrigger a301investigation against "priority foreign countries" inresponse
toalleged infringements ofU.S.intellectual property rights. Bylaw,theUSTR isrequired toreport
oncountries thatdeny"adequate andeffective" protection ofintellectual property rights, orfairand
equitable market access toU.S.persons thatrelyupon intellectual property protection, within thirty
daysafterthesubmission toCongress oftheNational Trade Estimates Report.65Thereport contains
a"Priority Foreign Country list", a"Priority Watch list", a"Watch list"anda"Special-Mention"
category.Priorityforeigncountriesaredeemedtoemploypoliciesandpracticeswiththegreatestadverse
impact ontheUnited States andnottobeentering ingood faithinnegotiation withtheUnited States
toremedy these policies andpractices orotherwise make progress todoso.Countries listed onthe
65Trade Actof1974, Section 182,added bySection 1303 oftheOmnibus Trade andCompetitiveness Act
of1988, cited in:Committee ofWays andMeans U.S. House ofRepresentatives (1995), p.85.WT/TPR/S/16 Trade Policy Review
Page 72
priority watch listandwatch listaresubject toanannual review oftheirpolicies bytheUSTR. As
some countries wereperceived bytheU.S.authorities tomake progress onthese matters onlyprior
totheannual report toCongress, theyweresubject toout-of-cycle reviews (thatisduring adifferent
season thanthatprior tothereport toCongress). Acountry maybelisted apriority foreign country
inspiteoffullcompliance totheTRIPS Agreement.66TheUSTR isrequired toinitiate aSection 301
investigation within 30daysafteridentifying apriority foreign country initsreport toCongress or
ithastoreport toCongress adetailed explanation forthereasons fortherevocation.
48. Since thelastreview theUSTR haspublished three Special 301annual reports andinitiated
oneSpecial 301caseoutside theannual report cycle. On30April 1994 theUSTR announced that
Argentina, China andIndia would bedesignated priority foreign countries within 60daysifno
satisfactory progress wasmade. Inaddition sixcountries wereplaced onthepriority watch listand
19onthewatch list,ofwhich fourwould besubject toout-of-cycle reviews.67Intheevent, China
wasdesignated apriority foreign country andsubject toaSection 301investigation (Chapter II(3)(iv)(e)).
In1995, nocountries weredesignated aspriority foreign countries, while eight werementioned on
thepriority watch list,fiveofwhich would besubject toreview overthecourse oftheyear, and24
countries wereplaced onthewatch listfourofwhich would besubject toout-of-cycle reviews.68In
January 1996, theUnited States initiated a301action parallel toWTO dispute settlement consultations
concerning Japan'sretroactive copyright protection forrecordings (Table AII.2c, Chapter II(3)(iv)(c)
andsection (3)above). On30April 1996 theUSTR announced under the1996 Special 301report
thatChina wasdesignated asapriority foreign country andthattheUnited States would initiate in
thenearfuture additional WTO dispute settlement actions against Portugal, Turkey, IndiaandPakistan
inthecontext ofself-initiated Section 301investigations (Tables III.5andAII.2c). The1996Special
301priority watch listmentioned Argentina, Greece, theEuropean Union, India, Indonesia, Japan,
Korea andTurkey, ofwhich Argentina andGreece would besubject toreview during thecourse of
theyear; 26trading partners wereplaced onaSpecial 301watch list;growing concerns about IPR
protection inanadditional 14trading partners were alsonoted.69InMay1996 theUnited States
conducted aSection 301investigation intoChina 'sprotection ofintellectual property which was
terminated on17June1996 following abilateral agreement (section (8)(iii) andTable III.5).
(d) Perceived discrimination inpublic procurement
49. TheBuyAmerica Actof1988 (Title VIIoftheOmnibus Trade andCompetitiveness Actof
1988) requires theUnited States toidentify, inanannual report, countries which discriminate against
U.S.suppliers inpublic procurement. Thereports listscountries which, intheU.S. view, violate
theplurilateral Government Procurement Agreement orotherwise maintain asignificant andpersistent
pattern orpractice ofdiscrimination ingovernment procurement against U.S.products orservices which
results inidentifiable harm toU.S. business. Intheevent there isseentobeaviolation ofthe
GovernmentProcurementAgreement,thestatuterequirestheUSTRtofollowtheWTOdisputesettlement
procedures. Incases ofprocurement notcovered bytheGovernment Procurement Agreement, the
66Uruguay Round Agreements Act,Section 313,"Aforeign country maybedetermined todeny adequate
andeffective protection ofintellectual property rights, notwithstanding thefactthattheforeign country maybe
incompliance withthespecific obligation oftheAgreement onTrade-Related Aspects ofIntellectual Property
Rights referred toinSection 101(d)(15) oftheUruguay Round Agreements Act."
67U.S. Trade Representative, press release 30April 1994, "USTR announces three decisions: Title VII,
Japan superconductor review, Special 301".
68U.S. Trade Representative, press release 29April 1995, "USTR announces twodecisions: Title VIIand
Special 301".
69U.S. Trade Representative, press release 30April 1996, "USTR announces twodecisions: Title VIIand
Special 301".United States WT/TPR/S/16
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statute provides thatcountries which donoteliminate theidentified restrictions within 60daysmay
bebarred fromU.S.procurement. Inthecaseoftheplurilateral Government Procurement Agreement
signatories thisapplies onlytoprocurement notcovered bytheAgreement.
50. Since thelastreview theUSTR haspublished three annual reports concerning perceived
discrimination inforeign government procurement. The1994report didnotidentify Japan under this
titlebuttheUSTR announced areview ofthesituation in60days.70On30June1994 theUSTR
identifiedJapanasdiscriminatinginprocurementofmedicaltechnologyandtelecommunicationsproducts
andservices. InOctober 1994 thisidentification ofJapan wasterminated following abilateral
government procurement agreement covering telecommunications andmedical technology (Table II.2).
Nocountries wereidentified inthe1995report.71In1996Germany wasidentified fordiscrimination
intheheavy electrical equipment sector.72On1July1996, theUSTR announced thatthedeadline
forconsultations onthismatter wasdelayed until30September 1996 (section (6)(v)).73
(e) Telecommunications equipment procurement
51. Section 1377ofthe1988Telecommunications Trade Actalsorequires annual review ofexisting
telecommunications agreements. Section 1375 oftheStatute requires theUSTR tonegotiate with
"priority" countries and,ifnoagreement isreached, Section 1376authorizes thePresident totakecertain
actions todenytrade benefits tothecountry inquestion. Regarding telecommunications equipment
procurement, areview isalsocarried outannually, under Section 1374 oftheTelecommunications
Trade Actof1988, covering procurement practices offoreign trade partners.
52. The1994 "Section 1377" annual review identified Japan asbeing inviolation ofabilateral
third-party radio andcellular phone agreement.74Theissue wasresolved when theUnited States and
Japan reached anewcellular telephone agreement on12March 1994(Table II.2). In1995, nocountries
wereidentified under thissection. On3April 1996, theUSTR determined under Section 1377 that
Mexico wasnotincompliance withitsobligations under theNAFTA Agreement andthattheUnited
States would initiate NAFTA dispute settlement procedures (Table II.1).75On26July1996theUSTR
identified Korea asapriority foreign country under Section 1374 ofthe1988 Telecommunications
Trade Act(Chapter II(3)(iv)(d)).
(f) Active Section 301investigations, October 1994 -July1996
53. During theperiod 1October 1994until31July1996, thefollowing Section 301investigations
wereactive: Canada softwood lumber (Case 301-87); Brazil intellectual property rights (Case 301-91);
Chinaintellectualpropertyrights(Case301-92);Japanautoparts(Case301-93);EuropeanCommunity
70U.S. Trade Representative, press release 30April 1994, "USTR announces three decisions: Title VII,
Japan supercomputer review andSpecial 301".
71U.S. Trade Representative, press release 29April 1995, "USTR announces twodecisions: Title VIIand
Special 301".
72U.S. Trade Representative, press release 30April 1996, "USTR announces twodecisions: Title VIIand
Special 301".
73U.S. Trade Representative press briefing, 1July1996, "U.S. action onGerman procurement forestalls
imposition ofsanctions for90days".
74U.S. Trade Representative (1995).
75U.S. Trade Representative press release, 3April 1996, "Annual Review ofTelecommunications Trade
Agreements under Section 1377 ofthe1988 Trade ActCompleted"WT/TPR/S/16 Trade Policy Review
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banana import régime (Cases 301-94 and301-100); Korean agricultural market access restrictions
(Case 301-95); Colombia 'sexportation ofbananas totheEU(Case 301-96); Costa Ricaexportation
ofbananas totheEU(Case 301-97); Canadian practices relating tocountry music television (Case 301-
98);Japan, barriers toaccess tothemarket forconsumer photographic filmandpaper (Case 301-99);
European Union enlargement (Case 301-101); Canadian practices affecting "split-run" periodicals (301-
102);Japan,intellectualpropertyrights(soundrecordings);China,intellectualpropertyrights;Portugal,
intellectual property rights; Pakistan, intellectual property rights; India, intellectual property rights;
andTurkey, intellectual property rights (Table III.5). Acomplaint bytheU.S.Committee onPipe
andTube Imports wasfiledunder Section 301on1June1995, "alleging thattheKorean government
restricts exports ofsteelsheet andpipeandtubeandcontrols exports ofsteelsheet".76Abilateral
agreement wasreached andnoinvestigation wasinitiated (Chapter II(3)(iv)(d)).
(g) Other measures implemented under "Section 301", inforce asof31July1996
54. Measures not"formally raised under theconsultation anddispute settlement provisions ofthe
covered agreements" arenotmandatorily notified totheWTO.77Only three suchcases -allagreed
bilaterally -remain inforce asof31July1996:
- on31March 1986 theUnited States raised tariffs onanestimated US$24 million inimports
ofleather andleather goods from Japan aspartofabilateral agreement concerning Japanese
quotas onimports ofleather andleather footwear;
- on5August 1987theUnited States reached anagreement withtheECinwhich theECagreed
toreduce itspastaexport subsidies by27.5percent,which wasintended toeliminate allexport
subsidies onhalfthevolume ofpastaexported totheUnited States. Theagreement wassigned
on15September 1987. On30September 1987 thePresident directed theCustoms Service
toexclude from entry intotheUnited States anypasta from theECunless accompanied by
appropriate documentation determined bytheUSTR tobenecessary toenforce theAgreement.
Specific documentation continues tobeapplied toimports ofpasta from theEU; and
- government procurement sanctions against theEUunder TitleVIIasimposed on28May1993.
According totheU.S.authorities, thesanctions wereimposed aftertheUnited States andthe
EUfailed tonegotiate anagreement ending EUdiscrimination inthetelecommunications sector
(section 6(v)).
76U.S. Trade Representative (1996), p.125.
77UnderstandingonRulesandProceduresGoverningtheSettlementofDisputes,Article3:6"Mutuallyagreed
solutions tomatters formally raised under theconsultation anddispute settlement provisions ofthecovered
agreements shall benotified totheDispute Settlement Body andtherelevant Councils andCommittees, where
anyMember mayraise anypoint thereto".United States WT/TPR/S/16
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Table III.5
"Section 301" investigations active between October 1993 andJuly1996
Date of
initiationCountry Product Statute GATT/
WTO
procedureSanctions Actions taken during theperiod on
30September 1993 -31July1996
May1991 India IPR Special
301No Yes Action hasbeenterminated pursuant tosection 302of
theTrade Act.
October
1991Canada Softwood
lumberSection
301Subsidies
CodeNo Replaced byapositive CVD determination, which
wasterminated on19October 1994 following the
completion ofabi-national panel under the
Canada-U.S. FreeTrade Agreement.
May1993 Brazil IPR Special
301No No On28February 1994 onthebasis ofmeasures and
assurances offered, theUSTR decided toterminate
theinvestigation.
June1994 China IPR Special
301No Yes On25February 1995 agreement wasreached and
sanctions were terminated.
October
1994Japan Auto parts Section
301Yes No On28June1995 agreement wasreached andUSTR
terminated theinvestigation.
October
1994European
UnionBananas Section
301Yes No On27September 1995 USTR terminated the
investigation andself-initiated asecond investigation
parallel toWTO dispute settlement procedures.
November
1994Korea Agricultural
productsSection
301Yes No Agreement wasreached on20July1995.
January
1995Colombia Exportation of
bananasSection
301No No Agreement wasreached on6January 1996.
January
1995Costa Rica Exportation of
bananasSection
301No No Agreement wasreached on9January 1996.
February
1995Canada Country music
televisionSection
301No No Theinvestigation wasinitiated on6February 1995.
On6February 1996 theU.S. Trade Representative
ruled theCanadian practices "unreasonable and
discriminatory", butnoaction wastaken inviewof
ongoing discussions. Thecasewasclosed on
7March 1996 aftertheparties involved reached an
agreement.
June1995 Japan Photographic
filmandpaperSection
301Yes No TheTrade Representative initiated aninvestigation of
barriers toaccess totheJapanese market for
consumer photographic filmandpaper inJuly1995.
TheUnited States requested consultations under WTO
dispute settlement provisions on13June1996
(Table AII.2c).
October
1995European
UnionEU
enlargement
compensationSection
301No No On22December 1995 agreement wasreached on
compensation.
January
1996Japan IPR Special
301Yes No Agreement wasreached through theWTO dispute
settlement process (Table AII.2c).
March
1996Canada Split-run
publicationsSection
301Yes - WTO dispute settlement panel hasbeenrequested
(Table AII.2c).
April 1996 Portugal IPR Special
301Yes - Self-initiated action inparallel toWTO dispute
settlement procedures (Table AII.2c).
April 1996 Pakistan IPR Special
301Yes - Self-initiated action inparallel toWTO dispute
settlement procedures (Table AII.2c).
April 1996 India IPR Special
301Yes - Self-initiated action inparallel toWTO dispute
settlement procedures (Table AII.2c).
April 1996 Turkey IPR Special
301Yes - Self-initiated action inparallel toWTO dispute
settlement procedures (Table AII.2c).
May1996 China IPR Special
301No No Agreement wasreached on17June1996.
Source: WTO Secretariat based oninformation supplied bytheU.S. Government.WT/TPR/S/16 Trade Policy Review
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(v) Other trade measures
(a) National Security Clause
55. Section 232oftheTrade Expansion Actof1962allows forproduct-specific trade restrictions
ongrounds ofaperceived threat tothenational security. Thisclause remains unchanged; between
October 1993andMarch 1996, oneinvestigation wasinitiated (Table III.3). Anumber oflawsallow
forcountry-specific trade restrictions ongrounds ofnational security. These laws, which restrict the
activities ofU.S.companies incountries which aredeemed toconstitute arisktotheU.S.national
security,havenotbeenchangedsincethelastTPRReport.Regulationsadministeredunderthesestatutes
havetightened theembargoes onIran, while trade restrictions imposed onVietNam were lifted.78
(b) Trade adjustment assistance
56. TherehavebeennochangesintheadministrationoftheTradeAdjustmentAssistanceprogrammes
since thelastReview. Details oftheimplementation ofthese areprovided inTable III.3.
(c) Newlegislation
57. Arecent development since thelastReview hasbeentheenactment ofstatutes which extend
tradesanctions tonon-U.S. companies doing business withCuba, IranandLibya. TheCuban Liberty
andSolidarity (LIBERTAD) Act(H.R. 927)wassigned bythePresident on13March 1996. Under
TitleIIIofthelegislation, U.S.citizens mayclaim damages inaU.S.court fromnon-U.S. companies
using property "wrongfully" confiscated bytheCuban Government since 1January 1959 from U.S.
nationals. Under TitleIVtheStateDepartment maybarfromentry intotheUnited States executives
of,andshareholders withacontrolling stake in,companies using confiscated property inCuba, as
wellastheirminor children. ThePresident maysuspend theeffective dateofTitleIIIoftheStatute
foraperiod ofsixmonths atatime, ifhedeems thisintheU.S.national interest andthatitwillexpedite
atransition todemocracy inCuba. On16July1996thePresident decided tosuspend therighttofile
suitunder TitleIIIuntil1February 1997. TitleIVisnotsuspended andasat31August 1996 the
StateDepartment wasreported tohaveinformed certain firms thattheirexecutives, theirspouses and
theirminor children would bedenied visas totheUnited States iftheircompanies continued touse
confiscated property inCuba. Concerning thislawanditsimplementation Canada andMexico have
78Asat31August 1996, country-specific trade restrictions ongrounds ofnational security considerations
areimposed onimports andexports from andtoCuba, Iran, Iraq, Democratic People 'sRepublic ofKorea, Libya,
Sudan, theNational Union fortheTotal Independence ofAngola (UNITA), Rwanda, andtheBosnian Serbforces
andauthorities inBosnia andHerzegovina. Since thelastTPRReport thefollowing changes incountry-specific
trade restrictions were applied: thetrade embargo against VietNam waslifted on3February 1994. Trade
sanctions against Haiti were terminated on14October 1994. Under theSouth African Democratic Transition
SupportActof1993sanctionsagainstSouthAfricawereconditionallyrepealed,withtotalremovalofallsanctions
upontheelectionofaninterimgovernmentthroughfreeandfairelections.On8June1994,thePresidentinformed
Congress thattheelections were freeandfair. Remaining restrictions onarms sales toSouth African military
andpolicy entities were lifted on15June 1994. On21October 1994, some trade sanctions against Democratic
People'sRepublicofKoreawereliftedinthecontextofabilateralagreemen t.TradesanctionsagainsttheRepublic
ofYugoslavia(SerbiaandMontenegro)wereliftedon16January1996,althoughtheembargoagainsttheBosnian
Serbforces andauthorities intheareas ofBosnia andHerzegovina remains ineffect. Theembargo against trade
withUNITA wasimposed on26September 1993, covering mainly arms andpetroleum products andlimiting
U.S. registered vessels andaircraft toselected ports ofentry inAngola. Theembargo against Rwanda became
effective asof17May 1994 andcovers salesofarms tothegovernment. On6May1995 thePresident imposed
byExecutive Order acomprehensive embargo ontrade andinvestment withIran, withonlylimited exceptions.
TheOrder included aprohibition onbrokering andother dealing byU.S. persons inIranian goods andservices.
Subsidiaries ofU.S. firms arealsocovered bytheOrder.United States WT/TPR/S/16
Page 77
requested consultation under Chapter 20oftheNAFTA Agreement andtheEUhasrequested
consultations under WTO dispute settlement provisions (Tables II.1andAII.2c).
58. On5August 1996 thePresident signed intolawtheIranandLibya Sanctions Actof1996
(H.R. 3107). TheActrequires thePresident toimpose twosanctions outofalistofsixoncompanies
thatinvest more thanUS$40 million inoneyearinIranorLibya todevelop theirpetroleum resources
oronfirms which actinviolation ofResolutions 748and883oftheSecurity Council oftheUnited
Nations regarding tradewithLibya. TheActdoesnotaffect existing investments. Thelistofsanctions
includes withdrawal ofExport Import Bank assistance; withdrawal ofeligibility forexport licences;
prohibition ofloans fromU.S.financial institutions; inthecaseoffinancial institutions aprohibition
onprimary dealership andservices asarepository ofgovernment funds; exclusion fromgovernment
procurement; andimport restrictions.
(4) Anti-Trust Policies
(i) U.S.competition policy
59. U.S.anti-trust policies haveremained largely unchanged since thelastReview. Cartels and
anti-competitive practices outside U.S.jurisdiction which affect U.S.domestic orforeign commerce
mayviolate U.S.anti-trust laws, irrespective ofwhere suchactions takeplace orthenationality of
theparties involved.79Inthiscontext, import monopolies areopentochallenge under anti-trust law.
Export associations canbeexempted under theWebb-Pomerene ActandtheExport Trading Company
Actof1982. Sixexemptions weregranted in1994, fivein1995 andnoneinJanuary-March 1996.
Suchexemptions apply onlytochallenges under U.S.law;U.S.export associations maybechallenged
under foreign competition lawintheimporting country.
60. Intheenforcement ofanti-trust laws, theAgencies (theDepartment ofJustice andtheFederal
Trade Commission) takeaccount ofcomity issues involved: "Indeciding whether ornottochallenge
analleged antitrust violation, theAgencies would, aspartofacomity analysis, consider whether one
country encourages acertain course ofconduct, leaves parties freetochoose among different strategies,
orprohibits some ofthestrategies. Inaddition, theAgencies takeintoaccount theeffect oftheir
enforcement activities onrelated enforcement activities ofaforeign antitrust authority".80Inexceptional
circumstances, foreign policy considerations mayalsoleadtheAgencies nottopursue acase. Ifa
foreign sovereign compels, orimplements directly initsownterritory, aspecific conduct thatis
prohibited under U.S. anti-trust law,suchconduct isimmune from U.S. antitrust law,unless the
government action isitself ofastrictly "commercial" character.81
61. Actions which violate U.S.anti-trust lawmaybechallenged inU.S.courts. Insome cases,
adefendant mayberequired tosurrender sources ofrelevant information located outside theUnited
States. International co-operation toallow theagencies toacquire suchinformation hasstrengthened
significantly since thelastReview "tofurther thetwingoals ofpromoting enforcement cooperation
between theUnited States andforeign governments andorreducing tensions thatmayariseinparticular
proceedings".82TheAgencies oftenseekco-operation withforeign authorities, inthecontext ofNAFTA
andthegeneralrulesendorsedbytheOrganizationforEconomicCo-operationandDevelopment(OECD)
aswellasageneral policy.
79U.S. Department ofJustice andFederal Trade Commission (1995a), p.12.
80U.S. Department ofJustice andFederal Trade Commission (1995a), p.21.
81However, inthiscase, theforeign sovereign maybechallenged under aSection 301action (section (3)(iv)).
82U.S. Department ofJustice andFederal Trade Commission (1995a), p.10.WT/TPR/S/16 Trade Policy Review
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62. Formal bilateral arrangements specifically addressing anti-trust matters exist between the
United States andAustralia, Canada, theEUandGermany. Inaddition theUnited States hasconcluded
anumber ofMutual Legal Assistance Treaties which maybeusedasabasis toexchange information
related toanti-trust enforcement.83Asof31March 1996, onlytheMutual Legal Assistance Treaty
withCanada hadbeenusedinthreecasestoprovide assistance inanti-trust investigations. TheAgencies
alsoholdregular consultations withofficials fromCanada, theEuropean Commission andJapan and
haveinformal tieswithagencies inother countries. TheInternational Antitrust Enforcement Assistance
Actof1994further authorizes thestrengthening ofinternational co-operation bytheagencies involved
"tonegotiatebilateralagreementswithforeigngovernmentsorantitrustenforcementagenciestofacilitate
theexchange ofdocuments andevidence incivilandcriminal investigations".84
(ii) Competition policy byU.S.trading partners
63. TheUnited States considers anti-competitive behaviour asanobstacle totrade withsome of
itstrading partners. Since thelastreview, theUnited States hasconcluded bilateral agreements with
Japan covering elements ofcompetition policy regarding cellular phones; insurance policy; flatglass;
financial services; andautos andautoparts(Table II.2). TheU.S.-Korea Agreement onautos and
autopartsalsoaddresseselementsofcompetitionpolicy(ChapterII(3)(iii)(d)).Theinvestigationinitiated
under Section 301ofthe1974 Trade Actdealing withphotographic filmandpaper imports ofJapan
alsodealswithelements ofcompetition policy; sincetheinitiation ofthisinvestigation theUnited States
hasrequested consultations under WTO dispute settlement provisions regarding thisissue(Tables III.5
andAII.2c). Competition policy isalsocovered inChapter 15oftheNAFTA Agreement.
(5) Export Policies
64. Modest changes havebeenmade inexport policies sincethelastReview. Export controls have
beensomewhat relaxed andtheco-ordination between implementing agencies hasimproved. Continued
funding hasbeenapproved byCongress fortheExport-Import Bank tofinance export credits and
insurance. Theactivities bytheOverseas Private Investment Corporation (OPIC) tofacilitate foreign
direct investment byU.S.companies continue. TheDepartment ofCommerce isresponsible forexport
awareness andmarket information.
(i) Export controls
65. TheExport Administration Actof1985 wasextended on27March 1994 until30June1994
andagain byPublic Law103-277 until20August 1994. On19August 1994thePresident issued an
Executive Order continuing theexport control regulations previously administered under theExport
Administration Actunder theInternational Emergency Economic Power Act.85Export licences are
administered withtheobjective ofprotecting national security, furthering U.S.foreign policy objectives,
andprotecting commodities inshort supply. Export licences fornuclear materials andtechnology are
administered bytheNuclear Regulatory Commission under theAtomic Energy Act; under theArms
Export Control ActtheState Department isresponsible forexport licensing ofdefence articles and
services;andtheBureauofExportAdministrationisinchargeofexportlicencesrequiredforcommercial
goods anddatalisted ontheCommodity Control List.
83Thetreaty withSwitzerland explicitly excludes theexchange ofinformation related totheenforcement of
anti-trust policies.
84U.S. Department ofJustice andFederal Trade Commission (1995a), p.31.
85Executive Order 12924, 19August 1994, "Continuation ofExport Control Regulations". TheOrder was
extended bythePresident through aletter toCongress dated 14August 1996.United States WT/TPR/S/16
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66. Exportcontrolsmaintainedfordefenceornationalsecuritypurposesaretrading-partnerspecific;
themoststringent controls areapplied toCuba, Iran,Iraq,Libya andtheDemocratic People 'sRepublic
ofKorea. Export andre-export bythirdcountries ofproducts completely orpartially originating in
theUnited States, aswellasexports byforeign affiliates ofU.S.companies, arealsosubject toexport
controls. Inaneffort tostrengthen theimpact ofexport controls fordefence purposes theUnited States
participated intheCoordinating Committee onMultilateral Export Controls (COCOM). Following
thedemise oftheCOCOM Agreement, theUnited States became asignatory ofitsreplacement, the
"Wassenaar Agreement", signed on18-19 December 1995.86Participating countries haveagreed to
share intelligence andmonitor salestonon-participating countries onaregular basis, thusimproving
thetransparency ofsuchsensitive transactions. However, export decisions remain atthediscretion
oftheexporting country. Thecommitments under thenewagreement therefore arelessstringent than
those under theCOCOM Agreement.
67. Export controls areaburden onexporting companies interms oftimeandmanpower, even
ifexport licences areeventually granted. TheU.S.administration hasmade administrative changes
toremove licensing requirements forproducts which areinternationally available87,andshorten delays
ingranting export licences through strict timetables forinter-agency co-ordination.88
(ii) Foreign aid,export andinvestment credits andinsurance
68. During1992-95U.S.governmentpaymentsunderexportpromotionandforeignaidprogrammes
declined. Foreign development assistance wasthelargest programme under which payments were
made. Total payments under thisprogramme amounted toUS$9.6 billion in1995, thisrepresents
asharp decline from payments ofUS$22.2 billion in1990 (Chart III.7).
69. Theimpact oftheindicated programmes onexports goes beyond thedirect government
expenditure involved. Inorder tocontain thetrade-distorting effect ofexport credit subsidies the
United States agreed in1992, inthecontext ofthe"Helsinki package", tolimittheuseofforeign aid
funds formixed credits tolong-term investments which arefinancially viable astheresult ofasignificant
aidcomponent. InSeptember 1993 theAdministration launched acampaign toconsider matching,
butnotinitiating, offers oftiedaidbycompeting export credit agencies, evenifthese offers were
legitimate under therulesagreed under theauspices oftheOECD. On29December 1995 Congress
86OthersignatoriesoftheWassenaarAgreemen tare:Australia,Austria,Belgium,Canada,theCzech Republic,
Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Japan, Luxembourg, theNetherlands,
NewZealand,Norway,Poland,Portugal,theRussianFederation,theSlovakRepublic,Spain,Sweden,Switzerland,
Turkey andtheUnited Kingdom. TheAgreement 'ssecretariat willbeinVienna anditsfirstplenary meeting
washeldthere on2-3April 1996.
87Forexample, inAugust 1995 export restrictions onsoftware products withencryption capabilities were
relaxed; on6October 1995 export controls were lifted onabroad range ofpowerful computers; andon
8November 1995 Congress lifted the22-year banonexports ofAlaska oil.On20December 1995 theU.S.
Commerce Department announced thatitwaseasing restrictions onexports ofsemiconductors, mobile telephones
andcertain software toformerly proscribed destinations, including China andRussia.
88On6December 1995, thePresident signed anExecutive Order setting timetables forresolving inter-agency
disputes overexport licensing. Inamessage toCongress accompanying theOrder thePresident noted thatthe
measure wasdesigned tomake thelicensing "more efficient andtransparent forexporters", subject totheU.S.
protectionforitsnationalsecurity,foreignpolicyandnon-proliferationpolicies.Theordersetsspecificprocedures
fortheassessment bytherelevant agencies ofexport licences submitted totheDepartment ofCommerce. It
specifically requires theagencies involved toruleonexport licensing applications within 90daysor,alternatively
torefer thematter tothePresident.WT/TPR/S/16 Trade Policy Review
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extended theauthority forthispolicy from 30September 1996 until30September 1997, when the
EXIM Bank'scharter isupforrenewal.89
70. Nochanges havebeenmade inthecharter oftheOverseas Private Investment Corporation
(OPIC) sincethelastTPRReport. TheOPIC issued arecord US$8.6 billion inpolitical riskinsurance
andUS$1.8 billion infinancing toU.S.businesses investing overseas during fiscal year1995.90
(iii) Marketing support
71. TheForeign Commercial Service, partoftheInternational Trade Administration atthe
Department ofCommerce, wasestablished bytheExport Enhancement Actof1988 topromote the
export ofU.S.goods andservices, particularly bysmall andmedium-sized businesses, andtopromote
andprotect U.S. business interests abroad.91Inorder toimprove theeffectiveness oftheexisting
export promotion programmes, thePresident announced agovernment-wide export promotion plan
"The National Export Strategy", inSeptember 1993. ThisStrategy hascontributed totheintegration
andco-ordination oftheexport promotion activities of19federal agencies comprising theTrade
Promotion Co-ordinating Committee. Trade information incombination withmarketing support are
thekeyelements oftheprogramme. Themarketing efforts included theestablishment oftheTrade
Information Centre as"acomprehensive clearing-house forinformation onfederal export assistance
89Bureau ofNational Affairs, Inc.(1996b), p.10.
90Bureau ofNational Affairs, Inc.(1995a), p.2053
91Committee onWays andMeans U.S. House ofRepresentatives (1995), p.156.United States WT/TPR/S/16
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programs".92Undertheprogramme,exportmarketingeffortsofU.S.companieshavereceivedhigh-level
support intheircontacts withforeign government officials.
(6) Government Procurement
(i) Value ofgovernment procurement
72. Theshare ofpublic expenditure intotalU.S. GDPstood ataround 35-37 percentduring 1990-
95,lower thaninmostother OECD countries.93In1994, federal expenditure represented 22.8percent
ofGDP, andStateandlocalexpenditure 13.6percent. Government purchases represent 22.8percent
oftotalfederal expenditure and80.5percentoftotalStateexpenditure; federal purchases represented
6.5percentofGDP andStateandlocalpurchases 11.0percentofGDP in1994. Stateprocurement
wasthuslarger thanfederal procurement although totalStateexpenditure waslower thantotalfederal
expenditure. Halfofallfederal purchases werefordefence purposes, illustrating theimportance of
thissector fortotalgovernment procurement (Chart III.8).
73. Public purchases comprise purchases ofdurable goods, non-durable goods, services and
structures. Services include compensation ofemployees, thatis,salaries andother labour costs, and
other services. Compensation ofemployees wasthesingle largest category ofpublic procurement;
itrepresented halfoffederal purchases forbothdefence andnon-defence purposes, aswellastwothirds
ofStateandlocalpurchases. Durable goods andother services represented aparticularly large share
ofdefence procurement, respectively 20and28percent. Other services alsorepresented athirdof
federal non-defence procurement, while government purchases ofstructures wereparticular important
attheState andlocallevel.
74. Asasignificant share ofinfrastructure ispublicly provided, itistobeexpected thatgovernment
purchases ofstructures isasubstantial share oftotaldemand. Inthiscontext, government procurement
represented 21-22 percentoftotaldemand forstructures during 1990-95, while government demand
forservices represented almost aquarter ofthetotal. However, ifcompensation ofemployees is
excluded, other services represented around 5-6percentoftotaldemand forservices.94Theshare
ofgovernment demand fornon-durables intotaldemand wasstable ataround 6percent,andtheshare
ofgovernment demand fordurables declined from13.5percentoftotaldemand in1990to8.7percent
in1994.
75. Itwould appear thatgovernment procurement represents alarger share oftotaldemand intrade-
oriented sectors suchasdurable goods thaninlesstrade-oriented sectors, suchasnon-durables and
"other services".95Theshare ofgovernment procurement intotaldemand fortradeable goods suggests
thatgovernment procurement policies mayhaveasignificant impact ontotalimports. Inthiscontext
theopening-up ofU.S.public procurement toforeign competition (asforother countries) would play
animportant rôleinoverall trade liberalization.
92Trade Information Centre (1995).
93OECD (1996b).
94Compensation forgovernment employees isinthiscase removed from both thenominator andthe
denominator.
95Structures hasbeenexcluded from theshares asimports ofsuchitems arenotreported. (Survey ofCurrent
Business, various issues.)WT/TPR/S/16 Trade Policy Review
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United States WT/TPR/S/16
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(ii) Tendering procedures andrestrictions onU.S.companies tendering abroad
76. Tenders forfederal government procurement contracts above athreshold value ofUS$25,000
areannounced intheCommerce Business Daily; electronic tendering procedures arebeing developed,
buthavenotyetbeenfullyimplemented.96Theannouncement contains tender specifications andlatest
submission date. Tenders forlocalandStatecontracts maybepublished inlocalorStatepublications.
Forthe37StateswhichhavemadecommitmentsundertheGovernmentProcurementAgreement,covered
procurement mustbepublicly advertised. These States utilize State-level publications, although the
USTR encourages theStates toannounce theirtenders intheCommerce Business Daily. Additionally,
theStates areexploring thepossibility ofahome-page ontheInternet forprocurement covered under
theGovernment Procurement Agreement.
(iii) Buy-American provisions
77. Local firms receive preferences asmandated inStatutes andregulations atboththefederal
andtheState level. TheBuyAmerican Actof1933, unchanged since thelastReview, requires the
U.S.Government topurchase U.S.-produced products unless "theheadoftheFederal agency concerned
shalldetermine ittobeinconsistent withthepublic interest, orthecosttobeunreasonable".97U.S.
products aredefined as50percentdomestic content (section (2)(iii)). Unreasonable isdefined as
6percent,while ahigher percentage maybeapplied ifitserves thenational interest.98TheDepartment
ofDefense hasapplied a50percentpricedifferential under thenational interest clause.99A12percent
difference isapplied toproducts produced inlabour-surplus areas. Buy-American provisions donot
apply tooverseas procurement unless financed byU.S.A.I.D. TheBuyAmerican Actdoesnotapply
toservices.100With regard tocontracts covered bythePlurilateal Agreement onGovernment
Procurement, Buy-American provisions arewaived forcompanies forMembers oftheAgreement.
78. Further national security conditions apply atthefederal leveltodefence-related government
expenditure. TheBerry Amendment, theByrnes-Tollefson Amendment andtheDepartment ofDefense
Appropriations Actof1992allow fornational preferences indefence procurement. Canada isgranted
national treatment atthefederal levelinthecontext oftheNorth American Mobilisation Sphere.
96InOctober 1993, thePresident directed theFederal Government tomove from thecurrent paper-based
system toanelectronic process forprocurement procedures. Recent legislation callsforthedevelopment and
implementation ofafederal acquisition computer network architecture (FACNET) by1January 2000. (WTO
document GPA/IC/W/7/Add.5, 15November 1994).
97"Notwithstanding anyother provision oflaw,andunless thehead oftheFederal agency concerned shall
determine ittobeinconsistent withthepublic interest, orthecosttobeunreasonable, onlysuchunmanufactured
articles, materials, andsupplies ashavebeenmined orproduced intheUnited States, andonlysuchmanufactured
articles, materials, orsupplies ashave been manufactured intheUnited States substantially allfrom articles,
materials,orsuppliesmined,produced,ormanufactured,asthecasemaybe,intheUnitedStates,shallbeacquired
forpublic use". (Buy American Act,Title III,Section 2.)
98Executive Order 10582, issued in1954, cited in:Committee onWays andMeans U.S. House of
Representatives (1995), p.140.
99Committee onWays andMeans, U.S. House ofRepresentatives (1995), p.140.
100U.S. General Accounting Office (1994).WT/TPR/S/16 Trade Policy Review
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79. Additional buy-American orbuy-State provisions arespecified inarange offederal, Stateand
locallawsandregulations. Examples offederal preference programmes which havebeennoted by
other WTO members are:
- theCompetition inContracting Actof1984 -allows forprocurement restrictions in
order toachieve industrial policy objectives;
- theNational Space Policy Directive of1990 -restricts U.S.Government satellites to
belaunched onlyfrom U.S.manufactured launch vehicles;
- theAirport andAirway Safety, Capacity, Noise Improvement andInter-modal
Transportation Actof1933 -includes price andlocal-content preferences forU.S.
products procured bytheFederal Aviation Authority;
- theFederal Water Pollution Control act,asamended bySection 39oftheClean Water
Act-provides 6percentpreferences forU.S.suppliers towater treatment projects;
- theSurface Transportation Assistance Actof1978-provides federal assistance toState
transport projects, provided thattheStates impose U.S.standards including 25percent
price preferences forU.S.equipment andrequire theuseofU.S.steel;
- theInter-modal Surface Transportation Efficiency Actof1991 -extends theexisting
Buy-American restrictions onironandsteelproducts, andreserves 10percentoftotal
appropriations forU.S.small anddisadvantaged business;
- theAmtrakImprovementActof1978asamended-limitsprocurementofsteelproducts,
rolling stock andpower trainequipment under certain conditions toU.S.suppliers;
- theRuralElectrificationAdministration-providesloansandloanguaranteestotelephone
andelectric authorities subject toprocurement being limited toU.S.-produced materials
andequipment; and
- theClean CoalTechnology Program, partoftheEnergy Policy Act-limits projects
selected bytheAgency forInternational Development toequipment withaminimum
50percentU.S.manufacturing content.
According totheauthorities, preferential margins havenotincreased inscope orinnumber since the
lastTPRReport. Onthecontrary, preferential margins havebeeneliminated onprocurement below
US$100,000 funded byDepartment ofTransportation urban mass-transit grant programmes toState
andlocal governments. Thenumber andvalue offederal, State andlocal authorities procurement
activities bound under theGovernment Procurement Agreement hasincreased, reducing theimpact
ofpreferential margins ofbuy-American orbuy-State provisions (section (iv)).
(iv) International commitments
80. TheUnited States wasasignatory tothe1979 Tokyo Round Agreement onGovernment
Procurement. ThisAgreement (or"Code") opened 7-8percentofFederal non-wage procurement
toforeign competition. Between 8and12percentoftenders subject totheCode andnotified tothe
GATT were wonbynon-U.S. companies, while derogations oftheCode applied toapproximatelyUnited States WT/TPR/S/16
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7percentoftenders (Table III.6).101However, market access toforeign government procurement
byU.S.companies under theTokyo Agreement didnotmeetU.S.expectations.102Since then, the
U.S.Government encouraged other countries toopentheirgovernment procurement markets toU.S.
companies through bilateral andregional agreements aswellasmostrecently through the1994WTO
Plurilateral Agreement onGovernment Procurement. Under TitleVIIoftheTrade andCompetitiveness
Actof1988theU.S.authorities reserves therighttowithdraw access toitsgovernment procurement
market granted under these Agreements (section (v)).
Table III.6
Government procurement opened uptoforeign competition under theTokyo Round Code, 1992-93
1990 1991 1992 1993
Federal procurement other thancompensation forpersonnel
(US$ billion)245.5 255.4 249.0 239.9
Notifications toGATT/WTO under the1979 Code (US$ billion) 17.7 21.3 18.7 19.4
Notifications asashare oftotalFederal non-personnel
procurement (percent)7.2 8.4 7.5 8.1
Share ofnotified tenders wonbynon-U.S. companies (percent) 11.9 9.2 7.1 8.2
Share ofnotified tenders subject toderogations (percent) 7.0 6.8 ... 7.4
.... Notavailable.
Source: U.S.notifications totheGATT (Documents GPR/60/Add.6, 15April 1992; GPR/70/Add.10, 17March 1994; GPR/72/Add.10,
17November 1994; GPR/75/Add.6, 1May1995); andDepartment ofCommerce (various issues), Survey ofCurrent Business,
Washington, D.C.
81. TheUnited States hasalsoconcluded 21bilateral Co-operative Industrial Defense Agreements
orReciprocalProcurementAgreements.103Theseagreementsensurereciprocalaccessindefencemarkets
andserve theinterests ofinterchangeability andcompatibility ofequipment among allies. They may
berescinded byeither party, butnoagreements havebeenrescinded since 1January 1993.
82. Public procurement provision intheNAFTA, andtheU.S.- Israel FreeTrade Agreement have
remained unchanged since thelastReview. Themain distinction between thevarious agreements is
thethreshold above which companies from therespective trading partners areentitled totender for
public procurement contracts: Canadian companies areinsome cases allowed totender forfederal
contracts withavalue above US$25,000, Israeli andMexican companies haveaccess tosome contracts
forgoods andservices valued overUS$50,000 withspecific limitations forselected sectors. TheUnited
States hasnotmade anycommitments regarding State orlocalprocurement practices inregional or
bilateral trade agreements.
83. The1994 Plurilateral Agreement onGovernment Procurement entered intoforce on
1January 1996 andtheUnited States withdrew from theTokyo Round Agreement asof9January
101Section 301oftheTrade Agreements Actof1979 provides theauthority toimplement theinternational
governmentprocurementagreemen ts.UnderthisSectionthePresidentmaywaivetheapplicationofdiscriminatory
measure oftheBuyAmerican Actof1933 andthelabour-surplus setasides other thanthose forsmall businesses.
Section 302ofthe1979 Actrequires thePresident, after thedatethatanywaiver takes effect, toprohibit
procurement tonon-designated countries unless sufficient government procurement market access isgranted to
U.S. companies bythese countries.
102U.S. General Accounting Office (1994).
103SuchAgreemen tshavebeensignedwith:Australia,Austria,Belgium,Canada,Denmark,Egypt,Germany,
Finland,France,Greece, Israel,Italy,Luxembourg,Netherlands,Norway,Portugal,Spain,Sweden,Switzerland,
Turkey, andtheUnited Kingdom.WT/TPR/S/16 Trade Policy Review
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ofthesame year.104The1994 Agreement includes commitments covering federal procurement,
procurement byfederal agencies andprocurement byselected Stateandlocalauthorities (Table III.7).
TheUnited States concluded comprehensive packages withseveral members oftheAgreement, but
doesnotautomatically extend thiscoverage toallsignatories. TheUnited States currently extends
comprehensive access toitsfullcommitments under theAgreement totheEuropean Union (including
itsnewmember States), Israel, Japan andtheRepublic ofKorea (Japan isstillexcluded fromcontracts
forelectricity utilities because, according theU.S.authorities, itdoesnotofferreciprocal coverage).
Switzerland, Norway andCanada stillreceive lessthanfulltreatment, although according totheU.S.
authorities, further extension ofcoverage withSwitzerland andNorway islikely inthenearfuture.
TheUnited States seeks aninterim arrangement ontransparency, openness anddueprocess while
extending comprehensive coverage under theGovernment Procurement Agreement toallsignatories
through bilateral negotiations inwhich itspartners improve access forU.S. companies totheir
government procurement contracts.
84. The1994 Plurilateral Agreement onGovernment Procurement hasincreased thetotalvalue
ofcontracts opentointernational competition beyond thatexisting inthecontext ofthe1979Agreement.
Asnotallcontracts areopentocompanies fromallsignatories, andtheagreed thresholds aresomewhat
higher thanthose onwhich thetable isbased, thevalue presented inTable III.8presents anupper
limitofthevalue ofcontracts opentointernational competition. Ingoods andservices, thelion'sshare
ofprocurement open tointernational competition istendered atthefederal level. State andlocal
authoritiesmadeupfortwothirdsofallU.S.commitmentsunderthe1994Agreementintheconstruction
(structures) sector. Overall, more thanhalfoftheU.S.commitments were made atthesub-federal
andpublic utilities level.
85. TheAgreement prohibits offsets suchaslocal content ingoods, technology transfer tothe
purchaser, investment inthecountry ortradeinotherareas.105However, offsets indefence procurement
areexempt from thisprovision astheAgreement doesnotapply to"procurement indispensable for
national security orfornational defence purposes".106TheU.S.Government doesnotrequire offsets
initsdefence procurement fromforeign sources andneither doesitmonitor theuseofoffsets byU.S.
firms togainaccess toforeign markets.
104On27October1995theUnitedStatesinformedtheDirector-GeneraloftheWTOofitsintentiontowithdraw
from theTokyo Round Agreement asof9January 1996. TheDirector-General circulated thisinformation as
WTO document GPR/79, dated 10November 1995.
105WTO Plurilateral Agreement onGovernment Procurement, Article XVI.
1061994 Agreement onGovernment Procurement, Article XXIII(1)United States WT/TPR/S/16
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Table III.7
Summary oftheU.S.commitments under the1994 WTO Plurilateral Agreement onGovernment Procurementa
Goods Services Construction
Central
GovernmentbThreshold SDR 130,000
m.f.n. treatment.
Federal Aviation Administration
excepted.Threshold SDR 130,000;
reciprocal access.
Federal Aviation Administration
excepted.Threshold: SDR 5million;
m.f.n. treatment.
Federal Aviation Administration
excepted.
Subcentral
governmentscThreshold: SDR 355,000
m.f.n. treatment forprocurement
by37States only.d
Canada, Switzerland andNorway
excepted. National treatment of
EUbidsoncontracts procured by
North Dakota andWest Virginia
and7ofthe24largest U.S.
cities.eThreshold: SDR 355,000;
reciprocity for37States only.d
Canada, Switzerland andNorway
excepted. National treatment ofEU
bidsoncontracts procured byNorth
Dakota andWest Virginia and7of
the24largest U.S. cities.eThreshold: SDR 5million (for
Korea SDR 15million); m.f.n.
treatment forprocurement by37
States only.d
Canada, Switzerland andNorway
excepted. National treatment of
EUbidsoncontracts procured by
North Dakota andWest Virginia
and7ofthe24largest U.S.
cities.e
Public
utilitiesfThreshold: SDR 400,000 m.f.n.
treatment forprocurement bythe
NewYork andNewJersey Port
Authority, thePortofBaltimore,
andNewYork Power Authority,
aswellaspower generation
projects funded byRural
Electrification Administration.
Canada, Switzerland andNorway
excepted (Japan isexcluded from
entities responsible forgeneration
anddistribution ofelectricity).
Threshold: SDR 182,000; m.f.n.
treatment forprocurement by
Tennessee Valley Authority,
Power Marketing Administrations,
andSt.Lawrence Seaway.
Canada, Switzerland andNorway
excepted. National Treatment of
EUbidsoncontracts tendered by
Massachusetts PortAuthority
(Japan isexcluded from entities
responsible forgeneration and
distribution ofelectricity).Threshold: SDR 400,000;
reciprocity forprocurement bythe
NewYork andNewJersey Port
Authority, thePortofBaltimore,
andNewYork Power Authority, as
wellaspower generation projects
funded bytheRural Electrification
Administration. Canada,
Switzerland andNorway excepted.
(Japan isexcluded from entities
responsible forgeneration and
distribution ofelectricity).
Threshold 182,000; reciprocity for
procurement byTennessee Valley
Authority, Power Marketing
Administrations, andSt.Lawrence
Seaway. Canada, Switzerland and
Norway excepted. National
Treatment ofEUbidsoncontracts
tendered byMassachusetts Port
Authority (Japan isexcluded from
entities responsible forgeneration
anddistribution ofelectricity).Threshold: SDR 5million (for
Korea SDR 15million); m.f.n.
treatment forprocurement bythe
NewYork andNewJersey Port
Authority, thePortofBaltimore,
Tennessee Valley Authority,
Power Marketing
Administrations, St.Lawrence
Seaway, andNewYork Power
Authority, aswellaspower
generations project funded bythe
Rural Electrification
Administration.
Canada, Switzerland andNorway
excepted. National Treatment of
EUbidsoncontracts tendered by
Massachusetts PortAuthority
(Japan isexcluded from entities
responsible forgeneration and
distribution ofelectricity).
a Telecommunications contracts arenotincluded. U.S.setasides onbehalf ofsmall andminority-owned businesses areexempt.
TheU.S.offer includes, interalia,thefollowing services: transportation (except when incidental toprocurement ofsupplies),
dredging, overseas military services procurement; public utilities services; RandDservices; andprinting services (Annex II
only).
b Except Japan forcontracts procured bytheN.A.S.A.
c Statemass-transit andhighway improvement projects thatreceive federal funding, areexempted fromthese commitment. States
maystillapply restrictions thatpromote thegeneral environmental quality inthatstate, aslongassuchrestrictions arenotdisguised
barriers tointernational trade.
d Including thefivemost populous States (California, Pennsylvania, NewYork, Florida andTexas).
e Chicago, Detroit, Boston, Dallas, Indianapolis, SanAntonio, andNashville.
f Airports thatreceive federal funding areexempted from these commitments.
Source: The1994 WTO Plurilateral Agreement onGovernment Procurement, Geneva; WTO Secretariat; andSchott, Jeffrey J.assisted
byJohanna W.Buurman (1995), TheUruguay Round anAssessment, Institute forInternational Economics, Washington, D.C.WT/TPR/S/16 Trade Policy Review
Page 88
Table III.8
Estimatedvalueof1993U.S.procurementcontractsaboveGovernmentProcurementAgreementthresholds,excludingtelecommunications
entities andsetasidesa
(Billions of1993 dollars)
Goods Services Construction Total
Federal Government 26.1 27.5 3.8 57.4
State andlocal
authorities11.3 14.8 15.6 41.7
Public utilities 2.0 1.8 4.1 7.9
Total 39.4 44.1 23.5 107.0
a ThefinalGovernment Procurement Agreement (GPA) commitments oftheEuropean Union andtheUnited States donotcover
allcontracts included inthese estimates. Moreover, thethresholds upon which these estimates arebased aregenerally lower
thantheactual GPA thresholds, andthusoverstate theactual sales opportunities generated bytheGPA.
Source: Schott,JeffreyJ.assistedbyJohannaW.Buurman(1995),TheUruguayRoundanAssessment,InstituteforInternationalEconomics,
Washington, D.C.
86. Under boththe1979 andthe1994 Agreements theU.S. exempted "setasides onbehalf of
small andminority businesses" fromitscommitments.107Under suchsetasides anygovernment tender
shallbereserved forsmall business participation when there isareasonable expectation thatoffers
willbeobtained fromatleasttwosmall businesses andawards willbemade atfairprices.108The1994
Agreement, however expands coverage tocontracts tendered attheState andlocallevel. State and
localcontracts tendtobemore important for"small andminority owned businesses". Inthiscontext
theissue ofsetasides hasreceived more attention thanpreviously, although, thepolicy onsetasides
hasnotbecome more restrictive during recent years. Historically, setasides ongoods werevalued
atapproximately 6-7percentoftheprocurement covered bytheGovernment Procurement Agreement;
datapresented inarecent consultants 'study indicate thatsetasides ongoods, services andconstruction
could equal some 12.5percentofcovered federal procurement under thenewAgreement (Table III.9).
Federal setasides maydecline inimportance asthePresident announced on8March 1996athree-year
moratorium on"new federal programs thatreserve some contracts forcompanies owned byminorities
andwomen".109
1071994 Agreement onGovernment Procurement Agreement, General Notes, p.337.
108Asmall business concern isanybusiness entity organized forprofit, with aplace ofbusiness inthe
United States, thatis(i)independently owned andoperated; and(ii)meets thesizecriteria established bythe
Small Business Administration (SBA). Thesizecriteria aresector specific andarebased onthenumber of
employeesandgrossrevenues,includingthoseofaffiliates.Aminorityfirm,alsoknownasasmalldisadvantaged
business concern, isasmall business concern thatisatleast51percentunconditionally owned byoneormore
individuals whoarebothsocially andeconomically disadvantaged.
109International Herald Tribune, 9March 1996, "Clinton Jettisons Program forMinority Contractors".United States WT/TPR/S/16
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Table III.9
Federal procurement included inthe1994 Agreement andshare ofsetasides intotal, 1992
Goods Services Construction Total
Total expenditure included inU.S. offer
(US$ billion)27.4 33.0 7.1 67.5
Estimated value ofU.S. offer overthreshold
(US$ billion)a26.5 31.7 4.0 62.2
Share ofcontract subject tosetasides (percent)b6.7 17.8 9.6 12.5
a Based onhistorical trends ofnewoffers overthreshold.
b Based onfiscal year1989 newcontracts overthreshold awarded through preference programmes.
Source: Deloitte Touche Tohmatsu International (1994), Study ofPublic Procurement Opportunities: European Union -Government of
theUnited States, Houston.
(v) U.S.policies andforeign procurement practices
87. Inthecontext ofthe1994Government Procurement Agreement aswellasbilateral andregional
agreements, access byU.S. exporters toforeign procurement contracts hasimproved. The
implementation oftheseagreements byforeign governments ismonitored bytheUSTR under TitleVII
oftheTrade Agreements Actof1979. Bythesubmission datetheUSTR isrequired tostartconsultations
under Section 301ofthe1974Trade Act(section (3)(iv)). Since 28May1993, theUnited States has
excluded EUsuppliers, except German firms, fromU.S.federal procurement fortelecommunications.
FollowingtheaccessionofAustria,FinlandandSwedentotheEuropeanUnion,sanctionswereextended
tothese countries. Inreturn, central government entities ofcertain EUmember States arerequired
torejectbidsfromU.S.firmsforpublicworks,suppliesandservicecontractsbelowcertainthresholds.110
Countries identified under theannual review prescribed byTitleVIIoftheTrade Agreement Actof
1979 arelisted insection (3)(iv).
88. TheForeign Corrupt Practices Actimposes onU.S. exporters certain standards ofconduct
when tendering forcontracts abroad. Under thisActU.S.companies arebanned frommaking direct
payments toforeign officials involved inevaluating tenders made bytheircompanies. According to
U.S. authorities, bribery efforts byforeign companies undermine thecompetitive position ofU.S.
companiesoninternationalmarkets.111TheU.S.authoritiesseektoimprovetransparencyofprocurement
policiesbyitstradingpartnersthroughtheimplementationoftheAgreementonGovernmentProcurement
aswellasthrough international co-operation intheOrganization ofEconomic Co-operation and
Development, theSummit oftheAmericas andAPEC.112
(7) Standards, Technical Regulations andConformity Assessment
(i) Overview
89. Standards areusedingovernment procurement specifications orenacted inorder toenhance
national security, theenvironment, health andsafety orconsumer information. Technical regulations
aregenerally based onvoluntary standards. Foreign firms andindividuals arefreetoparticipate in
theprocess ofvoluntary standard development. Most standards andtechnical regulations areenforced
110WTO (1995).
111Statement byDepartment ofCommerce Secretary Ron Brown totheSenate Banking Committee,
12October 1995.
112TheBureau ofNational Affairs, Inc.(1995c), pp.791-800.WT/TPR/S/16 Trade Policy Review
Page 90
through selfdeclaration, policed through product liability laws. However, third-party certification
isbecoming increasingly important andapproval ofcertifiers orofproducts bygovernment agents,
such astheOccupational Safety andHealth Administration (OSHA) andtheFood andDrug
Administration, ismandatory forselected products.
(ii) Development ofstandards andtechnical regulations
(a) Standards
90. Asinother countries, standards aredeveloped andadopted onavoluntary basis, mainly with
aviewtoimproving product compatibility. Suchstandards maybedeveloped through inter-firm co-
operation orcompetitive behaviour, assmaller firms adjust tostandards established bythemarket
leader. There areapproximately 600U.S.private formal andinformal standards developers, generally
organized around agiven industry, profession oracademic discipline. Within these organizations,
standards arewritten within technical committees made upbyvolunteer technical experts. Theefforts
ofmany ofthese private non-profit standards organizations areco-ordinated bytheprivate non-profit
American National Standards Institute (ANSI). Thisorganization hasestablished guidelines forthe
establishment andmanagement ofthestandards process inafairandopenmanner, however, itdoes
notreview standards ontheirtechnical merit. Ifamember organization usestheANSI-accredited
procedures, itmaychoose tohavethestandard approved anddistributed byANSI asanAmerican
National Standard.113Asof1996, more than49,000 standards hadbeenestablished through voluntary
private sector co-operation (Table III.10). Thisstandard-setting process ismonitored bytheFederal
TradeCommissionforcollusionandunfairordeceptivepracticesthatproduceanti-competitiveeffects.114
Table III.10
Number ofactive standards developed byagency/organization, 1991
Standards developing agency/organization Number ofstandards
Scientific andprofessional services 13,000
Trade associations 14,500
Standards-developing membership organizations 14,000
Total 41,500
Source: Toth, Robert B.,ed.Standards Activities ofOrganizations intheUnited States, NIST Special Publication 806.P.4,National
Institute ofStandards andTechnology, U.S.Department ofCommerce, Washington, D.C., U.S.Government Printing Office,
1991, citedin:National Research Council (1995), Standards Conformity Assessment andTrade Intothe21stCentury, National
Academy Press, Washington, D.C., p.27.
113National Research Council (1995).
114Asian Pacific Economic Co-operation (1993). However, observers notethat"Ineachcasewhere thesuit
wassuccessful, itwasthesubsequent interpretation ofthestandard bysome other party, suchasacertifier, that
wasdeemed anti-competitive." (National Research Council, 1995, p.35.)United States WT/TPR/S/16
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(b) Technical regulations
91. Technical regulations maybeestablished atthefederal, Stateorlocallevel.115They comprise
standards developed bytheprivate sector, orbypublic sector officials, which aremandated inthe
context ofspecific policy objectives ortobeusedinpublic procurement (section (6)). Federal
governmentagencieswhichdevelopstandardsortechnicalregulationsareencouragedtotakeinternational
standards intoconsideration andusethem ifappropriate.116Theuseoftechnical regulations bythe
Federal Government anditsagencies aswellasthedevelopment ofanational conformity assessment
programme iscoordinated bytheNational Institute ofStandards andTechnology (NIST).117TheFederal
government doesnothavetheauthority tocompel Stateauthorities totakeinternational standards into
account (Chapter II(2)). U.S.trading partners havenoted thatnational technical regulations provide
institutional stability incontrast tostandards developed andadopted bytheprivate sector, "product
safety requirements canchange overnight astheproduct liability insurance market makes anew
assessment ofwhatwillberequired forinsurance purposes".118
92. Themainpolicy objectives targeted bytechnical regulations are:national security, consumer
information, health andsafety, andenvironmental protection. Technical regulations maybeclassified
intodesign andperformance requirements applied toproducts andprocesses. Ingeneral, design
requirements areusedwhen practical obstacles existtotheenforcement ofperformance requirements.
Forexample,theFDAimposesstrictdesignstandardsonpharmaceuticalproductsaspracticaldifficulties
prohibit anassessment whether apharmaceutical produced byadifferent process isidentical inall
respects (Chapter IV(5)).
93. In1991, 8,500 technical regulations wereestablished atthefederal level.119TheUnited States
wasanoriginal signatory totheTokyo Round Agreement onTechnical Barriers toTrade andtheWTO
TBTAgreement. AsatJuly1996, 545technical regulations hadbeennotified totheGATT/WTO,
under theTokyo Round andWTO Agreements ashaving asignificant impact ontrade.120Most notified
measures were forhealth orsafety reasons; other purposes included consumer information and
environmental protection. Notifications ofregulations implemented toenhance public health andsafety
affected mainly motor vehicles, pharmaceutical products andfood; measures toimprove consumer
protection were most widespread inthefoodandbeverages sector (Chart III.9).
115Thedifferencebetweenstandardsandtechnicalregulationshasbecomeblurredassomestandardsarerequired
byprivate insurance companies toqualify forproduct liability andhealth insurance. Inview ofthecommercial
necessity ofinsurance some standards have become effectively technical requirements.
116TradeAgreemen tsActof1979,TitleIV,asmodifiedbytheUruguayRoundAgreemen tsAct;alsoNational
Technology Transfer andAdvancement Act(P.L. 104-113).
117NIST ispartoftheDepartment ofCommerce. TheSecretary ofCommerce hasresponsibility forco-
ordinating andfostering Executive Branch implementation ofP.L. 104-113.
118European Commission (1995).
119Toth (1991), p.27.
120Fifty-seven notifications were made during theperiod 1January 1995 to31July1996.WT/TPR/S/16 Trade Policy Review
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Specific trade-relevant product regulations
94. Statutes andregulations which havebeennoted fortheirimpact onimported products include:
theCorporate Average FuelEconomy Law(CAFE) of1975; theGasGuzzler Taxasspecified inthe
Energy TaxActof1978; theLuxury Excise Taxof1990, which alsoapplies tocarsonly; and
administrative regulations toimplement theClean AirActof1963 asamended in1990.121Product
regulations forautomobiles promulgated under these statutes havebeenmodified since thelastTrade
Policy Review (Chapter IV(4)). Newregulations havebeenpromulgated under theClean AirAct
specifying thecomposition andemissions effects ofgasoline. From 1January 1995, theGasoline Rule
permits onlygasoline ofaspecified cleanliness ("reformulated gasoline") tobesoldtoconsumers in
themost polluted areas inthecountry. Intherestofthecountry, onlygasoline nodirtier thanthat
soldinthebaseyearof1990 ("conventional gasoline") canbesold. Thequality ofgasoline soldin
1990 isestablished onarefinery-specific basis forrefineries which operated foratleastsixmonths
during thatyear. TheEnvironmental Protection Agency (EPA) established astatutory baseline, applied
torefiners whowerenotinoperation foratleastsixmonths in1990 andimports andblenders. The
regulations havebeensuccessfully challenged byBrazil andVenezuela inaWTO dispute settlement
case(Table AII.2c). TheUnited States hasindicated itsintention toimplement changes toitsregulations
soastoaccommodate thedecision oftheWTO Dispute Settlement Body; inthisregard, consultations
withtrading partners were proceeding asofmid-October 1996.
95. TheUnited States adheres toOECD Council Decision C(92)(39)(Final) governing trade in
recyclable waste withother OECD countries, buthasnotratified theBasel Convention. Exports of
waste havetobenotified bytheexporter totheEnvironmental Protection Agency (EPA) which informs
121TheU.S.FishandWildlife Service hasalsobanned imports ofselected endangered species asauthorized
under theEndangered Species Actof1973 (Table III.2).United States WT/TPR/S/16
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theimportingcountryasagreedinOECDCouncilDecisionC(86)(64)(Final).122Dumpingofradioactive
waste, aswellasthatofindustrial waste andincineration ofindustrial waste atseaisprohibited under
authority oftheOcean Dumping BanAct.
Environmental process regulations
96. Environmental regulations areissued atboththefederal andtheStatelevel. U.S.lawauthorizes
theenforcement ofenvironmental process regulations onimports under theMarine Mammal Protection
Actof1972, asamended; theInternational Dolphin Conservation Actof1992; Section 609ofPublic
Law101-162; Section 8oftheFisherman 'sProtective Actof1967, asamended; theHighSeasDriftnet
Fisheries Enforcement Act;andtheWildbird Conservation Actof1992.
97. TheUnited States hasaprimary embargo oncertain imports oftunafromColombia, Mexico,
Panama, Vanuatu andVenezuela under theUnited States Marine Mammals Protection Act.TheUnited
States currently alsoidentifies Costa Rica, ItalyandJapan as"intermediary nations" andthusprohibits
imports oftunafalling under theprovisions oftheActfromthese sources.123Asat31August 1996,
these restrictions hadnotbeenmodified since thelastTrade Policy Review. Legislative changes were
proposed in1996intheInternational Dolphin Conservation Program Bill,which would havepermitted
imports oftunafromthesignatories ofthePanama declaration countries, caught by"dolphin-friendly"
fishing methods ascertified bythegovernment oftheexporting country.124However, theBilldidnot
passthrough thelegislative process inthe1996 congressional session.
98. Following anorder bytheU.S.Court ofInternational Trade concerning thedriftnet moratorium
agreed bytheU.N. General Assembly andimplemented inU.S.lawbytheU.S.High SeasDriftnet
Fisheries Enforcement Actof1992, theSecretary oftheDepartment ofCommerce identified Italyon
28March 1996 as"acountry forwhich there isreason tobelieve itsnationals orvessels conduct
large-scale driftnet fishing beyond theexclusive economic zoneofanynation".125Consequently, as
of29May1996allfishandfishproducts imported fromItalyintotheUnited States require certification
byanofficial fromtheGovernment ofItalythattheproducts werenotharvested withlarge-scale driftnets
onthehighseas.Furthermore, theUnited States andItalyhaveentered intoanagreement toterminate
theuseoflarge-scale driftnet fishing byItalian national andvessels.
99. Section 609ofPublic Law101-162 prohibits theimport ofshrimp andshrimp products which
havebeenharvested withcommercial fishing technology thatmayadversely affect seaturtles. Until
theendof1995, theU.S.Administration interpreted thislawtoapply onlyto14nations oftheWider
Caribbean region. However, theU.S.Court ofInternational Trade ruled on29December 1995that
thelawappliestoanynationthatharvestsshrimp.Beginning1May1996,shrimpimportsareprohibited
unless theU.S. Department certifies either thattheharvesting nation hasadopted acomparable
programme toprotect seaturtles inthecourse ofcommercial fishing operations orthatthefishing
environment oftheharvesting nation doesnotposerisktoseaturtles. Thebasicelement ofacomparable
programme isarequirement thatcommercial shrimp trawl vessels useturtle excluder devices intimes
andareas where there isalikelihood ofintercepting seaturtles. Nations thatarenotcertified may
122OECD (1996c).
123Embargoes ontunaunder theActwere challenged under GATT dispute settlement cases in1992 bythe
ECandtheNetherlands, acting fortheNetherlands Antilles; aPanel ruling onthetwocases concluded that
theprimary andintermediary nations embargoes were notinconformity withU.S.obligations under theGATT.
124TheBillfollowed the"Panama Declaration"; aninternational agreement reached in1995, signed byBelize,
Colombia, Cost Rica, Ecuador, France, Honduras, Mexico, Panama, Spain, theUnited States,Vanuatu and
Venezuela.
125Federal Register, 29April 1996, Vol. 61,No.83,pp.18721-18722.WT/TPR/S/16 Trade Policy Review
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nevertheless continue toexport shrimp totheUnited States thatisharvested inways notharmful to
seaturtles; i.e.,shrimp thatis:harvested from aquaculture facilities inwhich theshrimp hasspent
atleast30daysinponds prior tobeing harvested; harvested byboats using turtle excluder devices;
harvested byboats thatretrieve netsthrough non-mechanical means; andharvested inareas inwhich
noseaturtles occur. Compliance withthese conditions must becertified byboththeharvester and
agovernment official oftheharvesting nation.126Thecountry oforigin isdeemed tobethenation
inwhose waters theshrimp isharvested whether ornottheharvesting vessel isflying theflagofanother
nation (Table III.2).
100. FromApril1994until30June1995theUnitedStatesimposedtradesanctionsonChineseTaipei
under thePelly Amendment totheFisherman 'sProtective Actof1967, oncharges thatChinese Taipei
wastolerating trade inbody partsofrhinoceroses andtigers thatareprotected under theConvention
onInternational Trade inEndangered Species. Thesanctions, covering approximately US$20 million
ofimportsfromChineseTaipei,wereliftedfollowingchangestoChineseTaipei'sWildlifeConservation
Law(Table III.3).127
101. TheAdministration hasalsoannounced thatitintends toaddress trade issues intheU.N.
Commission forSustainable Development 'sIntergovernmental Panel onForests, such astimber
certification andlabelling, andinthenegotiation andimplementation ofinternational environmental
agreements. TheUnited States isamember oftheInternational Tropical Timber Agreement, 1994,
which wasasuccessor ofthe1983 Agreement.
(iii) Conformity assessment procedures andcosts
102. Asinother countries, adjustment ofproducts tosatisfy standards andtechnical regulations,
aswellasthetesting ofcompliance, involves costs. Ingeneral, these costscanbeclassified intothree
categories: product design changes tosatisfy therelevant standard orregulation; conformity assessment
costs; andthecostoftime-delay inbringing theproduct ontothemarket. These costs mayform
atradebarrier iftheydiffer significantly between domestic producers andimporters. (TheAgreement
onTechnical Barriers toTrade, Article 5.2.5, acknowledges that"equitable" differences mayexist.)
(a) Adjustment costs
103. Adjustments ofexports totheU.S.regulatory requirements maybecostly, butremain profitable
forexporting firms duetothesizeoftheU.S.market. Even ifregulations apply toonlyalimited
number ofStates foreign producers haveadapted theirproducts inviewofthemarket opportunities:
forexample, inspiteofsubstantial costs, foreign automobile manufactures haveadapted theirproducts
tothestricter Californian standards (Chapter IV(4)).128However, adjustment costsmaybeparticularly
highinthecaseofselected sanitary andphytosanitary measures which serve asaneffective import
banforcertain products from selected trading partners (Chapter IV(2)). Noestimates areavailable
ofcross-sectoral costs ofcompliance.
(b) Certification andtesting -direct costs
104. AU.S.conformity assessment maybecarried outbytheproducer orimporter; anindependent
testing authority; ortheGovernment. Theproducer orimporter maytestwhether products conform
tothestandard andissueadeclaration ofconformity (self-certification ormanufacturer 'sdeclaration);
126Federal Register, 19April 1996, Vol61,No.77,page 17342-17344.
127Bureau ofNational Affairs, Inc.(1995d), p.1135.
128Asian Pacific Economic Co-operation (1993).United States WT/TPR/S/16
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self-certification ispoliced through product liability laws. Insurance companies, regulating authorities
orother customers mayrequire independent testing bythird parties beyond self-certification bythe
producers involved.
105. Thetesting process involves coststobothU.S.andforeign suppliers. Direct costsoftesting
aregeneratedatthreelevels:(i)theproducer'sin-houseassessmentofconformitytostandards;(ii)costs
ofusing third-party conformity assessment bodies; and(iii)inthecaseofselected products, costto
theGovernment ofcertifying products and/or accrediting testing laboratories orengineering companies.
Table III.11 gives anindication ofthedevelopment oftherevenues ofonecategory ofthird-party
conformity assessment companies revenues over time. Inaddition toindependent laboratories,
engineering firms arealsoinvolved inindependent testing. Total revenues ofallfirms directly engaged
intesting thusexceed theUS$5.6 billion presented inTable III.11 andareestimated tohavebeen
approximately US$10.5 billion in1992.129
Table III.11
Revenues ofindependent testing laboratories, 1985-92
(US$ billion)
Year Profit oriented services Nonprofit services Total services
1985 2.1 0.2 2.3
1986 2.2 0.2 2.4
1987 2.4 0.2 2.6
1988 3.1 0.3 3.4
1989 3.8 0.4 4.2
1990 4.5 0.4 5.0
1991 4.8 0.5 5.3
1992 5.1 0.5 5.6
Source: U.S.Bureau oftheCensus, Census ofService Industries: Subject Series, Miscellaneous Subjects .Summary pp.4-9and4-11.
Washington, D.C.: U.S.Government Printing Office, 1987; U.S.Bureau oftheCensus, Service Annual Survey: 1991 (p.25)
and1992 (p.18), Washington, D.C., Government Printing Office, 1993 and1994. citedin:National Research Council (1995),
Standards Conformity Assessment andTrade Intothe21stCentury, National Academy Press, Washington, D.C., p.71.
106. Tofacilitate teststhatassess compliance withtechnical regulations, authorities maygiveofficial
recognitiontoanindependenttestingauthoritythroughaccreditationorsimilarmeasures.130Forexample,
theOccupational Safety andHealth Administration (OSHA) oftheU.S.Department ofLabor operates
aprogrammeforaccreditingthird-partycertificationbodies(NationallyRecognizedTestingLaboratories,
NRTLs) which certify compliance withOSHA standards andregulations. Insome cases, State
authorities arecertified toinspect ortestproducts under authority delegated bytheFederal Government;
129National Research Council (1995), p.72.
130TheFederal Communications Commission (FCC), forexample, requires laboratories tofileinformation
todemonstrate thattheyarecapable ofmaking thenecessary measurements; theNational Institute ofStandards
andTechnology oftheDepartment ofCommerce hasavoluntary programme; other agencies employ other
programmes. (Asian Pacific Economic Co-operation, 1993.WT/TPR/S/16 Trade Policy Review
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anexample istheinspection byState authorities ofmeatcarried outaccording toU.S.Department
ofAgriculture regulations. U.S.trading partners havenoted thefollowing examples inwhich accredited
testing companies oragencies givepreference toU.S.manufactured products intheirtests:131
- allpressure equipment imported intotheUnited States musthavea"U"or"B"stamp
oftheAmericanSocietyofMechanicalEngineers(ASME).Suchstampsareonlyissued
topressure vessels made withU.S.materials; and
- over-the-counter drug approval procedures used bythefederal Food andDrug
Administration require adrugingredient tohaveaU.S.market history.
107. Certification offoreign inspection authorities allows preshipment compliance testsofimported
goods; absence ofsuchpreshipment testsmaydeter wholesalers orretailers from selling products
thataresubject toproduct liability laws.132According totheauthorities "Many certifiers havewell-
structured, functioning agreements fortheexchange oftestdataandsystem audits onwhich certification
isbased".133Such agreements aredeveloped onaproduct- andtrading-partner-specific basis, such
astheOSHA accreditation process, which hasaccredited some foreign testing organizations. U.S.
accreditedorganizationsalsoallowselectedforeignorganizationstoevaluatedatapackagesandproducts,
while theU.S.companies retain responsibility fortheevaluation andcertification. According tothe
authorities, theAmerican National Standards Institute "isalsoworking co-operatively withthenational
accreditation systems intheU.K., theNetherlands, andCanada toestablish thecommonality ofthe
accreditation processes with theultimate goal ofachieving mutual recognition agreements".134
Harmonization ofstandards andtechnical requirements, aswellasmethods toreduce compliance costs
arebeing discussed inallregional groups inwhich theUnited States participates (Chapter II(3)). The
NAFTA Agreement obliges thesignatories toaccept datafromdesignated testcentres andlaboratories
located intheterritories oftheother parties which demonstrate compliance withtelecommunication
equipment authorization requirements.135
(c) Certification andtesting -time-delay costs ofbringing products onthemarket
108. Inaddition totheirdirect costs, testsmayincrease product costs totheextent thattheydelay
newproducts reaching themarket. Thecosts ofdelays inbringing anewproduct onthemarket are
particularly highwhen theproduct lifeislimited asaresult ofalimited conservation period, rapid
technological change, ortime-limited patent protection. Suchdelays areimportant forU.S.andforeign
produced products alike. However, ithasbeenasserted that"With theU.S.firms themselves being
involvedinestablishingandmodifyingU.S.standards,thetimetakentoobtaincertificationofcompliance
withthese standards forforeign-made products isgenerally much longer thanforlocalproducts".136
109. Alimited product conservation period isparticularly relevant toagricultural andfoodproducts,
where implementation offederal marketing orders under Section 8eoftheAgricultural Marketing
131Government ofAustralia (1995); andEuropean Commission (1995).
132Government ofAustralia (1995).
133Asian Pacific Economic Co-operation (1993).
134Asian Pacific Economic Co-operation forum (1993), p.17.
135U.S. Trade Representative (1996).
136Australia Department ofForeign Affairs andTrade (1995), p.16.United States WT/TPR/S/16
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Agreement Actof1937hasbeenamatter ofconcern toU.S.trading partners.137Over20agricultural
commodities aresubject totheseorders, which include inspection requirements, minimum size,grade,
quality andmaturity requirements (Chapter IV(2)). In1995 theburden oftesting wassignificantly
increased ontomato imports fromMexico, which aresoldasindividual ripepieces (Chapter IV(2)).
110. Theduration oftesting mayalsoundermine thecommercial value oftime-limited intellectual
property. Tests bytheFDAofnewdrugs takeonaverage 10years, thusundermining thecommercial
value ofpatent protected pharmaceuticals which were limited toa17-year protection period, taken
fromthetimeofinvention. Inresponse the1984Drug Price Competition andPatent Restoration Act
restored patent lifeforpharmaceuticals, which hadbeenlostduetothelengthy FDA testing process
(Chapter IV(5)). Nocompensation isavailable forother products forwhich theeffective period of
intellectual property protection hasbeenshortened asaresult oftime-intensive product approval testing.
(iv) International co-operation andagreements
111. Ingeneral, international co-operation intheareaofstandards andtechnical regulations can
beclassified intoco-operation which focuses ontheharmonization ofthestandards andregulations
themselvesandinternationalrecognitionofconformityassessmentprocedures.Internationalorganizations
suchastheInternational Organization forStandardization (ISO) andtheInternational Electrotechnical
Commission (IEC) facilitate international co-operation inthestandard-setting process. Onabilateral
basis, some trading partners haveaccepted U.S.standards, while theU.S.federal technical regulations
takeinternationalstandardsintoconsideration.Nomultilateral,regionalorbilateralagreementmandates
theUnited States toautomatically accept regulations developed outside theUnited States unless approved
asaU.S.regulation. TheUnited States ispartner inanumber ofmutual recognition agreements in
which foreign conformity assessments ofU.S.regulations areaccepted onabilateral product-specific
basis. Onacase-by-case basis, some authorities intheUnited States haveaccredited selected foreign
testing agencies.
112. AsofMay1989theUnited States participated in189international orregional standard setting
organizations. Ingeneral theU.S. Government isthemember oftreaty organizations, while the
American National Standards Institute (ANSI) isthemember body oftheISOandtheIEC, andco-
ordinates theU.S.representation innon-governmental regional fora.
113. Acceptance ofU.S.standards ortechnical regulations is,insome markets, subject tomutual
recognition agreements applied bygovernment agencies onasector-specific basis. Selected examples
ofsuchagreements are:138
- bilateral agreements concluded bytheU.S. Food andDrug Administration andthe
U.S.Environmental Protection Agency tofacilitate theapproval ofchemical products
withtherelevant authorities inFrance, Germany, Italy, theNetherlands, theUnited
Kingdom, Sweden, Switzerland, Canada andJapan; and
- recognition, under reciprocal agreements, by21contracting parties ofcertificates issued
under theAgreement ontheInternational Carriage ofPerishable Foodstuff Act.
114. Some U.S. trading partners automatically accept orhaveadopted U.S. standards, technical
regulations andconformity tests.139Others, including Mexico, Brazil, Japan andSaudi Arabia, have
137GATT (1994).
138Asia-Pacific Economic Co-operation (1993), p.22.
139Asia-Pacific Economic Co-operation (1993), p.22.WT/TPR/S/16 Trade Policy Review
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received technical assistance fromtheU.S.Department ofCommerce 'sNational Institute ofStandards
andTechnology.
115. StandardsasappliedbyU.S.tradingpartnersmaybesubjecttoSection301actions/WTOdispute
settlement provisions. Standards applied bytheGovernment ofJapan havebeenaddressed inbilateral
agreements (Table II.2). Disputes withKorea concerned phytosanitary measures applied toimports
ofmeatandmeatproducts (Chapter II(3)(iv)(d)).
(8) Trade-Related Intellectual Property Rights
(i) Overview ofintellectual property protection
116. TheU.S.Constitution, Article I,Section 8,Clause 8,grants power totheU.S.Congress, rather
thantotheStates, topassstatutes pertaining topatents andcopyrights. TheClause authorizes Congress
topromote science bygiving authors theexclusive rights totheirwritings andtopromote the"useful
arts"bygiving inventors theexclusive rights totheirdiscoveries forlimited times. Thisclause ensures
thatfederal lawsproviding protection forpatents, copyrights, industrial designs andlayout-designs
ofintegrated circuits would preempt anycompeting State laws.
117. Incontrast topatent andcopyright protection, trademark protection isenacted atthefederal
level under Congress 'general constitutional authority toregulate inter-State andforeign commerce
andunder treaty powers. Trademark protection isalsoavailable under Statestatutes andcommon law.
Appellations oforigin areprotected under trademark lawiftheappellation atissuefunctions asamark
toidentify thesource ofgoods andservices. Trade secrets are,forthemost part,protected under
State, notfederal, law.
(a) Requirements for,andduration of,protection ofintellectual property rights
118. Patents, including patents forindustrial designs aregranted bythePatent andTrademark Office
(PTO). Patents arepresumed validuponregistration butcanalways bechallenged inlitigation. U.S.
patent lawandpatent registration isbased onthefirst-to-invent rule,rather thanthefirst-to-file rule.
Tobepatentable, aninvention mustbenew,useful, unobvious (contain aninventive step)andbefully
disclosed. Working apatented invention isnotarequirement forprotection. Thetermofautility
patent (patent ofinvention) is20years fromthefiling dateoftheearliest filedandrelated application
forapplications filedafter8June1995; forthose inforce onthatdate,orissued afterorapplications
filedbefore thatdate,thetermis20years fromthefiling dateoftheearliest filedandrelated application
or17years fromthegrantofapplication, whichever isthelonger.140Patent protection maybeextended
foratotal offiveyears tocompensate forcertain delays inprosecution and, inthecaseof
pharmaceuticals, foranadditional fiveyears fordelays inthegrant ofmarketing approval.141Patents
forindustrial designs areinforce for14years measured from thedateofgrant142(subject tocertain
limitations, protection forindustrial designs isalsoavailable under U.S.copyright andtrademark law).
Only inventions ordiscoveries usedsolely onutilization ofspecial nuclear material oratomic energy
inanatomic weapon areexcluded bystatute from patentable subject matter.143U.S.patent grants,
14035U.S.C. 173.
14135U.S.C. 154and156.
14235U.S.C. 154.
14342U.S.C. 2181United States WT/TPR/S/16
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butnotapplications,arepublished.144Informationinpatent
applications maybetreated asatrade secret untilpublication.
119. Onthebasis ofanapplication forpatent ordesign registration inaParis Convention country
andcertain othercountries, theapplicant maywithin 12orsixmonths, respectively, apply forprotection
intheUnited States andreceive theearlier priority filing date. Asof1January 1994, Section 104
ofthePatent Actwasmodified topermit activities occurring inaNAFTA country tobeusedtoestablish
adateofinventionwhendeterminingwhoisfirsttofileapatentapplication.ActivitiesinWTOmembers
maybesousedfrom 1January 1996.145
120. TheUruguay Round Agreements Actestablished aprovisional patent application system.146
Thissystem allows anapplicant tofileasimplified application, "thatcanserve asabasis foraclaim
ofpriority iftheapplicant subsequently filesaformal application within 12months ofthefiling of
theprovisional application".147Claims forpriority canbedomestic orforeign.
121. Allcopyrighted works, including computer software, areprotected forthelifeoftheauthor
plus50years or,ifproduced anonymously orasaworkforhire,75years frompublication or100years
fromcreation, whichever expires first.148Section 514oftheUruguay Round Agreements Actrestores
copyright protection to"virtually allcopyrighted works, including sound recordings from members
oftheWTO ortheBerne Union thatarenotinthepublic domain intheirsource country" andhave
fallen intothepublic domain intheUnited States forareason other thanthenormal expiry oftheterm
ofprotection.149Copyright protection isalsoavailable fororiginal ornamental features ofindustrial
designs. Noregistration isrequired forcopyright protection. Registration withtheCopyright Office
allows forrecovery ofstatutory damages, costs andattorney 'sfeesincaseofinfringement. Such
registration isnotnecessary forforeign copyrighted works protected bytheBerne Convention and
works protected byanyother WTO members. Generally available remedies include actual damages
andinjunctive relief.
122. TheSemiconductor ChipProtection Actof1984established protection fordesigns ofintegrated
circuits under a"suigeneris protection" régime, effective asof1January 1985. Protection isnot
available fordesigns that(i)arenotoriginal; or(ii)consist ofdesigns thatarestaple, commonplace,
orfamiliar inthesemiconductor industry, orvariations ofsuchdesigns, combined inawaythat,
considered asawhole, arenotoriginal.150Asinthecaseofcopyright law,theSemiconductor Chip
144TheU.S.-Japan August 1994 bilateral intellectual property rights agreement "..requires theU.S.Patent
andTrademark Office topublish pending patent applications 18months afterfiling, beginning withapplication
filed after 1January 1996" (U.S. Trade Representative, 1995, p.66.)
145UruguayRoundAgreemen tAct,Section531(b)(2)"Anapplicantforpatent,orapatentee,maynotestablish
adateofinvention forpurposes ofTitle 35,United States Code, thatisearlier than12months after thedate
ofentry intoforce oftheWTO Agreement withrespect totheUnited States byreference toknowledge ofuse,
orother activity, inaWTO member country except asprovided inSections 119and365ofsuch title."
146Uruguay Round Agreements ActSection 532(b)(3); Subsection 111(b) ofTitle 35oftheUnited State
Code.
147Statement ofAdministrative Action (1994), p.1004.
148Limited exceptions apply tocopyright protection (17U.S.C. 107-120).
149Statement ofAdministrative Action (1994), p.993.
150Semiconductor Chip Protection Actof1984, Section 902(b).WT/TPR/S/16 Trade Policy Review
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Protection Actof1984 protected theexpression ofanideabutnottheideaitself.151Observers have
notedthatthelegislativehistoryoftheAct
clearly intends toallow forreverse engineering.152
123. Protection granted under theSemiconductor ChipProtection Actof1984isextended tonationals
ofWTO Members andother countries thatprovide anequivalent levelofprotection forU.S.designs.
Thetermofprotection istenyears fromthedateofregistration orfromfirstcommercial exploitation,
whichever occurs first,anywhere intheworld.153Owners ofdesigns mustapply forregistration within
twoyears ofcommercial exploitation ofthedesigns anywhere intheworld. Asof1January 1994,
9,532 mask works hadbeenregistered withtheU.S.Copyright Office (Chapter IV(6)(i)).
124. Ablank tapelevyisapplied todigital audio recording media andequipment. Thelevyis3per
centforall"blank tapes" suitable fordigital audio recording. Inaddition, royalty payments areset
at2percentofthetransfer priceofdigital audio recorders distributed intheUnited States irrespective
whether theyareimported ordomestically manufactured, withspecific adjustment totakeaccount of
higherpricesforcombineddevices.154PaymentsaremadetotheRegisterofCopyrightsandsubsequently
distributed tointerested copyright owners aswellasthemusic works fund.155Nolevyapplies toanalog
recording devices oraudiovisual recording equipment.
125. Trademarks areprotected bycommon lawonthebasis ofuse; protection isalsoavailable
under Statelaw.Protection under federal lawmaybeobtained byfiling anapplication forregistration
withtheU.S.Patent andTrademark Office.156Exceptions toprotection under thefederal trademark
lawarespecified.157Registration oftradeandservice marks withtheU.S.Patent andTrademark Office
isforaduration oftenyears, renewable forsubsequent periods aslongasthemark isinuse.Between
thefifthandthesixthyears following registration theowner mustprovide anaffidavit ofusetoavoid
cancellation.158Three years ofnon-use ofatrademark isconsidered prima facie evidence ofits
abandonment.159Onthebasisofanapplication fortrademark registration inaParisConvention country
andcertain other countries, theapplicant maywithin sixmonths apply forprotection intheUnited
States andreceive theearlier filing dateinthatcountry.
151"Innocasedoesprotection under thischapter foramask work extend toanyidea, procedure, process,
system, method oroperation, concept, principle, ordiscovery, regardless oftheform inwhich itisdescribed,
explained illustrated, orembodied insuchwork". (Semiconductor Chip Protection Actof1984, Section 902(c)).
152"Iftheresulting semiconductor chipproduct isnotsubstantially identical totheoriginal, anditsdesign
involved significant toilandinvestment sothatitisnotamere plagiarism, itdoesnotinfringe theoriginal chip,
even ifthelayout ofthetwochips is,insubstantial part, similar". (Senate memorandum, S12917 andHouse
Memorandum, E4433, ascited in:Christie (1995), p.144.
15317U.S.C. 904
15417.U.S.C. 1004.
15517U.S.C. 1005-1007.
15615U.S.C. 1051.
15715U.S.C. 1052(a)-(e).
15815U.S.C. 1058, 1059
159Section 45oftheTrademark Actasamended bytheUruguay Round Agreements Act,Section 521.United States WT/TPR/S/16
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126. Geographical indications canberegistered ascertification marks bypersons, nations, States
andmunicipalities byfiling anapplication withtheU.S.Patent andTrademark Office.160Geographical
indications ofwines andspirits arealsoprotected pursuant totheFederal Alcohol Administration (FAA)
Actof1935.161Under thisact,alcohol products (wine, beeranddistilled spirits) maynotbesoldin
theUnited States without advance labelapproval fromtheBureau ofAlcohol, Tobacco andFirearms
(BATF) oftheU.S.Treasury (section (2)(iii)). TheFAA Actrequires theBATF toprescribe such
regulations aswillprotect theconsumer frombeing misled ordeceived atwill.162Asof1January 1996,
geographical indications forwines orspirits thatinfactdonotoriginate intheindicated areaarerefused
labelapproval. Geographical indications inuseprior tothatdatemaybemaintained eveniftheydo
notindicate thecorrect origin oftheproducts.163There isnofixed termofprotection. Geographical
indications areprotected aslongastheconditions necessary forprotection aremaintained.
127. Undisclosed information isgenerally protected under State, notfederal, law. There arethree
elements ofatradesecret: itmustnotbegenerally known orreadily ascertainable, havevalue because
ofitssecrecy, andbesubject toreasonable measures tokeepitsecret. Protection doesnotpreclude
usebyothers whodeveloped thesame secret independently. Thetermofprotection isunlimited as
longastheelements noted arepresent. Asnoted, theinformation contained inpending patent
applications maybetreated astrade secrets.
(b) Enforcement ofintellectual property rights
128. Intellectualpropertyrightsinfringementcasesmaybesettledinthecourts.Protectionisavailable
against imported infringing goods under Section 337ofthe1930 Tariff Act,inanaction bytheU.S.
International Trade Commission.164Inaddition, inthecaseofcopyrights andtrademarks theU.S.
Customs Service willtakeenforcement action directly against infringing imported merchandise ifa
federal trademark orcopyright registration hasbeenrecorded withCustoms.165
129. TheUSITC hasthelegal authority toinvestigate allegations regarding theimportation of
infringing goods based onacomplaint filedbytheinjured party orontheCommission 'sowninitiative.
Upon afinding ofviolation, theCommission canissueanorder excluding imports onthebasisofunfair
competition orunfair actsorinfringement ofU.S.patents, copyrights, trademarks ormask works.
Moreover, theCommission canissue anorder providing forseizure andforfeiture ofimported
16015U.S.C. 1051.
16127U.S.C., para. 201etseq.(cited in:Alford, 1995, p.126).
162Thelabel willthus"...provide theconsumer withadequate information astotheidentity andquality of
theproducts". 27U.S.C., para. 205(e)(2) (cited in:Alford, 1995, p.126).
163Statement ofAdministrative Action (1994), p.1000.
164TheU.S. Customs Service doesnothavethelegal authority tomake patent infringement determinations;
thusitdoesnotinitiate exofficio action tostopimported goods thatmayinfringe apatent. Totheextent that
an"industrial design" iscovered byU.S. copyright law,Customs hasauthority toprotect copyrighted designs
andwilldosoifthedesign isrecorded withCustoms. TheSemiconductor Chip Protection Actof1984 includes
aprovisionthatsubjectsimportedinfringingmaskworkstoseizureaspropertyimportedinviolationoftheCustoms
law;however, Customs hasnotyetimplemented regulations forexofficio action.
165There arecircumstances inwhich copyright owners donothave torecord aU.S. copyright registration
certificate inorder toobtain Customs enforcement against infringing imports. Foreign copyrighted works that
areprotected under theBerne Convention fortheProtection ofLiterary andArtistic Works arenotsubject to
registration formalities andcanobtain protection without submitting aU.S. copyright registration. Inaddition,
Customs protection against theimportation ofpirate sound recordings canbeobtained without acopyright
registration certificate.WT/TPR/S/16 Trade Policy Review
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merchandise ifthemerchandise isimported inviolation oftheCommission exclusion order. Such
anorder canbeissued regardless ofwhere theinfringing goods areproduced. ThePresident hasthe
authoritytodisapprovetheCommission'sactionsforpolicyreasons.166Reasonsmayincludethe"order's
effect onpublic health andwelfare, U.S.consumers andtheproduction ofsimilar U.S.products, or
foreign policy reasons".167Asat31December 1994, 44exclusion orders were ineffect mainly
concerningviolationsofU.S.patents.168During1995,theUSITCinitiated14Section337investigations
ascompared to11investigations during 1994. Investigations launched during 1995leadtooneformal
enforcement proceeding; threelimited exclusion orders, specifying oneormore firms, wereconcluded
ofwhich twowere implemented byyearend,while thePresident 'spolicy review overathird was
stillpending.169
130. AGATT dispute-settlement panel found inJanuary 1989 thatSection 337wasinconsistent
withGATT Article III.4.170TheUnited States hassince amended Section 337oftheTariff Actof
1930 aspartoftheUruguay Round Agreements Act. Specifically, ithasamended thelegislation to
eliminate therequirement thattheUSITC issue afinaldetermination within afixed period oftime;
toauthorize district courtjudges tosuspend; infringement proceedings brought against imported goods
inadistrict court inparallel tothesame issuepending before theUSITC; andtopermit respondents
inaSection 337casetoraisecounterclaims. Other amendments relate togeneral exclusion, bonding
requirements anddeference accorded toarbitration agreements. According totheauthorities "The
amendments bring U.S.procedures intoconformity withnational treatment obligations under GATT
1994, while providing fortheeffective enforcement ofintellectual property rights attheborder".171
(c) Parallel imports andcompulsory licensing
131. Ingeneral, parallel importation ofgoods embodying intellectual property maybeprevented
bytherightholder inthecaseofgoods embodying copyright orpatent (including patent foranindustrial
design). Parallel imports oftrademarked goods areallowed ifboththeforeign andtheU.S.products
areowned orcontrolled bythesame person orbusiness entity, except inthecaseofcontractual
provisions tothecontrary orwhere theparallel imports arematerially, physically different thanthe
goods bearing theU.S.registered trademark.172Inprinciple, parallel imports ofproducts protected
byatrademark andapatent could besubject toeither régime.
132. U.S.competition lawdoesnotrequire theowner ofintellectual property tocreate competition
undermining itsownrights, butdoesprevent actswhich mayharm competition through unreasonable
conduct inconnection withsuchproperty.173Thekeycompetitive issueraised bylicensing arrangements
iswhether theyharm competition among entities thatwould have been actual orlikely potential
166U.S. Trade Representative (1996).
167U.S. Trade Representative (1996).
168Imports from Chinese Taipei were subject toSection 337excluding orders in28cases, aswere byimports
from Hong Kong (9cases), Korea (7cases) andJapan (5cases). (U.S. International Trade Commission (1995).
169U.S. Trade Representative (1996).
170GATT (1994), pp.74-75.
171Statement ofAdministrative Action (1994), p.704.
172LeverBrothersCo.versusUnitedStates,981F.2d1330(D.C.Cir.1993).AccordingtotheU.S.authorities,
theU.S. Customs Service hasnotyetpromulgated regulations implementing thisdecision.
173U.S. Department ofJustice andtheFederal Trade Commission (1995b), p.4.United States WT/TPR/S/16
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competitors intheabsence ofthearrangement. Such harm could occur if,forexample, thelicences
foreclose access tocompeting technologies, prevent licensees from developing theirowncompeting
technologies orfacilitate market allocation orprice-fixing foranyproduct orservice supplied bythe
licensees.174Inrareoccurrences, courts haveissued compulsory licences forpatents toremedy violations
ofthelawsagainst unfair competition.
133. TheFederal Government mayuseanypatented invention, copyrighted work, industrial design
orlay-out design ofintegrated circuits fornon-commercial purposes subject tothepayment ofdamages
forsuchuse.175According totheU.S.authorities, "Itisnotpossible toprovide information onthe
number ofpatents usedbytheGovernment orthirdparties authorized bytheGovernment". Individual
agencies thatmight beaware thatthegoods orservices theyareprocuring areprotected byparticular
intellectual property rights would negotiate directly withtheintellectual property owner butthere is
norequirement thattheinformation bereported tosome central body. TheU.S.Government also,
because oftheexpense, doesnotmaintain aseparate compilation oftheU.S.Court ofFederal Claims
cases dealing onlywithGovernment useofintellectual property rights.
134. Compulsory licensing ofpatents isauthorized under theAtomic Energy Act,theClear Air
ActandtheEnergy Policy Act.Compulsory licensing ofcopyrights isavailable inthefollowing cases:
secondary transmissions bycable176;non-dramatic musical work oncephono-records oftheworks
havebeendistributed intheUnited States177;andtransmissions bysuper-stations andsatellite carriers.178
Secondary transmissions under compulsory licence maynotaltertheprimary transmission. Royalty
ratesforcompulsory licensing ofcopyright works aresetthrough negotiations among theinterested
parties orbytheCopyright Arbitration Royalty Panel, whose decisions maybechallenged incourt.
(d) International commitments
135. TheU.S. holds thefollowing position ininternational agreements mentioned intheTRIPS
Agreement:
- TheUnited States isamember oftheParis Convention fortheProtection ofIndustrial
Property (Stockholm Act). Ofthe177,388 patent applications received during 1992,
49.8percentwerefiledbynon-residents,ofwhich21.8percentoriginatedfromJapan.
- In1989, theUnited States became amember oftheBerne Convention fortheProtection
ofLiterary andArtistic Works. TheBerne Convention Implementation Actof1988
made thenecessary changes toU.S. lawtoimplement U.S. obligations under the
Convention. TheUnited States protects moral rights inaccordance withArticle 6bis
oftheConvention through acombination ofState andfederal law.
- TheUnited States isnotamember oftheRome Convention, "International Convention
fortheProtection ofPerformers, Producers ofPhonograms andBroadcasting
Organizations". TheConvention provides for,among otherthings, performance rights
174U.S. Department ofJustice andtheFederal Trade Commission (1995b), p.6.
17528U.S.C. 1498.
17617U.S.C. III(8)(c), (d).
17717U.S.C. 115.
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insound recordings, which aregranted under U.S. lawwithrespect toon-demand
andsubscription ofdigital transmissions.179
- TheUnited States isnotamember oftheTreaty onIntellectual Property inRespect
ofIntegrated Circuits.
(ii) Therôleofintellectual property intheU.S.economy
136. Theeconomic value ofintellectual property rights totheirowner isbased ontherevenue they
generate orareexpected togenerate. Financial investments intheestablishment ofbrand names through
advertising andinthedevelopment ofpatentable technology through research anddevelopment suggest
thatintellectual property rights represent substantial value incommercial markets.180Revenue might
begenerated (i)through thesaleofgoods andservices whose prices contain areward forintellectual
property embodied inthem or(ii)through licensing orfranchising ofintellectual property.181
137. Historically, investments inintellectual property have, byandlarge, beenexploited through
thesalesofgoods andservices, while licensing hasbeenofsecondary importance, bothdomestically
andinternationally. Noeconomy-wide quantitative dataareavailable ontheshare ofdomestic sales
thatcanbeattributed to"brand names", patents orcopyright protection. Observers note, however,
thatindustries which depend oncopyright protection havegrown faster thanaverage, increasing their
share ofGDP.182Quantitative dataareavailable forinternational receipts andpayments only. Most
international receipts andpayments fortheuseofintellectual property arebetween affiliated companies.
Thismaysupport thehypothesis thatdirect exploitation ofintellectual property isalsogenerally realized
through cross-boarder salesofgoods andservices rather thanlicensing. Intra-company payments of
intellectual property asashare oftotalintellectual property payments aremore important forexports
thanforimports (Chart III.10). TheUnited States hadasignificant surplus ofintellectual property
payments, improving thecurrent account deficit byaround 15percent.
138. There areimportant differences among trading partners intheshare ofintra-company payments
intotalpayments. Receipts fromunaffiliated companies asashare oftotalreceipts wereparticularly
large inJapan andtheRepublic ofKorea. Incountries withalarge stock ofU.S.-owned foreign
investment, most international royalty andlicence payments were realized byaffiliated companies.
Foreign investment -and,byimplication, itsregulatory environment -isthusparticularly important
forinternational trade inintellectual property.
139. Inviewofthelargeshare ofintellectual property receipts fromforeign direct investment abroad,
itistobeexpected thatprotection forintellectual property isadeterminant ofsuchcapital flows.
Protection forintellectual property isamore important determinant formanufacturing andresearch
activities thanfortheestablishment ofsalesanddistribution outlets.183Thechemical andpharmaceutical
sector appears tobeextremely vigilant about theprotection ofintellectual property inmaking its
investments abroad (Chapter IV(5)).
17917U.S.C. 106(6).
180Thevalue ofthestock ofintellectual property rights would depend onthecurrent andexpected revenue
from thesaleofthese rights. Thetotalvalue ofintellectual property percompany could beindicated bythe
market value minus thebook value (Parr andSmith, 1994, pp.39-68). However suchestimates include goodwill,
which isgenerally, assuch, notconsidered anintellectual property right.
181Franchising captures areturn onthecombined value ofintellectual property rights andgoodwill.
182Siwek andFurchtgott-Roth (1995).
183Mansfield (1995).United States WT/TPR/S/16
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(iii) Intellectual property inU.S.regional andbilateral agreements
140. TheNAFTA istheonlycomprehensive regional trade agreement inwhich theUnited States
participates thatincludes provisions forintellectual property protection.184Some provisions gobeyond
theTRIPS Agreement forexample broader application ofthenational treatment rule,more extensive
protection intheareaofcopyrightandrelated rights, ashorter transition period forimplementation,
pipeline protection forpharmaceuticals andagricultural chemicals, andgreater restrictions ondependent
patent compulsory licensing. Therighttotakeaction against parallel imports fromCanada andMexico
isthesame asforimports fromother countries. Inother areas, suchasthegeographical indications,
theNAFTA Agreement doesnotgoasfarastheTRIPS Agreement.
141. Inaddition, theUnited States hasconcluded anumber ofbilateral agreements regarding
intellectual property protection. Asunder theNAFTA Agreement, theUnited States seeks through
these agreements, among other improvements, toprovide forshorter transition periods thanthose
specified intheTRIPS Agreement, andforpipeline protection forpharmaceutical andagricultural
chemical products. Asageneral rule,theUnited States onlyconcludes bilateral investment agreements
withcountries thathavealsoagreed toabilateral intellectual property rights agreement.
142. TheUnited States monitors bilaterally theprotection forintellectual property extended byall
itstrading partners. Irrespective ofwhether abilateral agreement isinforce, theUSTR isrequired
toidentify countries thatdenyadequate andeffective protection ofintellectual property rights orfair
andequitable market access toU.S.persons thatrelyuponintellectual property protection, within 30
daysofthepublication oftheNational Trade Estimates Report (section (3)(iv)).185
184TheUnitedStatesisamemb erofregionalintellectualpropertyagreemen tssuchastheGeneralInter-American
Convention forTrade Mark andCommercial Protection, andparticipates inother regional initiatives involving
IP,such astheFTAA andAPEC.
185Those countries whose practices areregarded bytheUnited States asthemost egregious andashaving
thegreatest effect onU.S. interests aredesignated as"priority foreign countries" which maybesubject toa
"Special 301"investigation. On30April 1996, theUSTR announced thatChina wasdesignated apriority foreign
country forfailure toimplement the1995 intellectual property enforcement agreement. Eight trading partners
were placed onthe"priority watch list"and26onthe"watch list".