WORLD TRADE ORGANIZATION  
ORGANISATION MONDIALE DU COMMERCE  
ORGANIZACIÓN MUNDIAL DEL COMERCIO WT/TPR/M/126/Add.3 
22 November 2004 
 (04-5013) 
Trade Policy Review Body 
14 and 16 January 2004 Original:  English/ 
                 anglais/                  inglés 
  
TRADE POLICY REVIEW 
UNITED STATES 
Minutes of Meeting
 
Addendum  
Chairperson:  H.E. Mrs. Mary Whelan (Ireland) 
 This document contains the final responses from the United States1. 
__________________________________________________________________________________  
Organe d'examen des politiques commerciales 
14 et 16 janvier 2004  
 
EXAMEN DES POLITIQUES COMMERCIALES 
ÉTATS-UNIS 
Compte rendu de la réunion
 
Addendum  
Présidente:  S.E. Mme Mary Whelan (Irlande) 
 Le document contient les réponses finales fournies par les États-Unis1. 
__________________________________________________________________________________  
Órgano de Examen de las Políticas Comerciales 
14 y 16 de enero de 2004 
 
 
EXAMEN DE LAS POLÍTICAS COMERCIALES 
ESTADOS UNIDOS 
Acta de la reunión
 
Addendum  
Presidenta:  Excma. Sra. Mary Whelan (Irlanda) 
 Este documento contiene las res puestas finales de los Estados Unidos1. 
                                                      
1 In English only./En anglais seulement./En inglés solamente  
  WT/TPR/M/126/Add.3 
 Page 3 
 
 RESPONSES FROM 
THE UNITED STATES 
 
CHAPTER I:  RECENT ECONOMIC DEVELOPMENTS  Question:  (Switzerland #1)  
 
How does the U.S. intend to correct the twin deficits ?  How sustainable are they in the medium term?  
What could be the impact of the continuing dollar depreciation on key elements of the current account of the balance of payments?  Question:  (Turkey #1)  
 
Within the last two years, both the U.S. budget and current account deficits have started to widen.  
How does the U.S. consider to tack le the issue of twin deficits? 
 Answer  
 
Much of the shift from budget surplus to deficit ca me from a timely fiscal response to the weakening 
of the U.S. economy.  This fiscal action contributed  to the U.S. economic revival, and it is benefiting 
both the United States and the rest of the world.  
The budget deficit is expected to be  about $500 billion in fiscal year 2004.  This is a legitimate subject 
of concern.  We intend to reduce it.  Even this  large, however, the deficit should be kept in 
perspective.  The ratio is lower than for deficits in 5 of the previous 20 years and is well below the 
deficit peak of 6.0 percent in 1983.  
Under U.S. Administration policies, the deficit is proj ected to begin declining after this year.  It is 
expected be in a $300 billion range for 2005 and 2006.  By  2009, the deficit is expected to fall to half 
its 2004 level, or around 1.7 percent of  GDP.  This is lower than the average deficit-to-GDP ratio over 
the last four decades.  The ratio of government debt-to-GDP declines over this period as well.  This 
progress, of course, requires maintaining the fundame ntals of strong economic growth together with 
spending restraints.  The links between budget deficits  and current account deficits are tenuous at best.  
Over the last 7 years, the most  significant increase in the U.S. trade and current account deficits 
occurred during the period of fiscal surpluses.  Current account balances are related to many factors other than the budget balance, many of which are 
out of the immediate control of the government.  These include changes in relative rates of economic 
and productivity growth among countries, relative inflation rates and relative attractiveness of capital 
markets. Much of the increase in U. S. net capital inflows and the U.S. trade deficit has been related to 
the relatively strong performance of the U.S. economy over the last decade.  One path of adjustment 
for the external deficit would be for Japan, Europ ean Union members and a number of other countries 
to improve their rates of economic grow th and imports of goods and services. 
 
Question:  (China #2) 
 
Could the U.S. please provide detailed statistics and information on imports that assist to control its 
domestic prices and to achieve the obj ectives of its macroeconomic policy? 
 WT/TPR/M/126/Add.3 
Page 4  
 Answer 
 
The Bureau Labor Statistics collects price data and disseminates an index of U.S. import and export 
prices.  Statistics and information on trends in U.S. import prices are publicly available at: 
http://www.bls.gov/mxp/. 
 
Question:  (China #3) 
 
How will U.S. authorities ensure that trade will not be unduly hindered by administrative and other 
barriers when dealing with the "twi n deficits" issue in the future? 
 
Answer  
 
The United States is fully committed to meeting its obligations under all WTO agreements.  
Furthermore, the United States will continue to pur sue energetically a successful outcome in the Doha 
negotiations, which are an opportunity for all Memb ers to reduce many of the tariff and non-tariff 
barriers that hinder trade.  
 
Question:  (China #4) 
 
How does the U.S. comment on the fact that Sino-U .S. imports and exports simultaneously increased 
in recent years against the adverse trend suffered by U.S. merchandise trade with other partners? 
 Answer  
The Chinese economy has been one of the fastest growi ng in recent years.  Its imports from the world, 
not just the United States, are increasing rapidly.  It  is, therefore, not surprising that U.S. exports to 
China have increased sharply in r ecent years, even as they have sh own little growth and even declined 
to a number of trade partners that have not en joyed China's recent economic dynamism.  The rapid 
growth of U.S. imports from China reflects both th e increasingly strong recovery and expansion of the 
U.S. economy, as well as China's highly competitive pos ition vis a vis many third country suppliers to 
the U.S. market of a considerable range of products imported by the United States. 
 CHAPTER 2:  DEVELOPMENTS IN TRADE AND INVESTMENT POLICY  
 
(4) Preferential and Other Arrangements  
 Question:  (New Zealand #8) 
 What is the strategy and criteria for conducting furt her regional and bilateral free trade agreements, in 
particular with countries which are already strong  advocates of free and open trade?  Could the 
United States elaborate on how it sees bilateral trade agreements as complementing multilateral 
negotiations? 
 
Answer 
 
The U.S. strategy is to pursue actively numerous re gional and bilateral initiatives to liberalize trade, 
including free-trade agreements (FTAs).  All FTAs  negotiated by the United States have WTO rules 
as a foundation.  Initiating FTA nego tiations with countries committed to trade liberalization helps 
ensure the U.S. goal of comprehensive coverage in  the resulting agreement.  In addition, pursuing 
agreements with free-trade advocates permits ev en greater degrees of innovation in FTAs.  The 
innovations pioneered in these agreements can be , and have been, replicated in multilateral  WT/TPR/M/126/Add.3 
 Page 5 
 
 agreements.  These regional and bi lateral agreements can act to accelerate and deepen multilateral 
liberalization.  By pursuing multiple free trad e initiatives, we are creating a "competition for 
liberalization" that provides leverage for openn ess in all negotiations and establishes models of 
success that can be used on many fronts.  
Question:  (China #5) 
 What is the opinion of the United States about the impact of FTA arrangements on the multilateral 
trading system regarding the negotiating and ad ministrative resources and the possible impacts 
incurred on trade by the multi-structure on implementati on, inter alia the rules of origin, of various 
FTAs?  Answer  
Please refer to the response to New Zealand ques tion #8.  Regarding resources, any active trade 
agenda will require resources.  However, it is our vi ew that the economic benefits to our citizens and 
the citizens of our free-trade partners far outwei gh any administrative costs or resource burdens. 
 The United States maintains rule of origin regimes in  the context of its preferential trade arrangements 
that are transparent and provide great certainty and predictability to the trading community.  For 
example, as part of its FTA origin regimes, th e United States issues binding advance rulings at the 
request of traders, consistent with the commitmen ts under the WTO Agreement on Rules of Origin.  
The FTA origin regimes are designed for efficient administration by the customs authorities of the 
Parties and provide trade facilitative methods for traders to achieve compliance with FTA origin 
provisions. 
 
Question:  (European Union #6) 
 The EC notes with concern a growing discrepancy  between the pro-market access stance the U.S. 
takes in multilateral fora and the use of far-r eaching safeguard measures in recent bilateral 
agreements, such as the FTA with Chile.  Is the U.S. moving the substance of trade agreements - 
including safeguard - into bilateral or regiona l agreements, while only supporting multilateral trade 
liberalization in as far as it benefits U.S. exports?  Answer  
U.S. FTAs, from NAFTA to the more recently concluded agreements, are exemplary among WTO 
Member regional trade agreements with regard to the great extent they eliminate barriers to 
agricultural trade.  They therefore squarely promote GATT Article XXIV objectives, rather than 
create any discrepancy as suggested in the question.  The U.S. - Chile FTA includes a price-based 
safeguard mechanism on a limited and fixed numb er of products that allows for a proportional 
increase in the tariff, which cannot exceed MFN ra tes.  Safeguard provisions are fairly common in 
FTAs.  In the U.S.-Chile agreement, their use as a transitional device in fact facilitates the removal of 
tariff barriers on sensitive products.  We see no c onflict between this safeguard mechanism and 
pursuing highly ambitious agriculture goals in the WTO, as the United States has done since the 
launch of the Uruguay Round in 1986.  We consider  our objectives in the Doha Round to serve the 
interests of U.S. agriculture as a whole.  
Question:  (European Union #46) 
 Bilateral, regional and global trad e liberalization is vital for pr omoting prosperity, growth and 
development to the benefits of the world at larg e.  The EC considers that the WTO and multilateral WT/TPR/M/126/Add.3 
Page 6  
 liberalization is the most certain way for promo ting global interests for industrialized countries and 
developing countries at large.  How does U.S. judge the relative importance and weight of bilateral/FTA policies and further development of the WTO system in terms of its own trade and 
development needs? And to what extent has the U.S.  analyzed and compared the efficiency and level 
of economic benefits deliv ered by bilateral trade agreements by  comparison with multilaterally agreed 
liberalization?  
 Answer  
The United States is steadfast in its  commitment to the rules-based sy stem of the WTO, and continues 
to be a leader in pursuit of ambitious multilateral liberalization through the WTO.  With regard to 
bilateral and regional liberation, the U.S. strategy is to ensure a complementary approach between 
multilateral system of the WTO and our regional and bilateral initiatives.  Rigorous pursuit of bilateral 
and regional liberalization does not lessen the U.S.  commitment to the multilateral system.  U.S. 
bilateral and regional agreements use the WTO as  a foundation for further cooperation on trade.  
These regional and bilateral agreements can al so act to accelerate and deepen multilateral 
liberalization.  By pursuing multiple free trad e initiatives, we are creating a "competition for 
liberalization" that provides leverage for openn ess in all negotiations and establishes models of 
success that can be used on many fronts.  The innov ations for greater liberalization pioneered in our 
bilateral and multilateral agreements  can be, and have been, replicated in multilateral agreements.  
Finally, it is notable that a recent IMF study of U.S. trade agreements concluded the U.S. model for 
bilateral and regional agreements meets many of the criteria for ensuring these agreements yield the 
greatest possible benefits.  
 
Question:  (Japan #3)  
Does the U.S. consider that all the FTAs, which th e U.S. has concluded after the passing of the TPA 
legislation by the Congress, achieve all the 17 prin cipal negotiating objectives stipulated in the TPA 
legislation?  Do the FTAs, which the U.S. will negotia te in the future, need to be consistent with all 
the 17 principal negotiating objectives without exception?  
 
Answer  
Section 2102(b) of the Trade Act of 2002 ("Trade Act") (19 U.S.C. 3802(b), sets out seventeen 
principal negotiating objectives.  Several of those objectives are explicitly applicable to negotiations 
in the World Trade Organization (WTO).  Obj ectives relating to Improvement of the WTO and 
Multilateral Trade Agreements (Section 2102( b)(7)), WTO Extended Negotiations (Section 
2102(b)(13)) and Border Taxes (Section 2102(b)(15) are examples.  For agreements that are subject to 
trade promotion authority procedures, the Trade Act requires the President to state that the agreement 
"makes progress in meeting the applicable objec tives described in section 2102(a) and (b)." (Section 
2105(a)(2)(B)).  President Bush submitted this statement and supporting documentation to the 
Congress with the draft bills implementing the Un ited States-Chile Free Trade Agreement and the 
United States-Singapore Free Trade Agreement.  Futu re free trade agreements that are submitted to 
the Congress for approval and implementation w ill need to meet these same requirements. 
 Question:  (Japan #4)  
Please explain the U.S. position on the relations hip between the WTO-based multilateral trading 
system and the bilateral and regional FTAs.  Does th e U.S. pursue different roles for respective FTAs?  
If so, does the U.S. consider that it is preferable to have as many FTAs as possible? 
  WT/TPR/M/126/Add.3 
 Page 7 
 
 Answer 
 
With regard to the U.S. view on the multilateral/r egional/bilateral relationship, please see the response 
to question #8 from New Zealand and to question #46  from the European Union.  As we understand 
Japan's question, the United States does not pursue different roles for its FTAs, but seeks to ensure 
their complementarity to the multilateral system.  In the choice of FTA partners, the United States 
seeks countries committed to liberalizing trade more  deeply than required by current multilateral 
commitments.  While the U.S. FTA strategy is to pursue actively numerous  regional and bilateral 
initiatives to liberalize trade, the qu estion of whether it is preferable to have as many FTAs as possible 
must depend ultimately on the degree of multilatera l liberalization our WTO partners are willing to 
undertake.  Question:  (Japan #5)  
The negotiation of the U.S.-Central American Fr ee Trade Agreement (CAFTA) was concluded in 
December 2003, between the U.S. and four Centra l American countries except Costa Rica.  Will the 
Congress start its discussions on the CAFTA only after conclusion of the negotiations with Costa 
Rica?  If  the U.S. does not reach an agreement with Costa Rica, does the U.S. intend to conclude the 
CAFTA only with the four Central American countries excluding Costa Rica?  What is the 
relationship between CAFTA and FTAA? 
 
Answer  
 
Negotiations between the United States and El Sa lvador, Guatemala, Honduras and Nicaragua on a 
U.S. - Central American Free Trade Agreement (C AFTA) were indeed closed in December 2003.  
Costa Rica has been an active pa rticipant in CAFTA since the beginning of the negotiations in 
January 2003.  Costa Rica and the United States concluded negotiations for Costa Rica to join 
CAFTA in January 2004.  In March 2004, the Un ited States and the Dominican Republic concluded 
trade talks integrating the Dominican Republic into CAFTA.  United States views the success of 
CAFTA as a milestone that lends further momentum toward conclusion of the FTAA.  With regard to 
Congressional consideration of CAFTA, we have notif ied Congress of our intent to enter into this 
agreement.  We will work closely with Congress to ensure timely consideration of CAFTA after it is 
signed. 
 
Question:  (Japan #6) 
 
The negotiations of the U.S.-Australia FTA and th e U.S.-Morocco FTA were not concluded within 
2003. What is the prospect of concluding these negotia tions?  In particular, what is the prospect for 
the negotiations on market access for agricultural prod ucts in the U.S.-Australia FTA?  Does the U.S. 
intend to have both FTAs deliberated upon in the U.S. Congress this year? 
 
Answer  
Negotiations of the U.S.-Australia FTA were conc luded on February 8, 2004 and the U.S.-Morocco 
FTA were concluded on March 2, 2004.   We have notified Congress of our  intent to enter into both of 
these agreements, and will work closely with C ongress to ensure their timely consideration. 
 
Question:  (Japan #7)  
 The U.S. announced the start of FTA negotiations  with Thailand last October.  Which ASEAN 
countries will be the U.S. priority for FTA nego tiations?  Japan would like to know how the U.S. 
basically sets its priorities among the ASEAN countries. WT/TPR/M/126/Add.3 
Page 8  
 Answer 
 
Under the Enterprise for ASEAN Initiative, announ ced by President Bush in October 2002, the 
United States offered the prospect of bilateral fre e trade agreements with ASEAN countries that are 
committed to economic reforms and openness.  The United States stated that it would expect any 
potential FTA partner to be a WTO Member and to negotiate first a trade and investment framework 
(TIFA) with us.  We currently have TIFAs with Indonesia, the Philippines, Thailand and Brunei, and 
are negotiating one with Malaysia. 
 
Question:  (Japan #8)  
As for the U.S.-Middle East Free Trade Initiative, we understand that the U.S. intends to start FTA 
negotiations with those countries committed to a highe r level of trade liberalization.  At the same 
time, Japan understands that this Initiative is more prominent in its security strategy aspect than the 
other FTAs that the U.S. pursues.  Japan would thus like to know the future process that the U.S. will 
pursue for the Initiative from the perspective of promoting both free trade and security policy. 
 Answer  
The United States is negotiating free trade agre ements under MEFTA.  These FTAs do not contain 
special security-specific provisions.  As to the ov erall strategy behind the MEFTA, the United States 
expects that prosperous, regionally-integrated, rules-based and transparent, job-creating and 
competitive economies in the region will contribute  significantly to security and peace in the Middle 
East.  The United States expects the MEFTA Initiative to contribute to all of these objectives.  The 
United States has committed under the MEFTA to engage economically with all countries in the 
region.  However, for certain countries such as Libya, Syria and Iran, issues concerning security, 
support for terrorism and related matters must first be resolved before the United States can pursue 
normalized, robust economic relationships.  
 
Question:  (Switzerland I #2)  
What will be the relationship between NAFTA and th e other free-trade agreements concluded by the 
United States thus far and the FTAA?  Answer  
The FTAA is expected to co-exist with bilateral a nd sub-regional agreements to the extent that the 
rights and obligations under these agreements are not covered by or go beyond the rights and 
obligations of the FTAA.  
 
Question:  (Switzerland I #3)  
What synergies do the United States see between th e Doha round of negotiations and the new free-
trade agreements negotiations including the FTAA?  Answer  
With regard to the U.S. view on the multilateral/r egional/bilateral relationship, please see the response 
to question #8 from New Zealand and to question #46 from the European Union. 
    WT/TPR/M/126/Add.3 
 Page 9 
 
 Question:  (Norway #7) 
 
The United States is pursuing negotiations on a num ber of regional, sub- regional and bilateral 
agreements.  Norway hopes and believes that thes e negotiations do not lessen the U.S. willingness to 
move forward on the Doha Development Agenda.  Do es the U.S. believe that progress in the regional, 
sub-regional and bilateral negotiati ons the U.S. is currently pursuing will influence progress on the 
DDA, 
and vice versa, and if so, how? 
 
Answer  
The 70 U.S. papers and proposals submitted in  support of the DDA, combined with the U.S. 
commitment not to let 2004 be a lost year made by USTR Zoellick in his January 2004  letter to all 
WTO Ministers, speak clearly of continued U.S. lead ership on the DDA.  All of these U.S. efforts on 
the DDA have taken place alongside the initiation, negotiation and conclusion by the United States of 
several bilateral and regional free trade agreemen ts.  With regard to the U.S. view on the 
multilateral/regional/bilateral relationship, please s ee the response to question #8 from New Zealand 
and to question #46 from the European Union. 
 
Question:  (Chinese Taipei #1)  
In the interests of assisting LDCs and certain de veloping countries in meeting their development 
needs through WTO-consistent programmes, we w ould be interested in learning more about the 
administration of the United States' preference progr ams.  In particular, we would like to know how 
the United States determines country and product e ligibility, whether or not the waiver of these 
programmes (such as CBTPA) is sought under the WTO.  Furthermore, could these programmes 
serve as precursors to regional trade agreements?  Answer  
With regard to country eligibility, each U.S. preferen ce program has a set of criteria.  With respect to 
country eligibility for the Generalized System of Preferences (GSP) program, the President of the United States is authorized by Title V of the Tr ade Act of 1974, as amended, to designate as a GSP 
beneficiary a developing country that meets the statutory designation criteria. 
 With respect to country eligibility for the othe r regionally based unilateral preference programs, 
waivers for the Caribbean Basin Economic Recovery Act ("CBERA") and the Andean Trade Preference Act ("ATPA") have been obtained.   The Caribbean Basin Trade Partnership Act 
("CBTPA") amended the CBERA, the Andean Trad e Promotion and Drug Eradication Act amended 
the ATPA, and the African Growth and Opportunity  Act created a new preference program for sub-
Saharan African countries.   Pref erence programs are self-standing and are not precursors to free trade 
agreements.  
Question:  (Turkey p. 1 #2)  
 
As a key supporter of the multilate ral trading system, how does the U.S. balance its multilateral 
commitments and regional-preferential initiatives?  W ould the U.S. also please explain the differences 
between its integration strategy with APEC and the other FTAs? 
 WT/TPR/M/126/Add.3 
Page 10  
 Answer 
 
In terms of balance, the 70 U.S. papers and pr oposals submitted in support of the DDA, combined 
with the U.S. commitment not to let 2004 be a lost  year made by USTR Zoellick in his recent letter to 
all WTO Ministers, speak clearly of continued U.S. leadership on the DDA.  Yet, all of these U.S. 
efforts on the DDA have taken place along-side the initiation, negotiation and conclusion by the 
United States of several bilateral and regional free tr ade agreements.  With regard to the U.S. view on 
the multilateral/regional/bilateral relationship,  please see the response to question #8 from New 
Zealand and to question #46 from the European Union.  As far as the difference in U.S. strategy between APEC and our FTAs - FTAs are binding agreements.  
In APEC, members agreed to liberalize in the key trade and investment areas by 2010 for developed 
members and 2020 for developing members.  This ag reement is referred to  as the Bogor Goals, 
because Leaders from all 21 APEC economies agreed to this in 1994 in Bogor, Indonesia.  In 1995, 
Members agreed to an elaborate structure to me et these goals, and to an elaborate mechanism to 
review progress being made by each member.  This structure and peer review mechanism is laid out 
in the 1995 Osaka Action Agenda. 
 
Question:  (Brazil I #15)  
In paragraph 57, page 42, WT/TPR/S/126, it is st ated that "Average tariffs under unilateral U.S. 
preference schemes are lower than the average MFN rate but still substantially higher than the average 
under FTAs that are in force between the United States and Canada, Israel, Jordan and Mexico; 
moreover, they are, in general, c onditional upon statutory criteria (...)".  If the U.S. grants lower tariffs 
to some developed countries under FTAs (such as  Canada) than to developing countries under 
preferential agreements, does not this work agains t the WTO principle of special and differential 
treatment to developing countries?  How is it comp atible with the U.S. Foreign Policy goal of 
promoting development through trade?  
 
Answer  
In its question, Brazil cites co mparative statistics on average U. S. tariffs under its preference 
programs versus its free trade agreements.  The di fferences in the average tariffs under these programs 
reflect in large part U.S. adherence to WTO Article XXIV obligations in its FTAs.  The obligations on 
free trade agreements under this article include the elimination of duties on "substantially all trade".  
Elimination of duties on substantially all trade will ta utologically result in a very low average tariff.  
In fact, as shown in Table III.2 of the Secretariat Report, WT/TPR/S/126, the average is close to zero 
under three of the four FTAs cited.  The United St ates maintains among the most generous preference 
programs for the developing countries.  It is the U.S. view that these preferences should not be an 
obstacle to multilateral liberalization and in 2002 the United States submitted proposals in the DDA 
for elimination of all consumer, i ndustrial and agricultural tariffs on an MFN basis.  The United States 
invites all of our WTO partners to work togeth er to promote development through trade in the DDA 
by achieving an ambitious outcome on market access.  Question:  (Brazil #17)  
In paragraph 175, page 71, WT/TPR/S/126, we can re ad that "In its FTAs, the United States seeks to 
restrict the use of duty-drawback programmes, consid ering that they can distort investment decisions 
by creating an incentive for investors to locate in the FTA partner country in order to benefit from 
duty drawback when exporting processed goods for sale in the U.S. market.  (...)  However, there are 
no restrictions on the use of drawback in the FTAs with  Jordan or Israel."  Is there any such provision 
on the initiatives of the Caribbean Basin or on the recently agreed CAFTA?  WT/TPR/M/126/Add.3 
 Page 11 
 
 Answer 
 
The programs of the Caribbean Basin Initiative do not  make any changes to the U.S. duty drawback 
program.  The U.S.-Central America Free Trade Ag reement does not discipline or limit the use of 
duty drawback.  Question:  (EU #48)  
 
Available information at this stage regarding CA FTA underscores that some agricultural sectors (such 
as sugar) would be permanently excluded from total tr ade liberalization.  Could the U.S. specify the 
list of the agricultural products covered by such pr ovisions?  In addition, could the U.S. give some 
details as to the length of the transition periods?  (Reference is made to the Secretariat report, 
paragraph 54) 
 
Answer  
 No products are excluded from the agreement.  Liberalization will occur through tariff reductions, 
tariff-rate quota expansion and comb ination approaches.  Tariffs w ill be phased-out according to 
specific schedules negotiated on a product and countr y-specific basis.  Phase-outs will be immediate, 
5 years, 10 years, 12 years, 15 years and, for a few products, 20 years.  As a general rule, tariffs will 
be reduced in equal annual installments over the phase-out period.  Products subject to TRQ 
expansion only and no out-of-quota duty reducti on are sugar, white corn, potatoes and onions. 
 
Question:  (EU #49)  
 
Could the U.S. elaborate on the CAFTA provisi ons regarding investment both concerning the 
definition of investment and the rights granted to  third parties in case of disputes (amicus curiae, 
transparency)?  In addition, some information hi nts that investment definition would cover IPR and 
that therefore compulsory licenses might be consid ered as equivalent to expropriation.  Is this 
information accurate? What are the de tails of the agreement on this point? 
 
Answer  
 All forms of investment are protected under the CAFTA, including enterprises, debt, concessions, 
contracts and intellectual property and subject to an effective, transparent and impartial procedure for 
dispute settlement.  Therefore, submissions to arbitral  panels will be available to the public, interested 
parties will have the opportunity to comment, and pa nel hearings will be open to the public.  U.S. 
views on expropriation are long-standing and clearly laid out in the expropriation article and the 
expropriation annex.  However, the expropriation artic le does not apply to the issuance of compulsory 
licenses granted in relation to IP rights in acco rdance with the TRIPS Agreement.  Both the 
expropriation article and annex can be found in  the investment chapter of the CAFTA at 
www.ustr.gov.  
Question:  (EU #50)  
 
According to U.S. government information, CAFTA  would include a provision regarding trade marks 
and geographical indications based on a "first in tim e, first in right" principle.  Could the U.S. 
elaborate about these provisions? 
Answer  
 
The United States views the concept of "first in time, first in right" as confirming the appropriate balance between trademarks and geographical indications and ensuring that trademarks are fully WT/TPR/M/126/Add.3 
Page 12  
 protected against later established geographical indi cations.  For further information, the text of 
CAFTA is available at http://www.ustr.gov/new/fta/Cafta/text/index.htm.  
Question:  (EU #55)  
 
The U.S. announced recently its intentions to prolon g the AGOA legislation, which grants preferences 
to certain African countries.  How can this proposal  and the overall the existence of trade preferences 
for the least developed countries be made compatible  with the zero tariff initiative that U.S. put 
forward in the WTO?  
 
Answer 
 The U.S. WTO proposal to eliminate all tariffs on consumer and industrial goods by 2015 reflects the 
U.S. policy that the ultimate objective of multilatera l trade negotiations should be elimination of all 
tariffs.  We believe, and World Bank studies s how, that developing countries stand to gain 
substantially from trade liberalization.  The Enablin g Clause is clear that preferences are not supposed 
to act as an impediment to MFN tariff liberaliza tion.  The African Growth and Opportunity Act 
(AGOA) is part of the U.S. effort to lower barrier s to trade and foster economic development, growth, 
and openness.  AGOA is a tangible demonstration of  the United States' commitment to assisting sub-
Saharan African countries, among the poorest in the world, to develop and participate more fully in the global economy.  By bringing increased invest ment to and creating ne w jobs in sub-Saharan 
African countries, AGOA is helping to promote sub- Saharan Africa's integrati on into the multilateral 
trading system.  AGOA has helped sub-Saharan African  nations to experience the benefits of trade 
and open markets.  AGOA and other preference programs play an important role in the period prior to 
full elimination of tariffs by helping developing countries to attract the investment and establish the industries that will allow them to reap the greatest benefits from trade liberalization.  Such programs 
give developing countries assistance in making the transition to free trade.  President Bush has 
indicated his intention to work with the U. S. Congress to extend AGOA beyond its current 2008 
expiration.  
 
Question:  (EU #56)  
In relation to paragraph 62 of the report: the ne w provisions of AGOA, amended in 2002, improve 
upon existing rules on textiles.  Thirty-eight coun tries met the Act's requirements for 2003, up from 
36 previously.  The United States has not yet requ ested a WTO waiver for the AGOA program.  The 
AGOA program is comparable to the EU's EBA in itiative, but does not apply to all least-developed 
countries.  The eligibility to AGOA is, however, not on ly dependent on objective criteria related to the 
development status of individual countries.  What political and non-objective criteria are used to 
determine AGOA benefits and how do these square with the applicable WTO rules governing such 
arrangements?  
 
Answer  
AGOA seeks to support the efforts of those s ub-Saharan African countries undertaking difficult 
economic, political, and social reform s.  AGOA's eligibility criteria reflect "best practice" policies that 
are ultimately helping to attract trade and investment and foster broadly-shared prosperity.  AGOA requires the President to consider country eligibilit y based on specific criteria, including whether the 
country has established or is making continual progress toward establishing:  a market-based economy, the rule of law, the elimination of barri ers to trade and investment, economic policies to 
reduce poverty, the protection of internationally re cognized worker rights, and a system to combat 
corruption.   WT/TPR/M/126/Add.3 
 Page 13 
 
 AGOA builds on and augments the United States Generalized System of Preferences (GSP) program.  
It recognizes the principles and objectives of GA TT Part IV (Trade and Development)-Article 
XXXVI, the WTO Ministerial Decision on Measures in Favor of Least-Developed Countries, and the 
significance and special needs of sub-Saharan Africa.  Although over one-tenth of the world's population lives in sub-Saharan Africa and sub-Sahara n African countries represent the largest bloc of 
WTO Members, in terms of trade, the region lags behind that of other regions of the world.  Many 
sub-Saharan African economies con tinue to depend on exports of  a few commodities for the vast 
majority of their export earnings, making their economies more vulnerable than those of other 
developing countries with more di versified economies.  Sub-Saharan African countries are still in the 
process of implementing the reforms necessary to  create a fully open and market-based economic 
system.  As the volume of global trade tripled in th e past two decades, sub-Saharan Africa's volume of 
trade and share of world trade continued to declin e, increasing Africa's marginalization in the global 
economy and excluding the region from growing world prosperity.  The United States is presently consulting with its  trading partners regarding a WTO waiver for 
AGOA.  
 Question:  (China #7, #8, and #9)  
Reference:  p. 25, paras. 58-59 
 
With the only exception of the United States, 28 out of the total of 29 major developed countries with GSP schemes to developing countries have granted GSP to China since 1980.  With its accession to 
the WTO on 11 December 2001, China has met all th e legal terms to be granted GSP by the U.S.  
However, China's application for GSP of the year 2002 was rejected by the U.S. 
 Could the U.S. delegation explain the required qua lifications of the applicants and the review 
procedures of the U.S. on granting GSP?  
 
Please clarify the reason why China's 2002 application was rejected.  Is it that the applicant country must have no curre nt account surplus to the U.S. constitutes an extra 
restriction in considering granting the GSP?  Answer  
 
The President is authorized by Title V of the Trade Act of 1974, as amended, to designate GSP 
program beneficiary developing countries, if a c ountry meets the statutory designation criteria.  A 
basic concept underlying the U.S. GSP program is  to grant tariff preferences to products of a 
developing economy that are not competitive interna tionally to improve their access to the U.S. 
market.  China has made extraordinary gains in economic deve lopment over the past twenty years, particularly 
with respect to expanding exports and becoming a global trading nation.  As a result of China's 
economic reforms, including its recent entry into the WTO, U.S.-China bilateral trade increased this 
year to reach a record high.  U.S. trade data shows in particular, that the value of China's exports to 
the United States increased by 21.7 percent in 20 03, totaling US$152.4 billion.  China is now the 
second largest exporting country to the United States,  and the value of China's exports is almost 
equivalent to the total from all GSP beneficiar y countries to the United States in 2003.  China's 
extremely high and expanding access to the U.S. market  is clearly demonstrated by these statistics. 
 
Thus, China does not appear to need to become a beneficiary of the U.S. GSP program to improve its access to the U.S. market.  Rather , bilateral trade with China can be increased by both our economies WT/TPR/M/126/Add.3 
Page 14  
 continuing to work to remove the bilateral and multilateral trade barriers that currently exist.  Our 
producers and consumers alike stand to benefit greatly  from the progress we make in that regard.  The 
United States looks forward to continuing to work w ith the government of China in order to advance 
that goal. 
 
Question:  (India #1) & Question:  (Brazil #16)  
 
The USTR issues a Federal Register notice regarding possible de-minimis competitive need limitations (CNL) waivers with respect to artic les covered under the U.S. GSP scheme and the 
imports of which have exceeded the CNL valu e/quantity limit from particular GSP recipient 
countries.  The countries who have crossed the CNL by value/quantity stand to lose the GSP benefit 
in respect of such items unless a special waiver is granted by the U.S. President.  The products on 
which India is likely to lose GSP benefit unless a waiver is granted includes whole buffalo skin 
leather, unsplit buffalo leather and uppers for footw ear materials to the U.S.  Could the United States 
provide details of the methodology used for grantin g a waiver and also consider granting India a 
waiver in respect of the aforesaid items. 
 
The U.S. GSP program provides (paragraph 64, page 45, WT/TPR/S/126) that "Products can be removed from GSP benefits when imported from a pa rticular country if imports from that country 
exceed a given threshold (competitive need limitation) .  The country can be redesignated if the share 
decreases subsequently."  Which are the criteria for setting this threshold?  By the number of 
countries "redesignated" for preferences, how do Amer ican authorities regard the effectiveness of this 
procedure to foster sustainable export competitivene ss for developing countries?   Otherwise, does it 
not work as a means to "punish" count ries that are becoming competitive? 
 
Answer  
 A basic concept underlying the U.S. GSP program is to grant tariff preferences to products of a 
developing economy that are not competitive interna tionally to improve their access to the U.S. 
market.   Under the U.S. GSP statute, determina tions of whether a given product from a given country 
is internationally competitive are made.  These Competitive Need Limitations (CNLs) impose general 
ceilings on GSP benefits for each product on a country -specific basis.  A country will lose its GSP 
eligibility for a product if the CNLs are exceeded  unless a waiver is provided.  The CNLs are 
exceeded if, during the previous calendar year, U.S. imports of a single GSP article from that country: 
  - Account for 50 percent or more of the va lue of total U.S. imports of that product 
   (50 percent CNL), or  
 - Exceed a certain dollar value (dollar value CNL).  In 2003 that dollar value limit was 
   USD110 million in a single eight-digit tariff category.  There are no quantity limitations for GSP benefits.  GSP modifications that result from imports that exceed  CNLs in one year take effect on July 1 of the 
next calendar year. 
 Under the GSP statute, the President may grant, among other kinds of waivers, a waiver from the 50 percent CNL when total U.S. imports from all countries of a product are small or de minimis .  The 
de minimis  level is adjusted upward annually, and in 2003 it was set at USD16.5 million in a single 
eight-digit tariff category.  Each year, a de minimis  waiver will automatically be considered, provided 
total imports from all countries for the preceding y ear were below the dollar value CNL.  Comments 
from interested parties, including foreign governments,  are solicited in this process.  In advising the  WT/TPR/M/126/Add.3 
 Page 15 
 
 President regarding these waivers, the economic impact on the U.S. economy of granting the waiver is 
considered.  
Question:  (Brazil #16)  & (India #4)  
 
GSP concessions given to India for agro-chemicals and pharmaceuticals were withdrawn in 1992 on 
the grounds that we had not taken adequate IPR protection.  While all necessary steps have been taken 
by India and we are TRIPS compliant as of date, the restoration of the GSP concessions to these 
products is awaited.  We would request the U.S. authorities to indicate as to when India can expect the 
restoration of GSP concessions on these items.  
 
Answer  
The U.S. GSP program is an autonomous, unilatera l preference program.  From the United States' 
perspective, the problems continue to persist in I ndia concerning the adequacy of its IPR protection.  
These issues are subject to continuing bilateral discu ssions between the U.S. and Indian governments. 
 (5) Foreign Investment Regime  Question:  (Switzerland #4)  
The USA has concluded a number of treaties relati ng to trade and investment, namely bilateral 
investment treaties containing pre-establishment elements (BIT), recently concluded free trade 
agreements (e.g. Singapore, Ch ile, FTAs), the NAFTA and trade and investment framework 
agreements, in addition to its membership to WT O and OECD (Code of Li beralization and National 
Treatment Instrument).  
Do the U.S. foresee to continue to follow a multi- layered approach to international investment 
arrangements, and if so, which will be its guiding principles?  
 
Answer  
The United States will continue to pursue a multi-le vel approach to the negotiation of disciplines on 
and market access for foreign investment.  Th e United States recently c oncluded nego tiations on 
several new free-trade agreements (FTAs), one with  Australia, one with five countries in Central 
America and the Dominican Republic, and another FTA with Morocco.  These FTAs will all include 
investment chapters modeled in large part on the in vestment chapters of the U.S.-Singapore and U.S.-
Chile FTAs, which were, in turn, based upon prior  U.S. investment treaty practice and negotiating 
objectives of the Trade Act of 2002.  We expect to pursue similar disciplines and market access in the 
FTAs we will continue or begin negotiating in 20 04 with the countries of the Southern Africa 
Customs Union, Bahrain, Thailand, sev eral Andean countries, and Panama. 
 The U.S. government is also preparing to initiate  negotiations on new bilateral investment treaties 
(BITs) after a hiatus of several years.  We are nearing completion of a comprehensive revision of the 
U.S. model BIT, which was last updated in 1994.  Th e new model BIT will be substantively similar to 
the investment chapters of recent U.S. FTAs. As in the investment negotiations since NAFTA, th e United States plans to seek agreement with its 
current and prospective investment negotiating part ners on several core principles.  These include 
national and most-favored nation treatment for the full life-cycle of investment (i.e., from pre-
establishment to dissolution);  coverage of all i nvestment, whether to manufacture or to supply a 
service;  the customary international law mini mum standard of treatment;  disciplines on 
expropriation and standards for compensation for expropr iation;  unimpeded transfers, at market rates WT/TPR/M/126/Add.3 
Page 16  
 of exchange, into and out of a host country; di sciplines on performance requirements;  the ability to 
employ senior management of the investor or inve stment's choice, without regard to nationality;  
investor-state arbitration;  a negative listing appr oach to the scheduling of non-conforming measures 
(i.e., obligations apply to all investors and inv estments unless a reservation against a particular 
obligation is taken with respect to particular investors or investments in a party's schedule of non-conforming measures);  and transparency of investment-related measures and procedures. 
 
Question:  (Brazil Set II Services #1)  
 
In paragraph 28 (page xi) it is mentioned that "A side from those described below in the services 
sectors, restrictions on foreign direct investment exist in energy, mining, and fisheries."  Could the 
U.S. indicate what are the restrictions on FDI in energy? 
 
Answer  
 
The U.S. energy sector is largely open to foreign dir ect investment (FDI).  The few restrictions that 
the United States does maintain include those listed below. 
 Under the Atomic Energy Act of 1954 (42 U.S.C. §2011 et seq.), a license issued by the United States Nuclear Regulatory Commission is required for any pers on in the United States to transfer or receive 
in interstate commerce, manufactur e, produce, transfer, use, import, or export any nuclear "utilization 
or production facilities" for commercial or industrial purposes.  Such a license may not be issued to 
any entity known or believed to be owned, controlled, or dominated by an alien, a foreign corporation, 
or a foreign government.  A license issued by th e United States Nuclear Regulatory Commission is 
also required for nuclear "utilizati on and production facilities," for use in medical therapy, or for 
research and development activities.  The issuance of  such a license to any entity known or believed 
to be owned, controlled, or dominated by an alien,  a foreign corporation, or a foreign government is 
also prohibited. 
 A company seeking to receive assistance under th e Energy Policy Act of 1992 (42 U.S.C. §13525) 
must show that its participation in the program w ill be in the economic interests of the United States, 
as evidenced by investments in the United States in  research, development, and manufacturing.  In 
order to receive assistance, the company must also be  U.S.-owned or incorporated in the United States  
with a parent company incorporated in a co untry that (1) provides U.S.-owned companies 
opportunities comparable to those afforded to any other company; (2) provides U.S.-owned 
companies local investment opportunities comparable to those afforded any other company; and (3) 
provides adequate and effective intellectua l property rights to U.S.-owned firms. 
 
Under the Mineral Lands leasing Act of 1920 (30 U.S.C.  Chapter 3A), aliens a nd foreign corporations 
may not acquire rights-of-way for oil or gas pipe lines, or pipelines carrying products refined from oil 
and gas, across on-shore federal lands or acquire leases or interests in certain minerals, such as coal or 
oil, on on-shore federal lands.  Non-U.S. citizens ma y, however, own a 100 percent interest in a U.S. 
corporation that acquires a right-of-way for an oil or gas pipelines across on-shore federal lands, or 
that acquires a lease to develop mineral resour ces on on-shore federal lands, unless the foreign 
investor's home country denies similar or like privile ges for the mineral or access in question to U.S. 
citizens or corporations, as compared to the privileg es it accords to its own citizens or corporations or 
to the citizens or corporations of other countries.  Foreign citizens, or corporations controlled by them, 
are restricted from obtaining access to federal leases on Naval Petroleum Reserves if the laws, customs, or regulations of their home country deny the privilege of leasing public lands to citizens or 
corporations of the United States. 
 
  WT/TPR/M/126/Add.3 
 Page 17 
 
 Question:  (Turkey #5) 
 
According to the Secretariat Report, "the U.S. has a generally liberal foreign investment regime with 
some sectoral exceptions.  The OECD has recently ob served that there has been almost no change in 
the U.S. concerning FDI policy, while most other co untries have greatly liberalized access for foreign 
investors.  As a result, the U.S. is at about th e OECD mean in terms of overall restrictiveness of 
inward FDI." 
 Could the Representatives of the U.S. make a comment on this issue? 
 
Answer 
 As the author of the OECD report cited in the S ecretariat Report acknowledges, it is very difficult to 
quantify with any precision the relative openness of  economies to FDI, since the investment policy 
regimes of OECD countries differ so substantiall y in character (Stephen S. Golub, "Measures of 
Restrictions on Inward Foreign Direct Invest ment for OECD Countries," Economics Department 
Working Papers No. 357, 2 June 2003).  We do not be lieve there is any doubt, however, that the U.S. 
economy is one of the most open economies in the world to  FDI.  This is demonstrated by the fact that 
the United States has been the world's largest recipient of inward FDI for many years. 
 It is important to note that, as the OECD study ob serves, the closing of the FDI liberalization gap 
between the United States and other OECD countri es was the result not of any backsliding by the 
United States, but rather of increased liberalization in other countries.  Other OECD countries have, in 
effect, caught up with the United States in terms of their openness to FDI. 
 
Question:  (Chinese Taipei page 1, section 1) Reference:  pp. 27-29, paras. 69-74 
 We recognize and endorse the United States' strong in terest in safeguarding its national security.  
However, we are concerned that the so-called "national security" in the Exon-Florio Amendment 
might provide wide discretionary powers to relevant  authorities, which may have an adverse effect on 
the transparency and stability of  the U.S. business environment. 
 
Bearing in mind the close investment relationshi p between the U.S. and  the Separate Customs 
Territory of Taiwan, Penghu, Kinmen and Matsu, it w ould be appreciated if the U.S. could elaborate 
further on what factors are considered in determini ng the effects on national security of, for example, 
a foreign acquisition. 
 
Answer 
 
Since implementation of the Exon-Florio provision involves national security, there is a limit on the 
extent to which the process can be transparen t.  For example, sometimes the reason for an 
investigation is based on information that is classifi ed.  In such cases, it may no t be possible to reveal 
the reasons for an investigation without compromisi ng classified information.  Similar considerations 
may pertain to the reasons for the final determination by the President. 
However, CFIUS endeavors to provide the parti es with ample opportunity to present their position 
and address issues that may arise during the process of an investigation in order to provide due 
process and to ensure that the most complete a nd accurate information is obtained to inform the 
Executive Branch decision making process. 
 
It is not possible to discuss in detail the factors taken into consideration by CFIUS in conducting a 
national security review under Exon-Florio beyond  those requested in section 800.402 (section WT/TPR/M/126/Add.3 
Page 18  
 entitled: "Contents of voluntary notice") of the Exon-Flo rio regulations.  In part this is because these 
factors change with each transaction.  Moreover, to the extent that these factors relate to classified 
information, it would not be possibl e to discuss them in this forum. 
 
Nonetheless, it is important to note that only a si ngle transaction has been refused under Exon-Florio.  
Despite the fact that some companies choose to with draw their applications voluntarily subsequent to 
their filings, the vast majority of transactions su bmitted to or reviewed by CFIUS proceed without 
difficulty. 
 
Question:  (Japan #12) Reference:  pp. 27-29, paras. 69-74 
 The transparency and predictability of government regulations are key elements in the determination 
of business investment.  They are also prerequis ites for competitive businesses to be able to conduct 
business under fair conditions.  Japan is thus c oncerned about the Exon-Florio provision from the 
following viewpoints: 
 
(a) the lack of predictability, due to the ambiguous definition of "national security"; 
(b) the lack of legal stability due to the possible inv estigation of completed transactions in the future;  
 and  
(c) the lack of due process, illustrated by the fact that even the parties concerned are not notified of 
the     reasons for the commencement of inves tigation, nor of the final decisions taken by 
the President.  
 
Question:  (Japan #13)  
Especially, the U.S. has been strengthened its antiterrorism measures after the multiple terrorist 
attacks, Japan concerns that this provision is app lied rather strictly.  Therefore, Japan requests the 
U.S., in the operation of the Exon-Florio provision, not only to comply with WTO rules, but also to take the necessary measures to ensu re transparency and fairness, to  the maximum extent possible, 
during the process starting from the notification to the Committee on Foreign Investment in the U.S. 
up until the final decision by the President.  Japan wo uld like to have the U.S. view on this request. 
 
Answers 
 
We believe that the United States is fully livin g up to its responsibilities and has implemented a 
regime that is predictable, stable, and that provid es an appropriate opportunity for participation in the 
review process.  
12 (a) Predictability: 
 In implementing the Exon-Florio provision since its inception in 1988, CFIUS has adhered to the original intent of the statute to address national secu rity issues raised by foreign acquisitions of U.S. 
companies.  The vast majority of transactions submitted to CFIUS proceed without difficulty (i.e., 
without initiation of an investigation within thirty days of the initial notification), and since 1988, only 
a single transaction subject to Exon-Flori o has been acted on by the President. 
 - Exon-Florio does not define national security, so  as to provide flexibility in its application. 
 
- While there is not a statutory definition, there is  in the investment community a general recognition 
of what businesses are of particular interest to th e national security sector (i.e., defense contractors, 
companies with technology applicable to defense/military uses, etc.).   WT/TPR/M/126/Add.3 
 Page 19 
 
  
- Although Exon-Florio is limited to nati onal security, no industrial sector is exempt. 
 (b) Legal Stability:   Transactions notified under Exon-Florio and subject to  a national security review will not be reviewed 
a second time unless CFIUS determines that the parties made a material omission of fact or a 
misrepresentation of the facts that  it provided to the Committee. 
 - There is no time limit
 on the ability of the President to utilize the authority provided to him under 
Exon-Florio when considering appropriate action wi th regard to non-notified transactions.  The only 
limitation on his authority is that whatever acti on the President might deem appropriate under this 
authority must be based on the facts, conditions, or  circumstances existing at the time the transaction 
was concluded.  (c) Process: 
 
- CFIUS shares with parties the reasons for initiating an  investigation, to the extent permitted by U.S. 
law, and consistent with its mandate to advise the President on matters of national security. 
 - For example, sometimes the reason fo r an investigation is based on in formation that is classified.  In 
such cases, it may not be possibl e to reveal the reasons for an investigation without compromising 
classified information. 
 - Similar considerations may pertain to the reas ons for the final determination by the President. 
 - However, CFIUS endeavors to provide the par ties with ample opportunity to present their position 
during the process of an investigation in order to provide due process and to ensure that the most 
complete and accurate information is obtained to  inform the Executive Branch decision making 
process.  13. The implementation of Exon-Florio is consiste nt with U.S. obligations under WTO agreements 
that provide for national security exceptions.  As me ntioned in the previous response, since we are 
dealing with national security, there are limits on the extent to which the process can be transparent.  
For example, we are not in a position to reveal ma terial that compromises classified information.  
Similar considerations may pertain to whatever action the President may take. 
 CFIUS implements Exon-Florio in the context of an open U.S. investment policy and, therefore, 
attempts to provide a process that encourages foreign direct investment in the United States.  As also 
mentioned previously, CFIUS attempts to give th e parties ample opportunity to present their position 
and address issues that may arise during the process of an investigation in order to provide due 
process and to ensure that the most complete a nd accurate information is obtained to inform the 
Executive Branch decision making process. 
 
Question:  (Japan #14) 
 
What kind of criteria does the United States use wh en choosing those countries with which it wishes 
to negotiate and conclude a bila teral investment treaty (BIT) or trade and investment framework 
agreement (TIFA)? 
 
  WT/TPR/M/126/Add.3 
Page 20  
 Answer  
 
United States decisions on whether to initiate negotia tions on a bilateral investment treaty (BIT) or 
trade and investment framework ag reement (TIFA) with a particular country are made through an 
interagency consultation process.  In the case of BI Ts, this interagency process is co-chaired by the 
Office of the United States Trade Representative (USTR)  and the Department of State.  In the case of 
TIFAs, the process is chaired by USTR. 
 A variety of U.S. government agencies and priv ate sector groups suggest potential BIT and TIFA 
negotiating partners on an ongoing basis.  When ma king decisions on actual negotiating priorities, the 
U.S. government considers a flexible rather than a fixed set of criteria.  These criteria are not applied 
in a mechanistic manner:  considerations that weigh heavily in the case of one country may be 
outweighed by other considerations in the case of other countries.  Some of the criteria the U.S. 
government considers when selecting BIT and TIFA negotiating partners include the following (in no 
particular order):  
• The level of interest of a prospective negotiating partner. 
• Potential trade and investment market, as  identified by the U.S. private sector. 
• Quality of the trade and investment policy regi me, and prospects for future liberalization. 
• Potential contribution of a BIT or TIFA to the promotion of economic reform and the 
development of the rule of law. 
• Willingness and ability to accept and implement high standards of investor protection. 
• The existence of outstanding investment disputes. 
• Potential collateral economic benefits, e.g., regionally. 
• Support for U.S. trade and foreign policy objectives. 
 
Question:  (Korea) 
Reference:  p. 29, para. 76  
Paragraph 76 describes restrictive measures on fishing operations and direct investment by foreigners.  
Could the U.S. government provide us with inform ation with respect to the reasons for placing 
restrictions on fishing operations and direct investment by foreigners? 
 
Answer 
 Given that fish are a limited and transient natu ral resource, governments must impose rules on the 
allocation of the resource.  Over time, it has b ecome common practice for countries to allocate this 
resource on the basis of nationality.  Many countr ies thus impose certain restrictions on foreign 
ownership in the fisheries sector.  Reasons for giving  preference to nationals include practical limits 
on the ability of governments to enforce domestic la ws with respect to foreign vessels collecting a 
transient natural resource.  The United States, howev er, has sought to achieve an appropriate balance 
between these practical law enforcement concerns  and its otherwise open investment policy by 
providing various exceptions to these restrictions.  Exceptions exist, for example, for smaller-sized 
fishing vessels, for vessels fishing in particular are as, and for vessels from countries that have entered 
into bilateral fishing agreements with the United States.  Question:  (Korea, page #1)  
Reference:  p. 28, para. 73  
 
Paragraph 73 indicates that, in the wake of the Sept ember 11 attacks, issues relating to terrorism are 
given heightened consideration in the review of submissions under th e Exon-Florio provisions.  Korea  WT/TPR/M/126/Add.3 
 Page 21 
 
 has concerns that the predictable and transparent business environment of the United States might be 
undermined by heightened national security concerns.  Please provide us with further information on how terrorism-related issues are taken into account in 
the review process, from the notice to the CFIU S up to the final decision by the President. 
 
Answer  
CFIUS thoroughly considers all information about a pr oposed transaction as it pertains to the potential 
for the transaction to support terrorist activity.  The United States will not undermine its predictable 
and transparent business environment.  The Exon-Florio statute contains factors the President may 
consider (50 USC Sec 2170(f)) in evaluating the effects of an investment on national security, a 
number of which relate to terrorism.  These include  the potential effects of the proposed or pending 
transaction on sales of military goods, equipment, or technology to any country that supports 
terrorism, is a country of concern re garding missile proliferation, or is a country of concern regarding 
the proliferation of chemical and biological weapons. 
 
Question:  (China #10) 
 
The Chinese and the U.S. government have si gned the bilateral Agreement on Insurance and 
Guarantees for Investments in 1980.  As the investment in terests of U.S. private capital in China have 
increased drastically in the past years, the earlie st resumption of the U.S.  Overseas Private 
Investment Corporations' (OPIC) business activity in China will benefit both China and the U.S. 
 
When will the U.S. resume the OPIC's cooperation with China, which will comprehensively enforce 
the Sino-U.S. Agreement on Insuran ce and Guarantees for Investments?  
 
Answer  
As stated in the report, OPIC is required by statute to review projects for their effects on human rights, the environment, worker rights and U.S. employment.  Pursuant to Section 231A(1) of the Foreign Assistance Act of 1961, as amended, following the events of spring 1989, OPIC determined in 1990 
that China no longer met the statutory worker right s standard, effectively suspending the availability 
of OPIC programs.  In addition, the United St ates Congress suspended  OPIC activities in China 
effective February 16, 1990 (Section 902 of th e Foreign Relations Act of 1990-1991 (PL 101-206)), 
until the President reports to Congress that China has made progress on a program of political reforms throughout the country and that it is in the national interest of the United States to terminate the suspension. 
 
CHAPTER 3:  BY MEASURE 
 (1) Customs Procedures, Rules of Origin, Tari ffs, Customs Fees (including Customs Security 
Issues)  
Question:  (India #12)  
The fees being levied in the U.S. as charges for customs, harbour and other arrival facilities place 
foreign products at an unfair disadvantage vis a vis domestic companies.  The most significant of the 
customs user fees is the Merchandise Processing Fee (MPF) that is being levied on all imported 
merchandise except for products from LDCs and othe r eligible countries under different agreements.  
The MPF adversely affects small exporters of low va lue items usually exporting small consignments.  
The U.S. Customs also collects the Harbour Maintena nce Tax (HMT) in all U.S. ports on waterbourne WT/TPR/M/126/Add.3 
Page 22  
 imports at an ad valorem rate of 0.125 percent.  U.S. authorities have stopped collecting HMT on 
exports while it is still being collected on imports.  We would request the U.S. authorities to clarify 
the reasons for such a differential treatment of  exports and imports and consider removing these 
impediments to trade.  
Answer  
 
Congress specifically intended that the MPF approxima te the cost to Customs in processing the entry 
of imported merchandise.  That intent is set in the Senate Report on the 1990 Customs and Trade law 
and was intended to meet GATT obligations.  The amendment specifically placed a maximum amount on the assessment, among other changes, to address GATT c oncerns.  It should be noted that domestic 
products are subject to similar inspection fees that  are administered by other Federal Agencies. 
 The HMT is imposed equally on imported and domes tic water-borne shipments.  The purpose of the 
HMT is to have the businesses that benefit directly from the use of U.S. harbors to move commercial 
cargo bear the cost of maintenance of those harbors.   Shippers that load or unload cargo in a harbor 
that does not receive Federal funds for maintenance are not assessed the fee. 
 
Question:  (India #13)  
 
Local procurement by foreign ships at port:  There is a provision that all requirements for daily use may be procured from local market by all foreign ships calling at U.S. ports.  Please provide the U.S. 
view on this point. 
 
Answer  
 
We are unable to determine the provision regarding local procurement to which India refers in its 
question.  We regret, therefore, that we are not ab le to provide the U.S. view on India's statement. 
 
Question:  (Canada #1) 
Reference:  para. 33  
Paragraph 33 in the Secretariat Report indicates that country of origin marking is mandatory for most 
imported manufactured products and that  the determination of origin re lies on self-certification.  What 
is the basis for determining the country of origin  for marking purposes of products imported into the 
U.S.?  
 
Answer 
 The country of origin of a good for the purposes of  country of origin marking under 19 U.S. Code 
1304 is determined in accordance with the principl e of substantial transformation as elaborated in 
judicial precedent and in Title 19 Code of Federal Regulations, Part 102.  G oods that are not wholly 
obtained or produced in a single country, or that ar e not produced entirely from domestic materials, 
will be considered goods of the country of final pr oduction if such production results in a substantial 
transformation. 
 
Question:  (Canada #2)  
 
Paragraph 34 indicates that the U.S. maintains several sets of preferential rules under free-trade 
agreements but goes on to provide details only on the NAFTA rules of origin in the subsequent 
paragraphs.  Can the U.S. provide further details  on the rules of origin negotiated under their FTA  WT/TPR/M/126/Add.3 
 Page 23 
 
 with Singapore and under their FTA with Chile?  Ho w do the rules of origin negotiated under these 
two FTAs compare with the NAFTA rules of origin?  
Answer  
 
The overarching structure of the rules-of-origin regime  in U.S. FTAs is largely the same.  All U.S. 
rules-of-origin regimes are based upon principles of transparency and predictability, and are 
consistent with the WTO Agreement on Rules of Origin  both in terms of the rules of origin and their 
implementation.  With respect to the "wholly obtai ned or produced" criteria for determining origin, 
the United States uses the strict and precise definition used by most countries.  In both U.S-Chile and U.S.-Singapore FTAs, product-specific rules are also utilized which are generally articulated in terms 
of 'change in tariff classification,' much like NAFTA.  The de minimis  is 10 percent, rather than 7 
percent as it was  in NAFTA, and in general terms there is considerably less use of a regional value 
content percentage criterion for products.  The Un ited States, in concert with Singapore and Chile, 
notified the respective agreements along with th eir full texts, to the WTO in December 2003. 
 Question:  (Canada #3)  
Comment
 
 
Paragraph 37 indicates that on 1 January 2003, following requests from industry, the United States together with Canada and Mexico  implemented measures to liberalize the NAFTA rules of origin 
applicable to alcoholic beverages, crude petroleu m, esters of glycerol, pearl jewellery, headphones 
with microphones, chassis fitted with engines, and photocopiers. 
 
Answer 
 
This is not quite correct.  On 1 January 2003, Ca nada and the United States implemented measures to 
liberalize the rules of origin specified above. Canada  extends those benefits to importations from both 
the United States and Mexico;  the United States ex tends the benefits to importations from Canada 
only. Mexico has yet to implement measures to liber alize these rules of origin.  Mexico has informed 
the United States that the Mexican Senate has appr oved the legislation necessary to liberalize these 
rules of origin, and the United States is working w ith Mexico to resolve the situation bilaterally. 
 
Question:  (China #1)  
Could U.S. delegation explain how the U.S. will ensu re that legislations with respect to national 
security are consistent with the principle of mini mizing the effects on trade and safeguard the normal 
operation of international trade and inve stment to the greatest possible extent?  
 Answer  
Section 343 of the Trade Act of 2002, as amended by section 108 of the Maritime Transportation 
Security Act, states that regulations shall be pr omulgated providing for the transmission to U.S. 
Customs and Border Protection (CBP) through an el ectronic data interchange system of information 
pertaining to cargo that is to be brought into or ta ken out of the United States, prior to the arrival or 
departure of the cargo.  CBP drafted a Notice of Proposed Rulemaking (NPRM) taking into consideration the transcripts of four public meetings, comments that were received  as a response to the meetings and a Commercial 
Operations Advisory Committee of the Customs Se rvice (COAC) Subcommittee Report.  After DHS 
approval, the NPRM was published in the Federal Register on July 23, 2003 (68 FR 43574), with a 
30-day comment period. WT/TPR/M/126/Add.3 
Page 24  
  
CBP received additional comments in response to the NPRM, which underwent thorough review and 
analysis.  Also, a detailed regulatory impact analys is (RIA) of the proposed rule was conducted.  A 
final draft was completed after careful considerati on of the comments and of the economic impacts of 
the proposal.  
The volume of trade that flows in and out of the United States requires CBP to use the principles of 
risk management to align finite resources and pers onnel with cargo that poses the greatest risk to the 
United States.  Given that trade volume will only con tinue to increase, and given that much of the 
information needed to perform comprehensive ri sk management is stored in CBP and other 
government databases, it is not only essential that the information pertaining to cargo be electronic, it 
is also essential that CBP receive this inform ation in advance of arrival and departure. 
 Advance cargo information allows CBP personnel to screen cargo information on a fluid basis 
through the Automated Targeting System (ATS).  Th is tool allows CBP to review shipment data 
against information stored in our law enforcement and commercial databases a nd in light of strategic 
intelligence in order to identify potentially high-ri sk shipments.  Receiving advance electronic cargo 
information from all modes of transportation will al low CBP to identify and intercede with high-risk 
cargo before the cargo enters the commerce of the U. S. (or departs) and cannot be recovered.  By 
identifying high-risk cargo at an early stage, the movement of low risk imports and exports will be 
facilitated.  
The Trade Act was published in the Federal Register on December 5, 2003 (68 FR 68140). 
 
Question:  (China #13) 
Non-Ad Valorem Tariffs
 
 China urges the U.S. authorities to  transform these Non-Ad Valorem duties to the ad valorem duties 
as soon as possible.  When will the United States ta ke specific steps and measures in this respect? 
 
Answer 
 
The number of non-ad valorem tariff lines in the U.S.  schedule has continued to decline, as noted in 
paragraph 47 of Chapter III.  The WTO Secret ariat and the U.S. International Trade Commission 
(ITC) have verified that the number of non-ad valo rem tariff lines in the U.S. schedule amounts to 12 
percent of all tariff lines, not 12.47 percent, as noted in China's comments.  The United States has 
continued to support the discussion of the phase-out of  all non-ad valorem tariff rates as part of the 
multilateral Doha Development Age nda negotiations and will continue  to discuss this in multilateral 
fora. 
 
Question:  (China #14) 
Tariff Peaks
 
 
When will the U.S. take efficien t measures to reduce tariff peaks and promote international trade 
effectively? 
 
Answer 
 
According to the WTO Secretariat, the number of to tal tariff lines exceeding 15 percent is 6.6 percent, 
as noted in paragraph 50 of Chapter III.  The Doha mandate specifically calls upon Members to 
address this issue and the United States has conti nued to state that it supports the reduction and/or  WT/TPR/M/126/Add.3 
 Page 25 
 
 elimination of all tariffs on a multilateral basis.  The U.S. has repeatedly stated its willingness to 
reduce and eliminate tariffs in sensitive sectors if  other WTO members are willing to do the same. 
 
Question:  (China #15) 
Tariff Escalation  
 Is there any plan or immediate timetable for the U.S. government to eliminate the tariff escalations? 
 
Answer 
 
The United States, as part of its market access proposals under the Doha Development Agenda, has 
advocated for the total elimination of all tariffs (agricultural and non-agricultural) after a period of 
reduction.  There is no better method to handle the issues of tariff peaks a nd tariff escalation than 
harmonization and reduction of tariffs  with the eventual goal of total elimination at an agreed-upon 
date.  The United States has continued to be an a dvocate of multilateral tariff reductions in the Doha 
negotiations and will continue to be engaged on these topics as long as there continues to be ambition 
among other members for multilateral liberalization. 
 
Question:  (China #18) 
 
What is the legal basis for the U.S. to levy merchandise processing fees upon importers?  
 
Answer 
 
The statutory basis for assessment of the merchandise processing fee is 19 USC 58c(a)(9) and (10).  
The statute is implemented by the regulations in 19 CFR 24.23. 
 
Question:  (China #19)  
 
Could the U.S. Delegation explain the practic e's consistency with Article 8 of GATT 1994? 
Answer 
 
Congress, in the Customs and Trade Act of 1990 (104  Stat 635-639, Pub. L 101-382), set a maximum 
and minimum amount for the user fee in order to ensu re that the fee approxima tes the Customs cost of 
processing import entries, in accordance with GATT Article VIII.  
Question:  (China #89)  
 Does the U.S. have any schedule to lower its tariff on textiles and clothing? 
 
Answer 
 
Under the Uruguay Round Agreement, the United Stat es agreed to a phased reduction in tariff rates 
for textiles and apparel products.  Tariffs on tex tile and apparel products will decline from a trade 
weighted average of 17.2 percent ad valorem to a tr ade weighted average of 15.2 percent ad valorem.  
The majority of these reductions were phased ove r the 10 years.  The final Uruguay Round tariff 
reductions occurred on January 1, 2004.  With regard to the DDA negotiating agenda, the U.S. Government supports significant movement 
toward the harmonization and/or elimination of textile  and apparel tariffs and elimination of non-tariff 
barriers.  Given the sensitivity of these products  for a large number of WTO members, clearly 
progress in this area can only be achieved in the context of broad participation encompassing key WT/TPR/M/126/Add.3 
Page 26  
 players, both developed and developing.  This mo st likely would be facilitated through a sectoral 
approach. 
 
Question:  (Japan #17)  
What is the specific time-table for implementi ng the Automated Commercial Environment (ACE)?  
The Report says that the "ACS (Automated Commercial System) and ACE will initially operate in 
parallel." What kind of "operation" is specifically ex pected?  As soon as the ACE gets into full swing, 
will the U.S. review the 24-hour rule and the require ment to present cargo information in advance, for 
which the final rule was recently announced? 
 
Answer  
 
The Automated Commercial Environment (ACE) is the first project of the U.S. Customs and Border 
Protection Modernization Program.  Based on current status and projected funding profiles, ACE is 
expected to be a six-year development project, culminating in winter 2007-2008. 
 
The ACE is being developed incrementally.  During  the development period there will be a "release" 
of ACE capabilities approximately every six months, for a total of seven rel eases.  Each succeeding 
release enhances and expands upon AC E capabilities deployed in the prev ious release(s).  The CBP is 
currently working on ACE Release 3.  There is a comprehensive, phased plan to move from the 
legacy system, the Automated Commercial System (ACS), to ACE. 
 
Generally, as ACE capabilities are developed and test ed as part of the release schedule, ACS and 
ACE capabilities will initially operate at the same time to ensure there is no degradation in CBP 
operations.  As ACE capabilities are phased in and operationally verified, the ACS capabilities being 
replaced will be "turned off."  The ACE is not a technology project.  It encompasses a significant re-
engineering of CBP business processes and the inform ation technology systems that support those re-
engineering efforts.  Moreover, it is the info rmation technology platfo rm supporting the Customs-
Trade Partnership against Terrorism, and the Container Security Initiative.  The ACE is a 24-7-365 operation that will enhan ce border security and facilitate the flow of 
legitimate trade by providing a st ate-of-the-art, integrated system for tracking information on 
commerce entering the United States.  The ACE will improve communication and coordination 
among more than 20 U.S. agencies with border enfo rcement responsibilities and more than 100 U.S. 
agencies that have regulations affecting imports and exports, or are users of statistical trade 
information.  These agencies will have significantl y greater access to advance information on cargo 
and conveyances bound for the United States, and inform ation analysis will be significantly enhanced. 
 
The prominent feature of ACE is the Secure Data Portal, which provides one screen for both 
interagency coordination and for interface with the tr ade community.  This portal is a single, web-
based screen that provides the trade community with  a national account view of their trade activity.  
The capabilities developed for the portal will speed cargo processing at the border while enhancing 
security and information-sharing; enhance the in terface between the trade community and government 
agencies; help improve trade compliance; and elim inate labor-intensive procedures, thus reducing 
costs to both government and private industry.  Th e United States will not be reviewing the 24-hour 
rule as a result of ACE deployment.   
 
   WT/TPR/M/126/Add.3 
 Page 27 
 
 Question:  (Japan #18)  
Reference:  p. 36, paras. 30-32 
 
Japan understands and basically supports the impor tance of implementing measures regarding anti-
terrorism in order to strengthen transport security, which the U.S. has been promoting.  However, 
Japan would ask the U.S. to pay considerable atten tion to fair and free trade by ensuring that these 
measures will not hinder a swift, harmonious and ef fective distribution.  Japan also would like to 
request the U.S. to aim these measures at beco ming compatible with those efforts of other 
international organizations and that the U.S.' efforts will contribute to making, building and 
implementing and building a world-wide, common, and integrated system.  Answer  
 
The United States is very sensitive to the impact that Customs and Border Protection's (CBP) anti-
terrorism efforts have on the flow of trade a nd its resulting effect on the economies of the United 
States and our trading partners.  CBP has built upon targeting and screening capabilities by 
implementing more effective non-intrusive inspecti on technology and targeting systems.  Greater 
cooperation and communication betw een government agencies respons ible for homeland security has 
provided a stronger defense against terrorist acts,  and has not negatively impacted the swift and 
effective transportation of merchandise.  Also, inte rnational traders are par ticipating in cooperative 
security partnerships and are providing more detail ed information in advance of arrival for those 
shipments that are destined for market. 
 
Components of the layered anti-terrorism strategy include:  (1) receipt of advance passenger and cargo information – allowing for more effective ri sk assessments and inspections in advance of 
arrival, (2) investing in non-intrusive inspec tion equipment provides effective uniform screening 
technology for targeted shipments, (3) cooperation between U.S. government agencies, and (4) U.S. 
partnership with the trade community.  The United States continues to support of the acceptance of 
these concepts through our strong support and partic ipation in organizations like the World Customs 
Organization and the World Trade Organization.  
Question:  (Japan #19) 
 
When the U.S. Customs announced the C-TPAT, it pr omised that C-TPAT participants would enjoy 
benefits, such as swifter customs clearance and a reduction in the number of inspections.  C-TPAT 
participants, however, have not in fact received such  benefits, due to the reinforcement of transport 
security, including the 24-hour rule.  Japan requests th at such promised merits be realized, and, in 
addition, would like to have the U.S. view. 
 
Answer  
 
Currently, C-TPAT members do receive direct benefits such as a systematic reduction in the number of cargo examinations for targeted exams and manda tory compliance exams.  In addition, C-TPAT 
importer participants are experien cing expedited release on our land bor ders with Canada and Mexico.  
The first phases of the Free and Secure Trade (FAST) program are operational in El Paso, Texas and 
Port Huron, Michigan which are among the ten busiest U.S. ports by import volume.  
Question:  (Japan #20)  
 In June 1999, the U.S. amended the Harmonized Tari ff Schedule of the U.S. (HTSUS) to permit an 
indelible ink marking, in addition to a dye-stamping, on the surface of movements and cases as a measure for meeting the labeling requirement of or igin for clocks and watches.  The amendment, WT/TPR/M/126/Add.3 
Page 28  
 however, does not sufficiently respond to Japan's re quest, which is to limit labeling requirements of 
origin to the finished products of clocks and wa tches only, and to leave the choice of the labeling 
methods up to the discretion of manufactures.  Japan , therefore, continues to request the U.S. to 
simplify its labeling requirements of origin for cloc ks and watches.  Japan would appreciate receiving 
the U.S. views on our comment.  Answer 
 
The United States takes note of Japan's request rega rding the simplification of labeling requirements 
for the country of origin markings for clocks and watches.  Question:  (Japan #23)  
 
The U.S. imposes high tariffs, for example 25 percent on most trucks (8704).  Compared with Japan, which sets its rates at 0 percent on the same items, th e U.S. figure remains considerably higher.  Japan 
would also like to know why the U.S. imposes ta riff rates on trucks 10 times higher than those on 
passenger vehicles (the bound rate be ing at 2.5 percent).  According to the minutes of the 2001 Trade 
Policy Review, the U.S. stated  its willingness to e ngage the matter in comprehensive market access 
negotiations on goods based on the WTO's built-in ag enda.  Japan thus requests the earliest possible 
elimination of the peak tariff.  
Answer 
 
The United States has continued to be an advocate of multilateral tariff reductions in the Doha negotiations and will continue to be engaged on these topics as long as there continues to be ambition 
among other members for multilateral liberalization.  Tariffs in sensitive sectors are included in this 
approach - the U.S. has repeatedly stated its w illingness to reduce and eliminate tariffs in sensitive 
sectors if other WTO members are willing to do the same. 
 
Question:  (Mexico #2) 
 
According to document WT/TPR/S/126 the Secretaria t makes reference to examination of products 
under the 24-hour system.  In this respect Mexico  would like to request the U.S. to provide 
information about the percentage of products subj ect to examination with regard to total imports. 
 The Report by the Secretariat states that only 75 pe rcent of the 20 largest foreign seaports participate 
in the Container Security Initiative (CSI).  Theref ore Mexico would appreciate that the U.S. could 
elaborate about the main obstacles that prevented participation in the CSI. 
 
Regarding the information provided in the Report by th e Secretariat about the CSI, it is noted that CSI 
may cause trade distortion among the ports that do and do not have such a program in place.  In this 
respect Mexico would like to request the U.S.  to indicate additional actions that would be 
implemented with regard to non-CSI ports in order to avoid the possibility of trade distortion and facilitate trade flows. 
 
Answer 
 
The first 20 CSI ports were selected based on their high volume of container traffic to the United 
States.  Seventeen of these ports are now operationa l with CSI personnel in place.  Two more of the 
first 20 have agreed to accept CSI teams and are in the process of becoming operational. 
  WT/TPR/M/126/Add.3 
 Page 29 
 
 In June 2003, CBP announced that the CSI would be  expanding to include strategic locations beyond 
the 20 initial major ports.  This expansion could in clude ports located in areas of the Middle East, 
Africa, Latin America, and other major ports in Asia and Europe. 
 The criteria for selecting additional ports for CSI is based on the existing volume of container traffic 
to the United States, geographic location, strategic c oncerns, infrastructure capacity, and other factors.  
Since the U.S. Customs and Border Protection (CBP) has limited personnel resources, our first 
priority for expansion of CSI to additional internati onal seaports is to those ports that currently meet 
these criteria.  CSI focuses on containers that are being shipped fro m a foreign port of lading to or through a port in 
the United States.  As you are aware, there is not a large volume of containers shipped directly from 
Mexican seaports to ports in the United States.  Th e immediate focus of CSI expansion is to those 
ports that ship the greatest number of containers that meet the criteria listed above.  Therefore, we are not able to consider expansion of the CSI ports in Mexico at this time.  
It is important to mention that there is no "speci al agreement" necessary for the U.S. and Mexico to 
continue to trade in the friendly and cooperative manne r practiced for many years.  The fact that CSI 
will not be expanded at this time to Mexican ports should not affect its ability to trade with the United 
States.  CBP appreciates Mexico's interest in the CSI and its resolve to protect international commerce.  
Enhanced container security is good for business.  Therefore, CBP encourages Mexico to make any 
necessary efforts to enhance the security of its ports .  This will benefit Mexico's economic welfare as 
well as the international maritime trading system.  
Question:  (Switzerland #6) 
 
§26-29 ( The 24-hour Advance Vessel Manifest Rule ) outlines some measures on providing mandatory  
informational elements before the cargo is loaded in  a foreign port and that the data be provided in 
electronic form.  How do the U.S. ensure that these measures do not become an unduly administrative burden or even a 
new non-tariff barrier?  
 
Answer 
 
The requirements of the 24-hour rule have been in effect for over a year, during this time Customs and 
Border Protection (CBP) has continuously worked with  trade partners to achieve compliance.  The 24-
hour rule expanded the use of the Sea Automated Ma nifest System (AMS), which allowed Non-Vessel 
Operating Common Carriers (NVOCCs) to become bonde d with CBP in order to transmit their data 
directly.  Additionally, the number of automated carriers and NVOCCs has risen, as well as AMS service centers available for use.  Question:  (Switzerland #7) 
 
Having regard to Part 103 of Title 19 of the C ode of Federal Regulati ons (published on Monday, 
August 11, 2003 in the Federal Register V ol. 68) a bout the availability of information, how does the 
U.S. ensure the confidentiality of the information provided and why are the U.S. of the opinion that 
making data available is needed for reasons of national security? 
  WT/TPR/M/126/Add.3 
Page 30  
 Answer 
 
CBP is regulated by statute (19 USC 1431(c)) regarding disclosure of manifest data.  Congress must enact any changes to the statute.  Title 19 of the Code of Federal Regulations secti on 103.31(3)(d), (19 CFR 103.31(3)(d)) states that an 
importer or consignee may request confidential treatme nt of its name and addr ess contained in inward 
manifests, to include identifying marks and numbers .  In addition, an importer or consignee may 
request confidential treatment of the name and addre ss of the shipper or shippers to such importer or 
consignee.  
Each initial certification will be valid for a period of two years from the date of receipt.  Renewal 
certifications should be submitted to the Disclosur e Law Officer at least 60 days prior to the 
expiration of the current certification.  Certified information may be copied but not published by the 
press during the effective period of the certification.  An importer or consignee shall be given written 
notification by Customs of receipt of its certification of confidentiality. 
 
Question:  (Chinese Taipei #2a) 
Reference:  p. 36, paras. 30-32 and paras. 26-29 
 
(a) Regarding the Customs Trade Partnership Agai nst Terrorism scheme (CTPAT), we note that the 
Bureau of Customs and Border Protection (CBP) is now in the process of expanding the scheme to 
foreign companies in Europe and Asia.  We tr ust that the scheme will be operated in a manner 
consistent with the principle of non-discrimination and we would appreci ate it if the U.S. could advise 
us of the criteria, if any, to be used in the selection of foreign companies.  
Answer 
 CBP has developed criteria to select foreign manufac turers for inclusion in C-TPAT.  This selection 
criteria is based on commonly accepted risk management principles and incorporates international supply chain security concerns.  At this time, CBP  does not anticipate releasing this sensitive criteria 
to any entities public or private. 
Question:  (Chinese Taipei #2b) 
 
(b) The 24-hour Advance Vessel manifest Rule requ ires that the vessel's cargo declaration must be 
notified in electronic form to the CBP 24 hours before  the cargo is loaded in a foreign port.  We 
wonder whether the U.S. might c onsider conducting a review of th e effectiveness of this practice 
within the Rule, with a view to determ ining whether it should be maintained.  
 Answer 
 
The requirements of the 24-hour rule have been in effect for over a year, during this time Customs and 
Border Protection (CBP) has continuously worked with trade partners to achieve compliance.  
Additionally, the 24-hour rule was used as the vessel  requirement standard in the recent publication of 
the Trade Act final rule published in the Federa l Register on December 5, 2003 (68 FR 68140).  
Approximately 90 percent of world cargo mov es by container;  200 million cargo containers are 
transported between the world's seaports each year, constituting the most critical component of global 
trade.  Nearly half of all incoming trade to the United States (by value) arrives by ship, and most of that is in sea containers.  Annually, nearly 6 m illion cargo containers are off-loaded at U.S. seaports.  
Due to the volume of containers being shipped, the im pact of terrorists using sea containers to conceal  WT/TPR/M/126/Add.3 
 Page 31 
 
 weapons of mass destruction woul d have an immediate and devastating impact on global trade and the 
global economy.  To address the threat terrorists pose to containeri zed shipping, Customs and Border Protection (CBP) 
developed the Container Security Initiative (CS I).  Under CSI, CBP is working with other 
governments to identify high-risk cargo containers and pre-screen those containers at the foreign ports 
before
 they are shipped to the U.S.  In addition to protecting global trade, CSI should facilitate  the 
flow of that trade. When a container has been pre-screened and sealed under CSI, U.S. Customs will not, absent additional information affecting its risk analysis, need to inspect  it for security purposes 
when it reaches the U.S.   Moreover, this sy stem could reduce the processing time for certain 
shipments because the scre ening at a CSI port will in most cases take place during "down time."  
 Question:  (Chinese Taipei #2c) (Reference:  p. 65, paras. 146-149) 
 
(c) The Bioterrorism Act of 2002 requires in partic ular the registration of most food manufacturing 
and handling facilities, and prior notice to be given to the FDA of all food shipments destined for the 
U.S.   Given the time difference between the Unit ed States and other areas, it may be difficult to 
contact the manufacturer and receive the necessary records/documents within the given timeframe.  
With this in mind, we would ask that the deadline be extended, preferably to 24 hours, in order to 
avoid creating an unnecessary burden on trade.  Answer 
 
Please refer to the response to Part b above. 
Question:  (EU #2)  
 Cumbersome inspection and approval procedures for goods entering the U.S. often lead to perishable 
goods being damaged with resulting commercial losses for exporters.  What measures might be taken 
to improve U.S. Customs sampling and inspection procedures in this respect?  
Answer  
 With respect to improved sampling, the more detailed cargo information that CBP receives the less 
likely an examination will be required.  With im proved information to assess risk, fewer examinations 
would be required.  However, there are legislativ e requirements that mandate both examinations and 
sampling be conducted on certain goods.  Question:  (EU #3)  
 
What procedures does the U.S. have in place to ensure  that the principle of proportionality/least trade 
restrictiveness and non-discrimination have been adequately observed in the development of new 
proposals and new measures to increase security against future terrorist attacks?  Have there been any 
risk analyses undertaken or studies into the likel y impact on trade flows of specific measures? 
 
Answer  
 
CBP has numerous layers of targeting and risk management tools in place to assist in making 
decisions concerning threat assessments.  By us ing advance information, risk management and 
technology, and by partnering with other nations an d with the private sector, the twin goals of the 
United States of enhanced security and trade facilita tion do not have to be mutually exclusive. Since WT/TPR/M/126/Add.3 
Page 32  
 9-11, we have developed ways to ma ke our borders more secure that al so ensure the efficient flow of 
legitimate trade and travel.  
Question:  (EU #4) 
 
How does the U.S. intend to ensure that adequate resources are assigned to effectively implement the 
provisions of new legislative security measures, in particular where these have a direct or indirect 
impact on overseas economic operators?  
Answer  
 CBP is required to enforce legislation and w ill do what is necessary and required under such 
legislation to ensure the task is accomplished.  
Question:  (Brazil II, Customs Procedures) 
 Regarding the bilateral agreements with ports under the CSI, it is stated that (paragraph 25, p. 32) 
"noting that such a bilateral approach may penali ze smaller EU ports that have not signed bilateral 
agreements with the United States, the European  Commission is seeking a U.S.-EU agreement to 
replace the eight bilateral agreements:  the author ities noted that negotiations are under way between 
the CBP and the Commission."  
Does the U.S. consider the possibility of negotia ting bilateral agreements with WTO Members under 
the CSI, instead of seeking agreemen ts with individual ports?  Can the terms of a U.S.-EU agreement 
set benchmarks for agreements with other Members? 
Answer  
 International organizations, most notably the Wo rld Customs Organization (WCO) and the G8, have 
supported CSI expansion through th eir adoption of resolutions that support the additional security 
measures introduced by CSI at ports throughout the world.  The implementation of CSI at the world's largest ports is currently underway;  the inclus ion of smaller ports will be a subject of ongoing 
discussion between the United States and its trade partners.  Question:  (Brazil #2)  
 
Paragraph 34 (page 38) informs that the U.S. main tains both preferential and non-preferential rules of 
origin.  In the case that a cer tificate is required from importing countries, what authorities would be 
responsible for issuing the certificate of origin? 
 
Answer 
 
Certificates of origin are only required with respect  to claims for preferential tariff treatment under 
certain preferential tariff programs.  These certifi cates of origin are not issued by any government 
authority.  Rather, they generally are issued and executed by the producers or exporters of the 
merchandise for which preferential tariff treatment is sought. 
 
Question:  (Brazil #4)  
 
In paragraph 34 (page 38), it is mentioned that  "In addition, the Department of Commerce may 
determine  whether a particular product is produced in the country covered by a specific anti-dumping 
or countervailing duty order;  its determinations may include different criteria than those used by CBP.  
Country of origin marking and labeling regulations are also u sed to provide consumers with  WT/TPR/M/126/Add.3 
 Page 33 
 
 information regarding the origin of the product, and are mandatory for most imported manufactured 
products, and for many agricultural products (e.g. eggs , meat and poultry section vii below)."  Is this 
legislation the legislation established in 19 CFR 102.20?   What are the different criteria used by the 
CBP (and legislation)?  
Answer 
 
The U.S. Department of Commerce determines  origin for anti-dumping and countervailing duty 
purposes.  The rules set forth in section 102.20 of title 19 to the U.S. Code of Federal Regulations (19 
C.F.R. §102.20) are used to determine the country of origin for products imported from Mexico and Canada for country of origin marking purposes and fo r determining the applicable rate of duty under 
the North America Free Trade Agreement.  Annex 311 to the North American Free Trade Agreement 
requires the parties to establish such rules.   
Question:  (Brazil #5)  
 Are the rules of origin used for origin marking are the same for non-preferential rules of origin 
applying for anti-dumping and countervailing measures? 
 
Answer  
 
There are two sets of rules of origin for country of origin marking purposes.  The first set is used to 
determine the country of origin of a product for all countries except Canada and Mexico.  The second 
set, as discussed above, it is used to determine th e country of origin of a product imported from 
Canada or Mexico.  These rules are applied, as appropriate, without regard to anti-dumping or 
countervailing duty measures. 
 
Mexico:  (Customs Procedures, #1, a-d)  Question:  (Mexico #1) 
 
In response to the tragic September 11th attacks, th e United States has modified its procedures for the 
entry of good into its territory and now requests that  it be notified in advance of the arrival of goods in 
U.S. territory.  Mexico requests that the U.S. expand upon its explanation, addressing the following 
points:  
Question:  (Mexico #1a) 
 How have the Customs authorities ensured that the informati on requested in advance will not              
result in a duplication of the procedur es already required by other agencies? 
 
Answer 
 
CBP continues to work with other government agen cies such as FDA and Coast Guard in attempts to 
limit the duplication of work by the trade. 
 
Question:  (Mexico #1b)  
How will notifications not electronically transmitted be treated? 
 
 WT/TPR/M/126/Add.3 
Page 34  
 Answer 
 
The Trade Act of 2002 requires advance electronic cargo information on all cargo arriving or departing the U.S. 
 
Question:  (Mexico #1c)  
 
What results have been achieved to da te in the application of these programs?  
 
Answer  
The 24-hour rule and Trade Act final regulation heav ily leverage use of existing automated manifest 
systems in the rail, air and sea environments to acco mplish the mandate of receiving electronic data in 
advance of shipments arriving in the U.S.  The Automated Export System will be the vehicle for receiving advanced data on goods leaving the country .  Shipments arriving by truck will be reported 
using existing interim methods of Free and Secure Trade System (FAST), Pre-Arrival Processing 
System (PAPS), Border Release Advance Scre ening and Selectivity (BRASS) and Customs 
Automated Forms Entry System (CAFES).  Paper based BRASS shipment volumes will be gradually 
reduced.  When Automated Truck Manifest under AC E is nationally available, it will become the 
preferred vehicle of advanced truck reporting. 
 
Question:  (Mexico #1d) 
 
Does the U.S. have procedures in place to ensure that the information requested of companies is 
protected against disclosure to third parties?  
Answer 
 CBP is regulated by statute (19 USC 1431(c)) regarding disclosure of manifest data.  Congress must 
enact any changes to the statute. 
 
Title 19 of the Code of Federal Regulations secti on 103.31(3)(d), (19 CFR 103.31(3)(d)) states that an 
importer or consignee may request confidential treatme nt of its name and addr ess contained in inward 
manifests, to include identifying marks and numbers .  In addition, an importer or consignee may 
request confidential treatment of the name and addre ss of the shipper or shippers to such importer or 
consignee.  
Question:  Mexico (#1-2: CTAP)  
 
Mexico was one for the first countries where C-TPAT 's foreign manufacturer phase was implemented.  
Participation by Mexican companies in the first worldwide supply chain security initiative ensures a 
more secure supply chain for their employees, supp liers and customers.  C-TPAT secures the supply 
chain from the point of manufacture, through transpor tation and importation, to ultimate distribution.  
To secure their supply chain of goods entering the U.S ., exporters that consolid ate their products could 
benefit from C-TPAT participation by ensuring that  their products are being shipped along with other 
C-TPAT members.  Several benefits of C-TPAT include access to the C-TPAT membership list, and eligibility to participate in the Free and Secure Tr ade (FAST).  A consolidated shipment crossing the 
border containing shipments from Mexican exporters that are all approved for C-TPAT, with a FAST 
approved truck driver, C-TPAT carrier and importer, would be eligible for e xpedited FAST processing. 
    WT/TPR/M/126/Add.3 
 Page 35 
 
 Question:  Mexico (#1-2a)  
 
According to the Report by the Secretariat the CBP and the Department of Commerce may apply 
different  criteria to determine the origin of goods.  On this  basis Mexico will appreciate that the U.S. could 
indicate which criteria would prevail in cases where CBP and the Department of Commerce consider 
that a product is originating of different countries and an indication of the costs that will be incurred in 
such cases by importers due to the need of  complying with different requirements. 
 
Answer  
 No criterion prevails over another because the differ ing criteria are applied for the administration of 
different programs.  Therefore, the criteria are not in conflict and importers are not obliged to satisfy 
two criteria for the same program.  Importers do not incur additional costs when the Department of 
Commerce administers its programs using its origin criteria.  Question:  Mexico (#1-2b)  
 
The Report by the Secretariat states that country of  origin markings are mandatory for most imported 
manufactured products and for many agricultural pr oducts. Therefore Mexico would appreciate that 
the U.S. could indicate the applicable criteria to exempt products of country of origin marking requirements. 
 
Answer  
 
Exceptions to the country of origin marking requir ements are set out in 19 U.S. Code Section 1304 
and in the corresponding regulations in 19 Code of Federal Regulations Part 134. 
 
Question:  (Korea Para. 51)  
 
Compared with the average U.S. tariff rate of 2. 4 percent on fisheries products, the 35 percent tariff 
rate on tuna in oil in airtight containers seem s to be excessive.  Is there any special reason for 
maintaining this high tariff rate?  
 Answer  
The United States, like all WTO members, has a sm all number of specific domestic sensitivities where 
slightly higher tariff rates are sometimes applied (please note in para 50 of Chapter III that according 
to the WTO Secretariat, the number of total U.S. ta riff lines exceeding 15 percent is only 6.6 percent).  
The United States has continued to be an advocate of multilateral tariff reductions in the Doha negotiations and will continue to be engaged on these topics as long as there continues to be ambition 
among other members for multilateral liberalization.  Tariffs in sensitive sectors are included in this 
approach – the United States has repeatedly stated  its willingness to reduce and eliminate tariffs in 
sensitive sectors if other WTO members are willing to do the same.  
 
Question:  (Turkey Section III, Part #1) 
 
The U.S. bound all tariff lines except two lines coveri ng crude oil.  What is the rationale for this? 
 Answer  
 WT/TPR/M/126/Add.3 
Page 36  
 Through our WTO negotiations the United States has bound all tariff lines with the exception of two 
petroleum products which have remained unbound since the Uruguay Round as a result of broader 
economic policy concerns.  The United States is prepar ed to discuss further tariff reductions in the 
context of a new round of the Doha Development Ag enda discussions on market access.  The United 
States urges all Members to increase their binding cove rage in the context of the Doha negotiations. 
 Question:  (Turkey Section III, Part #2)  
 
The 12 percent of U.S. tariff lines are still non-ad  valorem and these tariffs presumably result in 
higher protection than the ad valorem rates.  Could the U.S. representative make a comment converting non-ad valorem duties to ad-valorem? 
 
Answer 
 
The United States continues to honor its obligatio ns under the Uruguay Round and therefore the 2004 
U.S. tariff schedule converts a number of previously non-ad valorem tariff lines to ad valorem rates.  
In 2004, only 11 percent of U.S. tariff lines are non-ad valorem.  Like many countries, the United 
States maintains non-ad valorem tariff rates on a sma ll number of products for cultural or historical 
reasons.  The United States is prepared to discuss furt her tariff reductions in the context of the Doha 
Development Agenda discussions on market access.  
Question:  (New Zealand #7)  
 
While measures such as the Bioterrorism Act, CSI and the 24 Hour Advance Manifest Rule are key elements in the campaign against terrorism, it would be  helpful if the U.S. could indicate what steps it 
is taking to minimize their impact on legitimate trade.  Answer  
 
In reference to the Bioterrorism Act, the U.S.  Food and Drug Administration (FDA) has encouraged 
public comment at every stage of the bioterrorism  regulations' developmen t.  FDA developed and 
published proposed regulations wh ich were open to public comment  from both domestic and foreign 
parties.  We also conducted numerous outreach meetin gs directed at foreign stakeholders, both within 
the U.S. to foreign embassy officials in Washington and via videoconference.  We received numerous 
comments from foreign governments, industries, and trade associations on both rules.  We reviewed 
each comment that was submitted during the comment period and developed the final rule, taking the 
comments into account.  In the case of the prior notice and registration regulations, we are allowing for several opportunities for interested individua ls to provide comments even as we begin 
implementing the interim final rule to make sure th at we minimized any negative effect on trade while 
ensuring our food safety and security.  We have pub lished a compliance policy guide that describes 
the U.S. strategy for maintaining an uninterrupted  flow of imports while improving their safety in 
accordance with the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 
(Bioterrorism Act) requirements.  FDA included an  economic impact analysis in the proposed rules 
for affected entities to review and provide comment , and made revisions to the rules based on the 
comments we received to further minimize the impact to trade consistent with the requirements in the 
Act.  Both interim final rules include a regulatory impact analysis.  The United States is very sensitive to the impact that U.S. Customs and Border Protection's (CBP) 
anti-terrorism efforts have on the flow of trade a nd its resulting effect on the economies of the U.S. 
and our trading partners.  Due to the volume of cont ainers being shipped on a daily basis, the impact 
of terrorists using sea containers to conceal weapons  of mass destruction would have an immediate 
and devastating impact on global trade and the global economy.  Greater cooperation and  WT/TPR/M/126/Add.3 
 Page 37 
 
 communication between government agencies res ponsible for homeland security has provided a 
stronger defense against terrorist acts, and has not negatively impacted the swift and effective 
transportation of merchandise.  The United States r ecognizes the potential for trade disruption and has 
taken every possible step to ensure th at legitimate trade is not disrupted. 
 To address the threat terrorists pose to containerized shipping, the CBP developed the Container 
Security Initiative (CSI).  Under CSI, CBP is wo rking with other governments to identify high-risk 
cargo containers and pre-screen those containers at the foreign ports before they are shipped to the 
U.S.  In addition to protecting global trade, CSI sh ould facilitate the flow of that trade.  When a 
container has been pre-screened and sealed under CSI, CBP will not, absent additional information 
affecting its risk analysis, need to inspect it for security purposes when it reaches the U.S.  Moreover, 
this system could reduce the processing time for cer tain shipments because the screening at a CSI port 
will in most cases take place during "down time."  The requirements of the 24-hour rule have been in  effect for over a year, in this time CBP has 
continuously worked with trade partners to achie ve compliance.  Additionally, the 24-hour rule was 
used as the vessel requirement standard in the recen t publication of the Trade Act final rule published 
in the Federal Register on December 5, 2003 (68 FR 68140).  
Question:  (Indonesia #1)  
 
Indonesia is concerned that the U.S. continues to appl y high tariffs, tariff peaks, and tariff escalation 
in a number of sectors of export interest to developing countries, including Indonesia.  The following 
are those products which are of the great interest  to Indonesia and need further explanation and 
clarification from the U.S.:  cocoa, jewelry, ceramics and glass.  
Answer 
 
The United States, like all WTO members, has a sm all number of specific domestic sensitivities where 
slightly higher tariff rates are sometimes applied.  We continue to support mu ltilateral tariff reductions 
in the Doha negotiations and will be engaged on these topics as long as there continues to be ambition 
among other members for multilateral liberalization.  Tariffs in sensitive sectors are included in this 
approach — the U.S. has repeatedly stated its w illingness to reduce and eliminate tariffs in sensitive 
sectors if other WTO members are willing to do the same. 
 In addition, we have consistently  supported the inclusion of sectoral initiatives in the non-agricultural 
market access negotiations that harmonize or elimin ate tariffs in agreed-upon product sectors.  This is 
yet another constructive way to promote liberali zation and the lowering of barriers in sectors of 
interest to WTO members. 
 
Question:  (Indonesia #2a) 
 
Procedures and requirements for exporting certain pr oducts to the U.S. tend to be excessive, and in 
some instances far exceed normal practices.  Some of these procedures and requirements are 
burdensome and costly and therefore can constit ute a barrier to entry for new exporters and 
particularly for micro, small and medium enterprise s.  Indonesia wishes to have further justification 
on these policies in relation to the U.S.  obligations under WTO agreements.  
 
Answer 
 The requirements of the 24-hour rule have been in effect for over a year, during this time Customs and 
Border Protection (CBP) has continuously worked with trade partners to achieve compliance.  WT/TPR/M/126/Add.3 
Page 38  
 Additionally, the 24-hour rule was used as the vessel  requirement standard in the recent publication of 
the Trade Act final rule published in the Federa l Register on December 5, 2003 (68 FR 68140).  
Approximately 90 percent of world cargo mov es by container;  200 million cargo containers are 
transported between the world's seaports each year, constituting the most critical component of global 
trade.  Nearly half of all incoming trade to the United States (by value) arrives by ship, and most of that is in sea containers.  Annually, nearly 6 m illion cargo containers are off-loaded at U.S. seaports.  
Due to the volume of containers being shipped, the im pact of terrorists using sea containers to conceal 
weapons of mass destruction woul d have an immediate and devastating impact on global trade and the 
global economy.  
 
To address the threat terrorists pose to containeri zed shipping, Customs and Border Protection (CBP) 
developed the Container Security Initiative (CS I).  Under CSI, CBP is working with other 
governments to identify high-risk cargo containers and pre-screen those containers at the foreign ports 
before
 they are shipped to the U.S.  In addition to protecting global trade, CSI should facilitate  the 
flow of that trade. When a container has been pre-screened and sealed under CSI, U.S. Customs will not, absent additional information affecting its risk analysis, need to inspect  it for security purposes 
when it reaches the U.S.   Moreover, this sy stem could reduce the processing time for certain 
shipments because the scre ening at a CSI port will in most cases take place during "down time."  
 
Question:  (Indonesia #2b)  
Indonesia finds that the requirements under the Bioterrorism Act is basically unnecessary and could have been accommodated in a more cost effective way.  Please comment.  
 
Answer  
Please refer to the response to Indonesia's Question 2a. 
 Question:  (Indonesia #2c)  
 
The customs procedures for import of textile and ga rment to the U.S. require the presentation of 
detailed and voluminous information, leading to additional costs and in some instances include 
business confidential processing methods.  Indonesia be lieves that much of this information is 
irrelevant for customs use or statistical purpose.  It is also Indonesia's concern that as the phasing-out 
of the quota system draws near, the U.S. industry  is pressing the Administration to put in place an 
even closer monitoring system that may require no t only detailed information, but also additional 
information for the purpose of imposing a trade remedy as necessary.  Answer 
 
The procedures of the U.S. Customs and Border Pr otection (formerly called “Customs”), procedures 
for imports of textiles and clothing are streamlined to facilitate all trade.  In addition to routine 
commercial documentation (invoice & bill of lading ), U.S. Customs and Border Protection (CBP) 
currently only requires one or two additional documents.  The first document, a declaration by the 
manufacturer, producer, exporter, or importer concerning the country of origin (19CFR12.130(f)).  
The information contained in this document is us ed to determine the origin of imported textile 
products.  The information requested is not volu minous, nor is it business confidential.  The second 
document, a textile visa, is not required on all textile  shipments.  In fact, this documentation is only 
required for certain textile goods and only when our trading partners have requested our assistance in 
controlling their textile exports to the United States.   The United States will continue to meet all its 
commitments under the WTO's Agreement on Textiles and Clothing.   WT/TPR/M/126/Add.3 
 Page 39 
 
 Question:  (Indonesia #2d) 
Fees other than Import Duties and Tax:  Merchandise Processing Fee (MPF)  
 
Please comment on the Merchandise Processing Fee.  
Answer  
 
Congress specifically intended that the MPF approxima te the cost to Customs in processing the entry 
of imported merchandise.  That intent is set in  the Senate Report on the 1990 Customs and Trade law 
and was intended to meet GATT obligations.  Th e amendment specifically placed a maximum amount 
on the assessment, among other changes, to address GATT  concerns.  It should be noted that domestic 
products are subject to similar inspection fees that  are administered by other Federal Agencies. 
 
Question:  (Indonesia #2e)  
Harbor Maintenance Tax (HMT)
 
 The United States has stopped collecting the HMT on exports but continues to collect it on imports.  
Please explain. 
 
Answer  
 
The HMT is imposed equally on imported and domestic  water-borne shipments.  The purpose of the 
HMT is to have the businesses that benefit directly from the use of U.S. harbors to move commercial 
cargo bear the cost of maintenance of those harbors.  Shippers that load or unload cargo in a harbor that does not receive Federal funds for maintenance are not assessed the fee.  
Question:  (Columbia IA:  2)  
 
As regards the 24-hour Advance Vessel Manifest Rule, are there guidelines governing the ability of 
maritime ports to assess monetary penalties on foreign cargo not adhering to this Rule? 
 
Answer 
 CBP will not assess penalties in a foreign port for ca rriers failing to comply with the 24-hour rule.  
There are several other options available.  Denial  to load the cargo on the vessel bound for the United 
States, or denial of unloading the container if in  fact it reaches the United States.  If the container 
reaches the United States and is in violation of th e 24-hour rule then penalties will/can be assessed at 
that point. Penalties are assessed based on existing statutes. 
 
Question:  (Argentina #1)  
 Paragraph 22 indicates that with a view to impl ementing the Container Security Initiative (CSI), 
foreign ports without radiation detection equipmen t must purchase such equi pment before the U.S. 
Customs and Border Protection (CBP) deploys inspection agents to said ports.  In this regard, Argentina would like to know what measures the United States is cons idering with regard to those 
countries which cannot afford to purchase the equi pment and technology needed to implement the 
CSI.  Answer  
 Customs and Border Protection does not anticipate that the CSI initiative will entail extraordinary 
additional costs to the host nations. CBP will be payi ng the costs to deploy officers and computers in 
foreign seaports.  Many host nations already have  screening and detection technology in place, and WT/TPR/M/126/Add.3 
Page 40  
 only ports that already have sophisticated scanni ng technology in place or are in the process of 
purchasing it will participate in the first two rounds of  CSI.  To the extent that additional detection 
equipment is needed to implement CSI, the invest ment is well worth the cost to the host nation 
considering the efficiency and safety that CSI contri butes by scanning the containers before they leave 
the port, rather than having them waiting for scanning on the docks upon arrival.  Question:  (Columbia IA: 1a, 1b and 1c)  
 The Secretariat's document describes the changes to  the U.S. Customs Regulations since the last 
review. We found the information on the new import re gulations very valuable, namely the Automated 
Commercial System (ACS) and the Automated Commercial Environment (ACE). 
(a) In this regard, we would like to know the resu lts of the new customs policy based on the "informed 
compliance" principle, given the goal of an effi cient use of limited customs resources and the 
possibility of focusing on areas of highest risk. 
 
(b) If possible, we would like information on the pro cedures used to distinguish between the different 
agents involved in the introduction of merchandise, as well as the methods for tracking and control.  (c) We understand the ACE will enter into force in  the spring of 2004 for cargo imports.  What does 
this new method consist of and how does it differ from the ACS? 
 
Answer (Columbia IA:  1a, 1b and 1c) 
 
The Automated Commercial Environment (ACE) is the first project of the U.S. Customs and Border 
Protection Modernization Program.  Based on current status and projected funding profiles, ACE is 
expected to be a six-year development project, culminating in winter 2007-2008. 
 The ACE is being developed incrementally.  During  the development period there will be a "release" 
of ACE capabilities approximately every six months, for a total of seven rel eases.  Each succeeding 
release enhances and expands upon AC E capabilities deployed in the prev ious release(s).  The CBP is 
currently working on ACE Release 3.  There is a comprehensive, phased plan to move from the 
legacy system, the Automated Commercial System (ACS), to ACE.  Generally, as ACE capabilities are developed and test ed as part of the release schedule, ACS and 
ACE capabilities will initially operate at the same time to ensure there is no degradation in CBP 
operations.  As ACE capabilities are phased in and operationally verified, the ACS capabilities being 
replaced will be "turned off."  The ACE is not a technology project.  It encompasses a significant re-
engineering of CBP business processes and the inform ation technology systems that support those re-
engineering efforts.  Moreover, it is the info rmation technology platfo rm supporting the Customs-
Trade Partnership against Terrorism, and the Container Security Initiative.  
The ACE is a 24-7-365 operation that will enhan ce border security and facilitate the flow of 
legitimate trade by providing a st ate-of-the-art, integrated system for tracking information on 
commerce entering the United States.  The ACE will improve communication and coordination among more than 20 U.S. agencies with border enfo rcement responsibilities and more than 100 U.S. 
agencies that have regulations affecting imports and exports, or are users of statistical trade 
information.  These agencies will have significantl y greater access to advance information on cargo 
and conveyances bound for the United States, and inform ation analysis will be significantly enhanced. 
 The prominent feature of ACE is the Secure Data Portal, which provides one screen for both 
interagency coordination and for interface with the tr ade community.  This portal is a single, web-
based screen that provides the trade community with  a national account view of their trade activity.   WT/TPR/M/126/Add.3 
 Page 41 
 
 The capabilities developed for the portal will speed cargo processing at the border while enhancing 
security and information-sharing; enhance the in terface between the trade community and government 
agencies;  help improve trade compliance; and eliminate labor-intensive procedures, thus reducing costs to both government and private industry. 
 
Question:  (Columbia IA:  2)  
 As regards the 24-hour Advance Vessel Manifest Rule, are there guidelines governing the ability of 
maritime ports to assess monetary penalties on foreign cargo not adhering to this Rule? 
 
Answer 
 CBP will not assess penalties in a foreign port for ca rriers failing to comply with the 24-hour rule.  
There are several other options available.  Denial  to load the cargo on the vessel bound for the United 
States, or denial of unloading the container if in  fact it reaches the United States.  If the container 
reaches the United States and is in violation of th e 24-hour rule then penalties will/can be assessed at 
that point. Penalties are assessed based on existing statutes.  Question:  (Colombia IB: 1)  According to the Secretariat's report, the Fore ign Trade Act of 2002 mandated the Comptroller 
General to conduct a study on the extent to wh ich the amount of each customs user fee is 
commensurate with the level of services provided.  It also mentions proposals to restructure the 
Harbor Maintenance Tax in the form of a fee to vessel owners and operators, thereby ensuring that 
fees assessed more closely reflect th e use of port services and facilities. 
 Is there information available on the conclusions reached by the Comptroller General's study on 
customs user fees? Is there a timeline for adjusting the Harbor Maintenance Tax to reflect the cost of 
services rendered?  Answer  The Comptroller General's report, GAO-02-1033 entitle d  "Marine Transportati on:  Federal Financing 
and a Framework for Infrastructure Invest ments" is available at www.gao.gov. 
 We are not aware of any timeline for adjusting the Harbor Maintenance Fee.  The regulation 
explaining the fee, mitigation of the fee, a nd appeals, can be found in 19 CFR 24.24 (CBP 
Regulations). 
 
CHAPTER 3:  TRADE POLICIES BY MEASURE 
 
(2) Remedies:  Anti-dumping, Count ervailing, and Safeguards Actions 
 Question:  (China #22)  
 Could the U.S. please elaborate whether there are relevant provisions on the procedures for an 
industry or sector to apply for the market economy conditions pursuant to the criteria provided in the 
national anti-dumping legislations of  the U.S.  If not, please inform us of the plan and timetable to 
provide such procedures.   
 
 WT/TPR/M/126/Add.3 
Page 42  
 Answer 
 
Section 771(18)(B) of the Tariff Act of 1930, as amended,  lists the six factors that the Department of 
Commerce must consider in making a non-market ec onomy country determination.  The Department 
initiates an inquiry into a country's non-market ec onomy status only on request from that country's 
government.  Such inquiries are conducted within the framework of a quasi-judicial proceeding, 
which is fully open to participation by the public and all interested parties and is subject to strict due 
process and transparency requirements.  If, as a resu lt of its inquiry, the Department determines that 
graduation to market economy status is warranted , producers' prices and costs are then used for 
purposes of calculating normal value.  Non-market  economy producers ("NME") can also have their 
prices or costs used to calculate normal value if th ey operate in a market-oriented industry ("MOI").  
The Department has discussed with PRC government officials several times the Department's three-
pronged MOI test and the procedures for submitting a MOI claim, and the Department would be more 
than happy to do so again. In addition, this i ssue was raised in the JCCT and the Joint Committee 
created the market economy working group.  
 
Question:  (Switzerland #18)  
 
§57 ff. outlines the safeguards in the steel sector. On  December 4, 2003, the U.S. announced the full 
and immediate termination of its steel safeguards.  The decision had been taken by President George 
W. Bush because the measures, introduced in March 2002, had achieved their purpose by helping 
U.S. producers consolidate and regain competitiveness. Nevertheless, the Steel Import Licensing 
System, introduced on February 1, 2003 is still in place.  The system was put in place to provide 
timely statistical data on steel imports to monitor significant changes in steel imports.  What are the reasons to keep this system in place?  When or  under what conditions will it be terminated?  What 
measures have been taken that this system does not become an unduly administrative burden?  
 
Answer 
 
On December 4, 2003, the President issued a pr oclamation terminating the safeguard measures; he 
also directed the Secretary of Commerce to continue  the steel import licensing system.  Its purpose is 
to provide the public with the most accurate a nd timely information possible on imports of certain 
steel products so that potential steel import surges may be identified quickly.  The current system was 
established effective February 1, 2003, and will re main in place until the earlier of March 21, 2005 or 
such time as the Secretary of Commer ce establishes a replacement program. 
 The current steel licensing system, established under section 203(a)(3)(I), is an easy-to-use, transparent, WTO-consistent system that is not tr ade restrictive.  In estab lishing the current license 
system, the Department of Commerce sought comme nts from potential users to  ensure that users 
would not find it burdensome, before publishing th e December 31, 2002 regulations on the licensing 
program.  It continues to operate smoothly.  The we b-based system is automatic and there is no fee to 
obtain a license.  
Question:  (China #24 - 26)  
 
In the context of this case [Crawfish Tailmeat from China], could the U.S. elaborate how it will deal 
in a fairer manner with the difference of the leve ls of development of tw o countries and between the 
relevant products?  
 
Could the U.S. please explain its criteria for selecting a surrogate country in this case? 
  WT/TPR/M/126/Add.3 
 Page 43 
 
 While selecting surrogate countries, how does the U.S.  avoid and rectify the problem with respect to 
insufficient relevance of surrogate countries?  
 
Answer 
 
The Department of Commerce's general practice is to  select a surrogate country that is both at a level 
of economic development comparable to a non-market economy ("NME") country and a significant 
producer of comparable merchandise.  In some ca ses, however, there is a significant input that is 
special or unique and dedicated to the production of the subject merchandise.  In such cases, the 
Department places relatively more weight on signif icant production of comparable merchandise and 
adopts stricter definitions of bot h "significant producer" and "compara ble merchandise," to ensure that 
special or unique factors are valued appropriate ly.  Thus, in these special cases, the group of 
significant producers narrows, and it is from this more narrow group the Department selects a country 
at a level of economic development that is most co mparable to the NME country.  In this way, it can 
happen that the economic comparability criterion is not fully satisfied, but the U.S. statute requires only that the two criteria be satisfied to the extent possible. 
 
The United States appreciates the issues China has ra ised in questions 24-26.  However, such detailed 
questions relate to ongoing, quasi-judicial trade remedy proceedings, and are highly case and fact specific.  If China wishes to pursue these questions, we suggest that it be done either on the record of 
the specific proceeding before the U.S. Department  of Commerce or the U.S. International Trade 
Commission, or within the context of the WTO Committees on Anti-Dumping Practices and/or 
Subsidies and Countervailing Measures, as appropriate. 
 
Question:  (China #27 - 28)  
Could the U.S. explain why it discarded the original method in calculating the profit margin of the surrogate country [in the case involving Color Televisions from China]? 
 Please provide the justification for the inconsiste ncy regarding the data of the producers at a loss 
between the methods in calculating profit margin of  the surrogate country and in calculating the cost 
and expenses of the producers in the surrogate country. 
 
Answer 
 
The Department of Commerce published its final de termination in the anti- dumping investigation of 
color TVs from China on April 16, 2004.  In accordance with U.S. law and its normal practice, the Department used data from companie s in the surrogate country to cal culate the surrogate profit rate 
for calculating normal value.  The Department fully explained its selection of surrogate companies in 
the published notice of its final determination.  The United States appreciates the issues China has 
raised in questions 27 and 28.  However, aspects of these questions relate to quasi-judicial trade 
remedy proceedings, and are highly case and fact specific.  For these reasons, if China wishes to pursue these questions, we suggest that it be done either on the record of the specific proceeding 
before the U.S. Department of Commerce or the U.S. Internationa l Trade Commission, or within the 
context of the WTO Committees on Anti-Dumping Pr actices and/or Subsidies and Countervailing 
Measures, as appropriate. 
 
Question:  (China #29 - 31)  
Could the U.S. elaborate on the criteria for determin ing the high level of production integration of the 
Chinese producers [in the case of aspirin from China]?  WT/TPR/M/126/Add.3 
Page 44  
 Please provide the legal basis for the U.S. to mul tiply the indirect overhead cost of the Chinese 
producers by several times.  If the U.S. considers this practice to be consistent with WTO Agreements, please clarify the consistency. 
 
Answer (China #29 - 31) 
 
As an initial matter, we note that the preface to th ese questions refers to the investigation of aspirin 
from China and misconstrues the Department's methodology.  In non-market economy cases, the Department generally does not use actual costs of producers and does not multiply such costs.  In any 
event, we believe the comment refers to certain  surrogate values used in the original final 
determination in the aspirin investigation.  In th at regard, we note that on December 30, 2003, the 
Department published an amended fina l determination in the aspirin investigation.  In that amended 
determination, the Department did not find the su rrogate producers to be less integrated than the 
producer in China.  
More generally, in non-market economy cases, the Department values the non-market economy 
producer's factors of production based on surrogate values in a comparable market economy country.  
As noted above, the Department u ses the best information available to determine surrogate values for 
the factors of production.  In determining surro gate values, the Department may take into 
consideration, in appropriate circumstances, whet her a non-market economy producer is integrated 
while a surrogate market economy producer is not, or  vice versa, as this may affect the determination 
of the appropriate surrogate value used for factory overhead.  The United States appreciates the issues China has raised in questions 29 through 31.  However, 
aspects of these questions relate to ongoing, quasi-judicial trade remedy proceedings, and are highly 
case and fact specific.  If China wishes to pursue th ese questions, we suggest that it be done either on 
the record of the specific proceeding before th e U.S. Department of Commerce or the U.S. 
International Trade Commission, or within the context of the WTO Committees on Anti-Dumping Practices and/or Subsidies and C ountervailing Measures, as appropriate. 
 
Question:  (China #32) 
 Could the U.S. provide the legal basis for excluding "0" duty rate from weighted-average 
anti-dumping rate [in the case of apple juice from China]? 
 
Answer 
 The final determination in the apple juice case was litig ated in the United States Court of International 
Trade.  If no party appeals the court's decision, the Department of Commerce will amend the final 
determination to reflect the results of the cour t-ordered remand redeterm inations.  The question 
appears to refer to these court-ordered remand redeterminations.  The United States did not exclude the zero margins in those redeterminations. 
 
The United States appreciates the issue China has rai sed in question 32.  However, aspects of this 
issue relate to ongoing, quasi-judicial trade remedy proceedings, and are highly case and fact specific.  If China wishes to pursue this issu e, we suggest that it be done either on the record of the specific 
proceeding before the U.S. Department of Commerc e or the U.S. International Trade Commission, or 
within the context of the WTO Committees on Anti-Dumping Practices and/or Subsidies and 
Countervailing Measures, as appropriate.   WT/TPR/M/126/Add.3 
 Page 45 
 
 Question:  (China #33 - 34)  
 
Please clarify the method adopted by the U.S. for calculating the average anti-dumping rate of enterprises subject to voluntary verifi cation and the legal basis thereof. 
 Could the U.S. please elaborate how it will avoid such practices in future anti-dumping 
investigations? 
 
Answer  
 
In calculating rates applied to c ooperative exporters not selected for examination, the United States 
generally follows the methodology described in section 735(c)(5) of the Tariff Act. 
 
Question:  (China #35 - 36) 
 
Please explain the consistency of the qualification of petitioners in [the case of Color Televisions from 
China] with Article 4 of the WTO Agreement on Anti-dumping Measures. 
 Please explain the consistency of the affirmative determ ination made by DOC of an injury to the U.S. 
domestic industry by the color TV sets imported from China with Article 3 of the WTO Agreement on 
Anti-dumping. 
 
Answer 
 
The Department of Commerce published an anti- dumping duty order on color television receivers 
from China on June 3, 2004.  The petition in this  case was filed by or on behalf of the domestic 
industry by a domestic producer of like products. 
 
The U.S. International Trade Commission determ ined on May 14, 2004 that a U.S. industry is 
materially injured by reason of imports of certain color television receivers from China that the U.S. 
Department of Commerce had determined are sold in the United States at less than fair value.  The 
U.S. International Trade Commission’s public report, Certain Color Television Receivers from China  
(Investigation No. 731-TA-1034 (Final), USITC Publ ication 3695, May 2004) contains the views of 
the Commission and information deve loped during the investigation. 
 The United States appreciates the issues China has ra ised in questions 35 and 36.  However, these 
detailed questions relate to quasi-judicial trad e remedy proceedings, and are highly case and fact 
specific.  If China wishes to pursue these questions, we suggest that it be done either on the record of 
the specific proceeding before the U.S. Department  of Commerce or the U.S. International Trade 
Commission, or within the context of the WTO Committees on Anti-Dumping Practices and/or 
Subsidies and Countervailing Measures, as appropriate.  
 
Question:  (China #37 - 40)  
Please provide justifications for DOC's refusal to change its wrong decision [to decline to initiate a 
new shipper review in the case of honey from China].  Please provide the legal justification for denying this  application [for a new shipper review in the case 
of honey from China]. 
 
Please explain the reason for the inconsistency of th is practice [in the case of honey from China] with 
19 USC §1675(a)(2)(B)(i) and 19 C.F.R. §351.214(b)(2)(ii)(A), §351.214(b)(2)(ii)(B), §351.214(b)(2) WT/TPR/M/126/Add.3 
Page 46  
 (iii)(A), and §351.214(b)(2)(iii)(B), as well as prec edents made by U.S. DOC in the case of glycine 
from China and in the case of crawfish from China.  
 
From the practice of the U.S. in the above case, it seems that the definition of "sales to the U.S." 
consists of an extra restriction that the contractor of the products should also be within the territory of 
the U.S.  If this understanding is co rrect, please provide the legal basis for such restriction on "sales to 
the U.S." defined in the U.S. anti-dumping legislation. 
 
Answer (China #37 - 40)  
The issues raised by these questions do not reflect broader U.S. trade policy so much as specific 
factual findings made by U.S. authorities when pr esented with a certain body of evidence.  New 
shipper reviews are governed by section 751(a)(2)(B)  of the Tariff Act and section 351.214 of the 
Department of Commerce's regulations.  The decisi ons in these cases were consistent with those 
provisions.  The exporters in question have again re quested new shipper review s, and the Department 
is considering those requests.  If an exporter do es not qualify under the requirements established to 
request a semi-annual new shipper review, that entit y may still request an administrative review to 
establish an amount of duty based on its current sales practices.  
 
Question:  (China #72)  
Will the U.S. kindly indicate how much subsidies a nd assistance in average terms it grants annually to 
its services and service providers? 
 
Answer  
 
There is no readily available source of information with respect to government assistance provided to 
the service sector in the United States.  
 
Question:  (Japan #29)  
 
Japan claimed, in the WTO dispute settlement system , the WTO inconsistency of the sunset review by 
the U.S. of anti-dumping duties on corrosion-resistant carbon steel flat products from Japan.  The report of the Appellate Body supports Japan's arguments that the Sunset Policy Bulletin of the 
Department of Commerce, which regulates the rule of the sunset review determinations themselves, is 
"challengeable" as such under the WTO Agreement, and that a sunset review determination, based on 
the anti-dumping margin calculated with a WTO-inc onsistent "zeroing" methodology, is inconsistent 
with the WTO agreements.  In Japan's view, the U. S. must amend the Sunset Policy Bulletin, and all 
sunset review determinations which are based on the U.S. methodology of calculating the dumping 
margin, if they are found to be WTO-inconsistent  in subsequent dispute settlement cases.  Please 
explain the U.S. position on the matter.  
Answer  
 
We disagree with the premise of Japan's question.  The Appellate Body made no finding with respect 
to whether the Commerce Departme nt's Sunset Policy Bulletin is challengeable "as such" under the 
WTO.  Rather, the Appellate Body concluded that  the panel had not fully considered relevant 
arguments in finding that the Sunset Policy Bulletin  cannot be challenged "as such," and reversed the 
finding on that basis.  Furthermore, the Appe llate Body made no finding that the Commerce 
Department's dumping margin calculati on methodologies are WTO-inconsistent. 
  WT/TPR/M/126/Add.3 
 Page 47 
 
 Question:  (Canada #1)  
 
The Secretariat Report refers to the current status of the Foreign Sales Corporation Repeal and 
Extraterritorial Income Exclusion Acts  provisions.  Please indicate when the U.S. proposes to rescind 
its WTO-inconsistent corporate tax provisions with  a view to ending its illegal export subsidies. 
 Answer  
 
The United States has made clear its commitment to work with the U.S. Congress to fully comply 
with the prior recommendations and rulings of  the Dispute Settlement Body concerning the 
Extraterritorial Income Act.  Both branches of Congress are currently considering legislative 
proposals that would repeal the ETI Act.  
 
Question:  (Canada #2a) 
 
With respect to administrative reviews, please i ndicate the average time required in 2000-02 for 
conducting administrative reviews. Please specify the average time between the importation of a 
product subject to an AD or CVD order and the fi nal liquidation of the duties in cases where an 
administrative review is conducted.  
Answer  
 Under U.S. law administrative reviews normally ta ke 365 days to complete, but can be extended 
under certain circumstances.  Regarding the aver age time between the importation of a product and 
the final liquidation of the duties in administrative reviews, the United States does not maintain the 
statistical information requested by Canada.  Question:  (Canada #2b)  
 
We understand that, out of the 361 sunset review s of AD and CVD orders completed between July 
1998 and July 2003, the question of whether the expiry of the duty would be likely to lead to continuation or recurrence of dumpi ng or of subsidization has been examined by the Department of 
Commerce in 269 cases.  Out of these 269 cases, we understand that the Department of Commerce 
has made negative determinations  in only 3 sunset reviews.  Please briefly describe the factors 
examined in making such determin ations and explain why the propor tion of negative determinations 
is so low.  
Answer  
 
The AD and SCM Agreements provide for the conduct of  expiry (sunset in U.S. parlance) reviews to 
determine whether expiry of the duty (revocation of an  order in U.S. parlance) would be likely to lead 
to continuation or recurrence of dumping or subsid ization and injury.  Under the United States sunset 
regime, there are two agencies that play a role in the conduct of sunset reviews.  The Department of 
Commerce ("Commerce") has the responsibility for determining whether revocation of an order 
would be likely to lead to continuation or recu rrence of dumping or subsidization.  In making its 
likelihood determination, Commerce considers, inter alia , information concerning dumping and 
import volumes for the subject merchandise.  The U.S. International Trade Commission ("USITC") has the responsibility for determining whether revoca tion of an order would be likely to lead to 
continuation or recurrence of material injury.  Cana da's figures, even if accurate, are incomplete and 
misleading because they do not reflect completed sunset reviews, i.e ., where both Commerce and the 
USITC have made their final likelihood determinations. WT/TPR/M/126/Add.3 
Page 48  
 Of the 321 sunset reviews of anti-dumping and count ervailing duty orders initia ted between July 1998 
and December 1999, almost 50 percent were revoked.  
Question:  (Brazil Set I #32)  
 
What kind of procedures do U.S. authorities adopt to comply with Art. 5.3 of the ADA? 
 
Answer  
 
The United States carefully reviews each application for an anti-dumping investigation to ensure that 
the evidence provided by the domestic industry as re quired by Article 5.2 of the ADA is both accurate 
and sufficient.  Under U.S. law (section 732(1)  of the Tariff Act of 1930, as amended), the 
Department of Commerce is responsible for perform ing that review and for determining whether the 
evidence is sufficient to justify the initiation of an anti-dumping investigation.  In performing its 
review,  Commerce uses a checklist which forms the analytical record for the initiation.  A copy of 
that checklist, and a more in-depth discussion of th e Department's initiation pr ocedures, can be found 
at the following website: http://ia.ita .doc.gov/admanual/admanual_ch01.pdf. 
 
Question:  (Brazil Set I #33)  
 
With regard to paragraph 94, page 53, WT/TPR /S/126, could the U.S. specify for how long a 
suspension agreement may be in force? 
 
Answer  
 
Suspension agreements are subject to five-year re views (also called sunset reviews), as are anti-
dumping duty orders and countervailin g duty orders.  If the United States determines that injury and, 
as appropriate, dumping or countervaila ble subsidization is likely to continue or recur in the absence 
of the suspension agreement, the suspension agreem ent may continue beyond five years.  Please note 
that all parties to a suspension agreement have th e option to terminate the agreement at any time. 
 
Question:  (Brazil Set I #34)  
 With regard to paragraph 96, WT/TPR/S/126, could th e U.S. indicate, in general terms, what kind of 
information interested parties must submit when requesting an administrative review? 
 
Answer  
 Administrative reviews, which are discussed in  paragraph 96, are conducted when requested by 
interested parties in the anniversary month of the order or suspension agreement.  Requests for such 
reviews are to be made in accordance with se ctions 351.213 and 351.303 of  the Department of 
Commerce's regulations.  When requesting an admi nistrative review, the interested party submitting 
the request must identify the producer or exporter th at the interested party wishes the Department to 
review.  Other requirements apply when requests ar e made for other types of reviews, such as new 
shipper reviews or changed circumstances reviews. 
 
Question:  (Brazil Set I #35)  
 
We understand that in several cases foreign expor ters have paid money to U.S. producers in 
connection with U.S. AD and CVD investigations a nd Reviews.  Does the U.S. delegation have any 
comments on this practice of direct payments to producers? 
  WT/TPR/M/126/Add.3 
 Page 49 
 
 Answer  
 
While there have been reports of this kind, we ha ve no specific information about such practices.  We 
are, therefore, not in a position to comment.  
Question:  (Brazil Set I #36)  
 
Does the U.S. intend to comply with the Appe llate Body recommendation also as regards the CVD 
illegally charged on imports from Brazil?  
Answer  
 
On June 23, 2003, the U.S. Department of Commerce adopted a new methodology for analyzing changes of ownership in the countervailing duty cont ext.  An explanation of this new methodology 
was published in the Federal Register under Notice of Final Modification of Agency Practice Under 
Section 123 of the Uruguay Round Agreements Act, 68 FR 37125 (June 23, 2003).  As stated in that 
notice, Commerce is applying this new methodology to all countervailing duty investigations and 
reviews initiated on or after J une 30, 2003.  Accordingly, Commerce will apply this new 
methodology, where applicable, to any reviews of th e CVD orders cited by Brazil initiated after that 
date. 
 
Question:  (Mexico Set V #1) 
 Were the 280 million dollars deposited by virtue of  anti-dumping and countervailing duties distributed 
among national producers?  
 
Answer  
 
The actual amount disbursed for FY2003 to date (F ebruary 2004) is $150 million.  An additional 
$90 million will be disbursed once the Appeal Court makes a decision in the Candle Corp case, bringing the total for FY2003 to $240 million.  The reason for the difference between the estimated 
$280 million stated above and the actual amount disbursed  is due to the fact th at the amount disbursed 
is reduced by any uncollected bills for AD/CV dut ies.  For FY2003 there were a large amount of 
uncollected bills, especially for crawfish. 
 
Question:  (Mexico Set V #2)  
 
In part III.3 concerning "CDSOA" [Byrd] one observes an increase in the number of claims: from 900 
in 2001, rising to 1200 in 2002 and reaching 2100 in 2003.  In this respect, to what do you attribute 
the increase in the number of claims?  
 
Answer  
 
The United States has not conducted an analysis to explain the number or amounts of claims under the 
Continued Dumping and Subsidy Offset Act of 2000,  except insofar as it appears that the number and 
amounts of claims generally reflect the amount of duties available in the special accounts established under the Continued Dumping and Subsidy Offset Act of 2000.  We note that, for FY2003, the United States received over 800 new claims on the lumber and honey cases, accounting for most of the increase noted above.  
   WT/TPR/M/126/Add.3 
Page 50  
 Question:  (Mexico Set V #3)  
 
Does the United States recognize that the CDS OA represented an incentive to present claims?  
 
Answer  
See answer to previous question.  See also the report of the WTO Appellate Body in United States - 
Continued Dumping and Subsidy Offset Act of 2000 , WT/DS217, 234/AB/R (adopted on 
27 January 2003), regarding whether the Conti nued Dumping and Subsidy Offset Act of 2000 
constitutes an inappropriate incentive to pr esent anti-dumping and countervailing duty claims.  
 
Question:  (Mexico Set V #4)  
 
Article 11 paragraph 9 of the Subs idies Agreement establishes that the de minimis margin occurs 
when the amount of the subsidy is less than 1 percen t. Considering this, why in its regulation on the 
investigations of the effects of the expiration of  the measures does the United States consider as de 
minimis whatever rate of subsidy eligible for countervailing  that is less than 0.5 percent?  
 
Answer  
 
Article 11.9 of the SCM Agreement sets forth th e de minimis standard in countervailing duty 
investigations.  The United States (specifically, the U.S. Department of Commerce) applies the 
Article 11.9 one percent de minimi s standard in countervailing duty i nvestigations.  Nothing in the 
Agreement sets a de minimis standard in sunset reviews conducted pursuant to  Article 21.3.  Thus, 
Members, including the United States, are free to determine what, if any, de minimis standard they will apply.  The Appellate Body in Corrosion-Resi stant Steel from Germany agreed.  As a matter of 
U.S. law and regulation, the United States applies a 0. 5 percent de minimis standard in sunset reviews.  
 Question:  (Chile #1)  
Given the significant increase in anti-dumping measu res applied in recent years and their negative 
impact on trade, in addition to the opinion of vari ous WTO members on the lack of justification for 
many of the investigations and measures adopted, does the U.S. think it is possible to decrease the 
discretionality and substantially increase the numbe r of investigations conducted and measures 
adopted solely by making improvements in procedures that do not affect the substance of the AD and 
SCM Agreements? 
 
Answer 
 The mandate of the Doha Declaration, to "clari fy and improve" the AD and SCM Agreements, is not 
limited either to substantive or to procedural pr ovisions of those Agreements.  That being said, the 
United States believes that there must be substan tial progress made in improving the transparency of 
trade remedy proceedings to allow Members and othe r interested parties to see that those proceedings 
have been conducted in accordance with WTO rules.  Th at is not to say that substantive clarifications 
and improvements should not also be made;  indeed, the United States has proposed a number of such 
topics for discussion in the Negotiating Group on Rules.  
Question:  (Chile #2) 
 
Does the U.S. believe that it is necessary to reso lve the ambiguities and the gaps existing in the Anti-
dumping Agreement in order to prevent the prolifer ation of excessively onerous investigations, of  WT/TPR/M/126/Add.3 
 Page 51 
 
 arbitrary application, and misuse of anti-dumping measures?  If so, is it considering improving the 
rules and disciplines of the Agreements  in order to achieve this goal? 
 
Answer 
 
The United States has raised numerous issues in the Negotiating Group on Rules to clarify and 
improve the AD and SCM Agreements in ways whic h minimize the possibility for misuse of trade 
remedy measures while also increasing the effectiveness of those remedies. 
 
Question:  (Chile #3)  
The United States indicated in a communication to the Negotiating Group on Rules (document 
TN/RL/W/27) the importance it attaches to the need  to identify disciplines on trade-distorting 
practices, in order to improve the ability to forecast  trends in trade on the global level and reduce the 
need to use trade remedies.  Does the United St ates believe that while disciplines that prevent 
trade-distorting practices are being strengthened or established, trade remedies must not be restricted 
or regulated more extensively in order to prevent the undue proliferation and discretional use of such 
measures? 
 
Answer  
The discussion of disciplines on trade distorting practices does not preclude a parallel discussion of other ways in which the AD and SCM Agreements should be clarified and improved.  The United 
States has raised numerous issues in the Negotiati ng Group on Rules to clarify and improve the AD 
and SCM Agreements in ways which minimize the possibility for misuse of trade remedy measures 
while also increasing the effectiveness of those remedies.  
 
Question:  (Chile #4) 
 
With regard to anti-dumping investigation proce dures, especially the treatment of Section 201 and 
Countervailing Duties, Chile has learned that the United States might change the way that the 
Department of Commerce calculates the dumping margin so as to be ab le to deduct duties applicable 
under Section 201 of the 1974 Trade Act and count ervailing duties under the 1930 Customs Tariff Act 
from the export price and the reconstructed export price in calculating the dumping margin.  When 
does the U.S. Government anticipate that this change will become effective?  Does the U.S. 
Government expect that there will be any in compatibility in this change with prior DOC 
interpretations, or with WTO agreements, especially w ith respect to the applic ation of Article VI of 
the GATT or the Agreement on Subsidies and Countervailing Duties? 
 
Answer  
 
The Department of Commerce announced on April 6,  2004 that it had decided not to deduct Section 
201 safeguard duties from the export price in calculati ng dumping margins.  The U.S. Government is 
currently considering its position on the issue of  deduction of countervailing duties in calculating 
dumping margins, and is in the process of evalua ting public comments that have been filed. 
 
Question:   (Indonesia #7) 
 
On the issue of trade remedy, the Secretariat Repor t stated that contingency measure remain a key 
form of protection against imports.  The large presentation of the anti-dumping actions has involved 
steel related products.  As Indonesia is one of the affected countries on the anti-dumping actions WT/TPR/M/126/Add.3 
Page 52  
 against imported steels, Indonesia is of the view th at anti-dumping actions taken by the U.S. Authority 
are directed to provide protection for steel sector rather than remedies.  Please explain.  
Answer 
 
The Anti-dumping Agreement recognizes anti-dumping duties as a legitimate tool to counter the 
effects of injurious dumped imports.  An anti-dum ping duty is only imposed where an objective and 
transparent examination of the facts reveals that  such a measure is warranted under the Anti-dumping 
Agreements and U.S. law.  The United States has in place strong procedural protections for firms involved in all U.S. anti-dumping duty proceedings.  
The United States has no control over the number of petitions filed by private parties or the products 
which they cover.  The prevalence of steel produc ts covered by anti-dumping measures is evidenced 
not only in the United States but throughout the world.  The sources of these trade frictions are widely acknowledged to be protected markets, interventi onist government policies as well as other market-
distorting trade practices that have plagued the world steel industry for decades. 
 
Question:  (India #22)  
 
The U.S. has imposed anti-dumping duties on the SAIL, India on HR Coil products.  In this case, USA had imposed AD duties and CVD duties at such a high rate that trade which has a potential of 1 to 1.5 million tonnes annually has been totally disrup ted.  The system of Annual Review is extremely 
cumbersome, unpredictable and expensive for a developi ng country like India.  We would like to hear 
the response of the U.S. delegation on this matter and the solutions proposed for resumption of trade.  
Answer  
 The Anti-dumping Agreement and the Agreemen t on Subsidies and Countervailing Measures 
recognize anti-dumping and countervailing duties as legitim ate tools to counter the effects of injurious 
dumped or subsidized imports.  A trade remedy is  only imposed where an objective and transparent 
examination of the facts reveals that such a measu re is warranted under the relevant WTO agreements 
and U.S. law.  The United States has in place strong procedural protections for firms involved in all U.S. anti-dumping and countervailing duty proceedings .  We note that some of these protections go 
well beyond what is required under the Agreements. 
 
Question:  (India add 1, 2) 
 
Could the U.S. provide the details of the total amount of under-funded pensi on obligations taken over 
by PBGC for the following years 1999-2000, 2000-01, 2001-02, 2002-03? 
 Could the U.S. further indicate how much of th e under-funded pension liab ilities taken over by PBGC 
during the period 1999-2003 related to the automobile  industry, steel industry and airline industry?  
Year-wise details may be provided separately in respect of each of the three industries.  
Answer  
 
The Pension Benefit Guarantee Corporation (PBGC)  protects the pensions of roughly 44 million 
people in about 32,500 private defined benefit pens ion plans.  The PBGC has not received any funds 
from the U.S. government and its liabilities are not guaranteed by the U.S. government.  Operations 
are financed by insurance premiums and investment income. 
  WT/TPR/M/126/Add.3 
 Page 53 
 
 Table 1
FISCAL YEAR
ENDING 9/30
AIRLINES -                      -                      710,513,624       -                      753,687,525       
AUTOMOTIVE 2,368,391           -                      -                      -                      1,303,324           
PRIMARY METALS 9,135,061           690,121              309,707,983       2,587,565,314    4,925,077,189    
ALL OTHERS 156,758,012       102,041,507       307,414,114       1,092,867,859    536,517,921       
TOTAL $168,261,463 $102,731,628 $1,327, 635,721 $3,680,433, 173 $6,216,585,958        2001         2002         2003PBGC CLAIMS FOR MAJOR INDUSTRIES 1999-2003
        1999         2000
 
 Sources:  PBGC Participant System (PRISM), fiscal year calculations and PBGC Management Reports.  
Table 1 provides the present value of the net liab ilities assumed by the PBGC at the time various 
funds were taken over.  Please note that the industry categories in Tables One and Two are the standard industry categories used by the PBGC for statistical monitoring purposes based on the 1987 
U.S. Office of Management and Budget Standard  Industry Classification (SIC) Codes as follows: 
Airlines – 4500-4599; Automotive – 3700-3719; Prim ary Metals – 3300-3399.  In particular, please 
note that the “Primary Metals” category includes more than steel products.  (Explanations of 
industries in each SIC range can be found at:  ht tp://www.wave.net/upg/immigration/sic_index.html.) 
 
Question:  (India, add 3)  
 
Out of the total disbursement from the PBGC coul d the U.S. indicate year-wise total disbursements 
during the period 1999-2003 of pens ion benefits from PBGC and th e corresponding annual details for 
the automobile industry, steel industry, and airline industry?  
Answer  
 
Table 2 provides the amount of benefits paid to retirees covered by pension plans taken over by the 
PBGC. 
 Sources:  PBGC Participant System (PRISM), fiscal year calculations and PBGC Management Reports.  
 
  Table 2
FISCAL YEAR
ENDING 9/30
AIRLINES 276,162,731      262,180,337      366,878,028      413,619,123      525,319,249      
AUTOMOTIVE 16,190,716        19,218,754        21,363,588        18,382,191        21,523,101        
PRIMARY METALS 236,151,825      221,452,660      218,638,152      543,634,532      1,286,337,306   
ALL OTHERS 372,406,250      399,217,500      435,444,291      561,472,358      655,037,190      
TOTAL $900,911,522 $902,069,251 $1,042,324,059 $1,537,108,20 4$2,488,216,846PBGC BENEFITS PAID FOR MAJOR INDUSTRIES 1999-2003
        1999         2000         2001         2002         2003WT/TPR/M/126/Add.3 
Page 54  
 Question:  (Brazil Set V #19)  
 
How does the American federal government follow the initiatives of business assistance at local levels 
and check their compatibility with the WTO rules?   How are the U.S. commitments to the WTO 
complied at local levels since those initiatives are not notified to the Federal Government? 
 
Answer 
 
The United States federal government has devoted c onsiderable time and resources in working with 
government officials at the sub-federal level to  ensure their cognizance of the commitments the 
United States has undertaken as a WTO Member.  The current degree of close cooperation between 
federal and sub-federal governments is evidenced by  the subsidies notification made by the United 
States in 2003 to the Committee on Subsidies and Countervailing Measures pursuant to Article 25 of 
the Agreement on Subsidies and Countervailing Measures (see, G/SCM/N/95/USA).  In this notification, the United States notified 330 sub-fe deral programs, nearly double the number of 
programs notified in 2002.  
Question:  (Canada #3 ) 
 Canada would like to point out that the Continued Dumping and Subsidy Offset Act of 2000  (the 
CDSOA, also known as the Byrd Amendment) was successfully challenged at the WTO and found to 
be inconsistent with the United States’ ob ligations under the Anti-Dumping and Subsidies 
Agreements.  In June 2003, an Arbitrator gave th e U.S. 11 months from the Appellate Body Report to 
bring its measure into compliance with its WT O obligations.  Why has the U.S. ignored the 
reasonable period of time established by the Arbitrator (until December 27, 2003) and not complied with the Appellate Body ruling?  When can Canada expect the U.S. to repeal this measure that has 
been found to be WTO inconsistent? 
 
Answer  
 
The United States Administration proposed repeal of the Continued Dumping and Subsidy Offset Act in its fiscal year 2004 and 2005 budgets, and has been  working with the U.S. Congress on appropriate 
legislation.  In addition, a bill was introduced in  the U.S. Senate to amend the CDSOA in a WTO-
consistent manner, and another has been introduced in  the U.S. House of Representatives to repeal the 
CDSOA.  The United States will continue to seek compliance with the DSB recommendations and rulings.  Question:  (Canada #4 ) 
 
The Report refers to the non-conformity of the  Anti-Dumping Act of 1916  with multilateral rules and 
recent bills introduced to address the issue.  W ill the Administration convey to Congress the urgency 
of enacting a measure that repeals the Act and terminates pending cases (e.g., S 1080)?  
Answer 
 
The United States Administration has conveyed to Congress the importance of timely repeal of the 
1916 Act which would terminate pending cases.  The Administration will continue to work with Congress towards this end.  
 
 
   WT/TPR/M/126/Add.3 
 Page 55 
 
 Question:  (China #11 and #12) 
 
Would the U.S. Government expect that other Me mbers will follow the practice of the U.S. thus 
harming the world environment of fair trad e and the implementation of WTO Agreements?  
 
Does the U.S. have any plan on repealing or amendi ng the relevant legislation inconsistent with the 
WTO Agreements?  
 
Answer  
The United States has made clear its commitment to work with the U.S. Congress to fully comply 
with the prior recommendations and rulings of  the Dispute Settlement Body concerning the 
Extraterritorial Income Act.  Both branches of Congress are currently considering legislative 
proposals that would repeal the ETI Act.  While the United States cannot specify the precise date on 
which this will occur, the United States is confid ent that the ETI Act will be repealed in the 
reasonably near future.  
 Question:  (China #20 & #21)  
As the “reasonable period of time” for implementati on has expired, what detailed measures will the 
United States adopt to implement the WTO recommendation?  
 
Is the U.S. prepared to notify the detailed program me and timetable to comprehensively repeal the 
Byrd Amendment?  
 
Answer  
 The United States Administration proposed repeal of the Continued Dumping and Subsidy Offset Act 
in its fiscal year 2004 and 2005 budgets, and has been  working with the U.S. Congress on appropriate 
legislation.  In addition, a bill was introduced in  the U.S. Senate to amend the CDSOA in a WTO-
consistent manner, and another has been introduced in  the U.S. House of Representatives to repeal the 
CDSOA.  The United States will continue to seek compliance with the DSB recommendations and rulings.  
 
The United States Congress determines the timing and c ontent of legislation in the United States.  The 
United States Administration will continue to work with the U.S. Congress to achieve early passage of 
legislation on the CDSOA bringing the United St ates into compliance with its WTO obligations.  
 
Question:  (China #23) 
 
Could the U.S. Delegation provide some inform ation about the progress of repealing 1916 Anti-
dumping Act in Congress?  
 
Answer 
 There are three bills pending in the U.S. Congress to repeal the 1916 Act.  One bill in the U.S. Senate, 
S. 1080, would repeal the 1916 Act and terminate all pending cases.  Two bills, H.R. 1073 in the U.S. 
House of Representatives and S. 1155 in the U.S. Senate, would repeal the 1916 Act but not affect 
1916 Act litigation already underway.  H.R. 1073 w as reported favorably out of the Committee on the 
Judiciary of the U.S. House of Representatives in January, 2004.  The United States is continuing to 
work with the U.S. Congress to pass legislation repealing the 1916 Act a nd terminating pending cases.  
 WT/TPR/M/126/Add.3 
Page 56  
 Question:  (EC #57) 
 
Article 21.1 of the WTO Understanding on Dispute Settlement (DSU) states that prompt compliance 
with recommendations and rulings of the DSB is essen tial in order to ensure effective resolution of 
disputes to the benefit of WTO Members.  Moreover , Article 3 of the DSU affirms that "the dispute 
settlement system of the WTO is a central elemen t in providing security an d predictability to the 
multilateral trading system".  Notwithstanding these provisions, the U.S. has a patchy record with 
regard to compliance with recommendations and rulings formulated by the DSB on the basis of 
Panels' and the Appellate Body's reports.  What me asures are being taken by the U.S. to comply, and 
when is full compliance expected , with WTO Dispute Settlement Rulings in the following cases: the 
Foreign Sales Corporations legislation (concerning  the FSC Repeal and Extraterritorial Income 
Exclusion Act (ETI));  the 1916 Anti-dumping measures;   Section 110(5) of the U.S. Copyright Act;  
the Continued Dumping and Subsidy Offset  Act (the so-called “Byrd Amendment”)?  
 
Answer 
 In the disputes in which U.S. measures have been  found inconsistent with U.S. WTO obligations, the 
United States has implemented the vast majority  of DSB recommendations and rulings in full and 
within the reasonable period of time.  With respect to  the disputes referred to in  the EC’s question, the 
United States will continue to seek  early passage of required legislation in order to fully implement 
the DSB’s recommendations and rulings.  
 
Question:  (EC #58) 
 
How does the U.S. judge the relevant importance of  prompt compliance with WTO rulings, and hence 
the upholding of the rules-based international tr ading system, and the setting of a good example for 
the rest of the world, vis-a-vis its own domestic goals and interests in terms of U.S. economic and 
commercial development?  
 
Answer  
The United States shares the European Commun ities’ priority in complying with DSB 
recommendations and rulings, although as the EC’s own experience in its failures and years’ long 
delays in implementing DSB recommendations and rulings demonstrates (e.g., Bananas, Beef 
Hormones), compliance is not always possible by the end of the reasonable period of time.  In the disputes in which U.S. measures have been found in consistent with U.S. WTO obligations, the United 
States has implemented the vast majority of DSB recommendations and rulings in full and within the 
reasonable period of time.  It continues to make effo rts to enact legislation where such legislation is 
necessary for implementation.  
 
Question:  (EC #59)  
What explanation can be given for the longstanding  trend whereby the U.S. has not implemented the 
necessary measures to comply with WTO ru lings within the designated time frame?  
 Answer  
Unlike the EC which began its record of not implementing DSB recommendations and rulings from 
the beginning of the WTO, in the disputes in whic h U.S. measures have been found inconsistent with 
U.S. WTO obligations, the United States has implem ented the vast majority of DSB recommendations 
and rulings in full and within the reasonable period of time.  The United States further notes that the 
EC has continued to be out of compliance longer than any other Member.  WT/TPR/M/126/Add.3 
 Page 57 
 
  
Question:  (Japan #10)  
p. 22, para. 38 and p. 23, para. 42 
 
The U.S. has been imposing anti-dumping and countervailing duties on certain lumber products from Canada under the Department of Commerce’s final determination.  Concerning these duties, three 
related panels based on the DSU of WTO were se t up in response to requests by the Canadian 
Government.  The panel regarding countervailing duty reported on August 29, 2003, that the U.S.' 
final determination was inconsistent with the WTO agreement.  The U.S. appealed to the Appellate 
Body on October 21, while bilateral negotiations ha ve, Japan understands, been held continually.  
Could the U.S. explain the latest developments  in the bilateral nego tiations with Canada? 
 
Question:  (Japan #11)  
 
We are aware that the Softwood Lumber Agreem ent of September 1996 between the U.S. and 
Canada, which tackles the exports of Canadian so ftwood lumber to the U.S., expired on March 31, 
2001.  We consider this agreement as an “export mode ration” as mentioned in para. 1(b) of Article 11 
of the Agreement on Safeguards, and request that any measure of this kind not be reintroduced. 
 
Answer 
 
The 1996 U.S. Canada Softwood Lumber Agreement expired on March 31, 2001.  The United States 
subsequently sought agreement with Canada on fundamental pr ovincial reforms.  However, 
negotiations broke off and we im posed CVD and AD duties in response to U.S. industry petitions 
alleging unfair Canadian trade practices.  Specifically, the Department of Commerce (“DOC”) issued final anti-dumping and countervailing duty (“AD/C VD”) orders applying an average 27.2 percent 
duty on imports of softwood lumber from Canada on May 22, 2002. 
 
The CVD statute allows for “changed circumstan ces reviews” in instances where changes in the 
conditions that led to the imposition of duties woul d justify a reduction or elimination of the CVD 
duties.  The DOC recently published draft guidelin es for reforms in Canadian provincial forest 
practices.  This Policy Bulletin can be found at th e website www.ita.doc.gov.  The Policy Bulletin 
provides a roadmap of reforms provinces must undertake in their stumpage and forestry practices 
before revocation of duties may be assessed.  We c ontinue to work with all stakeholders toward 
finding a long term, durable solution to the softwood lumber dispute.  
Question:  (Argentina #2)  
 
In paragraphs 77-79, it is stated that the C ontinued Dumping and Subsidy Offset Act of 2000 
(CDSOA), also known as the Byrd Amendment, is one of  the instruments of U.S. trade legislation.  It 
was reviewed by a Special Panel, which concluded th at this measure is inconsistent with a series of 
WTO agreements.  Given that the number of requ ests for protection under the Byrd Amendment has 
increased exponentially over a three-year period (jumping from 900 in 2001 to 2,100 in 2003), and 
that the WTO Appeal Organ has confirmed that it is  inconsistent with WTO rules, what measures will 
the U.S. implement to comply with the determinat ion of the Special Panel and the Appeal Organ in 
this regard? 
 
Answer  
 
The United States Administration proposed repeal of the Continued Dumping and Subsidy Offset Act 
in its fiscal year 2004 and 2005 budgets, and has been  working with the U.S. Congress on appropriate 
legislation.  In addition, a bill was introduced in  the U.S. Senate to amend the CDSOA in a WTO-
consistent manner, and another has been introduced in  the U.S. House of Representatives to repeal the WT/TPR/M/126/Add.3 
Page 58  
 CDSOA.  The United States will continue to seek compliance with the DSB recommendations and 
rulings.  Question:  (Norway #6 ) 
 Can the U.S. delegation update the Members on the st atus of this [CDSOA] repeal legislation, and 
when the Administration envisag es it being passed by Congress? 
 
Answer  
 
The United States Administration proposed repeal of the Continued Dumping and Subsidy Offset Act 
in its fiscal year 2004 and 2005 budgets, and has been  working with the U.S. Congress on appropriate 
legislation.  In addition, a bill was introduced in  the U.S. Senate to amend the CDSOA in a WTO-
consistent manner, and another has been introduced in  the U.S. House of Representatives to repeal the 
CDSOA.   
While the United States Congress determines the timing and content of legislation in the United 
States, the Administration will continue to work with the U.S. Congress to achieve early passage of 
legislation on the CDSOA, in order to bring the United States into compliance with its WTO obligations. 
 
Question:  (Korea)  
Reference:  p. 47, paras. 74-76  
The U.S. Department of Commerce is reportedl y considering deducting S ection 201 and CVD duties 
from the constructed export price in dumping margin  calculations.  What is the U.S. government’s 
position on this matter? 
 
Answer  
 
The Department of Commerce announced on April 6,  2004 that it had decided not to deduct Section 
201 safeguard duties from the export price in calculati ng dumping margins.  The U.S. Government is 
currently considering its position on the issue of  deduction of countervailing duties in calculating 
dumping margins, and is in the process of eval uating public comments that have been filed.  
 
Question:  (Korea ref. para. 77)  
 
Can the United States provide any detailed plan to implement the ruling of the WTO/DSB? 
 
Answer  
 
The United States Administration proposed repeal of the Continued Dumping and Subsidy Offset Act in its fiscal year 2004 and 2005 budgets, and has been  working with the U.S. Congress on appropriate 
legislation.  In addition, a bill was introduced in  the U.S. Senate to amend the CDSOA in a WTO-
consistent manner and another has been introduced in  the U.S. House of Representatives to repeal the 
CDSOA.   While the United States Congress determines the timing and content of legislation in the United States, the Administration will continue to work with the U.S. Congress to achieve early passage of 
legislation on the CDSOA, in order to bring the United States into compliance with its WTO 
obligations.   WT/TPR/M/126/Add.3 
 Page 59 
 
 Question:  (Thailand #1)  
 
Regarding “the Continued Dumping and Subsidy Of fset Act of 2000 (CDOSA)” or also known as the 
Byrd Amendment which the U.S. has stated its intention to implement the recommendations and 
rulings of the DSB, we [Thailand], therefore, woul d like to urge the U.S. Government to take action 
on this matter as soon as possible. 
 
Answer  
 
The United States Administration proposed repeal of the Continued Dumping and Subsidy Offset Act in its fiscal year 2004 and 2005 budgets, and has been  working with the U.S. Congress on appropriate 
legislation.  In addition, a bill was introduced in  the U.S. Senate to amend the CDSOA in a WTO-
consistent manner and another has been introduced in  the U.S. House of Representatives to repeal the 
CDSOA.   While the United States Congress determines the timing and content of legislation in the United 
States, the Administration will continue to work with the U.S. Congress to achieve early passage of 
legislation on the CDSOA, in order to bring the United States into compliance with its WTO obligations. 
 
Question:  (Mexico Set III #2)  
Is the Byrd Amendment considered in the 2004 U.S. budget?  If so, how the U.S. believes it complies 
with the WTO and the decisions made by the WTO Pa nel, or how will be the process that the U.S. 
Government will follow to comply with it?  
Answer  
 
The United States Administration proposed repeal of the Continued Dumping and Subsidy Offset Act in its fiscal year 2004 and 2005 budgets, and has been  working with the U.S. Congress on appropriate 
legislation.  In addition, a bill was introduced in  the U.S. Senate to amend the CDSOA in a WTO-
consistent manner and another has been introduced in  the U.S. House of Representatives to repeal the 
CDSOA. 
 
While the United States Congress determines the timing and content of legislation in the United States, the Administration will continue to work with the U.S. Congress to achieve early passage of 
legislation on the CDSOA, in order to bring the United States into compliance with its WTO obligations.  Question:  (Japan #24 and #25)  
Japan urges the U.S. to repeal the Byrd Amendment without delay. 
 
Answer 
 
The United States Administration proposed repeal of the Continued Dumping and Subsidy Offset Act in its fiscal year 2004 and 2005 budgets, and has been  working with the U.S. Congress on appropriate 
legislation.  In addition, a bill was introduced in  the U.S. Senate to amend the CDSOA in a WTO-
consistent manner and another has been introduced in  the U.S. House of Representatives to repeal the 
CDSOA.  
 WT/TPR/M/126/Add.3 
Page 60  
 While the United States Congress determines the timing and content of legislation in the United 
States, the Administration will continue to work with the U.S. Congress to achieve early passage of 
legislation on the CDSOA, in order to bring the United States into compliance with its WTO obligations.  
Question:  (Japan #27)  
 
Three years have passed since the Reports of the Pa nel and the Appellate Body affirmed that the Anti-
Dumping Act of 1916 was inconsiste nt with WTO Agreement.  Even  after the extended “reasonable 
period of time”, the Act is yet to be repealed.  Wh at is the U.S. view on the implementation of the 
DSB’s recommendations? 
 
Answer  
 
Legislation repealing the 1916 Act is pending in  both the U.S. Senate and U.S. House of 
Representatives.  The U.S. Administration will conti nue to work for legislation which would repeal 
the 1916 Act with respect to bot h existing and prospective cases. 
 
Question:  (Japan #28)  
 
Could the U.S. Administration look into the judicial administration of 1916 Act?  Could the U.S. Administration make up for the loss suffered by th e Japanese company in the sa me way that the U.S. 
made a lump-sum payment regarding Secti on 110(5) of the U.S. Copyright Act? 
 
Answer  
 
As Japan is aware from bilateral discussions, the Un ited States is monitoring developments in the 
administration of the 1916 Act.  While the arra ngement in the dispute concerning Section 110(5) 
reflected the specific circumstances of that disput e, the United States is open to discussion with Japan 
on any issue involved in the dispute over the 1916 Act.  
Question:  (Japan #30)  
 With regard to paragraph 115 of the Report by th e Secretariat concerning the U.S. safeguard measures 
on the imports of certain steel products, in the WT O dispute settlement proceedings, the Panel, as well 
as the Appellate Body, concluded that these meas ures were inconsistent with the Agreement on 
Safeguards and GATT 1994. Japan requests the U.S. to clarify whether it has the intention to review 
the ways and means of the U.S. safeguard invest igation, as well as the criteria it applies in the 
investigation as a result of the rulings by these WT O dispute settlement bodies.  For example, in the 
USITC Report concerning the safeguard measures, the USITC used the “substantial cause” as criteria 
in conducting causation analysis. According to our understanding, under Section 201 of the U.S. 
Trade Act of 1974, more weight is given to incr eased imports when investigating the causal link 
between the increased imports of the product concerned and the serious injury or threat thereof.  That 
is to say, the existence of a causal link is believe d to be proved as long as the increased import is the 
cause, which is important and no less than any other cause.  On the other hand, under Article 4.2 of 
the Agreement on Safeguards, non-attribution require ments are called for when a detailed analysis is 
required, in order to demonstrate that factors othe r than increased imports are not attributed to the 
injury caused in the domestic industry.  Thus, Japan believes that the issue of the compatibility of the 
U.S. domestic safeguards legislation with the WT O Agreement needs to be addressed and carefully 
looked into by the U.S.  What are the U.S. views on this matter? 
 
  WT/TPR/M/126/Add.3 
 Page 61 
 
 Answer  
 
Section 202(b) of the Trade Act of 1974 provides that in a safeguard investigation, the U.S. International Trade Commission (USITC) is to determ ine whether an article is being imported into the 
United States in such increased qua ntities as to be a substantial cause of serious injury, or the threat 
thereof, to the domestic industry, producing an ar ticle like or directly competitive with the imported 
article.  It defines “substantial cause” as meaning a cause which is important and not less than any 
other cause.  Among other statutory requirements, Section 202(c) further requires the USITC, in making the determinations under Section 202(b), to  examine factors other than increased imports 
which may be a cause of serious injury, or threat th ereof, to the domestic industry, and to include the 
results of this examination in its report.  Thus, th e characterization of the requirements of Section 201 
in the question is not accurate or complete. 
 Moreover, contrary to the suggestion in the question, the Appellate Body has not found the U.S. domestic safeguards legislation to be incompatible  with the Safeguards Agreement.  Indeed, in United 
States – Wheat Gluten, the Appellate Body expressly reversed a Panel finding that the USITC’s 
causation examination pursuant to these statutor y requirements was inconsistent with the non-
attribution language in Article 4.2(b) of the Agreemen t.  In reversing, the Appellate Body stated that 
this Panel finding, based on reasoning similar to that  set forth in this question, was “based on an 
erroneous interpretation of Article 4.2(b).”  United States – Definitive Safe guard Measures on Imports 
of Wheat Gluten from the European Communities , WT/DS166/AB/R (22 December 2000), at 
Paragraph 79. 
 
Question:  (Japan #31)  
 
While the U.S. lifted the safeguard measures on the imports of certain steel products, it continues to 
retain the monitoring program and steel impor t licensing until March 2005, through which it can 
closely monitor the status of steel imports into the U.S.  On December 4, 2003, the U.S. President said 
in his statement on the lifting of safeguard measures that an integral part of our commitment to free 
trade is our commitment to enforcing our trade laws  In view of such statement, we cannot but address 
our concern over the possibility that a trade-cont rolling measure, such as the above program, may lead 
to protective measures, should such measure not be  properly used.  Therefore, Japan would like to 
seek the confirmation of, and commitment by, the U.S. that the above program shall be strictly used in 
conformity with the WTO Agreement. 
 
Answer 
 
It is the policy of the United States to comply fully with its WTO commitments.  The current steel 
licensing system, established under section 203(a)(3)(I), is an easy-to-use, transparent, WTO-
consistent system that is not trade restrictive.  Its purpose is to identify po tential steel import surges 
quickly.  
Question:  (Japan #26)  
 Japan brought a claim against the U.S. before the WTO Dispute Settlement Body that the anti-
dumping investigations conducted by the U.S. au thorities on certain hot-rolled steel products from 
Japan are inconsistent with the WTO agreements.  The report by the Appellate Body concluded that 
the methodology employed by the Department of  Commerce for calculating the anti-dumping margin, 
as well as the USITC methodology for determining injury  is not consistent with the WTO agreements; 
the DSB adopted the report in August 2001.  The U.S., however, has not yet amended its law 
concerning the methodology for calculating the anti-dumping margin. During the DSB session held in December 2003, the U.S. stated that they inte nded to renew their efforts to complete the WT/TPR/M/126/Add.3 
Page 62  
 implementation of the DSB’s rulings and recommenda tions when the Congress resumes its activities 
in January 2004.  Please explain the present status of discussions in the Congress.  
Answer 
 
The United States continues to work with Congress to pass the necessary legislation. 
 
Question:  (Chinese Taipei)  
Reference:  p. 3 
 
In view of the fact that at least 6 percent of th e anti-dumping measures curren tly enforced in the U.S. 
involve exporters from the Separate Customs Territo ry of Taiwan, Penghu, Kinmen and Matsu, we 
would be particularly interested in knowing whether the U.S. has any plan to improve its investigation 
procedures regarding sunset reviews, in recogniti on of the principle of terminating anti-dumping and 
countervailing measures after 5 years of implementation.  Answer  
 
Article 11.3 of the AD Agreement and Article 21.3 of the SCM Agreement permit the authorities to 
evaluate an anti-dumping or countervailing duty orde r, respectively, five years from its imposition; 
they do not require the termination of an order af ter five years if a sunset review results in a 
determination that termination of the order would be  likely to lead to continuation or recurrence of 
dumping or subsidization and injury.  U.S. laws and regulations concerning the conduct of sunset 
reviews are consistent with the applicable WTO obligations.  
 
Question:  (Chinese Taipei pp. 3-4)  
 (Secretariat Report;  p. 197, para.  227).  One par ticular noteworthy remark in the Secretariat Report 
states that “All the cases in whic h safeguard measures were applied by the United States since 1998 
have been challenged in the WTO.”  In addition, th ere were striking similarities between the bases of 
complaints made by other WTO Members, which were  later accepted by the panels and the appellate 
body.  It appears, for example, that imports from NAFTA countries were excluded from the application of safeguard measures, but included when  it came to consideration of an “import surge”. 
Bearing in mind the precedent established by repeated  DSB rulings, we would ask the U.S. to advise 
us of any improvements it makes in future inves tigation procedures in order to ensure more WTO-
acceptable results.  
Answer  
 
The Appellate Body has not yet found a single safeguard measure by any WTO Member to be 
consistent with the WTO Agreement on Safeguards, so  it is not surprising that there have been WTO 
challenges to the safeguard measures taken by the United States, given the size of the U.S. market and 
its importance to many Members.  It should be em phasized, however, that the Appellate Body has not 
found the U.S. safeguards law to be incomp atible with the Safeguards Agreement. 
 
In the event of any modification to U.S. laws, re gulations or administrative procedures relating to 
safeguard measures, the United States would promptly provide a notification to the Committee on Safeguards in accordance with Article 12.6 of the Agreement on Safeguards. 
     WT/TPR/M/126/Add.3 
 Page 63 
 
 Question:  (Chile – Safeguards #1)  
 
What are the criteria used to determine the app lication of a tariff surcharge, of quantitative 
restrictions, or a tariff rate quota for the safeguards applied by the U.S.?  What are the bases and the 
mechanics for the application of import licenses and “other measures” referred to in Section 203 of 
the 1974 Trade Act?  Are such measures applied on  a supplemental basis or in replacement of the 
aforementioned measures? 
 
Answer  
 
The criteria for what action, if any, the President s hould take in a safeguard investigation following an 
affirmative injury finding by the U.S. Interna tional Trade Commission (“USITC”) are specified in 
Section 203 of the Trade Act of 1974.  Section 203(a )(1)(A) states that after such a USITC finding the 
President “shall take all appropriate and feasibl e action within his power which the President 
determines will facilitate efforts by the domestic industry to make a positive adjustment to import 
competition and provide greater economic and soci al benefits than costs.”  Section 203(a)(2) 
identifies particular factors that the President is  to take into account in making this decision, 
specifically including the recommendation and report of the USITC containing its recommendations as to what action(s) to take.  Section 203(a)(3) authorizes various actions (or combin ations of actions) that the President may take.  
Some of the possible actions authorized by this Section involve the imposition of a safeguard measure 
(e.g., tariff increase, quantitative restriction, ta riff rate quota), while a number of other actions 
authorized by the Section (e.g., trade adjustment assistance) do not.  Under section 203, the President 
retains the authority to take other actions, includi ng but not limited to import licensing, without regard 
to the early termination of safeguard measures.  For example, the current steel licensing system, 
established under section 203(a)(3)(I), is an easy-to-use,  transparent, WTO-consistent system that is 
not trade restrictive.  Its purpo se is to identify potential steel im port surges quickly.  The licensing 
system is not a safeguard measure, and it does not replace or act as a surrogate for the steel safeguard measures which were terminat ed on December 4, 2003. 
 
Question:  (Chile – Safeguards #2)  
 Under the NAFTA, imports of products from other NAFTA countries are exempted from application 
of the final measure when they do not represent a s ubstantial share of imports.  In such cases, does the 
United States take into account imports that are not  subject to safeguards when calculating the injury 
and imposing the safeguard?  Answer  
 
While this may be only a translation error, it is important first to clarify that in its injury 
determinations in safeguard investigatio ns, the USITC does not "calculate" injury. 
 In response to the substance of the question, the USITC was specifically requested by USTR Zoellick 
to make a finding during the steel investigation as to whether increased imports from all sources other 
than FTA partners were a substantial cause of seri ous injury or threat of serious injury to the 
corresponding domestic industry.  The ITC provided a response to this question in its report under 
Section 203(a)(5) of the Trade Act of 1974.  Similarly, in the evaluation of what relief if any to impose, the President's analysis of the likely eff ectiveness of any proposed remedial measure would 
be informed by taking into account the possible effect s of any imports that would not be subject to the 
measure.  WT/TPR/M/126/Add.3 
Page 64  
 Question:  (Chile – Safeguards #3)  
 
How does the U.S. interpret the st atement of the WTO Secretariat to  the effect that “although the 
number of investigations has been low, their scope  has been broad in recent years, especially with 
regard to steel…”?  Is this true, considering the nu mber of products, the type and category of products 
involved, or the lack of precision in the tariff headings? 
 
Answer  
 
As the question states, the statement quoted was by the Secretariat, not the U.S. Government.  We 
assume that the Secretariat’s statement that the num ber of U.S. investigations has been “limited” 
refers to the facts that the investigation regarding certain steel  products initiated in June 2001 has been 
the only U.S. Section 201 safeguard investigati on after 2000, and that there were no Section 201 
investigations initiated during the review peri od.  Thus, the United States had fewer such 
investigations in this period than some other WTO Members, including Chile.  
As to the Secretariat’s statement about breadth of the scope of safeguard inv estigations, that appears 
to be a reference to the steel investigation, si nce the Secretariat does not identify any other such 
investigations with a broad scope.  In the steel Section 201 investigation, which was part of the 
President’s comprehensive steel initiative, th e U.S. International Trade Commission found 29 
different products, although the United States ultimate ly imposed safeguard measures with respect to 
only 10 of those products. 
 
Question:  (Mexico III #1)  
 
What is the percentage of “non- initiation/petition” related to the ITC determination that a petition 
does not contains sufficient information supporting the allegations? 
 
Answer  
 
While a majority of petitions forma lly filed have led to investigati ons, it is not unusual for a petition 
not to be filed formally following an informal review in the context of pre-petition counseling. 
 CHAPTER 3 - TRADE POLICIES BY MEASURE  (3.3) TBT/SPS Measures and Environm ent (including Bio-terrorism)  
 
Question:  (Mexico III 1.a) 
 Mexico has expressed in bilateral forums and mu ltilateral meetings its position on this issue.  
Moreover, Mexico actively participated in the pu blic comment period on the regulations with the 
submission of comments.  Nevertheless, Mexico requests that the U.S. provide clarification on the following points with reference to the Bioterrorism Act:  
How many companies have registered? 
 
Answer 
 
The Government of Mexico requests clarification w ith respect to the number of companies that have 
registered under the requirements of the Bioterrorism Act.  As of June 18, 2004, the total number of 
registrations was 207,432.   Of these, 6,467 registrations are from facilities in Mexico.  A total list of  WT/TPR/M/126/Add.3 
 Page 65 
 
 the number of facilities registered by country as of May 19, 2004 may be found at:  http://www.cfsan. 
fda.gov/~furls/ffregsum.html.  
 
Question:  (Mexico III 1.b) 
 
What are the initial results of application of the Act? 
 Answer 
 
Regarding the level of compliance with the interi m final rule concerning the registration of food 
facilities, FDA estimates that the total number of f ood facilities that must register is approximately 
420,000, approximately half of which are domestic.  As of June 18, 2004, FDA had received 207,432 
registrations, of which 98,654 are from U.S. facilitie s and 108,778 are from foreign facilities.  Most 
facilities are registering electronically.  FDA cont inues to encourage the remaining facilities to 
register.  
In regard to the activities concerning the interim fina l rule pertaining to prior notice of imported food 
shipments, FDA is pleased to announce that on December 3, 2003, under the authority in Section 314 
of the Bioterrorism Act, the Bureau of Customs and Border Patrol (CBP) and FDA signed a Memorandum of Understanding (MOU) commissioning ag reement.  Under this agreement, we have 
commissioned 6,000 CBP officials to date See 
<http://www.fda.gov/bbs/topics/NEWS/2003/NEW00988.html> to assist with responsibilities under 
the Bioterrorism Act. 
 This MOU is a significant factor in FDA being ab le to reduce the prior notice time frames from noon 
the day before the food arrives (proposed rule) to th e time frames in the interi m final rule, while still 
meeting our public health mission. 
 
The level of compliance with the prior notice prov ision has been encouraging, but it will require 
continuing improvement.  FDA is still concentra ting its efforts on education rather than on 
compliance. FDA has been receiving about 150,000 pr ior notice submissions a week since February.  
About 88% (2.1 of 2.4 million) were submitted as additional information on transactions through 
CBP's Automated Commercial System (ACS), about 11% came through FDA's new Web-based Prior 
Notice System Interface (PNSI).  The remaining tran sactions are in the new form that CBP and FDA 
provided for submitting information through ACS on food shipments that do not require CBP ACS 
submission at the time of arrival in the U.S., e.g.  Transportation and Exportation, Immediate 
Transportation, and Foreign Trade Zones.  Since March, most of the prior notices received are 
complete, and very few submissions of food produc ts through ACS contain no prior notice data. 
 
There have been assertions by industry members that prior notice holds have been placed on 
shipments.  This is largely inaccurate.  The real reasons for a hold range from entry not being filed 
yet, importers/exporters not really knowing where their product is, and confusing a prior notice hold 
with the more routine holds for product sampling. 
 
Question:  (Mexico III 1.c) 
 
How have the U.S. authorities addressed the issue of synchronizing the FDA's and U.S. Customs' 
electronic systems?   
 WT/TPR/M/126/Add.3 
Page 66  
 Answer 
With regard to prior notice, the systems have b een synchronized:  For those who import food and who 
file with Customs and Border Protection (CBP) for entry, the FDA prior notice submission may be prepared in conjunction with the CBP filing.  Ho wever, the reverse is not  true; persons submitting 
prior notice using the FDA's Prior Notice System Interface (PNSI) may not use PNSI to file CBP entry information.  A separate entry must be filed with CBP.  Question:  (Mexico III 1.d)  
How will discretionarily be minimized with a view to avoiding the arbitrary detention of shipments? 
 Answer  
The United States Food and Drug Administration (FDA) and the U.S. Customs and Border Protection 
(CBP) issued a compliance policy guide (CPG) that is available on the FDA website, http://www.cfsan.fda.gov/~pn/cpgpn.html.  The CPG describes our strategy for maintaining an 
uninterrupted flow of food imports while improving their safety in accordance with the Public Health 
Security and Bioterrorism Preparedness and Res ponse Act of 2002 (Bioterrorism Act) requirements 
which became effective on December 12, 2003.  FDA and CBP expect a "good faith" effort at 
compliance with the requirement that FDA receive a prior notification of all human and animal food, 
drinks and dietary supplements impor ted or offered for import to the U.S. and the requirement that all 
facilities that manufacture, process, pack or hold f ood intended for consumption in the U.S. must be 
registered with FDA. During the 8 months fo llowing December 12, 2003, the two agencies will 
primarily rely on educating the affected firms and individuals.  During this period, the agencies will 
utilize communication and education initiatives, escal ating imposition of civil monetary penalties, and 
ultimately refusal of shipments.  This phase-in  period will end on August 12, 2004. FDA and CBP 
personnel have already begun an extensive campaign to educate other government officials, domestic 
and foreign food importers, brokers , transporters, and other affect ed industry representatives with 
written material, briefings, and se minars on how to comply with the new regulations implementing 
the Bioterrorism Act.  As part of this outreach, FDA senior officials traveled  to Mexico both after 
FDA and CBP issued the proposed rules and again af ter we issued the two interim final rules to 
explain the requirements to government officials and industry members. 
 
Question:  (Mexico III 1.e) 
 
What is the possibility of harmonizing prior-notice- of-shipment times under the Bioterrorism Act with 
other existing programs, in particular FAST?  Answer  
FDA and CBP continuously are assessing the completeness of prior notice submissions received as 
well as the amount of time necessary to receive, review, and respond to those submissions requiring a human review.  However, that process is not yet complete, as we are currently operating under the 
enforcement discretion policies outlined in the Prior Notice Compliance Policy Guide (CPG). See 
"Notice of Availability:  Compliance Policy Guid e Sec. 110.310--Prior Notice of Imported Food 
Under the Public Health Security and Bioterrori sm Preparedness and Response Act of 2002" (68 FR 
69708, Dec. 15, 2003). http://www.cfsan.fda.gov/guid ance.html.  We currently do not receive prior 
notice for all shipments.  
In April 2004 FDA and CBP announced the following plan, which we intend to implement in 
August 2004.  WT/TPR/M/126/Add.3 
 Page 67 
 
  
• From August 12, 2004, to October 12, 2004, we  plan to assess existing procedures and 
staffing needed to receive, review, and respond to the prior notices submitted in accordance 
with the Prior Notice IFR (i.e., 2 hours before a rrival by land by road; 4 hours before arrival 
by air or by land by rail; and 8 hours before arrival by water). 
• From October 13, 2004, to November 12, 2004, we intend to identify what changes to work 
practices and staffing would be necessary to de termine if FDA could continue to receive, 
review, and respond to all prior notice submissi ons with reduced timeframes (e.g., 1 hour/30 
minutes before arrival by land by road;  2 hours before arrival by land by rail; and by "wheels 
up" for flights originating in North and Central America, South America (north of the Equator 
only), the Caribbean, and Bermuda;  othe rwise 4 hours before arrival by air). 
• From November 13, 2004, to February 12, 2005, we plan to implement necessary changes 
and make appropriate adjustments to ensure we  could receive, review, and respond to all prior 
notice submissions with reduced timeframes. 
• In March 2005, we intend to issue a prior noti ce final rule that responds to the comments we 
received on the Prior Notice IFR, including this  plan, during the two open comment periods. 
 
Question:  (Mexico III 1.f)  
How are records that are not in electronic form are being handled? 
 
Answer 
 
If the question relates to record keeping requirements, FDA will co mment on the provisions once they 
are finalized and stakeholders ha ve an opportunity to assess the impact of the final rule as it may 
apply to them.  FDA will be issuing a final rule after fully considering the timely comments we have 
received.  Under the Administrative Procedure Act, FDA cannot address comments during a pending rule making process  If the question relates to how is FDA handling pape r registrations, FDA staff are inputting into the 
registration database all completed paper forms received via mail or fax and returning to the facility 
its registration number and confirmation of registration.  This is a slower process than a facility or its 
authorized representative registering the facility electronically.  
Question:  (Brazil II TBT #1)  
 To what extent do the USA and the EU adopt inte rnational standards as a basis for their harmonized 
technical regulations under the Tr ansatlantic Economic Partnership? 
 
Answer 
 
The WTO Agreement on Technical Barriers to Trad e obliges the United States (and EU) to base its 
technical regulations and conformity assessment pro cedures on international standards to the extent 
that relevant ones exist and they are effective and ap propriate for meeting legitimate regulatory needs.  
The U.S. and EU affirmed this obligation in th e Transatlantic Economic Partnership.  The U.S. 
government does not maintain centralized statistics on the extent to which either Party has based their 
regulations on international standards. 
 
Question:  (Canada II #16)  
 
Canada continues to have concerns regarding the consistency of the U.S.  Marine Mammal Protection 
Act (MMPA ) with U.S. WTO obligations.  In past WTO reviews of U.S. trade policy, the U.S. WT/TPR/M/126/Add.3 
Page 68  
 delegation has cited in defense of the MMPA , that a waiver is available, subject to certain conditions, 
to allow imports of marine mammal products. Howeve r, in response to the last TPR questions, the 
U.S. delegation stated that since 1975, no applicatio n for an import waiver had been received.  On 
what objective basis would the U.S. Secretary of Commerce grant a waiver for the commercial import 
and retail of marine mammal products?  If the conditi ons for a waiver were met, how would such a 
waiver be implemented for the commercial import and retail of marine mammal products?  How can 
the waiver process be justified as relief from the import ban considering WTO obligations? 
 
Answer 
 
The U.S. Secretary of Commerce may waive the MMPA's moratorium on the taking of marine 
mammals if such taking is in accord with sound pr inciples of resource protection and conservation.  In 
addition, in order to grant a waiver for the impor t of marine mammal products, the Secretary must 
certify that the program for taking marine mammals in  the country of origin is consistent with the 
MMPA.  Implementation of a waiver would entail fo rmal rule making and the issuance of permits.  
Thus, the waiver process provides relief from the MMP A's trade ban with respect to marine mammal 
products. 
 The process for waiving the moratorium is a formal  rule-making that includes a hearing before an 
Administrative Law Judge, and any person could requ est, in writing, to be a party to the hearing. 
 The entire process can be summarized as follows: 
 
1.  Waiver and regulations - Formal rule ma king process in accordance with 50 CFR part 228 and 
considering the criteria described above.  If a waiv er is warranted, NMFS would need to promulgate 
regulations that would allow issuance of permit s to import marine mammal products for commercial 
purposes. 
 
2.  Permits - NMFS could then issue permits in accordance with the regulations.  The United States believes that the regulatory regi me under the Marine Mammal Protection Act, as 
described in the detailed answers to Canada's qu estions, is consistent w ith our WTO obligations. 
 Question:  (Canada II #17) 
 
If a country requested a waiver of the prohib ition of importing marine  products and provided 
documentation of the following conditions, NOAA could waive the moratorium.  The population 
stock from which the animals came would have to be within their Optimum Sustainable Population 
levels, and the taking for impor tation would not cause the population level to drop below their 
optimum sustainable yield.  In addition, regard less of the waiver provision, there are several 
prohibitions of the MMPA that would continue to a pply to any import.  Marine mammals or marine 
mammal products cannot be imported if the marine mammal was pregnant, nursing, or less than 8 
months old at the time of the taking, taken from a stock designated as depleted, taken in an inhumane 
manner, taken in violation of the MMPA or in viol ation of the law of the country in which it was 
taken, or the sale of the marine mammal product is illegal in the country of origin. 
 In addition to a waiver, Canada understands that pe rmits would be required to import and sell marine 
mammal products in the U.S.  However, the MMPA a nd its regulations do not provide for commercial 
imports or sales in the United States.  How do pe rmits allow for the commercial importation and retail 
of marine mammal products?  How can that be jus tified considering WTO obligations?  How is this 
defensible under WTO obligations? 
  WT/TPR/M/126/Add.3 
 Page 69 
 
 Answer  
 
The waiver process itself involves formal rule maki ng that would allow the issuance of permits to 
import marine mammal products for commercial purposes.  The permits could be issued in accordance to the regulations that were promulgate d following the formal rule making and the waiver 
of the moratorium.  If the waiver provisions of the MMPA  do provide relief from the trade ban with 
respect to marine mammal products, then the Presidential order that consideration be withheld "...of 
any Canadian requests for waivers to the existing moratorium on the importation of seals and/or seal products into the United States" removes any possible relief from the trade ban for Canada. 
 The United States believes that the regulatory regi me under the Marine Mammal Protection Act, as 
described in the detailed answers to Canada's qu estions, is consistent w ith our WTO obligations. 
 
Question:  (EU #5) Reference:  Bio-terrorism Act of 2002  
Why did the FDA not carry out a specific risk asse ssment during the development of the proposed set 
of four far-reaching rules to implement the food-rela ted provisions of this Act?  What efforts are 
being made by the FDA to reduce the impact of th ese new measures on trade?  Will there be a review 
mechanism of the parent legislation from the date of implementation of the new measures, and if not, 
why not?  More specifically rega rding the new record-keeping measur es, what efforts are being made 
to improve the manifest lack of communication be tween U.S. agencies such as the FDA, Tax and 
Trade Bureau, and U.S. Customs? 
 
Answer 
 
FDA has published the risk assessment with the interim final rule.  Under the U.S. system, legislation 
is not normally put into effect until the final regul ations take effect.  The risk assessment may be 
found on the FDA Website at http://www.cfsan.fda.gov/~dms/rabtact.html.  FDA has encouraged public comment at every stage of the Bioterrorism regul ations' development.  
FDA developed and published proposed regulations which were open to public comment from both 
domestic and foreign parties.  We  also conducted numerous outreach meetings directed at foreign 
stakeholders, both within the U.S. to foreig n embassy officials in Washington and via 
videoconference.  We received numerous comments from foreign governments, industries, and trade associations on both rules.  We reviewed each  comment that was submitted during the comment 
period and developed the final rule, taking the comme nts into account.  In the case of the prior notice 
and registration regulations, we are allowing for sev eral opportunities for interested individuals to 
provide comments even as we begin implementing th e interim final rule to make sure that we 
minimized any negative effect on trade while ensuring our food safety and security.  On April 14, 2004 FDA and the Customs and Border Protection (CBP) reopened for 30 days the comment period for FDA’s prior notice of imported food shipments interim final rule (IFR) and its 
registration of food facilities IFR, which were publishe d in the Federal Register of October 10, 2003.  
FDA reopened the comment period consistent with its statement in each of the preambles of the IFRs 
that it would do this for an additional 30 days in  March 2004, to ensure that those who comment on 
the IFRs would have had the benefit of our outreach  and education efforts and would have had some 
experience with the systems, timeframes, and data elements of the registration system and the prior 
notice system.  
 
Subsequently, on May 18, 2004, in response to a request from the Government of Canada, FDA 
extended the comment period for an additional 60 da ys for Prior Notice. Accordingly, the comment WT/TPR/M/126/Add.3 
Page 70  
 period for the prior notice rulemaking, including the comment period for the "Joint FDA-CBP Plan 
for Increasing Integration and Assessing the Coordinati on of Prior Notice Timeframes,'' is extended to 
July 13, 2004. 
We have published a compliance policy guide that describes the U.S. strategy for maintaining an 
uninterrupted flow of food imports while improving their safety in accordance with the Public Health Security and Bioterrorism Preparedness and Respon se Act of 2002 (Bioterrorism Act) requirements. 
 
The Public Health Security and Bioterrorism Pr eparedness and Response Act of 2002 was signed into 
law by President Bush, on June 12, 2002.  It is now public law (PL107-188).  It is the U.S. legislative 
body - our Congress - that makes laws and amends existing laws.  From time to time, Congress 
reviews existing legislation as it deems necessary. 
 
FDA has worked closely with sister  agencies in the development of the Bioterrorism regulations.  In 
the U.S. regulatory system, the Office of Manageme nt and Budget coordinates all draft proposed and 
final rules and ensures that all regulations are revi ewed by any agency that may be affected by the 
regulation.  Any affected agency may provide comments or not clear a regulation pending further 
consideration.  This process makes sure that all a ffected agencies are consulted prior to a regulation 
being published. 
 
Question:  (Korea) Reference:  p. 65, paras. 146-149 
 Does the U.S. government have any intenti on to streamline such burdensome procedural 
requirements?  
Answer 
FDA has encouraged public comment at every stage of the Bioterrorism regul ations' development.  
FDA developed and published proposed regulations which were open to public comment from both 
domestic and foreign parties.  We  also conducted numerous outreach meetings directed at foreign 
stakeholders, both within the U.S. to foreig n embassy officials in Washington and via 
videoconference.  We received numerous comments from foreign governments, industries, and trade associations on both rules.  We reviewed each  comment that was submitted during the comment 
period and developed the final rule, taking the comme nts into account.  In the case of the prior notice 
and registration regulations, we are allowing for sev eral opportunities for interested individuals to 
provide comments even as we begin implementing th e interim final rule to make sure that we 
minimized any negative effect on trade while ensuring our food safety and security.  FDA and the Customs and Border Protection (CBP) reopened for 30 days the comment period for 
FDA’s prior notice of imported food shipments interi m final rule (IFR) and its registration of food 
facilities IFR, which were published in the Federal Register of October 10, 2003.  FDA reopened the 
comment period consistent with its statement in eac h of the preambles of the IFRs that it would do 
this for an additional 30 days in March 2004, to ensure that those who comment on the IFRs would have had the benefit of our outreach and education efforts and would have had some experience with 
the systems, timeframes, and data elements of the registration system and the prior notice system. 
 
In response to a request from the Government of  Canada, FDA is extending the comment period for 
an additional 60 days for Prior Notice.  Acco rdingly, the comment period for the prior notice 
rulemaking, including the comment period for the "Joint FDA-CBP Plan for Increasing Integration 
and Assessing the Coordination of Prior Notice Timeframes,'' is extended to July 13, 2004. 
  WT/TPR/M/126/Add.3 
 Page 71 
 
 The joint plan, which is posted on FDA’s website  at: http://www.cfsan.fda.gov/~pn/pnplan.html,  
describes the process by which FDA and CBP inte nd to increase integration and examine whether 
they could amend the timeframe requirements in F DA’s prior notice IFR to have the same advanced 
notice timeframes for arrivals by land via road or ra il, or arrival via air that currently are in CBP’s 
Required Advance Electronic Presentation of Ca rgo Information Final Rule (68 FR 68140). 
 
We have published a compliance policy guide that describes the U.S. strategy for maintaining an 
uninterrupted flow of food imports while improving their safety in accordance with the Public Health Security and Bioterrorism Preparedness and Respon se Act of 2002 (Bioterrorism Act) requirements. 
 FDA included an economic impact analysis in the proposed rules for affected entities to review and 
provide comment, and made revisions to the rul es based on the comments we received to further 
minimize the impact to trade consistent with the re quirements in the Act.  Both interim final rules 
include a regulatory impact analysis. 
 
Question:  (Switzerland #1 set II) 
 
Switzerland has taken note that the U.S. has not yet ratified neither the PIC, the POPs nor the Basel 
Convention although the U.S. is one of the main fi nancial contributors to these conventions.  What are 
the U.S. intentions referring to the ratifica tion of these chemical and waste conventions? 
 
Answer 
 
The United States intends to join the PIC, POPs and Basel Conventions and is currently developing 
the necessary implementing legislation in order to join.  
Question:  (Mexico II n.1) 
 
Finally, with respect to sanitary and phytosanitary  measures, Mexico wishes to pose the following 
questions:  Can the United States indicate the percentage of all sanitary and phytosanitary measures that have been harmonized with internati onal guidelines and recommendations? 
 
Answer 
 
Our SPS measures are transparent, based on risk asse ssments as appropriate to the circumstances and 
are consistent with our WTO obligations.  
Question:  (Canada II #4 ) 
 General Comment:  The TBT section provides little information to assist Members in understanding 
how the U.S. is meeting its international trade oblig ations in this area.  The heading for the section 
does not give any recognition to "standards".  Fo r example, the equivalent section in Canada's 2003 
Trade Policy Review was entitled "Standards, Techni cal Regulations and Phytosanitary Measures."  
Reports on other Members have similar headings.  Th is leads one to question if the U.S. implicitly 
does not recognize the role of standardization in its trade policy regime. 
 
Answer  
 
In response to Canada's comment, we would note that  the comment is made in relation to the report 
prepared by the WTO Secretariat — we did not dictat e to the Secretariat the titles for the subsection.  WT/TPR/M/126/Add.3 
Page 72  
 Canada questions whether the United States recognizes the role of standardization in its trade policy 
regime.  Although the heading does not include the wo rd "standards", we would note that in fact the 
United States places a significant value on the role of  voluntary standardization and the Secretariat has 
indeed mentioned aspects of this in paragraphs 8 and 9 of its report. 
 
Question:  (Canada II #5) 
 
(Re:  para. 124) Reference is made to The Offi ce of Management and Budget's (OMB) role to 
"oversee and coordinate agency ac tivity concerning technical and SPS regulations" within the federal 
U.S. framework.  The OMB issued a draft Bulletin on August 29, 2003 proposing to regulate scientific information in federal agencies using a more uniform standard of peer review.  We 
understand that the proposed peer review process w ould be used by certain federal agencies, which 
develop technical regulations whose underpinnings may include science as a basis for their contents.  
Issues have arisen since the Bulletin's release, such  as:  questioning the need for an overarching peer 
review policy;  its value to the regulatory process;   improved access apparen tly afforded industry to 
influence the outcome;  and, the role the OMB a ppears to be taking as the arbiter of science and 
information quality [OMB Watcher; http://www.om bwatch.org/article/articleview/1941/1/198)]. 
 
Further, seven members of the U.S.  House of Representatives, in a letter dated December 15, 2003 to 
The Honorable Joshua Bolten of the OMB, describ e the peer review process being proposed as 
follows:  "it actually erects new roadblocks to th e use of high-quality science in agency decision-
making." (http://www.house.gov/reform/min/recent.htm, page 1, para. 3).  The requirements of the 
Bulletin were to apply to information disseminated on  or after January 1, 2004.  Has the United States 
proceeded with the Bulletin and are any elemen ts of the Bulletin's requirements changed? 
 
Answer  
 
The Bulletin was published for comment by OMB on September 15, 2003 with public comments due 
by December 15, 2003 and comments from Depart ments and agencies due by January 16, 2004.  
OMB is currently in the process of reviewing tho se comments.  Due to the extended comment period, 
the requirements of a final bulletin were not implem ented on January 1, 2004 as originally proposed.  
While Canada has referenced several examples of comments received, there is a much larger number 
of interested parties who have expressed their vi ews.  OMB has posted comments received on its 
website at: www.whitehouse.gov/omb/inforeg/2003iq/iq_list.html. 
 
Question:  (Canada II #6) 
 
(Re:  para. 126) Please provide an elaboration of the extent to which the U.S. is meeting its obligation 
under Article 2.4 of the WTO Technical Barriers to Trade (TBT) Agreement to use international 
standards as a basis for its technical regulati ons, given the operation of Title IV of the Trade 
Agreements Act of 1979 as noted in this paragraph. 
 
Answer  
 
Title IV of the Trade Agreements Act of 1979 , as amended by the Uruguay Round Agreements Act , is 
the primary, but not exclusive, means by which the United States ensures its compliance with Article 
2.4 and other provisions of the WTO Agreement on Tec hnical Barriers to Trade.  Article 2.4 requires 
WTO members to use international standards as a basis for technical regulations only to the extent 
that a relevant international sta ndard exists and it is effective and appropriate for fulfilling the 
legitimate objective pursued.  This commitment has been incorporated into U.S. legislation. 
 
  WT/TPR/M/126/Add.3 
 Page 73 
 
 Question:  (Canada II #7) 
 
(Re:  para 128) Reference is made to "most"  U.S. states having enacted statutes containing 
transparency procedures in order to meet the C onstitutional requirements of due process.  Which 
states have not enacted such procedures?  How do these states meet their transparency obligations 
under Article 3 of the TBT Agreement?   Reference is also made to the "majority" of U.S. states 
having enacted statutes that prov ide for public access to information and judicial procedures.  Which 
states have not yet done so? How is a member of the public guaranteed access both to information and 
to judicial procedures in these states? 
 
Answer 
 
We are unaware of any states that do not have in place the necessary infr astructure to fulfil the 
transparency and other obligations under the WTO Agreement on Technical Barriers to Trade.  With 
respect to Article 3, the U.S. Federal Government has assumed the responsibility for making the requisite notifications and contacts with st ate officials, as foreseen by Article 3.3. 
 Question:  (Canada II #8)  
 
(Re:  para. 130) Canada would appreciate if the United States could elaborate on its model of 
"public/private partnerships in st andardization" as mandated under the National Technology Transfer 
and Advancement Act (NTAAA) of 1995 , in particular areas or sect ors where government players are 
involved in the development of voluntary standards. 
 
Answer  
 
Under the NTTAA, each regulatory agency is enc ouraged to participate in the development of 
voluntary standards.  Agencies that have partic ipated include the Food and Drug Administration, 
Department of Defense, Occupational Safety a nd Health Administration, and the Environmental 
Protection Agency.  Some agencies maintain on their websites information regarding their 
participation in standards development as well as a ppointed agency representatives; we encourage you 
to visit these sites.  Information on specific webs ites can be obtained via the U.S. inquiry point. 
 Question:  (Canada II #9) 
 
Canada asks the United States to provide inform ation to Members on the requirement under the 
NTAAA for federal agencies to publish an annua l report on the adoption of voluntary consensus 
standards, both domestic and intern ational, in lieu of technical regul ations and to identify location(s) 
where this information can be found. 
 
Answer  
 
Under the NTTAA, agencies with significant st andards development activities report on their 
standards development involvement.  NIST comp iles the annual report on NTTAA activities that 
contains information on particular areas or sect ors where government agencies participate in the 
development of voluntary standards and the adopti on by Federal agencies of standards in lieu of 
government unique standards.  The 2001 report can be  found at http://ts.nist.gov/nttaa, Publications, 
NTTAA Library.  The 2002 report has not yet been published.     WT/TPR/M/126/Add.3 
Page 74  
 Question:  (Canada II #15)  
 
(Re:  para. 131) Further to Section 12 of the NTAAA and OMB circular A-119, final policy guidance 
was issued by the National Institute of Standard s and Technology (NIST) in August 2000 (15 CFR 
Part 287) entitled "Guidance on Federal Conformi ty Assessment Activities".  The guideline was 
intended to assist federal agencies in evaluating th e efficacy and efficiency of their conformity 
assessment activities, including to "make more productive use" of resources and "to reduce 
unnecessary duplication".  Has an evaluation been  conducted on the extent to which unnecessary 
duplication exists and to what degree it has been reduced since the Act and subsequent guidance has 
been in place? 
 
Answer  
 
NIST has not conducted such an evaluation to date.  
Question:  (Canada II #11)  
 
This paragraph also states that conformity assessment is satisfied mainly by supplier's self-declaration. 
How are mandatory requirements for conformity asse ssment met at the federal, state, and local 
government levels?  To what extent does government  conformity assessment reply upon private sector 
testing and certification organizations to fulfil regulatory requirements?  Has the United States 
assessed the degree to which it has me t its obligations related to "local government bodies" contained 
in Articles 7.2, 7.4 and 7.5 of the TBT Agreement?  If so, are the results publicly available and, if not, 
is it intending to conduct such a review and wh en?  Finally, can the United States explain how 
coordination occurs between the various federal agencies responsib le for conformity assessment?  
 
Answer  
 
We would highlight the statement in the Secretar iat's report that, "It is most frequently the 
responsibility of the supplier (producer or importer) to ensure compliance with technical regulations, 
or with standards when such compliance is requi red by the purchaser."  This does not necessarily 
mean that compliance is in the form of a supplie r's declaration of conformity (as foreseen in ISO 
standards).  The United States does not have a mono lithic approach to conformity assurance.  Some 
regulatory authorities do rely on third party testing and certification, but there are many regulations 
which do not rely on the submission of test data or certification to assure product conformity to 
technical regulations.  The United States has no r eason to believe it needs to undertake a special 
assessment of the degree to which it has met obliga tions related to local government bodies in Articles 
7.2, 7.4 and 7.5 of the TBT Agreement as we belie ve sufficient mechanisms are in place to ensure 
effective and ongoing compliance with the obligations in the TBT Agreement. 
 Under the NTTAA, NIST published "Guidance on Federal Conformity Assessment Activities" 
(Federal Register August 10, 2000), which outlines Federal agencies' respons ibility for evaluating the 
efficacy and efficiency of their conformity asse ssment activities.  It encourages each agency to 
coordinate its conformity assessment activities with  other agencies and with the private sector to 
maximize resources and reduce unnecessary dupli cation.  The guidelines can be found at 
http://ts.nist.gov/nttaa, under the Conformity Assessment heading.  
 
Question:  (Canada II #12) 
 (Re:  para. 134) Given the fact that no notifications  of proposed U.S. sub-national measures have been 
received by the WTO related to the TBT Agreement, how does the United States intend to meet its  WT/TPR/M/126/Add.3 
 Page 75 
 
 obligations under this Agreement with respect to the notifications of technical regulations prepared or 
adopted by local government bodies, in particular  the level immediately below the federal level? 
 
Answer  
 
The United States is meeting its obligations with re spect to the notification of technical regulations 
prepared.  The U.S. federal government has a ssumed responsibility for making notification of 
proposed state-level technical regulations and c onformity assessment procedures (as foreseen under 
Articles 3 and 7).  Notification obligations relate only to proposals, and only to those for which (a) a 
relevant international standard does not exist or  the technical content of a proposed technical 
regulation is not in accordance with the technical cont ent of relevant international standards; (b) there 
may be a significant effect on trade of other Memb ers;  and, (c) the technical content is not 
substantially the same as that of previously no tified technical regulations of central government 
bodies.  The United States has not identified a state- level proposal meeting the criteria for notification.  
(Comment:  There is no notification requirement  for technical regulations that have been adopted  (i.e. 
final regulations) at any level of government under the TBT Agre ement, as suggested by Canada's 
question. 
 
Question:  (Canada II #13)  
 
(Re:  para. 136) Please explain why the specific provision of NAFTA Article 908.2 is highlighted in this paragraph.  How is identification of this pr ovision relevant to fulfillment by the United States of 
its obligations under the WTO TBT Agreement?  Also, who are "the authorities" referred to in this 
paragraph?  
 
Answer  
 This comment has been made in relation to the Secr etariat's draft.  It is our understanding that the 
paragraph in question was intended to provide so me information on how the NAFTA related to WTO 
obligations on technical barriers to trade.  Se veral, not just one, articles of the NAFTA are 
highlighted, presumably to provide some background on this question.  It does not appear that the Secretariat was attempting to ascertain whether or how NAFTA, or the specific provision cited by Canada, assists the United States in fulfilling WT O obligations.  "Authorities" is a term used 
throughout the document, presumably in reference to the meetings with a variety of government 
officials held by the Secretariat in the preparati on of its report.  Canada may wish to seek further 
information from the Secretariat. 
 
Question:  (Canada II #14)  
 
(Re:  para. 137) Canada is aware that the FTA between the United States and Chile, in force as of 
January 2004, contains provisions which appear to  extend certain obligations beyond those found in 
the WTO TBT Agreement, e.g., Article 7.3 of the FTA.   What is the United States' view of the extent 
of this Article's consistency with  WTO TBT Agreement Article 2.4? 
 
Answer  
Chapter 7 of the Free Trade Agreement with Chile affirms the existing rights and obligations of the 
Parties with respect to each other under the WTO Ag reement on Technical Barriers to Trade.  Article 
7.3 incorporates, by reference, the TBT Committ ee's Decision on Principles for the Development of 
International Standards, Guides and Recommendations , originally agreed in the Second Triennial 
Review.   WT/TPR/M/126/Add.3 
Page 76  
 We believe this is consistent  with the WTO TBT Agreement. 
 
Question:  (Canada II #15) 
 
(Re:  para. 138) Please clarify the last sentence since this appears to refer to duplication of accreditation/verification of foreign conformity ass essment bodies, which is not permitted under the 
MRAs notified to the WTO. 
 
Answer  
 
The United States is unaware of any prohibition by  the WTO TBT Agreement of recognizing foreign 
conformity assessment bodies in the absence of a mutu al recognition agreement.  In fact, MRAs are 
but one option foreseen under Article 6 for ensuring the recognition of conformity assessment by central government bodies - the core obligation of Article 6.  Under Article 6, Members are not 
required to enter into mutual recognition agreements , rather they are encour aged, when requested by 
another Member, to be willing to enter into nego tiations (Article 6.3).  We would also question 
Canada's suggestion that any MRA notified to the WTO is "permitted."  
 
Question:  (India #8 and #10)  
 
We would like to know whethe r the U.S. considering institut ing less onerous procedures while 
meeting its security concerns do not act as an add itional barrier to trade?  In order to meet the 
additional procedures and informa tion requirements imposed by the Bioterrorism Act exporters are 
being asked to pay additional charges.  For exporte rs with small volume or value, these charges are a 
significant additionality and operate as a tax.  We  would like to hear a response from the U.S. 
delegation on this matter and also their opinion on whether the U.S. is considering less onerous 
procedures?  Answer 
 
FDA has encouraged public comment at every stage of the Bioterrorism regul ations' development.  
FDA developed and published proposed regulations which were open to public comment from both 
domestic and foreign parties.  We  also conducted numerous outreach meetings directed at foreign 
stakeholders, both within the U.S. to foreig n embassy officials in Washington and via 
videoconference.  We received numerous comments from foreign governments, industries, and trade associations on both rules.  We reviewed each  comment that was submitted during the comment 
period and developed the final rule, taking the comme nts into account.  In the case of the prior notice 
and registration regulations, we are allowing for sev eral opportunities for interested individuals to 
provide comments even as we begin implementing th e interim final rule to make sure that we 
minimized any negative effect on trade while ensuring our food safety and security.  We have published a compliance policy guide that describes th e U.S. strategy for maintaining an uninterrupted 
flow of food imports while improving their safety in accordance with the Public Health Security and 
Bioterrorism Preparedness and Response Act of 2002 (Bioterrorism Act) requirements. 
 
FDA and the Customs and Border Protection (CBP) reopened for 30 days the comment period for 
FDA’s prior notice of imported food shipments interi m final rule (IFR) and its registration of food 
facilities IFR, which were published in the Federal Re gister of October 10, 2003.  FDA is reopening 
the comment period to ensure that those who comment  on the IFRs would have had the benefit of our 
outreach and education efforts and would have had some experience with the systems, timeframes, 
and data elements of the registrati on system and the prior notice system. 
  WT/TPR/M/126/Add.3 
 Page 77 
 
 In response to a request from the Government of  Canada, FDA is extending the comment period for 
an additional 60 days for Prior Notice.  Acco rdingly, the comment period for the prior notice 
rulemaking, including the comment period for the "Joint FDA-CBP Plan for Increasing Integration 
and Assessing the Coordination of Prior Notice Timeframes,'' is extended to July 13, 2004.  The joint plan, which is posted on FDA’s webs ite at: http://www.cfsan.fda.gov/~pn/pnplan.html, 
describes the process by which FDA and CBP inte nd to increase integration and examine whether 
they could amend the timeframe requirements in F DA’s prior notice IFR to have the same advanced 
notice timeframes for arrivals by land via road or ra il, or arrival via air that currently are in CBP’s 
Required Advance Electronic Presentation of Ca rgo Information Final Rule (68 FR 68140). 
 
FDA included an economic impact analysis in the proposed rules for affected entities to review and 
provide comment, and made revisions to the rul es based on the comments we received to further 
minimize the impact to trade consistent with the re quirements in the Act.  Both interim final rules 
include a regulatory impact analysis. 
 
Question:  (India #17) 
 
Under the U.S. Milk Act, the import of milk protein into the U.S. is generally permitted.  However the 
yogurt industry is not allowed to us e imported proteins, unless they originate in industries that are 
'Grade A' approved buy U.S. authorities.  We w ould like clarification on the reasoning behind this 
provision and seek a relaxation in the certification pro cedure so that industries in developing countries 
could get 'Grade A' certification for the purpose of export of dairy products. 
 
Answer  
 
Grade "A"  milk products are subject to identity and qua lity standard regulations in the Code of 
Federal Regulations and are further defined in the Grade "A" Pasteurized Milk Ordinance  (PMO), 
which is available on line at <http://www.cfsan.fda .gov/~ear/pmo01toc.html>.  The States utilize the 
PMO, to regulate Grade "A"  products.  The States have formed an organization known as the National 
Conference Interstate Milk Shipments (NCIMS ) whose purpose is to ensure the safety of Grade "A"  
milk and milk products shippe d in interstate commerce and to minimize duplicate regulatory 
restrictions on these products if they are produced according to this groups stringent public health 
standards. 
 In a 1977 Memorandum of Understanding (MOU) w ith the NCIMS, FDA ac cepted the standards, 
requirements and procedures of the NCIMS to mana ge the public health risks associated with Grade 
"A" milk and milk products.  Based on the 1977 MOU,  milk sanitation and safety measures in the 
United States have been set by the combined e fforts of FDA and the States under the NCIMS milk 
safety program.  Currently, FDA and NCIMS have iden tified and mutually accepted three options that 
are consistent with NCIMS Procedures and which will allow States to receive PMO defined Grade 
"A" milk and milk products produced outside of the Un ited States.  These options and the rationale for 
them were published in the Federal Register on J une 28, 2000, Volume 65, Number 125.  In brief 
those options include:  
 
1. FDA can evaluate the exporting country's syst em of assuring the safety of dairy products and 
compare the effect of that system with the effect  of the United States system on the safety of dairy 
products produced domestically.  The NCIMS has adopted a procedure to accept FDA findings of 
equivalence and allow NCIMS member states to accep t products produced within the scope of such a 
finding. 
 WT/TPR/M/126/Add.3 
Page 78  
 2. A dairy firm outside of the United States c ould contract with any with any current NCIMS 
member's regulatory/rating agency to provide the "Gra de A" milk safety program in total.  This would 
include the regulatory licensing, dairy farm and mi lk plant inspection and sampling, pasteurization 
equipment testing, laboratory certification and rating/ NCIMS certification.  To use this option the firm 
would be required to abide by all applicable NCIMS regulatory and rating requirements and the 
regulatory/rating agency would have to agree to treat the firm as if it were located within its 
jurisdiction for all purposes, including inspection a nd enforcement.  Ratings of the firm would be 
checked-rated by FDA.  3. The exporting country, or a political subdivision thereof, may become a full member of the NCIMS subject to all NCIMS rules and enjoying all pr ivileges of a U.S. State.  This would require, 
among other things, that the milk regulatory ministry (ies) of the exporting countries adopt and enforce 
rules and regulations, which are the same as those required in the United States and abide by all 
applicable NCIMS regulatory and rating requirements.   Their ratings would be  check-rated by FDA in 
the same way as State ratings.  FDA would certify their rating, sampling surveillance and laboratory evaluation officers. 
If PMO defined Grade "A"  milk and milk products produced outsi de of the United States have not 
been produced, processed, transported and packaged in  accordance with one of the three options cited 
above, they are subject to the State's seizure or ot her regulatory actions, notwithstanding the fact that 
they may meet the requirements of the FFDCA a nd other statues and regulations as appropriate. 
 
Question:  (Canada #8) 
 
Canada's particular concerns have  been with respect to the prior notice requirement.  The Canadian 
Government submitted formal comments on these proposed regulations in April 2003.  On 
October 10, 2003, the FDA issued interim final Ru les, effective December 12, 2003, which addressed 
many of Canada's comments.  In particular, th e FDA established prior notification timelines, which 
reflect the different modes of transportati on, such as truck, rail, air, and ship. 
 The FDA provided an opportunity to comment on the interim final Rules by December 24, 2003.  
Canada submitted further comments, which expressed some continuing concerns about the provisions, 
as well as how a number of provisions will be im plemented.  There are still many areas where the 
current interpretation of the interim final Rules is causing confusion and imposing questionable costs 
on Canadian firms and individuals. Specifically, co ncerning the Prior Notice Rule, Canada continues 
to recommend that timelines for imports by road and rail be amended to reflect those of the U.S. Bureau of Customs and Border Protection, that th e Rule should differentiate sufficiently between high 
risk and low risk products/sources, and that it  should take into consideration the cost of 
implementation by individuals sending manufactured  food products to the United States for non-
commercial use.  In addition, Canada recommends that the FDA eliminate the requirement for prior 
notice of transhipments due to the fact that this information will be collected by the U.S. Bureau of 
Customs and Border Protection.  This will avoid cos tly duplication, unnecessary disruptions to trade, 
and reduce inconsistencies re lating to the application of this Rule.  Canada requests assurances that its 
comments will be taken into consideration. 
 
Answer  
FDA and CBP announced the following plan to achieve  the goal of a uniform, integrated system and 
to coordinate timeframes for import prior notice information while fulfilling the Bioterrorism Act 
mandates for air and truck modes of transportation with timeframes promulgated by the Bureau of 
Customs and Border Protection (CBP) when it fina lizes its rule entitled "Required Advance Electronic 
Presentation of Cargo Information." FDA intends to implemen t in August 2004. 
  WT/TPR/M/126/Add.3 
 Page 79 
 
 • From August 12, 2004, to October 12, 2004, we  plan to assess existing procedures and 
staffing needed to receive, review, and respond to the prior notices submitted in accordance 
with the Prior Notice IFR (i.e., 2 hours before a rrival by land by road;  4 hours before arrival 
by air or by land by rail;  and 8 hours before arrival by water). 
• From October 13, 2004, to November 12, 2004, we intend to identify what changes to work 
practices and staffing would be necessary to de termine if FDA could continue to receive, 
review, and respond to all prior notice submissi ons with reduced timeframes (e.g., 1 hour/30 
minutes before arrival by land by road; 2 hours before arrival by land by rail; and by "wheels 
up" for flights originating in North and Central America, South America (north of the Equator 
only), the Caribbean, and Bermuda;  othe rwise 4 hours before arrival by air). 
• From November 13, 2004, to February 12, 2005, we plan to implement necessary changes 
and make appropriate adjustments to ensure we  could receive, review, and respond to all prior 
notice submissions with reduced timeframes. 
• In March 2005, we intend to issue a prior noti ce final rule that responds to the comments we 
received on the Prior Notice IFR, including this  plan, during the two open comment periods. 
 Under the statute, any timeframe must be suffici ent to receive, review, and respond to prior notice 
submissions, as set out in section 801(m)(2)(A) of th e Federal Food, Drug, a nd Cosmetic Act, 21 USC 
801(m)(2)(A). The agencies emphasize  that the evaluation of whether to reduce the timeframes for 
prior notice review will depend on the level of compliance industry achieves during the assessment. 
 
FDA and the Customs and Border Protection (CBP) reopened for 30 days the comment period for 
FDA’s prior notice of imported food shipments inte rim final rule (IFR) which was published in the 
Federal Register of October 10, 2003.  In th e notice to reopen the comment period, FDA posed 
questions regarding C-TPAT and FA ST as part of our exploration of flexible alternatives for 
submission of prior notice for foods or firms covered by programs of other agencies.  In response to a 
request from the Government of Canada, FDA is extending the comment period for an additional 60 
days for Prior Notice. Accordingly, the comment pe riod for the prior notice rulemaking, including the 
comment period for the "Joint FDA-CBP Plan for Increasing Integration and Assessing the Coordination of Prior Notice Timeframes,'' is extended to July 13, 2004. 
 
Prior notice is required for food for transshipment through the U.S. to another country and food for 
future export (21 CFR 1.277(a)).  As we discuss in the IFR (68 FR 58974 at 58991, we include food for transshipment (T&E’s) so that a loophole is no t created in the prior notice requirements.  For 
example, if we were to exclude T&E’s, an importe r could simply bring in an article of food under a 
T&E entry without giving prior notice and then, as a llowed by CBP regulations, file a consumption or 
other entry. 
 
Under the Administrative Procedure Act, U.S. agencies are required to respond to significant and 
relevant comments from all parties that were su bmitted within the comment period.  The comments 
are not reviewed and answer individually since ma ny interested parties ask similar questions or 
forward similar concerns, but each issue raised is analyzed and responded to within the body of the 
final regulation.  Thus, any timely comments subm itted by any stakeholder are addressed in the 
preambles to the final rules. 
 
Question:  (Brazil #9)  
Paragraph 1.232 of the Interim Fi nal Regulation for the implementation of Section 305 of the 
Bioterrorism Act of 2003 — Registration of Food Facilities - as issued by the FDA and published in 
the Federal Register in October 2003, requires that  all foreign facilities that manufacture/process, pack 
or hold food for consumption in the U.S. designate a single U.S. agent for that facility.  This U.S., or WT/TPR/M/126/Add.3 
Page 80  
 "local" agent, is the liaison for all communication,  or routine or emergency nature, between the FDA 
and the foreign facility.  The agent has to be physi cally present in the U.S. and be available 7/7 days, 
24/24 hours, in case there is an emergency.  Fore ign facilities may opt to indicate an "emergency 
contact" that is not their agent, but this does not preclude the need for the agent itself.  Could you 
explain that?  Answer  
Because the role of the U.S. agent is to act as a communications link between the facility and FDA, 
FDA will communicate with the U.S. ag ent in both routine and emergency situations.  This means that 
the U.S. agent needs to be accessible to FDA 24 hour s a day, 7 days a week, unless the foreign facility 
opts to designate a different person other than th e facility's U.S. agent to serve as the facility's 
emergency contact by providing the information specified  in Sec. 1.233(e) in the facility's registration.  
If a facility's registration includes an emergency contact person provided und er Sec. 1.233(e), FDA 
will notify this person instead of the U.S. agent durin g emergencies, but will continue to use the U.S. 
agent for routine communications with the facility. 
 
The requirement for the U.S. agent and the unde rlying rationale for its importance in addressing 
Bioterrorism threats is explained in detail in the Interim Final Rule, 68 Fed. Reg. 58894.  The 
extensive discussion is covered on pages 58915-589 16 in the Responses to Comments 84-93.  The 
Interim Final Rule can be accessed on the FDA web site at http://www.fda.gov/oc/bioterrorism/bioact.html by c licking on the Interim Final Rule under Section 
305.  Additional information including a Fact Sh eet and Questions and Answers can be accessed by 
clicking on Fact Sheet under Section 305.  
 
Question:  (Brazil #10)  
Domestic facilities are not subject to the request of keeping a local agent in the U.S., although they do 
have to indicate an emergency contact, also 7/7 and 22/24.  This provision appears to be a clear 
discrimination against foreign facilities exporting food to the U.S. and, in this sense, a disguised restriction to trade (if there is an emergency an d the foreign facility has indicated and emergency 
contact different from the U.S. agent, as allowed by regulation, what is the agent's purpose?).  If not, 
can the U.S. explain what sort of legitimate objec tive - in terms of protecting the U.S. food supply 
against bioterrorist menace - is being accomplished by the local agent requirement? 
 
Answer 
 
FDA believes that it has structured the U.S. agent requirement to be consistent with the statutory 
mandates of the Bioterrorism Act.  To minimi ze burden and provide flexibility while meeting the 
mandate in the Bioterrorism Act that requires regi strations from foreign facilities to include the name 
of their U.S. agent, the rule sets out only two qualifi cations for a U.S. agent:  The agent is required to 
reside or maintain a place of business in the Unite d States and to be physically present in the United 
States.  Therefore, many foreign facilities are able to use existing contacts in the United States as their 
U.S. agents.  Moreover, FDA has clarified in the in terim final rule that the requirement of a single 
U.S. agent for FDA registration purposes does no t preclude facilities from having multiple agents 
(such as foreign suppliers) for other business purposes.  The requirement for the U.S. agent and the unde rlying rationale for its importance in addressing 
Bioterrorism threats  is explained in detail in the Interim Final Rule, 68 Fed. Reg. 58894.  The 
extensive discussion is covered on pages 58915-589 16 in the Responses to Comments 84-93.  The 
Interim Final Rule can be accessed on the FDA website at:  http://www.fda.gov/oc/bioterrorism/bioact.html by c licking on the Interim Final Rule under Section  WT/TPR/M/126/Add.3 
 Page 81 
 
 305.  Additional information including a Fact Sh eet and Questions and Answers can be accessed by 
clicking on Fact Sheet under Section 305. 
 
Question:  (Brazil #11 and #12)  
Section 306 of the 2002 Bioterrorism Act authorizes th e FDA to have access to certain records of food 
processors/manufacturers, packers, holders and impo rters when there is a reasonable belief that an 
article of food is adulterated and presents a threat of serious adverse health consequences or death to 
humans or animals.  Records to be kept — for tw o years, in most cases — are those identifying the 
previous sources and immediate subsequent recipien ts of food handled by each facility.  The proposed 
regulations issued by the FDA to implement Section 306 indicate that foreign facilities are also 
subject to the requirement.  How do you expect to implement that? 
 Brazil understands that these traceability requirements may well fulfill a legitimate goal with the U.S., 
in that they would allow prompt action along the chain of production, distribution and commercialization of food should an emergency arise and a recall be necessary.  In the case of foreign 
facilities, this same rationale does not apply.  The U.S. could obvious ly not conduct a recall or hazard 
investigation in another country, because most record s are kept in foreign languages, what would in 
principle be meaningless for the U.S. authorities.  In  this case, the legitimate objective (of protecting 
the health and life of the American population) pu rported by the measure in question is not being 
actually promoted.  Does the U.S. consider that  requiring record-keeping provisions from foreign 
facilities amounts to a trade-disruptive measure, possibl y leading to the extraterritorial application of 
U.S. domestic regulations?  Can the U.S. explain wh at legitimate goal is being promoted through this 
measure? 
 
Answer  
Regarding the questions relating to the record  keeping requirements, FDA will comment on the 
provisions once they are finalized and stakeholders  have an opportunity to assess the impact of the 
final rule as it may apply to them.  FDA will be i ssuing a final rule after fully considering the timely 
comments we have received.  Under the Admini strative Procedure Act, FDA can not address 
comments during a pending rule making process. 
 
Question:  (Thailand #3) 
Reference:  p. 65-66 paras. 146-149  
We would like to take this opportunity to request th e U.S. delegates at this meeting to convey our 
deep concerns to relevant agencies to help us gain immediate clarification and guidance regarding 
proper and effective preparation, in particular, the "Registration of Food Facilities and Maintenance 
and Inspection of Records" in relation to agent in the United States and defined recipe respectively. 
 
Answer 
 
The purpose of the U.S. agent is to serve as a communications link between FDA and an individual facility for a number of purposes, including both emer gency situations and day-to-day registration 
issues. These routine issues may include FDA's need for information about that facility and arranging 
both routine inspections and inspections or comm unications with the facility due to a potential 
Bioterrorism threat or other public health emergency.  
To minimize burden and provide flexibility while me eting the mandate in the Bioterrorism Act that 
requires registrations from foreign facilities to include the name of their U.S. agent, the rule sets out 
only two qualifications for a U.S. agent: The agen t is required to reside or maintain a place of WT/TPR/M/126/Add.3 
Page 82  
 business in the United States and to be physically  present in the United States.  Therefore, many 
foreign facilities are able to use existing contacts in  the United States as their U.S. agents. Moreover, 
FDA has clarified in the interim final rule that  the requirement of a single U.S. agent for FDA 
registration purposes does not preclude facilities fro m having multiple agents (such as foreign 
suppliers) for other business purposes.  
The requirement for the U.S. agent and the unde rlying rationale for its importance in addressing 
Bioterrorism threats  is explained in detail in the Interim Final Rule, 68 Fed. Reg. 58894.  The 
extensive discussion is covered on pages 58915-589 16 in the Responses to Comments 84-93.  The 
Interim Final Rule can be accessed on the FDA web site at http://www.fda.gov/oc/bioterrorism/bioact.html by c licking on the Interim Final Rule under Section 
305. Additional information including a Fact Shee t and Questions and Answers can be accessed by 
clicking on Fact Sheet under Section 305.  Regarding the question relating to the record k eeping requirement on recipes, FDA will comment on 
the provisions once they are finalized and stakeholde rs have an opportunity to assess the impact of the 
final rule as it may apply to them.  FDA will be i ssuing a final rule after fully considering the timely 
comments we have received.  Under the Admini strative Procedure Act, FDA can not address 
comments during a pending rule making process. 
 
Question:  (Mexico III 1.c)  
How have the U.S. authorities addressed the issue of synchronizing the FDA's and U.S. Customs' 
electronic systems?  
Answer 
 With regard to prior notice, the systems have been synchronized: For those who import food and who 
file with Customs and Border Protection (CBP) for entry, the FDA prior notice submission may be prepared in conjunction with the CBP filing.  Ho wever, the reverse is not  true; persons submitting 
prior notice using the FDA's Prior Notice System Interface (PNSI) may not use PNSI to file CBP entry information.  A separate entry must be filed with CBP.   
 
Question:  (Chinese Taipei Page 2, II-C) 
 
Given the time difference between the U.S. and other area, it may be difficult to contact the 
manufacturer and receive necessary records and documen t within the given time frame.  With this in 
mind we would ask that the deadline for prior notifi cation to the FDA be extended, preferably to 24 
hours, in order to avoid creating unnecessary burden on trade. 
 
Answer  
Prior notice must be received and confirmed electroni cally by FDA no more than 5 days before arrival 
and, as specified by the mode of transportation below, no fewer than: 
 
• 2 hours before arrival by land by road  
• 4 hours before arrival by air or by land by rail 
• 8 hours before arrival by water. 
 
The time consistent with the time frame establishe d for the mode of transportation for an article of 
food carried by or otherwise accompanying an individua l if it is subject to prior notice (The food must 
also be accompanied by the FDA confirmation.)  In addition, prior notice must be received and  WT/TPR/M/126/Add.3 
 Page 83 
 
 confirmed electronically by FDA before food is mailed  by international mail.  (The parcel must be 
accompanied by confirmation of FDA receipt of prior notice.)  
 
Question:  (Japan #32) 
 
The Public Health Security and Bioterrorism Pr eparedness and Response Act, which was signed by 
President Bush in June 2003 and comes into eff ect as of December 12, 2003, sets out the following 
measures; registration of food manufacturing and ha ndling facilities; (b) prior notice of all food 
consignments intended for import into the U.S.; (c) maintenance of certain records pertaining to the 
receipt and distribution of foods;  and (d) admi nistrative detention of any illegal food found.  
Although recognizing the importance of taking necessary measures for combating terrorism, Japan 
asks the U.S. to implement these measures in consiste ncy with the WTO agreements and not to hinder 
a smooth distribution more than it is necessary. 
 
When implementing measures, the SPS Agreement re quires that "these measures only be developed 
within necessary scope based on sufficient scientific fi ndings". With regard to the Bioterrorism Act, 
please explain what scientific findings for implementing the measure were used, and whether this was 
a necessary measure for achieving its objective. 
 
The TBT Agreement requires that technical regulati ons shall not be more trade restrictive than 
necessary to fulfill a legitimate objective, taking  account of the risks that non-fulfillment would 
create.  Japan would like to have an explanation as to what kind of evaluations the U.S. took account 
of these risks? 
 
Answer 
 
Though the likelihood of a biological or chemical  attack on the U.S. food supply is uncertain, 
significant scientific evidence documen ts the risk to public health of food that has been inadvertently 
contaminated. After performing a risk assessment which describes uncertainties, and noting the broad 
range of agents that may contaminate the food supp ly that FDA regulates, the agency concluded that 
there is a high likelihood, over the course of a year, that a significant number of people will be 
affected by an act of food terrorism or by an inci dent of unintentional food contamination that results 
in serious food borne illness.  FDA has determin ed that this qualitative risk assessment, which 
discusses prior incidents of food contamination and available unclassified information on prior acts of 
food sabotage, is appropriate to the circumstances.   The scientific risk assessment can be found at:  
http://www.cfsan.fda.gov/~dms/rabtact. html#iii. 
 
The United States Food and Drug Administration (FDA) and the U.S. Bureau of Customs and Border 
Protection (CBP) issued a compliance policy guide  which is available on the FDA website that 
describes their strategy for maintaining an uninterrupted flow of food imports while improving their 
safety in accordance with the Public  Health Security and Bioterrori sm Preparedness and Response Act 
of 2002 (Bioterrorism Act) requirements which b ecame effective on December 12, 2003.  FDA and 
CBP expect a "good faith" effort at compliance with the requirement that FDA receive a prior 
notification of all human and animal food, drinks  and dietary supplements imported or offered for 
import to the U.S. and the requirement that all fac ilities that manufacture, process, pack or hold food 
intended for consumption in the U.S. must be regi stered with FDA.  During the 8-month phase-in 
period, the two agencies will primarily rely on educa ting the affected firms and individuals.  During 
this period, the agencies will utilize communication and education initiatives, escalating imposition of 
civil monetary penalties, and ultimately refusal of shipments.  This phase-in period will end on 
August 12, 2004. FDA and CBP pers onnel have already begun an exte nsive campaign to educate with 
written material, briefings, and semi nars with other government offici als, domestic and foreign food WT/TPR/M/126/Add.3 
Page 84  
 importers, brokers, transporters, and other affected industry representatives on compliance with the 
Bioterrorism Act. 
 
In addition, during the 8-month tr ansitional period, the two agencies  have taken the following steps: 
 
• Gather data to track compliance with the prior notice requirements and to determine how to best 
use FDA's and CBP's resources to educate industry and the public to achieve full compliance with 
the Bioterrorism Act. 
• Provided industry and the public with summary in formation about the level of compliance with 
the prior notice rules, including data on the types of errors in submitted prior notices. 
• Posted the summary information on FDA's website at www.fda.gov. 
• Developed a joint plan to achieve the goal of a uniform, integrated system and to coordinate 
timeframes for import prior notice information wh ile fulfilling the Bioterrorism Act mandates for 
air and truck modes of transportation with timefra mes promulgated by the Bureau of Customs and 
Border Protection (CBP) when it finalizes its rule entitled "Required Advance Electronic 
Presentation of Cargo Information.” 
 
As always, both agencies will continue to ensure that  imported products are safe for human or animal 
consumption.  
 
Question:  (Thailand #2) 
 
We would like to address our deep concern on the deci sion of the Southern Shrimp Alliance to file an 
anti-dumping petition on imported shrimp from deve loping countries.  We hope that the U.S. 
Government will give careful consideration on the matter, since such action will only result in trade 
disruption and could end up hurting the interests of  American consumers.  Moreover, it could 
jeopardize our shrimp exports and eventually send ne gative repercussions to our low income farmers. 
 
Answer 
 
We take note of the concerns of the Government of Thailand. 
 
Question:  (Argentina #3) 
 
Paragraph 146 refers to the Public Health Securi ty and Bioterrorism Preparedness and Response Act 
of 2002, also known as the Bioterrorism Act.  While it is known that this Act apply to foods and agricultural products, we request additional clarifica tion on the scope of this law in terms of its 
application to other products.  Answer 
 
In terms of products, the Public Health Security and Bioterrorism Preparedness and Response Act of 
2002 contains the following five titles: 
 
• Title I - National Preparedness for Bioterrori sm and Other Public Health Emergencies; 
 
• Title II - Enhancing Controls on Dange rous Biological Agents and Toxins; 
 
• Title IIII - Protecting Safety and S ecurity of Food and Drug Supply; 
 
• Title IV - Drinking Water Security and Safety; and  WT/TPR/M/126/Add.3 
 Page 85 
 
  
• Title V - Additional Provisions. 
 
These titles contain provisions that relate to de veloping and maintaining medical countermeasures 
(drugs, biologics and other products) for use in the event of a Bioterrorism attack, the tracking of 
select agents and toxins, and enhancing emergency pr eparedness.  In particular, section 121 b) covers 
smallpox vaccine, section 122 addr esses approval of priority countermeasures, section 126 examines 
new and emerging technologies and section 127 covers  potassium iodide.  Title II - Enhancing 
Controls On Dangerous Biological Agents And Toxi ns, Subtitle A - Department of Health and Human 
Services, section 201 addresses the regulation of certa in biological agents and toxins. In Title III 
section 321 covers annual registra tion of foreign manufacturers, shipping information and drug and 
device listing and section 322 requires additional in formation regarding import components of all 
FDA regulated products intended for use in prod ucts intended for export products.  For more 
information on the Bioterrorism Act, please see the Food and Drug Administration website at 
http://www.fda.gov/oc/bioterrorism/bioact.html. 
 
Question:  (Mexico II.A) 
 
With respect to paragraph 122, could the United St ates confirm that the rules of the Administrative 
Procedure Act apply to services -related technical regulations? 
 
Answer 
 
The referenced technical regulations and sanitary  and phytosanitary measures are covered by the 
Administrative Procedure Act. 
 
Question:  (Mexico II.B)  
 
Also, regarding the third sentence in paragraph 12 2, could the United States explain what orders 
govern the issuance of technical regulations and sanitary and phytosanitary measures by the U.S. 
Congress?  Also, could the U.S. confirm whether, in  its opinion, the Congress is required to comply 
with the provisions of the TBT and the SPS Agreements , respectively, if it decides to issue a technical 
regulation or a sanitary and phytosanitary measure? 
 
Answer 
 
The U.S. Congress does not issue technical regulations.  Rather, it delegates the authority to Federal 
agencies within the Executive Branch.  
 
Question:  (Mexico II.C)  
 
As indicated in paragraph 123, in accordance w ith the Congressional Review Act, Congress reviews 
technical regulations and sanitary and phytosanita ry measures issued by the various government 
agencies. Could the U.S. tell us whether, b ased on such review, the Congress can amend the 
provisions of those regulations and measures? 
 
Answer  
 
Under the Congressional Review Act, Congress cannot am end provisions of a regulation issued by a 
Federal agency.  It may only overturn the entire regulation. 
 
 WT/TPR/M/126/Add.3 
Page 86  
 Question:  (Mexico II.D)  
 
With regard to the final part of paragraph 124, could the United Sates confirm whether the issuance of 
a technical regulation or sanitary and phytosanitary  measure by the Congress involves the drafting of 
a regulatory impact analysis as a prerequisite and, if so, whether said analysis can be consulted by 
nationals of WTO member countries. 
 
Answer  
 
Again, the U.S. Congress does not issue techni cal regulations.  Federal agencies issue these 
regulations. 
 
Question:  (Mexico II.E) 
 
As concerns paragraph 126, could the United States explain what it considers to be an international 
standard?  Also, could the U.S. indicate the perc entage of current technical regulations that are 
equivalent to international standards? 
 
Answer  
 
In general, the United States considers internati onal standards to be those which emanate from bodies 
with procedures which allow for participation by all interested parties, ensure consensus, and provide 
a mechanism for appeal.  The United States h as not prescribed the use of standards from any 
particular standardizing body, instead, the emphasis has been on considering whether such criteria has 
been met in the development of a particular sta ndard.  The United States does not compile centralized 
data on the percentage of technical regulations that  are "equivalent" to (or based upon, as foreseen in 
Article 2.4 of the TBT Agreement) international standards. 
 
Question:  (Mexico II.F) 
 
Paragraph 127 indicates that the National Institu te of Standards and Technology maintains a 
collection of technical regulations, specifications, test methods, codes, and recommended practices.  
In this regard, could the United States describe the substance and provide the definition and legal 
framework of these specifications, test me thods, codes, and recommended practices? 
 
Answer 
 
The National Center for Standards and Certification Information  (NCSCI), which is part of NIST, is a 
central repository for standards-related informa tion in the United States and has access to U.S., 
foreign and international documents  and contact points through its role as the U.S. national inquiry 
point under the TBT Agreement.  The NCSCI refere nce collection of standards and standards-related 
documents includes:  microform, hard copy an d CD-ROM of military and Federal specifications , 
selected U.S. industry and national standards, and international and sel ected foreign national 
standards;  the United States Code  of Federal Regulations (CFR)  and Federal Register ;  reference 
books, including directories, technical and scientif ic dictionaries, encyclopedias and handbooks;  
articles, pamphlets, reports and handbooks on st andardization and conformity assessment;  and 
standards-related periodicals and newsletters.  NC SCI maintains a database on NIST and Department 
of Commerce staff participation in standards devel oping activities.  For more information, please visit 
NCSCI's website at http://ts.nist.gov/ts/htdocs/210/ncsci/ncsci.htm. 
 
 
  WT/TPR/M/126/Add.3 
 Page 87 
 
 Question:  (Mexico II.G) 
 
As concerns paragraph 128, Mexico  would like the United States to explain why some states have still 
not enacted statutes regulating the process for issuing technical standards and regulations.  Mexico 
also requests the United States to describe the measures taken to ensu re that local public institutions 
and non-governmental institutions comply with the obligations under Articles 3,  4, 7, and 8 of the 
TBT Agreement. 
 
Answer 
 
We are unaware of any states that do not have in place the necessary infra structure to fulfill the 
transparency and other obligations under the WTO Agreement on Technical Barriers to Trade.  Title 
IV of the Trade Agreements Act of 1979 (Pub lic Law 96-39), as amended by the Uruguay Round 
Agreements Act (Public Law 103-465), prohibits U.S.  agencies from employing standards, technical 
regulations or conformity assessment procedures as unnecessary obstacles to trade.  This legislation 
includes the Administration's commitment to promot e state agencies' and non-governmental bodies 
compliance with U.S. obligations under the WTO through reasonable measures including through 
state-federal consultation and c ooperation.  The Administration publicized the results of these 
Agreements and has ongoing consultations through intra-governmental and private sector advisory 
committees.  Should specific questions regarding the WTO consistency of state or local government 
regulations or procedures, or non-governmental bod ies' standards or procedures, be brought to our 
attention, USTR would engage in consultations with interested state authorities to ascertain whether 
there is in fact a compliance issue and, if so, how best to proceed.  
 
Question:  (Mexico II.I) 
 
As regards paragraph 130, could the United States e xplain what voluntary consensus standards consist 
of? Also, could the U.S. confirm that this type of standard can only be developed by standardization 
organizations that belong to ANSI (and, therefore,  organizations that have accepted the Code of 
Conduct annexed to the TBT Agreement)? 
 
Answer 
 
Revised OMB Circular A-119 establishes policies on Federal use and development of voluntary 
consensus standards and on confor mity assessment activities.  For purposes of the policy, "voluntary 
consensus standards" are standards developed or  adopted by voluntary consensus standards bodies, 
both domestic and international. 
 
A voluntary consensus standards body is defined by the following attributes:  (i) Openness;  (ii) 
Balance of interest;  (iii) Due process;  (vi) An ap peals process;  and, (v) C onsensus.  Consensus is 
defined as general agreement, but  not necessarily unanimity, and in cludes a process for attempting to 
resolve objections by interested parties and giving al l comments fair consideration.  Each objector is 
advised of the disposition of his or her objection(s), the reasons why, and the consensus body 
members are given an opportunity to change thei r votes after reviewing the comments.  For further 
information, please see:  http://www.whitehouse.gov/omb/circulars/a119/a119.html. 
 
Question:  (Mexico II.J)  
 
Would the United States describe the procedure for r ecognizing the equivalency of a foreign standard 
or a foreign conformity assessment procedure and,  if found equivalent, how many standards or 
conformity assessment procedures have been recognized as such? 
 WT/TPR/M/126/Add.3 
Page 88  
 Answer 
 
The recognition of equivalent technical regulations is  determined by the relevant regulatory authority.  
We would note that the TBT Agreement does not oblige Members to recognize "foreign standards."  
The U.S. government does not attempt to compile centralized data on the extent to which either 
regulators or voluntary standardizing bodies have  recognized foreign standards or conformity 
assessment procedures. 
Question:  (Mexico II.K) 
 
As concerns paragraph 132, could the United States indicate how many conformity assessment 
procedures are in effect in U.S. territory, how many products they cover, and under what legal 
system(s) they are established?  In addition, coul d the U.S. indicate in what cases the assessment of 
conformity with technical regulations can be carried out by private organizations? 
 
Answer  
 
The United States does not have a single approach to conformity assurance. To the extent that 
conformity assessment is required to ensure comp liance with a technical regulation, it would be 
specified in the technical regulation and published in the Code of Federal Regulations .  Information 
on specific technical regulations and conformity as sessment requirements is available through the 
U.S. inquiry point.  In addition, NIST has published a directory of private sector certifiers and a 
directory of private sector laboratory accreditation bo dies as well as government directories.  To view 
these directories and access further information on the United States conformity assessment 
procedures, please visit the NIST website at:  http://ts.nist.gov/ts/htdocs/210/gsig/cainfo.htm. 
 
Question:  (Mexico II.L)  
 
Paragraph 134 indicates that the United States has not notified the WTO of any technical regulations 
or sanitary and phytosanitary measures.  In this regard, Mexico would like to know the reasons why 
the United States has not issued such notifications a nd whether it is planning to do so in the future. 
 
Answer  
 
Para. 134 states that no notifications of proposed U.S.  sub-federal measures have been received by the 
WTO.  The U.S. federal government has assumed responsibility for making notification of proposed 
state-level technical regulations and conformity  assessment procedures (as foreseen under Articles 3 
and 7).  Notification obligations relate only to prop osals for which (a) a relevant international standard 
does not exist or the technical content of a proposed  technical regulation is not in accordance with the 
technical content of relevant international standards;   (b) there may be a significant effect on trade of 
other Members;  and, (c) the technical content is  not substantially the same as that of previously 
notified technical regulations of central government  bodies.  The United States has not identified a 
state-level proposal meeting the criteria for notification. 
 
Question:  (Japan #16) 
 
Considering the world trend and the impact of the U.S. market on world trade, Japan strongly requests 
that the metric system (the SI Unit), which is a global standard, be adopted to its full extent by the 
U.S. and American businesses.  Japan would like to know of any specific action that the U.S. intends 
to take for promoting the metric system in the country. 
  WT/TPR/M/126/Add.3 
 Page 89 
 
 Answer 
 
The transition to the metric system is voluntary but  the federal government currently has an effort 
underway to remove regulatory barriers to the use of the metric system.  There is also an effort to 
amend the Federal Fair Packaging and Labeling Ac t that would give manufacturers the option to 
continue to label the products covered by the Act in  dual units (that is, in inch-pound and metric units 
as they are doing now) or to label products in only metric units.  For information regarding the U.S. 
metric system activities, please visit NIST's website at 
http://ts.nist.gov/ts/htd ocs/200/202/mpo_home.html. 
 
Question:  (Indonesia #3) 
 
In 1989 the U.S. Congress passed a law to complement the Endangere d Species Act.  The new law, 
Section 609 of Public Law 101-162, authorizes the U.S. Department of State to annually certify 
whether a country is allowed to export sea-harvested  shrimp to the U.S.  The certification process 
involves an on-site inspection to find whethe r the host country has adopted and effectively 
implemented a shrimp-harvesting program that prev ents the accidental drowning of endangered sea 
turtles.  At the heart of this program is the requi rement to install a Turtle Excluder Device (TED) on a 
shrimp trawl with a precise design, operability a nd use as set forth by the U.S.  In 2001 Indonesia 
failed to have the certification on the ground that seven shrimp fishing vessels being inspected at two 
separate local ports could not satisfy the requirement s for proper design, installation and use of TEDs.  
In 2002, another inspection was c onduction involving 45 shrimp fishing vessels at several local ports 
but Indonesia once again failed the verification.  The inspection team concluded that not only did the 
inspected vessels fail to meet the TED requirements, but also there was a lack of comprehensive sea 
turtle protection program that is comparable in e ffectiveness to that of the U.S. Indonesia is of the 
view that the inspections were made in a very  arbitrary manner since the inspections were done 
without prior notice and allowing reasonable time for preparation. 
 
Indonesia wishes to have a clear explanation on this situation.  
 
Answer 
 
The United States can only inspect a country's fishi ng vessels for certification at the invitation of the 
host country.  The inspections referred to in this  question were conducted by invitation of, and in 
coordination with, the Government of Indonesia. 
 
Question:  (China #54-55) 
Reference:  p. 65, para. 146 
 
On June 12 2002, the U.S. released "Public Hea lth Security and Bioterrorism Preparedness and 
Response Act of 2002". According to chapter 3 of  the Act, FDA worked ou t and notified successively 
to WTO in 2003:  "Registration of Food Facilities U nder the Public Health Security and Bioterrorism 
Preparedness and Response Act of 2002" (G/SPS/N/USA/691),"Prior Notice of Imported Food Under 
the Public Health Security and Bioterrori sm Preparedness and Response Act of 2002" 
(G/SPS/N/USA/690)," Establishment and Maintenance of Records Under the Public Health Security 
and Bioterrorism Preparedness and Response Act of 2002"(G/SPS/N/USA/703)  and "Administrative 
Detention of Food for Human or Animal Consum ption Under the Public Health Security and 
Bioterrorism Preparedness and Response Act of 20 02 (Draft) " (G/SPS/N/USA/704), On October 10, 
2003, "Registration of Food Facilities Under the Public Health Security and Bioterrorism 
Preparedness and Response Act of 2002" and "Prior Notice of Importe d Food Under the Public Health 
Security and Bioterrorism Preparedness and Res ponse Act of 2002" were formally released as 
temporary final rules, and entered into force on December 12 , 2003. WT/TPR/M/126/Add.3 
Page 90  
  
With regard to the Registration of Food Facilities, the U.S. officials clearly expressed that they would 
not extend the comments period, and all comments should be proposed before April 4, 2003.  The 
provision of article 26 of para . E on handling of Comments on Notifications of the "Recommended 
Procedures for Implementing the Transparency Ob ligations of the SPS Agreement (Article 7)" 
(G/SPS/7/Rev.2) of WTO/SPS committee provides "Me mbers should grant requests for extension of 
the comment period wherever practicable, in partic ular with regard to notifications relating to 
products of particular interest to developing count ry members, where there have been delays in 
receiving and translating the relevant documents or wh ere there is a need for further clarification of 
the measure notified.  A 30-day extension should no rmally be provided".  Please elaborate how the 
U.S. implements this provision. 
 
Answer 
 
FDA did not consider any comments submitted afte r the 60-day comment period closes and did not 
intend to grant any requests for extension of the comment period due to the Bioterrorism Act's 
requirements to have final regulation in effect by D ecember 12, 2003.  This required publication on or 
before October 12, 2003.  This question is addressed in the pro posed Registration rule (see 68 Fed. 
Reg. 5378, at page 5416, Feb. 3, 2003) . 
 
FDA has posted on its website additional fact sh eets, guidance documents, presentations, videos, 
tutorials, and other materials to explain the requirements of these rules and FDA's implementation of 
them.  The preambles to the interim final ru les describe how FDA intends to implement the 
provisions.  See 68 Fed. Reg. 58894 and 68 Fed. Reg. 58974, Oct. 10, 2003.  
 
Question:  (China #56) 
 
Both Article 2.12 of TBT Agreement and article 10.2 of SPS Agreement provided that the developing 
country member should be given "longer time-fram es" from the adoption and entry into force of a 
regulation. 
 
Have the special interests and difficulties of th e developing country members been seriously 
considered by the U.S. in this regard and what specific measures have b een taken to fulfill these 
obligations? 
 
Answer 
 
FDA has encouraged public comment at every stage of the Bioterrorism regul ations' development.  
FDA developed and published proposed regulations which were open to public comment from both 
domestic and foreign parties.  We  also conducted numerous outreach meetings directed at foreign 
stakeholders, both within the U.S. to foreig n embassy officials in Washington and via 
videoconference.  We received numerous comments from foreign governments, industries, and trade associations on both rules.  We reviewed the comments submitted during the comment period and 
developed the final rule, taking the comments in to account.  In the case of the prior notice and 
registration regulations, we are allowing for several  opportunities for interested individuals to provide 
comments even as we begin implementing the interim fi nal rules to make sure that we minimized any 
negative effect on trade while ensuring our food safety and security.  
Please also refer to the responses to China’s Questions 54 and 55.  WT/TPR/M/126/Add.3 
 Page 91 
 
  
Question:  (China #57) 
 
Could the U.S. indicate whether the above-men tioned WTO rules and provisions have been .followed 
when the Establishment and Maintenance of Reco rds.  Under the Public Health Security and 
Bioterrorism Preparedness and Res ponse Act of 2002 is implemented? 
 
Answer 
 
We are in the process of considering the comments and preparing the final rule, which we plan to 
issue shortly.  We will comply with all of our WTO obligations as part of this rule making process.  
While the proposed rule applied only to foreign fac ilities that were subject to the registration rule, 
numerous foreign commentators stated that they be lieved the Bioterrorism Act was not intended to 
cover foreign entities.  FDA will addres s this comment in the final rule.  
 
Question:  (China #58) 
 
Has the U.S. conducted the risk assessments before  the adoption of the above-mentioned legislation 
and regulations, according to Article 5.1 of the SPS agreement?  If so, could the U.S. provide the 
details?  
 
Answer 
 
FDA has published the risk assessment with the interim final rule.  Under the U.S. system, legislation 
is not normally put into effect until the final regul ations take effect.  The risk assessment may be 
found on the FDA Website at http://www.cfsan.fda.gov/~dms/rabtact.html 
 
Question:  (China #59) 
 
What measures has the U.S. taken to ensure that th e enforcement of the legislation will not increase 
the cost of food export and prolong the time of the exportation? 
 
Answer 
 
The Bioterrorism Act directs FDA to implement certa in regulations to protect the safety and security 
of the U.S. food supply.  As part of the rule  making effort, FDA sought ways to implement the 
requirements of the Act in a way that minimize impacts on trade.  We included an economic impact 
analysis in the proposed rules for affected entities to review and provide comment, and made 
revisions to the rules based on the comments we received to further minimize the impact to trade 
consistent with the requirements in the Act.  Both  the registration and prior notice interim final rules 
and the administrative detention final rule that  FDA issued on June 4, 2004 (69 FR 31659) include 
regulatory impact analyses. 
 
Question:  (China #60) 
 
How will Article 5.4 of the SPS agreement be followed by the U.S. to ensure that the efforts in anti-
terrorism will not constitute new trad e barriers and restrict normal trade? 
 
Answer 
 
FDA develops and published proposals for regulatio ns which are open to public comment from both 
domestic and foreign parties.  We  also conducted numerous outreach meetings directed at foreign WT/TPR/M/126/Add.3 
Page 92  
 stakeholders, both within the U.S. to foreign embassy officials in Washington and via video 
conference and in-country visits by senior FDA officials.  We received numerous comments from 
foreign governments, industries, and trade associa tions on both rules.  We reviewed each comment 
that was submitted during the comment period and developed the final rule taking in account the 
comments.  In the case of the Bioterrorism regulations, we are allowing for several opportunities for 
interested individuals to provide comments even as we begin implementing the interim final rule to 
make sure that we minimized any negative effect  on trade while ensuring our food safety and security.  
We have published a compliance policy guide that describes the U.S. strategy for maintaining an 
uninterrupted flow of food imports while improving their safety in accordance with the Public Health 
Security and Bioterrorism Preparedness and Respon se Act of 2002 (Bioterrorism Act) requirements. 
 
Question:  (China #61) 
Reference:  (p. 65, paras. 146-149) 
 
Registration of Food Facilities and Prior Notice of Imported Food under the Public Health Security 
and Bioterrorism Preparedness and Response Act of 2002 has taken effect. Up to now there have been 
uncertainties which will influence the transportation of  these cargoes.  As to the food that is imported 
or offered for import into the U.S., after the fac ilities are registered and prior notice on the importation 
is given to the FDA, what kind of documentati on should accompany with the carrier when the vessel 
arrives at a U.S. port? 
 
Answer 
 
For food offered for import to the U.S. after facilities are registered and prior notice is given, it would 
be prudent for the carrier to have the Prior No tice Confirmation number when the vessel arrives at 
port. 
 
Question:  (China #62) 
 
The food is subject to refusal and detention for lack of registration or without prior notice.  If all the 
food in one container is refused, how will the container be treated? 
 
Answer 
 
As stated in the interim final rule ( see 68 Fed. Reg. at page 58976 ) : if adequate notice is not 
provided, section 801(m) of the FD&C Act provides that the food is subject to refusal, and that 
refused food must be held until adequate notice is given and may not be delivered to the importer, 
owner, or consignee.  The stated purpose of requiring notice of imported food shipments before 
arrival in the United States is to enable FDA to  conduct inspections of imported food at U.S. ports 
(see section 801(m)(1) of the FD&C Act).  Thus, FDA intends to use prior notice information to make 
decisions about which inspections to conduct at the ti me of arrival.  Currently, we intend to focus on 
conducting these inspections when our information suggests the potential for a significant risk to 
public health. FDA and CBP are coordinating FDA's new prior notice requirements with CBP's and 
FDA's existing entry requirements to the greatest extent  possible.  Thus, the interim final rule allows 
prior notice to be submitted electronically to FDA through either ABI/ACS or the FDA Prior Notice 
(P.N.) System Interface.  
 
If none of the food in a container is covered by ad equate prior notice, each of those foods would be 
refused and held until adequate notice is provide.  Foods that have not been put under hold can be 
segregated from foods refused for inadequate prior notice at no cost to the government.  See 21 CFR 
1.283(a)(3) and (4). 
  WT/TPR/M/126/Add.3 
 Page 93 
 
 Question:  (China #63) 
 
The Public Health Security and Bioterrorism  Preparedness and Response Act (for short as the 
Bioterrorism Act below) is not clear under what circumstances the carrier shall provide the prior 
notice to the FDA. What information must be included in a prior notice? 
Answer 
 
Any individual with knowledge of the required in formation may submit the prior notice, including, 
but not limited to, brokers, importers, and U.S. agents (see 21 CFR 1.278). Please refer to 21 CFR 
1.281 to determine the information that must be in cluded in a prior notice.  Please also refer to the 
FDA website provided (see answer to question #58.).  The prior notice must be submitted 
electronically and contain the following information: 
• Identification of the submitter, including na me, telephone and fax num bers, email address, 
and firm name and address  
• Identification of the transmitter (if different  from the submitter), including name, telephone 
and fax numbers, email address, and firm name and address  
• Entry type and CBP identifier  
• The identification of the article of food, in cluding complete FDA product code, the common 
or usual name or market name, the estimated  quantity described from the smallest package 
size to the largest container, and the lot or c ode numbers or other identifier (if applicable)  
• The identification of the manufacturer  
• The identification of the grower, if known  
• The FDA Country of Production  
• The identification of the shipper, except for food imported by international mail  
• The country from which the article of food is shipped or, if the food is imported by 
international mail, the anticipated date of ma iling and country from which the food is mailed  
• The anticipated arrival information (location, date, and time) or, if the food is imported by 
international mail, the U.S. recipient (name and address)  
• The identification of the importer, owner, a nd ultimate consignee, except for food imported 
by international mail or transshipped through the United States  
• The identification of the carrier and mode of  transportation, except for food imported by 
international mail  
• Planned shipment information, except fo r food imported by international mail  
 
Question:  (China #64) 
 
Most of the food and drug that are imported or offe red for importing into the U.S. by water are carried 
in containers. Under what circumstances ar e the containers subject to registration? 
 
Answer 
 
Neither the registration nor the prior notice interim final rules apply to drugs.  Containers are not 
subject to registration, but one or more prior no tices must be submitted for its contents, depending on 
how many different food products ar e included within the container, unless the food is exempt from 
prior notice under the rule.  Prior notices must be received and confirmed electronically by FDA no 
more than 5 days before arrival and, as specified by the mode of transportation below, no fewer than: 
 WT/TPR/M/126/Add.3 
Page 94  
 - 2 hours before arrival by land by road  
- 4 hours before arrival by air or by land by rail  
- 8 hours before arrival by water  
 
The time consistent with the time frame establishe d for the mode of transportation for an article of 
food carried by or otherwise accompanying an individua l if it is subject to prior notice (The food must 
also be accompanied by the FDA confirmation.) 
Question:  (China #65) 
 
If an ocean carrier cancels the Canadian port by reason of weather or other reasons and arrives at a 
U.S port directly and if the prior notice submitter or transmitter does not know the temporary change 
and miss the proper time to provide the prior notice, the Bioterrorism Act does not provide what to do 
with this case, which will bring inconvenien ce to the food, drug expo rters and the carrier. 
 
Is there any regulation in the U.S. to deal with such circumstances?  If not, does the U.S. intend to 
make any arrangement in this regard? 
 
Answer 
 
FDA addresses this in section 1.283(a)(1)(iii) of the in terim final rule. If the article of food is refused 
due to untimely prior notice, unless CBP concurren ce is obtained for export and the article is 
immediately exported from the port of arrival under CBP  supervision, it must be held within the port 
of entry for the article unless directed by CBP or FDA. 
 
Question:  (China #66)  
 
How would the U.S. deal with the food which shoul d arrive at Canada but for some reasons finally 
arrives at a U.S. port and needs to be transported to Canada from the U.S. by rail or by road?  Does 
the carrier need to give prior notice to the FDA? 
 
Answer 
 
Under the circumstances, as descr ibed, prior notice would be required, because the food would be 
imported into the U.S. before being placed on a truc k for transport to Canada.  If, however, the food 
was imported, then exported without leaving the port of arrival until export (e.g., the food arrives by 
plane in the U.S. and is transferred to another pl ane at the same port bound for Canada), then prior 
notice would not be required.  See section 1.277(b)(3) of the interim final rule. 
 
Question:  (China #67) 
(p. 65, para. 147) 
 
According to the Registration of Food Facilities, fo reign establishments shoul d apply for registration 
through U.S. agencies, and have to pay thousands of  U.S. dollars to the U.S. agencies. In the mean 
time, in order to meet the requirements set in the Establishment and Maintenance of Records, foreign 
food and feedstuffs processing establishments and transportation and trade-related establishments 
should establish and maintain relevant records.  Some of the small and medium enterprises are 
considering abandoning the U.S. market due to th ese requirements.  Hence, FDA's requirements are 
do not comply with the WTO Principle of least trade restriction and create trade barriers to the 
exportation of Chinese products. 
  WT/TPR/M/126/Add.3 
 Page 95 
 
 Is FDA seeking other alternative measures which wi ll minimize the impact on trade while preventing 
Bioterrorism and tracing terrorists?  
 
Answer 
 
The WTO SPS obligation is "not more trade restric tive than necessary."  "Least trade restrictive" is 
not the WTO SPS obligation.  There is no registration fee to register with FDA.  Both the 
Bioterrorism Act and the Registration interim fina l rule implementing it require foreign facilities to 
have a U.S. Agent.  FDA specifies minimal require ments for the U.S. Agent.  Accordingly, owners, 
operators, or agents in charge of foreign facilitie s may select persons who will not charge a fee to 
serve as their U.S. agent (e.g., family members residi ng in the U.S., brokers, sister facilities or parent 
corporations in the U.S. or other persons with wh om they do business who agree to serve as the U.S. 
agent without any cost), or enter into a business relati onship with persons for a fee.  FDA is aware that 
various firms may be offering their services to assist domestic and/or foreign facilities to register with 
FDA.  These firms are not affiliated with FDA, nor  has the agency contracted with any firms to 
register facilities. 
 
Regarding the record keeping requirements, F DA will comment on those provisions once they are 
finalized and stakeholders have an opportunity to assess the impact of the final rule as it may apply to 
them.  The proposed rule imposes no requirements, a nd FDA will be issuing a final rule after fully 
considering the timely comments we have received. 
 
FDA has published a proposed rule and an interim fina l rule to give ample opportunity for interested 
parties to provide comments on how the FDA ca n minimize any negative impact on trade while 
meeting the requirements of the Public Health S ecurity and Bioterrorism Preparedness and Response 
Act of 2002.  
 
FDA and the U.S. Bureau of Customs and Border Protection (CBP) issued a compliance policy guide 
which is available on the FDA website that describe s their strategy for maintaining an uninterrupted 
flow of food imports while improving their safety in accordance with the Public Health Security and 
Bioterrorism Preparedness and Response Act of 2002  (Bioterrorism Act) requirements which became 
effective on December 12, 2003.  FDA and CBP exp ect a "good faith" effort at compliance with the 
requirement that FDA receive a prior notification of all human and animal food, drinks and dietary 
supplements imported or offered fo r import to the U.S. and the requi rement that all facilities that 
manufacture, process, pack or hold food intended for c onsumption in the U.S. must be registered with 
FDA.  During the next 8 months, the two agencies w ill primarily rely on educating the affected firms 
and individuals.  During this period, the agenci es will utilize communication and education initiatives, 
escalating imposition of civil monetary penalties, and ultimately refusal of shipments.  This phase-in 
period will end on August 12, 2004. 
 
Question:  (China #68) 
 
What kind of measures will the U.S. take to ensure that the implementation of Bioterrorism Act will 
not increase the export cost of food trad e and prolong the time of exportation? 
 
Answer 
 
Please refer to the response to China’s Question #67. 
 
 
 
 WT/TPR/M/126/Add.3 
Page 96  
 Question:  (China #69-71) 
Reference:  p. 65, para. 149 
 
The Chinese government made comments in a serious  manner on the "Registration of Food Facilities" 
(G/SPS/N/USA/691), "Prior Notice of Imported Food" (G/SPS/N/USA/690), the "Establishment and 
Maintenance of Records" (G/SPS/N/USA/703) and th e "Administrative Detention of Food for Human 
or Animal Consumption Under the Public Health  Security and Bioterrorism Preparedness and 
Response Act of 2002 (Draft)" (G/SPS/N/USA/704) notified by FDA, provided with the U.S. the 
comments before the final date and requested the U.S.  to provide answers in written form and clarify 
some related questions. However, so far China has not received any formal reply, clarification and 
explanation from the U.S. 
 
For food and feedstuffs establishments, the releva nt record is made based on the General Food 
Sanitation of 1997 and RACCP system and App lication Rules of 1997 developed by CAC, a 
standardization body which is recognized by TBT/ SPS Agreement, and the food establishments which 
have exported food to the U.S. have also I net the requirements set out in FDA 21 CFR PART 110, 
FDA 21 CFR PART 120.  These records should have met the requirements set out in the 
Establishment and maintenance of Records, a nd there is no need to repeat them anyway. 
 
Please explain whether the requirements set out in the "Establishment and Maintenance of Records 
Under the Public Health Security and Bioterro rism Preparedness and Response Act of 2002" are 
based on "CAC General requirements for Food Sanitation "of 1997, "CAC HACCP System and 
Application Rules" of 1997, and its relationship with the requirements set out in FDA 21 CFR PART 
110, FDA 21 CFR PART 120. 
 
Answer 
 
Under the Administrative Procedure Act, U.S. agencies are required to respond to significant and 
relevant comments from all parties that were su bmitted within the comment period.  The comments 
are not reviewed and answered individually since ma ny interested parties ask similar questions or 
forward similar concerns, but each issue raised is analyzed and responded to within the body of the 
final regulation.  Thus, any timely comments subm itted by any stakeholder are addressed in the 
preambles to the final rules. 
 
Regarding the record keeping requirements, F DA will comment on those provisions once they are 
finalized and stakeholders have an opportunity to assess the impact of the final rule as it may apply to 
them.  The proposed rule imposes no requirements, a nd FDA will be issuing a final rule after fully 
considering the timely comments we have received.  FDA notes, however, that proposed Sec. 1.330 
states that the proposed record keeping regulation does not require duplication of existing records if 
those records contain all of the information require d by this subpart.  If a person subject to  the 
regulations keeps records of all of the informati on as required by this subpart in compliance with 
other Federal, State, or local regulations, or for an y other reason, e.g., as a result of its own  business 
practices, then those records may be used to meet these  requirements. 
 
Question:  (Columbia #1.C2) 
 
Paragraph 128 of the Secretariat's report states that in order to meet the Constitutional requirements of 
due process, most States have enacted statutes c ontaining transparency procedures.  For example, 
most States have enacted administrative procedure acts whose procedures are similar to those of the 
federal APA.  The majority of States have also enacted statutes that provide for public access to 
information and judicial procedures. 
  WT/TPR/M/126/Add.3 
 Page 97 
 
 As regards Technical Regulations applied to produc ts, what progress has been made in standardizing 
requirements at the state and federal level?  
 
Answer 
 
Title IV of the Trade Agreements Act of 1979 (Public Law 96-39), as amended by the Uruguay 
Round Agreements Act (Public Law 103-465), proh ibits U.S. agencies from employing standards, 
technical regulations or conformity assessment procedures as unnecessary obst acles to trade.  This 
legislation includes the Administration's commitment to promote state agencies' compliance with U.S. 
obligations under the WTO through reasonable meas ures including through state-federal consultation 
and cooperation.  Should specific questions rega rding the WTO consistency of state or local 
regulations or procedures be brought to our attent ion, USTR would engage in consultations with 
interested state authorities to ascertain whether there is in fact a compliance issue and, if so, how best 
to proceed. 
 
Question:  (Colombia #I.C2) 
 
United States requirements regarding technical standards do not seem to reflect international 
standards, and there is a proliferation of standard s for each state.  This can make exporting companies 
less competitive.  Some sectors in Colombia have  noted this difficulty, for example those with 
products such as doors and windows, safety footwear, leather products and auto parts. 
 
Is the United States notifying the WTO of draft measures at the sub-federal level? 
 
Answer  
 
The United States has yet to identify and notify an y proposed technical regulations or mandatory 
conformity assessment procedures at the state leve l that would require notification under the TBT 
Agreement. 
 
Question:  (Colombia #I.C3) 
 
There are certain products for which the United States  requests third-party certification of conformity 
assessment, that is, a certifier accredited and reco gnized through some me chanism of the agency 
enforcing regulations at the border.  Bearing in mind that the Government of the United States may 
give official recognition to an independent testi ng authority through accreditation or similar measures, 
what mechanisms are in place to facilitate Mutu al Recognition Agreements (MRA) aimed at easing 
access for these types of products from developing countries? (paragraph 132). 
 
Answer  
 
We are unclear as to the specific concern/question raised by Colombia.  The United States does not 
have a single approach to conformity assurance.  In some cases, U.S. regulatory authorities rely on 
third-party conformity assessment bodies.  In those cases, the regulatory authority usually specifies 
criteria for competence, and, any body that qualifies as competent according to those criteria 
(regardless of location) may be recognized to perform the conformity assessment.  Developing 
country suppliers benefit from this  approach and minimize costs and r esources to the extent that they 
have qualified conformity assessment bodies.  U.S.  regulators have confidence in this type of 
approach as they rely on our own domestic infrast ructure (including penalties for non-compliance and 
other enforcement mechanisms) to ensure the integrity of the bodies they have recognized.  An 
additional agreement (mutual or ot her recognition agreement) with a developing or other country may 
not be necessary or desirable to facilitate trade.  Such an agreement would require the U.S. authority WT/TPR/M/126/Add.3 
Page 98  
 to understand and confirm that the procedures in place in the other country are sufficient to assess 
compliance with U.S. regulations.  In our experi ence, such understanding is not easily established. 
 
Question:  (Colombia #I.C4) 
 
We are interested in knowing th e findings and experiences gained fro m the application of the Mutual 
Recognition Agreements for which foreign verifica tion of conformity is accepted in accordance with 
United States regulations.  What are the author ities that, on a case-by-case basis, have accredited 
selected foreign testing agencies?  Which agencies have been accredited? (paragraph138). 
 
Answer 
 
The United States is party to a limited number of agreements which may or may not fit within 
Colombia's definition of "mutual recognition agreem ents."  Our experiences with such agreements 
have been varied.  For example, agreements which require a counterpart authority to demonstrate the 
competence of its bodies to assess conformity to the ot her Party's technical regulations tend to require 
a significant amount of resources and commitme nt (e.g., negotiations, confidence-building, 
implementation) on both sides.  Many of the obser vations made by Canada in its paper submitted to 
the WTO Committee on Technical Barriers to Trad e on its experience with mutual recognition 
agreements (G/TBT/W/167) are reflective of our ow n experience.  The United States believes that 
MRAs are only one option of many for achieving the acceptance of conformity assessment results 
when those are required by regulation. 
 
The United States government does not have a centra lized data base of regulatory authorities which 
rely on accreditation or other recognition criteri a for bodies conducting conformity assessment to 
technical regulations.  For further information on United States conformity assessment procedures 
please visit the NIST website at http://ts.nist.gov/ts/h tdocs/210/gsig/cainfo.htm.  This link includes a 
"Directory of State and Local Government Labor atory Accreditation/Designation Programs" (NIST 
SP 815: 2002 Edition);  and a Directory of Federal Government Certificati on and Related Programs 
(NIST SP 739: 1999 Edition). NIST SP 808, "Dir ectory of Federal Government Laboratory 
Accreditation/Designation Programs" is out of-date a nd is currently being updated.  For information 
on specific regulations and whether they specify conformity assessment requirements, including 
accreditation, please contact the U.S. inquiry point. 
 
Question:  (Colombia I.C6) 
Reference:  WT/TPR/S/126  
 
Is it possible to obtain from the regulatory auth orities enforcing the environmental provisions 
governing the use of marine resources, the automati c lifting of the embargo prohibiting the export of 
tuna to countries fishing in the eastern tropical Paci fic Ocean, if those countries are signatories to the 
Agreement on the International Dolphin Conservation Program (AIDCP)? 
 
Answer 
 
Only one process exists through which an embar go that prohibits a nation from exporting to the 
United States yellowfin tuna and yellowfin tuna products harvested in the eastern tropical Pacific 
Ocean (ETP) by purse seine vessels greater than 400 short tons (362.8 metric  tons) carrying capacity 
may be lifted.  That process is known as an "affirmative finding."  The affirmative finding process is 
described fully in the U.S. Code of Federal Regulations (CFR) at 50 CFR 216.24(f);  however, a 
summary of the requirements is provided in the following paragraph. 
 
  WT/TPR/M/126/Add.3 
 Page 99 
 
 To attain an affirmative finding, the harvesting nation must submit the following: 
 
(1) Evidence of membership in the IATTC; 
(2) Evidence that a nation is meeting its obligati ons to the IATTC, including financial obligations; 
(3) Evidence that a nation is complying with the IDCP; 
(4) Evidence of a tuna tracking and verification program comparable to the U.S. tracking and 
verification   regulations at 50 CFR 216.94; 
(5) Evidence that the national fleet DMLs and nati onal fleet per-stock per-year mortality limits, if 
they  are allocated to countri es, were not exceeded;  and 
(6) Authorization for the IATTC to provide or release information, or a commitment from the 
harvesting   nation to provide directly to th e Assistant Administrator, complete, accurate, 
and timely information  necessary to verify information on TTFs. 
 
It is the United States' understanding that, to date , Colombia has not ratified the IATTC or submitted 
an affirmative finding package to National Ma rine Fisheries Service (NOAA Fisheries). 
 
Question:  (Hong Kong #1)  
 
We note that apart from mutual recognition agr eements, which accept foreign conformity assessment 
on a bilateral product-specific basis, the U.S. has also accredited selected foreign testing agencies on a 
case-by-case basis.  We are interested in getting more details on the accreditation arrangements for 
foreign testing agencies, noting the trade fac ilitation effects that might be brought about by 
accreditation arrangements.  (WT/TPR/S/126, para. 138) 
 
Answer  
 
The United States government does not have a centrali zed database of regulatory authorities that rely 
on accreditation of bodies that conduct conformity asse ssment to technical regulations.  For further 
information on United States conformity assessment procedures please visit the NIST website at  
http://ts.nist.gov/ts/htdocs/210/gsig/cainfo.htm.  Th is link includes a "Directory of State and Local 
Government Laboratory Accreditation/Designation Programs" (NIST SP 815:  2002 Edition);  and a 
"Directory of Federal Government Certificati on and Related Programs" (NIST SP 739:  1999 
Edition).  NIST SP 808, "Directory of Federal G overnment Laboratory Accreditation/Designation 
Programs" is out-of-date and is currently being upda ted.  For information on specific regulations and 
whether they specify conformity assessment requi rements, including accreditation, please contact the 
U.S. inquiry point. 
 
Question:  (India #16)  
 
Exports of shrimps to the U.S. are embargoed unl ess exporting nations can provide evidence that their 
shrimp trawlers match U.S. efforts to protect sea turtles.  In 1996, the U.S. banned the import of 
marine products from India on the grounds that I ndian fishermen were not using turtle excluder 
devices while harvesting shrimp and other marine products.  By the DSB ruling of December 1999, 
the Appellate Body agreed that the measure as a pplied by the U.S. constitutes an arbitrary and 
unjustifiable discrimination between members of th e WTO and recommended that the U.S. authorities 
should bring this measure into conformity with th e obligations under WTO.  In view of the ruling 
given by the DSB, the U.S. delegation is requested for information on whether action has been 
initiated to amend Section 609 of Public Law 101-16 2 which has been found to be WTO inconsistent. 
 
 
 
 WT/TPR/M/126/Add.3 
Page 100  
 Answer 
 
The Appellate Body report found that the underlying  law, Section 609, in fact, did fall under the 
measures covered by Article XX(g), but stated the import ban was not justified because of the manner 
in which it was implemented by the United States.  The Appellate Body listed six specific points regarding the USG's implementation of the law that, on the whole, contributed to its decision that such 
implementation was inconsistent with the United States' WTO obligations. 
 In response to the WTO findings, the United States revised the implementing guidelines to bring the 
process for implementing the law into  line with the recommendations and rulings of the DSB.  No 
changes were made to the text of Section 609.  In June 2001, a subsequent WTO dispute settlement 
panel found that the revised guidelines and their ap plication were fully consistent with the United 
States obligations under the WTO Agreement.  The appellate body confirmed this result. 
 
Question:  (India #20) 
 
Would the U.S. authorities clarify how these new regulations meet the requirements of GATT Article 
VIII 1 (c), and of the WTO SPS Agreement, particularly the 'necessity test' and the 'least trade restriction test'?  ....how can these meas ures be made less trade restrictive? 
 
Answer  
Though the likelihood of a biological or chemical  attack on the U.S. food supply is uncertain, 
significant scientific evidence documen ts the risk to public health of food that has been inadvertently 
contaminated. After performing a risk assessment which describes uncertainties, and noting the broad 
range of agents that may contaminate the food supp ly that FDA regulates, the agency concluded that 
there is a high likelihood, over the course of a year, that a significant number of people will be 
affected by an act of food terrorism or by an inci dent of unintentional food contamination that results 
in serious food borne illness.  FDA has determin ed that this qualitative risk assessment, which 
discusses prior incidents of food contamination and available unclassified information on prior acts of 
food sabotage, is appropriate to the circumstances.   The scientific  risk assessment can be found at: 
http://www.cfsan.fda.gov/~dms/ rabtact.html#iii. 
 
The United States Food and Drug Administration (FDA) and the U.S. Bureau of Customs and Border 
Protection (CBP) issued a compliance policy guide  which is available on the FDA website that 
describes their strategy for maintaining an uninterrupted flow of food imports while improving their 
safety in accordance with the Public  Health Security and Bioterrori sm Preparedness and Response Act 
of 2002 (Bioterrorism Act) requirements which b ecame effective on December 12, 2003.  FDA and 
CBP expect a "good faith" effort at compliance with the requirement that FDA receive a prior 
notification of all human and animal food, drinks  and dietary supplements imported or offered for 
import to the U.S. and the requirement that all fac ilities that manufacture, process, pack or hold food 
intended for consumption in the U.S. must be registered with FDA. 
 
• During the 8 month transition period, the two agenci es are relying on educating the affected firms 
and individuals.  During this period, the agencies are utilizing communication and education 
initiatives, escalating imposition of civil monetary pe nalties, and ultimately refusal of shipments.  
This phase-in period will end on August 12, 2004.  FDA and CBP personnel have already begun 
an extensive campaign to educate with written material, briefings, and seminars with other 
government officials, domestic and foreign f ood importers, brokers, tr ansporters, and other 
affected industry representatives on comp liance with the Bioterrorism Act. 
 
In addition, during the 8-month tr ansitional period, the two agencies  have taken the following steps:  WT/TPR/M/126/Add.3 
 Page 101 
 
  
• Gathered data to track compliance with the pr ior notice requirements and to determine how to 
best use FDA's and CBP's resources to educate i ndustry and the public to achieve full compliance 
with the Bioterrorism Act. 
• Provided industry and the public with summary in formation about the level of compliance with 
the prior notice rules, including data on the types of errors in submitted prior notices. 
• Posted the summary information on FDA's website at www.fda.gov. 
• Developed a joint plan to achieve the goal of a uniform, integrated system and to coordinate 
timeframes for import prior notice information wh ile fulfilling the Bioterrorism Act mandates for 
air and truck modes of transportation with timefra mes promulgated by the Bureau of Customs and 
Border Protection (CBP) when it finalizes its rule entitled "Required Advance Electronic 
Presentation of Cargo Information" 
 
As always, both agencies will continue to ensure that  imported products are safe for human or animal 
consumption. 
 
Question:  (Indonesia #2) 
 
One aspect of the [Bio terrorism Act] registrati on that concerns Indonesia is the requirement for a 
food facility to have a U.S. agent in the registeri ng facility.  Indonesia finds that this requirement is 
basically unnecessary and could have been accommodated in a more cost-effective way.  Please 
comment. 
 
Answer  
The purpose of the U.S. agent is to serve as a communications link between FDA and an individual 
facility for a number of purposes, including both emer gency situations and day-to-day registration 
issues. These routine issues may include FDA's need for information about that facility and arranging 
both routine inspections and inspections or comm unications with the facility due to a potential 
Bioterrorism threat or other public health emergency.  
The rule sets out only two qualifications for a U.S. ag ent: The agent is required to reside or maintain a 
place of business in the United States and to be physically present in the United States .  Therefore, 
many foreign facilities are able to use existing c ontacts in the United States as their U.S. agents.  
Moreover, FDA has clarified in the interim final rule  that the requirement of a single U.S. agent for 
FDA registration purposes does not preclude facilities from having multiple agents (such as foreign 
suppliers) for other business purposes. 
 The requirement for the U.S. agent and the unde rlying rationale for its importance in addressing 
Bioterrorism threats is explained in detail in the Interim Final Rule, 68 Fed. Reg. 58894.  The 
extensive discussion is covered on pages 58915-589 16 in the Responses to Comments 84-93.  The 
Interim Final Rule can be accessed on the FDA web site at:  
http://www.fda.gov/oc/bioterrorism/bioact.html by c licking on the Interim Final Rule under Section 
305.  Additional information including a Fact Sh eet and Questions and Answers can be accessed by 
clicking on Fact Sheet under Section 305. 
 
Question:  (Indonesia #4)  
 
It is apparent that in the U.S. products are increasingly being subject to a growing number of 
regulations regarding consumer and environmen tal protection.  While it may legally be non-
discriminatory in nature, the intricacy of the U. S. regulatory system tends to become a major WT/TPR/M/126/Add.3 
Page 102  
 impediment to market access.  There is also a lack of clear distinction in the U.S. between what is 
essentially required for safety, security, health and environmental reasons on the one hand, and what 
is basically option requirement for quality, on the othe r hand.  The situation is even worse since in the 
fact that there are more than 2,700 state and muni cipal authorities in the U.S. that call for specific 
requirements for products to be sold or installed in their jurisdictions.  These requirements are not 
necessarily consistent with each other, or even in line with requirements provided for at the federal 
level.  Could the U.S. provide a justification in  relation to U.S. obligations under the TBT and SPS 
Agreements? 
 
Answer  
 
The TBT and SPS Agreements establish certain discip lines and obligations which must be followed in 
the development and application of measures, includi ng regulations.  We believe that the U.S. system, 
albeit complex, is consistent with these disciplin es and obligations, and achieves the WTO objectives 
of preventing the creation of unnecessary or arbitrary ba rriers to trade.  The U.S. system ensures that 
standards and regulations are developed th rough open and transparent procedures. 
 
Question:  (Indonesia #5) 
 
Electrical machinery and electronics represent the second most important Indonesia's export products 
to the U.S.  In 2002, Indonesia's export to the U.S. of electrical machinery and equipment and parts 
thereof, sound recorders and reproducers, televisi on image and sound recorders and reproducers, and 
parts and accessories of such articles that all t ogether are classified under the HS Number 85 was 
valued at $1.61 billion, amounted to 16.69 percent of total Indonesia's export to the United States.  
However, marketing these products in the U.S. mark et is not at all an easy task for Indonesian 
companies.  The U.S. market for these products is split up by different federal, state, and sectoral 
technical regulations, procurement specifications a nd standard requirements.  Complying with federal 
regulations and being cleared by U.S Customs is not  sufficient to market electrical machinery and 
electrical products in the U.S.  How can this s ituation be justified under the TBT Agreement? 
 
Answer  
 
We agree with Indonesia that it takes more th an clearing Customs and meeting U.S. regulatory 
requirements to gain acceptance in the U.S., or for that matter, any market.  There are many other 
factors that affect marketing of a product, including consumer preference and choice.  The fact that 
the U.S. is federated and de-centralized does not, per se , raise a question of compliance with WTO 
rules.  As noted in the response to Indonesia’s Question #4, we believe the U.S. system is consistent 
with obligations under the TBT Agreement.  
 
Question:  (Japan #21) 
 
Automobiles weighing less than 8,500 pounds, which are sold in the U.S., are obliged to label 
elements, such as the percentage of U.S. or Canadi an parts, the final assembling ratio, the final place 
of assembly and the place of manufacture of the engine and transmission.  This is aimed at stimulating 
the U.S. consumers' spirit of "buy American", while placing much burden on the auto manufacturers 
by creating various kinds of labels  based on its dates and types.  In addition, the real state of the 
procurement rate is not properly calculated for ex ample, the procurement ratio does not reflect the 
labor cost of the assembly lines. 
  WT/TPR/M/126/Add.3 
 Page 103 
 
 Answer 
 
The American Automobile Labeling Act (AALA) requires passenger motor vehicles to be labeled 
with information about the country of origin of the vehicle and its parts.  The requirements are solely 
informational; they apply in the same way and to the same extent, regardless of where a vehicle is 
manufactured.  While there are costs associated w ith calculating country-of-origin information, the 
National Highway Traffic Safety Administration, in implementing the AALA, has sought to minimize 
cost impacts to the extent consistent with ensuri ng that consumers are provided with the information 
required by the Congress.  We do not believe th ese informational requirements are burdensome.  
While the calculation of U.S./Canadian parts cont ent does not, per the AALA, include final assembly, 
this fact is explained in a note included on the labe l.  Moreover, the final assembly point of the vehicle 
is included separately on the label.  
 
Question:  (Japan #22) 
 
The Energy Policy and Conservation Act of 1975 requires auto manufacturers to calculate the 
corporate average fuel economy (CAFÉ), which shoul d clear certain thresholds for the purpose of 
environmental protection.  When calculating CAFÉ figures, it is necessary to compute the rate of 
domestic manufacturing for each line, and to obtain the standards of fuel consumption for domestic 
and imported automobiles respectively.  However,  as automobiles obtain standards in their own 
category, the division between domestic and importe d vehicles sometimes brings out negative effects 
on the improvement of fuel efficiency itself, whic h was the initial goal.  Companies specializing in 
imported and fuel inefficient large-sized cars and sports-type cars experience disadvantages. 
 
Answer 
 
NHTSA is examining what CAFÉ reforms it could make  within its existing legislative authority under 
the Energy Policy and Conservation Act.  To th at end, NHTSA published an advance notice of 
proposed rule making in December 2003 requesting comments on possible reforms.  Comments on the ANPRM closed on April 27, 2004. 
 
Additional Background 
 
Statutory requirement : 
 
49 U.S.C. 32904 requires that the CAFÉ of a manufacturer's fleet of domestically manufactured 
passenger automobiles be calculated separately from the CAFÉ of a manufacturer's fleet of non-
domestically manufactured passenger automobiles.  For any model year, each of the two fleets must 
separately meet that year's CAFÉ st andard for passenger automobiles. 
 
Recent events  
 The conference report for the Department of Tran sportation and Related Ag encies Appropriations Act 
for FY 2001 Public Law 106-346 directed that NHTSA fund a study by the National Academy of 
Sciences (NAS) to evaluate the effectiveness and impacts of CAFÉ standards (H.R. Conf. Rep. No. 
106-940, at 117-118).  In July 2001, the National Academy of Scie nces released its report entitled, 
"Effectiveness and Impact of Corporate Average Fuel Economy (CAFÉ) Standards." 
 
In February 2002, Secretary Mineta asked Congress "to provide the Department of Transportation 
with the necessary authority to reform the CAFÉ program, guided by the NAS report's suggestions." 
 WT/TPR/M/126/Add.3 
Page 104  
 In February 2002, NHTSA published a request fo r comments entitled "National Academy of Science 
Study and Future Fuel Economy Improvements" (67 Fed. Reg. 5767). 
 
In December 2003, NHTSA published an advan ce notice of proposed rule making entitled 
"Reforming the Automobile Fuel Economy Standards Program." 
 
Question:  (Korea, ref. page 68 para. 161) 
 
The Pelly Amendment to the Fisherman's Protectiv e Act of 1967 authorizes the U.S. Secretary of 
Commerce to certify a country for activ ities that diminish the effectiv eness of an international fishery 
conservation program. 
 
Does the U.S. have a clear set of criteria for dete rmining what activities diminish the effectiveness of 
an international fishery conservation program?  If, so, is there any possibilit y that the above criteria 
would act as a non-tariff barrier? 
 
Answer  
 
In applying the Pelly Amendment, the U.S.  uses the Amendment language, "diminish the 
effectiveness of an international fishery conserva tion program" as the criteria.  We review activities 
on a case-by-case basis examining the facts and scientif ic evidence.  The U.S. has endeavored to 
ensure that any decision made under th e Pelly Amendment is WTO consistent. 
 
Question:  (Japan #36) 
 
Japan's research program on whales under special perm it is not only based on the legitimate right of a 
contracting government to the International Convent ion on the Regulation of Whales (Article 8), of 
which the U.S. is also a member, but is also care fully designed so as not to undermine the health of 
the targeted species of the research.  Therefore, it is regrettable that the U.S. certified the research 
under the Pelly Amendment in 2000. 
 
Please provide the U.S. position on the matter. 
 
Answer 
 
See the response to Korea’s Question (ref. page 68 para. 161). 
 
Question:  (Switzerland  #2) 
 
Could the U.S. elaborate on their intentions to ratify the Convention on Biological Diversity and the 
Cartagena Protocol on Biosafety? 
 
Answer 
 
The United States is committed to protecting and maintaining biological diversity.  While the 
United States has no current plans to ratify the Convention on Biological Diversity, we actively 
participate in Convention meetings as observers a nd serve on a number of its technical and expert 
groups.  As only Parties to the Convention may sign or  ratify the Cartagena Protocol, we are unable to 
sign or ratify the Protocol at this time. 
 
 
  WT/TPR/M/126/Add.3 
 Page 105 
 
 Question:  (Turkey, Section III #3) 
 
Since the last TPR, the United States has introd uced new procedures and rules regarding import 
regulations such as the Container Security Initia tive and "Operation Safe Commerce" Project.  In 
addition, the new Bioterrorism Act of 2002 requi res the registration of food manufacturing and 
handling facilities, and prior notice to FDA of  all food shipments destined to the U.S. 
 
Would the U.S. kindly inform us of the conform ity of the new rules and procedures with the WTO 
system and the measures being taken to assure the new system will not create any kind of technical 
barriers. 
 
Answer 
 
FDA is aware of the international trade obligati ons of the United States, including those under the 
World Trade Organization and the North American Free Trade Agreement, and has considered these 
obligations throughout the rule making process for these regulations.  FDA believes that the 
registration and prior notice interim final rules are fu lly consistent with these international obligations.  
FDA also is developing the record keeping and administrative detention final rules to be fully 
consistent with these international obligations.  FDA has encouraged public comment at every stage of developing the four Bioterrorism regulations.  
Although not required by law, FDA began with an early outreach and public comment period, and 
considered all comments the agency received by August 30, 2002, in developing each of the four 
proposed rules.  The four proposed regulations that FDA published were open to public comment 
from both domestic and foreign parties.  We also conducted numerous outreach meetings directed at 
foreign stakeholders after publication of the four  proposed rules and two interim final rules, both 
within the U.S. to foreign embassy officials in  Washington, and by sending senior FDA officials 
abroad to meet with foreign government officials and foreign industry members.  In addition, FDA 
held satellite downlink meetings for each proposed rule and the two interim final rules that were 
broadcast around the world.  We posted both a copy of the downlink and transcripts of the downlink in English, French, and Spanish (the three offi cial WTO languages) on our website.  Moreover, FDA 
held live video conference meetings with numerous  other foreign entities around the world.  We 
received numerous comments from foreign governments,  industries, and trade associations on all four 
proposed rules, which the agency considered as we  developed the interim final and final rules. 
 In the case of the prior notice and registration regu lations, even though not required by either the 
Bioterrorism Act specifically, or our rule making procedures (e.g., the Administrative Procedure Act) 
or international obligations generally, FDA issu ed these rules as interim final rules and provided 
interested individuals two additional opportun ities to provide comments even as we begin 
implementing the interim final rules.  This is to ensure that we minimize any negative impact on trade 
to the extent feasible while ensuring the safety and s ecurity of our food suppl y.  We have published a 
compliance policy guide that describes the U.S. strate gy for maintaining an uninterrupted flow of food 
imports while improving their safety in accordance with  the Public Health Security and Bioterrorism 
Preparedness and Response Act of 2002 (B ioterrorism Act) requirements.  See 
http://www.cfsan.fda.gov/~pn/cpgpn.html. 
 
• In order to help countries become more accustomed to the new rules and to minimize any 
negative impact on trade from the new requireme nts, during the first 8 months following the 
rules’ effective date of December 12, 2003, FDA and U.S. Bureau of Customs and Border 
Protection (CBP) will primarily rely on educating the affected firms and individuals.  During this 
period, the agencies will utilize communication and education initiatives, escalating imposition of 
civil monetary penalties, and ultimately refusal of  shipments.  This phase-in period generally will WT/TPR/M/126/Add.3 
Page 106  
 end on August 12, 2004, although as noted in the compliance policy guide, FDA will continue to 
exercise enforcement discretion fo r certain shipments, such as certain food shipments arriving by 
international mail.  FDA and CBP personnel have  already begun an extensive campaign to 
educate with written material, briefings, and semi nars with other government officials, domestic 
and foreign food importers, brokers, transporters , and other affected industry representatives on 
compliance with the Bioterrorism Act.  
 
In addition, during the 8-month tr ansitional period, the two agencies  have taken the following steps: 
 
• Gathered data to track compliance with the pr ior notice requirements and to determine how to 
best use FDA's and CBP's resources to educate i ndustry and the public to achieve full compliance 
with the Bioterrorism Act. 
• Provided industry and the public with summary in formation about the level of compliance with 
the prior notice rules, including data on the types of errors in submitted prior notices. 
• Posted the summary information on FDA's website at www.fda.gov. 
• Developed a joint plan to achieve the goal of a uniform, integrated system and to coordinate 
timeframes for import prior notice information wh ile fulfilling the Bioterrorism Act mandates for 
air and truck modes of transportation with timefra mes promulgated by the Bureau of Customs and 
Border Protection (CBP) when it finalizes its rule entitled "Required Advance Electronic 
Presentation of Cargo Information. 
 
Question:  (Venezuela #2) 
 
Could you comment on how the bilateral trade agreements concluded by the United States in recent 
years ensure the transparency and harmonization of importation standards for third parties:  what 
efforts have been made to ensure that all par ties involved in importations are apprized of the 
applicable import rules? 
 
Answer 
 
The United States continues to apply its standards a nd regulations on a non-discriminatory basis.  The 
Administrative Procedure Act  requires U.S. agencies to publish proposals and seek comment from all 
interested persons on proposed regulations - whether foreign or domestic - before they are finalized.  
In addition, for technical regulations and sanitary and phytosanitary measures within the scope of the 
TBT and SPS Agreements, notificati on of proposals are made to WTO  members, and inquiry points 
for information are established as required by these Agreements.  
 
Question:  (Venezuela #3) 
 
Could the United States provide a detailed explana tion of how the FDA will apply the procedures 
provided for in the Bioterrorism Act in a transparent and non-discriminatory manner? 
 
Answer 
 
FDA is aware of the international trade obligati ons of the United States, including those under the 
World Trade Organization, and has considered th ese obligations throughout the rule making process 
for these regulations.  FDA believes that the final re gulation is fully consiste nt with international 
obligations. 
 FDA encouraged public comment at every stage of the Bioterrorism regulations' development.  FDA 
developed and published proposed regulations that  were open to public comment from both domestic 
and foreign parties, and conducted nu merous outreach meetings directed at foreign stakeholders.  The  WT/TPR/M/126/Add.3 
 Page 107 
 
 FDA received numerous comments from foreign gove rnments, industries, and trade associations on 
both rules.  They reviewed each comment th at was submitted during the comment period and 
developed the interim final rules, taking the comme nts into account.  In the case of the prior notice 
and registration regulations, the FDA is allowing inte rested individuals to provide comments even as 
the FDA begins implementing the interim final rule. 
 
Question:  (Venezuela #4)  
With respect to the exceptions contained in the Biot errorism Act, can the United States furnish more 
details about facilities that would be exempt from the registration requireme nt?  This information 
could avoid misunderstandings that might hamper trade. 
 
Answer 
 
Facilities that are exempt from registration requirements are:  
• Private residences of individuals, even thoug h food may be manufactured/processed, packed, 
or held there. 
• Non-bottled water drinking water collection and distribution establishments and structures, 
such as municipal water systems. 
• Transport vehicles that hold food only in th e usual course of their business as carriers. 
• Farms, which are facilities in one general ph ysical location devoted to the growing and 
harvesting of crops, the raising of animals (i ncluding seafood), or both.  Washing, trimming 
of outer leaves, and cooling of produce are cons idered part of harvesting.  The term "farm" 
also includes facilities that pack or hold food, pr ovided that all food used in such activities is 
grown, raised, or consumed on that farm or another farm under the same ownership, and 
facilities that manufacture/process food, provided that all food used in such activities is consumed on that farm or anot her farm under the same ownershi p.  A farm-operated roadside 
stand that sells food directly to consumers as its primary function would be exempt from 
registration as a retail food establishment. 
• Restaurants, which are facilities that prepar e and sell food directly to consumers for 
immediate consumption.  Entities in which food is provided to humans, such as cafeterias, 
lunchrooms, cafes, bistros, fast food estab lishments, food stands, saloons, taverns, bars, 
lounges, catering facilities, hospital kitchens, day care kitchens, and nursing home kitchens, 
are restaurants.  Pet shelters, kennels, and vete rinary facilities that provide food directly to 
animals are also restaurants.  Facilities that pr ovide food to interstate conveyances, such as 
commercial aircraft, or central kitchens that  do not prepare and serve food directly to 
consumers are not restaurants for purposes of the rule. 
• Retail food establishments, which are establishm ents that sell food products directly to 
consumers as their primary function, meaning th at annual sales directly to consumers are of 
greater monetary value than annual sales to all other buyers.  A retail establishment may 
manufacture/process, pack, or hold food if its primary function is to sell food directly to consumers, including food that the establishm ent manufactures/processes, packs, or holds.  
The term “consumers” does not include businesses.  Examples of retail food establishments 
include groceries, delis, convenience stores, and vending machine locations. 
• Non-profit food establishments, which are charita ble entities that meet the terms of §501(c)(3) 
of the Internal Revenue Code and that prepar e or serve food directly to the consumer or 
otherwise provide food or meals for consumpti on by humans or animals in the U.S. Central 
food banks, soup kitchens, and non-profit food delivery services are examples of non-profit 
food establishments. 
• Fishing vessels that harvest and transport fish. Such vessels may engage in practices such as WT/TPR/M/126/Add.3 
Page 108  
 heading, eviscerating, or freezing fish solely to prepare the fish for holding on board the 
vessel and remain exempt. 
• Facilities regulated exclusively and throughout th e entire facility by the U.S. Department of 
Agriculture, under the Federal Meat Inspection Ac t, the Poultry Products Inspection Act, or 
the Egg Products Inspection Act. 
• Foreign facilities, if food from such facilities undergoes further manufacturing/processing 
(including packaging) by another facility outside th e U.S.  However, a facility is not exempt if 
the further manufacturing/processing conducted by the subsequent facility consists of adding 
labeling or any similar activity of a de mini mis nature.  In that case, both facilities are 
required to register.  Also, any foreign facility that packs or holds food after the last foreign 
manufacturer/processor of the food must register. 
 Facilities that are exempt from registration requireme nts are listed in the Act.  Please refer to the 
website (www.fda.gov). 
 
Question:  (Japan #1) 
 
Are there any examples of domestic environmental po licy which the U.S. amends in order to enhance 
coordination between trade policy and environmenta l protection during the process for accelerating 
trade liberalization? 
 
Answer 
 
U.S. environmental and trade agencies coordinate cl osely in order to ensure that environmental and 
trade policies are mutually compatible, which avoi ds a situation in which an environmental policy 
needs to be "amended" during the process for accelerating trade liberalization. 
 
Question:  (Japan #2)  
 
According to paragraph 108, the U.S. has establishe d "an effective system of environmental reviews 
of trade negotiations".  Specifically, how has the system been implemented?  What kind of outcome 
has the U.S. obtained so far from these reviews?  How does the U.S. utilize the outcome in terms of 
trade negotiations? 
 
Answer 
 
The United States has a long-standing commitment to a policy of conducting written environmental 
reviews of major trade agreements that dates back to  1992.  In 1999, the President of the United States 
issued an Executive Order requiring careful assessme nt of the potential environmental impacts of 
major trade agreements.  Guidelines for implem enting this Executive Order were developed and 
finalized in 2000 and included numerous opportuniti es for public review and comment.  The Trade 
Act of 2002 requires environmental reviews of future  trade agreements, consistent with the Executive 
Order and guidelines, and reports to Co ngress on the results of these reviews. 
 
Our environmental reviews provide information concerning potentially significant environmental 
implications of trade agreements, and a framewo rk for discussing these implications within the 
government and with the public.  Reviews are c onducted by an inter-agency committee composed of 
federal agencies with environmental and trade exper tise.  The review begins early in the process of 
negotiating a trade agreement, and there is clos e coordination between the negotiation and review 
processes. 
  WT/TPR/M/126/Add.3 
 Page 109 
 
 Public involvement is a prominent feature of our environmental reviews.  This includes inviting the 
public to identify important concerns and advise us on methods, data and scope for reviews.  We also 
invite the public to comment on an interim review  that is prepared and released in the course of 
ongoing trade negotiations. 
 
The environmental review process has contributed  to U.S. efforts to ensure that trade and 
environmental policies are mutually supportive.  Re views also have contributed to our ability to 
identify opportunities and priorities for coopera tive activities that seek to enhance positive 
environmental benefits from trade agreements and mitigate possible negative effects. 
 
Question:  (Mexico Set III, #3) 
 
Does the paragraph 159 means that any country, member  of the AIDCP, can currently export "dolphin 
safe" canned tuna to U.S. as long as no dolphins were  injured in the fishing process, even if dolphins 
were encircled or chased when tuna was cap tured?  If not, could the U.S. explain why?  
 
Answer  
 
Pursuant to U.S. Public Law 105-42 from August 15,  1997, the labeling standards for Dolphin Safe 
Tuna have been defined as tuna which has been ca ptured without the intentional netting of dolphins.  
Subsection 5 states that it is a violation of section 5 of the Federal Trade Commission Act (15 U.S.C. 
45) to offer to sell tuna as dolphin safe which has been caught with a purse seine net intentionally 
deployed on or used to encircle dolphins durin g the particular voyage on which the tuna was 
harvested.  Although the legislation foresees a possible ch ange in the definition, that change is subject 
to a finding by the Secretary of Commerce that th e tuna purse seine fishery in the eastern Pacific 
Ocean is not having a "significant adverse impact" on any depleted dolphin stock.  On December 31, 
2002, the Secretary found that the fishery is not having any such significant adverse impact.  
However, the decision has been challenged in U.S. courts and any potential change in the definition 
has been enjoined by the courts  until this case is resolved. 
 
Question:  (Venezuela #5) 
 
Since the 1990s, U.S. market access for certain Ve nezuelan fisheries and/or aquaculture exports 
(yellowfin tuna and yellowfin-tuna products) has b een blocked as the result of an embargo imposed 
by the U.S. Government on Venezuelan exports not meeting the requirements of U.S. domestic 
regulations connected with an ecological labe ling scheme relating to the implementation of 
international fisheries regulations (Intern ational Dolphin Conservation Program Act). 
 
Since that time, Venezuela has made a series of efforts (officially and privately), incurring great 
financial cost, to achieve compliance with the provisi ons of the U.S. legislation in question and thus 
have the embargo lifted.  Via these efforts, Venezu ela has achieved compliance with the International 
Dolphin Conservation Program; nonetheless the restri ction continues, a circumstance that might 
suggest that this measure is being used as a non-ta riff barrier of a technical and financial nature.  
Could the United States explain why this measure remains in effect? 
 
Answer 
 
Venezuela cannot currently export yellowfin tuna and yellowfin-tuna products to the United States 
because it has not yet submitted a completed packag e for an "affirmative finding." The affirmative 
finding is required for any country fishing for yellowfin tuna in the Eastern Pacific Ocean with purse 
seine vessels greater than 400 short tons (362.8 metr ic tons) and seeking to export that tuna to the 
United States.  According to the National Marine Fisheries Service, while Venezuela submitted an WT/TPR/M/126/Add.3 
Page 110  
 affirmative finding application on March 23, 2001, the original application has been supplemented by 
additional information, but it is not yet complete.  The affirmative finding would allow Venezuela to 
export yellowfin tuna and yellowfin-tuna products to the U.S. as either non-dolphin safe or dolphin-
safe depending on whether or not intentional sets on dolphins had been made during that particular 
voyage. 
 
The affirmative finding process is described fully in  the U.S. Code of Federal Regulations (CFR) at 
50 CFR 216.24(f);  however, a summary of the requi rements is provided in the following paragraph. 
 
To attain an affirmative finding, the harvesting nation must submit the following: 
 
(1) Evidence of membership in the Inter-A merican Tropical Tuna Commission (IATTC); 
(2) Evidence that a nation is meeting its obligati ons to the IATTC, including financial obligations; 
(3) Evidence that a nation is complying with the International Dolphin Conservation Program 
(IDCP); 
(4) Evidence of a tuna tracking and verification program comparable to the U.S. tracking and 
 verification regulations at 50 CFR 216.94; 
(5) Evidence that the national fleet dolphin morta lity limits and national fleet per-stock per-year 
 mortality limits, if they are allocated to countries, were not exceeded;  and 
(6) Authorization for the IATTC to provide or release information, or a commitment from the 
harvesting  nation to provide directly to the A ssistant Administrator, complete, accurate, and 
timely information  necessary to verify information on tuna tracking forms.  
Question:  (Venezuela #6) 
 
Again with respect to labeling, could the United St ates provide information about existing regulations 
under U.S. law regarding genetically modified products? 
 
Answer 
 
Legal authority for food labeling rests with the U.S. Food and Drug Administration (FDA), which 
operates under the Federal Food, Drug, and Cosm etic Act (FFDCA). Under the FFDCA, foods 
derived from biotechnology are required to be la beled if they differ significantly from their 
conventional counterparts - i.e., if th eir nutritional content is altered, if they contain an allergen, or if 
they require special handling or preparation.  If a pr oduct is determined to be  substantially equivalent 
to its conventional counterpart - as all of the biot ech products currently on the market have been 
determined to be - then labeling is not required. 
FDA is not aware of any information indicating th at foods developed through biotechnology differ as 
a class in quality, safety, or any other attribut e from foods developed through conventional means - 
this is why there has been no requirement to add a special label saying that they are bioengineered. 
 
However, the United States supports consumers' d esire for information about the products they 
purchase. For example, some consumers may wish to have biotech products labeled (as either 
"biotech" or "non-biotech") for ethical, religious, or  other personal reasons.  In this regard, FDA is 
working on guidelines for voluntary  labeling of biotech products to en sure that any such labeling is 
truthful and not misleading to consumers, and gene rally conforms to U.S. food labeling regulations. 
 
FDA developed draft guidance for industry on labeli ng of genetically modified products in January 
2001.  It can be accessed via FDA's website at www.cfsan.fda.gov/~dms/biolabgu.html.  
 
 
  WT/TPR/M/126/Add.3 
 Page 111 
 
 Question:  (Venezuela #7)  
 
Could the United States supply information on the following:  (1) What are the maximum permitted 
levels of additives, contaminants, and pesticide residues?  (2) What regulations are expected to be 
issued by the United States concerning f oods for veterinary use and risk analyses? 
 
Answer  
 
This request is very extensive.  Each additive, contaminant, and pesticide residue and its effects on 
health are reviewed on an individual basis.  Pestic ide tolerances can be found in the Code of Federal 
Regulations (CFR), 40, Parts 180 - 186.  Food additive tolerances can be found CFR, 21, Parts 
172,173,180,181, 182, and 184.  Color additive tolerances can be found in CFR, 21, Parts 73 and 74.  
The website for searching the CFR is http ://www.gpoaccess.gov/cfr/index.html.  The maximum 
permitted levels for contaminants are not necessarily  found in regulations but  may be found on FDA's 
website at http://www.cfsan.fda.gov/~lrd/fdaact.html and at 
http://www.cfsan.fda.gov/~lrd/pestadd.html. 
 
The U.S. publishes a document called the Unified Ag enda that describes what new regulations U.S. 
federal agencies have committed to work on in the next six months.  The Unified Agenda can be 
accessed at http://www.gpoaccess.gov/ua/index.html. 
 
Question:  (Japan #40) 
 
The U.S. provided Japan with an explanation that  this export prohibition measure aims to protect 
spotted owls.  Japan, however, regards this measure  as a quantitative export restriction for protecting 
domestic saw millers because, first of all, the prot ection of spotted owls must be done by regulating 
log-cuts and not through export bans.  Secondly, onl y export restrictions have been introduced, while 
no regulations have been established for the domestic transactions of logs.  Japan would, therefore, 
like to request the U.S, once again, to amend this  measure in accordance with  the WTO Agreement as 
requested at the last Trade Policy Review of the U.S. 
 
Answer 
 
The United States takes note of Japan's views. 
 
Question:  (India #18)  
 
In agriculture and fisheries, U.S. standards and regulations governing the entry of certain products 
seem arbitrary and unscientific in nature.  For th e export of certain fruit items, the U.S. asks for 
preclearance inspection to ensure th at goods are free from ce rtain specified pests and "other insect 
pests that do not exist in the U.S. or that are not widespread in the U.S." Regulations on the basis of 
such an open ended list of unspecified pest do not appear to be scientific and lead to lack of 
transparency and hence hinder market access.  We would request the U.S. authorities to address the 
problem and review the legislation to make it more  definitive and less open ended.  We would also 
request the U.S. authorities to indicate as to whether the list of specific pests refers to the pests that 
exist in the USA and also whether this list of  specific pests is reviewed by the authorities. 
 
Answer 
 
U.S. standards and regulations are based on transp arent scientific and analytic assessments of pest 
risk. The United States bases its import requireme nts for fresh fruits and vegetables on an assessment 
of the phytosanitary risk posed by the particular product originating from a particular region.  The WT/TPR/M/126/Add.3 
Page 112  
 measures are appropriate to the risk and may range  from inspection upon importation to a mitigation 
treatment such as fumigation to a requirement fo r area pest-freedom.  Preclearance inspection is a 
measure that is agreed between the parties as appr opriate to the circumstances, and is not necessarily 
or even normally required. The United States fo llows the definition of the International Plant 
Protection Convention for quarantine pests, namely  a pest of potential economic importance to the 
area endangered thereby and not yet present there,  or present but not widely distributed and under 
official control.  This is consistent with the obligations under the WTO Agreement on the Application 
of Sanitary and Phytosanitary Measures a nd with international quarantine practice.  
 
Inspection and quarantine standards are developed based  upon an analysis of the pest risk associated 
with the imported commodity in accordance with international standa rds.  Our regulations are based 
upon an evaluation of risk.  We recognize that not all pests present a risk.  However, that is not the 
case for all pests.  Those pests that  present a risk must be prevented from entering the United States.  
The U.S. pest risk evaluation is an open and transp arent one.  The Animal and Plant Health Inspection 
Service (USDA) posts all pest  risk assessments (PRAS) on its website (www.aphis.usda.gov), 
including draft P.R.A.S. for the commodities seeking access.  All P.R.A.S. are prepared and reviewed 
and approved by U.S. scientists. 
 
CHAPTER 3 - TRADE POLICIES BY MEASURE 
 (4) Export Finance, Export Rest rictions & Controls, Section 301 
 
Question:  (EU #12)  
The WTO Secretariat report (WT/TPR/S/126, paragraph 164) describes the terms in which export 
transactions in the U.S. can be eligible for Ex-Im  Bank financing grant.  How is the term 'export' 
defined and how is the local content being assessed for services when the Ex-Im Bank grants support 
to an export transaction?  
Answer 
 Definition of Export
 
 
The United States defines the term "export" to be those goods and services that affect its balance of 
payments.  To distinguish the export of goods fro m the export of services, Ex-Im Bank follows the 
definition of service exports as defined by the World Trade Organization's General Agreement on 
Trade in Services (GATS).  GATS defines trading of services in four modes:  
 
 cross-border supply: services supplied from one country to another (e.g. 
international telephone calls) 
 consumption abroad: consumers or firms making use of a service in another 
country (e.g. tourism) 
 commercial presence: foreign company setting up subsidiaries or branches to 
provide services in another country (e.g. foreign banks 
setting up operations in a country) 
 presence of natural persons: individuals traveling from their own country to supply 
services in another (e.g. consultants). 
     WT/TPR/M/126/Add.3 
 Page 113 
 
 Assessing Local Content for Services  
 
Ex-Im Bank is assuming that the term "local content", as asked in this question, refers to U.S. content.  
To be eligible for Ex-Im Bank support, local (i.e . U.S.) services must be included in the U.S. 
exporter's scope of work.  Ex-Im Bank may support th e lesser of (i) 85% of the U.S. Net Contract 
Price;  or (ii) 100% of the U.S. content.  
 Question:  (EU #13)  
What kinds of services have been granted suppor t for exports?  Are these mainly transportation 
services as illustrated in the report (paragraph 168) or are there other kinds of services? 
 
Answer 
 
Ex-Im Bank's Charter was amended by Congress in 1983 to explicitly include services as an industry 
sector eligible for support on the same terms and conditions as support for goods.  Ex-Im Bank has 
established numerous services initiatives over the year s including an engineering multiplier program 
to facilitate the export of U.S. architectural, i ndustrial design, and engineering services; a medium-
term credit program in 1996 for environmental servi ces such as feasibility studies, energy services 
contracts, and environmental assessment services;  a Y2K initiative in 1999;  and a film production 
loan guarantee program in 2000 to back the production of exported U.S. independent films.  
 
While Ex-Im Bank can provide support for stand al one services, its support for services has typically 
been for those that are included as part of the capita l costs of an infrastructure project and other goods.  
Examples include services related to feasibility st udies and the maintenance of a facility such as 
product transportation services and training for plan t personnel, respectively.  Ex-Im Bank's support 
for services that have been tied to the export of g oods has been due largely to the fundamental fact 
that a service, unlike a capital good, is not a ta ngible item with a physical location.  Intangibility 
means that foreign content is not readily quantifia ble, which makes determining eligibility for Ex-Im 
Bank support an onerous task (e.g. c ontent, tenor, economic impact).  Furthermore, lack of a physical 
location means that the documentation normally required by Ex-Im Bank is difficult to produce.  
Question:  (Japan #37)  
 
The U.S. requires export licenses on the re-export of U.S.-origin items, even if they have already 
received export licenses from the exporting countries .  Such a regulation could be recognized as an 
extraterritorial application of U.S. domestic law,  which is impermissible under general international 
law.  The U.S. re-export control should, therefore be  abolished.  Especially, countries such as Japan, 
control their exports most effectively by, for inst ance, taking part in all export control regimes and 
introducing the Catch-all system for weapons of ma ss destruction and their delivery means.  Thus, 
Japan is convinced that there is little reason to control re-export items from these countries. 
 
Answer  
 The Governments of the United States and Japan have had extensive discussions regarding reexport 
controls.  The U.S. Government recognizes that th e Government of Japan considers U.S. re-export 
controls to be an extraterritorial application of domestic law.  However, U.S. reexport controls are 
required under federal law and reflect a long-st anding Congressional requirement.  Further, the 
United States is convinced that both export and reexport controls are necessary to protect U.S. 
national security and foreign policy interests.  The United States would be pleased to continue 
discussions on this issue.  WT/TPR/M/126/Add.3 
Page 114  
 Question:  (Japan #38)  
 
Besides, the scope of the U.S. re-export control al so covers export items which are incorporated in 
U.S.-origin items or software, etc.  It is thus diff icult for foreign exporters to judge whether or not an 
export item falls under the U.S. regulation.  Therefor e, the U.S. re-export control is a barrier for the 
re-export U.S.-origin items or the items which are inco rporated in U.S.-origin items.  Therefore, Japan 
requests the U.S. to at least enable exporters to  judge whether or not the item falls under re-export 
control in order to enhance the transparency of the contents and the implementation of the re-export 
control.  Please provide the U.S. position on the matter .  In this regard, as a transitional measure until 
the U.S. re-export control is abolished, the U.S. s hould oblige its exporters to provide their customers 
with enough information on the pro duct to be re-exported, including the Export Control Classification 
Number (ECCN), so that they can judge whether or not the imported item falls under re-export 
control.  Please provide the U.S. position on this matter 
 
Answer  
 The U.S. Government has recently taken steps to  assist foreign exporters in understanding their 
obligations under the U.S. export control system.  The Department of Commerce's Bureau of Industry 
and Security (BIS) recently revised and posted on its website "Guidance on Re-exports and Other 
Offshore Transactions Involving U.S.-Origin It ems."  This guidance is available at 
http://www.bis.doc.gov/ Licensing/ReExportGuidance.htm.  
BIS has also translated this guida nce into Japanese, and posted the tr anslated text of the guidance on 
its web site at http://www.bis.doc.gov/InternationalPrograms/ Foreign_Language/DOC042203_Japanese.htm.    
 BIS also offers seminars to explain U.S. regulati ons and provides extensive telephone, email, and one-
on-one counseling.  BIS held an export control out reach seminar in Japan in June 2003 in which BIS 
discussed the responsibility of foreign parties to co mply with U.S. export controls when re-exporting 
U.S.-origin goods.  The U.S. Government appreciates the Government of  Japan's suggestion to require an exporter to 
share certain information with re-exporters to assist  in complying with their obligations under U.S. 
export control regulations.  We are willing to discuss this suggestion, as the Un ited States encourages 
exporters to communicate with their customers.   We note one concern is that the original 
classification of an export may not be accurate for re -export transaction.  In addition, the classification 
of the product may change if a U.S.-origin item is a ltered after receipt.  Thus, if a re-exporter used the 
original classification supplied by the exporter, it may be incorrect. 
 
Question:  (Japan #39) 
 
Japan understands that exports of unprocessed ti mber originating from federal and state-owned 
forests, which are located on the west-hand side of  the 100-degree Longitude in the continental United 
States, are prohibited.  Is this understanding correct? 
 
Answer  
 
Yes.  The Forest Resources Conservation and Shor tage Relief Amendments Act of 1993 prohibits the 
export of unprocessed timber originating from Federa l, state and other public lands, west of the 48th 
meridian in the contiguous 48 states. 
 
  WT/TPR/M/126/Add.3 
 Page 115 
 
 Question:  (Japan #41 & 42)  
Reference:  p. 75, para. 193 and p. 59, para. 119  
The sanctions measures taken by the U.S. based on re lated acts (the Iran and Libya Sanctions Act, the 
Cuban Liberty and Democratic Solidarity Act, the Burmese  Freedom and Democracy Act as well as 
local and municipal sanctions acts) discourage, si gnificantly and unreasonably, investment into, and 
the establishment of economic relations with, the co untries targeted by those laws, which affects not 
only U.S. private enterprises, but also those worl d-wide.  In legal terms, they constitute an 
extraterritorial application of domestic laws, whic h is not permissible under general international law 
and may cause a problem of inconsistency with  the WTO agreements.  Moreover, fairness, 
transparency and predictability have not been observe d in their applications.  Particularly regarding 
the Iran and Libya Sanctions Act, Japan has taken every opportunity, including those available under 
the Japan-U.S. Regulatory Reform and Competition Polic y Initiative, to urge the U.S. not to apply the 
Act in a manner that may constitute a double standard.  
 
Japan, therefore, strongly requests the U.S. to ensu re the consistency of these acts with international 
laws, and to implement them prudently.  The appli cation of these acts to enterprises of third countries 
is especially discouraged.  What is the U.S. view on these points? 
 
Answer  
We appreciate the views of all our trading partners in this matter.  However, The United States remains bound by sanctions laws such as the Iran and Libya Sanctions Act (ILSA).  As you have 
noted, in August 2001, the Act was extended for a fu rther five years, until 2006, with amendments.  
By its terms, ILSA applies to those who engage in activities covered by the statute, without distinction 
by nationality.  The legislative history of the Ac t indicates a concern by Congress that the law be 
applied in a manner consistent with the inte rnational obligations of the United States. 
Question:  (Japan #104)  
We urge the U.S. to ensure that immigrati on measures relating to terrorism do not hinder the 
movement of persons, that there are no negative effe cts on trade and investment, and that consistency 
is maintained with WTO agreements  Answer  
 
The United States shares the goal of other countries in striving to achieve a transparent, reliable 
system for admission of natural persons to provide  services.  We have recently initiated changes to 
our immigration law that revise admission procedur es in response to national security concerns.  
Applicants affected by these pro cedures are informed of the need  and the importance for additional 
screening at the time they submit their applicati ons and are being advised to expect delays. 
 We recognize that these delays may impact visa  applicants, and we have already had success 
streamlining the process, consistent with our secu rity and legal responsibilities.  U.S. government 
agencies are working to rationalize clearance procedures in ways that continue to protect U.S. borders, 
while facilitating legitimate travel.  With regard to  the programs cited in Japan's question 104(a) (i)-
(vi), the United States would encourage econom ies to review the internet links below: 
 -  Visa waiver program, http://travel.state.gov/vwp.html -  Transit without Visa (TWOV) and International in-Transit (ITI),  
    http://travel.state.gov/twov.release.html  and http://travel.state.gov/twov.faq.html 
-  U.S.-VISIT, http://www.dhs.gov/dhspub lic/interapp/editorial/editorial_0333.xml 
-  Biometrics, http://www.dhs.gov/interweb/assetlib rary/veryFINALRevised_FAQs12-31-2003.pdf  WT/TPR/M/126/Add.3 
Page 116  
  
The U.S. Citizenship and Immigration Services (BCI S) offers quick e-mail notification of new Web 
content on visa-related issues.  Subscribers ma y choose from a number of different categories, 
including Immigration Policy and Procedure Me moranda, Updated Immigration Forms and Forms 
Information, What's New in Laws and Regu lations, and more.  To subscribe, go to 
http://uscis.gov/graphics/exec/ cns/index.asp. 
 
Question:  (Chile #5) 
 
Under the provisions of the Export Administration Act of 1979, 50 U.S.C. app. 2401-2420, the 
International Emergency Economic Powers Act, 50 U.S.C. 1701-1706, and the Export Administration 
Regulation, 15 C.F.R. (730-774), the exportation and reexportation of computer programs requires 
that an application for an export license be submitted to the Bureau of Industry and Security (BIS).  
Chile would like to know what criteri a are used in granting this license? 
 
Answer 
 The Department of Commerce, Bureau of Industry a nd Security (BIS) is the primary licensing agency 
for dual use exports (commercial items  which could have military appli cations). Computer software is 
considered a dual-use item.  If an item is subject  to the Export Administration Regulations (EAR), 
which is the case with U.S. origin computer soft ware, the item may require a license for export or re-
export. Whether a license is required will depe nd on the item's technical characteristics, the 
destination, the end-use, and the end-user.  Even if a license is required, license exceptions may be 
available in certain situations.  There are also special rules for exporting encryption software.  In 
addition, there may be no license requirement if th e software is published and publicly available.  
Where a license is required, the license application for computer software will be reviewed on a case-
by-case basis.  Most of these applications are appr oved.  Reasons for denial would include concerns 
that the end-user may utilize the computer software  for conventional military uses or the development 
of weapons of mass destruction. The risk of divers ion of computer software to a country or end-user 
of concern is also a consideration in determining whether to approve a license.  For more information 
on the licensing process, please see the following internet site:  http://www.bis.doc.gov/.  
 
Question:  (Chinese Taipei #4) 
 
We would therefore like to see the above-mentioned factors (i.e., the economic development status, 
and the policy-making and enforcement efforts of e ach country concerned) being taken into account 
by the U.S. in its Special 301 review.  Answer  
 
The United States engages in a comprehensive and caref ul review of its trading partners efforts to 
provide adequate and effective protection of intellect ual property rights.  We consult closely with our 
trading partners throughout the year and intensiv ely during the special 301 review process.  As 
indicated in USTR's annual report on special 301, we ta ke into account all relevant factors, including 
a government's IPR policy, in order to provide eff ective enforcement of IPRs and the success in those 
efforts.  
Question:  (Japan #57)  
 Since the Special 301 provisions may cause concern as to their compatibility with the WTO 
agreements, Japan requests the U.S. to implemen t them in a proper and prudent manner.  Please 
provide the U.S. view on Japans comment.  WT/TPR/M/126/Add.3 
 Page 117 
 
  
Answer 
 
The United States administers the Special 301 provisions  and all of its other trade laws in a manner 
consistent with its obligatio ns under the WTO Agreement. 
 Question:  (Switzerland #5)  
 
The new U.S. visa regime causes serious difficulties fo r travels to the U.S.  Taking into account the 
impact of these new measures on business, would the U.S. be ready to consider introducing flexibility 
in the procedures to obtain the visa in  particular for the business community?  
 Answer  
We recognize that these delays may impact visa  applicants, and we have already had success 
streamlining the process, consistent with our secu rity and legal responsibilities.  U.S. government 
agencies are working to rationalize clearance procedures in ways that continue to protect U.S. borders, 
while facilitating legitimate travel.  
Question:  (Cuba #1) 
 
When does the United States plan to comply with the 12 U.N. General Assembly resolutions that 
have, since 1992, overwhelmingly c ondemned the blockade against C uba, which constitutes a system 
of economic, financial, and commerc ial sanctions that violate the principles and specific provisions 
governing international trade endorsed by the WTO,  the United Nations, and various international 
agencies?  Answer  
 
The embargo is only one part of the United States ' multifaceted Cuba policy, intended to bring about a 
peaceful transition to democracy on the island.  The United States maintains that the embargo is a bilateral issue that has no place in multilateral fo ra.  The embargo is not a blockade;  embargo 
regulations apply only to persons or entities subject to U.S. jurisdiction.  We note Article XXI (b) in 
the GATT/WTO and other trade agreements that allo w states to exempt actions taken for purposes of 
national security.  (“Nothing in this Agreement shall be construed . . . to prev ent any contracting party 
from taking any action which it considers necessary  for the protection of its essential security 
interests.”)  Question:  (Cuba #2)  
 
When and how does the United States of America plan to comply with the decision of the WTO 
Appeal Organ concerning Section 211 of th e 1998 Omnibus Budget Appropriations Act? 
 
Answer  
 
The United States has informed the WTO Dispute Se ttlement Body that it intends to implement the 
DSB's recommendations and rulings in this dispute.  Consistent with the rules of the WTO, the parties 
to the dispute, the United States and the Europ ean Union, have agreed  that the deadline for 
implementation is December 31, 2004. 
 
 
 WT/TPR/M/126/Add.3 
Page 118  
 Question:  (India #34)  
 
It has been noticed that businessmen and exporters wanting to participate in jewellery exhibitions and 
trade fairs are facing problems in getting a U.S. vi sa.  Even recommendation letters of national export 
promotion council such as the Gen and Jewellery Ex port Promotion Council of India (GJEPC) are not 
given any weightage and Council officials have also not got a visa when they are selected to represent 
GJEPC at these exhibitions.  This operated as a ma rket access barrier.  We would request the U.S. 
authorities to address the problem and ensure that bonafide business visits are not hindered. 
 
Answer  
 We thank India for its comments.  We would note that while letters of support may be helpful they 
cannot guarantee visa issuance to a foreign national.   Visa applicants mu st qualify for the visa 
according to their own circumstances.  Questi ons on visa application procedures and visa 
ineligibilities should be made to the American consul ar office abroad by the applicant. Information on 
visa denials can be found at, http://travel.state.gov/visa ;ineligible.html.  The U.S. has also developed a 
guide for obtaining visas, which can be found at 
http://unitedstatesvisas.gov/ pdfs/gettingavisa.02.03.pdf. 
 The United States is in the process of consider ing various policy proposals concerning temporary 
entry as it relates to trade in services.  However, th ese policy considerations are at an early stage of 
development and thus it is not possible at this time to speculate.   Question:  (Korea Ch. IV, para. 118)  
 
According to para 118, the U.S. maintains an MF N exemption covering restrictions on performance of 
longshore work when making U.S. port calls by crews of foreign vessels owned and flagged in 
countries that similarly restrict U.S. crews on U. S.-flag vessels from longshore work.  Please provide 
us with information about which countries are subj ect to such reciprocity exceptions from the U.S. 
and whether or not the conditions that had created  the need for the MFN exemptions still prevail. 
 
Answer  
 In accordance with the Immigration and Nationality Act of 1952 (INA), the Department of State 
annually updates the list of countries in which perfo rmance of one or more specified activities of 
longshore work by crewmembers aboard United States ve ssels is prohibited by law, regulation, or in 
practice in the country.  Among certain other exce ptions, section 258(e) of the INA, entitled the 
"Reciprocity exception", allows the performance of  activities constituting longshore work by alien 
crewmen aboard vessels flagged and owned in count ries where such activities are permitted by crews 
aboard U.S. ships.  The Secretary of State is direct ed to compile and annually mainta in a list, of longshore work by 
particular activity, of countries where performan ce of such a particular activity by crewmembers 
aboard United States vessels is prohibited by law, regulation, or in practice in the country.  The 
Attorney General uses the list to determine whethe r to permit an alien crewmember to perform an 
activity constituting longshore work in the United St ates or its coastal waters , in accordance with the 
conditions set forth in the Act.  Crews of ships either  registered in or owned by nationals of countries 
on the list may not perform the longshore activities listed for that country.  
The Department bases the list on reports from U.S. diplomatic posts’ reports abroad and submissions 
from interested parties in response to the noti ce-and comment process.  On the basis of this 
information, the Department amended the 2003 list.  Effective January 14, 2004, the list includes 24  WT/TPR/M/126/Add.3 
 Page 119 
 
 countries not previously listed:  Albania, Antigua , Barbados, Brunei, Chile, Cook Islands, Grenada, 
Kazakhstan, Latvia, Lebanon, Macau, Namibia, Nige ria, Oman, Russia, St. Christopher and Nevis, 
Singapore, Sudan, Syria, Tonga, Turkey, Tuvalu , United Arab Emirates and Viet Nam.  Two 
countries were dropped from the list because the most recent information indicates that they do not 
restrict longshore activities by crewmembers of U.S. vessels:  Estonia and Micronesia.  
For more information on the country-specific re gulations, laws or pr actices that prohibit 
crewmembers aboard U.S. vessels from longshor e work, please see Federal Register Notice 4556, 
RIN 1400-AA34 found in Federal Register Vol. 68, No. 240.  
Question:  (China #73) 
 
Trade Assistance and Aid
 (p. 82, para. 222)  
 
Please list actual outlays to date, including actual payments obtained by various sectors, such as agriculture, textiles and apparels.  
 Answer 
 
The U.S. calculates the aggregate annual figures fo r the Trade Adjustment Assistance Program, both 
expenditures and participants (see chart below).  Expenditures on a sector or industry basis are not 
available. 
TRADE ADJUSTMENT ASSISTANCE PROGRAM ACTIVITIES 
Fiscal Years 1997-2002 
Number of Participants, Except Where Noted 
 
ACTIVITY 1997 1998 1999 
2000 2001 
2002 
Program Services:   
Entered training 22,839 21,333 28,113 22,657 24,843 34,255 
Job search allowances 481 243 255 351 236 251 
Relocation allowances 706 330 398 641 363 375 
Total allocations for TAA (mil$ ) 1/ $84.80 $96.70 $94.30 $92.70 $94.30 $94.40 
Trade Readjustme nt Allowances   
Number of new recipients  31,565 24,133 35,766 32,808 31,459 36,124 
Average weekly benefit $193.43 $191.12 $202.47 $217.45 $221.26 $232.51 
1/ TAA (trade adjustment assistance) includes traini ng and training-related expenses (tuition, supplies, 
travel and subsistence where necessary), job search allowances, relocation allo wances, and allocations 
for State administrative expenses.  Prepared June 5, 2003.  Question:  (Argentina #4) 
 
Reference is made in paragraphs 222-224 to a federal program called the Trade Adjustment 
Assistance Program (TAA), the key aim of which is to provide assistance and other support to 
workers displaced and firms whose sales have  declined as a result of foreign trade. 
 (a)  We ask for additional clarification regardi ng the distribution of the benefits under the TAA by 
branch of domestic industry.  WT/TPR/M/126/Add.3 
Page 120  
 (b)  In addition, it is not clear whether the groups  of workers and companies benefiting from the TAA 
must belong to branches of domestic productio n that have submitted requests for dumping 
investigations or subsidies to the Department of Commerce. 
 
Answer  
 (a)  Please refer to the response to China's Question #73. 
 (b)  The existence of an Anti-Dumping/Counterv ailing Duty petition is not an element in the 
Department of Labor's eligibility criteria for the Tr ade Adjustment Assistance Program (TAA).  Any 
party filing an application for certification for TAA eligibility must claim either loss of sales due to 
import competition or a shift of production abroad. 
 
Chapter 3 - BY MEASURE 
 (5) Competition 
 
Question:  (Japan #43)  
 
The U.S. gives the immunity from antitrust laws re garding the agriculture sector (certain activities 
under the Capper-Volstead Agricultural Producers' Asso ciation Act).  Japan is in a view that the 
immunity from antitrust laws has to be minimum in orde r to ensure fair trade.  Does the U.S. have any 
plans to review immunity from antitrust laws regarding the agricultural sector?  If not, please explain 
the necessity of maintaining the immunity.  
Answer  
 The vast bulk of the U.S. economy is subject to stan dard antitrust enforcement.  Any exceptions to the 
application of the antitrust laws, including those applied to the agricultu re sector, are narrow and 
strictly construed, exempting specific activities or entities for important public policy or constitutional 
reasons.  In addition, in some cases, specia lized regulatory agencies with sector-specific 
responsibilities apply competition rules analogous to  the federal antitrust laws, and the antitrust 
agencies retain an advisory, competition-advocacy ro le.  There is a wealth of public information 
available relating to antitrust exemptions and the reasons for maintaining them.  See e.g., ABA Section 
of Antitrust Law, Antitrust Law Developments (5th ed. 2002).   With respect to the Capper Volstead 
Act specifically, the U.S. Supreme Court, in c oncluding that an agricultural cooperative is not 
protected by the Act when it monopolizes or attempts to monopolize by engaging in predatory or otherwise anticompetitive practices, stated that th e general philosophy behind the Act "was simply 
that individual farmers should be given, through agricultural cooperatives acting as entities, the same 
unified competitive advantage - and responsibilit y - available to businessmen acting through 
corporations as entities."  Maryland & Virginia Milk Producers Ass'n v. United States, 362 U.S. 458, 
466 (1996).  The United States has relatively few exemptions fro m the antitrust laws, and, as noted in our response 
to question 44 below, the Department of Justi ce and the Federal Trade Commission (FTC) monitor 
the scope of such exemptions closely.  For exam ple, the FTC has taken a number of steps since the 
last TPR to ensure that the scope of the state acti on doctrine (whereby conduct of the states is shielded 
from the antitrust laws if such conduct is clearly ar ticulated state policy that is actively supervised by 
the state) remains appropriately limited to the doct rine's original intent.  To this end, the FTC 
established the State Action Task Force to examin e the doctrine's scope and to make any necessary 
recommendations to ensure that the application of the doctrine remain narrowl y construed.  The FTC 
is taking similar actions with respect to the No err - Pennington doctrine, which provides immunity  WT/TPR/M/126/Add.3 
 Page 121 
 
 from the antitrust laws to private parties petitioning the government, to ensure that the scope of this 
doctrine is limited to the doctrine's underlying rationale.  
Question:  (Japan #44)  
 
Japan understands that in sectors which contain ex emptions from the application of antitrust laws, 
there are regulatory authorities and, for some sector s, independent organizations (e.g. FMC).  The 
laws which allow immunity from antitrust la ws are implemented by  the above-mentioned 
organizations, and thus the authorities competent for providing immunity from antitrust laws are 
sectionalized.  In order to continue systematically lessening the scope of exemption from the application of antitrust laws, does there exist any l eading administrative organization to coordinate the 
progress?  How are the FTC and the Antitrust Division of  the Department of Justice able to cooperate 
with the regulatory authorities and/or independent organizations?  
Answer  
 The question raises broad issues concerning antitrus t exemptions, the interface between competition 
and regulation, and competition advocacy by antitrust agencies;  we will try to address each of these 
areas.  Industry-specific regulators, such as th e Federal Communications Commission ("FCC"), and 
antitrust authorities, the Antitrust Division of the Depa rtment of Justice (hereinafter "DOJ") and the 
Federal Trade Commission ("FTC"), have their genesi s in different statutes enacted at different times 
in the United States.  Traditionally, regulatory pr ograms were established for, and have had as their 
objectives, goals other than just competition (e.g., uni versal access, diversity of information sources) 
whereas the antitrust agencies have  been focused solely on comp etition.  However, deregulation 
initiatives in many industry sectors in the United St ates over the past several decades have led to 
greater regulatory emphasis on competition analysis and respect for free market fo rces.  This shift, in 
turn, has affected the dynamic between the indus try-specific regulator and the antitrust agencies. 
 
In general, business conduct in regulated industries is  addressed in one of three ways in the United 
States.  First, as noted in the answer to the prev ious question, in a few limited instances, conduct is 
statutorily exempt from the antitrust laws.  In such cases, the regulated company is said to be 
expressly exempt from the antitrust laws, or immunity is implied.  Antitrust immunity may be implied 
when there is a "clear repugnancy between the antitrust laws and the regulatory system."
1  Second, 
certain categories of conduct are subject only to th e antitrust laws.  For example, while the industry-
specific regulators may have jurisdiction to set pri ces, they do not have jurisdiction to criminally 
prosecute allegations of price-fixing.  Finally, th ere are categories of conduct over which the antitrust 
agencies and the industry-specific regulator have conc urrent or shared jurisdiction.  Concurrent or 
shared jurisdiction is observed most frequently in the area of merger enforcement but can occur in 
non-merger situations as well. 
 While there is no single, formal administrative or ganization dedicated exclusively to lessening the 
scope of exemptions from the antitrust laws, this is  something that the DOJ and FTC monitor closely 
pursuant to their consumer advocacy role in th e U.S. government.  (See response to Question 43 
describing the FTC's current efforts in this regard .)  In fact, both the FTC and DOJ have active 
competition advocacy programs.  The aim of these programs is to promote competition and to 
encourage other agencies, and state and local governments, to adopt pro-competitive rules and 
regulations.  Thus, the stated goals of DOJ's a dvocacy program are to: eliminate existing regulation 
that is unnecessary or too costly; discourage unnecessary new regulation;  minimize competitive distortions where regulations are needed by enc ouraging use of the least anticompetitive regulatory 
                                                     
 
1 United States v. Nat'l Ass'n of Securities Dealers, Inc., 422 U.S. 694, 719 (1975 ). WT/TPR/M/126/Add.3 
Page 122  
 methods;  and ensure that regulati on is designed to meet legitimate objectives.  The goals of the FTC's 
advocacy program, which are similar though more ge neral (and also cover its  consumer protection 
mission), are to prevent or lessen injury to co nsumers and competition that may be caused by 
government activities that interfere with the proper  functioning of the marketplace, and by advising 
appropriate government and self-regulatory bodies on the potential effects, both positive and negative, 
of proposed legislation, rules, or industry guides or  codes.  Consistent with these purposes, both DOJ 
and FTC have established effective relationships with many of the regulatory bodies in the United 
States.  Even when the specific advice of the antitrust agencies is not accepted, advocacy is valuable 
in a broader context because it allows the agenci es to share their expertise with regulators and 
legislators and to bring to their and the public's a ttention the potential costs to consumers of proposed 
laws and regulations. 
 
Question:  (Brazil Set III Competition #1)  
 
Antitrust review is mentioned in  paragraph 209 of document WT/TPR/S/126.  Could USA further 
explain its policies towards such practices?  Whic h are the main issues taken into account under U.S. 
antitrust review mechanism? 
 
Answer 
 
The Federal Trade Commission and the Department of Justice issued the current Horizontal Merger 
Guidelines (Guidelines) in 1992, and revised the se ction on efficiencies in 1997.  These Guidelines, 
which are available at http://www.ftc.gov/bc/docs/ho rizmer.htm, discuss the basic factors considered 
by the Agencies in their review of horizontal merg ers.  These Agencies held a three-day workshop in 
February 2004 aimed at seeking input on a range  of topics addressed in the Guidelines, from the 
application of the hypothetical monopolist test, to un ilateral effects and efficiencies, in an ongoing 
effort to improve understanding of issues aris ing in horizontal merger investigations. 
 
Question:  (Brazil Set III Competition #2) 
 
Are there any other criteria other than public inte rest and accordance with American antitrust law that 
applicants must comply with in order to obtain an exclusive or partial exclusive license under the 
Technology Transfer Commercialization Act of 2000?   How is "substantially manufactured in the 
United States" defined under such law? 
 
Answer 
 
Applicants must comply with several other statut ory requirements in order to obtain an exclusive 
license under the Technology Transfer Commerciali zation Act of 2000.  These requirements are set 
forth in 35 USC 209(a)(1)-(5), (b) and (c).  For example, under subparagraph (a)(1), an agency may 
only grant an exclusive license if the license is necess ary to call forth risk capital to commercialize the 
invention or otherwise promote utilization of the inve ntion by the public;  (a)(2) if the exclusivity is 
not greater than necessary;  (a)(3) if the licen see makes a commitment to commercialize within a 
reasonable time;  (a)(4) if granting the license w ill not tend to substantia lly lessen competition or 
create or maintain a violation of the Federal an titrust laws; or (a)(5) in the case of an invention 
covered by a foreign patent appli cation or patent, the interests of the Federal Government or United 
States industry in foreign commerce will be enhanced.  Section 209(b) states that "a Federal agency sha ll normally grant a license under section 207(a)(2) to 
use or sell any federally owned invention in the United States only to a licensee who agrees that any 
products embodying the invention or produced throu gh the use of the invention will be manufactured  WT/TPR/M/126/Add.3 
 Page 123 
 
 substantially in the United States.  "Substantially ma nufactured in the United States" is not defined in 
the statute nor in the implementing regulation in 37 CFR Part 404.  Section 209 (c) states that "first preference for the granting of any exclusive or partially exclusive 
licenses under section 207(a)(2) shall be given to  small business firms having equal or greater 
likelihood as other applicants to bring the invention to practical application within a reasonable time. 
 
Question:  (Chile #1) 
 
Does the United States believe that firms or c onglomerates that export to other WTO member 
countries should be subject to the laws and regulati ons on competition of the country of origin, just as 
companies that sell on the domestic market? 
 
Answer  
 
This question appears to deal with export comme rce, which is governed by the Foreign Trade 
Antitrust Improvements Act, 15 U.S.C. §6(a) and §45( a)(3).  Specifically, where the alleged conduct 
does not have the requisite effects on U.S. commer ce, U.S. antitrust laws would not apply.  See 
Paragraph 195 of the Secretariat's Report (W T/TPR/S/126), which summarizes the jurisdictional 
scope of U.S. a laws.  
Chapter 3 - BY SECTOR 
 
(6) Government Procurement and State Trading  Question:  (Brazil, Set 1-section VI)  
In paragraph 239, page 85, WT/TPR/S/126, it is writt en that:  "The United States maintains a number 
of "Buy American" restrictions for procurem ent not covered by the GPA, NAFTA, the WTO 
plurilateral Agreement on Trade in Civil Aircraft, and bilateral procurement agreements with Chile, 
Singapore, and Israel."  What are those?  
Answer  
 
The Buy American Act of 1933 is described in para graph 242 of the Report of the WTO Secretariat.  
As described in paragraph 244 of that Report, th e United States waives "buy American" restrictions 
for procurements covered by the GPA, NAFTA and other government procurement agreements. 
 Question:  (Brazil Set III Services #3) 
 
In Paragraph 234 it is stated that, "...The absence of  a uniform regulatory regime at the national level 
means that different market access conditions apply at  the state level, with reciprocal treatment being 
widely used;... Most states apply special rules a nd thresholds for the procurement of professional 
services (Chapter III(4)(iii).  Which States apply Speci al rules? What kind of special rules and 
thresholds are applied? 
 
Answer 
 
A number of U.S. states have agreed to cove r procurement under the Government Procurement 
Agreement (GPA).  That information can be found in Annex 2 of the U.S. Appendix to the GPA on 
the WTO website at: www.wto.org/English/traptop_e/gproc_e.  WT/TPR/M/126/Add.3 
Page 124  
 Question:  (Canada #13)  
 
The Report notes the exceptions to the Buy American Act, specifically;  "if it is determined that 
domestic preference is inconsistent with the public interest;  in case of U.S. non-availability of a 
supply or material;  or for reasonableness of cost."  What percentage of federal procurement contracts, 
for which the Buy America Act applies, is affect ed by one of the three exemptions noted above? 
 
Answer  
 
The United States does not maintain government-wid e information as to the percentage of federal 
procurement contracts affected by th e specific Buy American exemptions. 
 
Question:  (China #74)  
 
Please indicate the specific legislations applicable  to government procurement in services sector. 
 
Answer  
 
The Federal Acquisition Regulations (FAR) (found  at http://www.acqnet.gov/far/), as supplemented 
and implemented by agency regulations, govern the U.S. federal procurement system for both goods 
and services.  Question:  (EU #9)  
 
In the report of the WTO Secretariat (WT/TPR/S /126, paragraph 229), it is written that U.S. 
commitments at sub-central level under the GPA ar e limited to 37 States.  When does the U.S. 
administration expect to extend the coverage at s ub-central level both in terms of inclusion of all 
States and improved s ubstantial coverage? 
 
Answer  
 
Coverage at the sub-central level is based on th e voluntary commitment of the individual states.  
Thus, the United States is not able to indicate whethe r it will be able to extend coverage to additional 
states. 
 
Question:  (EU #10)  
 
Is the single web-based portal for government ac quisitions, resulting from the E-Government Act of 
2002 (paragraph 235), operational by now? 
 
Answer  
 
The official website for U.S. government acquisi tions (www.FedBizOpps.gov) has been operational 
for three years, beginning January 2, 2001.  Proc urement notices of all the agencies subject to the 
Federal Acquisition Regulations  are posted on that site. 
 
Question:  (EU #11)  
 
In the report of the WTO Secretariat it is mentione d (paragraph 239) that the U.S. maintains a number 
of 'buy American' restrictions for procurem ent not covered by the Agreement on Government 
Procurement, NAFTA, the WTO plurilateral agreem ent on Trade in Civil Aircraft and bilateral  WT/TPR/M/126/Add.3 
 Page 125 
 
 procurement agreements.  What is the extent of these restrictions and what is the reason for continuing 
this restriction?   
Answer  
 
The Buy American Act of 1933 is described in para graph 242 of the Report of the WTO Secretariat.  
As described in paragraph 244 of that Report, th e United States waives "buy American" restrictions 
for procurements covered by the GPA, NAFTA and other government procurement agreements. 
 
Question:  (Indonesia #6)  
Authorities at the state level apply some restricti ons that make the BAA even more discriminatory 
against foreign products.  In New Jersey, for instan ce, State legislation that for the construction of 
public work projects funded by the State, the materials used must be of domestic origin.  In the States 
of Connecticut, Louisiana, Maine, Michigan, I llinois, Maryland, New York, Pennsylvania, Rhode 
Island and West Virginia there are legislations that, in effect, require the use of locally produced steel 
for public works and other government procuremen t contracts involving steel and steel products.  
Legislation in West Virginia and Ohio makes it even  clearer of the discriminatory nature of the BAA 
at the state level by introducing procurement rest rictions on steel imports.  These restrictions have 
clearly affected the interests of many countries in cluding Indonesia.  Therefore, Indonesia would like 
to have further clarification on this policy.  
 
Answer 
 
States that have agreed to be covered by the WTO Agreement on Government Procurement (GPA) 
carry out their procurement in a manner that is consiste nt with that Agreement.  In certain cases, they 
have taken reservations for certain types of procuremen ts.  For those states that are not covered by the 
GPA, they are under no international obliga tions with regard to their procurement.  
 
Question:  (New Zealand #6) 
 
(1) What criteria does the United States use to  assess whether a count ry accords its national 
treatment and therefore should be granted r eciprocity vis-a-vis government procurement? 
 
(2) In what way(s) does the United States percei ve New Zealand does not fulfill the criteria set 
out in the answer to the question above?  
 
Answer 
 
(1) The Trade Agreements Act of 1979, as am ended, authorizes the President to waive 
discriminatory purchasing requireme nts with respect to countries that  have become a Party to the 
WTO Agreement on Government Procurement or a nother government procurement agreement that 
provides for reciprocal competitive government procurement opportunities for U.S. products and suppliers of such products. 
 
(2) New Zealand has not become a Party to the GPA or another agreement that covers 
government procurement.  
 WT/TPR/M/126/Add.3 
Page 126  
 Question:  (Switzerland #10) 
 
Will the web-based portal for government acquisitio ns (III, §235) cover all entities under the GPA at 
the federal level for tender notices?  Will it include also award notices and notices referring to lists of 
qualified suppliers?  When w ill it be fully operational? 
 Answer 
 
The official website for U.S. government acquisi tions (www.FedBizOpps.gov) has been operational 
for three years, beginning January 2, 2001.  Proc urement notices of all the agencies subject to the 
Federal Acquisition Regulations ar e posted on that site, including award notices and notices relating 
to qualified supplier lists.  
 
Question:  (Switzerland #11) 
 
What potential do the United States see in impr oving market access and eliminating discriminatory 
provisions in the current negotiations under the GPA? 
 
Answer  
The United States has been an active participant in  the ongoing negotiations on reexamining the GPA 
text.  We look forward to participating in the market access negotiations under the GPA.  
 Question:  (Switzerland #12) 
 
What flexibility could the United States envisage in te rms of rules and market access in order to make 
the GPA more accessible to the developing countries who have taken commitments to join it in their 
WTO accession protocol and to other devel oping and the least developed countries?  
 
Answer  
The United States supports the use of transition peri ods for developing and least developed countries 
to facilitate their accession to the GPA.  It is al so prepared to consider other measures that would 
further facilitate their accession to the GPA.  
 
Chapter 3 - BY MEASURE  (7) Intellectual Property Rights 
 
Question:  (Japan #45) Reference:  p. 90, para. 265  
 
Please explain how many cases have been judged as ha ving infringing importation (right to control 
the imports of copyright products) under Article 602 of the Copyright Act?  Are there any other cases 
of having infringing importation, except for the musi cal CDs?  Please provide some statistics on these 
infringing importation cases.  In addition, please explain the relation between controlling the imports of a copyright product and the anti-trust law.  
Answer 
 Section 602(a) of the U.S. Copyright Act makes th e unauthorized importation into the United States 
of "lawfully made" copies or phonorecords "acquire d outside of the United States" an infringement of  WT/TPR/M/126/Add.3 
 Page 127 
 
 the distribution right.  Section 602 (b) of the Act prohibits the importation of unlawfully made, or 
piratical, copies or phonorecords.  Section 602 is not limited to a specific category of protected work (such as sound recordings in the CD format), but rath er covers all protected subject matter, including 
literary works, works of visual art, and audiovisu al works.  Under sections 602 and 603, U.S. Customs 
is authorized to seize imports at the border of artic les that are made without authorization (i.e., were 
unlawfully made) and does so on a regular basis.  U.S. Customs has no authority to stop the 
importation of products lawfully made outside th e U.S., so it cannot seize parallel imports at the 
border (i.e., articles that infringe only Section 602(a)).   Rightsholders, however, have a private right of 
action under Section 602 to stop infringing parallel imports. 
 Customs does not break down its statistics concerni ng infringing imports in such a way that we can 
determine the total number of infringing "parallel" imports seized.  Here is the link to the Customs 
Rulings Online Search System (CROSS):  http://www.cbp.gov/xp/cgov/import/co mmercial_enforcement/ ipr/seizure 
 A search of U.S. federal case law reveals approximately thirty cases in which a U.S. federal court has 
cited Section 602 of the United States Copyright Act.  The cases represented many categories of 
works, including video games, toys, works embodi ed in consumer products, sound recordings, and 
books.  U.S. courts have held that the mere exercise of one of the copyright owner's exclusive rights does not 
create an antitrust violation.  If the alleged infringe r believes that the exercise of the importation right 
creates an antitrust violation, then the defendant may raise antitrust or "copyright misuse" defenses. 
 
Question:  (Japan #46) Reference:  p. 91, para. 266, p. 92, para. 270 and p. 93, para. 272  
Japan has faithfully implemented the "Japanese Actions  to be taken by the Patent Office", confirmed 
by the Japan Patent Office (JPO) and the United States Patent and Trademark Office (USPTO) during the 1994 intellectual property rights working group of the Framework Talks.  However, the U.S. has never entirely implemented the introduction of an early publication system without exceptions, nor 
the improvement of re-examination.  Japan strongl y requests the U.S. to implement these items in 
accordance with the agreed actions promptly.  
 Answer 
 
The provisions for the adoption of an "early pub lication" system in the United States that were 
originally sent to the U.S. Congress (in the 104
th Congress) were fully consistent with the obligations 
of the 1994 United States-Japan patent accords.  
 U.S. obligations in those 1994 patent accords were satis fied by the timely introduction of the relevant 
bill in the 104
th Congress.  The United States made every e ffort to have legislation passed that was 
consistent with the 1994 patent accords, and C ongress enacted Public Law 106-113 on November 29, 
1999.  This law contains a provision to publish, with in 18 months, most patent applications filed in 
the United States.  The law also added new oppor tunities for third parties to participate in 
reexaminations, including determinati ons made by the patent examiner to the Board of Patent Appeals 
and Interferences, in accordance with the understanding reached as part of the Framework Talks.  The 
U.S. Congress more recently passed legislation that  would provide for third party appeals to the 
Federal Circuit in inter partes reexamination.  (See Section 13106 of 5P.L. 107-273.)  
   WT/TPR/M/126/Add.3 
Page 128  
 Question:  (Japan #47) 
 
In particular, in order to tackle the following i ssues, Japan requests the U.S. to promptly implement 
these items in accordance with the agreed actions of the Framework Agreement in order to abolish the 
early publication systems with exceptions, and  to disclose all applications, excluding those non-
pending and those under secret order, within 18 mont hs after the first filing date of the patent 
application. 
 (a) The early publication system in the U.S., which was introduced in November 2000, provides 
exceptions whereby patent applications filed in the U.S., but not filed overseas, or matters included in 
a patent application filed in the U.S., but not in cluded in the corresponding application filed overseas, 
cannot be laid open at the request of the applicant.  It might be, therefore, possible that a patent will be 
granted after a long undisclosed period ("Submar ine Patent").  Without knowing whether or not 
another application is already on file for the same invention, it is unavoidable to invest in R&D in 
duplication;  thus, we are concerned that this  system causes serious social and economic loss.  
 
(b) Furthermore, USPTO provides that patent pr otection may be extended  to compensate for any 
amount of processing delays and USPTO-caused delays.  Japan would like to point out that there is a 
possibility of deliberate delays being caused, and that under the current U.S. system of not having an adequate early publication system, there would be  other opportunities to create a submarine patent 
through the extension of patent terms.  
 
Answer  
Because most patent applications filed in th e United States are published within 18 months, we 
believe that experience with our publication syst em will demonstrate over time that the need for 
exceptions will be proven to be unwarranted.  More over, continuing efforts to further reduce patent 
pendency in the United States will help to alleviat e any problems that these exceptions may cause. 
 
Extensions of patent term ar e not available for delays caused by a patent applicant. 
 
Question:  (Japan #48) 
 In addition, any pending applications , already filed with the USPTO at the time of the amendment of 
the law (before June 8, 1995), continue to benefit fr om the former patent term s (i.e. a 17-year patent 
term from the date of the patent grant);  the amende d patent law not being applicable.  There is still, 
therefore, the possibility that a dditional submarine patents occur.  
 
Answer  
Because average patent pendency in the United States  is approximately two years, the possibility of 
submarine patents occurring based on applications pending on June 8, 1995, has greatly diminished 
over time and will continue to do so.  Question:  (Japan #49) Reference:  pp. 91-94, paras. 268-279  
Regarding the Plant Breeder's Right, Japan understand that the U.S. is a member of the 1991 Act of 
the UPOV Convention and that it protects new plant varieties through the Plant Variety Protection 
(PVP) law and the patent law.  
  WT/TPR/M/126/Add.3 
 Page 129 
 
 (a) Please explain the acts that will cause loss of " novelty" under both the PVP law and the patent 
law as a plant patent.  
 
Answer 
 
Under 7 U.S.C. 2402 of the Plant Variety Protection Ac t (PVPA), a plant variety is deemed new if on 
the date of filing of the application for plant vari ety protection, propagating or harvested material of 
the variety has not been sold or otherwise disposed of to other persons, by or with the consent of the 
breeder, or the successor in interest of the breeder, for purposes of exploitation of the variety (1) in the 
United States, more than 1 year prior to the date of filing, or (2) in any area outside of the United States, more than 4 years prior to the filing of th e application or in the case of a tree or vine, more 
than 6 years prior to the date of filing.  Under the PVPA, therefore, acts that do not meet these 
conditions would result in a loss of novelty.  Any sexually reproduced or  tuber propagated plant 
variety (other than fungi or bacteria) are covere d under the PVPA.  (See Section 3 of Public Law 103-
349, 108 Stat. 3138, and Sec. 913(a) of Public Law 104-127, 110 Stat. 1186.) Under the Plant Patent Act, a plant variety is deemed new unless: 
 
(a) the invention was known or used by others in  this country, or patented or described in a 
printed publication in this or a foreign country, be fore the invention thereof by the applicant for 
patent, or  
 (b) the invention was patented or described in a pr inted publication in this or a foreign country or 
in public use or on sale in this country, more than one year prior to the date of the application for 
patent in the United States, or  (c) he has abandoned the invention, or  
(d) the invention was first patented or caused to be  patented, or was the subject of an inventor's 
certificate, by the applicant or his legal representatives  or assigns in a foreign country prior to the date 
of the application for patent in this country on an application for patent or inventor's certificate filed 
more than twelve months before the filing of the application in the United States, or 
 (e) the invention was described in - (1) an app lication for patent, publis hed under section 122(b), 
by another filed in the United States before the inve ntion by the applicant for patent or (2) a patent 
granted on an application for patent by another file d in the United States before the invention by the 
applicant for patent, except that an international application filed under the treaty defined in section 
351(a) shall have the effects for the purposes of this  subsection of an application filed in the United 
States only if the international application d esignated the United States and was published under 
Article 21(2) of such treaty in the English language;  or  
 (f) he did not himself invent the subject matter sought to be patented, or  (g)(1) during the course of an interference c onducted under section 135 or section 291, another 
inventor involved therein establishes, to the extent permitted in section 104, that before such person's 
invention thereof the invention was made by such  other inventor and not abandoned, suppressed, or 
concealed, or (2) before such pers on's invention thereof, the invention was made in this country by 
another inventor who had not aba ndoned, suppressed, or concealed it.  In determining priority of 
invention under this subsection, there shall be c onsidered not only the respective dates of conception 
and reduction to practice of the invention, but also  the reasonable diligence of one who was first to 
conceive and last to reduce to practice, fro m a time prior to conception by the other. 
 WT/TPR/M/126/Add.3 
Page 130  
 The Plant Patent Act 35 U.S.C. 161, applies to ase xually reproduced varieties, other than a tuber 
propagated plant or a plant found in an uncultivated  state.  With respect to novelty, this Act 
incorporates the requirements of 35 USC 102 in the Patent Act.  See Public Law 92-358, sec. 2, 86 Stat. 501; Public Law 94-131, sec. 5, 89 Stat. 691;   Public Law 106-113, sec. 1000(a)(9), 113 Stat. 
1501A-565 (S. 1948 sec. 4505);  Public  Law 106-113, sec. 1000(a)(9),  113 Stat. 1501A-590 (S. 1948 
sec. 4806);  Public Law 107-273, sec. 13205, 116 St at. 1903.)  Under United States law, however, in 
order for a publication to defeat novelty, the publi cation must be an enabling publication under 35 
U.S.C. 112, 1
st paragraph.  Any acts consistent with th e above, will defeat novelty under the Plant 
Patent Act. 
 
Question:  (Japan #49, i) 
 
Do the acts of publication, such as the publication of catalogues, the publication of the application in 
other countries, or the publication of papers on a certain variety, cause a loss of "novelty" of the 
variety in question?  Answer  
 
A printed publication can serve as a statutory bar under 35 USC §102(b) of the Plant Patent Act if the reference, combined with knowledge in the prior art,  would enable one of ordinary skill in the art to 
reproduce the claimed invention, see In re LeGrice , 301 F.2d 929 (CCPA 1962).  Therefore, if the 
plant in question was publicly available, then the granted PBR certificate, combined with knowledge 
in the prior art, would enable one of ordinary skill in the art to reproduce the claimed plant, and would 
therefore constitute an enabling disclosure under 35 USC §102(b), see Ex Parte Thomson , 24 
USPQ2d 1618 (Bd. Pat. App. & Int. 1992).  The pub lic availability referred to here may include 
availability to the public in a foreign country.  Fo r example, a foreign Plant Breeder's Right (PBR) 
certificate may be considered a "printed publicatio n," and may therefore be prior art against an 
invention under 35 USC §102(b), if it constitutes an "enabling disclosure". 
 This availability must not be confused with the stat utory bar of prior use or sale, also contained in 
section 102(b), as foreign prior use or sale, as such, is  not a bar to patentability in the United States. 
 
Question:  (Japan #49, ii) 
 
According to the UPOV Act, "the variety shall be de emed to be new if, at the date of filing of the 
application for a breeder's right, propagating or harves ted material of the variety has not been sold or 
otherwise disposed to others, by or with the con sent of the breeder, for purposes of exploitation of the 
variety".  However, the cases described above are acts  of publication of the variety, and no act relating 
to sale or otherwise disposed to ot hers for propagating material or for harvested material are involved.  
If the cases described above suffer a loss of "novelty" for a variety in the U.S., please explain why.  In 
addition, please provide the U.S.'s interpretati on of Article 6 of the 1991 Act of the UPOV 
Convention. 
 
Answer 
 With the exception of tuber propagated plants (whi ch are subject to the PVPA), asexually reproduced 
plant varieties are not subject to the PVPA under Un ited States law.  Additionally, the United States 
made a reservation pursuant to Article 35(2) of the 1991 UPOV Convention when it ratified the 
Convention, and therefore, asexually reproduced pl ants are not subject to the 1991 UPOV Convention 
(with the exception of tuber propagated plants).  Thus, if an asexually reproduced variety loses 
novelty based on a publication, this is because 7 US C 2402 (which is consistent with Article 6 of  WT/TPR/M/126/Add.3 
 Page 131 
 
 UPOV) is not the controlling law;  35 USC 102 is the law that is applied to asexually reproduced plant 
varieties.  Some situations which would result in a loss of novelty under Article 6 of the 1991 UPOV Convention would include sale of a variety in United St ates more than 1 year prior to filing for a plant 
breeder's certificate in the United St ates, sale of a variety in a foreign country more than 4 years (or 6 
years for trees or vines) prior to filing for a plant breeder's certificate in the United States, or giving 
away a variety for exploitation within the prescribed time periods, for example.  
 
Question:  (Japan #49, iii)  
The 1991 Act of the UPOV Convention states that th ere are certain grace periods for novelty:  one 
year for that taking place within the territory of th e Contracting Party and four years (six years for 
trees and vines) for that outside the territory.  Pl ease provide information on the relevant provisions of 
the grace periods in the U.S., both unde r the PVP law and the patent law. 
 
Answer  
7 U.S.C. 2402 describes the circ umstances for which novelty is defeated under the Plant Variety 
Protection Act.  
 35 U.S.C. 102 describes the circumstances for which novelty is defeated under the patent law.  A 
prima facie case is made out under 35 U.S.C. 102(a) if, within 1 year of the filing date, the invention, 
or an obvious variant thereof, is described in a "p rinted publication" whose authorship differs in any 
way from the inventive entity unless it is stated with in the publication itself that the publication is 
describing the applicant's work.  In re Katz, 687 F.2d 450, 215 USPQ 14 (CCPA 1982).  The term 
"others" in 35 U.S.C. 102(a) refe rs to any entity which is different from the inventive entity.  The 
entity need only differ by one person to be "by others ."  This holds true for all types of references 
eligible as prior art under 35 U.S.C. 102(a) incl uding publications as well as public knowledge and 
use.  Any other interpretation of 35 U.S.C. 102(a) "would negate the one year [grace] period afforded 
under §102(b)."  In re Katz, 687 F.2d 450, 215 USPQ 14 (CCPA 1982).  
 
Question:  (Japan #49(b)) 
 
Is there any plan to change the provisions for "nove lty" in the U.S. laws in the future?  If so, please 
indicate the details of the changes and the timetable. 
 
Answer 
 
A bill has been introduced before the 108
th Congress, but when or if this Congress will take action on 
this bill is unknown. 
 
Question:  (Japan #50)  
Reference:  p. 92, para. 270  
 
The U.S. is the only country to use a "first-to-invent" system, which, with regard to the patent system, 
makes the U.S. rather unique.  Moreover, this syst em lacks certainty and predictability in the sense 
that a patentee's status can be overturned by the appearance of a subsequent prior inventor.  This 
involves additional burden to inventors, who are thus required to prepare and keep documentary 
evidence to prove the date of invention.  Many c ountries, including Japan, have pointed out that this 
issue creates a barrier for foreign companies when trying to penetr ate the U.S. business community.  
Although the practice of maintaining the first-to-invent system is not necessarily against the TRIPS WT/TPR/M/126/Add.3 
Page 132  
 Agreement, Japan again requests the U. S. to adopt the first-to-file syst em.  This is due to the necessity 
to maintain a transparent and stable system, as we ll as to reduce the burdens borne by users through 
the differing systems. 
 
Answer 
 Although the U.S. first-to-invent patent system is  unique, it is clearly compatible with the TRIPS 
Agreement, it has worked well and, indeed, has certain  advantages.  For example, our system is fairer 
than first-to-file systems in that it rewards the first inventor who files a patent application rather than 
the first-to-file an application, regardless of whethe r that first applicant to file an application was, 
indeed, the first inventor. 
 
From a purely statistical viewpoint there would seem to be little difference in result between a first-to-
invent patent system and a first-to-file patent system .  More than 99.9% of patent applications filed in 
the U.S. raise no dispute as to priority of invention.   Even when such disputes arise, the inventor who 
filed first prevails in a significant majority of th ese cases.  The actual effect of a switch to first-to-file 
system, thus, is likely to have little or no act ual significance based upon these statistical findings. 
 With regard to the alleged burden imposed by a fi rst-to-invent system with regard to documentary 
evidence to prove the date of invention, it should be  kept in mind that inventors in most first-to-file 
systems also maintain such  evidence in order to be able to assert "prior user rights" or derivation.  
Documentary and other objective evidence is require d to establish prior user rights in cases where an 
earlier inventor wishes to continue using an inventio n that was patented by another party that filed 
first, and obtained, a patent on that invention.  Such evidence is also required prove inventorship 
where the first person to file derived the invention from the true inventor and is not entitled to the 
patent.  Question:  (Japan #51) Reference:  p. 93, para. 271 
 
The "Hilmer" doctrine, which exists in the United Stat es, is an application which has a prior art effect 
only up to the date of the application in the United St ates.  Foreign applicants usually file applications, 
first in their own country and then in the U.S., th ereby claiming priority under the Paris Convention.  
Due to the "Hilmer" doctrine, such  foreign applicants cannot prevent the patent grant from conflicting 
with applications filed before the actual filing date of any subsequent applications in the U.S., even 
during the priority period, and therefore may suffer a disadvantage. 
 
Answer 
 
The concerns of the Hilmer Doctrine, if any, were mitigated to a large extent  by changes to the U.S. 
patent law that went into effect on June 8, 1995.  These changes permit all patent applicants, including 
those from Japan, to file provisional patent applicati ons that will give them the earliest possible prior 
art date for subsequently filed non-provisional applicati ons.  It should also be noted that this issue is 
under discussion in the ongoing substantive patent law harmonization talks in WIPO. 
 Question:  (Japan #52) 
 
This might be against Article 4B of the Paris Conve ntion, which stresses that acts by a third-party in 
the priority period "cannot give rise to any third- party right or any right of personal possession" and 
Article 2.1 of the TRIPS Agreement, which re quires compliance with Article 4 of the Paris 
Convention.  Japan therefore requests the U.S. to revise its system . 
  WT/TPR/M/126/Add.3 
 Page 133 
 
 Answer 
 
The effective date of a patent application as a prio r art reference under the so-called "Hilmer" doctrine 
is not inconsistent with the obligations of Article 4B of the Paris Convention, as it does not affect the 
ability of an applicant to obtain a patent where the ap plicant has made a priority claim that establishes 
an effective filing date prior to the effective prior art date of the patent.  Note that WIPO's Patent 
Cooperation Treaty explicitly allows countries to  apply the Hilmer doctrine in Article 64.4. 
 
Question:  (Japan #53) 
Reference:  p. 94, para. 275  
Japan understands that the USPTO implemented a public comment procedure, and is trying to 
harmonize its patent system with the international syst em of Patent Law.  However, with regard to the 
unity of invention, under the current U.S. patent sy stem, the scope of inventions that can be included 
in a single application is, according to what we have  been requested so far, narrower than that under 
the systems of the JPO and the European Patent O ffice (EPO).  Thus, a patentee is obliged to submit 
multiple applications, thereby increasing the burden.  Jap an repeats its request to the U.S. to adopt the 
same criterion for its unity of invention as that of Japan and Europe.  
 
Answer  
The U.S. Patent and Trademark Office has been st udying the implementation of unity of invention for 
national applications for many years.  There ar e serious implementation c oncerns including revenue, 
resource allocation and labor management.  These c oncerns must be viewed in the context of the 
difficulties in coping with application filings that co ntinue to increase year-to-year, especially in high-
technology areas.  There are also concerns that the current unity standard may not be the best approach to the issue of limiting the claiming of mu ltiple inventions in single applications, especially 
in those emerging technologies.  To that end, th e United States, in the ongoing discussions of WIPO's 
Standing Committee on the Law of Patents (SCP), h as supported the formation of a Working Group to 
further study this issue. 
 
Question:  (Japan #54) Reference:  p. 97, para. 289 
 The Secretariat's Report describes that the  Digital Millennium Copyright Act of 1998 implemented 
the WCT and the WPPT.  However, Japan is of the view that the U.S. Copyright Law does not fully 
protect the moral rights stipulated in Article 6 (2 ) of the Berne Convention applied to the WCT, the 
moral rights of performers stated in Article 5 of the WPPT, the right of making available expressed in 
Article 8 of the WCT and in Articles 10 and 14 of  the WPPT, and the economic rights of performers 
in their unfixed performances mentioned in Article  6 of the WPPT.  Please explain, with the specific 
provisions of legislation, how these rights are protected in the U.S.  
 
Answer 
 Moral rights are protected in the United States not under a single law, but rather through a 
combination of federal copyright law, state commo n law, and other federal and state laws.  Moral 
rights are protected in the Copyright Act, not only through section 106A, but also through the application of the author's economic rights in sect ion 106, such as the right to prepare derivative 
works under section 106(2).  For instance, the protection of the right of integrity will almost always 
implicate the author's (or other copyright owner' s) right to reproduce the work or to prepare a 
derivative work.  These are rights that would be invo lved in preparing a modification of an author's 
work that could violate the right of integrity (which is probably the moral right most likely to be WT/TPR/M/126/Add.3 
Page 134  
 violated in the digital manipulation of images or te xt).  Protections for the right of attribution are 
provided under a combination of state, federal and common laws. 
 
The U.S. provides full rights of making available as required by the WCT and WPPT in Section 106 
(4)-(6) of the Copyright Act, as further clarified by th e definitions in Article 101 of the Act, as further 
clarified by the definitions in Article 101 of the Act, as well as through case law.  
 
The United States protects unfixed or live performances under section 1101 of the Copyright Act.  Section 1101 was adopted as part of the Uruguay Round Agreements Act in order to comply with certain portions of Article 14 of the TRIPS Agreem ent.  All of the various remedies for copyright 
infringement are made available to those w ho are injured by violations of section 1101. 
 Question (Japan #55)  
Reference:  p. 97, para. 292  
 
Regarding Articles 203 and 304 of the Copyright Act,  which enables the right holders to terminate 
transfers and licenses, Japan wishes to have concrete  explanations on the following points:  (a) the 
purpose of this system;  (b)the basis of the termin ation period, which is effective for 5 years after 
expiration of the 35-year period from the date of execution of the grant; and (c) in the case where someone doing business by using the transferred right notices the termination of a grant by the author, 
how is the safety of the business assured?  
 
Answer 
 
Purpose of Sections 203 and 304 of the Copyright Act 
 In general, the purpose of Section 203 of the Co pyright Act, which permits the termination of 
transfers and licenses in copyrighted works made on or after January 1, 1978, is to allow the author, or 
the author's heirs, to recapture the value of the work.  The purpose of Section 304(c), which permits the termination of transfers and licenses of renewa l rights in copyrighted works made before January 
1, 1978, is to allow the author, or the author's heir s, to recapture the 19-year extension of the renewal 
term under the 1976 Copyright Act.  
Basis of the Termination Period 
 Under Section 203, termination may be effected at any time during a five-year window, which begins 
at the end of 35 years from the date of executions of the grant.  Under Section 304(c), termination 
may be effected during the five-year window that begins 56 years from the date copyright protection 
was originally secured (in the usual case , upon notification with proper notice). 
 Business Safety  Under both Sections 203 and 304, ther e are exceptions to termination that  help to assure what the U.S. 
understands as "business safety".  Under Section 203,  for example, the owner of a derivative work 
made under a grant before termina tion may continue to use the deri vative work after termination, 
subject to a duty to continue to comply with the terms of the original gran t (such as the payment of 
royalties).  There is a similar provision for the use of  derivative works under Section 304.  In addition, 
works made for hire (such as works made by an employee of a business) are not subject to termination under Sections 203 and 304. 
 
 
  WT/TPR/M/126/Add.3 
 Page 135 
 
 Question:  (Japan #56) 
Reference:  p. 97, para. 293  
As the U.S. was unable to implement the recommendations of the WTO panel on the U.S. Copyright 
Act, in a reasonable period of the time, which is in violation of TRIPS obligations, the U.S. made a 
lump-sum payment of US$3.3 million to the EU ove r a three-year period ending in December 2004 
US$1.1 million per year as compensation for the EU's loss of benefit.  Japan would like to ask the 
U.S. for an explanation on the lega l process of this matter in the U.S. 
 
Answer  
Consistent with the Understanding on Rules and Procedures Governing the Settlement of Disputes , 
the United States and the European Communities reached a mutually satisfactory temporary 
arrangement with respect to the dispute United States - Section 110(5) of the U.S. Copyright Act  (DS 
160).  The arrangement, which the United States a nd the European Communities have notified to 
WTO Members, covers the period commencing at the end of the "reasonable period of time" for 
implementation in this dispute and ending December 21, 2004. 
 Pursuant to this arrangement, the United States made a lump-sum payment of $3.3 million to the 
European Communities, to a fund  established to finance activities of general interest to music 
copyright holders, in particular awareness-raising campaigns at the national and international level 
and activities to combat piracy in the digital netw ork.  The funds were appropriated by the U.S. 
Congress.  
 
The mutually satisfactory temporary arrangement addresses the dispute for a three-year period.  
 
Question:  (Brazil #1)  
 
In paragraph 266, it is stated that bilateral intell ectual property agreements "are based, as a minimum, 
on the WTO TRIPS Agreement."  Please explain if this  statement also refers to IPR provisions in 
bilateral free trade agreements (FTAs).  
Answer 
 
Yes, the statement also applies to bilateral free tr ade agreements concluded after the establishment of 
the WTO that include intellectual property provisions. 
 
Question:  (Brazil #2) 
 Has the United States already evaluated the possibl e impact of the extension of the protection of 
geographical indications under article 23.4 of the TRIPS Agreement to products other than wines and 
spirits?  If so, please provide information on the met hods used to assess such impact and on the results 
of such evaluation.  Please also identify which Am erican products could benefit from such extension.  
 
Answer 
 
Please refer to WTO Document No. IP/C/W/386, en titled "Implications of Article 23 Extension," a 
joint communication from the governments of Arge ntina, Australia, Canada, Chile, the Dominican 
Republic, El Salvador, Guatemala, New Zealand, Paraguay, the Philippines, Chinese Taipei and the 
United States.  Contained therein is a detailed expl anation of the impact of Article 23.4 protection, 
including the costs to governments, producers and manufacturers, and consumers.  WT/TPR/M/126/Add.3 
Page 136  
 Question:  (Brazil #3) 
 
Is there any geographical indication for U.S. products recognized and protected in other countries?  
Please provide examples.  Has this protection caused  any impact on the export performance of such 
products?  
 
Answer  
Under the TRIPS Agreement, geographical indications  are intellectual property rights, and therefore 
are private rights.  Accordingly, it is the responsib ility of the private right holder to obtain, maintain 
and enforce those rights.  As these are private rights,  the U.S. does not track their individual status in 
other countries.  The U.S. does have interest in foreign protection for geographical indications where 
systemic problems exist in the availability of  protection for U.S. geographical indications.  
 
Question:  (Brazil #4) 
 
Is there any geographical indication registered for a U.S. product covering all the national territory, 
and not only a specific region?  Please explain and provide examples.  
Answer 
 
Geographical indications covering all of the national territory, including country names, are eligible 
subject matter for geographical indication protection in the United States.  Examples of such 
geographical indications include the terms SWISS, for chocolate from Switzer land (U.S. Certification 
Mark Registration No. 1,570,455), and COLOMBIAN,  for coffee from Colombia (U.S. Certification 
Mark Registration No. 1,160,492).  
 
Question:  (Brazil #5) 
 Are PCT applications re-examined by the USPTO in cases where another International Authority 
under the PCT has issued a positive search and examination report?  Please explain if it is possible to have patents granted in the United States based on the reports of other countries' intellectual property 
offices.  Please provide examples.  Answer  
Following receipt of a positive International Search Report and International Preliminary Examination 
Report (IPER) for a patent application filed under the PCT, the United States Patent and Trademark 
Office (USPTO) examines the application before  granting a patent.  The USPTO does not grant 
patents based upon reports of foreign intellect ual property offices, although USPTO examiners 
consider IPERs when examining patent applications .  A thorough review of nationally filed patent 
applications is currently required because thes e applications may differ from the corresponding 
internationally filed applications.  The USPTO is exploring ways in which it could grant patents based 
upon the work of other offices.  The USPTO is also interested in continuing to discuss options that 
patent offices may use to maximize the use and bene fits of the work done by foreign PCT authorities.  
Several options are presented in WIPO document PCT/R/WG/5/9. 
 
Question:  (Brazil #6)  
 
Is the USPTO the only authority in the United Stat es to examine patent applications and to grant 
patents?  According to U.S. law on this matter, is it possible that other institutions examine such 
applications or, at least, assist the USPTO during the examination?  If so, please provide details on the 
relevant legal provisions.  WT/TPR/M/126/Add.3 
 Page 137 
 
  
Answer 
 
The USPTO is the only authority in the United Stat es to examine patent applications and to grant 
patents.  Please note, however, that 35 U.S.C. 2 authorizes the USPTO to outsource patent searching and examination.  While we ha ve not done so to date, our 21
st Century Strategic plan contemplates the 
outsourcing of patent searching and examination to fo reign patent offices.  Mo re information on this 
topic is available at www.USPTO.gov. 
 
Question:  (Brazil #7)  
Please inform what measures have been taken recently , if any, to reduce the average pendency period 
for patent applications.  
Answer 
 
Please refer to the response to Brazil’s questions 5 a nd 6.  In addition, the USPTO's revised Strategic 
Plan, which was submitted to the U.S. Congress in March 2003, calls for the hiring of almost 3,000 
new patent examiners over the next five years.  
Question:  (Brazil #8)  
 How is exhaustion of intellectual property rights ruled in  the U.S. legislation?  What is its impact on 
industrial policies in the United States?  
Answer 
 
Under U.S. laws, the authorized sale of a patent ed product within the United States exhausts the 
patent right, allowing the purchaser to resell th e product (Intel Corp. v. USLI Corp., 27 USPQ2d, 
1136, 1138 (Fed. Cir 1993)).  If a patented product is sold  abroad by the patent holder or others, then 
35 U.S.C. 154 allows the patent holder to exclude ot hers, who lack the consent of the patent holder, 
from importing the product into the United States.  
Under Section 106(3) of the U.S. Copyright Act, the copyright owner has the exclusive right "to 
distribute copies or phonorecords of the copyrighted wo rk to the public by sale or other transfer of 
ownership, or by rental, lease, or lending."  Th e copyright owner's distribution right, however, is 
limited by the "first sale doctrine," which is roughly comparable to the Aexhaustion doctrine" in the 
copyright laws of many countries.  Under the U.S. first sale doctrine, which is codified at 17 U.S.C. 
Section 109(a), the owner of a lawfully-made c opy or phonorecord is free to sell or otherwise 
physically dispose of that particular copy or phonorecord.  Under Section 602 of the U.S. Copyright 
Act, it is an infringement of copyright to import piratical or unauthorized copies or phonorecords.  
However, where the copies or phonorecords were lawf ully made in the United States, shipped abroad, 
and later reimported into the United States, the Supreme Court has ruled that the Section 602 
importation right is limited by the first sale doctrine. 
 
These laws further U.S. industrial policies by prom oting innovation and creativ ity without restricting 
the domestic sale of patented products and lawful copies by authorized purchasers.  
Question:  (Brazil #9) 
 
How are genetic resources protected in the United States?  Can you provide further information and 
statistics on the protection of inventions related to  genetic resources?  In paragraph 270, there are WT/TPR/M/126/Add.3 
Page 138  
 references only to patents of invention and design pa tents.  Are patents of any kind available for 
plants?  If so, how do they comply with the three conditions of patentability established in article 27.1 
of the TRIPS Agreement? 
 
Answer 
 An explanation of various United States systems for protection of genetic resources and plants can be 
found in documents IP/C/W/393, IP/C/W/209 and WIPO/GRTKF/IC/Q.3.  It is difficult to provide statistics on the protection of inventions "related to genetic resources," since the phrase "related to genetic resources" does not have a specific meaning.  The United States has been actively participating in the WIPO IGC meetings, which ar e working to delineate internationally recognized 
definitions relating to genetic resources.  Ho wever, the USPTO website (www.uspto.gov) has a 
searchable database for all issued United States Patent s, so any statistics of interest on issued United 
States patents to the Government of Brazil based on their  understanding of this phrase may be 
determined.  
In the United States, two types of patents are availa ble for plant varieties.  The first is our utility 
patent, which is a patent for invention.  The statut ory provisions for the utility patent can be found in 
35 U.S.C. 101 et. seq.  All varieties of plants are elig ible for protection by a utility patent if they meet 
the statutory requirements for this type of patent.  A plant patent is also availa ble in the United States 
for asexually reproduced plants (excluding tuber propa gated plants).  The statutory provisions for a 
plant patent can be found in 35 U.S.C. 161 et. seq.  Bo th a utility patent to a plant and a plant patent 
require that an invention be new (35 U.S.C. 102), in volve an inventive step (35 U.S.C. 103) and be 
capable of industrial applicability (35 U.S.C. 101) , i.e., the 3 patentability requirements of TRIPS 
Article 27.1.  Protection for sexually reproduced plants  and tuber propagated plants are also  available 
in the United States under our Plant Variety Protection Act (PVPA) (7 USC 2321 et. seq).  Please refer to the response to Japan’s Question #49 for mo re information regarding the PVPA and our plant 
patents. 
 
Question:  (Brazil #10) 
 
How are traditional knowledge and folklore protect ed in the United States?  Is there a specific 
category of protection for such subject matter or ar e they protected by any of the existing categories 
(e.g., patents, copyright, etc.)?  If so, are there sp ecific requirements for the protection of such subject 
matter?  
 
Answer  
The United States, like many delegations, activel y participates in the WIPO Intergovernmental 
Committee on Intellectual Property and Genetic R esources, Traditional Knowledge and Folklore 
(IGC).  As part of the work of the IGC, the United States and many others, submitted comprehensive 
answers on their legal and policy framework with r espect to genetic resources, traditional knowledge 
and folklore.  Accordingly, with an eye towards e fficiency, we encourage delegations to review the 
answers of the United States in documents WIPO /GRTKF/IC/Q.3, the Questionnaire on various 
requirements for Disclosure rela ting to Genetic Resources and Tr aditional Knowledge in Patent 
Applications and WIPO/GRTKF/IC/2/7, the Ques tionnaire on National Experiences with the Legal 
Protection of Expressions of Folklore.  
 
Question:  (Brazil #11) 
 In paragraph 279, there is a clear reference to th e fact that the decision on the implementation of 
paragraph 6 of the Doha Declaration on TRIPS an d Public Health would make it easier to import  WT/TPR/M/126/Add.3 
 Page 139 
 
 generic drugs, "made under compulsory licensing."  In paragraph 277, however, it is stated that, 
although the U.S. Government can allow use of the subject matter of a patent without the authorization of the right holder - which is, in other words, compulsory license - the relevant 
provisions on this matter have not been used for over 20 years.  Please explain if there are provision in the U.S. legislation that could allow compulsory licenses to be granted in the United States so as to 
enable drugs to be exported un der the mechanism created for the implementation of paragraph 6 of 
the Doha Declaration on TRIPS and Public Health. 
 
Answer 
 
U.S. legislation provides very limited statutory auth ority for the grant of compulsory licenses (e.g., the 
Atomic Energy Act and the Clean Air Act noted in pa ragraph 277).  No such authority exists to grant 
compulsory licenses to manufacture patented drugs in the United States (for export or otherwise). 
 
Question:  (Chile #1)  
Please specify the term of protection for works an d performances created or published for the first 
time abroad prior to 1978.  
Answer 
 
Before January 1, 1978, the term of protection unde r the U.S. Copyright Act (1909 Act) was 28 years 
from the date of first publication of a work with pr oper notice, renewable for an additional 28 years, 
for a total of 56 years.  Because of the numerous va riables involved, the exact determination of term 
of protection for a particular work created prior to 1978 is a fact-based inquiry.  The question asked 
by Chile does not provide the United States the nece ssary facts to make a specific determination of 
term for a particular work.  In order to make su ch a determination, the rightholder may consult the 
U.S. Copyright Office Circular 15, which provides a general summary of the statutory provisions 
dealing with duration of copyright under the current act, the Copyright Act of 1976, as amended.  The Circular also provides information about duration u nder the law in effect prior to the current act, 
which would be the case for works and performances creat ed prior to 1978.  This circular is available 
at http://www. copyright.gov/circs/circ15a.pdf.  
 
Question:  (Chile #2) 
 
Please specify the categories of works to whic h the exception under Section 110(5)(A) of the 
Copyright Act applies.  Does it also apply to both dramatic and non-dramatic musical works? 
 Answer  
Section 110(5)(A) contains an exception for transmission on a single "home-style" apparatus of a 
performance or display of a work.  Section 110(5) (A) applies to all categories of works that are 
capable of being publicly performed or displayed.   Under Section 106(4), a copyright owner has the 
exclusive right to publicly perform literary, musica l, dramatic, and choreogr aphic works, pantomimes, 
and motion pictures and other audiovisual works.  Under Section 106(5), a copyright owner has the 
exclusive right to publicly display literary, musi cal, dramatic, and choreogr aphic works, pantomimes, 
and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work. 
 
Section 110(5)(A) does not distinguish between dram atic and non-dramatic musical works (as, for 
instance, Section 110(5)(B) does).  WT/TPR/M/126/Add.3 
Page 140  
 Question:  (Chile #3)  
 
Please describe the amendments the Copyright Act bei ng formulated or to be formulated in order to 
amend Section 110(5)(B) with a view to granting full  protection to the right-holders of non-dramatic 
musical works that are adversely affected by  the exception contained in that paragraph. 
 Answer  
Please refer to the response to Japan's Question #56. 
 
Question:  (Chile #4) 
 In what cases do performers of works have exclus ive rights in or receive payment for communication 
to the public and broadcasting of their performanc es fixed on phonograms, and in what cases do they 
have such rights or receive such payment for th eir performances fixed on audiovisual media such as 
videos or DVDs? 
 
Answer 
 
To the extent that a performer is an author, that  performer is a copyright owner under U.S. law and 
therefore has the exclusive rights provided under Sect ion 106, which include the exclusive rights to do 
and to authorize any of the following:  
 
(1) to reproduce the copyrighted work in copies or phonorecords;  
(2) to prepare derivative works based upon the copyrighted work; 
(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other 
transfer  of ownership, or by rental, lease, or lending; 
(4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion  pictures and other audiovisual works, to perform the copyrighted work publicly; (5) in the case of literary, musical, dramatic, and ch oreographic works, pantomimes, and pictorial, 
 graphic, or sculptural works, including the individual images of a motion picture or other 
 audiovisual work, to display the copyrighted work publicly;  and 
(6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital 
 audio transmission.  Copyright owners have a right to communication to the public of their works, by wire or wireless 
means.  This right includes the making available to  the public of their works in such a way that 
members of the public may access these works from a place and at a time individually chosen by 
them.  This obligation is satisfied through sections  106(1), 106(3), 106(4), 106(5) and 106(6) of the 
U.S. copyright law, which provide exclusive right of reproduction, public distribution, public performance, display and for performance of sound reco rdings by means of digital audio transmission 
for all copyright owners , and through case law. 
 
With respect to performances fixed on audiovisual me dia, the Copyright Law is not the exclusive act 
protecting audiovisual performers.  Certain othe r federal laws, state laws, case law and private 
agreements also provide protection to audiovisual  performers and can be controlling authorities. 
 Question:  (Chile #5)  
In what provision of U.S. law is the right of performers to broadcast their non-fixed performances 
recognized?   WT/TPR/M/126/Add.3 
 Page 141 
 
 Answer 
 
Please refer to the final paragraph of the response to Japan's Question #54. 
 
Question:  (Chile #6) 
 Please inform us whether temporary copies which ar e technically required to visualize an image on a 
computer screen or to listen to a work transmitted over the Internet require specific authorization from 
the owner of the right to reproduce such work.  If not, under what provision of the Copyright Act are such copies excepted.  Answer 
 
It is well established under U.S. law that activiti es that require the making of temporary copies may 
implicate one or more of the exclusive rights of the copyright owner.  For example, in MAI Sys. Corp. 
v. Peak Computer, Inc ., 991 F.2d 511 (9th Cir. 1993), the court found that the loading of operating 
system software into random access memory (RAM) creates a copy of softwa re, thereby implicating 
the reproduction right.  More recently, the U.S. Copyright Office concluded that "the making of temporary copies of a work in RAM implicates the reproduction right so long as the reproduction 
persists long enough to be perceive d, copied, or communicated." (S ee A Report of the Register of 
Copyrights Pursuant to Section 104 of the Di gital Millennium Copyright Act available at: 
www.loc.gov/copyright/reports/ studies/dmca/dmca_study.html). 
 
Although there is no general exemption from liability for the making of temporary copies, the U.S. Copyright Act contains a number of provisions th at limit liability for such conduct under specific 
circumstances, so-called "safe harbors."  See e.g.,  17 U.S.C. Section 512(a)(2); 17 U.S.C. Section 
110(2). 
 
Question:  (Chile #7) 
 
Please inform us whether those who are licensed to broadcast to the public copyright-protected works 
and phonograms (webcasters) also require a license for the temporary copies that are technically 
required for the transmission process.  Please describe under what U.S. legal provision said copies are 
excepted. 
 
Answer 
 
Under section 112(e) of the U.S. Copyright Act, wh ich was enacted as part of the Digital Millennium 
Copyright Act (DMCA), webcasters that are otherwise qualified to publicly perform a sound 
recording by means of a digital audio transmission ar e also permitted to make one ephemeral copy of 
the sound recording in connection with the transmissi on.  Ephemeral recordings are copies that are 
made and used by a transmitting organization to fac ilitate its transmitting activities.  Such ephemeral 
recordings, among other conditions, must be destroyed within six months of the date of transmission. 
 Question:  (Chile #8)  
Please indicate the legal or administrative provisi ons that actively regulate the acquisition and 
administration of computer programs for government u se by federal or central agencies of the U.S. 
Government. 
 WT/TPR/M/126/Add.3 
Page 142  
 Answer 
 
Pursuant to Executive Order 13,103-Computer Soft ware Piracy (September 20, 1998), each executive 
agency was required to adopt procedures to ensu re that the agency does not acquire, reproduce, 
distribute, or transmit computer software in viola tion of applicable copyright laws.  Exec. Order No. 
13,103, 63 Fed. Reg. 53,273 (1998).  Question:  (Chile #9a) 
 
While the subject of exhaustion of rights with respect   to copyright and patents seems clear, such is 
not the case with regard to manufacturing marks or trademarks.  Could you specify the rules that 
apply to the exhaustion of rights for manufacturing ma rks or trademarks and the applicable norms or 
case law?  Do the same legal provisions apply to geographic indications? 
 
Answer  
 Current U.S. law provides owners of U.S. registered  trademarks with the legal basis to stop parallel 
imports.  The underlying law that establishes U.S.  national exhaustion can be found in the U.S. 
Customs provision 19 U.S.C. 1526(a)-(c).  Under 15 U.S.C. §1054, registered certification marks and 
collective marks are afforded the same protection affo rded to trademarks;  therefore, the owner of a 
registered geographical indication certification mark also has the legal basis to stop parallel importation.  See also, K Mart Corp. v. Cartier, Inc. , 486 U.S. 281 (U.S. 1988) and Lever Bros. Co. v. 
United States , 796 F. Supp. 1 (D.C. Cir. 1992). 
 
Question:  (Chile #9b) 
 
Is there any recent case law regarding Title 28 US C 1498?  Please indicate to what cases the pertinent 
legal decisions refer.  
 
Answer 
 
Yes, there are several recent cases cited in the 200 3 "Cumulative Annual Pocket Part (on pages 153-
158) of the United States Code Annotated  (© 1994, West Publishing Co., St. Paul, Minnesota), 
dealing with a variety of issues, including what is "reasonable and entire compensation", 
infringement, jurisdiction, etc.  Because of the num ber and variety of cases, no attempt is made to 
summarize them here. 
 
Question:  (Chile #10) 
 
Once a drug has been registered in the Orange Book,  the owner of a patent can prevent the entry on 
the market of a generic competitor by filing a lawsui t.  This stays the entry of the generic product on 
the market for a period of 30 months or until the suit is settled.  Does U.S. law provide for the possibility that the generic drug can be put on the market if the patent expires during the 30-month 
period or before the suit is settled?  Are there an y statistics available as to how long these lawsuits 
take? 
 
Answer 
 
If the patent expires before the 30 -month period or  before the law suit is settled, the generic is 
permitted to enter the market.  On average the time between the filing of a patent infringement lawsuit 
and a district court decision in each case was 25 months and 13 days.  
  WT/TPR/M/126/Add.3 
 Page 143 
 
 Question:  (Canada #18)  
Reference:  (v) Intellectual Property Rights;  Section 337 investigations;  Paragraph 297 
 
In 1989, a GATT panel found that Section 337 of the United States Tariff Act of 1930 violated GATT 
obligations and yet, as noted in paragraph 297, 47 new Section 337 investigations involving unfair 
practices related to intellectual property rights were initiated against foreign companies.  What steps 
are being taken by the United States to ensure that non-American companies do not face additional 
procedural burdens in defending against allegations of intellectual property infringement, contrary to 
international trade obligations?  
 
Answer 
 The United States amended section 337 of the Tari ff Act of 1930, 19 U.S.C. para. 1337, as part of 
U.S. implementation of the Uruguay Rou nd results.  These amendments addressed the 
recommendations of the GATT panel cited in the question.  
Specifically, inter alia , the amendments: 
 
− Eliminated the requirement that the USITC issu e a final determination within a fixed period 
of time.  Instead, the amendment provides that th e ITC must complete its investigation "at the 
earliest practicable time" and requires the USITC, within 45 days of initiating an investigation, to establish a "target date" for its  completion.  See 19 U.S.C. para. 1337(b)(1).  
These requirements  are consistent with federal dist rict court rules and district court efforts to 
avoid delay, such as by establishing a schedule for the completion of various stages of 
litigation; 
 
− Provide a means to prevent subjecting importe d goods to infringement proceedings in two 
fora simultaneously.  A district court hearing an infringement case is required to stay its proceedings, at the request of a respondent in  a section 337 proceeding, in respect of any 
claim involving the same issues as those pending befo re the ITC.  In addition, to eliminate 
any duplication of effort or expense, the stat ute provides for the record  in an ITC proceeding 
to be transferred to the federal district court for its use;  and 
 
− Provide that a respondent in a section 337 actio n may file with the USITC any counterclaim 
that may be filed with a federal court.  If the claim is of the form of a defense to the alleged 
violation of section 337, the USITC will consider  the matter;  otherwise the counterclaim is 
removed to a federal district court.  See 19 U.S.C. para. 1337(c). 
 
Question:  (China #75) 
Reference:  p. 92, para. 270  
The U.S. is the only country in the world that adopts the "first invent" system in judging the novelty 
of patents.  The "first invent" system prima fa cie conforms to National Treatment and MFN rule, 
however it has caused many inconven iences to national of WTO Members.  For example, Article 102 
of the Patent Act of the U.S. states that criteri a of novelty for inventions created in the U.S. are 
different from those for invention completed out of th e U.S.  Comparing with the U.S. applicants, the 
above provision is obviously unfavorable to foreign a pplicants filing applications for patents in the 
U.S.  Please elaborate what actions the U.S. intends to take  to make foreign applicants in an equal position 
with the U.S. applicants. 
 WT/TPR/M/126/Add.3 
Page 144  
 Answer 
 
Please refer to the response to Jap an's Question #50 regarding the first-to-invent system.  The 
suggestion is made in the question that the operatio n of Section 102 of U.S. patent law produces an 
effect that favors nationals of the United States.  Th ere is no basis for this suggestion.  Section 102(a) 
of the United States patent statute does limit the pa tent-defeating effect of prior public knowledge or 
use to knowledge or use of the invention in the Unit ed States.  The effect of section 102(a) is that an 
invention claimed in an application for a United Stat es patent will not be treated as being novel if the 
invention has been disclosed or known to others in  the United States.  Section 102(a), however, does 
not distinguish between applications claiming invent ions made in the United States versus those made 
outside the United States;  any application for patent  that fails to possess novelty through operation of 
section 102(a) is treated as unpatentable subject matt er.  Application of section 102(a) is made in an 
identical  fashion to applications for inventions developed in the United States and those that are made 
outside the United States.  
 
Question:  (China #76) 
Reference:  p. 94, para. 277 
 
Section 1498 of the U.S. Code states that when products manufactured and used by the U.S. 
Government or manufactured or used upon a request  by the U.S. Government involve a patent, the 
patentee has no right to prevent the manufacturing and use of the products by the U.S. Government.  This situation is akin to compulsory licensing sy stem without the permission of the patentees as 
stipulated in Article 31 of TRIPS, but protections to  the patentees provided in relevant act of the U.S. 
is much weaker than those provided in Article 31 of TRIPS.  Please explain the consistency of th is act with Article 31 of TRIPS.  
 
Answer 
 
Section 1498 of Title 28, United States Code, conc erns a limitation on remedies that can be obtained 
from the United States Government for public non-comme rcial use of a patented invention by it or a 
party authorized by it.  The United States routinel y seeks licenses or permission to use the patented 
invention from the patentee.  In the unlikely event a patentee believes the United States is using the 
patented invention without permission of the pate ntee, the United States has waived its sovereign 
immunity to suits against the United States for in fringement of patents.  Section 1498 codifies the 
explicit waiver.  Article 44.2 of the TRIPS Agreement authorizes Members to limit the remedies available against non-commercial use of a right by the government to payment of remuneration in 
accordance with paragraph (h) of Article 31.  The United States does limit remedies in this manner;  
however, Section 1498 does provide for reasonable compensation for use or manufacture of a 
patented invention by or for the United States.  In  any event, to the extent applicable, all of the 
relevant provisions of Article 31 are still complied with.  The U.S. Federal Acquisition Regulations -- 
codified uniform policies used by government agencies when acquiring goods or services -- call 
Article 31(b) of TRIPS to the attention of the agencies.  FAR 27.209 notifies contracting officers of U.S. agencies that Article 31 of TRIPS applies wher e the law of a member country allows for the use 
of patents without authorization and advises the co ntracting officers to consult with legal counsel 
regarding questions under this section.   WT/TPR/M/126/Add.3 
 Page 145 
 
 Question:  (China #77) 
Reference:  p. 95, para. 281 
 
Please provide information on the implementation of  the obligation to protect well-known trademark 
under the TRIPS Agreement in the U.S. domes tic legislation and judicial practices. 
 
Answer 
 
The United States fully implements its obligatio ns under both the Paris Convention and the WTO 
Agreement on Trade Related Aspects of Intellectua l Property Rights (TRIPS) with regard to well-
known marks.  The United States protects register ed as well as unregistered well-known marks, of 
both domestic and foreign origin, from use and/or registration through the operation of Lanham Act 
§43(a), §44(b) and §44(h) and under the Lanham Act §2(a) and 2(d).  (15 U.S.C., §1125(a), §1126(b) 
and (h), and §1052(a) and (d)).  In cases where th ere is no use in commerce of the well-known mark 
in the United States, but the mark is still well-known in the relevant sector of the public, the mark will 
receive U.S. federal unfair competition protecti on under the Lanham Act §43( a), §44(b) and §44(h).  
Lanham Act §44 grants "national treatment" to fore igners entitled to the benefits of the Paris 
Convention with regard to prot ection against unfair competition. 
 U.S. federal law protects a mark against infringement or registration by another, whether the mark is 
registered or not, for goods or services that are the same , similar, related or even unrelated if there is a 
likelihood of confusion.  When ma king a determination of likelihood of  confusion at the United States 
Patent and Trademark Office (USPTO) or in an infri ngement action in U.S. federal court, U.S. case 
law outlines a variety of non-exclusive and non-exhaustiv e factors that can be used in the analysis.  
These factors include, but are not limited to, the simila rity of the marks, the relatedness or proximity 
of the goods and/or services, the strength of the plaintiff's mark including the level of commercial 
recognition, marketing channels used including the similarity or dissimilarity between the consumers 
of the parties' goods and/or services, the degree of care likely to be exercised by purchasers in 
selecting goods and/or services, the defendant's inte nt in selecting its mark, the evidence of actual 
confusion, the likelihood of expansion in product lines, etc. 
 
USPTO Examining Attorneys may refuse to register  marks that conflict w ith unregistered well-known 
marks, foreign or domestic, whether used or not in  the United States, under Lanham Act §2(a) and (d). 
(15 USC §1052(a) and (d)).  The USPTO does not ma ke a specific determination in examination as to 
whether a mark is well-known.  USPTO evaluates th e strength of the mark in determining the scope 
of protection to afford a previously registered or unregistered mark against a pending application.  
Under U.S. law, strong or well-known marks have a wider scope of protection than weaker marks 
against use of the mark on similar goods or ser vices or even against use on unrelated goods or 
services. 
 
Question:  (China #78) Reference:  p. 97, para. 293 
 
The exceptions to copyright protection (Limitations on exclusive rights:  Exemption of certain 
performances and displays) as specified in Article 110. 5 of U.S. Copyright Act is inconsistent with 
Article 13 of TRIPS.  
 Is the U.S. going to make any amendment to such  provision so as to make it consistent with the 
TRIPS Agreement?  
 WT/TPR/M/126/Add.3 
Page 146  
 Answer 
 
Please refer to the response to Japan's Question #56. 
 
Question:  (China #79) 
 Does the U.S. Government have any plan for such  amendment?  If yes, please provide the detailed 
information.  
 
Answer 
 Please refer to the response to Japan's Question #56. 
 
Question:  (Colombia #1) 
 
Paragraph 270 of the Report establishes that, in th e case of USPTO-caused delays in the granting of 
patents, there are formulas to calculate the extens ion of the term of patent protection.  Could you 
explain how the formula works and give examples of its application?  
 
Answer 
 
35 U.S.C. §154(a) (2) sets the term of a granted U.S. patent at 20 years from the effective U.S. filing 
date. 35 U.S.C. §154(b) sets forth conditions under which the patent applicant may extend the patent 
term to recoup time lost due to administrative dela ys caused by the PTO.  There are five categories of 
administrative delay for which patent term adjustment may be sought:  (1) Failure by the PTO to take certain actions within a specified time; 
(2) Failure by the PTO to issue a patent within 3 years of the application filing date; 
(3) Delays due to successful appellate review; (4) Delays due to interference proceedings;  and (5) Delays due to secrecy orders.  The total period of term extension is the sum of th e delays attributable to each of the above-listed 
categories to the extent that they do not overlap.  Thus, the term cannot be extended beyond the actual
 
length of the delay caused, i.e., the same delay, though attributable to more than one category, is 
counted only once.  The statute also allows for a reduction  in the patent term restoration to the extent 
of delays caused by the applicant's failure to engage in reasonable efforts to prosecute the application.  
The net restoration term is therefore the differe nce between the amount of the delay caused by the 
PTO minus the amount of delay caused by the applicant. 
 Once an application has been allowed, the PTO ca lculates what it considers the proper term of 
adjustment, extending the term one day for each da y of the pendency of the delays described above, 
and provides the applicant with one opportunity to re quest reconsideration.  If, upon reconsideration, 
the applicant is dissatisfied with the PTO's determin ation of adjustment, the applicant may appeal by 
way of a civil suit against the Director in D.C. District Court. 
 
Question:  (Colombia #2) 
 
Is there a similar extension period for delays in  the approval for marketing products undergoing the 
permit process with regulatory agencies like the FDA or the EPA?  
 
  WT/TPR/M/126/Add.3 
 Page 147 
 
 Answer 
 
Yes.  The decision of the length of the patent term extension (PTE) is a decision made by the 
United States Patent and Trademark Office, with input as to the length of the regulatory review 
period, the approval date, and any prior approvals  from the Food and Drug Administration (or the 
Department of Agriculture, if appropriate).  35 USC 156 provides that a patent owner may file an 
application for PTE to the USPTO within 60 days of  approval of the product by the Food and Drug 
Administration (FDA).  Upon receipt of the application, the USPTO reviews the application for completeness, and forwards a copy of the appli cation to FDA, and requests FDA to confirm the 
approval date of the product, and that the approv al of the product was the first permitted use or 
commercial marketing of the product under the pe rtinent section of the Federal Food, Drug and 
Cosmetic Act. 
 If the application is found to be eligible for exte nsion, the USPTO requests that FDA determine the 
regulatory review period of the product.  FDA notif ies the USPTO of the dete rmination, and publishes 
the determination of the regulatory review period in  the Federal Register.  For a drug product, the 
"testing phase" is the period from the beginning of testing (defined in the statute as the date an 
exception under subsection (i) of section 505 of th e Federal Food, Drug, an d Cosmetic Act (FFDCA) 
became effective, and ending on the date an a pplication was initially submitted for the drug product 
under section 351 or 505 of the FFDCA (i.e., the fili ng of the new drug application (NDA)).  For a 
drug product, the "approval phase" is  the period beginning with the f iling of the NDA and ending with 
the approval of the NDA.  See 35 USC 156(g) (1) (A ).  The time the market ing applicant takes to 
reply to FDA queries is not taken out of this period.  
 The USPTO then determines the patent term extensi on.  The statute permits a patent owner who has 
lost patent term due to regulatory review by the F DA to be compensated for the lost term that is no 
longer than one half of the "testing phase" of the re gulatory review plus all of the "approval phase" of 
the regulatory review.  If the number of days in the expression (½("testing phase") plus all of the 
"approval phase") when added to the original expirati on date of the patent would extend the patent to 
more than 14 years after the approval date of the pr oduct by FDA, then the patent term extension is 
shortened to the difference in time between the original  expiration date of the patent and the date that 
is fourteen years after the approval date of the produc t.  Finally, if the patent  term extension according 
to the earlier calculations would be longer than 5 years, then the PTE is capped at five years.  
However, if the patent issued before Septembe r 24, 1984, and testing began before September 24, 
1984, then the cap would be two years, or, if the pa tent is to an animal drug product, if the patent 
issued, and testing began, before November 16, 1988, then the cap would be three years. 
 
Question:  (Colombia #3) 
 We have learned that the United States Congress passed the "Fairness in Music Licensing Act of 
1998," thereby amending article 110 (5) regarding limita tions to exclusive rights.  We understand this 
law allows some uses without prior and expr ess consent from the right-holder and without 
remuneration.  This situation affects Colombian au thors, as we understand it allows for the use, under 
the conditions described above, of a wide arra y of Colombian musical works and performances 
having a large audience in the United States.  
 Has the United States considered amending article 1 10(5) (A), given the harm this limitation causes 
copyright-holders from other countries?  WT/TPR/M/126/Add.3 
Page 148  
 Answer 
 
Please refer to the response to Japan's Question #56. 
 
Question:  (EU #45)  
 U.S. law stipulates that the U.S. Government can al low use of the subject matter of a patent without 
the authorization of the right holder.  Does U.S. law provide that the right holder will be notified of such decision as soon as reasonably possible, and does it foresee the payment of adequate remuneration to the right holder?  Answer  
Yes.  Please refer to the response to China's Question #76.  
 
Question:  (EU #50) 
 
According to U.S. government information, CAFTA  would include a provision regarding trade marks 
and geographical indications based on a "first in tim e, first in right" principle.  Could the U.S. 
elaborate about these provisions?  
 
Answer 
 The United States views the concept of "first in time, first in right" as confirming the appropriate 
balance between trademarks and geographical indications and ensuring that trademarks are fully 
protected against later established geographical in dications.  The U.S.-CAFTA FTA draft text is 
available at:  
<http://www.ustr.gov/new/fta/cafta.htm>. 
 
CHAPTER 3:  BY MEASURE 
 (1a) Textiles  Question:  (China #90) 
 China would like to know what steps the U.S. w ill take to comply with the TMB recommendation. 
 
Answer  
The United States continues to believe that the met hodology used is consistent  with Paragraph 241 of 
the Working Party Report and that, therefore, it woul d not be appropriate to make any adjustment to 
the methodology applied.  The United States has as ked that the TMB reconsider its recommendation.  
 
Question:  (China #91)  
How does the United States ensure th at interested parties will be informed of the petition promptly?  
 
Answer  
On May 21, 2003 the Committee for the Implementati on of Textile Agreements  (CITA) published a 
notice in the Federal Register
 setting forth procedures it would follow in considering requests from 
the public for textile safeguard actions on imports from China under Paragraph 242 of the Protocol of 
Accession.  On August 18, 2003, CITA publis hed another notice in the Federal Register  clarifying  WT/TPR/M/126/Add.3 
 Page 149 
 
 those procedures.  That notice specifies, inter alia, th at with respect to any re quest for a safeguard that 
CITA has accepted for consideration, CITA will publish a Federal Register  notice requesting public 
comments and commencing a 30 day comment period.  The Federal Register  notice and the request, 
with the exception of information marked "busin ess confidential", are posted by the Department of 
Commerce's Office of Textiles and Apparel on the internet.  
 
Question:  (China #92) 
 
How does it ensure that interested pa rties will get sufficient information?  
 
Answer 
 The procedures set forth in the May 21, 2003 Federal Register
 notice provide that comments received 
in response to a request, with the exception of in formation marked "business confidential", will be 
available for review by interested parties.  
 
Question:  (China #93) 
 
How does it ensure that interested partie s will have enough time to defend themselves?  
 
Answer  
The procedures ensure that interested parties ha ve a 30-day period during which such parties may 
comment on any request for a safeguard that CITA h as accepted for consideration.  With respect to 
China, the procedures set forth in the May 21, 2003 Federal Register
 notice provide that, following an 
affirmative determination on a request, CITA will requ est consultations with China within 30 days of 
the receipt for request for consultations, and ever y effort will be made to reach agreement on a 
mutually satisfactory solution within 90 days of receipt of the request for consultations.  
 
Question:  (India #5)  
 
Although India is a beneficiary of the GSP, it has been noticed that inappropriate customs duty is being imposed by U.S. authorities on imports of Jute  Yarn, Net Leon, Wave Fa bric and Jute Bags.  
Further, the U.S. authorities insist upon production of VISA for export of Jute Bag, which is normally 
applicable to textiles under quota.  Would the U.S.  authorities take steps to remove this anomaly.  
 
Answer  
Jute yarn and bags are bound at a zero rate eff ective 1/1/2004.  We do not have a textile visa 
requirement for jute bags.  We are unfamiliar with  the terms "Net Leon" and "Wave Fabric" and do 
not know what they reference.  
 WT/TPR/M/126/Add.3 
Page 150  
 Question:  (India #9) 
 
Burdensome customs procedures in textiles, clot hing and footwear:  For these products, customs 
formalities require providing excessively detailed and voluminous information.  Some of the 
information asked for seems irrelevant for customs or  statistical purposes.  For example, in the case of 
garments with an outer shell of more than one c onstruction or material, it is necessary to give the 
relative weight, percentage values and surface area of each component;  for outer shell components 
which are blends of different materials, it is also  necessary to include the relative weights of each 
component material.  Would the U.S. authorities give the underlying reason for seeking such voluminous information?  Answer  
 
The Bureau of Customs and Border Protection requi res sufficient documentation in order to properly 
classify products upon entry.  Proper classificat ion is important for duty and quota purposes.  
Documentary requirements are transparent as they  are provided in published circulars and on the 
website for the Bureau of Customs and Border Protection.  
 
Question:  (India #15)  
There are extensive product description requirements for textiles, clothing & footwear.  There are 
particular rules for marking and labeling of retail  packages to clarify the country of origin, the 
ultimate purchaser in the U.S. and the name of the country in which the article was manufactured or 
produced.  Could the U.S. authorities clarify why such burdensome marking requirements are maintained for certain selected product categories?  
 
Answer 
 
Textile labeling requirements are the result of sp ecific statutes, enacted by Congress, as described 
below: Two agencies are involved in the enforcement of gene ral textile and wool labe ling regulations.  One is 
the U.S. Bureau of Customs and Border Prot ection, which enforces duty assessments and import 
quotas and requires proper country-of-origin marki ng of imported textile, w ool, and various other 
products before such goods are allowed into the United States.  The other is the Federal Trade 
Commission ("Commission"), which administers and enforces several laws pertaining to labeling, including the Textile Fiber Products Identification Act ("Textile Act") 15 U.S.C. §70, and the Rules 
promulgated thereunder, 16 C.F.R. Part 303, and the Wool Products Labeling Act ("Wool Act"), 15 
U.S.C. §68, and the Rules promulgated thereunder, 16 C.F.R. Part 300.  The U.S. Customs Service 
enforces the Textile Act and Wool Act as imported products enter the United States. 
 The Textile Act and Wool Act require that a label be  attached to imported or domestic textile or wool 
products, and disclose: (1) the fiber content, (2) th e business name or registered identification number 
(RN) of the product manufacturer, importer, or distri butor, and (3) the country of origin.  Generally 
speaking, most household textile products should be  labeled in accordance with the Textile Act or 
Wool Act.  In addition, the Bureau of Customs administers the Tariff Act of 1930, and Section 1304 
of the Tariff Act (19 U.S.C. §1304) states that import ed products must be marked with their foreign 
origin as "permanently as the nature of the article (or container) will permit."  Congress passed the Textile Act "To protect producer s and consumers against misbranding and false 
advertising of the fiber content of textile fiber products, and for other purposes."  In fact, a Senate 
Report on the issue notes that "while the Government should not seek to set product quality standards, 
the purchaser should be protected to the extent of a label containing basic information about items, the  WT/TPR/M/126/Add.3 
 Page 151 
 
 composition of which is not readily apparent.  In ot her words, it is a disclosure bill, for the protection 
of the consumer.  Clothes, draperies, floor cove rings, bedding, and other household goods would be 
subject to this act."2 
 Non-textile consumer commodities are also subject to packaging and labeling requirements.  "The 
Fair Packaging and Labeling Act (FPLA or Act) , enacted in 1967, directs the Federal Trade 
Commission and the Food and Drug Administration to issue regulations requiring that all 'consumer 
commodities' be labeled to disclose net contents , identity of commodity, and name and place of 
business of the product's manufacturer, packer, or distributor."
3  The Fair Packaging and Labeling Act 
does not apply to textiles, but like the textile-speci fic labeling rules discussed above, aims to assist the 
consumer in making informed decisions about consumer goods.4  The Commission's Rules and 
Regulations under the Fair Packaging and Labeling Ac t, set forth some of the parameters to be 
identified.  For example, "[t]he ne t quantity of contents shall be expressed in terms of weight or mass, 
measure, numerical count, or a combination of numer ical count and weight or mass, size, or measure 
so as to give accurate information regarding the net quantity of contents thereof, and thereby facilitate 
value comparisons by consumers."5 
 Question:  (India #27)  
Unilateral changes in Rules of Origin by U.S.A have a ffected trade in textiles and clothing.  As part of 
its legislation implementing the results of the Uru guay Round, the U.S. substa ntially altered its rules 
for determining the origin of textiles and clothing products.  The modified rules, put into effect July 
1996, have resulted in changes disadvantageous to developing countries.  As the process of 
harmonization of Rules of Origin is in progress, I ndia requests that no unilateral changes are made in 
the Rules of Origin in detriment of developing count ries.  Could the U.S. delegation offer its response 
to this?  Answer  
The United States fully explained its rules of origin in the WTO dispute brought by India.  In DS243, 
the Panel found that India failed to establish that  Sec. 334 of the URAA, Sec. 405 of the Trade & 
Development Act of 2000, and the Customs Regul ations contained in 19 C.F.R. 102.21, are 
inconsistent with the Uruguay Round Agreement on Rules of Origin.  Question:  (India #28)  
The Integration Programme for Stage 3:  The U. S. integration programme for stage 3, being 
implemented from 1 January 2002, continues the tre nd witnessed in stages 1 and 2.  Thus, although it 
would result in integration of the minimum of 18 percent required under the ATC, it has contributed 
little to liberalization of quota restrictions.  The pro cess of integration of items has been very reluctant 
and tardy.  In effect, commercially meaningful inte gration has not been done.  Canada & Norway, on 
the other hand, who are also operating quotas under th e ATC have significantly reduced the restraints 
under the phase-out programme during the first two stages.   On the contrary, the U.S. appears to have 
adhered to the strictly 'legal' requirements of th e integration process, without taking into account 
                                                     
 
2 Senate Report 1658, 1958 USCCAN 5165-66 (June 6, 1958). 
3 See http://www.ftc.gov/os/ statutes/fpla/outline.html . 
4 "Informed consumers are essential to the fair and efficient functioning of a free market economy. 
Packages and their labels should enab le consumers to obtain accurate info rmation as to the quantity of the 
contents and should facilitate value co mparisons.  Therefore, it is hereby  declared to be the policy of the 
Congress to assist consumers and manufacturers in reachin g these goals in the marke ting of consumer goods."  
From the Fair Packaging and Labeling Act, 15 U.S.C. at §1451. 
5 16 C.F.R. Part 500.7. WT/TPR/M/126/Add.3 
Page 152  
 commercial considerations.  We would like to have  a clarification from the U.S. authorities on the 
rationale behind the items selected for integration and whether the U.S. authorities are planning to 
take steps to make the phase-out programme comme rcially more meaningful to textile exporting 
developing countries.  
Answer 
 
At the request of importers for certainty and clar ity, the U.S. published its complete integration 
schedule in 1995 and fully met its obligations un der the WTO Agreement on Textiles and Clothing. 
 
Question:  (India #29)  
 
Adverse Conversion factor for export of yarn:  The U.S. quota for yarn is indicated in Square Meter 
Equivalent (SME) whereas yarn is exported in kilogrammes.  U.S. authorities use a standard conversion factor from kgs to SME for yarn which is  reportedly without any scientific basis.  This 
creates an artificial barrier as quota utilisation is s hown to be higher than it should be in such cases.  
Can the U.S. delegation indicate how this a nomaly is to proposed to be addressed. 
 
Answer  
 
The SME (square meter equivalent) factors in our b ilateral agreement with India were developed in 
close consultation with our industry and are standard in our textile agreements , and have been notified 
and continued under the WTO Agreem ent on Textiles and Clothing (ATC).  
 
Question:  (Indonesia #8) 
 
Paragraph 80 of the Secretariat Report notes that the 48.7 percent of import quotas would be 
integrated in January 2005.  Indo nesia would be interested to know the U.S. policy on the possibility 
to provide flexibility in the form of carry forward quota for 2004.  
Answer  
 
The U.S. will not allow carryforward to be a pplied to 2004 limits for WTO Members, because 
carryforward is not available in the last year of any of our bilateral agreements, as specified in the 
paragraphs which were notified to the WTO Tex tile Monitoring Body.  The U.S. has faithfully 
implemented the ATC provisions from its onset in 1995 and has no intention of taking unilateral 
action that would violate our commitments to our domestic textile and apparel industry. 
 
Under the ATC, with its provision for accelerated gr owth rates, cotton and man-made  fiber textile 
and apparel quotas have more than doubled since 19 94.  Quotas which had a six percent growth rate 
in 1994 now have annual growth rates of more than 11 percent.  As a result of  the accelerated growth 
rates in 2004, the great majority of the 2004 adjust ed quotas will be higher than the 2003 adjusted 
quotas, even though no carryforward will be available.   
ATC growth provisions increase market access.  Th e carryforward provision allows for the utilization 
of that increased access in an earlier year.  
 
Question:  (Brazil #3 ) 
 
The United States extends tariff preferences to numerous countries.  Many preferences granted on 
textile and clothing products, for instance, are s ubject to content requireme nts on regional produced  WT/TPR/M/126/Add.3 
 Page 153 
 
 inputs.  Is there any clause in the U.S. tariff preferential schemes that allows to import the inputs, in 
case there are not enough regional inputs? 
 
Answer  
The African Growth and Opport unity Act (AGOA), the Caribbean Basin Trade Partnership Act 
(CBTPA), and the Andean Trade Promotion and Drug Eradication Act (ATPDEA) contain provisions 
to address commercial availability of yarns and fabrics.  If an interested party believes that a particular 
yarn or fabric is not available in commercial qua ntities in a timely manner in the United States, it can 
petition the Committee for the Implementation of Tex tiles Agreements (CITA) for a review of the 
matter.  If CITA finds that the questioned yarn or fa bric is not available, it will issue a notice to the 
public allowing use of the particular produc t in apparel articles under these programs. 
 
Question:  (Brazil #6)  
 
Concerning the ATPDEA, preferential treatment is al so extended to yarn or fabrics that cannot be 
supplied by the U.S. in commercial quantities in a ti mely manner.  How is it controlled by the U.S. 
authorities?  
Answer 
 
Petitions for a determination that a particular yarn or  fabric is not available from the United States in 
commercial quantities in a timely manner are subm itted to CITA.  CITA published in the Federal 
Register procedures it follows in accepting a nd processing such petitions.  CITA seeks public 
comments and advice from industry and Congress on each case.  If CITA determines that a particular yarn or fabric is not available, it will issue a notic e to the public allowing use of the particular product 
in apparel articles under the ATPDEA.  CITA main tains a website containing copies of petitions, 
public comments, and its determina tions for viewing by the public. 
 
Question:  (Turkey #2, #IV.3.iii)  
 
ATC will come to an end at the end of this year.  The U.S. is committed to  abolishing all quantitative 
import restrictions in textile and clothing sector by the end of 2004.  Regarding the role of textile and 
clothing in manufacturing sector, what kind of strate gy does the U.S. have for the post-ATC period? 
 
Answer  
 
The entry into force of the ATC was a watershe d event for production and trade in textiles and 
apparel, as it established an irreversible schedule fo r the phased elimination of the quota regime that 
regulates a significant portion of world trade in the sector.  Equally important, it established binding commitments requiring all WTO Member countri es to open their own markets to increased 
competition.  The ATC is a very important agreement for the United States, and the United States has taken very seriously its commitment to ensure that the provisions of the ATC, in their entirety, are 
fully and faithfully implemented. 
 
The ATC has allowed imports from restrained markets to grow extremely rapidly and attain significant volumes.  In the U.S. market, the incr ease in imports has led to intense structural 
adjustment for the textile and apparel sectors thr oughout the transition period, as anticipated by the 
Agreement.  Structural adjustment in the U.S. textile  and apparel sector is strikingly evident in data on 
employment.  Textile employment in 2003, at 440,100  workers, was 37 percent below the 1994 level.  
Apparel employment has fallen even more precip itously.  Apparel employment in 2003, at 312,700 
workers, was 64 percent below the 1994 level.  Text ile and apparel employment declined 52 percent WT/TPR/M/126/Add.3 
Page 154  
 between 1994 and 2003, for a total job loss of 799,700.   Textile and apparel employment declined 42 
percent between 1994 and 2002, for a total job loss of 697,800.  
 The U.S. Government places a high priority on meas ures to ensure a level playing field, creating a 
healthy, competitive economic environment for the U.S. textile and apparel industry.  The U.S. 
Government will continue to focus on ways in wh ich conditions in the tex tile and apparel industry 
may be effectively addressed.  
 
Question:  (Hong Kong, China #2) 
 
We note that for various product groups, the averag e tariff rate under the U.S.' preference schemes are 
much lower that the average MFN rates.  Economies  which are not parties to the U.S.' preferential 
tariff schemes would thus be disadvantaged by the relatively high import duties.  The impact would be 
particularly significant for products such as T&C wh ich are subject to a relatively high tariff rate 
(MFN import duties can reach 33 percent, with an average of 10.8 percent for clothing in 2002, and 
9.3 percent for textiles) or jewelry wares which have high raw material costs.  Would the U.S. 
Government consider reducing tariffs in the sect ors concerned in the DDA negotiations so as to 
provide better market access opport unities to all Members alike? 
 
Answer  
 
The U.S. Government supports significant movement  toward the harmonization and/or elimination of 
textile and apparel tariffs and el imination of non-tariff barriers.  Given the sensitivity of these 
products for a large number of WTO members, clearly progress in this area can only be achieved in the context of broad participation encompassing key players, both developed and developing.  This 
most likely would be facilitated through a sectoral approach. 
 
Question:  (Hong Kong, China #3)  
 
We are pleased to find that the U.S. has eliminat ed the visa requirement for T&C products integrated 
under Stages 2 and 3 of the Agreement on Textiles a nd Clothing.  We believe that the same should 
apply to all the remaining products to be integrat ed in 2005 but would nevertheless wish to have the 
confirmation of the U.S. Administration in this resp ect.  We are also interested in knowing whether 
additional documentation requirements would be im posed for import of T&C products in the quota-
free environment.  
Answer 
 Article 2.17 of the ATC (which addresses administrative arrangements), along with the other 
provisions of the ATC, will terminate on January 1,  2005.  Thus, Article 2.17  would not justify any 
restrictions on trade that are inconsistent with the WTO Agreements, including GATT 1994, after that 
date.  However, to the extent agreed administrativ e arrangements are consistent with other obligations 
under the WTO Agreements, including GATT 1994, the United States does not believe that the termination of the ATC requires their termination.  Nothing in the ATC requires Members to remove 
measures that are consistent with the WTO Agreements. 
 
Question:  (Hong Kong, China #4)  
 
We note that effective liberalization of most sens itive T&C products particular ly clothing have been 
deferred until the very end of the ten-year transiti on period.  Such back-loading will only exacerbate 
the adjustment shock of the U.S. industry upon full liberalization of the T&C sector in 2005, sparking 
domestic pressure for recourse to alternate forms of  protection.  We therefore would like to know  WT/TPR/M/126/Add.3 
 Page 155 
 
 what specific measures have been undertaken by the U.S. authorities to  facilitate the integration of its 
T&C sector into GATT 1994 on 1 January 2005, in  particular, those relating to continuous 
autonomous industrial adjustment and increased compe tition in the U.S. market as provided in Article 
1.5 of the ATC.  
Answer  
 
The entry into force of the ATC was a watershe d event for production and trade in textiles and 
apparel, as it established an irreversible schedule fo r the phased elimination of the quota regime that 
regulates a significant portion of world trade in the sector.  Equally important, it established binding commitments requiring all WTO Member countri es to open their own markets to increased 
competition.  The ATC is a very important agreement for the United States, and the United States has 
taken very seriously its commitment to ensure that the provisions of the ATC, in their entirety, are 
fully and faithfully implemented.  The ATC has allowed imports from restrained markets to grow extremely rapidly and attain 
significant volumes.  In the U.S. market, the incr ease in imports has led to intense structural 
adjustment for the textile and apparel sectors thr oughout the transition period, as anticipated by the 
Agreement.  Structural adjustment in the U.S. textile  and apparel sector is strikingly evident in data on 
employment.  Textile employment in 2003, at 440,100  workers, was 37 percent below the 1994 level.  
Apparel employment has fallen even more precip itously.  Apparel employment in 2003, at 312,700 
workers, was 64 percent below the 1994 level.  Text ile and apparel employment declined 52 percent 
between 1994 and 2003, for a total job loss of 799,700.   Textile and apparel employment declined 42 
percent between 1994 and 2002, for a total job loss of 697,800.  
 The U.S. Government places a high priority on meas ures to ensure a level playing field, creating a 
healthy, competitive economic environment for the U.S. textile and apparel industry.  The U.S. 
Government will continue to focus on ways in wh ich conditions in the tex tile and apparel industry 
may be effectively addressed.  
 
CHAPTER 4:  DEVELOPMENTS BY SECTOR  Chapter 4 - BY SECTOR 
 
(1) Agriculture  
 
Question:  (Brazil #1) 
 In document WT/TPR/S/126, Item III (Trade Policie s and Practices by Measure), paragraph 46 states 
that "The simple average applied MFN tariff, includi ng the ad valorem equivalents (AVEs) of specific 
and compound rates, was 5.1 percent in 2002, down from 5.4 percent in 2000.  The average applied tariff for agriculture in 2002 was 9.8 percent down from 10.4 percent in 2002; the average for non-
agricultural products was 4.2 percent in 2002, down from 4.5 percent in 2000."  In paragraph 50, 
however, it is found that "In 2002, some 6.6 percen t of all tariff lines bore tariffs exceeding 15 
percent, in some cases estimated on AVE basis.  These tariffs tend to be concentrated in a few 
sensitive sectors, whic h are often also of particular interest  to exporters from developing countries.  
For example, tariffs reach ad valorem or ad valo rem equivalent rates of 350 percent for tobacco, 164 
percent for peanuts...".  Since the most protected  products in the USA are agricultural, which 
constitute the major exports from developing countri es, how does the U.S. expect to accomplish its 
stated goal of fostering development through trade?   
 
 WT/TPR/M/126/Add.3 
Page 156  
 Answer  
 
The strong U.S. commitment to free trade is reflected in the very statistics cited by the report.  The 
U.S. has a low overall tariff structure, which fosters trade and development.   This commitment to free 
trade is also reflected in our agricultural tariffs.  The average U.S. tariff on agricultural products is 12 
percent, much lower than the wo rldwide average of 62 percent.  Our proposal for the agricultural 
negotiations would further slash tariffs for agricu ltural products, bringing increased opportunity for all 
countries to access the U.S. market.  
Question:  (Brazil #2)  
 Paragraph 12 of Item IV (Trade Policies by Sect or), in WT/TPR/126, expresses that "The six-year 
Farm Act (2002-2007) increases reliance on price- dependent support, thus  departing from the 
objectives of gradually reducing production-distor ting support in favor of income supplements 
established in the Federal Agriculture Improvement  and Reform Act of 1996 (FAIR Act)."  How does 
the USA intend to make compatible the increased reliance on price-dependent support with American 
liberalizing goals for the Doha Round? 
 
Answer 
 
The United States is on record in every forum a nd on every occasion that we will honor our Uruguay 
Round commitment on agriculture.  The 2002 Farm Act a llows us to meet these  commitments, and we 
will honor all of them.  For the reasons we have explained, the 2002 Farm Act does not increase 
support; the USDA net outlays show trade-distorti ng domestic support trendi ng downward;  and our 
farm programs are still oriented toward fewer trade- distorting forms of support.  Finally, with full 
knowledge and understanding of the po tential implications for U.S. farm policy, U.S. farmers and 
ranchers have expressed their willingness to re form further and liberalize by supporting and 
developing with the Administration the U.S. ag riculture negotiating proposal, which calls for 
elimination of export subsidies, reductions in trade-distorting domestic support and a significant 
increase in market access.  
Question:  (Brazil #3) 
 
The adoption of the Direct Paymen ts (DP) - Paragraphs 24 and 25 of  item IV, WT/TPR/S/126 - in the 
Farm Bill of 2002, whose principle is similar to  those of the 1996 Production Flexibility Contract 
Payments (PFC), was aimed to substitute internal support measures that distort trade by those that do 
not cause this effect.  However, these Direct Paym ents were adopted with no reduction in the amber 
box measures.  In this context, irrespective of the fact that "direct payments" are considered to be 
"decoupled from production", their final effect continues to be distorting.  Why do the payments 
accomplished by the PFC, besides the Market Lo an Programmes (MLP), were considered "non-
specific" if they were limited to a list of seven products in 1999 (wheat, maize, barley, cotton, oats, 
rice, and sorghum)?  
Answer 
 
Both the Production Flexibility Contract (PFC) pa yments, in effect between 1996 - 2002, and the 
Direct Payments program, which came into effect during 2002, are green box programs.  The basis for 
the payment is historical area for traditional prog ram crops (as noted in the last sentence of the 
question).  Historical oilseed area was added as a program crop for the Direct Payments program.  The 
programs are consistent with green box criteria because the payments are not tied to current 
production or price of any crop, and no production is required to receive a payment.  In addition, 
farmers with historical base acres can choose not to  plant a crop at all.  The Market Loss Assistance  WT/TPR/M/126/Add.3 
 Page 157 
 
 payments for 1998 and 1999 were notified as non-product specific amber box.  Even though the actual 
payments were fully decoupled from current prod uction (the area basis was identical to the PFC 
payments), the U.S. chose to notify the MLA paymen ts as amber because they were intended to offset 
the effects of low prices and other marketing losses.  But the payments were non-product specific because they were not tied to the production of a particular crop.  Payments under the marketing loan program (loan deficiency payments and marketing loan gains) have always been notified as product-
specific amber box. 
 
Question:  (Brazil #4)  
 
The calculation methodology of the Loan Deficiency Payments (LDP) for rice and cotton presents a 
difference in relation to the other products (Par agraph 29 of Item IV of WT/TPR/S/126).  Besides 
that, it takes the principle of "Adjusted World Pri ce (AWP)", which incorporates in the calculation of 
the LDP for these two products an alignment for su ch a differentiation?  Can this difference in 
methodology be construed as operati ng as indirect export subsidies? 
 
Answer 
 
The marketing loan program opera tes for various commodities, and benefits are based on the 
difference between the loan rate and a loan repaym ent rate.  The loan repayment rate for rice and 
cotton, as noted in the question, is an adjusted world price, as calculated by the Department of 
Agriculture.  The programs for rice and cotton are c onceptually no different from the other eligible 
commodities.  Benefits are not tied to export of the commodity, and have always been notified as 
product-specific amber box.  For details, please see the USDA Farm Bill website: http://www.usda.gov/farmbill/.  
Question:  (Brazil #5)  
 
The adoption of the counter-cyclical payments (CCP ) by the Farm Bill of 2002 was meant to make 
permanent the so-called "emergency payments" made to U.S. farmers during the Asian crisis in 1998, 
which brought the fall in internati onal prices of major agricultural products.  So, why were the target 
prices set at so high values (Table IV.3, page 109,  WT/TPR/126)?  Can such payments be seen as 
reinforcing the effects of the LDPs, aiming to artificially guarantee income to the American 
producers, and thus isolating them even more from market signs? 
 
Answer  
 
The target prices were set in legislation and generall y reflect levels from previous farm legislation (for 
example, the 1990 farm bill).  Counter-cyclical payments are decoupled from current production, 
unlike LDPs.  It is an income safety net progr am, providing farmers with some income support if 
prices fall beneath a certain level.  But the amount of counter-cyclical payments is not dependent on 
recipients’ current production.  
Question:  (Brazil #6) 
 In paragraph 33, page 109, WT/TPR/S/126, it is me ntioned that "authorities have noted that the high 
levels of government outlays in recent years have been caused by the collap se in world prices".  Once 
USA is the major cotton exporter and it exports a bout 40 percent of its production, how do the high 
levels of support granted by the American gove rnment to producers affect cotton world prices? 
 WT/TPR/M/126/Add.3 
Page 158  
 Answer  
 
U.S. Government support to cotton producers is not r esponsible for the level of world cotton prices.  
The structure of U.S. farm programs has been substa ntially similar since the reforms introduced in the 
1996 Farm Act.  For example, that Act eliminated  traditional deficiency payments, which were linked 
to cotton production and set high target prices, and introduced decoupled income support payments 
not tied to production of cotton or any other cr op.  The 2002 Farm Act established new decoupled 
income support payments again not tied to production of cotton or any other crop.  During the period 
since the 1996 Act, cotton prices have swung from 78 cents per pound in marketing year (MY) 1996 
to a low of 42 cents in MY 2001 (as measured by  the A-index, a commonly-used price indicator).  
The A-index in MY 2003, to date, is 71 cents per pound.  These wide swings, in the context of two 
substantially similar U.S. farm pr ograms, demonstrate that U.S. support payments are not responsible 
for the level of world prices.  
Question:  (Brazil #7) 
 The Market Loss Payments (MLPs) can be regarded  as one of the support programmes mentioned in 
paragraph 35, page 110, WT/TPR/S/126.  In the notification G/AG/N/USA/43, it is stated that, in 1999, the producers that had received payments through Production Flexibility Contract (PFC) had 
also been benefited by payments through Mark et Loss Payments (MLPs) according to the sum 
received through PFC.  Since the payments were made directly to the same producers and in the same 
ratio, even if through different internal s upport programmes, why was one as amber box (MLP)?  
Since the payments made through the MLP were li mited to a list of only seven products in 1999 
(wheat, maize, barley, cotton, oats, rice, and sorghum), why was the total agricultural production 
considered in the calculation for the "de minimis"?  
Answer 
 
The Market Loss Assistance payments for 1998 and 1999 were notified as non-product specific amber 
box.  Even though the actual payments were fully decoupled from current production (the historical 
area basis was identical to the PFC payments), th e U.S. chose to notify the MLA payments as amber 
because they were intended to offset the effects of low prices and other marketing losses.  But the 
payments were non-product specific because they were  not tied to the production of a particular crop. 
 
Question:  (Brazil #8) 
 
Paragraph 36, page 110, WT/TPR/S/126, mentions that Export subsidies were scheduled by the 
United States under the WTO Agreement on Agricu lture for 13 product groups comprising cereals, 
oilseeds, dairy products, and vege tables, and were made subject to distinct reduction commitments 
over 1995-00 period.  Therefore, it is clear that cott on is not part of this list and, for this reason, 
cannot receive any kind of export subsidy.  On the other hand, one of the benefits of the "Step 2 
programme", which is specifically ch anneled to cotton, is conditioned to the export of the product.  Is 
not such practice and indirect export subsidy?  What is the understanding of the USA about it? 
 
Answer 
 
A recipient does not have to export cotton in orde r to receive a payment under the Step 2 program.  
Since the payment is not contingent on expor t of a product, it is not an export subsidy.  
 
 
   WT/TPR/M/126/Add.3 
 Page 159 
 
 Question:  (Brazil #13 & 14) 
 
Section 10816 of the 2002 Farm Ac t established a mandatory requirement for "country-of-origin" 
labeling applicable to beef, lamb, pork, including ground, wild, and farm-raised fish, perishable 
agricultural commodities and peanuts at the retail level in force as of September 30, 2004.  Even 
USDA is against the measure, deemed to be too cos tly and provide no visible benefit to consumers.  
This labeling requirement may lead to protectionist side effects such as encourage "Buy American" 
sentiment through allegations that the domestic agricu ltural products are "better" in terms of intrinsic 
qualities and of sanitary and phytosanitary concerns.  Such concerns are, obviously, unfounded, since 
any plant or animal, live or processed that enters the U.S. does so only after being cleared in the 
stringent risk analysis procedures conducted by either  the USDA or FDA.  Is the U.S. reconsidering 
this redundant provision? 
 Country-of-origin labeling is obviously not an SPS issue.   It is not related to the protection of human, 
animal or plant life or health.  Assuming that it is a TBT issue, can the U.S. explain what is the legitimate goal the COOL is expected to promote?  Answer  
The effects of country of origin labeling (COOL ) requirements on consumer  behavior cannot be 
determined at this time because much depends on how industry implements the regulation.  In a 
nation of brand conscious consumers, the 2002 Fa rm Act COOL provision is Congress' response to 
consumer stated preferences for country of origin  labeling.  USDA will be paying close attention to 
ensure that the implementation of mandatory COOL regulations will be consis tent with U.S. trade 
obligations.  Currently, the COOL compliance is only voluntary and it is not known when the mandatory regulations will be fully implemented.  
 
Question:  (Argentina #5)  
 
Regarding paragraph 10, d on't you think that the increase in paymen ts as described in that paragraph 
does nothing more than increase the developing countri es' disbelief in the genuine commitment of the 
United States to the Doha Declaration?  Could you specify the amounts, specific recipients, and distribution of each of such payments?  Doesn't the United States believe that the bound level has 
been exceeded? 
 
Answer 
 
The total amount to be paid to farmers through the direct payment and counter-cyclical payment 
programs are calculated using data on historical crop yields and acreages.  Unlike direct payments, 
counter-cyclical payments will be made only if cer tain crop prices drop below predetermined levels.  
Since future prices are unknown, average spending le vels for these programs is also unknown.  What 
is known is that the United States will not exceed its $19.1 billion AMS ceiling as agreed to in the 
Uruguay Round Agreement on Agriculture.  
In the current agricultural negotiations, the Unite d States is committed to reaching substantial 
reductions in trade-distorting supp ort and export subsidies, coupled  with substantial increases in 
market access.  As stated above, the United St ates is bound by the Uruguay Round agreement to limit 
AMS spending to an agreed-upon level.  The United States will continue to abide by its Uruguay Round commitments while continuing to pus h other countries to liberalize trade. 
 
 
 WT/TPR/M/126/Add.3 
Page 160  
 Question:  (Argentina #6)  
 
Regarding paragraphs 21 and 22,  it is noteworthy that failure by the United States to provide 
notification (as stipulated in Article 18.2 of the Agreement on Agriculture very greatly damages the 
credibility of the multilateral system and the current negotiations.  Answer  
 
The United States is pleased to draw Argen tina's attention to our DS: 1 notification 
(G/AG/N/USA/51) dated March 11, 2004.  The notifi cation contains two years of data for marketing 
years 2000 and 2001.  Of all countries with large AM S levels, the United States has the most current 
notification on file.  We note that many other countries are not current with their domestic support 
notifications.  
Question:  (Argentina #7) 
 Concerning paragraph 40(b), "Export Financing, Insura nce, and Guarantees," it is observed that these 
provisions are aimed primarily at developing c ountries (South America) and OECD countries 
(Mexico, Korea), all of which have easy access to in ternational lines of credit.  They are not geared 
towards the LDCs, which are the countr ies that need support in order to be able to secure financing.  
Is this because the aim is to displace the competition?  Answer  
U.S. programs are designed to work as commercial programs in countries with a relatively established 
financial infrastructure but require a guarantee to fac ilitate the sale.  LDCs typically do not meet these 
criteria.  In order to help improve access to th ese countries the United States has allowed many to 
participate via a third country, whereby the LDC im porter uses an approved bank in another ("third") 
country to finance the purchase of agricultural commodities.  In FY 02, $1.3 billion was made 
available to LDCs and NFIDCs through the GSM-102, GSM-103 and supplier credit guarantee 
program. 
 
Question:  (Canada #6) 
 Canada notes that the FY 2004 Consolidated Appr opriations bill (H.R. 2673), recently passed by the 
House of Representatives and still before the Sena te, delays funding for the implementation of 
mandatory COOL until 2006 for all products, excep t fish and seafood (for which implementation is 
still slated to occur in 2004).  Canada welcom es the implementation delay as it will allow the U.S. 
Government and stakeholders alike more time to study effective alternatives to mandatory COOL.  
However, could the U.S. clarify why fish and seafood products are being singled out for separate 
treatment and are not included in the implementation delay?  
Answer  
 Programmatically, fish and seafood labelling are sep arate from traditional agricultural commodities 
and are therefore handled differently. 
 
Question:  (Canada #10)  
 Reference is made to U.S. duty drawback systems, but it should be noted that at least one important 
such system has been established to  encourage the refining of foreign sugar in the U.S., as well as the 
manufacture of sugar-containing products destined for export, based on the importation of foreign  WT/TPR/M/126/Add.3 
 Page 161 
 
 sugar. Please explain how the U.S. sugar drawback  system affects the export of sugar and sugar-
containing products refined or produced in the U.S. from foreign sugar. 
 
Answer 
 
The United States Department of Agriculture ope rates a Sugar Containing Products and a Refined 
Sugar Re-export Program.  Participants in th e Sugar-Containing Products Re-Export Program may 
buy imported sugar from any of the re finer participants or their agents  for use in products that will be 
exported.  The Refined Sugar Re-Export Program est ablishes a license against which a refiner can:  
export domestically produced refined sugar and late r import raw sugar; impor t raw sugar for refining 
and distribution in the domestic market  and later export refined sugar;  or import raw sugar, refine it 
and export it.  Further detail about these programs can  be found on the Foreign Agricultural Service 
website at: http://www.fas.usda.gov/itp//imports/ussugar.html. 
 
Question:  (Canada #12) 
 These paragraphs refer to Trade Adjustment Assistance (TAA), but fail to note that a new TAA 
program for agricultural producers was introduced when the TAA was amended in 2002.  Please 
supplement the Secretariat's description of the TAA with an elaboration of how TAA is being 
implemented in support of agricultural producers.  Please include in your response how much money is allocated to TAA for agriculture, and whether it is  expected that all of the funds appropriated for 
2003 will be spent. 
 
Answer 
 
The Trade Act of 2002 contains a provision for Trad e Adjustment Assistance for Farmers, with an 
appropriation of not more than $90 million for each fiscal year 2003 through 2007 to be administered 
by the U.S. Department of Agriculture.  The Secr etary of Agriculture delegated authority for this 
program to the Administrator of the Foreign Agricultural Service.  The regulation to implement Trade Adjustment Assi stance for Farmers was published in the Federal 
Register on August 20, 2003 (7 CFR 1580).  No cash benefits were expended under this program in 
FY 2003.  Question:  (Canada #15)  
 
Paragraph 22 refers to the delays in the U.S. notifi cations to the Agriculture Committee of the level of 
its domestic support for the years following 1999. 
 
Comment
:  Canada is concerned that the extensive dela y in U.S. notifications of "new" or modified 
domestic support programs for agriculture, enacted in May 2002 and in effect since then, mean that 
the WTO notification and surveillance provisions re lated to domestic support are not being respected. 
 
Answer 
 The United States is pleased to draw Canada's a ttention to our DS: 1 notification (G/AG/N/USA/51) 
dated March 11, 2004.  The notification contains  two years of data for marketing years 2000 and 
2001.  Of all countries with large AMS levels, the United States has the most current notification on 
file.  We note that many other countries are not current with their domestic support notifications. 
 WT/TPR/M/126/Add.3 
Page 162  
 The United States domestic support notification G/AG/N/USA/51 includes support up to, but not 
including programs in 2002 Farm Act, which w ill be included in the next domestic support 
notification.  Most programs of the 2002 Farm act were applicable for the 2003 commodity year.  
Question:  (Canada #25) 
 This paragraph refers to legislative changes in Trade Adjustment Assistance (TAA) and argues that 
TAA is an essential component to maintaining support for trade liberalization in the U.S.  However, it 
fails to note that TAA is now available to th e agricultural sector.  Please comment on how much 
money has been allocated to agricultural TAA, a nd how much it expects will be spent and on which 
commodities.  Please also comment on the extent to  which, so far, TAA has lessened protectionist 
pressures in U.S. agriculture. 
 
Answer 
 
The Trade Act of 2002 contains a provision for Trad e Adjustment Assistance for Farmers, with an 
appropriation of not more than $90 million for each fiscal year 2003 through 2007 to be administered 
by the U.S. Department of Agriculture.  The Secr etary of Agriculture delegated authority for this 
program to the Administrator of the Foreign Agricultural Service.  The regulation to implement Trade Adjustment Assi stance for Farmers was published in the Federal 
Register on August 20, 2003 (7 CFR 1580).  No cash benefits were expended under this program in 
FY2003. 
 TAA announcements, including decisions regarding be nefits, are posted on the TAA Website.  As of 
early January 2004, petitions for T AA benefits have been approved for producers of wild blueberries, 
salmon, shrimp, and catfish.  The FY2004 deadline for petitions is January 31, 2004, and no estimate 
of program outlays for FY2004 will be available until later in the year after all petitions and producer 
applications have been processed and reviewed.  
Question:  (China #Add 1)  
 
How does the U.S. delegation explain the difference of  its positions with regard to the negotiations on 
agriculture as reflected in the EU-U.S. joint propo sal, which is considered by most WTO Members as 
a big step backward and discontinuation of leader ship in comparison with its original position as 
contained in its own proposal submitted in the middle of 2002?  
Answer  
 
The suggestion that U.S. policy toward agricultura l reform in the WTO has been inconsistent is 
simply not the case.  We have been clear from the out set of the DDA that agricultural reform is to us 
the lynchpin of the negotiations.  The U.S. negotia ting proposal on agriculture calls for fundamental 
reform in all three pillars.  This proposal refl ects in depth consultations with our Congress and 
agricultural community.  Last August we were ca lled upon by many WTO Members to work with the 
EU to bridge the substantial differences in our  positions.  The result was not put before WTO 
Members as a take it or leave it proposition but rather as a framework on which to build.  While WTO Members raised concerns with the joint text, it nevertheless stimulated engagement.  The United 
States has had, and will continue to have, a high level of ambition for the DDA negotiations on 
agriculture on all three pillars. 
  WT/TPR/M/126/Add.3 
 Page 163 
 
 Question:  (Mexico #I-4) 
 
In the "technical regulations" section, it is indicated that such regulations may be issued by Congress.  
Mexico wants to know, in this regard, if a tec hnical regulation may be issued by Congress without 
regard for the regulatory analyses conducted and the international commitments of the United States.  
We are asking this question in light of the fact  that the country-of-origin labelling regulations 
provided for in the Farm Bill have been repeated ly described as excessive and difficult to comply 
with, both by U.S. producers and by exporters.  
Answer 
 The effects of country of origin labelling (COOL ) requirements on consumer behaviour cannot be 
determined at this time because much depends on how industry implements the regulation.  In a 
nation of brand conscious consumers, the 2002 Fa rm Act COOL provision is Congress' response to 
consumer stated preferences for country of origin labelling.  USDA will be paying close attention to 
ensure that the implementation of mandatory COOL regulations will be consis tent with U.S. trade 
obligations.  Currently, the COOL compliance is only voluntary and it is not known when the 
mandatory regulations will be fully implemented.  
Question:  (Mexico II-H.1) 
 
(h) Mexico would like to obtain additional inform ation from the United States on what is termed 
"marketing orders."  In this regard, Mexico requests the U.S. to: 
 h.1 Indicate the legal framework governi ng the adoption of marketing orders; 
 
Answer  
 
Marketing agreements and orders are legal instruments authorized by the Agricultural Marketing 
Agreement Act of 1937 and in subsequent amendments .  The Secretary of Agriculture is vested with 
the power to exercise the use of these instruments to regulate the marketing of eligible commodities -- 
fruits, vegetables, specialty crops, and milk -- in certain clearly specified ways.  Question:  (Mexico II-H.2) 
 
h.2 Describe the legal effects resulting from the adoption of marketing orders; 
 
Answer 
 Marketing orders are binding on a ll individuals and businesses who are classified as "handlers" in the 
geographic area covered by the order. Marketing or ders are distinguished from marketing agreements, 
which are binding only on handlers who are signatori es of the agreements.  The definition of handler 
and handling depends on the particular  program.  As defined in most agreements and orders, a handler 
is anyone who receives the commodity from producers,  grades and packs it, transports, or places the 
commodity in commercial channels.  Handlers must comply with the grade, size, quality, volume, or 
other requirements established under the program. 
 
Question:  (Mexico II-H.3)  
 h.3 Confirm that the issuance of marketing or ders is regulated and allowed under the TBT and 
SPS Agreements or, if not, expl ain why this is not the case; 
 WT/TPR/M/126/Add.3 
Page 164  
 Answer 
 
The issuance of marketing orders is not linked to food safety criteria, and as such, the SPS Agreement 
would not apply to issuance of such orders.  The rules under the TBT agreement may apply in certain situations.  It is the responsibility of the federal gove rnment to ensure that marketing orders are issued 
in a WTO-consistent manner.    Question:  (Mexico II-H.4) 
 
h.4 Indicate how one can participate in the drafting of marketing orders;  Answer  
All marketing orders are initiated by producers.  Please refer to the following website for more 
information on marketing orders:  www.ams.usda.gov/fv/moabsteps.html. 
 Question:  (Mexico II-H.5)  
 
Explain the process for evaluating product-conform ity with the corresponding marketing orders. 
 
Answer 
 
The U.S. believes that these regulations fully comp ly with World Trade Organization requirements.  
The grade, size, quality and maturity requirements specify minimums only, do not limit the volumes of such commodities which may be imported, do not a pply a tariff or quota to such imports, and are in 
effect only during the same periods of time as domestic production is regulated.  These requirements 
are limited to grade, size, quality and maturity.  Domestic production is often required to meet 
additional requirements related to  pack and container, containe r marking, volume controls, and 
assessments to fund administrative costs for marketing order operations.  
 
Question:  (Mexico II-M) 
 
(m) Paragraph 134 indicates that the United States has not notified the WTO of any technical 
regulations or sanitary and phytosanitary measures.  In this regard, Mexico would like to know the 
reasons why the United States has not issued such not ifications and whether it is planning to do so in 
the future.  
Answer 
 
Mexico is incorrect.  Of all WT O members, the United States has made the most SPS notifications.  
The United States systematically notifies to the WTO all proposed changes in domestic sanitary and 
phytosanitary measures.  It has made 760 WTO SPS notifications from January 1995 to October 
2003; about one third of these since 2001.  Question:  (Brazil #18)  
 
Regarding GMOs and the Biotechnology Regulatory Se rvices (BRS), it is stated (paragraph 151, page 
66, WT/TPR/S/126) that "The new programme focuses on regulation of biotechnology, risk assessments, and the granting of permissions.  Am ong other responsibilities, BRS works with foreign 
governments to harmonize biotechnology standards."  With which countries had the BRS worked so 
far to harmonize biotechnology standards?  What has been achieved in this work? 
  WT/TPR/M/126/Add.3 
 Page 165 
 
 Answer 
 
APHIS/BRS participates in efforts to harmonize regu latory and risk assessment procedures related to 
agricultural biotechnology in both bilateral a nd multilateral discussions, and in international 
organizations such as the International Plant Prot ection Convention (IPPC) and Cartagena Protocol on 
Biosafety.  BRS is participating in the developmen t of a regional standard for environmental release 
of living modified organisms (LMOs) under the North American Plant Protection Organization 
(NAPPO), and has coordinated with COSAVE in  providing input for development of an LMO 
standard under the IPPC.  BRS regularly meets with  officials from other countries, including Brazil, 
to provide information about the U.S. regulatory pr ocess.  In addition, APHIS experts have provided 
biotechnology risk assessment training for regulatory officials from a number of countries including 
the Philippines, China, and in the APEC forum.   BRS also shares its agricultural biotechnology 
regulatory experience with foreign governments upon request. 
 
More specifically, BRS has been working closely with the Canadian Government to coordinate 
regulatory information and to deve lop environmental risk assessment criteria.  Canada and the United 
States have enjoyed a long history of cooperation in the area of agricultural biotechnology, both in 
bilateral and in international fora.  In simultane ous reviews of transgenic plants prior to their 
commercialization and during the recent bilateral di scussions, the CFIA, Health Canada, and APHIS 
have discussed the types of data that each office reviews before making a regulatory decision.  The 
two Governments conduct ongoing bila teral discussions to compare and harmonize where possible, 
the molecular genetic characterization components of the regulatory review process for transgenic 
plants.  Argentina and Mexico have pa rticipated in these discussions as well. 
 The results of these meetings, and other activities, ma y lead to mutual acceptance of assessments in 
the future.  In the near term, the continued exchange of information between USDA/APHIS and 
regulatory agencies in other countries that are responsible for oversight of biotechnology, further 
enhances the understanding of regulatory systems a nd requirements, and shoul d help to expedite 
review processes and safe adoption and use of  products of agricultural biotechnology. 
 
Question:  (China #69)  
 
The Chinese government made comments in a serious  manner on the "Registration of Food Facilities" 
(G/SPS/N/USA/691), "Prior Notice of Imported Food" (G/SPS/N/USA/690), the "Establishment and 
Maintenance of Records" (G/SPS/N/USA/703) and th e "Administrative Detention of Food for Human 
or Animal Consumption Under Public Health Secu rity and Bioterrorism Preparedness and Response 
Act (Draft0" (G/SPS/N/USA/704) notified by FDA, pr ovided with the U.S. comment before the final 
date and requested the U.S. to provide answers in  written form and clarify some related questions.  
However, so far China has not received any formal re ply, clarification and explanation from the U.S.  
Does the U.S. plan to respond to the comments made by China?  If so, when? 
 
Answer  
Under the Administrative Procedure Act, U.S. agencies are required to respond to significant and relevant comments from all parties that were su bmitted within the comment period.  The comments 
are not reviewed and answered individually since ma ny interested parties ask similar questions or 
forward similar concerns, but each issue raised is analyzed and responded to within the body of the 
final regulation.  Thus, any timely comments subm itted by any stakeholder are addressed in the 
preambles to the final rules.  
   WT/TPR/M/126/Add.3 
Page 166  
 Question:  (Colombia #1)  
 
Paragraph 128 of the Secretariat's report states that in order to meet the Constitutional requirements of 
due process, most States have enacted statutes c ontaining transparency procedures.  For example, 
most States have enacted administrative procedure acts whose procedures are similar to those of the federal APA.  The majority of States have also en acted statutes that provide for public access to  As 
regards Technical Regulations app lied to products, what progress has been made in standardizing 
requirements at the state and federal level?  
Answer 
 
Title IV of the Trade Agreements Act of 1979 (Public Law 96-39), as amended by the Uruguay 
Round Agreements Act (Public Law 103-465), proh ibits U.S. agencies from employing standards, 
technical regulations or conformity assessment procedures as unnecessary obst acles to trade.  This 
legislation includes the Administration's commitment to promote state agencies' compliance with U.S. 
obligations under the WTO through reasonable meas ures including through state-federal consultation 
and cooperation.  Should specific questions rega rding the WTO consistency of state or local 
regulations or procedures be brought to our attent ion, USTR would engage in consultations with 
interested state authorities to ascertain whether there is in fact a compliance issue and, if so, how best 
to proceed.  
 
Question:  (Colombia I-C.5)  
 
Paragraph 142 of the report explains that APHIS has regulatory responsibility to safeguard U.S. 
animal and plant resources from exotic pests and diseas es.  In the case of risk analysis specifically, 
where there are delays in the approval process, ha ve measures been taken to expedite the process? 
 Answer  
 
USDA has substantially increased staffing to perform  and review risk assessments over the past few 
years. 
 
Question:  (Colombia III-A.1)  
 
Has the United States defined any parameters for ma king headway in its agricultural policy, both in 
terms of access and domestic aid, and export subsidies?  
Answer  
 
In January, United States Trade Representative Zoellick has sent a letter to your trade minister suggesting options for negotiations.  We look forw ard to engaging in ambitious multilateral trade 
negotiations in 2004.  
Question:  (Colombia III-A.2) 
 
What is planned for tariff quotas on various types of products, including broomcorn brooms 
(HS 9603.10), tuna, and agricultural products?  High  out-of-quota tariffs on agricultural products do 
not allow for exports from developing countries in important sectors such as the sugar industry.  
  WT/TPR/M/126/Add.3 
 Page 167 
 
 Answer 
 
The United States takes note of Colombia's comment  and acknowledges that the current U.S. tariff 
structure reflects some domestic sensitivities.  We note that this is true for many of our WTO partners 
as well.  We also point out that the average U.S.  tariff on either agricultural or non-agricultural 
products is quite low (the average bound U.S. tariff on non-agricultural products is 3.2 percent and on 
agricultural products is approximately 12 percent) co mpared to those of many of our WTO partners.  
Finally, we invite our WTO partners, including Co lombia, to advance free trade and complete the 
tariff-cutting work begun more than 50 years ago wi th the creation of the GATT by working towards 
an ambitious market access outcome in the DDA.   As the U.S. agriculture and NAMA proposals 
tabled in 2002 indicate, the United States is w illing to move forward with tariff reduction or 
elimination as long as our WTO partners are willing to do the same. 
 
Question:  (Chile #19)  
 
Paragraph 12 indicates that the Farm Act does not  include a budget ceiling, although there are a 
number of mechanisms that impose limits on spending.   One of such measures is the "circuit breaker" 
clause under which domestic supports would not ex ceed WTO limits.  How are the domestic supports 
reviewed under this clause?  Has it been necess ary to invoke this clause during this period? 
 
Answer  
 The United States Department of Agriculture con tinually monitors actual spending in each of its 
programs.  If actual spending levels approach commitment levels, the Secretary of Agriculture is notified, and further spending is closely watche d in case the "circuit breaker" provision of the 2002 
Farm Act, which stops spending to ensure AMS commitment levels are not exceeded, needs to be 
invoked.  This provision has not been used. 
 
Question:  (Chile #20)  
 
With respect to the agricultural notifications that must be made to the WTO, for what reason were 
support programs for the period 1999-2000 not notifie d?  Does the failure to provide notification 
affect the monitoring system of the "circuit-breaker" clause? 
 
Answer 
 
The United States is pleased to draw Chile’s attention to our new DS: 1 notification (G/AG/N/USA/51) dated March 17, 2004.  We will submit the notifications for programs under the 
2002 Farm Act for which exemption will be claime d as soon as possible.  The United States remains 
committed to the notification process and will work to  fulfil all its WTO obligations.  No, a lack of 
notification does not affect the monitoring syst em of the "circuit-breaker" clause. The USDA 
continually monitors spending for each of its programs.  If actual spending levels approach 
commitment levels, the Secretary of Agriculture is  notified, and further spending is watch in case the 
provision of the 2002 Farm Act, which stops spe nding to ensure AMS commitment levels are not 
exceeded, needs to be invoked.  Th is provision has not been used. 
 WT/TPR/M/126/Add.3 
Page 168  
 Question:  (New Zealand #1)  
 
What is the U.S. justification for maintaining high  tariff protection in sectors such as agricultural food 
products?  What program does the U.S. have for the reduction and eventual elimination of such 
tariffs?  When does the U.S. intend to  reduce or eliminate tariff peaks? 
 Answer  
 
The U.S. tariff rates for agricultural products are low,  particularly compared to most WTO members.  
The average rate for food products coming in to the United States is 12 percent, not counting the 
many products that benefit from duty-free treatment  under the GSP.  To address the problems of high 
agricultural tariffs worldwide, the United States has submitted a very ambitious and aggressive 
proposal for reducing tariffs in the WTO negotiations .  In addition, the United States has proposed the 
elimination of all tariffs by a date certain.  The Un ited States is fully committed to further reform in 
world  agricultural trade.  
 
Question:  (New Zealand #2) 
 
How does the United States justify the long-standing  delay in resolving New Zealand's request for 
access to the United States for live honeybee and honeyb ee semen?  In particular when, in view of 
New Zealand's honey bee health (New  Zealand has superior honey bee status than Australia, Burma, 
France, Great Britain, and Sweden) and there is no specific scientific basis for further denying such 
access on SPS grounds?  When will USDA publish the Proposed Rule and associated Risk 
Assessment for New Zealand honeybees?  
 
Answer  
Inspection and quarantine standards ar e developed through analysis of the pest risk associated with 
the imported commodity in accordance with intern ational standards.  Time requirements for 
inspection at the port-of-entry are based on a vari ety of factors including clearance of documentation 
through U.S. Customs and available time for agricultura l inspection.  Every effort is made to expedite 
these risk assessments.  
Please refer to the APHIS website:  http://www. aphis.usda.gov/ppq/pra/ and the U.S. Embassy 
website: www.usembassy.org.nz/ for more informa tion on the United States risk assessment process.  
The final rule on New Zealand honeybees is currently  under review in the Office of General Counsel.  
The most recent risk assessment was published in A ugust 2002 and can be fo und at can be found in 
the following location:  http://www.aphis. usda.gov/ppq/pra/honeyb ees/nzealandbee_pra.pdf 
 
Question:  (New Zealand #5)  
 
To what extent does USDA expect food aid donations to continue and to what volume?  What has been undertaken since the last U.S. Trade Polic y Review to minimize the potential disruptions on 
trade caused by food aid?  Is the USDA notifyi ng these donations through the CSSD mechanism of 
the FAO? 
 
Answer 
 
The United States is currently planning to donate 3. 5 - 4.0 million metric tons of food aid in U.S. 
fiscal year 2004 (Oct. 1, 2003 - Sept. 30, 2004).  This is a decrease from the fiscal year 2003 
donations of approximately 4.5 million metric tons.  This fiscal year 2004 tonnage is only an estimate,  WT/TPR/M/126/Add.3 
 Page 169 
 
 however, and may change during the fiscal year de pending on whether or not any emergency food aid 
needs arise.  The United States adheres to the "Principles of Surp lus Disposal and Consultative Obligations" as laid 
out by the Consultative Subcommittee on Surplus Di sposal (CSSD).  The primary discipline under the 
CSSD is the usual marketing requirement (UMR).  The UMR is an average of the preceding five 
years of commercial imports for the particular r ecipient country and commodity in question.  The 
maximum level of food aid to avoid commercial di sruption is the difference between the country's 
consumption needs and the UMR pl us domestic supplies (production a nd stocks).  The United States 
uses the UMR as a tool to determine whether food aid will displace normal commercial imports or adversely affect domestic production.  The Unite d States notifies its food aid donations through the 
CSSD.  We are currently up-to-date with the required notifications. 
 
Question:  (China #6)  
 
Could the U.S. Delegation please explain the reas on why the notification obligations were not 
implemented?  Please inform us of the plan on the earliest implementation of these obligations. 
 
Answer 
 
The United States is pleased to draw China's atte ntion to our DS:  1 notification (G/AG/N/USA/51) 
dated March 11, 2004.  The notification contains  two years of data for marketing years 2000 and 
2001.  Of all countries with large AMS levels, the United States has the most current notification on 
file.  We note that many WTO Members are not current with their domestic support notifications. 
 The U.S. domestic support notification G/AG/N/US A/51 includes support up to, but not including 
programs in 2002 Farm Act, which will be included in  the next domestic support notification.  Most 
programs of the 2002 Farm act were applicable for the 2003 commodity year. 
 The United States is in the process of preparing Do mestic Support notifications to the Committee on 
Agriculture for programs under the 2002 Farm Bill for which exemption will be claimed and will 
submit these notifications as soon as possible.  The United States remains committed to the 
notification process and will work to  fulfil all its WTO obligations. 
 
Question:  (China #16 & #17)  
 
Could the U.S. explain the consistency of this me asure (peanut TRQ) with WTO principle of national 
treatment? 
 
Does the U.S. intend to modify the regime for pe anut imports and enhance its transparency in 
accordance with the WTO rules?  
Answer 
 The U.S. peanut import tariff rate quota (TRQ) wa s implemented following the Uruguay Round.  The 
TRQ set a maximum quantity of pea nuts permitted into the U.S. each year at a reduced tariff rate of 
9.35 cents/kg (6.6 cents/kg for shelled peanuts) .  The total quantity permitted under the TRQ 
provision is 52,906 MT (shelled weight) and allo cated between Argentina (43,901 mt) and other 
(9,005 MT).  These amounts have remained unchang ed since 2000.  Additional provisions under bi-
lateral free trade agreements (FTA ) allow for peanut imports at zero duty for select countries (Mexico, 
Israel, Chile).  Duty rates and TRQ limits are published in the Harmonized Tariff Schedule of the WT/TPR/M/126/Add.3 
Page 170  
 United States.  Provisions of the TRQ are provided in note 2 to the Chapter 12 duty rates and in 
general note 15 to the tariff schedule concerning bi-lateral free trade agreements.  The peanut TRQ was developed and set during WTO negotiations.  There does not appear to be a 
connection between the operation and administration of the TRQ and national treatment obligations.  
The TRQ was designed to provide access for foreign s uppliers to the U.S. market, replacing previous 
market access provisions that effectively barred access for foreign peanuts into the U.S. market.  All 
importers are given equal access into the U.S. market within their respective quota allotments. 
 
Question:  (China #42)  
The burdensome SPS requirements of the U.S. have al ways been a focus of complaints and concerns 
of Members.  During previous review, the U.S. govern ment indicated that the Federal Register was in 
the process of soliciting public co mments and seeking measures to improve the SPS requirements that 
had impeded normal trade.  
Please provide information on what measures the U. S. has taken in this respect since then. 
 
Answer  
The U.S. Administrative Procedures Act requires the publication of proposed rules and comment 
periods that conform to SPS obligations.  See Part I, Chapter 5, paragraph 553 at 
www.fda.gov/opacom/laws/ adminpro.htm.  Through this public rulemaking process, a foreign 
country has an opportunity to provide written co mments to a U.S. regulatory agency before 
regulations are implemented.  All significant new SPS measures that may impact trade are notified to the WTO SPS Committee, which also provides a fo reign country with an avenue for comments.  
 Question:  (China #43, #44, and #45)  
 
What domestic legislation prevents the U.S. from doi ng so?  We would appreciate it if the U.S. could 
provide us the full text of the relevant legislation.  How would the U.S. justify the situation of a high percentage of inconsiste ncy in terms of comment 
period provided by the U.S. for the SPS notifications, for example 57.3 percent of the U.S. SPS 
notifications were less than or equal to 30 days, 92.3 percent less than 60 days for the year 2002? 
 What measures will the U.S. take in order to abide by the recommendations of the SPS committee and 
the TBT Committee on the no less than 60 day comment period? Answer  
 
At any time any contracting party finds the comment period insufficient in length, they are encouraged to contact the WTO inquiry point.  
Question:  (China #46 & 47) 
 
Is it the consideration of the U.S. behind this le gislation that consumers would more likely choose 
products originating in the U.S. when they are labeled with the country of origin?  If not, what is the consideration behind the measure? 
 
Since imported meat products have already under gone relevant inspection and quarantine, how does 
the U.S. consider the impact of this practice on equitable competition between foreign and U.S. 
products?  WT/TPR/M/126/Add.3 
 Page 171 
 
  
Answer 
 
The effects of country of origin labeling (COOL ) requirements on consumer  behavior cannot be 
determined at this time because much depends on how industry implements the regulation.  In a 
nation of brand conscious consumers, the 2002 Fa rm Act COOL provision is Congress' response to 
consumer stated preferences for country of origin  labeling.  USDA will be paying close attention to 
ensure that the implementation of mandatory COOL regulations will be consis tent with U.S. trade 
obligations.  Currently, the COOL compliance is only voluntary and it is not known when the mandatory regulations will be fully implemented.  Question:  (China #48) 
 
What are the inspection and quarantine standards a dopted by the U.S. for Asian pears and apples from 
China?  Are such standards different from international quarantine standards? 
 Answer  
Inspection and quarantine standards ar e developed through analysis of the pest risk associated with 
the imported commodity in accordance with international standards. 
 
Question:  (China #49) 
 
Is there a time limit for inspecti on and quarantine of imported goods in the U.S.?  Has such time limit 
been respected in the inspections of  Asian Pears and apples from China? 
 
Answer 
 Time requirements for inspection at the port-of-entry are based on a variety of factors including 
clearance of documentation through U.S. Customs a nd available time for agricultural inspection.  
Every effort is made to expedite perishable comm odities.  All imported fruit is subject to some level 
of inspection.  In the event that pests are found on shipments of a specific commodity, the shipment in question may be subject to quarantine and additiona l scrutiny is given to subsequent shipments. 
 
China-origin apples have never been  authorized to be imported into the United States.  Recent issues 
involving China-origin Asian pears centered on problems in  retail fruit markets, rather than at the port 
of entry. 
Question:  (China #50) 
 
Could the U.S. please clarify the scientific justification in terms of SPS for refusing the importance of Chinese bergamot pears?  
Answer 
 
The U.S. is not familiar with a ma rket access request for China-origin  bergamot pears.  However, we 
are familiar with a market access request for fragran t pears.  Are fragrant pears and bergamot pears 
the same commodity?  The proposed rule to authorize importation of Ch ina-origin fragrant pears was published for public 
comment during the summer of 2003.  Public comme nts are currently being reviewed and addressed 
in preparation for publication of a final rule.  WT/TPR/M/126/Add.3 
Page 172  
 Question:  (China #51) 
 
Why did the U.S. refuse to conduct the pest risk analysis?  
Answer 
 
Again, the U.S. is not familiar with a market access re quest for China-origin bergamot pears.  If this is 
the same commodity as fragrant pears a pest risk analysis was conducted. 
 
Question:  (China #52)  
 Could the U.S. explain the necessity of these prac tices and their consiste ncy with the rule of 
harmonization and the principle of least trade restrictiveness contained in the WTO Agreement on TBT and SPS?  
Answer 
 
These inspections are performed upon arrival to en sure that any peanuts imported into the United 
States meet our standards, as applied to both imported and domestic product.  
 
Question:  (China #80) 
 Why has the U.S. not yet notified WTO of this 2002 Farm Bill? 
 
Answer 
 
The United States is pleased to draw China's atte ntion to our DS: 1 notification (G/AG/N/USA/51) 
dated March 11, 2004.  The notification contains  two years of data for marketing years 2000 and 
2001.  Of all countries with large AMS levels, the United States has the most current notification on 
file.  We note that many other WTO Member s are not current with their domestic support 
notifications.  The United States domestic support notification G/AG/N/USA/51 includes support up to, but not 
including programs in 2002 Farm Act, which w ill be included in the next domestic support 
notification.  Most programs of the 2002 Farm act were applicable for the 2003 commodity year.  
Question:  (China #81) 
 What is the annual average amount of direct payment and counter-cyclical payments provided 
according to the new Farm Bill?  
Answer 
 
The total amount to be paid to farmers through the direct payment and counter-cyclical payment 
programs are calculated using data on historical crop yields and acreages.  Unlike direct payments, 
counter-cyclical payments will be made only if cer tain crop prices drop below predetermined levels.  
Since future prices are unknown, average spending le vels for these programs is also unknown.  What 
is known is that the United States will not exceed its $19.1 billion AMS ceiling as agreed to in the 
Uruguay Round Agreement on Agriculture. 
  WT/TPR/M/126/Add.3 
 Page 173 
 
 Question:  (China #82) 
 
Please clarify the impact of such Bill on the pr ospect of the on-going multilateral agricultural 
negotiation.  
Answer 
 
In the current agricultural negotiations, the Unite d States is committed to reaching substantial 
reductions in trade-distorting supp ort and export subsidies, coupled  with substantial increases in 
market access.  As stated above, the United St ates is bound by the Uruguay Round agreement to limit 
AMS spending to an agreed-upon level. 
 
Question:  (China #83) 
 
Is such a bill contradictory to the stated attitude  of the U.S.on the agricultural negotiations in the 
"Doha Round" as appeared in the Report by the U.S. Government? 
 
Answer 
 
In the current agricultural negotiations, the Unite d States is committed to reaching substantial 
reductions in trade-distorting supp ort and export subsidies, coupled  with substantial increases in 
market access.  As stated above, the United St ates is bound by the Uruguay Round agreement to limit 
AMS spending to an agreed-upon level.  The United States will continue to abide by its Uruguay 
Round commitments while continuing to push for trade liberalization.  
Question:  (China #84) 
 The increase of subsidies to agriculture by the U. S. is contrary to the negotiation objective of 
"reductions of, with a view to phasing out, all forms of export subsidies" as set out in Para. 13 of the 
Doha Ministerial Declaration.  What is the U.S. opinion on this issue?  
Answer 
 The United States remains committed to the Doha objective of reducing with a view to phasing out 
export subsidies.  The 2002 Farm Act does not authorize increased use of export subsidies.  
Question:  (China #85) 
 Does the U.S. plan to make an amendment to this  bill so as to reduce the subsidies to agriculture 
substantially?  
Answer 
 
The 2002 Farm Act will be in place through 2007.   If the Doha round of negotiations finishes on 
schedule, reductions commitments will begin at the same time as the negotiations for the new farm 
bill.  Therefore no amendments to the current bill are planned.  WT/TPR/M/126/Add.3 
Page 174  
 Question:  (China #86) 
 
When will the U.S. notify its domestic support data since 2000, including data of "Amber Box" and 
de minimis ? 
 
Answer 
 
The Farm Security and Rural Investment Act of 2002  (i.e. the 2002 Farm Act) itself is not a program 
to be notified, but instead encompasses a wide vari ety of agricultural programs.  The 2002 Farm Act 
extends many ongoing programs, thus only a few no tifications of new programs are required.  As 
regulations for new programs are put into place a nd the new programs get up and running, the United 
States will submit the required DS-2 notifications to the WTO. 
 
Question:  (China #87)  
 
What is the U.S. intention to expand offset loan  price for its agricultural products and include more 
products under its loan coverage?  Is the increase of  loan by the U.S. contrary to its initiative of 
reducing trade-distorting domestic s upport to agricultural products at the multilateral since such loan 
falls into the Amber Box?  
Answer 
 While the 2002 Farm Act continues past programs su ch as loan deficiency payments to support 
agricultural prices and farm incomes, we expect  to fully meet our obligations under the Uruguay 
Round Agreement on Agriculture.  The United States will not exceed our WTO limits.  Again, the United States remains committed to an ambitious outcome of reducing global trade distortions in 
agriculture through the WTO.  We strongly encourage other countries to move forward in the 
negotiations to achieve substantial reform. 
 
Question:  (China #88) 
 
How does the U.S. determine the target price of the counter-cyclical subsidy?  Answer  
The target prices for determining the amount of c ounter-cyclical payments for base acreages are set 
out in the 2002 Farm Act.  National average prices will be used to determine final counter-cyclical 
payment rates. USDA's National Agricultural St atistics Service (NASS) determines the annual 
average prices for the marketing year.  NASS co llects monthly data on prices paid to farmers. 
Question:  (EU #1)  
 
What are the reasons for the continuing lack of U.S.  recognition of the principle of regionalization, as 
incorporated in the WTO SPS Agreement, in  cases of the outbreak of an animal disease? 
 Answer  
 
USDA's Animal and Plant Health Inspection Service (APHIS) has demonstrated recognition of the principle of regionalization in the case of animal disease outbreaks.  For example, on April 7, 2003, 
APHIS published a final rule recognizing Austria, Belgium, Greece, Portugal, the Netherlands, and 
certain regions of Germany and Italy as free of Classical Swine Fever (CSF).  France, Spain, and 
Luxembourg had been included in the original propo sed rule (published in June 1999), but they were 
not included in the final rule because of subseque nt CSF outbreaks.  On November 24, 2003, APHIS  WT/TPR/M/126/Add.3 
 Page 175 
 
 published in the Federal Register a completed risk analysis for CSF covering France and Spain.  After 
the public comment period has closed in late Jan uary 2004 and depending on the nature of the 
comments, APHIS would then proceed to publish a fi nal rule to declare these two Member States free 
of CSF.  On October 16, 2003, APHIS published a fi nal rule recognizing the CSF-free status of East 
Anglia.  APHIS is also working on a draft novel rule  that contains a new approach to the EU, which 
will involve recognition of all 15 current EU member st ates as low risk for (not free of) CSF to allow 
for more flexible response options in the case of future outbreaks. 
 
Question:  (EU #7) 
 
The EC notes that U.S. continues to use food aid and export credits to reduc e government stocks of 
agricultural commodities.  Is the U.S. ready to consider helping the DDA-process move forward by 
accepting to classify as export subsidies all measures used for subsidizing exports? 
 
Answer  
 The U.S. averages approximately $3.4 billion in cred it guarantees annually.  Export credits and export 
subsidies are not interchangeable as they have di fferent policy objectives and different impacts on 
global markets.  Direct export subsidies are cl early among the most trade-distorting measures in 
agricultural trade, designed to lower prices and di splace commercial competition.  On the other hand, 
export credit guarantee programs have a minimal imp act on trade and are used to assist importing 
countries in financing commodity imports.  In rec ognition of the importance of the elimination of 
export subsidies, the USG is willing to support a pa rallel reduction of any trade-distorting component 
of export credits and guarantees.  Once established, disciplines will ensure that export credit and 
guarantee programs are not applied so as to circum vent export subsidy commitments while allowing 
developing countries to access affordable credit to address food security and economic development needs. 
 
Almost all of the food aid provided by the Unite d States is purchased from the open market and all 
food aid is provided in response to an identified need. The United States does not agree that food aid is an export subsidy.  However, in the WTO ag ricultural negotiations, the United States is working 
with other Members on multilateral disciplines for food aid programs with the goal of continuing necessary, humanitarian assistance. 
 
Question:  (EU #8)  
 
The main agriculture and industry lobbies in the U.S. have been arguing for some years that the strength of the dollar was hurting their export compe titiveness.  At the same time, the position of the 
agriculture groups towards Congress and the U.S government has been to "max out" the trade 
distorting agriculture support allowed to the U.S. under the WTO. Now that the U.S. government and 
Federal Reserve are no longer pursuing a strong dolla r, can the world look forward to a substantial 
reduction in U.S. domestic subsidies as well?  
Answer  
 
The United States is well within its WTO commitments  in its support to farmers.  However, in the 
negotiations of the DDA, we have called for subs tantial reductions in trade-distorting domestic 
support and have made consecutive proposals to achie ve that goal, including the U.S./EU framework 
mentioned in the previous question.  We look forward to working with the EU and other WTO 
members towards a bold, ambitious, comprehensiv e package of reforms fo r global agriculture. 
 
Question:  (India #2)  WT/TPR/M/126/Add.3 
Page 176  
  
Sugar Tariffs:  The sugar industry is protected by  high tariffs (to the extent of 32.8 percent MFN 
tariffs on raw sugar and 42.5 percent on refined s ugar).  These tariffs, in addition to providing 
protection to domestic sugar producers, have also incr eased the use of alternative sweeteners such as 
high fructose corn syrup, eroding the natural sugar market  in the U.S.  In the long run, the high tariffs 
will lead to a permanent change in the sugar dema nd patterns in the U.S.  Please provide the U.S. 
view on this point and on the unintended effects of high tariffs. 
 
Answer 
 
The U.S. government closely monitors all commodity markets and is always alert to changes in these 
markets.  U.S. policy is created through numerous means and with extensive consultation with all 
stakeholders in an effort to create and administer  programs that serve the interest of the American 
people.  Further information about the U.S. sugar program can be found  at several United States 
Department of Agriculture websitesh, ttp ://www.fas.usda.gov/htp/sugar/sugar.html, 
http://www.fas.usda.gov/import. html, and http://www.fsa.usda.gov/ao/epas/dsa.htm.  Question:  (India #3) 
 
Seasonal tariffs: The U.S. operates a complex system of seasonal duties, quotas and entry prices to regulate fruit and vegetables imports.  We would like to have a clarification from the U.S. authorities 
on the reasoning behind such seasonal duties and on  the method of customs valuation for imposing 
such duties. 
 
Answer  
 
There may be a misunderstanding regarding the United St ates' import tariffs for fruits and vegetables.  
The United States does not employ quot as or entry prices for fruits and vegetables.  The United States 
does, in some cases, employ seasonal tariffs.  Howeve r, these seasonal tariffs are clearly specified in 
the U.S. tariff schedule (both applied schedule and schedule bound in the WTO).  That is, for the cases where a tariff only applies for certain months of the year, the time frame is given in the tariff line description along with the appropriate tariff rate.  Unlike the situation in many other countries, an 
importer does not have to look any further than the line-by-line U.S. tariff schedule to clearly 
understand what tariff rate applies for a particular sea son.  Our tariff structure for fruits and vegetables 
is transparent and WTO-consistent. 
 
Question:  (India #6) 
 TRQ on leaf tobacco:  Imports of leaf tobacco into  USA are subject to TRQs from September 1995.  
Of a total quota of under TRQ for 2002/2003 of 1,50,7 00  (sic) tons (both Flue cured and light air 
cured tobacco including Burley), the bulk of the q uota is allocated to 9 designated quota recipient 
countries.  A residual TRQ of 3,000 tons is availa ble to all other countries including India, although 
India is the second largest producer of tobacco in the world.  The out of quota tariff rate is 360 percent.  Prior to 1995 India could export any volume of tobacco at MFN duty rates to USA.  After 
introduction of TRQ Regime in 1995, Indian e xports of tobacco to the U.S. are rendered 
uneconomical.  In view of this, the U.S. delegatio n is requested for information on whether they 
propose to take action to review TRQ regime in tobacco and enhance the residual quota from its 
present level of 3000 tons.  The U.S. authorities ar e also requested to provide information on the 
mechanism for allocating unfilled TRQs in tobacco. 
 
 
  WT/TPR/M/126/Add.3 
 Page 177 
 
 Answer 
 
The tobacco TRQ was based on historical shipments of leaf tobacco to the United States.  The top 
9 countries were given quota allotments.  According to  the TRQ rules, a country is not required to fill 
its quota in any given year and the unused quota is not reallocated.  If a quota country does not fill its 
quota, it does not lose its allotment.  A non-country specific quota is set at 3,000 metric tons on a first 
come/first-serve basis.  Only Congress can change TRQ allotments. 
 
Question:  (India #7) 
 
Delays in testing export consignments of processed f ood to the United States:  It has been noticed that 
processed food consignments exported to the United States are delayed by the long time taken to test 
these consignments at various laboratories.  In the case of mangoes, it took over a year to send a 
report while the approval for export of egg powder into  the U.S. is still awaited.  We would request 
the U.S. authorities to address the problem and take remedial action to speed up the processes. 
 
Answer  
 
Inspection and quarantine standards ar e developed through analysis of the pest risk associated with 
the imported commodity, in accord ance with international standards.  Time requirements for 
inspection at the port-of-entry are based on a vari ety of factors, including clearance of documentation 
through U.S. Customs and available time for agricultura l inspection.  Every effort is made to expedite 
perishable commodities. 
 We assume that this question concerns the risk assessment process for impor tation of fresh products. 
All imported fresh products are subject to some level of inspection.  Please refer to the APHIS website: http://www.aphis.usda.gov/ppq/pra/  and the U.S. Embassy website:  
http://usembassy.state.gov/posts/ in1/wwwhmain.html for more information on the United States risk 
assessment process.  
Question:  (India #11)  
 
Payments into Escrow account on Bidi (tobacco) exports:  The U.S. requires tobacco product 
manufacturers and importers who ar e non-participating in the Master  Settlement Agreement (MSA) to 
pay a specified amount into a qualified Escrow account for products sold in the U.S.  The amount to be paid on this account works out to nearly four times the cost of manufacturing one Bidi.  This has 
acted as a severe barrier for Bidi exporters from India and consequently, there have been no Bidi 
exports from India to the U.S. during this year.  We  would like to have a clarification from the U.S. 
authorities on the reasoning behind the requirement  to pay specified amounts into an Escrow account 
and the basis for calculation of such amounts?  Given the severe market access problem faced by 
India on this account, we are interested in knowing whether there is any move to dispense with the 
above requirement to remedy this problem?  
Answer 
 There are 46 MSA states and 4 non-participating stat es.  Any non-participating company that sells a 
cigarette product in a MSA state is required to pay a fee in escrow.  The escrow was set up in order to 
cover any cost arising from tobacco litigation.  The fee is based on the number of cigarettes sold.  
Each State has a specified fee for the escrow.  Fo r example, a State may require a company to pay a 
fee of .39 cents per cigarette.  If the company se lls a million cigarettes in a State in a year, the 
company is required to pay $390,000 in fees in escrow  for that State.  After 25 years, any unspent WT/TPR/M/126/Add.3 
Page 178  
 money in the escrow will be returned to the compan y.  This fee is required for both domestic and 
international manufacturers that sell a cigarette product in a MSA State.  States will continue to collect fees for these escrow  accounts in the future.  The United States goal is 
to reduce cigarette smoking.  Most cigarette companies are raising prices in order to pay the fee.  Health advocates feel that increased cost for ciga rettes will deter some consumers from buying the 
product. 
 
Question:  (India #14) 
 
Prohibition on imports of uncooked meat products:  Uncooked meat products such as sausage, ham, 
and bacon have been subject to a long-standing pr ohibition on imports despite the fact that meat 
products may come from disease free regions and that  the processing involved should render any risk 
negligible.  Would the U.S. authorities clarify th e reasons for continuing with this prohibition and 
whether there is any move to review this prohibition.  Answer 
 
The United States does not have a prohibition on im ports of uncooked meat products, but does have 
food safety regulations for all meat sold in the United States.  To date, India has not petitioned for certification of its meat inspection system (equivale nce).  To petition for equivalence, please contact 
the United States Embassy or the United States Depa rtment of Agriculture Food Safety and Inspection 
Service.  For more information on the equiva lence process, please visit the following website: 
http://www.fsis.usda. gov/oppde/ips/EQ/EQProcess.htm.  
 
Question:  (India #19)  
 
SPS measures on egg products:  Import of egg products into the U.S. is allowed only under a regime 
requiring continuous inspection of the production pro cess whereas a system of periodic inspection of 
the production process could also be acceptable from the point of view of safety of human health.  Continuous inspection is expensiv e, and thus has a negative effect on prices and competitiveness.  
Please provide the U.S. view on this point.  Is th ere a possibility of review of the existing system? 
 Answer 
 
The United States does not have a prohibition on im ports of eggs and produc ts, but does have food 
safety regulations for all eggs and products sold in  the United States.  To date, India has not petitioned 
for certification of its egg inspection system.  To petition for certification, please contact the United 
States Embassy or the United States Department of Agriculture Food Safety and Inspection Service.  
For more information on this process, please visit the following website:  http://www.fsis.usda.gov/oppde/ips/. 
 
Question:  (India #23) 
 Subsidies on agricultural products:  The U.S. opera tes a range of programmes which appear to be 
designed to subsidize and/or promote export of U. S. agricultural products.  Some such programmes 
are (i) the Export Enhancement Program which allo ws U.S. exporters to apply for a cash subsidy 
designed to make U.S. products competitive with s ubsidized exports from other countries;  (ii) the 
Market Access Program which offers a share of costs for promotion campaigns for agricultural 
products;  and (iii) the Export Credit Guarantee Prog ram which offers U.S. Government guarantees 
targeted at countries which need gua rantees to secure financing but show a reasonable ability to repay 
(The program includes a specific list of commodities per country allocation.  It has recently become  WT/TPR/M/126/Add.3 
 Page 179 
 
 the main export policy tool of USDA, with annua l allocations exceeding US$5 billion and declared 
annual subsidy levels of over US$400 million.  The program has a default rate of over 10 percent 
historically, and is reported to be characterized by uncertainty and lack  of transparency with respect to 
the implicit subsidy component stemming from r escheduling of payments.)  Would the U.S. 
delegation comment upon consistency of these schem es with various WTO Agreements including on 
Subsidies and Agriculture.  The U.S. delegation is requested for information on whether they  propose 
to review these subsidy programmes. 
 
Answer 
 
The U.S. averages approximately $3.4 billion in  credit guarantees.  Export credits and export 
subsidies are not interchangeable as they have di fferent policy objectives and different impacts on 
global markets.  Direct export subsidies are cl early among the most trade-distorting measures in 
agricultural trade, designed to lower prices and di splace commercial competition.  On the other hand, 
export credit guarantee programs have a minimal imp act on trade and are used to assist importing 
countries in financing commodity imports.  In rec ognition of the importance of the elimination of 
export subsidies, the USG is willing to support a pa rallel reduction of any trade-distorting component 
of export credits and guarantees.  Once established, disciplines will ensure that export credit and 
guarantee programs are not applied so as to circum vent export subsidy commitments while allowing 
developing countries to access affordable credit to address food security and economic development needs.  Question:  (India #24) 
 
Producer support to sugar in the U.S. amounted  to well over US$1.3 billion per year during 1999-
2001.  The sugar programme supports in the US A depend on a tariff rate quota (TRQ) based on 
domestic output.  Production increases have reduced import quota volume.  This decline and price 
erosion have adversely affected market access to the U.S. sugar market.  Please provide the U.S. view 
on this point.  
Answer 
 
The U.S. sugar tariff rate quota (TRQ) is allocated consistent with WTO rules.  Changes in U.S. 
domestic sugar production cannot reduce sugar access below this minimum.   India's fiscal year (FY) 
2004 allocation is 8,424 metric tons raw value, wh ich is the same access level as FY 2003.  Further 
information about the U.S. sugar program can be found on the United States Department of 
Agriculture's sugar commodity page http://www.fas.usda.gov/import.html.  Also the official United States Trade Representative press release concerning the FY 2004 sugar allocations is available on 
their website, 
www.ustr.gov. 
 
Question:  (India #1 Annexure) 
 
We welcome the U.S. assertion in the Government's Re port that the U.S. remains firmly committed to 
the WTO-based multilateral trading system, and that consistent with the objectives agreed in Doha, 
the U.S shares a common purpose with WTO part ners towards expanding economic opportunities to 
the world's citizens by reducing trade barriers.  We al so note that as a part of its broader efforts to 
liberalize trade, the U.S. states that it is pursuing several regional and bilateral initiatives for free trade 
areas, in respect of some of which the U.S. exports  exceed its exports to "Russia, India, and Indonesia 
combined" [paragraph 47].  It is our hope and e xpectation that the U.S. regional initiatives will be 
consistent with WTO rules, and will be nurtured in a manner that promotes the complementarity of 
regional and bilateral initiatives with the multilatera l Doha Development Age nda.  In paragraphs 110 
through 113 of the Government Report, the U.S.  has drawn attention to its domestic support to WT/TPR/M/126/Add.3 
Page 180  
 farmers as well as export subsidies, including credit s, envisaged in the 2002 Farm Bill.  The U.S. 
asserts that it has been making very limited use of expor t subsidies, and that the trends in outlays, as 
well the nature of new programmes, suggests that the U.S. will continue to meet its Agreement on 
Agriculture domestic support obligations.  We not e with concern that the 2002 Farm Bill has a 
provision by which the AMS ceiling can be exceeded.  
Moreover, we note from paragraph 6 of the Secret ariat Report that the U.S. has not fulfilled its 
notification obligations with respect to various ag riculture notifications including on domestic support 
and special safeguards applied in agriculture.  The U. S. is well aware of the apprehensions of the bulk 
of the WTO membership as regards the provisions in the 2002 Farm Bill in furthering distortions in 
agricultural trade.  It would be highly desirable therefore for the U.S. to make its notifications 
expeditiously to that there is greater clarity and certainty as regards various proposals, including the 
U.S. proposals, on the modalities for negotiations on agriculture under the DDA.  We support the apprehensions expressed, in paragraph 22 of the Secretariat Report on domestic support, regarding 
monitoring of the domestic support levels under th e 2002 Farm Bill and would like to know what 
steps are proposed to be taken in this regard. 
 
Answer  
 
The statement above is incorrect.  The 2002 Farm  Act does not have a provision by which the AMS 
ceiling can be exceeded.  The 2002 Farm Act has a pr ovision called the circuit breaker, which calls on 
the United States Secretary of Agriculture to en sure that U.S. AMS commitment levels are not 
exceeded.  The United States Department of Agriculture  continually monitors actual spending in each 
of its programs.  If actual spending levels approach commitment levels, the Secretary of Agriculture is 
notified, and further spending is closely watche d in case the "circuit breaker" provision of the 2002 
Farm Act, which stops spending to ensure AMS commitment levels are not exceeded, needs to be 
invoked.  This provision has not been used. 
 
The United States is pleased to draw India's atte ntion to our DS: 1 notification (G/AG/N/USA/51) 
dated March 11, 2004.  The notification contains  two years of data for marketing years 2000 and 
2001.  Of all countries with large AMS levels, the United States has the most current notification on 
file.  We note that many other countries are not current with their domestic support notifications. 
 Question:  (India Annexure #2)  
 
In its Government Report, paragra phs 123 through 126, the U.S. inter alia outlines that the U.S. will 
continue to work within the Doha Agenda to re duce poverty and raise the living standard across the 
globe and that "an ambitious result in market access  will be the greatest legacy of our work in the 
DDA".  As the U.S. is aware, expanding market acce ss in agricultural products alone will not serve to 
reduce poverty and raise living standards.  Ec onomist and agricultural experts have widely 
documented that the largest welfare gains for the poor residing in the developing countries will stern 
from elimination of all forms of distorting subsidies,  both domestic and on exports.  It is our hope that 
they U.S. will be able to factor in this harsh r eality into its approach to wards the successful conclusion 
of the Doha Round. 
 
Answer  
 
The United States is seeking substantial reform in e ach of the three pillars of market access, export 
subsidies and trade-distorting domestic support in th e Doha Round.  We believe ambition is required 
in all three pillars to create a balanced and workab le package.  We hope India will join us in seeking 
an ambitious and successful conclusion to this Round.   WT/TPR/M/126/Add.3 
 Page 181 
 
 Question:  (India Annexure #3)  
 
Paragraphs 1 and 11 of the Secretariat Report draw attention to market access in the U.S., applied 
inter alia through non-ad valorem duties, prohibitiv e TRQs, tariff protection in the range of 50 - 350 
percent and tariff escalation across a number of ag ricultural products.  We would like to understand 
how the U.S. reconciles these barriers, which deny  market access opportunities to developing country 
exports in particular, with its call for trade liber alization under the Doha De velopment Agenda and the 
spirit and objectives of the Agreement on Agriculture?  
Answer  
 During the recent U.S. TPR discussions several deve loping countries expressed appreciation that the 
United States has maintained its markets largely open during the recent global economic slowdown.  In fact, despite the U.S. recession and moderate rec overy until recently, U.S. real imports have grown 
by nearly 5 percent since 2000.  While we do not seek  to deny certain barriers to trade cited by the 
Secretariat, the United States maintains among the most open economies in the world.  The United 
States continues to be a leader in seeking multilateral trade liberalisation, and is fully committed to the 
reform of world agricultural trade in the DDA.  We hope India will join us in contributing to a 
successful result of ambitious ag ricultural reforms in the DDA. 
 
Question:  (India Annexure #4)  
 (Para 45) It is observed that non-ad-valorem tariffs still cover 12.2 percent of the tariff lines and that 
these result in higher protection on low cost imports from developing countries.  It is also observed 
that specific and compound duties accounted for 77 of the 100 highest rates in 2002.  Most of these 
tariff rates are applicable in the case  of agricultural products, footwear, etc.  What is the rationale for 
maintaining such a complex tariff structure when th e same purpose can also be served by applying ad 
valorem duties?  
 
Answer  
The U.S. schedule contains a few remaining lines with non-ad valorem  rates, reflecting historical 
factors, product sensitivities and changing interests of trading partners in our market.  While we 
acknowledge these and the few remaining bound U.S. industrial tariffs that are higher than our 
average tariffs, the 2002 U.S. NAMA proposal makes clear that we are prepared to eliminate all our 
tariffs, on every line of non-agricultural goods, if others - including developing countries - will 
undertake a similar degree of liberalization and ensu re that our exporters can gain access opportunities 
to new markets.  
 
Question:  (India Annexure #5)  
 
It is observed from the Part IV Para 10 of the Report by the Secretariat that the total direct payment has increased to US$19.6 billion in 2003 from US$11 billion in 2002.  Can the U.S. explain the reasons for this sudden increase in the direct payments to farmers?  
 Answer 
 
The figures cited in the report are from the USDA's Economic Research Service.   These estimates are 
on a calendar-year basis, and 2002 was a transition year  between two farm legislations.  Therefore, the 
forecasted figure for 2003 includes 2 years of the AMTA direct payments, and it was the first year 
that included counter-cyclical payments.  Other pa yments that increased in 2003 over 2002 include 
the new dairy payments, conservati on payments, and disaster assistance.  Many of these programs fall WT/TPR/M/126/Add.3 
Page 182  
 into the green box category.  Since the United St ates notifies AMS by crop year, the notified AMS 
figures will differ from those that are reported on a calendar year basis. 
 
Question:  (India #6 Annexure)  
 
It is observed that the direct government payments constitute a major part of the direct payments and 
these payments account for more than 33 percent of the net farm income.  This type of production-
distorting support artificially depresses prices in the in ternational market thereby effectively restricts 
market access opportunities for the developing countr ies exports not only into the U.S. market but 
also many other countries.  Will the U.S. consider re ducing such type of support in view of its adverse 
impact on the international prices?  
 Answer  
The United States is fully committed to further reform  in world agricultural trade in each of the three 
pillars of market access, export su bsidies and trade-distorting domest ic support in the Doha Round.  
We believe ambition is required in all three pillars to create a balanced and workable package.  We 
hope India will join us in contributing to a successf ul result of ambitious agricultural reforms in the 
DDA. 
 
Question:  (India #7 Annexure)  
 
Para 26:  While supporting the observation made in  the Secretariat Report we would like to know 
what steps are being taken by the U.S. to ensure that subsidized output is not sold in the world 
market?  
 
Answer 
 The United States is on record in every foru m and on every occasion that we will honor our 
Uruguay Round commitment on agriculture.  The 2002 Farm Act allows us to meet these 
commitments, and we will honor all of them.  For th e reasons we have explained, the 2002 Farm Act 
does not increase support;  the USDA net outlays s how trade-distorting domestic support trending 
downward; and our farm programs are still oriented toward fewer trade-distorting forms of support.  
Finally, with full knowledge and und erstanding of the potential implications for U.S. farm policy, 
U.S. farmers and ranchers have expressed their willingness to reform further and liberalize by 
supporting and developing with the Administration th e U.S. agriculture negotiating proposal, which 
calls for elimination of export subsidies, reduc tions in trade-distorting domestic support and a 
significant increase in market access. 
 
Question:  (Japan #33)  
 
What measures has the U.S. take n to prevent the exportation  of GMOs which are unauthorized by the 
relevant regulations in importing countries?  Wh at measures does the U.S. intend to take if 
unapproved GMOs are found in agricultural produc ts exported from the U.S. to importing countries? 
 
Answer 
 
Once a biotech event is approved in the United States,  it can legally circulate in interstate commerce 
and be legally exported.  It is the responsibility of commercial interests to ensure that exports to a 
particular country meet all import regulations, and the responsibility of the importing country to 
implement and apply its import regulations.  
  WT/TPR/M/126/Add.3 
 Page 183 
 
 Civil and legal penalties exist in the United Stat es for cases where the regulatory requirements 
regarding the development, testing, and release of biotech events are not respected.  The United States 
takes seriously its biotech regulatory and food safet y responsibilities to U.S. consumers and customers 
around the world, and is committed to working closely with other governments on these issues.  
Question:  (India #25)  
 
Cotton subsidies:  U.S. domestic support to cotton farmers is leading to higher production of cotton 
even when it is non-competitive and consequently, to  higher exports which depress global prices.  As 
a result, producers and exporters in developing countries, including India, face restricted export markets.  We would like to hear the response of the U.S. delegation on this matter and whether there 
is any action proposed to remove this distortion. 
 
Answer 
 
Our view is that the best way to move ahead on the cotton agenda is to pursue comprehensive 
agricultural reform in the DDA.  We have always made  clear that cotton needs to be dealt with in all 
three pillars of the agriculture negotiations, along with other agricultural co mmodities.  With respect 
to current and past levels of U.S. domestic suppor t, we believe the United States remains in full 
compliance with its WTO commitments.  The Unite d States has submitted an ambitious, balanced, 
and reform-focused proposal focused on all three "p illars" for the WTO negotiations.  We hope India 
will join us in supporting an ambitious outcome in a ll three pillars.  With respect to the relationship 
between U.S. domestic support and the global price of  cotton, please refer to the response to Question 
Brazil #6.  
Question:  (Japan #35) 
 Is the U.S. ready to provide the necessary info rmation for detecting GMOs, unapproved in importing 
countries, which are released into the environment in the U.S. and/or which have the possibility of 
being exported?  
Answer 
 
USDA's Grain Inspection, Packer, and Stockyards  Administration (GIPSA) maintains a biotechnology 
reference laboratory which works with grain ha ndlers, test manufacturers, and life science 
organizations around the world to help ensure the av ailability of reliable test s. GIPSA's reference lab 
also offers a Proficiency Program  to organizations testing for biotechnology-derived grains and 
oilseeds.  A number of testing laboratories in Japan  and other countries have participated in this 
program.  In addition, officials from many countries,  including Japan, have toured the reference lab, 
and are welcome to visit at any time.  
 
Question:  (Japan #58) 
 
After abolishing its deficiency payments under the Federal Agriculture Improvement and Reform Act 
of 1996 (FAIR Act), the U.S. has been providi ng emergency assistance since 1998 as an additional 
protection measure under production flexibility contr act payments, which was introduced instead, and 
has introduced Counter Cyclical Payments under the Farm Security and Rural Investment Act (FSRI) 
of 2002.  Please explain why the U.S. has estab lished these payment systems and the background 
(including why the production limitation is no longer  a requisite for deficiency payments under the 
2002 Act, while it was a requisite under the 1990 Act) .  Measures and programs introduced under the 
Farm Security and Rural Investment Act (F SRI) have already entered into the phase of 
implementation.  Does the U.S. intend to notify some of those measures or programs as new or WT/TPR/M/126/Add.3 
Page 184  
 modified domestic support measures exempt from the reduction commitment?  If so, the U.S. should 
submit a notification as soon as possible in order to ensure transparency and to expand the discussions 
by Members on the U.S. relevant support measures.  
Answer 
 
Counter-cyclical payments were designed as an in come support program that, although linked to 
prices, would have minimal or no trade-distorting effects than traditional price support mechanisms.  
There is no requirement to limit production because these programs were phased out, as no production is required to receive these payments.  The counte r-cyclical payments are completely decoupled from 
production, as no production is re quired to receive these payments.  
 
USDA rulemaking is an open, transparent process.   The process and progress for the Farm Act 
programs is documented on the USDA webpage.  As  regulations for new programs outlined in the 
2002 Farm Act are put into place and the new programs get up and running, the United States will submit the required DS-2 notifications to the WTO.  
 Question:  (Japan #59)  
The U.S. is proposing a drastic reduction in or even  the elimination of, trade distorting measures in 
the agriculture negotiations, while increasing its direct government payments (Report by the 
Secretariat, p. 102, Chart. 1).  These two points are in compatible with each other.  In particular, it is 
rational to understand that the U.S. price-rela ted direct government pa yments and emergency 
assistance for certain products, such as wheat, rice, soybean and cotton, have export enhancing effects 
since a sizeable amount of those products is exporte d.  According to the Report by the Secretariat (p. 
101), the share of exports in terms of value of production was 48 percent for wheat, 42 percent for 
rice, 37 percent for soybeans, and 39 percent for cotton.  Under the FSRI, the U.S. has 
institutionalized export enhancing payments by introducing counter cyclical payments for such 
products and has increased actual payments since 2002.  Can the U.S. explain how this policy, and the 
increase of such payments, are consistent with the U. S. position in the agriculture negotiations, i.e. to 
phase-out export subsidies?  
Answer 
 The 2002 Farm Act does not authorize the increased  use of export subsidies.  The United States 
remains committed to the Doha Development Agenda objective of reducing, with a view to phasing 
out, export subsidies. 
Question:  (Japan #61) 
 Does the U.S. AMS in 2003 exceed its commitment level? 
 
Answer 
 
No.  Based on preliminary estimates, in 2003 the United States did not exceed its Uruguay Round commitment level of AMS spending.
 
 
Question:  (Japan #62)  
If the increase in direct government payments a nd emergency assistance in 2003 results from lower 
market prices, it is thus possible that the incr ease in government payments cannot be controlled and 
that the AMS level exceeds its commitment level when the market price falls ever further.  The U.S. 
commented that no decision had been made as to whether regulations are needed to implement  WT/TPR/M/126/Add.3 
 Page 185 
 
 Section 1601(e) of the FSRI (Report by the Secretaria t, p. 107).  With what kind of measures can the 
U.S. properly monitor the increase in direct paymen ts and ensure that its AMS level does not exceed 
its commitment level?  
Answer 
 
The United Stated Department of Agriculture cont inually monitors actual spending in each of its 
programs.  If actual spending levels approach commitment levels, the Secretary of Agriculture is notified and further spending is closely watched in case the "circuit breaker" provision of the 2002 
Farm Act, which stops spending to ensure AMS commitment levels are not exceeded, needs to be 
invoked.  Question:  (Switzerland #8 & #9) 
 
According to §139 some U.S. import restrictions are taken as a response to risks posed by FMD and 
BSE. In this context meat products are allowed to  be directly imported into the U.S. from a non-FMD-
free country if certain measures (as described in the Code of Federal Regulations  Title 9 Part 94.4) are 
taken in the exporting country.  However if th ese measures on products originating in a non-FMD 
country have taken place in a third country, the products are banned to be imported to the U.S.  
 
What is the scientifically-based justification, incl uding an assessment of the public health risk, of 
these additional U.S. import restrictions?  
 
According to §142 APHIS has regulatory responsibilit y to safeguard U.S. animal resources from 
exotic pests and diseases.  According to §143 FSIS has specific responsibility for the safety of meat, 
poultry and certain egg products.  
How does the U.S. government ensure the cooperati on of these two agencies, in order that various 
regulations and different control systems by these two agencies do not become an unduly administrative burden?  
Answer 
 
Inspections by APHIS and FSIS are required before  equivalence determina tions can be made.  
Consistent with the WTO SPS agreement, we welc ome products that comply with United States' 
scientifically based food safety requirements.  For more information on the United States process for 
evaluating the equivalence of foreign meat and poultry food regulatory systems, please visit the following website: http://www.fsis.usda.gov/oppde/ips/EQ/EQProcess.htm.  
 
The United States has very serious restrictions on FM D, because it is an extraordinarily devastating 
disease, as the European c ontinent has experienced.  
 
Question:  (Switzerland #13) 
 As mentioned in para 12, page 102, the six-y ear Farm Act (2002-07) increases reliance on price-
dependent support.  Such type of measures are known as production-distorting.  Could you explain the 
reasons for the re-orientation (compared with th e FAIR Act of 1996 reducing production-distorting 
support in favour of income supplements) of the package of U.S. support measures in favour of 
production-distorting measures?  
   WT/TPR/M/126/Add.3 
Page 186  
 Answer 
 
The United States has fully complied with WTO co mmitments.  However, to address the distortion 
affecting the agricultural sector, the United States has submitted an ambitious, balanced, and reform-
focused proposal focused on all thr ee "pillars" for the WTO negotiations.  
 Question:  (Switzerland #14) 
 
The new programme of counter-cyclical payments (CCP s) uses a target price as a reference.  As it 
appears in the Table IV.3 on page 109, this target  price is set rather higher than the average prices 
recorded during 1999-02.  Could you explain the m echanism allowing to set the target price at the 
level established for the period 2004-07?  What is  the basis for the calculation and which kind of 
prevision model allows to de termine this target price ? 
 
Answer 
The target prices are set in legislation.  For a dditional information, please refer to the following 
website: http://www.usda.gov/farmbill/index.html. 
 
Question:  (Switzerland #15) 
 
As mentioned in §33 on page 110, federal milk ma rketing orders establish minimum prices for milk 
depending on its use by processors.  Could you please d escribe the types of use and how the priorities 
are set to support one or the other type?  Is it pos sible that some type of milk supported by these 
measures is purchased by a processing plant at a lower price and therefore represents a form of processing plant support?  
Answer 
 
The Federal Milk Market Order (FMMO) system is based on milk classes which in turn are based on 
use.   Class I is beverage milk and cream-basically what one buys at the store.  Class 2 is for soft 
products which include such things as ice cream and yogurt.  Class 3, the largest class is milk used for 
cheese, while Class 4 is for making non-fat dry milk and butter.  In general, prices for class 3 and 4 are set by the markets for the respective products wh ile prices for Classes 1 and 2 are set by the higher 
of Class 3 or Class 4.  Again, as a general rule, Class 2 is 70 cents/cwt higher while Class 1 has 
regional differentials compared to Class 3 or 4.  (Timing and component prices significantly complicates these general rules)  The system mainly regulates the first handler of milk after it leaves 
the farm, plus most milk is delivered to farme r-owned cooperative so its unlikely significant quantities 
are sold at discount prices.  More info can  be obtained from http://www.ams.usda.gov/dairy/.  
 Question:  (Switzerland #16) 
 
According to §40 on page 111, the largest U.S. agricultural export promotion programmes are the 
Export Credit Guarantee Programme (GSM-102) an d the Intermediate Export Guarantee Programme 
(GSM-103).  What is the share of these two progra mmes in the U.S. total annual export volume and 
value and for which kind of commodities are they allocated? 
 
Answer 
 
In FY 2003, based on value, 6.04 percent of U.S. agricultural exports were traded using USDA's 
Export Credit Guarantee Programs.  The Commodity Credit Corporation selects agricultural  WT/TPR/M/126/Add.3 
 Page 187 
 
 commodities and products according to pr ogram criteria.  Please reference 
http://www.fas.usda.gov/excredits for a list of eligible commodities. 
 Question:  (Switzerland #17 ) 
 According to table IV.2 (p. 104) some products  covered by tariff quotas have reserved access for 
distinct suppliers.  Some of these quotas show fill rates below two third like low fat cheese or even 0 
percent for low-fat chocolate crumb.  How do th e United States intend to  reallocate unused quotas?  
 
Answer  
 There are numerous quotas that are administered by the United States and many of these quotas differ 
on how to reallocate unused portions.  It is the polic y of the U.S. government to administer each quota 
as effectively as possible within each individual set of requirements.  For more information, see the 
following United States WTO notification: G/AG/N/USA/48.  Question:  (Japan #34) 
 
Does the U.S. become a party to the Cart agena Protocol?  If not, please explain why. 
 
Answer  
 The United States is not a party to the Cartagena Protocol  by virtue of the fact that it is not a party to 
the original treaty - the Convention on Bio-Diversity.  
Chapter 4 - BY SECTOR 
 
(3) Maritime Transport  
 Question:  (European Union #18)  
 
The report of the Secretariat (Paragraphs 99 and 100)  states that total international water-borne trade 
(in volume) was 1.137 million tonnes in 2002 and that domestic water-borne trade was around 946 
million tonnes.  Can the U.S. indicate the share of  domestic water-borne trade that relates to pre-
onward carriage of international cargo ("feeder tran sport") between U.S. seaports?  Can the U.S. 
indicate the share of domestic water-borne trade that relates to inland waterway transport?  
Answer  
 
The information on pre-onward carriage of internati onal cargo is not available.  The inland waterway 
share of domestic waterborne trade is 562.2 milli on metric tons or 59.4 percent of the domestic 
waterborne trade.  
Question:  (European Union #19)  
 
The report of the Secretariat (paragraph 2) focu ses on initiatives to upgrade and develop maritime 
transport services in the U.S.  The U.S. restrictions on domestic water-borne transport (paragraphs 104-107) and the restrictions and nationality requirements in U.S. ports (paragraphs 117-119) limits 
the choice available to operators in terms of optim izing the transportation services they can offer to 
their customers (e.g. by having to rely more on road  transport in stead of coastal shipping).  Does the 
U.S. have any estimation on the additional transporta tion cost that results from these restrictions?  
Does the U.S. have an assessment of the environmen tal implications of using more road transport WT/TPR/M/126/Add.3 
Page 188  
 rather that coastal shipping (by a rough estimation, trucks pollutes 3-4 times more than ships, causes 
congestions etc.)?  
Answer  
 
The restriction of domestic trades to national–flag v essels, or cabotage, is practiced by most maritime 
nations, including EU-member countries.  We also recognize that the EU has focused considerable 
attention on relieving congestion on its roads by promoting short sea shipping through monetary 
incentives or subsidies.  Although our major cong ested domestic trade corridors (such as I-95 on the 
East Coast) appear to parallel E.U.’s surface tran sport traffic, we are only at the beginning stages of 
promoting this segment of our maritime sector.  With  respect to the environmental benefits of short 
sea shipping, we have no empirical data to provid e and we would view this question as outside the 
scope of the TPR.  We would agree that the mar itime sector offers an efficient alternative or 
supplement to land transport.  For example, one ba rge can carry the equivalent load of 58 tractor-
trailers.  Question:  (European Union #20)  
 
The report of the WTO Secretariat describes the 'Merchant Marine Act' (Jones Act) and its 
implications.  How many ships have been produced in the last y ears under the ruling of the Jones Act, kindly specify 
type of ship, purchasing-price and the tonnage of the ships? 
 
Answer  
 
This information (except for ship purchase price)  is reported annually to the WTO Secretariat. 
 Question (EU #21 and #22) 
 
The report of the Secretariat (paragraphs 133 and 145) relates to aspects of services in airports.  With 
regard to security services, the Aviation and Trans portation Security Act nationalized certain activities 
(such as passenger screening).  After a period of na tionalized operation of the sector, the Aviation and 
Transportation Security Act permits private compani es to undertake security screening at airports on 
the condition that "the private screening company is  owned and controlled by a citizen of the United 
States. Under its commitment to opening world ma rkets in the General Agreement on Trade in 
Services (GATS) the United States has signed up to fu ll market access in the field of security services 
(with specific exceptions for the states of Maine and Ne w York).  If applied this legislation appears to 
conflict with the commitments taken by the U.S.  under the auspices of the WTO.  Can the U.S. 
indicate if there are currently any plans to re-p rivatise airport security services and related activities?  
 
Answer 
 
The Aviation and Transportation Security Act (A TSA) requires TSA to establish a 1-year pilot 
program under which the screening of passengers a nd property is carried out by personnel from 
qualified private screening companies under a contr act with TSA.  The pilot program is currently 
underway at 5 airports. The participating airports are San Francisco, Kansas City, Tupelo, Rochester, 
and Jackson Hole.  The ATSA also established a "security screening opt-out program" which will 
allow an airport operator apply to have passe nger and property screening carried out by personnel 
from private screening companies, while under supe rvision of the Federal Government.  Airport 
operators will be able to apply for Opt-Out beginning in November 2004. 
  WT/TPR/M/126/Add.3 
 Page 189 
 
 Question:  (Norway #2)  
 
In the Secretariat report, paragraph 98, it is stated that the U.S. recorded a deficit of US$10.2 billion in 
freight and port services.  We would like to know if  the incomes from vessels registered under foreign 
flag and owned by U.S. shipping companies ha ve been included when calculating these figures. 
 Answer  
 
Balance of payments calculations are based upon wh ether the company is domiciled in the U.S. (for 
tax purposes) and not whether the vessels owned by these companies are registered under foreign or U.S. flags. 
 
Question:  (Norway #3)  
 
In the Secretariat report, paragraph 104, it is stated that the Jones Ac t does not prevent foreign 
companies from establishing shipping companies in th e U.S. as long as they meet the requirements 
with respect to U.S. employees.  Does this imply that foreign owned shipping companies established 
in the U.S. may own and register vessels under U.S. flag operating in U.S. cabotage trades? 
 
Answer  
 
With respect to foreign ownership of Jones Act vessels, U.S. law permits bona fide non-citizen 
leasing companies to own Jones Act vessels if those vessels are demise chartered to U.S. citizens for a 
period of 3 years or shorter.  For detailed inform ation on this subject please refer to 46 USC 12106(e). 
 
Question:  (Norway #4)  
 In the Secretariat report, paragraph 108, it is stat ed that the U.S. international maritime transport 
market is generally open to foreign participa tion, and para 114-116 describes the exemptions.  We 
would like to know if this implies that no cargo sh aring agreements/requirements exist with foreign 
countries or if such clauses are merely dormant.  
Answer  
 
We have no such agreements.  
Question:  (Norway #5)  
 In the Secretariat report, paragraph 116, it is explai ned that the last Alaskan crude oil was exported in 
April 2000.  Since then all Alaskan crude oil produc tion has moved to the United States.  The existing 
requirement of Alaskan crude oil exports to be carried by U.S.-flagged vessels seems therefore to 
have become obsolete.  Is the United States consider ing to remove the requirement that Alaska crude 
oil exports shall be carried by U.S.-flagged vessels?  Answer  
 
No consideration is being given to removing this requirement. 
 
 
 
  WT/TPR/M/126/Add.3 
Page 190  
 Question:  (Japan #63)  
Reference:  p. 127, para. 102 
 
The Federal Maritime Commission (FMC) is authorized  by Section 19 (1) (b) of the Merchant Marine 
Act of 1920 (the Jones Act) to make rules and regul ations affecting shipping in foreign trade.  The 
FMC imposed a unilateral sanction against Japan ese carriers in September 1997.  Although the 
sanction was removed in May 1999, the FMC still requires carriers to report to it on the situation of 
the ports in Japan.  The rule (repealed in May 1999), which provided grounds  for unilateral sanctions, 
was a violation of the Treaty of Friendship, Co mmerce and Navigation between Japan and the United 
States, which provides each other's ships with natio nal treatment and most-favored-nation treatment.  
Japan, therefore, requests the U.S. to work more cl osely with the FMC to ensu re that such unilateral 
measures will no longer be taken.  Japan is concerne d about the impact of the Jones Act and any other 
related legislation on shipping trad e, and submitted a list of questions  (WT/GC/W/520) at the Review 
of the General Council last December.  Japan would appreciate if the U.S. could provide information 
about the current situation regarding the responses to the questions. 
 
Answer  
 
The United States Government takes seriously its treat y obligations.  As we have stated before, the 
Government of the United States believes the FMC's ac tions with respect to Japan are fully consistent 
with the Treaty of Friendship, Commerce and Navigati on.  In our view, Japan's actions with regard to 
the previous licensing requirements and prior consu ltation system raised substantial issues concerning 
Japan's conformity with its obligations under the treat y.  We believe, therefore, that the action taken 
by the FMC, in response to Japan's actions, was in conformance with international law.  
 The U.S. reply to Japan’s questions (WT/GC/W/520 ) was circulated to Members on 4 February 2004 
in document WT/GC/W/524. 
 
Question:  (Japan #64)  
 
Since the repeal of the above-mentioned rule, the FMC requires Japanese and U.S. carriers to report to 
it on the progress of port situations in Japan.  Effort s have been made and signs of progress have been 
seen in various aspects.  The "prior consulta tion system" has improved significantly (and the 
improved system has been implemented steadily);  the Port Transportation Business Law was revised 
to abolish the supply-demand adjustment restricti on and thus has realized new entries into port 
transport business;  progress has also been made toward the introduction of port terminal service 
operation on the 24-hour/364-day basis.  Japan st rongly urges the FMC to fully understand these 
positive developments.  Despite significant improve ment in the port situation of Japan, the FMC 
introduced in August 2001 a new order, which not onl y increased the number of items to be reported, 
but also expanded the scope of the carriers subject to the reporting requirements.  The order includes 
requirements which go beyond the extent deemed appropriate to impose upon carriers, such as 
directly requiring Japanese carriers to submit translat ed copies of the Japanese laws and instructions 
concerned.  Thus, the order has been causing unfai r and excessive burdens on carriers.  Should it be 
the case that the FMC decided to expand the range of the reporting requirements in order to judge 
whether or not it should impose unilateral sanctions , this would violate the Treaty of Friendship, 
Commerce and Navigation between the United States and Japan, and Japan would recognize it as a 
regrettable and serious abuse of the FMC's mandate.  Japan, therefore, strongly requests the U.S. to 
withdraw the order. 
 
 
   WT/TPR/M/126/Add.3 
 Page 191 
 
 Answer  
 
The Government of the United States remains concer ned that the progress in improvement of the port 
situation has not extended to any meaningful opening  of Japanese port services to foreign companies.  
In particular, the port operations of foreign liner carri ers remain subject to the non-transparent aims of 
the Japan Harbor Transport Association (JHTA) an d costly and inefficient legal requirements for 
levels of labor and equipment to be  used by stevedoring companies are maintained by the Ministry of 
Land, Infrastructure and Transport (MLIT).  The eff ects of these practices on our mutual trade and the 
degree to which the Government of Japan has acted  to improve conditions pursuant to commitments 
made in the government-to-government agreement reach ed in 1997 remain a matter of concern to be 
addressed by the FMC. 
 
The August 9, 2001 FMC order required a limited number of carriers serving the U.S. trades with 
Japan to report only once on their experiences in  using Japanese ports; except for the Japanese and 
U.S carriers, the named carriers are not currently re quired to report.  The Japanese and U.S. carriers 
continue to file periodic reports.  The requirement th at such reports be filed in the English language is 
not extraordinary. 
 
Question:  (Japan #65)  
Reference:  Initial offer in Maritime Transport Services sector, p. 127, para. 103 
 
Please explain the reason why the U.S. has not subm itted its initial offer in the Maritime Transport 
Services sector and the Maritime Auxiliary Servi ces sector during the on-going round of negotiations. 
Japan is of the view that submitting MFN exemption list at the last phase of negotiation is against the 
rules of negotiation.  Please provide  the U.S. view on this point. 
 
Answer 
 
The United States has submitted offers and requests c overing a number of sectors.  With respect to 
offers, we have consulted with our domestic constituencies, and our offers reflect our commercial and 
economic interests in the WTO negotiations.  As spec ified in the Doha Ministerial Declaration, these 
are initial offers and may be supplem ented or changed at any time in the course of the negotiations.  
We do not believe that this prevents the United St ates from participating in bilateral consultations 
with other countries, should other countries wish to raise questions with respect to U.S. measures in 
this or any other sector.  We must note that th ere are several countries that have not submitted 
comprehensive requests or offers covering a ll sectors in this round of GATS negotiations. 
 
Question:  (Japan #66) 
Reference:  Ocean Shipping Reform Act of 1998, p. 128, para. 108  
The Ocean Shipping Reform Act of 1998 includes a provision allowing the discriminatory treatment 
of Japanese and other foreign shipping firms, by making it possible to impose unilateral regulations on pricing and other practices.  As the pricing prac tice is the foundation of a free shipping activity on 
a commercial basis, unilateral regulations by the FMC on the pricing practice obviously intervenes in 
such free shipping activity, thereby, discriminating foreign firms.  Furthermore, an amendment to the 
Act in 1998 explicitly stipulates the right of the Fede ral Government to make this intervention.  Japan 
requests the U.S. to confirm that in the future the FMC shall not impose unilateral regulations on 
shipping activities on a commercial basis, conducted by Japanese and other foreign shipping firms, 
which do not reflect the reality of the market. 
 
 
 WT/TPR/M/126/Add.3 
Page 192  
 Answer  
 
The Government of the United States has in the pa st pointed out that the language added in 1998 to 
the Merchant Marine Act of 1920 did not add new authority over the commercial practices of carriers 
or the setting of rates in foreign commerce, but mere ly clarified the pre-existing authority of the FMC 
to address discriminatory and unfair competitive practices of carriers in U.S. trades.  The Government 
of the United States will not change this policy mandated by U.S. law. 
 
Question:  (Japan #67)  
Reference:  Marine Security Program, p. 128, para. 109 
 Japan requests the U.S. to abolish the Mariti me Security Program, under which as much as 100 
million dollars of maritime subsidy is provided annually over a ten-year period.  It is obvious that a 
provision of such an enormous amount of subsidy di storts conditions for free and fair competition in 
the international maritime market.  Answer  
 
The enactment of the Maritime Security Program (M SP) in 1996 was driven by the knowledge that in 
national emergencies, no reliable ocean transportation alternative exists as a replacement for U.S.-flag 
ships with U.S. citizen crews.  The MSP is intended to ensure that an active U.S. merchant fleet and 
the trained personnel needed to operate both active and reserve vessels will be available to meet our 
national security requirements for sealift capacity.  The MSP has been highly successful in meeting 
this important national priority and remains key to our ability to meet global security contingencies.  
The MSP has proved its utility once again by providing U.S.-flag vessels in support of recent U.S. military operations in Iraq.  As we have stat ed before, the MSP supports are national security 
requirements, therefore, it will not be abolished. 
 
Question:  (Japan #68)  
Reference:  Cargo Preference Measures, p. 130, para. 116 
 
Japan requests the U.S. to abolish the Cargo Prefer ence Measures, such as the requirement to use the 
U.S. vessels for the export of Alaskan oil, wh ich is nevertheless commercial cargo.  These 
protectionist measures are inconsistent with the pr inciple of national treatment, and are also against 
the Ministerial Decision on the Negotiations on Ma ritime Transport Services of the WTO, which 
prescribes that participants should not apply an y protectionist measures during the negotiations. 
 
Answer  
 
It should first be noted that roughly 97 percent of  all oceanborne foreign-bo und cargo to and from the 
United States is carried by foreign flag vessels.  Only 3 percent of our oceanborne foreign trade is 
carried by U.S.-flag vessels.  U.S. Government -owned cargoes covered by cargo preference laws, 
including the transport of U.S. military cargo, repr esent less than 1 percent of the United States total 
oceanborne foreign trades.  This program thus af fects only a tiny fraction of outbound cargo from the 
United States.  As we have stated before, with r espect to cargo preference, U.S. Government policy is 
clear:  we will not abolish it.  
 
 
 
   WT/TPR/M/126/Add.3 
 Page 193 
 
 Question:  (Japan #69) 
Reference:  Shipbuilding and ship repairs, p. 132, para. 127 
 
The Capital Construction Fund (CCF) program includes fishing fleets of the U.S.  Please provide the amount allocated to the fishing fleets through the Fund,  as well as the amount of tax-deferral benefits 
for fishing fleets, over recent years. 
 
Answer  
 
This information is not available.  Question:  (China #99)  
Reference:  p. 128, para. 107  
Para. 30 of the Summary observations states that "Domestic cargo restrictions under the Jones Act 
remain in place but a legislation to facilitate the granting of waivers to the Act was passed in 2002."  
Please explain to what extent it facilitates the gr anting of waivers to the Jones Act as well as its 
impact on foreign services providers.  
Answer  
 
The recently enacted legislation permits the Secret ary of Transportation to issue a certificate of 
documentation with appropriate endorsement for employment in the coastwise trade as a small 
passenger vessel authorized to carry no more than 12  passengers for hire.  The Secretary is required to 
provide notice and opportunity for public comment that such employment in the coastwise trade will not adversely affect domestic shipbuilders or th e business of operators of vessels built in U.S. 
shipyards employed in th e U.S. coastwise trades. 
 
The measure is consistent with the requi rements of paragraph 3 of the GATT 1994. 
 
Question:  (China #100)  
Reference:  p. 131, para. 125 
 Will the United States kindly explain how the measures it has taken could effectively serve the 
objectives of its waiver under pa ragraph 3 of the GATT 1994? 
 
Answer  
 Please refer to the response to China's Question #99. 
 
Question:  (China #101)  
Reference:  p. 127, para. 102;  p. 128, para. 108 
 
The U.S. has not made any commitment in the maritime transport sector.  Please explain the reasons 
for not undertaking commitments in this sector, sin ce this sector plays a significant role in facilitating 
and expanding international trade among WTO Members.  
Answer  
 There has been no change in the U.S. position with  respect to its decision not to make a commitment 
in this sector.  This decision was made in consu ltation with our domestic constituencies.  We do not 
believe that this prevents the United States from pa rticipating in bilateral consultations with other WT/TPR/M/126/Add.3 
Page 194  
 countries in this current round of trade negotiations , should other countries wish to raise questions 
with respect to U.S. measures in this or any other sector.  
Question:  (China #102)  
Reference:  p. 127, para. 103 
 As demonstrated at the CTS special session by the joint statement from over 50 members of this 
organization, liberalization of maritime transport ser vices has been given considerable attention in the 
current round of GATS negotiations.  Does th e United States have any plans to undertake 
commitments in this sector during the current round of negotiations? 
 Answer  
 
Please refer to the response to China's Question #101. 
 
Question:  (China #103)  
Reference:  p. 130, paras. 120 and 121  
According to the Shipping Act of 1984, the Federa l Maritime Commission est ablished a category of 
so-called "controlled carriers" which was define d as "an ocean common carrier that is, or whose 
operating assets are, directly or indirectly owned or controlled by a government."  Compared with 
other carriers, these carriers are not granted fair treatment, e.g. their freight rates only take effect 30 
days after being submitted to the FMC.  Please  specify the criteria and procedures for the 
determination of "controlled carriers."  
Answer  
 The question asserts that the "Federal Maritime Comm ission established . . ."  This is incorrect; it was 
the Controlled Carrier Act (1978) (now contained in section 9 of the Shipping Act of 1984), amended 
by the Ocean Shipping Reform Act of 1998, which has established and defined "controlled carriers."  
The Federal Maritime Commission is the federal admi nistrative agency which h as been authorized by 
U.S. law to carry out the provisions of that Act.  
The question also asserts that controlled carrier " freight rates only take effect 30 days after being 
submitted to the FMC. "  This statement is incorrect in the following respects:  (1) service contract 
rates may be changed by a controlled carrier at any time ;  (2) service contract rates may be 
implemented simultaneously with their filing with the Federal Maritime Commission;  and (3) tariff 
matters are not "submitted" or filed with the Federal Maritime Commission at all, but rather must be 
available for public inspection.  Th e only difference in the treatment of controlled and non-controlled 
carriers by U.S. law in terms of effectiveness of  tariff rates is that controlled carriers may not 
implement reductions  in their tariff rates upon less than 30 da ys from the date of publication.  Under 
U.S. law, no ocean common carrier, whether a controlled carrier or otherwise, may implement an 
increase in its tariff rate upon less than 30 days fro m the date of publication.  46 U.S.C. app. §1707 
(d).  Since the enactment of the amendments to th e Shipping Act of 1984 made by the Ocean Shipping 
Reform Act of 1998, tariff matters are no longer  filed or submitted to the Federal Maritime 
Commission.  Rather, tariff matters must only be "kept open to public inspection in an automated 
tariff system."  46 U.S.C. app. §1707 (a).  Controlled carriers are also prohibited from implementing any decrease in tariff rates upon less than 30 days fro m the date of publication.  Section 9 of the 
Shipping Act of 1984, 46 U.S.C. app. §1708.  Th e Federal Maritime Commission is authorized to 
"prescribe rules and regulations as necessary to carry  out this Act" (46 U.S.C. app. §1716(a)) and has 
therefore issued regulations to carry out th e requirements of the Controlled Carrier Act. 
  WT/TPR/M/126/Add.3 
 Page 195 
 
 1a.  The criteria for the classification of controlle d carriers are established in the Shipping Act of 
1984, which states that:  
"controlled carrier" means an ocean common carri er that is, or whose operating assets are, 
directly or indirectly, owned or controlled by  a government;  ownership or control by a 
government shall be deemed to exist with respect to any carrier if: 
 
(A) a majority portion of the interest in the carrier is owned or controlled in any manner by 
that government, by any agency thereof, or by any public or private person controlled by that government;  or 
 
(B) that government has the right to appoint or disapprove the appointment of a majority of 
the directors, the chief operating officer, or  the chief executive officer of the carrier. 
 46 U.S.C. app. §1702(8).  
The criteria, specifically described in the statut ory language quoted above, are those used by the 
Federal Maritime Commission to determine whether an ocean common carrier should be classified as 
a controlled carrier and therefore subject to the re quirements of section 9 of the Shipping Act of 1984. 
 1b.  Procedure for the classification of controlled carriers.  
Classification of controlled carriers in the first instance is delegated to the Office of the 
General Counsel (46 C.F.R. §501.23).  However, when a carrier notified of its designation as 
a controlled carrier elects to submit a rebuttal st atement pursuant to 46 C.F.R. §565.3 (b), the 
Federal Maritime Commission makes a final determination of the carrier's status. 
 
The procedures for classification of controlled carrier s are set forth in the Commission's regulations, 
which state:  46 C.F.R. §565.3 Classification as controlled carrier. 
 
(A) Notification.  The Commission will periodically review the ocean common carriers 
operating in the foreign commerce of the Un ited States and will notify any ocean common 
carrier of any change in its classification as a controlled carrier. (B) Rebuttal of classification.  (1) Any ocean common carrier co ntesting such a classification 
may, within 30 days after the date of the Co mmission's notice, submit a rebuttal statement.  
(2) The Commission shall review the rebuttal and notify the ocean common carrier of its final 
decision. 
 When the General Counsel has information indicating a particular carrier may meet the criteria laid 
out in the Shipping Act of 1984, he or she genera lly sends a letter directly to the carrier requesting 
information regarding the control and operation of the carrier, as well as any reasons why the carrier 
believes the requirements of Section 9 of the Shipping Act of 1984 should not apply to it.  The 
General Counsel then reviews the response and makes a determination on the classification of that 
carrier.  The carrier is notified of the classification an d, from time to time, the list of all such classified 
controlled carriers is published in the Federal Register.  
Question:  (China #104)  
Reference:  p. 130, paras. 120 and 121  
Do carriers which are determined as controlle d carriers have an opportunity to appeal? WT/TPR/M/126/Add.3 
Page 196  
  
Answer  
 
Carriers classified by the Federal Maritime Commissi on as controlled carriers have the opportunity to 
appeal:  
A carrier which has been classified as a controlle d carrier by the General Counsel under authority 
delegated to it by the Federal Maritime Commission may file a "rebuttal statement" with the Federal 
Maritime Commission.  46 C.F.R. 565.3(b).  If th e Federal Maritime Commission affirms the General 
Counsel's action or if no such "rebuttal statement" is made within 30 days of the notice of classification, the determination of the General Coun sel is considered a "final agency action" for 
purposes of judicial appeal.  A carrier may petition the agency for reconsideration under 46 C.F.R. 
502.261;  or appeal this final administrati ve action to a federal Court of Appeals. 
 
Question:  (India #32)  
Bonding charges for Maritime Freight Forwarding Services
 
 
Insofar as Maritime Freight Forwarding Services are c oncerned, discriminatory charges are levied for 
Foreign (non-resident) NVOCC or Freight Forwarding company in respect of "Individual Bonding" to the Maritime Commission in which such company h as to pay US$150,000 as co mpared to a company 
which has a Joint Venture or branch presence in US A which has to pay only US$75,000.  There is a 
requirement to work through a U.S. Resident Agent in case the place of business is not in USA.  Such 
a requirement does not appear to be reasonable.  Please provide U.S. view on this point and the reason 
for such discrimination.  Will the U.S. delegation cl arify whether there is any proposal to review this 
requirement.  
Answer  
 
The bonding requirement established by Section 19 of the Shipping Act of 1984, 46 U.S.C. app. §1718, requires that any person doing business as an o cean transportation intermediary ("OTI") in the 
U.S. foreign trade must have a bond, proof of insu rance, or other surety to insure its financial 
responsibility to pay reparations or damages arisi ng from its transportation-related activities described 
in section 3(17) of the Act, and any penalties assessed for violation of the Act. 
 
The Ocean Shipping Reform Act of 1998 ("OSRA ") amendments to the Shipping Act of 1984 
changed the Shipping Act of 1984 to require that N VOCCs for the first time obtain a license.  On 
February 26, 1999, the FMC adopted new regulations at 46 CFR part 515 to implement changes made 
by OSRA relating to ocean freight forwarders and NVOCCs.  64 FR 11155- 11183, March 8, 1999.  
As part of the final rule, the FMC published as an  interim final rule a provision to allow foreign 
NVOCCs the opportunity to seek to obtain a license under the provisions of 46 CFR part 515.  The 
FMC explained that pursuant to the definition of "in the United States" in 46 CFR 515.3 adopted by the FMC, a foreign NVOCC could choose to establis h a presence in the United States for licensing 
purposes in accordance with §515.3 and secure financial responsibility applicable to NVOCCs in the 
United States.  To establish a presence in the Un ited States necessary to obtain a license under this 
part, a foreign NVOCC must set up an unincorporated o ffice that is resident in the United States that 
meets the requirements of the state in which it is  located.  The FMC does not consider the foreign 
NVOCC's primary location in the United States to be  a separate branch office subject to additional 
licensing and financial responsibility requirements.  
See FMC website, frequently asked questions , found at http://www.fmc.gov/Help/OTI.htm. 
  WT/TPR/M/126/Add.3 
 Page 197 
 
 The FMC is not aware of any legislative proposal s to revise this requirement, which was first 
instituted with the enactment of OSRA.  Nor are there any proposals to revise the FMC's regulations 
with respect to these requirements. 
 
(4) AIR TRANSPORT SERVICES  
 
Question:  (Argentina #8) Reference:  Chapter IV- 5. Air Transport Services, para. 149 
 
We would like to know why, under paragraph 149, ser vices for the leasing or chartering of aircraft 
without operators are classified under the category of  services to firms (along with services for the 
leasing of other industrial equipment without operato rs), thereby differentiating from aircraft leasing 
or chartering services with operators, which are excluded from the scope of the GATS because they 
are considered part of traffic rights.  
Answer  
 
The paragraph of the report to which this question refe rs (para. 149) pertains solely to aircraft leasing 
services, which are both from an economic and regulat ory perspective distinct from charter services.  
With regard to aircraft leasing services, the dis tinction between "wet" and "dry" leases, or operating 
and non-operating leases, respectively, is recognized  in various classification schemes, including the 
United Nations Central Product Classifications.  Th e Council for Trade in Services Secretariat has 
also assessed this distinction in the classification of aircraft rental and leasing services in several 
studies (see, inter alia, S/C/W/163, paragraphs  146-147 and S/C/W/59, paragraph 65.)  This 
classification recognizes the fact that in a "dry" or non-operating lease the service supplier (the lessor) 
does not provide an air transportation service and hence does not exercise traffic rights. 
 Question:  (Canada #20)  
Reference:  para. 137 
 
The Fly America Act requires U.S. government-financed transportation and cargo to be on U.S.-flag air carriers.  What percentage of U.S. government  funding is required for Fly America provisions to 
kick in (10 percent, >50 percent)?  The act allows  for the U.S. to negotiate agreements with other 
countries providing an exchange of Fly America type rights.  Has the U.S. negotiated any such rights? 
 
Answer  
 
Fly America applies to any transportation of passengers or cargo that is U.S. Government-
funded/procured.  The statute does not cite a threshol d percentage of funding that must be met for the 
provisions to kick in.  Two agreements have been concl uded.  Under one, Saudi Arabian ca rriers may transport personnel or 
cargo for contractors being paid with USG funds .  Under the second, Brazilian carriers may carry 
non-military cargo.  U.S. carriers sought this agreement to obtain reciprocal access to Brazilian 
government/parastatal cargo carriage. 
 Under the current interpretation of U.S. law, the carriage of U.S. Government-financed air 
transportation by a U.S. carrier may include trans portation sold pursuant to a codeshare arrangement 
with a U.S. carrier, but carried on an aircraft operated by a foreign carrier 
 
 
 WT/TPR/M/126/Add.3 
Page 198  
 Chapter 4 - BY SECTOR 
 (5) TELECOMMUNICATION SERVICES  Question:  (Brazil #37) (Services #1) WT/TPR/S/126 Para. 164 
 
Please provide further clarification on how the mech anism of granting new license to foreign telecom 
carriers wishing to operate in the U.S. works, purs uant to Sections 214 and 310 of the Act, especially 
in cases when the FCC undertakes the Public Interest Analysis test through consultations with the 
DOS, DOD and FBI.  Please also provide clarificati on on the compatibility of such test with Art XVII 
of the GATS (national treatment) since U.S. telecommunications carriers are not subject to the test. 
 
Answer  
 
The following is an FCC website link providing filing guidelines for section 214 applications and 
providing information on the process or "mechanism" on 214 licensing including section 310 
http://www.fcc.gov/ib/pd/pf/214guide.html.  The FC C places license applications on public notice 
which provides the opportunity for public comment  on all issues, including national security, law 
enforcement, foreign policy, or trade concerns.  The FCC takes into account the entire record when 
considering such a license application, and afford s the appropriate level of  deference to Executive 
Branch expertise on national security, law enforcement,  foreign policy and trade matters.  In addition, 
we note that to date, the FCC has not denied a ny license based on any of these types of concerns. 
 We also note that all carriers seeking application of grant for a 214 license are subject to review pursuant to the public interest.  Question:  (Brazil #40) (Services) WT/TPR/S/126 Para. 161 
 
Could the U.S. specify whether the taxes relati ng to the Universal Service Fund affect foreign 
consumers of telecommunications services through Modes 1 and 2?  Can this be considered a 
mechanism whereby foreign consumers subs idize the universal services in the U.S.? 
 
Question:  (Thailand #4) (Service #1)  
 
How are private companies encouraged to inv est in areas where operational costs are high? 
 Answer 
 
Generally investment decisions in the United Stat es are made by the private sector based on many 
factors, including whether a country has an open market and meaningful trade commitments.  The United States encourages open markets in this sector at home and abroad.  
 
Question:  (EU #23) 
 
The report of the Secretariat (paragraph 161), d escribes the finance of the U.S. universal 
telecommunications service, whereas companies must pay a percentage of their interstate end-user 
revenues to the Universal Service Fund.  What ar e those services to which access must be granted 
under the Universal service provisions?  What do es "reasonable and affordable rates throughout the 
country" mean?  How is the Universal Service fund money granted to operators?   WT/TPR/M/126/Add.3 
 Page 199 
 
 Answer 
 
Universal service provides support to eligible ca rriers serving high-cost areas and low income 
consumers, as well as discounts to eligible schools and libraries, and rural healthcare providers.  For 
the high-cost and low income mechanisms, the following telecommunications services are supported 
by federal universal service:  single-party servi ce;  voice grade access to the public switched 
telephone network;  Dual Tone Multifrequency (DTMF) signalling or its functional equivalent; access 
to emergency services;  access to operator services;  access to interexchange service;  access to directory assistance;  and toll limitation services for qualifying low-income consumers.  Telecommunications carriers that receive universal service high-cost support must provide all of these 
services throughout their service areas.  Eligib le schools and libraries may receive discounts on 
eligible telecommunications services, internal conn ections, and/or internet access.  Eligible rural 
healthcare providers may receive discounts on eligib le telecommunications services and/or internet 
access.  Additional information on each program is available at:  http://www.universalservice.org and http://www.universalservice.org/Re ports (USAC Annual Reports). 
 
The Commission has not specifically identified national reasonable or affordable rates, per se, because 
various factors, many of which are local in nature, affect rate affordability.  States exercise primary 
responsibility for determining the affordability of  rates.  Support provided by the high-cost 
mechanism goes to carriers to offset  their costs.  Through the provision of high-cost support to offset 
costs, however, the Commission ensur es that states are able to set  rates in rural areas that are 
reasonably comparable to those in urban areas.  S upport provided through the other universal service 
mechanisms enables consumers, who would otherwi se not be able, to afford the services provided by 
service providers.  The support amount is calculated and distributed by the Universal Service Administrative Company 
(USAC), the universal service fund administrator.  USAC calculates the support amounts based on the 
operation of the relevant mechanism (i.e., High- Cost, Low Income, Rural Healthcare, Schools and 
Libraries), as outlined in Part 54 of the FCC's rules (47 C.F.R. §54).  Additional information on each program is avai lable at:  http://www.universalservice.org and 
http://www.universalservice.org/Re ports (USAC Annual Reports). 
 
Also as noted in footnote 30 of the Secretariat’s report, an explanation of the U.S. universal service regime is available online at:  http://www. fcc.gov/wcb/universal_service/welcome/html. 
 
Question:  (EU #24) 
 The Secretariat report (paragraphs 162, 177 and 178) describe the FCC's Benchmark Order in the U.S. 
How does the U.S. justify the maintenance of a be nchmark system in its International Settlements 
Policy? How is this system compatible with the obligations of non-discrimination of the GATS and 
the commitments of market access made by the United States in 1997?  
 
Answer  
The FCC is obligated under Section 201 of the Comm unications Act of 1934, as amended, to ensure 
that rates for U.S.-international services are not unjust and unreasonable.  As a result, the FCC implemented the benchmarks policy in 1997 in orde r to curb excessive accounting rates U.S. carriers 
were paying, and U.S. consumers absorbed throu gh retail rates, for international termination.  
Similarly, the International Telecommunication Unio n also recognized the bene fits of achieving more 
cost-oriented accounting rates through its ITU-T Recommendation D.140. WT/TPR/M/126/Add.3 
Page 200  
  
All WTO Members retain the right under the GATS to maintain laws or regulations to protect 
competition in their markets, as long as the laws or regulations are applied in a manner consistent with 
the provisions of the GATS.  See paras. 260-267 of the Benchmarks Order for discussion (http://www.fcc.gov/ Bureaus/International/Orders/1997/fcc97280.txt). 
 
Question (EU #25) 
 
The report points out (paragraph 164) that the F CC considers various factors when considering a 
licence application from a foreign operator.  What ki nd of "trade policy concerns" can affect a licence 
application from a foreign operator?  What are th e criterias for assessing "security concerns" for a 
licence application from a foreign operator?  
 
Answer  
The Commission takes into account the entire record a nd affords the appropriate level of deference to 
Executive Branch expertise on national security, law en forcement, foreign policy and trade matters.  
We expect that concerns of trade concerns and foreign policy would be raised only in very rare 
circumstances. In addition, we note that to date, we have not denied any license based on any of these 
types of concerns.  
 
Question:  (EU #26) 
 The report (paragraph 173) says that the ORBIT act im poses criteria on entry into the U.S. market of 
Inmarsat and New Skies, in particular statutory privatisation criteria which the FCC must apply in 
order to determine whether to grant market access to these entities.  Howe ver, since these criteria 
apply to no other competitor, fore ign or domestic and could lead the FCC to limit these entities' access 
to the U.S. market (thus preventing an increase in th e number of players in the market), could the U.S. 
explain how this conforms with the intent of the Act to promote competition?  Also, one criterion for 
allowing market entry by these entities conditions ma rket access on the place of registration of the 
company
6 even for WTO members' territories:  can the U.S. explains how this complies with its WTO 
obligations on market access, Most Fa voured Nation (MFN) and National Treatment? 
 Answer 
 
Paragraph 173 of the report actually addresses FCC actions under the ORBIT Act to facilitate 
privatization of INTELSAT (now a U.S. licensee) and of New Skies (an INTELSAT spinoff and Netherlands licensee) and authorize service of both in  the U.S. market.  Paragraph 175 of the report 
addresses FCC authorization of Inmarsat's (a U.K.  licensee) access to the U.S. market for mobile 
satellite services in 2001.  The privatization cr iteria in the ORBIT Act for successor entities are 
generally the same for both INTELSAT and Inmarsat, c ontrary to the premise of your questions and 
therefore apply to both a U.S. and foreign licensee.  The intent of the criteria is to ensure that both 
INTELSAT and Inmarsat are privatized in a manne r that will not be harmful to competition. 
   
                                                     
 
6 "Any successor entity or separated entity shall be su bject to the jurisdiction of a nation or nations that: 
(A) have effective laws and regulations that secure  competition in telecommunications services;  (B) are 
signatories of the World Trade Organization Basic Tel ecommunications Services Agreement;  and (C) have a 
schedule of commitments in such Agr eement that includes n on-discriminatory market access to their satellite 
markets."  WT/TPR/M/126/Add.3 
 Page 201 
 
 Question:  (EU #27) 
 
As pointed out in the report by the Secretariat (paragraph 175), EU-based Inmarsat Ventures plc was 
indeed granted access to the U.S. market, but this gr ant is subject to further review after Inmarsat 
conducts an IPO, or revocation of its authorization to provide non-core services to the U.S. if it fails to 
conduct an IPO, or if substantial dilution of the aggregate ownership of the company by its former 
Signatories is not achieved through an IPO.  Can the U.S. explain why such conditions are imposed 
on Inmarsat (i.e. why the ORBIT act requires such c onditions) given that the U.S. has granted market 
access to any satellite operator based in a WTO member under the GATS? 
 
Answer 
 The conditions were imposed upon bo th INTESAT and Inmarsat as required by the ORBIT Act.  The 
ORBIT Act requirement that these former intergovern mental organizations dilute former signatory 
ownership through an IPO is based  upon Congress' view that such dilution is necessary to complete 
their transformation into independent commercial entities.  Question:  (EU #28)  
The EU takes good note that "the FCC endeavours to  follow technology-neutral policies" (paragraph 
179 of the Secretariat report).  However, for digita l terrestrial television, the U.S. has mandated an 
exclusive transmission standard in the U.S. (the ATSC developed in the U.S.), which prevents a 
technology (DVB-T) developed in Europe and a dopted in several countries around the world from 
entering into the U.S. market.  Could the U.S. explain why it does not "follow a technology-neutral policy" in this case?  
Answer 
 The EU is taking the FCC's endeavouring to follo w technology-neutral policies somewhat out of 
context.  Para. 179 of the Secretariat report deals with telecom services, which is distinct from the audio/video services section that cove rs broadcasting and, in particular, digital terrestrial television 
(DTV).  In establishing its rules for DTV, the F CC relied on an extensive public notice and comment 
process before deciding to adopt a single DTV standard.  See Fourth Report and Order in MM Docket 
No. 87-268 (adopted December 24, 1996, FCC 96-493) fo r specific rationale behind the decision.  We 
note that Europe has adopted DVB-T as its terrestrial broadcast standard and there isn't any opportunity for the ATSC DTV standard to compete there either.  The FCC is currently considering 
steps that would permit parties to operate with DVB-T, and other terrestrial TV transmission technologies, in the commercial spectrum bei ng reclaimed from TV channels 52-62 and 65-67.  
 
Question:  (Canada #21 and #22) 
 
Canada understands that when considering a li cense application, the Commission defers to the 
Executive Branch on other considerations such as national security, law enforcement, foreign policy, 
or trade concerns.  To what extent does the regulator have discretion in deciding on license 
applications that raise such concerns?  Is the FCC, for example, obliged to follow the 
recommendations of the executive agencies in this re spect, or does the FCC simply required take their 
consideration into account?  Though the GATS allows countries to take measures th at are essential to protect  security interests, 
there is no explicit exception for foreign policy or  trade concerns.  Please comment on whether the 
denial of licences on these grounds would fit within:  (i) the GATS exceptions; and (ii) the U.S. GATS commitments? WT/TPR/M/126/Add.3 
Page 202  
  
Answer  
 
The FCC places license applications on public notice which provides the opportunity for public comment on all issues, including national security, law enforcement, foreign policy, or trade concerns.  
The FCC takes into account the entir e record when considering such a license application, and affords 
the appropriate level of deference to Execu tive Branch expertise on national security, law 
enforcement, foreign policy and trade matters.  
We note that to date, the FCC has not denied a ny license based on any of these types of concerns. 
 
Question:  (Canada #23) 
 
The U.S. notes that in reviewing proposed fore ign investment pursuant to Section 310 of the 
Communications Act of 1934, the FCC relies on principles set forth in the 1997 Foreign Participation 
Order, including a presumption that foreign investment in the U.S. market by entities from WTO 
member countries is consistent with the public interest .  Does the U.S. intend to legislate to reflect in 
law the "practical" removal of barriers to invest ment by WTO members, thus providing the full 
security of law to foreign firms of WTO Member-countries.  Answer  
 
It is unclear what Canada is proposing, and what barriers Canada is sugges ting be removed.  Since 
late 2000, well over 500 carriers with foreign partic ipation have been granted authority to provide 
global facilities-based or resale services in the Un ited States, including over 60 with some level of 
Canadian interest. 
 
Question:  (Korea para. 169)  
Is it correct to understand that entities from WT O member countries are exempt from the public 
interest review? 
 
Answer  
 No.  As stated in the Secretariat's report, in re viewing petitions for proposed foreign investment as 
required pursuant to Section 310, the Commission relies on principles set forth in the 1997 Foreign Participation Order, including a presumption that foreign investment in the U.S. market by entities from the WTO member countries is consistent with the public interest.  Question:  (Korea para. 172)  
 
Provide information explaining the reasons for the U.S. classification of DBS/DTH services as telecommunications services.  
Answer  
 
One-way satellite transmission of DBS/DTH services does not have the characteristics of traditional 
free-to-air broadcast services.  Thus, they are cla ssified in the United States as telecommunications 
services as opposed to broadcast services.     WT/TPR/M/126/Add.3 
 Page 203 
 
 Question:  (Korea para. 179)  
Reference:  para. 179 
Does the U.S. feel that adopting a single standard wo uld not help enhance the mobile penetration rate 
in the U.S.? 
 
Answer  
 No.  Having multiple competing standards has not prove n to be a deterrent to wide-spread adoption of 
mobile services in the United States.  In fact, w ithout adopting a single standard, 6 wireless operators 
have nation-wide coverage, and are compe ting on the basis of innovation and price. 
 
Question:  (Korea para. 179 Part #2) 
 
How does the U.S. government interpret the concept and scope of "legitimate public policy objectives 
in telecommunications services?"  
Answer 
 
While the concept and scope of public policy objec tives are not predefined, they have typically 
included issues common to governmental oversight ev erywhere, such as safety, consumer protection, 
competition, and national security. 
 
Question:  (Japan #70) 
 According to the Report by the Secretariat, the FCC has authority to adjudicate disputes.  Please 
explain what kinds of disputes the FCC adjudicates, in what way and through which procedures they are adjudicated, and how many disputes a year are treated by the FCC?  
Answer 
 
The FCC adjudicates formal and informal complain ts against common carriers, and also reviews 
informal complaints against other entities regulated by the FCC.  Formal complaints are roughly the 
equivalent of a civil lawsuit.  Much of the FCC's work on formal complaints involves providing structured mediation to the parties.  Indeed, many cases are settled before a complaint is ever filed.  
More information is available on the Enforcement Bureas web site at www.fcc.gov/eb, including lists 
of formal complaints that have been resolved. 
 
Question:  (Japan #71)  
 
How long does it usually take the FCC to resolve a dispute? 
 
Answer  
 
In cases where a formal complaint is filed and we ha ve to write a decision, the FCC tries to resolve 
the case within a year.  But as noted above, many cases are settled without the need for a written 
decision. 
 
Question:  (Japan #72)  
 
How does the FCC ensure the tran sparency of its procedures including information disclosure? 
 WT/TPR/M/126/Add.3 
Page 204  
 Answer  
 
All procedures followed in complaint cases are set out in the Commission's rules. 
 
Question:  (Japan #73)  
 Is there situation where the FCC's individual disput e resolution is fed back to the rule-making or 
policy-making process?  If so, in what way?  
Answer  
 FCC decisions in complaint cases may resolve unans wered questions arising out of the rule-making 
process, so in that sense, individual cases do re late back to the policy-making process.  Also, 
information on the adjudicatory decisions made by the FCC's Enforcement Bureau and by the 
Commission itself is available throughout the agency  and to the public.  This enforcement experience 
can be taken into consideration in the developmen t of proposals for FCC rules designed to encourage 
compliance with existing regulations and laws. 
 
Question:  (Japan #74)  
 
What is the legal effect of a judgment by the FCC regarding dispute resolution?  What procedures can 
the parties to the dispute take if they ar e dissatisfied with the judgment of the FCC. 
Answer 
 
Like other decisions of the FCC, a judgment by th e FCC, including any sanctions ordered by the FCC, 
takes effect without further legal action.  A part y subject to a judgment regarding dispute resolution 
may, however, request review by a court.  Parties can  appeal decisions to a Federal Court of Appeals. 
 
Question:  (Japan #75)  
 
How is the responsibility regarding dispute resolutio n divided between the FCC and the State Public 
Utility Commissions?  Answer  
 
Where the Communications Act of FCC rules are at issue, the FCC has responsibility - except to the 
extent that our local competition rules give states au thority to resolve certain disputes (e.g., pricing of 
unbundled network elements).  Generally, stat es resolve only intrastate issues, although with 
exceptions, and the FCC resolves interstate issues. 
 
Question:  (Japan #76)  
(p. 138, para. 160) 
 
There are three different kinds of access charges in the U.S.:  reciprocal compensation, intra-state 
access charges and inter-state access charges, which ar e imposed, for instance, depending on the type 
of accessing carrier.  Japan requests that the FCC e liminate, or at least reduce, the disparity and 
inconsistencies among the access charges.  What is the U.S. view on these points ?  
Answer 
 
Access and reciprocal compensation charges in the United States have evol ved under different legal 
frameworks.  Access charges, in particular, addr ess goals that had to be addressed following the  WT/TPR/M/126/Add.3 
 Page 205 
 
 break-up of AT&T with respect to recovering fixe d costs of the local exchange network.  Since 
disparate compensation arrangements may not be sustainable given arbitrage opportunities and the 
advent of new technologies, the United States has an  interest in examining whether more uniform 
compensation arrangements are feasible.  This is the subject of an ongoing rulemaking: FCC Docket 
01-92, Developing a Unified Intercarrier Compen sation Regime, accessible through the Electronic 
Comment Filing System at www.fcc.gov.  Japan is welc ome to comment in this proceeding.  The fact 
that there are disparate rates in the United States, however, should not  obscure the fact that unlike in 
Japan, all these rates have systematically trended do wnward, and are typically one third to one half 
the levels that Japan has approved for its  dominant, government-owned company. 
 
Question:  (Japan #77)  
(p. 139, para. 162 and p. 140, para. 168)  
Japan abolished the restriction of foreign investment  on the licensing of radio stations for the purpose 
of  conducting telecommunications activities, and has further, been requesting the U.S. to take the 
same action regarding the restriction of foreign investment, as stipulated in Section 310 of the 
Communications Act 1934.  In addition, the "Second Report to the Leaders on the U.S.-Japan 
Regulatory Reform and Competition Policy Initiative " states that, "the Government of the United 
States will continue a dialogue with the Government of Japan on restrictions on direct investment in 
the U.S. wireless market".  On the other hand, the Report by the Secretariat relates that, "the 
restrictions on direct investment are statutory requirements that the FCC cannot waive".  Please 
explain the position of the U.S. on these restricti ons.  In particular, please explain the grounds for 
maintaining the restriction on direct investment, desp ite the fact that indirect investment has been 
fully liberalized.  
Answer 
 Restrictions on direct investment in radio stations are a statutory requirement that cannot be waived.  
The United States is pleased to continue its dial ogue with Japan explaining why this does not impose 
a meaningful restriction on market access.  The origin of this restriction can be traced, in  part, to the Russo-Japanese War, where Japan's 
successful use of radio technology for military purp oses raised the awareness in the United States of 
the national security implications of direct control over spectrum, which result ed in legislation that 
remains in force.  
Question:  Japan #78)  
(p. 139, para. 163) 
 
A foreign carrier providing international telecomm unications services, which has "market power" in 
its own market, is regulated more strictly than ot her carriers, being imposed additional rules.  Such 
regulations have no rationale and may result in unj ustified discriminatory treatment against foreign 
carriers.  These regulations may also have the effect  of unfairly restricting foreign direct investment. 
What is the U.S. view on our comments? 
 
Answer 
 
The United States is surprised and disappointed that Japan does not appear to understand the 
importance of dominant carrier regul ation, particularly in light of  its own WTO obligations.  The 
United States cannot always be assured that a foreig n regulator will prevent its carriers from abusing 
their position to the market to the detriment of U. S. consumers.  The United States has a legitimate 
interest in ensuring that is domestic rules adequately protect its consumers. WT/TPR/M/126/Add.3 
Page 206  
  
Question:  (Japan #79)  
 
Japan further requests the U.S. to make clear th e guidelines, which are applied when the dominant 
carrier regulation in Section 63, Title 47 of th e Code of Federal Regul ations (47CFR63), is 
implemented to those carriers providing international communications services. 
 
Answer  
 
The United States invites Japan to specify which aspects of this rule it does not understand.  In the 
Foreign Participation Order, the Commission adopt ed a narrowly-tailored dominant carrier framework 
designed to address specific concerns of anticom petitive behavior.  A U.S.-licensed carrier is 
classified as dominant on a particular route if it is affiliated with a foreign carrier that possesses market power in a relevant market on the foreign e nd of that route.  The safeguards include separation 
requirements, filing requirements, and the benchmar k condition.  A carrier may seek to modify its 
regulatory status from dominant to non-dominant on a particular route by submitting information, as 
specified under Part 63 of the Commission's rules, demonstrating that it qualifies for non-dominant 
treatment.  
Question:  (Japan #79, Part 2)  
 
Japan further requests the U.S. to make clear th e guidelines, which are applied when the dominant 
carrier regulation in Section 63, Title 47 of th e Code of Federal Regul ations (47CFR63), is 
implemented to those carriers providing international communications services. 
 
Answer  
 The United States invites Japan to specify whic h aspects of this rule it does not understand. 
 In the Foreign Participation Order, the Commissi on adopted a narrowly-tailored dominant carrier 
framework designed to address specific concerns of anticompetitive behavior.  A U.S.-licensed carrier 
is classified as dominant on a particular route if it is affiliated with a foreign carrier that possesses 
market power in a relevant market on the foreign e nd of that route.  The safeguards include separation 
requirements, filing requirements, and the benchmar k condition.  A carrier may seek to modify its 
regulatory status from dominant to non-dominant on a particular route by submitting information, as 
specified under Part 63 of the Commission's rules, demonstrating that it qualifies for non-dominant treatment.  Question:  (Japan #80)  
 
Sections 214 and 310(b)(4) of the 1934 Act provide several certification and licensing criteria for a 
foreign carriers entry into the U.S. telecommunicat ions market.  Among them, the criteria of trade 
concerns and foreign policy could be  applied to refuse the issuance of a certification or licenses by 
using reasons that are irrelevant to telecommunications policy.  The existence of such criteria is 
regarded by foreign carriers, including those from Japan, as a de facto barrier to entry.  There are 
actually cases where certificates to subsidiaries of Jap anese companies have been delayed, a situation 
causing long-term concern.  Japan, therefore, requests the U.S. to abolish the criteria. 
 
Answer  
 
Sections 214 and 310 of the Communications Act manda tes that the Commission determine that grant 
of an application to provide communications services in the United States or to hold a radio license  WT/TPR/M/126/Add.3 
 Page 207 
 
 will serve the public interest.  The public interest st andard is broad, and unde r this standard the FCC 
must consider many factors that may be raised in connection with an application, including national 
security, law enforcement, foreign policy and trade concerns.  The Commission takes into account the 
entire record and affords the appropriate level of deference to Executive Bran ch expertise on national 
security, law enforcement, foreign policy and trad e matters.  The requirement of Sections 214 and 
310(b)(4) to make a public interest determination can only be changed by an act of Congress and 
cannot be changed unilaterally by the FCC in the context of a rulemaking. 
 The Commission expects that concerns of trade conc erns and foreign policy would be raised only in 
very rare circumstances.  In addition, we note that  to date, the Commission has not denied any license 
based on any of these types of concerns. 
 
The United States would note that it is not unusual for governments, in the responsible exercise of their authority, to take into cons ideration a range of public interest factors in a licensing proceeding.  
In Japan, for example, telecommunications firms seeki ng to land submarine landing cable stations are 
typically instructed by MPHPT to negotiate with re presentatives of fishing interests.  It is unclear 
whether Japan considers fishing interests to be relevant to telecommunications policy. 
Responsible governments typically address a range of i ssues in the context of a licensing process.  We 
understand that Japan, for example, requires that telecommunications carriers seeking to land submarine cables address the concerns of fishing interest s.  Does Japan believe that fishing is relevant 
to telecommunications policy?  
 
Question:  (Japan #81)  
 
Japan also requests the U.S. to clarify and publis h the guidelines according to which the criteria of 
very high risk to competition will be applied.  Answer  
 
A very high risk to competition would be a very fact-specific determination, for which specific 
criteria would be inappropriate.  The Commission has stated that the very high ri sk to competition standard would apply only in 
exceptional cases in which the facts of the partic ular case demonstrate that Commission safeguards 
and conditions would be ineffectiv e at preventing anticompetitive conduct.  An applicant would have 
to possess the ability to harm competition in the U.S.  market in addition to the ability to exercise its 
foreign market power.  The Commission has not found a very high risk to competition in connection with any application to date. 
 
Question:  (Japan #82) 
(p. 140, para. 165) 
 
The U.S. should refrain from examining the regula tory policies and market trends of other member 
countries in the field of telecommunications, solely fr om a U.S. own point of view, by using the threat 
of countervailing measures under Section 1377 of the Omnibus Trade and Competitiveness Act of 
1988. Such an approach gives rise to problems:  (a) for easily raising individual issues around an 
intergovernmental table without using formal pro cedures, such as dispute resolution procedure and 
submission of opinions established by respective me mber countries, and (b) discouraging, possibly 
and unreasonably, foreign telecommunications ca rriers from expanding business operations.  What 
would be the U.S. view on the abolition of this approach? 
 
 WT/TPR/M/126/Add.3 
Page 208  
 Answer 
 
In countries with a truly independent regulator, with the will and ability to enforce decisions, resort to 
trade remedies to ensure meani ngful market access should not be necessary.  In countries like Japan, 
however, where the regulator is subject to direct  political control and the major suppliers are both 
politically influential and government-owned, it is not  prudent to assume that the regulator will be 
willing or able to ensure competitive access to its market. 
 
Question:  (Japan #83) 
(p. 140, para. 166) 
 In the U.S., telecommunication service carriers are obliged to file reports on business information, 
including their earnings, to all individual states where they are providing services.  As there is no standard filing form common among all states, excessive burden has been placed on carriers for reporting purposes.  Japan, therefore, requests the U.S. to abolish them.  What is the U.S. view on this 
point? 
 
Answer 
 
Japan is invited to work with state regulatory o fficials to submit an appropriate proposal in the 
appropriate forum.  Question:  (Japan #84)  
 
On August 21, 2003, the FCC published the "Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers (ILECs)" (Trie nnial review).  This order grants states the 
authority to determine whether an ILEC has an unbundling duty regarding a certain network element, 
and to define the geographical scope of the market  in which the same duty is applied. Japan is 
concerned that the authority given to states will de lay the implementation of the connecting rule and, 
by fragmenting the market, will impose undue burdens  and inefficiency on related companies.  
Therefore, Japan requests the FCC to ensure uniform ity, efficiency and promptness in the state-level 
application of federal rules.  What is the U.S. view on the matter? 
 
Answer  
Current rates remain in effect until new rates, if an y, are determined.  There is an inevitable trade-off 
between the benefits uniformity and region-specific cost determinations.  In this regard, we are 
disappointed that Japan has failed  to institute region-specific interconnection rates, the failure of 
which appears to have resulted in NTT East maintaining above-cost interconnection rates. 
 
Question:  (Japan #87)  
(p. 142, para. 177) 
 
Japan requests the U.S. to abolish its benchmark ru les as there exist certain problems regarding, for 
example, the followings: 
 (a) These could be a de facto barrier to entry into the U.S. market; (b) These allow the U.S. Government to set down one-sided settlement rates in connection with 
its  policy of regulation on new entry, wherea s the settlement rate should be determined 
 commercially;  and 
(c) There is doubt about their consistency with the various principles of the WTO Agreement, 
such  as the MFN treatment.  WT/TPR/M/126/Add.3 
 Page 209 
 
  
Please explain the view of the U.S. on these points.  
Answer 
 
Japan's views on this matter appear  inconsistent with the goals of liberalized telecommunications 
markets. This is particularly surprising, given the fact that Japanese companies have been major 
beneficiaries of U.S. efforts to curb abuses of the settlement rate system. 
 
Question:  (China #96) 
 How does the U.S. ensure that licensing requireme nts and procedures, qualification requirements and 
procedures and standards do not become unnecessary barriers to trade?  
Answer 
 As a general matter, our federal system of gove rnance and the Interstate  Commerce Clause of our 
Constitution require state and local regulatory auth orities to ensure that policy measures provide 
equivalent access and treatment to service suppliers  from all 50 states.  A practical consequence of 
this requirement is that state and local author ities develop licensing requirements and procedures 
based upon objective, non-discriminatory criteria.  Thus, for example, the licensing requirements to 
practice law in Florida must be drafted in such a way as to permit a lawyer from New York to have an 
equal opportunity for receiving a license.  In most cases, the inherent principles of non-discrimination 
contained in this system also serve to benefit Foreign Service suppliers.  In addition, our national professiona l organizations have been incr easingly active in developing model 
rules, which state and local authorities then draw upon in developing their re gulatory policies.  These 
model rules have fostered a great deal of c onvergence among the states toward a common set of 
practices and principles in sectors such as architectur al, engineering, accounting, and legal services.  
This effort toward harmonization and best practic es serves to encourage competition and trade. 
 The United States also encourages representatives of the professions and the competent authorities to 
actively engage their foreign counterparts to address  issues that may impede trade and to pursue the 
negotiation of agreements re garding mutual recognition. 
 
Question:  (China #105)  
(p. 138, para. 160) 
 In the Reference Paper attached to  the U.S. Services Schedule, note 29 to Article 2.2 provided that 
Rural Local Exchange Carriers may be exempted by a state regulatory authority for a limited period 
of time from the obligations of section 2.2. with  regard to interconnection with competing local 
exchange carriers.  Rural telephone companies do not  have to provide interconnection to competing 
local exchange carriers in the manner specified in Section 2.2 until ordered to do so by a state 
regulatory authority?  What is th e reason for retaining this kind of measures and how does it fulfil its 
purpose and objectives? 
 
Answer  
 
Rural carriers face unique challenges.  Generally, these carriers have higher operating and equipment 
costs, which are attributable to lower subscriber density, small exchanges, and a lack of economies of 
scale.  Thus, the Commission has historically not adopted a one-size-fits-all policy that might impede rather than support the provision of affordable service by rural carriers. WT/TPR/M/126/Add.3 
Page 210  
  
Question:  (China #106, follow up to #105) 
 
Under which circumstances will the state regulatory authority order in terconnection to be provided by 
rural telephone companies? 
 
Answer 
 
Under the Section 251(f)(2) of the Telecommunicati ons Act of 1996, a rural carrier may petition a 
state regulatory authority to suspend or modify the requirement to provide interconnection as an 
incumbent operator.  Question:  (China #107, follow up to #105) 
 
Has the U.S. considered alternative a pproaches to address its policy concerns? 
 Answer 
 
The FCC is always open to consider policy concer ns through its open and transparent processes. 
 
(6) AUDIOVISUAL SERVICES  
 
Question:  (EU #29) 
 
The U.S. has made commitments in 1994 for "2.D.b Motion Pictures Projection Services".  The EC would like to know whether the U.S. is implemen ting in full these commitments, or whether it has 
been facing difficulties to implement them, notably as regards non-profit and publicly funded entities. 
 Answer  
 
The United States faces no difficulty in fulfilling its 1994 commitments.  As we have noted in the 
introductory clarification of our current offer, our  commitments apply only to services open to private 
sector participants. 
 
Question:  (EU #30) 
 
The U.S. has made commitments in 1994 for "2.D.a Motion Pictures Production and Distribution Services", which include film dubbing, film title prin ting, editing, cutting, etc.  The U.S. has made 
commitments in 1994 for "2.D.c Radio and Television Services".  In  addition, the U.S. has made 
commitments in 1994 for "2.D.f Other Audiovisual Se rvices".  The EC would like the U.S. to indicate 
the specific services that it considers as being covered by its commitments under "2.D.f Other Audiovisual Services".  
Answer  
 
The United States scheduled a commitment for Othe r Audiovisual Services to ensure that new 
services, developing as a result of technological a dvances, would be included in its offer for 
audiovisual services.  The U.S. offer of Othe r Audiovisual Services does not, however, extend to 
infrastructure services, such as DTH satellite or cable services, which are found elsewhere in 
W/GNS/120.  The United States acknowledges the EC's interest in audiovisual classification issues 
and welcomes the opportunity to discuss these, a nd related issues, in the services negotiations. 
  WT/TPR/M/126/Add.3 
 Page 211 
 
 Question:  (Thailand #5)  
 
Please describe the U.S.'s policy, structure, and re gulations, classified by each type of entertainment 
and every process of audiovisual services sector.  
Answer 
 A. Policy  
 1. With the exception of regulations prohib iting obscenity, the Federal Government does not 
regulate the production, distribution or import of films.  Nor does the Federal Government restrict or 
limit television programming, or home video entert ainment that is produced and distributed by 
foreign-owned entities. Due to First Amendment prot ections, the FCC regulates video content only to 
a very limited degree.  Specifically, broadcast medi a are subject to statutory political advertising 
requirements;  commercial television stations must provide minimum quantities of children's 
programming, and so-called indecent programming on br oadcast media is relegated to the 10:00 PM-
6:00 AM time period. 
 2. Obscene speech is not protected by the First Amendment and cannot be broadcast at any time.  
With the exception of obscenity, the federal governme nt does not regulate or limit films imported into 
the United States, and is not in the business of  distributing or exhibiting cinematic films. 
 
B. Structure 
 3. Audiovisual services consist of the production and distribution of entertainment, including 
films, home video entertainment, and television prog rammes.  The transmission of this entertainment 
can be carried out through different transmission mechanisms, including through terrestrial, over-the-
air broadcasting or by cable or satellite.  With  technological progress, the mechanisms used to 
transmit audiovisual content and telecommunication services have become increasingly indistinguishable.
7 
 4. The U.S. audiovisual sector produces feature films as well as television series for broadcast, cable, and DBS distribution.  After theatrical releas e, feature films are frequently distributed via pay 
television distribution platforms such as cable and DTH satellite TV, and then via broadcast TV.  The 
audiovisual sector includes several large broadcast networks which provide programming to many of 
the over 1,700 local television stations.
8  They compete with non-broadcast distribution networks, 
which include approximately 230 national cable pr ogramming networks and more than 50 "premium 
networks".9 In the United States, 44 percent of audiovis ual revenues are derived from the home video 
entertainment market, 40 percent from TV markets, and 18 percent from theatrical.  In 2003, over 85 
percent of households received their video programming via satellite or cable.10  During the 2001-
2002 TV season, broadcast stations had a 47 percent share compared to the non-broadcast networks' 
53 percent share of viewing.11 
                                                      
7 For example, the authorities have noted that in the classification used for GATS services, cable and 
satellite services are not included in the audiovisual subcategory;  however, these constitute a support that is 
widely used to transmit entertainment services.  
8 Local TV stations distribute network programming and other programming from local, regional or 
national sources.  Broadcast Station Totals as of June 30, 2003, FCC News Release, 22 July 2003, 
http://www.fcc.gov/Daily_Releases/Daily Digest/2003/dd030722.html.  
9 2002 Competition Report, FCC 02-338.  
10 2002 Competition Report, FCC 02-338.  
11 Nielsen Media Research data reported in Cable Developments 2003, National Cable and 
Telecommunications Association.  WT/TPR/M/126/Add.3 
Page 212  
  
C. Regulations  5. In the case of telecommunications services, under Section 310 of the Communications Act, radio and television broadcast licenses may not be ow ned by a foreign corporation or a company of 
which more than 20 percent of the capital stock is  owned or voted by non-U.S. citizens;  by a 
corporation chartered under the laws of the United States that is directly or indirectly controlled by a 
corporation more than 25 percent of whose capital st ock is owned by non-U.S. citizens;  or by a 
foreign government or a corporation of which any offi cer or more than 25 percent of the directors are 
non-U.S. citizens.  
6. Six ownership restrictions were in place in October 2003, with the objective of promoting 
competition, diversity, and localism in media producti on.  The Dual Network Rule permits an entity 
to own a maximum of two broadcast networks as long  as one of the networks is not ABC, CBS, NBC 
or Fox.  The National Television Ownership Rule limits the viewing audience which one entity can 
control to 35 percent.  The Broadcast-Newspa per Cross-Ownership Rule bans a company from 
owning a newspaper and broadcast stations in the same local area.
12  The Local Television Multiple 
Ownership Rule permits ownership of  two TV stations in a market, with some limited restrictions.  
The Local Radio Ownership Rule limits the number of radio stations a company may own depending 
on market size.  The Television-Radio Cross-Owne rship Rule limits the number of television and 
radio stations an entity may commonly own in a local market.  
7. In 2001, the FCC began a Media Ownership Policy Re-examination of these rules, in the 
context of the biennial review of regulations th at is mandated under the Telecommunications Act.  
The resulting Report and Order adopted on 2 June 20 03 retained the Dual Network Ownership Rule.
13  
The Order relaxed the limits on ow nership of local TV stations by a single company.  The FCC 
incrementally increased the 35 percent limit containe d in the National Television Ownership Rule to a 
45 percent limit on national ownership.  The FCC found that the limits on local radio ownership 
contained in the Local Radio Ownership Rule cont inue to be necessary in the public interest, but 
changed the methodology for defining a radio mark et.  Changes were also made to both the 
Television-Radio Cross-Ownership Rule and the Br oadcast-Newspaper Cross- Ownership Rule which, 
among other things, eliminated the newspaper-broad cast cross-ownership ban and the television-radio 
cross-ownership ban in markets with nine or more TV stations.  The new ownership rules were stayed 
by an appellate court before they could become effective.14  The existing six ownership rules remain 
in place during judicial review of the F CC's ownership rules adopted on 2 June 2003. 
 8. At the state level, a number of states have  enacted legislation that regulates information 
motion picture distributors must provide to exhibitors in the conclusion of exhibition contracts and 
prohibits specified contract practices.  Further,  common law doctrines regarding defamation, privacy 
and publicity (the right to exploit the name and likeness of a public figure in a wide variety of 
commercial uses) may affect the marketing of copy righted works by enforcing the rights of certain 
individuals that may be violated by exhibition of the work.  Finally, in April 1978, the Supreme Court 
upheld the constitutional power of states and cities to  prevent the exposure of children to books and 
films which could not be denied to adults. 
 
                                                     
 
12 Report and Order, para. 328.  
13 See FCC News Release, 2 June 2003, at:  h ttp://www.fcc.gov/Daily_Releas es/Daily_Business/2003 
/db0602/DOC-235047A1.pdf.  
14 Prometheus Radio Project v. Federal Communications Commission,  No. 03-3388 (3rd Cir. Sept. 
3, 2003) ( per curiam)(order granting motion to  stay effective date of FCC's new ownership rules).   WT/TPR/M/126/Add.3 
 Page 213 
 
 Question:  (Thailand #5, Part #2)  
 
Please provide the details of government/non-g overnment authorities in this service sector. 
 
Answer 
 Please refer to the response to Thailand #1 a bove under "Policy" and "Regulations." 
 
Question:  (Thailand #5, Part #3) 
 
Please indicate the countries that U.S. has incl uded audiovisual services sector for engaging in 
bilateral agreement. 
 
Answer  
 
The United States has included audiovisual services in all its bilateral agreements. 
 
Question:  (Hong Kong #5) 
 
We are pleased to note that during the biennial  review in 2001 of the existing six regulations 
restricting ownership of TV and radio stations, so me changes have been proposed to relax certain 
limits and eliminate certain cross-ownership bans.  Ye t, it is stated that the new ownership rules were 
stayed by an appellate court before they could b ecome effective.  We would like to know when these 
changes would be effective and whether the U.S. w ould consider reflecting such improvements in its 
next offer.  
 
Answer 
 Provisions of the new multiple ownership rules have  also been raised in the context of pending 
legislation.  Thus, it is not clear when our "new" mu ltiple ownership rules will take effect.  Pursuant 
to court order (as indicated below), the prior owners hip rules remain in effect.  On September 3, 2003 
the U.S. 3
rd Circuit Court of Appeals stayed the effectiv e date of the rule changes contained in the 
Biennial Report and Order .  In its order, the Court stated that "the prior ownership rules [will] remain 
in effect pending resolution of these proceedings."  Prometheus Radio Project v. FCC , No. 03-3388, 
at 3 (3rd Cir. Sept. 3, 2003) (per curiam) (order gr anting motion to stay effective date of the 
Commission's new ownership rules).  
Chapter 4 - BY SECTOR 
 
(7) Financial Services 
 
Question:  (Canada #24) 
 
Under the Gramm-Leach-Bliley (GLB) Act introduced in 1999, U.S. banks continue to have little 
freedom to own and be owned by non-financial comp anies.  The issue of whether banks would be 
permitted to own non-bank companies as merchant ba nking investment may be reviewed five years 
after the enactment of the GLB Act (2004).  Does th e U.S. foresee more liberalization of the banking 
sector to permit banks to be owned and to own non-financial companies? 
 WT/TPR/M/126/Add.3 
Page 214  
 Answer 
 
The United States does not foresee any changes at this time to the U.S. policy separating banking and 
non-financial activities in the United States.  Th e Gramm-Leach-Bliley Act (GLBA) continued the 
longstanding U.S. policy of separation of banking a nd non-financial activities,  generally prohibiting 
non-financial companies from owning banks.  Compan ies that own banks (bank holding companies) 
may, however, own non-financial companies through the merchant banking provisions of the GLBA.  
Such investments are subject to the limitations  set forth in the GLBA and the implementing 
regulations.  There is no current proposal to aut horize banks directly to own non-financial entities 
through the merchant banking provisions of the GLBA.  Question:  (Canada #19)  
 
While the United States has undertaken national treatme nt commitments, some restrictions remain in 
the banking and insurance sub-sectors (e.g., regist ration requirements for foreign banks, certain 
federal excise taxes on life and non-life insurance premiu ms).  In addition, at the state level, market 
access restrictions remain in the banking and insurance sub-sectors (e.g., establishment, acquisition, 
licensing).  Does the U.S. contemplate a relaxation of these restrictions by state-level governments? 
 
Answer  
 
The U.S. believes that U.S. state treatment of fore ign financial services providers is, in general, very 
liberal.  That said, our initial GATS offer reflects  some improvements undertaken by the states, for 
example, in the area of insurance.  The U.S. will continue to consult with the states for the purpose of 
the negotiations.  
Question:  (China #98) 
 
What concrete measures has the U.S. taken to implement Article 4 of the GATS to increase the 
participation of developing countries in world trade of financial services? 
 
Answer 
 The United States supports the goal of increasing the participation of developing countries under the 
GATS more generally in addition to financial ser vices.  Under the GATS framework for trade in 
financial services, we have encouraged a large numb er of developing countries to negotiate and make 
broad commitments in financial services.  
Liberalization of trade in financial services, when  undertaken in conjunction with transparent and 
strong regulatory regimes, benefits countries in ma ny ways, some specific to the financial services 
sector and others related to the overall health of  their economies.  For developing countries, in 
particular, financial sector liberalization can  be important not only for improving domestic 
intermediation and competitiveness, but also for incr easing participation in global trade in financial 
services.  In particular, mode 3 commitments in banki ng can foster an environment for greater trade in 
goods and services and promote economic growth a nd stability through less distorted and volatile 
capital flows.  Further, developing Members c ould especially benefit from mode 3 commitments by 
attracting foreign direct investment and expertise in areas beyond banking (e.g., securities, insurance, 
funds management, and credit reporting agencies) , which tend to be underdeveloped in such 
economies.  Liberalization of cross-border access is also important for areas su ch as insurance.  In 
December of 2000, the United States submitted a proposal to the Council on Trade in Services 
(S/CSS/W/27) in which we outlined these and other views on financial services trade and the special 
interest we hold in this sector.  WT/TPR/M/126/Add.3 
 Page 215 
 
  
Question:  (China #108) 
 
How many licensing applications have been appr oved to foreign bankers and insurers since the 
previous U.S. trade policy review?  
 
Answer 
 
Over 70 foreign bank applications have been appr oved by the Federal Reserve since April 1, 2001.  
However, since the Federal Reserve is not the licen sing authority for offices of foreign banks in the 
United States, in most cases the relevant state or federal licensing authority also must approve the 
application.  We are not aware of any instances during this time period where the Federal Reserve 
approved an application by a foreign bank that was not also approved by the licensing authority.  In general, we note that there are a very large number of foreign banking or ganizations operating in 
the United States.  These foreign banking organizati ons own approximately 18 percent of all U.S. 
banking assets. 
 
Question:  (China #109)  
 
Have there been any applications rejected by th e licensing authorities in the United States during the 
same period?  If so, how many and why?  How many  licensing applications are pending for approval? 
 
Answer 
 
No applications by foreign banks have been rej ected by the Federal Reserve during the period since 
April 1, 2001.  Currently, there are five applicati ons by foreign banks pending at the Federal Reserve. 
 Question:  (China #110)  
 
Please provide total number and turnover of forei gn insurers in operation in the United States and 
their respective share in relation to the w hole insurance sector in the United States. 
 
Answer  
SUMMARY TABLE 
 
2002 Foreign Share 
U.S. Insurance Market 
(Millions of Dollars) 
 
 Life Non-Life (not incl. 
Acc./Health) Accident & Health Total 
All companies 441,242 417,055 313,903 1,172,200 
Foreign companies 121,147 58,991 9,294 189,432 
Foreign share (%) 27.41% 14.14% 2.82% 16.16% 
 
Number of Companies with "non-zero premiums" (actively providing insurance)  -  4,325. 
Number of Foreign15 Companies with "non-zero premiums" (actively providing insurance)  - 474. 
Source:  National Association of Insurance Commissioners (NAIC). 
 
                                                      
15 Foreign insurance companies defined as companies with 50 percent or more ownership by foreign 
shareholders and branches. WT/TPR/M/126/Add.3 
Page 216  
 Question:  (China #111)  
 
Will the U.S. kindly confirm whether a foreign insura nce company branch present in one of the U.S. 
cities (say Los Angeles) can set up a sub-bran ch in another U.S. city (say New York)? 
 
Answer 
 
Yes, in the United States, it is possible for a foreign insurance company branch in one state 
(California in the case of Los Angeles) to establish a branch in another U.S. state (New York for the 
case of New York City), assuming that the branch meet s all the normal prudential requirements of that 
second state.  
 
Question:  (China #112) 
 
(p. 149, Paras. 203, 204, and 205) Various market ac cess restrictions exist in the U.S. banking sector, 
in particular on the establishment of branches by foreign commercial banks.  Complicated approval 
procedures and prolonged pending period are two co mmon concerns of foreign banks.  Up till now, 
all the applications by Chinese banks to establis h branches or representative offices have been 
pending for a long time with the only exception of Ba nk of China's New York branch.  For example, 
the application by Bank of China to set up a branch  in San Francisco was filed 10 years ago but the 
approval is still pending by now.  The reasons given by the U.S. competent authorities are not 
convincing since Bank of China has been approved to  set up branches in several other countries in 
addition to the branch already existe d in New York City of the U.S. 
 
Please specify the criteria for approving the establishment of branches of foreign banks. 
 
Answer  
 
The discussion on an individual application for a br anch would seem outside the scope of the Trade 
Policy Review Process.  The United States maintain s a general policy of national treatment towards 
the U.S. branches, agencies, secur ities affiliates, and other operations  of foreign banks.  We welcome 
any foreign bank that meets internationally accepte d standards on capital adequacy and consolidated 
supervision.  The general criteria for the establishm ent of branches of foreign banks are set forth in 
the Foreign Bank Supervision Enhancement Act, as implemented by Regulation K, whether or not an 
interstate expansion is involved. 
 
The following are criteria reviewed by the Federal Reserve in assessing applications by foreign banks 
to establish branches in the United States.  In gene ral, a foreign bank seeking to establish a branch in 
the United States must be subject to comprehensive and consolidated supervision by its home country 
supervisor.  In certain circumstances, approval ma y be granted if the home country supervisor is 
actively working to establish arrangements for consol idated comprehensive supervision.  The foreign 
bank also must have capital that is equivalent to  the capital required of a U.S. bank in comparable 
circumstances.  The asset quality of the foreign ba nk is reviewed in making the capital assessment.  
The Federal Reserve must determine that it will have access to necessary information to determine 
and enforce compliance with applicable laws.  The Federal Reserve also reviews whether the foreign 
bank has adopted and implemented procedures to co mbat money laundering, whether there is a legal 
regime in place in the home country to address mo ney laundering, and whether the home country is 
participating in multilateral efforts to combat m oney laundering.  Other criteria include whether the 
home country supervisor shares supervisory info rmation with other supervisory authorities and 
whether the home country supervisor has consented to the establishment of the U.S. branch.  [Form 
FR K-2 outlines the required information for an application.  It is available on the web at: 
http://www.federalreserve.gov/boarddocs/re portforms/forms/ FR_K-220021010_f.pdf.]  WT/TPR/M/126/Add.3 
 Page 217 
 
  
The federal or state licensing authority may have additional requirements, although such requirements 
generally are similar to those mentioned above.  All of these standards are consistent with international norms.  
Question:  (Chinese Taipei #1, page 5) 
 
In addition to corporate income tax, foreign bank br anches in the U.S. are required to pay a 30 percent 
"Branch Profit Tax" if the earnings of the foreign bank are not reinvested in the U.S.  Furthermore, the 
rates of the Branch Profit Tax vary, according to wh ether or not the home country of the foreign bank 
has signed a tax treaty with the U.S.  My delegation is of the view that this measure does not conform 
to the principle of non-discrimination and has pl aced an excessive burden on Chinese Taipei banks 
operating in the U.S.  We would therefore like to see the U.S. review this measure in due course. 
 
Answer  
 
The United States believes that "branch profit taxes" are fully consistent with our GATS obligations.  
We note Chinese Taipei's statement of interest. 
 
Question:  (Chinese Taipei #2, page 5)  
 
(Secretariat Report:  p. 149, para. 205).  As indica ted, a foreign bank is required to establish an 
insured banking subsidiary in order to accept or maintain retail deposits of less than US$100,000.  
These restrictions, effective since 1991, have placed foreign banks operating in the form of branches 
in a disadvantageous position, which ser iously hampers their funding capability. 
 
We recommend that the U.S. affords the same treat ment to foreign bank subsidiaries as it does to 
branches whose parent banking institutions are properly insured in their domestic market. 
 
Answer 
 
We would highlight that foreign bank branches engaged in insured deposit-taking activities as of 
19 December, 1991, were exempted from this requi rement.  We would note that even before 1991, 
when they were permitted to accept retail deposits in  branches, foreign banks were primarily involved 
in wholesale banking.  The preference of foreign banks for branches may also be because, in some 
cases where states allow branches, and for federa l branches, foreign branches are generally not 
required to commit organizational capital.  The treatment of capital varies by state, however. 
Question:  (EU #31)  
 
Could the U.S. specify which are the 18 States allowing inter-state branching by de novo 
establishment, and whether more States contemplate to  allow such a possibility?  (Reference is made 
to paragraph 201 of the Secretariat report). 
 
Answer  
 
Connecticut, Hawaii, Indiana, Maine, Maryland, Massachusetts, Michigan, Nevada, North Carolina, 
North Dakota, Ohio, Oklahoma, Pennsylvania, Rh ode Island, Texas, Utah, Virginia, and West 
Virginia, (plus Puerto Rico and the District of Columbia). 
 WT/TPR/M/126/Add.3 
Page 218  
 We do not have further information as to what other states might move to permit this type of interstate 
branching. 
 
Question:  (EU #32)  
 
Under U.S. law foreign banks branches may not be  required to commit organizational capital omits 
that they may be required to pledge a certain amount of their assets, computed as a percentage of their 
third-party liabilities.  Could the U.S. explain the current state-of-play of the asset pledge 
requirements, and possible improvements contempl ated, especially in the State of New York?  
(Reference is made to paragraph 205 of the Secretariats report). 
 
Answer  
 
Federal and state law require that as a condition of opening a branch or agency, a foreign bank must 
maintain a pledge of high grade liquid assets in the st ate where that branch or agency is located.  This 
condition is referred to as the "asset pledge" require ment or "capital equivalency deposit".  The asset 
pledge is intended to serve as a capital-like cushi on for U.S. branches and agencies of foreign banks, 
as well as to protect creditors and cover liquidation co sts in the event of a failure of the branch or 
agency or foreign banking organization.  The Unite d States considers federal and state asset pledge 
requirements to be prudential and therefore does not list them in its reservations to market access or 
national treatment. 
 
Many states have recently modified their asset pledge requirements to reduce the economic costs 
imposed on foreign banks.  For example, in Illi nois, state legislation was amended to grant 
discretionary authority to the state banking commi ssioner to apply asset-pledge requirements based on 
a risk-focused assessment of safet y and soundness for individual banks.  In New York, legislation 
recently reduced the pledge requirement from 5 percen t of third party liabilities to 1 percent of third 
party liabilities; capped the pledge amount to $ 400 million for well rated institutions; expanded the 
type of assets that may be pledged, including more  flexibility for well rated institutions; and allowed 
the pledge to be calculated on a monthly basis. 
 
In 2002, the Office of the Comptroller of the Cu rrency (OCC) implemented more flexible capital 
equivalency requirements for federal branches of fo reign banks to reduce costs for institutions that 
present low levels of risk.  Under U.S. law, fede ral branches of foreign banks maintain a Capital 
Equivalency Deposit (CED) equal to 5 percent of thei r liabilities in trust accounts at other banks.  The 
OCC reduced administrative burdens for low ri sk branches, as they may now withdraw excess 
deposits without seeking prior OCC approval.  Addi tionally, the liability base over which the CEDs 
are calculated has been redefine d to exclude liabilities booked on a federal branch's International 
Banking Facility, or IBF.  An IBF may only accept deposits and extend credits to foreign companies 
and individuals and to other IBFs. 
The OCC has recommended legislation that would gi ve the Comptroller the same flexibility that 
states now have to adjust the 5 per cent CED re quirement to take account of the particular 
circumstances of an individual institution. 
 
Question:  (Hong Kong #6) 
 
We note with appreciation that in terstate expansion by a foreign bank through the establishment of 
branches by merger with a bank located outside the " home state" of a foreign bank is granted national 
treatment.  Citizenship requirements are however s till maintained in U.S. GATS initial offer and so 
are the residency requirements (without specification of exact requirements and state coverage) for 
directors, incorporators, organizers, or ex ecutive committee members of depository financial  WT/TPR/M/126/Add.3 
 Page 219 
 
 institutions.  We would appreciate it if the U.S. coul d share with us some more details of the exact 
requirements and the states included. 
 
Answer 
 
Citizenship, and in some cases residency, is requi red for incorporators or organizers of depository 
financial institutions organized under state law, as li sted in the U.S. GATS sch edule.  In the case of 
boards of directors, the U.S. GATS schedule contains a list of state specific limitations on citizenship 
requirements of which some would be eased under our  latest offer.  For example, Louisiana has 
removed citizenship requirements for board of direct ors, allowing residents to serve on boards as well 
and Georgia has reduced their requirement from all to 3/4.  If Hong Kong has a more specific area of 
interest we would be pleased to learn of it. 
 
Question:  (Hong Kong #7)  
 
We note that the U.S. has inscribed registration re quirements for foreign banks in the provision of 
securities advisory and investment management services in its GATS schedule.  Apart from the 
registration requirement, we understa nd that some other discriminatory requirements also exist in U.S. 
laws, such as citizenship/residency requirements fo r the majority of the directors and officers, 
maintenance of assets in the U.S. with a U.S. bank,  having a U.S. entity as a principal underwriter and 
have a U.S. auditor for the company.  We woul d appreciate it if the U.S. could advise us on the 
compatibility of these restrictions with the U.S. GATS commitments. 
 
Answer  
 
We are not aware of any practices, including the ones mentioned and listed above by Hong Kong, 
which are inconsistent with our GATS commitments. 
 
Question:  (Japan #88)  
 
Discriminatory measures against foreign banks fo r raising funds within the United States (p. 
147, para. 197)   In order for banks to enter a securities business through an affiliates, it is necessary 
for them to obtain the status of Financial Ho lding Companies (FHCs), based on the Gramm-Leach-
Bliley-Act enacted in November 1999.  The Act provid es that foreign banks are required to meet well-
capitalized and well-managed standards, comparable to those applied to U.S. banks.  Japan requests 
the United States to clarify the criteria of  FRB's judgment regarding these standards. 
 
Answer  
 
Banks may enter the securities business without obt aining FHC status.  So-called "section 20" 
companies may conduct general securities activities, s ubject to certain limitations.  In order to 
establish "section 20" companies, the foreign bank must meet capital and management standards as 
applied on a national treatment basis. 
 
With respect to the well-capitalized and well-mana ged standards for becoming an FHC, the Gramm-
Leach-Bliley ("GLB") Act requires capital and manage ment standards for a foreign bank that are 
comparable to the standards applied to a U.S. ba nk owned by a FHC, giving due regard to the 
principle of national treatment and equality of competitive opportunity.  In assessing a foreign bank's 
capital, the Federal Reserve Board (Board) uses a capital screening test referencing tier 1 and total 
capital levels calculated under the Basel Capital A ccord.  The Board also believes, however, that 
review of a non-U.S. bank's leverage ratio in partic ular cases may serve as an indicator that the bank's 
capital should receive further scrutiny in determini ng whether the bank has capital comparable to a WT/TPR/M/126/Add.3 
Page 220  
 well-capitalized U.S. bank.  Consequently, a foreign bank's leverage ratio will be considered by the 
Board as one of the factors that can be taken in to account for purposes of the comparability review.  
Under this approach, the Board may consider whethe r the level of a foreign bank's leverage ratio is 
such that it indicates that additional analysis s hould be undertaken in assessing comparability.  Such 
assessments would in all cases be based on all relevant factors, and not merely on the leverage ratio.  
The foreign bank's qualification for FHC status w ould not be dependent up on the leverage ratio.  
Instead, qualification would depend on the overall capita l strength of the foreign bank.  Moreover, the 
Board expects that staff would consult with the foreign bank's home country supervisor on issues 
relating to capital. 
 
The Board' requirements are applied to banks on a c onsolidated basis.  This is the internationally 
accepted method of assessing bank capital.  U.S. banks  have non-depository subsidiaries and those 
subsidiaries are consolidated into the U.S. bank' s balance sheet for purposes of assessing capital.  
Moreover, as noted above, a foreign bank would have the opportunity to submit a pre-clearance 
request to the Board for a determination on capital stat us, and would be able to make arguments that it 
believes demonstrate why its capital should be  considered acceptable under the tests. 
 
The Board takes into account a foreign bank's reliance on government support to meet capital 
requirements in determining whether the foreign bank is well capitalized.  In order to assure equality 
of competitive opportunity, the Board must be able to  consider the impact of any assistance a foreign 
banking organization receives from its home country fo r purposes of meeting capital requirements.  A 
bank operating with government assistance is not competing on market terms. 
 
With respect to management standards, the Bo ard assesses the foreign bank's U.S. operations and 
requires the same rating that U.S. banks must ach ieve.  The Board also consults with the home 
country supervisor to ensure that the supervisor believes the foreign bank has the capacity to engage 
in the expanded activities of an FHC. 
 
Question:  (Japan #89) 
 
Discriminatory measures against foreign banks fo r raising funds within the United States (p. 
149, para. 203)   When a foreign bank raises funds within th e United States, it is necessary to deposit 
a certain amount of collateral with the authoriti es as a guarantee.  Under the New York State Banking 
Law, for instance, the authorities demand bonds of high liquidity as eligible collateral, mainly CDs 
and CPs. Complying with the requirement causes a s ubstantial opportunity cost, since a much higher 
return could be expected if invested in other assets.   There are also other problems, such as the heavy 
burden related to administrative procedures and price fluctuation risk of the collateral bonds. 
Furthermore, according to a research conducted by th e Institute of International Bankers (IIB), United 
States and Canada are the only countries among over 40 countries surveyed, that oblige 'fund 
collateral posting' by fore ign banks' as business guarantee.  Therefor e, Japan requests that such action 
be abolished.  Should this not be possible, the qua lifications for eligible co llateral should be expanded 
to include, for example, standard loan assets in or der to provide flexibility for foreign banks.  Japan 
notes that the OCC has been reviewing this issue.  What is the current situation surrounding this 
review?  
 
Answer 
 
Federal and state law require that as a condition of opening a branch or agency, a foreign bank must 
maintain a pledge of high grade liquid assets in the st ate where that branch or agency is located.  This 
condition is referred to as the "asset pledge" require ment or "capital equivalency deposit".  The asset 
pledge is intended to serve as a capital-like cushi on for U.S. branches and agencies of foreign banks, 
as well as to protect creditors and cover liquidation co sts in the event of a failure of the branch or  WT/TPR/M/126/Add.3 
 Page 221 
 
 agency or foreign banking organization.  The Unite d States considers federal and state asset pledge 
requirements that may exist to be prudential and th erefore does not list them in its reservations to 
market access or national treatment. 
 
Many states have recently modified their asset pledge requirements to reduce the economic costs 
imposed on foreign banks.  For example, in Illi nois, state legislation was amended to grant 
discretionary authority to the state banking commi ssioner to apply asset-pledge requirements based on 
a risk-focused assessment of safet y and soundness for individual banks.  In New York, legislation 
recently reduced the pledge requirement from 5 percen t of third party liabilities to 1 percent of third 
party liabilities; capped the pledge amount to $4 00 million for well rated inst itutions;  expanded the 
type of assets that may be pledged, including more flexibility for well rated in stitutions;  and allowed 
the pledge to be calculated on a monthly basis. 
 
In 2002, the Office of the Comptroller of the Cu rrency (OCC) implemented more flexible capital 
equivalency requirements for federal branches of fo reign banks to reduce costs for institutions that 
present low levels of risk.  Under U.S. law, fede ral branches of foreign banks maintain a Capital 
Equivalency Deposit (CED) equal to 5 percent of thei r liabilities in trust accounts at other banks.  The 
OCC reduced administrative burdens for low ri sk branches, as they may now withdraw excess 
deposits without seeking prior OCC approval.  Addi tionally, the liability base over which the CEDs 
are calculated has been redefine d to exclude liabilities booked on a federal branch's International 
Banking Facility, or IBF.  An IBF may only accept deposits and extend credits to foreign companies 
and individuals and to other IBFs. 
On January 20, 2004, revised regulations governi ng Federal branches and agencies of foreign banks 
will go into effect.  Among the changes is a provisi on permitting a foreign bank with Federal branches 
and agencies in more than one state to consolidate so me or all of its CEDs into one depository bank.  
A depository bank is considered to be located, under the revised regulations, in those states in which it 
has its main office or a branch.  The revised re gulations mark another way in which the OCC is 
seeking to reduce any regulatory burden associated with the CED requirement. 
 
Question:  (Japan #90)  
 
Investment Company Act of 1940 (p. 150, para. 209)   According to the In vestment Company Act 
of 1940, an 'investment company', which is defined as a company that holds more than 40 percent of 
its assets in the form of invest ment securities and engages primarily in securities investment, is 
subject to regulations, such as the registration and disclosure requirement under the supervision of the 
SEC.  In this context, it should be noted that there are many cases where Japanese companies, that 
have a large amount of cross-holding stocks through their business practices, are recognized as 
'investment companies' under the Act and, therefor e, are required to comply with the relevant 
regulations.  Although there are exemption clauses in the Act, Article 3(b)2 stipulates that companies 
applying for such exemption should be declared by the SEC to be primarily engaged in other 
businesses, which gives a room for discretion by the SEC.  Japan, therefore, requests the United States 
to clarify and relax the criteria of the SEC deci sions under Article 3 (b) 2, by introducing objective 
criteria, such as the composition of their sales or profit dependency ratio based on financial 
statements.  What are the U.S. views on this point? 
 
Answer 
 
There are a number of exclusions from the defin ition of "investment company" available under the 
Investment Company Act of 1940.  Specific exclus ions from the definition of investment company are 
given in sections 3(b)(1), 3(b)(3) and 3(c).  In a ddition, if a company does not qualify for one of the 
exclusions, section 3(b)(2) provides an exemptiv e application procedure for issuers to seek a 
determination of their non-investment company st atus from the SEC on the basis that they are WT/TPR/M/126/Add.3 
Page 222  
 primarily engaged (directly or through majority-o wned subsidiaries or through controlled companies 
conducting similar types of businesses) in a business other than investing, reinvesting, owning, 
holding or trading in securities.  When the SEC determines whether a company is primarily engaged 
in a non-investment company business pursuant to section 3(b)(2), it looks principally at the 
composition of the company's assets and the sources of its income, and also considers the company's 
historical development, its public representations and the activities of its officers and directors. 
 
Question:  (Japan #91) 
 
Different insurance regulatory regimes in States (pp. 153-55, paras. 220-23, 227-230)   Since 
regimes of insurance supervision and regulation differ from one State to another, insurance companies 
wishing to engage in inter-state business, need to apply for a license in each State and also to comply 
with the supervisory regul ations set down by each State's authorities.  While Japan notes the NAIC's 
efforts toward achieving uniformity among the States' regulatory regimes, it requests further 
deregulation regarding inter-state insurance businesse s.  What are the U.S. views on this point? 
 
Answer 
 
We take note of the points you raise but we do not fi nd that the existence of state level regulation in 
and of itself poses a barrier to trade.  The U.S. st ates are very welcoming towards foreign investment 
in insurance and cross-border supply of many types of insurance. 
 
Question:  (Japan #92) 
 
Discriminatory measures against foreign insurers  (p. 153, para. 220)  
 
Japan requests the elimination of discrim inatory regulations as mentioned below. 
 
(a) Requirements for foreign insurers to participate in trust funds or to s ubmit a letter of credit 
issued    by a primary insu rer in the reinsurance business. 
 
 When a foreign insurer without a branch in the United States underwrites reinsurance 
products in   the United States, it is required, e ither to have a trust account, or to submit a L/C 
from the original  underwriter.  Jap an requests the elimination of this  system, since it discriminates 
against foreign  insurers. 
(b) Compulsory trust of assets for foreign insurers 
 
 Branches of foreign insurance companies are re quired to trust a larger amount of assets than 
their  liabilities in American banks or trust companie s.  Since this system prevents foreign insurance 
 companies from making investments with flexibility, thereby missing investment 
opportunities,  Japan requests the elimination of this  system, since it discriminates against foreign 
insurers. 
 
(c) Citizenship requirement fo r foreign insurance companies 
 
 Many States' regulatory authorities impose on foreign insurance companies the requirement 
that  all or part of their board members should be  U.S. citizens.  Japan requests the elimination of 
this  system, since it discriminates ag ainst foreign insurance companies. 
 
What are the U.S. views on these points? 
  WT/TPR/M/126/Add.3 
 Page 223 
 
 Answer 
 
Please note that U.S. reinsurance regulatory require ments pertain to any company (U.S. licensed or 
not) not meeting or choosing to meet the licensing requirements of the state in which the ceding 
company is located and are maintained to ensure  sound regulation.  We do not believe that the 
citizenship requirements have been perceived as a ma jor barrier to trade as th e U.S. is home to a 
number of foreign insurance companies.  
 
Question:  (Japan #93) 
 
Disclosure requirement in the issuance of new stocks as the reorganization.   If the U.S. investors 
own 10 percent or more of an equity of a Japanese  company, the company must file a registration 
form to SEC for the reclassification of securities, mergers, consolidations and the acquisitions of 
assets, in accordance with Article 145 of the Gene ral Rules and Regulations promulgated under the 
Securities Act of 1933.  As foreign investors in creasingly own Japanese stocks, the above-mentioned 
requirement is unreasonably burdensome to Japanese companies, which are forced to disclose relevant 
information by U.S. standards. Japan requests to in crease a 10 percent threshold by about 30 percent. 
 
Answer 
 
We note Japan's concern and statement on this matter. 
 
Question:  (Japan #94)  
 
Regulations regarding foreign mutual funds sold in the U.S. (p. 151. para. 213)   While 
approximately 20 U.S. mutual funds are publicly  offered in Japan, no Japanese funds have been 
offered in the U.S.  This imbalance results, in part, from the SEC Rule 7d-1.  Whereby the 
requirements prevent Japanese mutual funds from being offered in the U.S. markets. Japan, therefore, 
requests the U.S. to relax these requirements. 
 
Answer  
 
All funds that seek to sell their shares publicly in the United States generally must register with the 
SEC as investment companies under the Investment Company Act of 1940 ("Company Act").  Section 
7(d) of the Company Act requires that any non-U.S.  fund that wishes to register as an investment 
company and publicly offer its secur ities in the United States must first obtain an order from the SEC.  
To issue such an order, the SEC must find that "b y reason of special circumstances or arrangements, it 
is both legally and practically feasible to enforce th e provisions of [the Act against the non-U.S. fund], 
and that the issuance of [the] order is otherwise c onsistent with the public interest and the protection 
of investors."  Section 7(d) represents a prudential st andard that generally ensures that U.S. investors 
receive the same essential investor protections, whethe r they acquire shares in a non-U.S. fund or in a 
U.S. fund.  The section provides non-discriminatory,  national treatment for non-U.S. funds; that is, 
any non-U.S. fund that can provide the investor protections required by the Company Act may legally 
access the U.S. market to the same  extent as any U.S. fund.  Further, non-U.S. investment advisers 
may easily register in the United States as investment  advisers and offer their services to U.S. funds or 
establish funds that are organized in the United States. 
 
Question:  (Japan #95) 
 
Free participation of U.S. investors in  foreign ETF markets (p. 151, para. 213)   It is unclear how 
the ETFs publicly available in foreign markets are re gulated under U.S. law. ETFs are treated in Japan 
similarly to stocks, but because the exemption clauses applicable to stocks in the U.S. do not apply to WT/TPR/M/126/Add.3 
Page 224  
 ETFs, U.S. investors face difficulty in investing in  Japanese ETFs.  Japan, therefore, requests the U.S. 
to exempt ETFs from the process of the filing of registration forms and prospectuses. 
 
Answer  
 
The regulation of foreign ETFs under the U.S. fede ral securities laws will depend on the particular 
structure and characteristics of the ETF.  In genera l, however, the SEC would treat the offer and sale 
of non-U.S. ETF securities to U.S. investors in the same manner that it treats the offer and sale of any 
non-U.S. fund securities to U.S. investors, which is on a national treatment basis.  As described above, 
all non-U.S. funds that seek to sell their shares pub licly in the United States must register with the 
SEC as investment companies under the Company Act.   In addition, because ETFs operate differently 
from traditional investment companies, U.S. ETFs have had to seek exemptive relief from certain 
provisions of the Company Act.  Non-U.S. ETFs like ly would also have to seek exemptive relief to 
register under the Company Act. 
 
Question:  (Japan #96)  
 
Securities services (p. 152, para. 218)   Corporate governance takes place in a variety of forms based 
on regulatory and other differences.  Indeed, it seems  that, there is no one-size-fit-all standard for 
corporate governance, as proclaimed in the OECD  Principle of Corporate Governance, which was 
agreed by the OECD members including the U.S.  While recognizing the necessity of avoiding 
conflicts with foreign legal systems, the Sarban es-Oxley Act nonetheless requires that the foreign 
companies listed in the U.S. markets comply with the corporate governance standards.  For example, 
while the Act allows the exemption of a board of corporate statutory auditor system, there exists no 
similar exemption of the committee system.  Th e Act also puts a burden on foreign companies 
through such requirements as having to report and eval uate internal control.  The U.S. should refrain 
from applying its corporate governance to foreign co mpanies.  It risks inhibiting access unduly to its 
securities markets by foreign companies.  It is not enough to avoid conflicts of  various legal systems. 
Japan would like to seek the U.S. views on this matter. 
 
Answer  
 
While the Sarbanes-Oxley Act generally makes no distinction between U.S. issuers and foreign 
private issuers listed in the United States, the SEC is  cognizant of the fact that U.S. requirements and 
foreign requirements could come into conflict.  During implementation of the Act, the Commission 
and its staff sought to learn from foreign regul ators and market participants about how the 
requirements of the Act conflict with local law or local stock exchange requirements, and how foreign 
laws and regulations address in a lternative ways the same issues as the Act.  The SEC engaged the 
foreign community through public roundtables, bilate ral and multilateral meetings, and an analysis of 
foreign comment letters. 
 
Where appropriate, the SEC has made accommodations for foreign market participants, including in 
the two areas raised by the Japanese:  audit committe e requirements and intern al controls reporting. 
 
Regarding audit committee requirements, foreign priv ate issuers will have additional time to comply 
with new listing requirements (by 31  July 2005, rather than by 31 October 2004).  In addition, the 
accommodations will, among other things, allow for alte rnative structures such as statutory auditors or 
boards of auditors to perform auditor oversight f unctions where such structures are provided for under 
local law, such as in Japan.  These accommodations  take into account foreign corporate governance 
schemes while preserving the intended result of the Act to ensure that those with oversight 
responsibility for a company's outside aud itors be independent of management. 
  WT/TPR/M/126/Add.3 
 Page 225 
 
 Regarding internal controls reporting, the SEC 's rules include the following accommodations for 
foreign private issuers: 
 
Foreign private issuers are not required to begin re porting on internal controls over financial reporting 
on an annual basis until the first fiscal year ending on or after April 15, 2005.  Also, disclosure of 
changes in internal controls over financial reporti ng will be made on an annual basis rather than a 
quarterly basis. 
 
Foreign private issuers must use a suitable framewo rk for evaluating internal controls, but are not 
required to use a U.S. framework. 
 
Question:  (Korea Para. 205) 
Reference:  pp. 148-149, paras. 205, 207 
 
Paragraph 205 indicates that foreign branches and agencies are involved primarily in wholesale 
banking and seldom in retail banking a nd this is partly because a foreign bank is required to establish 
an insured banking subsidiary in order to accept or maintain domestic retail deposits of less than 
US$100,000. 
 
With regard to paragraph 205, please give us speci fic examples where a branch or an agency can 
accept domestic retail deposits of less than US$1 00,000.  And please provide us with detailed 
information on "insured deposits." 
 
Answer 
 
Foreign bank branches engaged in insured depos it-taking activities as of 19 December 1991 can 
accept domestic retail deposits of less than US$100,000. 
 
Please consult www.FDIC.gov for detailed in formation about "insured deposits". 
 
According to paragraph 207, the United States ma intains commercial presence limitations on market 
access and national treatment for foreign banks at the st ate level, with respect to the type of business 
establishment coverage of business (i.e. restriction on retail deposits) and requirements of citizenship 
or residence. 
 
Question:  (Korea Para. 210, Part #1)  
 
Does the U.S. government have any plan to a ddress these restrictions at the Federal level? 
 
Answer 
 
Under the U.S. federal system, states retain si gnificant rights to regulate within their borders.  
Moreover, in light of the dual banking system, forei gn banks have the alternative to establish offices 
at the federal level.  Accordingly, the U.S. government has no current plans to address the cited 
restrictions at the state level. 
 
Question:  (Korea Para. 210, Part #2)  
 
According to paragraph 210, "foreign investment a dvisers registered with the SEC are not required to 
have a U.S. place of business or set up a U.S. subsidiary or branch." 
 WT/TPR/M/126/Add.3 
Page 226  
 Please clarify whether or not this means that cro ss-border supply (mode 1) and consumption abroad 
are permitted by the foreign investment advisers registered with the SEC? 
 
If so, since the United States has already adopted the Understanding on Commitments in Financial 
Services whose paragraph B.3 (c) includes investment  advisory services, is it correct to understand 
that the United States has made such a commitment? 
 
With regard to this issue, could the U.S. governme nt explain the meaning of the following statement 
in the note on financial services as included in the in itial U.S. offer:  "the United States will consider, 
pending on the other Members' willingness to do lik ewise, adopting additional mode 1 commitments 
for certain other activities where the consumer is deemed sufficiently sophisticated to manage any 
attendant risk, such as allowing mutual funds located  in the United States to obtain certain investment 
advice and portfolio management services from fi nancial services suppliers located outside its 
territory." 
 
Answer  
 
As is the case for many members, actual practice in  the U.S. is occasionally, more liberal than our 
commitments, including in the area mentioned by th e Korean delegation.  The U.S. stands ready to 
negotiate reciprocal removal of such "binding gaps ."  With respect to Korea’s question on the U.S. 
initial GATS offer, the United States would be pleased to  respond to any questions  in the in the course 
of the bilateral request-offer process.  
 
Question:  (Korea Para. 250)  
 
What is the difference between "branch" and "agenc y" in terms of the conditions of establishment, 
boundary of business and prudential regulation? 
 
Answer  
 
The requirements for establishment of branches and agencies are generally the same.  The prudential 
regulation of such offices generally is the same as well.  However, agencies are more limited than 
branches in that deposits may only be accepted fro m persons and entities that are not citizens or 
residents of the United States. 
 
Question:  (Norway #1) 
 
Foreign reinsurers that do not hold a U.S. license mu st place in the trust fund 100 percent of the gross 
outstanding gross liabilities as collateral, as opposed to U.S. licensed companies.  Please explain the 
background for this requireme nt for foreign reinsurers. 
  WT/TPR/M/126/Add.3 
 Page 227 
 
 Answer  
 
Please note that U.S. reinsurance regulatory require ments pertain to any company (U.S. licensed or 
not) not meeting or choosing to meet the licensing requirements of the state in which the ceding 
company is located and are maintain ed to ensure sound regulation. 
 
Chapter 4 - BY SECTOR  (9) SELECTED PROFESSIONAL SERVICES  
 
Question:  (India #31) 
 There is a requirement of paying compensation to US$1 million as severance compensation to 
longshoremen in the event of termination of a liner service due to lack of cargo or any other reason.  This appears to be excessively stringent.  We would like to have a clarification from the U.S. 
authorities on the reasoning behind such a stringent requirement. 
 
Answer 
 
We are unable to identify the relevant law or measur e that is the subject of India's question.  The 
situation appears to be related to a private c ontract with a Stevedore services company where a 
penalty was assessed under the terms of that contract .  We would need to know the specifics of this 
case, including the basis in U.S. law, to addr ess this question in a more detailed manner. 
 The Department of Labor authority over longshore work is limited to worker safety issues.  The 
situation of concern to India may be related to a collective bargaining agreement between a Stevedore 
services company and the longshore union.  The company would make this stipulation in its 
Stevedore service contract with the shipping company. 
 
Question:  (India #33) 
 
It has been reported that the U.S. government  has decided to lower the cap on H-1B Visa from 
195,000 to 65,000 per annum.  In the context of the re cent growth in the U.S. economy, there will be a 
rising demand for IT professionals and computer hard ware engineers.  We are interested in knowing 
the details of the cap on the issuance of H- 1B visas and any plans to raise the cap. 
 
Answer  
 The H-1B cap is congressionally mandated.  Sec tion 214(g) of the Immigration and Nationality Act 
(Act) provides that the total number of aliens who may be issued H-1B visas or otherwise granted H-
1B status during FY2004 may not exceed 65,000.  The cap for FY2004 was returned to 65,000 after 
statutory authority for a temporary increase to 195,000 for FY2001, FY2002,  and FY2003 expired. 
 The cap applies only to H-1B petitions filed fo r beneficiaries who will be engaged in "new 
employment," to commence on or before Septem ber 30, 2004.  A petition for new employment 
includes a petition where the alien beneficiary is out side the U.S. when the H-1B petition is approved 
or where the alien is already in the U.S. in another status and is seeking H-1B status, either through a 
change of non-immigrant status from within the U.S. or a notice to the Consulate of the eligibility for 
the new status. Petitions for beneficiaries exempt  from the H-1B numerical limitations, amended 
petitions, and petitions for the extension of stay ar e not affected because these petitions do not count 
against the cap.  Likewise, petitions for aliens in th e U.S. who already hold H-1B status, i.e. petitions 
filed on behalf of an H-1B alien by  a new or additional employer, are also not affected.  Once the cap WT/TPR/M/126/Add.3 
Page 228  
 is reached, Citizenship and Immigration Servi ces will return any petitions requesting employment 
prior to October 1, 2004.  
Question:  (China #97) 
 
Despite its relatively small share in international trad e in services, Mode 4 is considered to be of great 
importance for China and many other developing me mbers.  The United States is one of the major 
markets for mode 4 services.  However, lack of regula tory transparency, in particular with respect to 
obtaining, extending, renewing and denying visas and work permits, has created significant obstacles 
to the development of mode 4.  
Will the United States kindly indicate whether and how it plans to improve transparency in this area to 
facilitate services trade under mode 4?  
Answer 
 As a general matter, the United States believes th at it provides full regulatory transparency with 
respect to the operation of our mode 4 commitments.   It you have specific cases where you believe 
that our measures and their application, as rela ted to admissions under Mode 4 of the GATS raise 
questions, we would be happy to clarify these matters.  
Question:  (Japan #97) 
(pp. 156-62, paras. 233-262) 
 
As the Secretariat report points out in the foll owing quotation, the different regulations on 
professional services in each state have proven to be obstacles to trade in professional services.  
"The regulation of professional services is mainly under the responsibility of  the individual States. 
Foreign market access in some States is affected by local presence, domicile, nationality, or legal form of entry requirements.  The lack of a unifo rm regulatory regime at the national level also 
complicates market access."  (paragraph 33 of page xii, Secretariat report.)  According to GATS Article VI, WTO Members are obliged to ensure that measures relating to 
qualification requirements and procedures, as well as  licensing requirements and procedures, do not 
constitute unnecessary barriers to trade in services.  In the case of measures taken by each State, the 
federal government shall take such reasonable meas ures as may be available to it to ensure their 
observance by regional and local governments. (GATS Article I. 3(a))  
Because the following concrete pr oblems are identified in legal, accounting, architectural and 
engineering services, Japan seeks clarification as to what measures are taken by the federal government in order to ensure the obligations by the state governments.  
Answer 
 The Federal government continues to work with all states to encourage the elimination of any 
remaining measures that are inconsistent with GATS disciplines.  This process includes regular 
interaction with designated state points of contact , participation in statutory intergovernmental 
committees, as well as direct corresponden ce with state regulatory authorities. 
However, the fact that less than half of WT O members have scheduled any commitments on 
accounting, architectural, engineering, and legal services presents a major difficulty in persuading 
state authorities to eliminate those few remaining measures identified by Japan.  In this as well as 
other areas, the federal government would be able to  make a much stronger case for the elimination of  WT/TPR/M/126/Add.3 
 Page 229 
 
 such measures if other WTO members were more forthcoming in making meaningful offers on 
professional services in the current negotiations.  
Question:  (Japan #98)  
 
Accounting services
 (p. 158, para. 243) 
 
It is identified that U.S. citizenship is require d for CPA (Certified Public Accountant) licensing only 
in North Carolina.  This requirement should be elim inated in common with all other States, because it 
constitutes a discriminatory measu re to the foreign citizens. 
 Answer  
 
Please refer to the response to Japan's Question #97.  
Question:  (Japan #99)  
 
Legal Services
 (pp. 159-60, paras. 249-53)  
 
Japan seeks information as to what measures are taken by the federal government in order to 
encourage all States to accord market access and national treatment for foreign legal consultancy 
services.  In addition to the 16 States which have already made commitments under the GATS for 
accepting FLCs (foreign legal consultants), 8 other Stat es, according to our information, have also 
introduced the FLC system.  Are there any other further initiatives to liberalize foreign legal 
consultancy in other States?  
Answer  
 
The federal government continues to work closely with the American Bar Association to encourage 
all states to adopt appropriate regulatory measures for foreign legal consulta ncy services and provide 
the necessary framework for scheduling market ac cess and national treatment commitments.  Our 
efforts have been directed at informing the rele vant regulatory authorities of the value of such 
commitments in supporting a liberal trading regime.  These efforts have included direct 
correspondence to all state supreme court justices,  the development and distribution of briefing 
materials, and delivering presentations at regulatory conferences. 
 
Question:  (Japan #100 & 101)  
 Japan also seeks clarification as to whether the e xperience requirements for FLCs have been abolished 
in the District of Columbia.  Japan, among others , reiterates its request that FLC activities should be 
allowed in all States and Districts.  
Answer  
 Yes, the experience requirement was eliminated as  of December 2001.  We note Japan's concern and 
statement on this matter.    
 
  WT/TPR/M/126/Add.3 
Page 230  
 Question:  (Japan #102)  
 Architectural services
 (p. 161, para. 255)  
 
It has been identified that there is a commerc ial presence limitation for architectural services in 
Michigan, whereby two-thirds of the officers, partners  and/or directors of an architectural firm must 
be licensed in the State as architects, professional engineers and/or land surveyors.  This limitation 
should be removed, because it is discriminatory to the foreign service suppliers.  
Answer  
 The federal government continues to work with all states to encourage the elimination of any 
remaining measures that are inconsistent with GATS disciplines.  This process includes regular 
interaction with designated state points of contact , participation in statutory intergovernmental 
committees, as well as direct corresponden ce with state regulatory authorities. 
 Question:  (Japan #103)  
 
Engineering and integrated engineering services
 (p. 162, para. 259)  
 
It has been identified that the United States makes reservations as an exception to the GATS 
commitments on the citizenship requirements for li censing of professional engineers in the District of 
Columbia and on in-state residency requirements in 12 States.  These requirements should be 
eliminated, because they constitute discrimin atory measures for foreign service suppliers. 
 
Answer  
 Please refer to the response to Japan's Question #102. 
 
Question:  (Japan #105) 
 
Although they do not necessarily connect directly to reinforcing counter-terrorism measures, the 
following measures have the possibility of negativel y affecting the movement of persons, as well as 
certain economic activities, such as trade and invest ment.  (i) Reduction of the annual quota of H-1B 
visas.  Since October 1st, 2003, the annual quota fo r H-1B visas, which is issued to those who will 
engage for a short period of time in jobs requi ring expertise, was reduced from 195 thousand to 65 
thousand (the former number was effective only for years 2001 to 2003).  Japan requests the U.S. to expand the quota again to avoid the movement of persons being hindered.  
 Answer  
The ceiling for admission of Specialty Occupation A liens and Fashion Models of Distinguished Merit 
and Ability (H-1B) was permitted to return from it s temporary level of 195,000 admissions to its 
historical level of 65,000. 
 
Members of Congress and Administration officials are consulting with all interested parties to determine the appropriate level fo r admissions under the H-1B category for the future.  No decision 
has been made at this time. 
  WT/TPR/M/126/Add.3 
 Page 231 
 
 Question:  (Japan #106) 
 
(ii) Social security numbers (SSN's):  A SSN is virtua lly the sole means of identification in the U.S. (it 
is required in daily life, such as for opening a bank account, signing a lease contract for housing, etc.).  
Therefore, Japan requests the U.S. Social Security  Administration to issue SSN for all legal foreign 
residents, or to instruct all relevant authorities not to oblige foreign nationals to present a SSN for 
purposes that do not concern social security or retirement.  
 
In March 2003, the U.S. Social Security Administra tion announced a change in regulations to restrict 
the issuing requirements of a SSN for foreign r esidents with non-employment visas and to stop the 
issuing of a SSN when only applied for the purpose of identification for obtaining a drivers license.  
Due to this rule, Japanese and other foreign reside nts have been facing unreasonable restrictions when 
acquiring a driver's license in States like Illinois,  which requires applicants of a driver's license to 
present a SSN with no alternative meas ure for identification being accepted. 
 
Answer 
 Only non-nationals who are not authorized to eith er take up employment or otherwise receive income 
in the United States would be impacted by the March 2003 decision of the U.S. Social Security 
Administration.  This is a question of immigration policy and not one of trade. 
 
Question:  (Argentina #9) 
 Concerning paragraph 234, we share the concern of the Secretariat regarding the lack of a uniform 
regulatory procedure at the national level for the performance of specific professional services 
activities.  The U.S. authorities indicate that they ar e developing certain "model rules" to be applied 
by U.S. professional organizations to promote greater  uniformity or standardization of regulations at 
the state level.  In this regard, Argentina woul d like to know what professions would be included, 
what the features of these "model rules" would be, and what the primary characteristics of the "uniformity" and "standardization" process would be.  Finally, please indicate whether these initiatives have been implemented on the regional level.  
Answer 
 
In the United States, private professional organizations  operate at both the state and national level.  
Traditionally, professional standards are develope d by state-level professional organizations and 
subsequently adopted by the relevant state lic ensing bodies.  Because both the standards and the 
measures necessary to implement those standards are de termined at the state level, policies often vary 
from one state to another.  This situation pr esents an inconvenience to all professional service 
providers who wish to operate in more than  one jurisdiction, regardless of nationality. 
 To promote greater harmonization of standards across jurisdictions, nationwide professional organizations often develop "mode l rules" or "model laws."  Th e national organizations then 
encourage state professional organizations and licensi ng bodies to use these as a basis for developing 
their own standards and implementing legislation.  Si nce this effort is driven by the private sector, 
there is no centralized list of which of the appr oximately 180 licensed professions have developed 
model rules, nor is there a list of which jurisd ictions have adopted the model rules in their 
implementing legislation.  However, model rules ar e widely used by those professions that are most 
frequently the subject of trade negotiations, includin g accounting, architecture, engineering, and legal 
services. 
 
 WT/TPR/M/126/Add.3 
Page 232  
 Question:  (Brazil, Services #2) 
 
How can information about restrictions in the states  be obtained?  Is there any central agency or 
department responsible for ma intaining such information? 
 
Answer 
 Information on state licensing policies may be obtai ned from a variety of sources, including national 
professional associations, national organizations of state licensing bodies, state professional associations, and of course the responsible state lic ensing body itself.  The U.S. federal government 
does not maintain a central source for such informati on.  However, the Office of the United States 
Trade Representative can facilitate the process of  obtaining information concerning specific 
professions and states upon request. 
 
Question:  (Brazil Services #4)  
Which criteria will the United States use to start considering the implementation of the GATS 
Disciplines in Regulation of the Accountancy Sector?  
Answer 
 
We believe that questions concerning the U.S. pos ition in ongoing negotiations are more appropriately 
addressed within the context of those negotiations. 
 
Question:  (Brazil, Services #5) 
 
Regarding NCARB's policy for determining the equi valency of degrees:  Are there other kinds of 
work restrictions for foreign professionals? 
 
Answer 
 
The policy referred to by Brazil is not a restric tion on foreign professionals.  This policy enables 
foreign professionals who have received their e ducation from unaccredited institutions to become 
eligible for NCARB certification.  Without such a policy, foreign professionals would need to repeat 
their education at an accredited institution.  
Question:  (Brazil, Services #6) 
 
What criteria were applied to grant recognition to Canadian architects in the U.S. through the Inter-
Recognition Agreement between NCARB and the Co mmittee of Canadian Architectural Councils?  
Can these criteria be applied at the multilateral level or just under NAFTA? 
 
Answer 
 
The basic requirements for an architect to receive certification from the National Council of 
Architectural Boards (NCARB) include the possess ion of an academic degree from an accredited 
institution, internship experience, and the successful completion of an  examination.  (Full details on 
NCARB certification may be found at:  http://www.ncarb.org/certification/index.html).  
The Inter-Recognition Agreement between NCARB and the Committee of Canadian Architectural 
Councils facilitates this process principally by  (1) recognizing that the Canadian academic 
accreditation is substantially equivalent to that of  the United States, (2) recognizing that the 3-year  WT/TPR/M/126/Add.3 
 Page 233 
 
 training requirement of the Canadian Experience Record Book or the Canadian Intern Architect 
Program is substantially equivalent to the NCARB training requirement, and (3) recognizing that the 
Canadian Architectural Practice Examination provid es substantial equivalence to part of the U.S. 
examination, such that Canadian architects would not need to sit for all elements of the U.S. test in 
order to satisfy the examination requirement.  
Applying these criteria at the multilateral level would appear to be quite difficult because academic 
accreditation standards, training requirements, and the content of professional examinations vary 
widely across countries.  Reaching agreement on s ubstantial equivalence for all of these elements 
presents a major challenge, as demonstrated by the f act that negotiations with Mexico over the past 
decade have thus far failed to result in an agreement acceptable to all parties. 
 Question:  (Brazil, Services #7)  
Regarding the NCEES model law:  Is there any kind of restrictions or add itional requirements, under 
the NCEES, directed at foreign professionals? 
 
Answer 
 
The NCEES model law and model rules can be found at the following Internet addresses: 
http://www.ncees.org/introduction/ab out_ncees/ncees_model_law.pdf. 
 
The model law and rules do not contain any additiona l substantive requirements directed at foreign 
professionals.  The only provisions directed at fore ign professionals are policies that address how a 
foreign-educated and/or licensed professional may de monstrate that he or she has obtained a level of 
competence equivalent to that of U.S. professionals.  
 
Question:  (Brazil #39)  
Could the U.S. indicate whether any measures are bei ng taken in order to effectively improve market 
access conditions for professional services through better transparency, harmonization of state 
regulations, easing of circulation of  suppliers among different states?  Could the U.S. inform whether 
it considers that positive discrimination measures are conveniently listed in its schedules?  Could the 
U.S. state its vision on whether visa requirements can  in practice impair any measures to facilitate 
access to professional services markets? 
 
Answer  
The requirements for state-level licensing of professi onals are readily available to the public through a 
variety of channels.  For example, through the website of the National Council of Architectural 
Registration Boards, one can find detailed inform ation on the registration requirements for all 
jurisdiction of the United States (see http://www .ncarb.org/stateboards/index.html).  Thus 
transparency is generally not an issue.  
With respect to the harmonization of state regula tions, the most appropriate means of promoting 
harmonization continues to be thro ugh the ongoing efforts of the private sector.  U.S. professionals 
have a strong commercial interest in improving thei r ability to provide services throughout the United 
States.  To this end, many U.S. professional orga nizations promote greater harmonization of standards 
across jurisdictions by developing "model rules" or  "model laws" that state licensing bodies may use 
as a basis for developing their own standards and im plementing legislation.  Model rules are widely 
used by those professions that are most frequen tly the subject of trade negotiations, including 
accounting, architecture, engineering, and legal services. WT/TPR/M/126/Add.3 
Page 234  
  
We are unsure what positive discrimination measures to which Brazil refers in the second question.  
The United States considers that all measures incons istent with GATS Articles II and XVII have been 
appropriately described in our Schedule of Specific Commitments and List of Article II (MFN) Exemptions.  
In the U.S. view, visa requirements are separate and distinct from market access limitations.  The 
GATS Annex on Movement of Natural Persons  Supplying Services Under the Agreement 
appropriately captures this distinction by stating th at the Agreement shall not prevent a Member from 
regulating entry into its territory, including those measures necessary to protect the integrity of its 
borders.  Question:  (Columbia, Professional Services #1)  
 
Paragraph 234 of the Secretariat's Report gives a brief description of United States regulations on 
professional services, stating that the power to regul ate professions is reserved for the states.  This 
paragraph acknowledges the absence of a uniform re gulatory regime at the national level and the 
differentiation among states in terms of the conditions  for market access, whic h makes it difficult for 
professional service providers to enter the American market.  Article VI:6 of the GATS provides that "In sectors where specific commitments regarding 
professional services are undertaken, each Member shall provide for adequate procedures to verify the 
competence of professionals of any other Member." 
 With that in mind, Colombia would like to know what procedures the United States has adopted for 
verifying the competence of foreign professionals  in those professional services for which specific 
commitments have been undertaken in order to comp ly with the requirements of the above-mentioned 
article. 
 
Answer  
As with U.S. professionals, verification of the co mpetence of foreign professionals is performed by 
professional licensing bodies on the basis of tran sparent and objective criteria.  Information 
concerning the procedures maintained by each prof essional licensing body is readily available by 
contacting the relevant organization or by visiting their Internet website.  For contact information 
concerning relevant U.S. organizations that have participated in mutual recognition agreements, see 
the U.S. communication to the Working Part y on Domestic Regulation on March 10, 2003 
(S/WPDR/W/23). 
 
Question:  (Columbia, Professional Services #2) 
 
How does one reconcile USTR's authority for establishing the frameworks under which Mutual 
Recognition Arrangements (MRAs) are negotiated with the states' discretionary authority to regulate 
professional services?  (Paragraphs 235 and 236) 
 
Answer 
 
Since the authority for determining qualification and licensing requirements for professional services 
rests with state governments, the federal governme nt does not have the technical competency to 
conduct MRA negotiations, nor does it have the authorit y to compel the states to accept an agreement.  
As a result, the most appropriate role for the fe deral government is to facilitate the process by 
bringing interested foreign parties together with re levant state and private sector representatives.  This  WT/TPR/M/126/Add.3 
 Page 235 
 
 is what is meant when we refer to establishing frameworks under which MRAs are negotiated.  Such 
framework agreements could include a set of br oad negotiating objectives as well as a timetable for 
the negotiations.  
Question:  (EU #33 & 34) 
 
According to the Secretariat report (pages 156 to 162), the Federal Government has the power to 
negotiate framework agreements with trading pa rtners with respect to professional and business 
services under which mutual recognition arrangement s (MRAs) are negotiated, but the MRAs are 
negotiated by representatives of the professions and other competent authorities (members of state 
licensing boards, national associations of state boa rds or other such organizations).  The report 
mentions a number of arrangements that have alr eady been concluded or that are being discussed. 
 Could the USA indicate whether, in the negotia tion of such MRAs, these representatives of the 
professions and other competent authorities do exerci se powers delegated to them by central, regional 
or local governments or authorities within the meaning of article I.3.(a)(ii) of the GATS, so that the 
arrangements can be considered as mutual rec ognition agreements concluded by the USA as a 
member of the WTO?  
Answer 
 
In the negotiation of MRAs, the U.S. delegation generally would include representatives of state 
licensing bodies as well as representatives of the prof essional association.  Once the negotiations are 
concluded, the agreement must be implemented by e ach state.  Consequently, the state representatives 
would be considered the competent authority,  and the professional associations do not possess 
delegated authority.  
 
Question:  (EU #35) 
 
If the answer to the preceding question is negative,  could the USA indicate whether, once it notifies 
those arrangements under Article VII of the GATS, the USA, by way of such notification, become, as 
a WTO member, bound by those arrangements under international law?  
 Answer  
The obligations of Article VII would apply to mutual recognition agreements that have been 
implemented by competent authorities of the Unit ed States, including the obligation to provide 
notification to the Council for Trade in Services. 
 
Question:  (EU #36) 
 
If the answer to the two preceding questions is nega tive, taking into account that the USA are able, as 
a WTO member, to undertake commitments in respect of professional and business services and in developing disciplines on domestic regulation under ar ticle VI of the GATS, could the USA indicate 
which are the reasons that prevent them from ne gotiating, as a WTO member, MRAs in respect of 
professional and business services under article VII of the GATS?  
Answer 
 Since the authority for determining qualification and licensing requirements for professional services 
rests with state governments, the federal government  does not have the competency to conduct MRA 
negotiations, nor does it have the authority to compel the states to accept an agreement.  As a result, WT/TPR/M/126/Add.3 
Page 236  
 the most appropriate role for the federal government is to facilitate the process by bringing interested 
foreign parties together with rele vant state and private sector representatives.  This is what is meant 
when we refer to establishing frameworks under which MRAs are negotiated.  Such framework 
agreements could include a set of broad nego tiating objectives as well as  a timetable for the 
negotiations. 
 
Question:  (EU #37)  
 
As reflected in the report by the Secretariat (pag es 157 to 162), as part of the ongoing negotiations in 
services, the USA offered to consider undertaking the implementation of the GATS Disciplines in Regulation of the Accountancy Sector, adopted in 1998, and similar ones for other professional 
services, if others did the same.  Taking into account that, by decision of the Committee on Trade in 
Services (CTS) taken in December 1998, the Discip lines on Domestic Regulation in the Accountancy 
Sector contained in document S/WPPS/W/21 will be  integrated into the GATS no later than the 
conclusion of the present round of services negotiati ons and are to be applicable to Members who 
have entered specific commitments on accountancy  in their schedules, why do the USA consider 
necessary the undertaking of an additional co mmitment to implement those disciplines? 
 
Answer 
 
The United States referred to the accountancy disci plines in its initial offer in order to draw 
appropriate attention to these disciplines as well as to  the prospect of negotiating a similar set of 
disciplines for other professional services such as architecture and engineering. 
 
Question:  (EU #38 & #39)  
 
The EC is surprised that the report does not include any section on Postal services, given that this has 
been the case for a number of other WTO members. 
 What is the regime of trade in postal and courier services in the U.S.?  In particular, what is the current status (reserved to the Postal Office, licensing requirement, restri ction on the number of 
operators) in the following fields of activity:  
- Handling of addressed written communications on any kind of physical medium, including:  
Hybrid    mail services and direct mail - Handling of addressed parcels and packages - Handling of addressed press products - Handling of items referred to in (1) to (3) above as registered or insured mail 
- Express delivery services 
- Handling of non-addressed items. - Document exchange - Other services not elsewhere specified.  
Answer 
 The principal areas in which the U.S. Postal Servi ce retains a monopoly are in the carriage of letters, 
access to mail receptacles and post office boxes, and in the making or printing of U.S. postage stamps.  Express delivery of letters is open to competition by  virtue of a suspension to the letter carriage 
monopoly for the delivery of "urgent" letters.  At pr esent, letters whose carriage costs more than $3.00 
or twice the rate of applicable First-Class Mail are considered to satisfy the test of urgency. 
  WT/TPR/M/126/Add.3 
 Page 237 
 
 Question:  (EU #40) 
 
Is it possible to have statistics on the level of ope ning of the U.S. postal-courier market to foreign 
operators (in percentage of turnover, for instance)?  
Answer 
 The United States does not maintain official statistics that would provide information on foreign 
market share.  
Question:  (EU #41) 
 
Does the Postal Office also operate in fields outside its monopoly (in particular, express delivery services)?  If so, do its competitors get a similar trea tment in these fields of activity?  How is this 
ensured?  Answer  
Yes, the U.S. Postal Service operates in sectors that are open to competition, including express 
delivery services.  Although there is no regulator of hard copy communications that directly oversees the state of competition in U.S. postal markets, th e Postal Rate Commission, an independent agency 
of the federal government, helps ensure that competi tion is fair by setting the rates of the U.S. Postal 
Service prospectively, and by selecting rates that  are designed to prevent cross-subsidization of 
competitive services by monopolized services.  
Question:  (EU #42) 
 Many multinational companies operate graduate tr aining programmes, whereby university graduates 
are posted to an overseas branch of that company fo r a period of time (usually between one and two 
years) to gain experience in management techni ques or in other areas.  How would a company go 
about transferring one of its employees on such a scheme to one of its affiliates in the U.S.?  For example:  
- Does the U.S. have a special regime to cover pe rsons entering the U.S. to carry out remunerated 
 training within a company? - What sort of permits (if any) does this sort of intra-corporate transferee require. - Are there any conditions attached to this sort  of transfer - e.g. age limitation, minimum 
educational  requirements? 
- What are the procedures for applying for the pe rmit(s) (who applies?  Supporting documentation 
 required to be sent with the application form?) - What is the average length of time taken to process applications? - What is the maximum length of the initial period of stay?  Is renewal possible?  
Answer 
 
There is presently no regime under United States law that permits foreign persons to be admitted into 
its territory for exclusively for purposes of recei ving training while being remunerated from a source 
within the country.  The United States does permit pe rsons to be admitted for the purpose of receiving 
training as Visitors for Business or as Trainees.  In both cases, the persons receive remuneration from 
a foreign source.  Persons provi ding training services may be admitted into the United States, and 
remunerated from a source within the country if th is is the principal purpose of their admission and 
their training services are considered to be highly specialized.  WT/TPR/M/126/Add.3 
Page 238  
  
Persons who are admitted into the United States as  intra-company transferees are presumed to be 
working in this country.  They must be engaged in a capacity with the co mpany that is Executive, 
Managerial, or requires Specialized Knowledge.  These persons may receive some training while 
working in the positions.  However, the person mu st already possess the qualifications necessary to 
perform in these capacities as a condition for admission. 
 
Question:  (EU #43) 
 
Over the last years, security considerations have led several Members to review their procedures on 
the access of foreigners to their territory (notably visa procedures).  Taking into account the provisions 
of the Annex of the Movement of Natural persons providing services and in particular the requirement 
that measures should not be applied in such a ma nner as to nullify or impair  benefits accruing under 
the terms of a specific commitment, how does the U. S. combine these considerations with the respect 
of WTO obligations on mode 4.  Answer 
 
The United States shares the goal of other countries in striving to achieve a transparent, reliable 
system for admission of natural persons to provide services.  We have recently initiated changes to our 
immigration law that revise admission procedures in  response to national security concerns.  These 
changes are consistent with our commitments unde r international agreements and do not nullify or 
impair benefits derived from them. 
 We realize, however, that some of these changes are new and that persons seeking admission are not 
familiar with the detailed procedures.  Our government  is engaged in consulta tions with all of the 
affected parties in an effort to  minimize any delays or misunders tandings that may arise from the 
application of these measures in specific cases. 
 
Question:  (EU #44) 
 
The U.S. has recently signed two agreements with  Chile and Singapore providing for specific H-1B 
quotas to be allocated for national of these countries on  the total number of H1-B visas granted by the 
U.S.  How does the U.S. intend to implement these provisions while remaining in conformity with its 
WTO obligations, which provide for a 65,000 H1-B quota granted on an MFN basis?  
Answer 
 Congress created a new non-immigrant category fo r admission of Professionals from Chile and 
Singapore that is similar in many respects to the H- 1B category.  The new category is the "H-1B1."  
Information on this category can be found at the ag ency website addresses listed below.  Admission of 
qualifying persons under the H-1B1 is related to the admissions under the H-1B, as these categories 
share a common numerical ceiling on the overall number of admissions.  
The Administration is presently consulting with Memb ers of Congress as to the final adjustments that 
are necessary for both classes of admissions.  We fully intend to meet the obligations for movement of persons contained in all of our trade agreements.  Bureau of Consular Affairs http://travel.state.gov 
U.S. Citizenship and Immigration Bureau http://uscis.gov 
U.S. Dept of Labor, Employment and Training Ad ministration http://workforcesecurity.doleta.gov. 
  WT/TPR/M/126/Add.3 
 Page 239 
 
 Question:  (EU #51) 
 
How does the U.S. see the relationship between the promotion of social policy and the conduct of 
trade policy both at bilateral and multilateral level?  
Answer 
 
The United States believes trade policy and social polic y should be mutually reinforcing, at both the 
bilateral and multilateral level.  In  particular, coherence between social policy and trade policy should 
assure that the gains from trade liberalization are e quitably shared on a sustainable basis, so that 
workers and their families in America and our tradin g partners improve their living standards.  While 
recognizing that social policy is predominantly a ma tter of domestic governance, the United States has 
long advocated, and continues to advocate, linkages between trade and social policy, a position shared 
with the EU at the Marrakech, Singapore, Seattle and Doha WTO Ministerials , and now demonstrated 
by the inclusion of labor and environmental provisions in our bilateral trade agreements. 
 Question:  (EU #52)  
 
The EC notes that in line with the TPA, the U.S.  includes provisions on the respect of core labour 
standards in many of its bilateral agreements.  C ould further information be provided on the follow-up 
to these provisions?  Answer 
 
Both the U.S.-Chile and U.S.-Singapore FTAs becam e effective on January 1, 2004.  It is thus too 
early to give any definitive answer to a questi on as to the efficacy of the follow-up mechanisms 
regarding provisions on the respect for core labor sta ndards.  From the text of the labor chapters of 
those FTAs, however, it is clear that consultations  and cooperation between the United States and its 
trading partners, along with an obligation to effectiv ely enforce domestic labor laws, are the long-term 
means of promoting respect for labor standards which we are incorporating in our bilateral 
agreements. 
 
Question:  (EU #53)  
 
The World Commission on the Social Dimension of Globalisation will issue its final report in February 2004.  How does the U.S. see the role of the World Commission and what actions does the 
U.S. foresee following the final report as far as trade policy is concerned?  Answer 
 
The United States has been strongly supportive of the work of the ILO's World Commission on the 
Social Dimension of Globalization.  The United Stat es Trade Representative has met with both the co-
Chairperson of the Commission and the Director Ge neral of the ILO to encourage the Commission to 
fully examine and report on the employment and social  implications of further trade liberalization.  
We have great expectations that the final report of the Commission will be fully supportive of the U.S. 
position (see reply to Q 51) that trade policy and social policy can - and should - be mutually 
supportive.  We, of course, will carefully study the Commission's report for its full policy implications 
and hope that all other WTO members will also. 
 
 
  WT/TPR/M/126/Add.3 
Page 240  
 Question:  (EU #54) 
 
If this is the case to what extent is Fair Trade (w hich takes account of sustainability) being promoted 
by the national trade policy.  
Answer 
 
As noted above, United States believes that both r espect for worker rights and the protection of the 
environment should be viewed as integral components of our national trade policy.  Transparency, public participation in trade policy development, anti- corruption rules, and regu latory equity are also 
goals of American trade policy.  Thus, although United States trade policy seldom uses the term "Fair 
Trade," we believe that our trade policy regi me is fully supportive of this concept. 
 
Question:  (Korea #1:  page 16, para. 9)  
 
Does the U.S. Government have any futu re plans to minimize the visa policy? 
 
Answer  
 
With respect to any future chang es to the U.S. visa policy, the government must balance the desire for 
free movement of travellers with significant nati onal security concerns.  New personnel are currently 
being hired and trained in a constant effort to improve the entry and exit processes.  A number of 
developing technologies will also facilitate improved processing, in addition to enhancing the overall 
effectiveness of U.S. visa policy. 
 
Question:  (Thailand #9a)  
Please provide information on the NCARB measures for accreditation of foreign architects. 
 
Answer  
The National Council of Architectural Registration Boards (NCARB) provides extensive information 
on policies concerning certification of foreign architects as well as registration requirements for each 
state and territory through its main In ternet address at http://www.ncarb.org. 
 More specific information can be found as indicated below:  NCARB certification information:  http://www.ncarb.org/certification/index.html. 
State registration board requirements:  h ttp://www.ncarb.org/stateboards/index.html. 
Foreign applicant information:  http://www.ncarb.org/reciprocity/foreign.html. Frequently asked questions by foreign applicants :  http://www.ncarb.org/reciprocity/intlfaq.html. 
 
Question:  (Thailand #9b) 
 
Please provide data that may explain the degree of  foreign participation in architectural and 
engineering services.  Please describe any bilateral or regional agreements to which the U.S. is a party 
for engaging in architectural and engineering services.  
Answer 
 Official data are available only for the aggregate cat egory of architecture, engineering, and technical 
or related services.  For this category, U.S. cross-border imports measured $312 million in 2002,  WT/TPR/M/126/Add.3 
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 whereas U.S. purchases of such services through aff iliates of foreign firms located in the United 
States measured $4.9 billion in 2001.  We interpret this question as concerning mutual recognition agreements rather than free trade 
agreements.  The Federal Government of the United States is not a party to any bilateral or regional 
mutual recognition agreements.  The relevant parti es to these agreements are professional associations 
and state licensing bodies. 
 With respect to architectural services, U.S. professi onals entered into a mutual recognition agreement 
with Canada in 1994.  This agreement, called the Inter-Recognition Agreement between NCARB and 
the Committee of Canadian Architectural Councils, facilitates the process of receiving NCARB 
certification principally by (1) recognizing that th e Canadian academic accreditation is substantially 
equivalent to that of the United States, (2) recognizing that the 3-year training requirement of the Canadian Experience Record Book or the Canadi an Intern Architect Program is substantially 
equivalent to the NCARB training requirement, a nd (3) recognizing that the Canadian Architectural 
Practice Examination provides substa ntial equivalence to part of the U.S. examination, such that 
Canadian architects would not need to sit for all el ements of the U.S. test in order to satisfy the 
examination requirement.  In addition, U.S. architectural professionals have entered into "Protocols for Practice in a Host 
Nation" with China, the Czech Republic, New Zeal and, and Australia.  These protocols establish 
procedures whereby foreign architects may practice in collaboration with U.S. architects without 
becoming licensed or certified in the United States. 
 With respect to engineering services, U.S. professi onals entered into an agreement on engineering 
education (the so-called "Washington Accord") with Canada, Australia, New Zealand, United 
Kingdom, and Ireland in 1989.  The Washington Acco rd was expanded to include Hong Kong and 
South Africa in 1995 and 1999, respectively.  This  agreement recognizes the substantial equivalency 
of accreditation systems of organi zations holding signatory status , and the engineering education 
programs accredited by them.  In addition, the agreement establishes that graduates of programs 
accredited by the accreditation organizations of each member nation are prepared to practice engineering at the entry level.  Detailed info rmation on the Washington Accord can be found at:  
http://www.washingtonaccord.org. 
 
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