WORLD TRADE
ORGANIZATIONWT/TPR/M/56/Add.1
9 March 2000
(00-0899)
Trade Policy Review Body
12 and 14 July 1999
TRADE POLICY REVIEW
UNITED STATES
Minutes of Meeting
Addendum
Outstanding Responses to Questions
The following communication, dated 15 February 2000, was received from the Permanent
Mission of the United States with the request that it be circulated to Members.
__________WT/TPR/M/56/Add.1
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CONTENTS
Page
Questions are arranged by topicG. GOVERNMENT REPORT (WT/TPR/G/56) 5
SECRETARIAT REPORT (WT/TPR/S/56) 7
1. Economic Environment 7
2. Miscellaneous Issues (TABD consumer di alogue, sub-federal/federal, sanctions) 8
3. Measures (301, title VII, dispute settlement) 11
4. Tariffs 16
5. Rules of origin/marking/labelling 19
6. Non-Tariff Measures (licensing, customs procedures, sanctions) 24
7. Contingency Measures (Dumping, countervail, safeguards) 27
8. Taxation and Investment 41
9. Intellectual Property 44
10. Standards and SPS 54
11. Government procurement 60
12. Competition policies 69
13. Textiles 71
14. Agriculture 74
15. Steel 86
16. Financial Services 88
17. Telecom 94
18. Maritime 100
19. Services-General 108WT/TPR/M/56/Add.1
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FROM GOVERNMENT REPORT (WT/TPR/G/56)
G1. (Canada) On the Economic Environment (pp. 6-7, para. 13) The Report indicates that
“the Clinton Administration has coupled a liberal trade policy with initiatives predicated on strong
fiscal discipline, support for education and scientific investment …”.  What specific measures
encouraging scientific investment have been introduced?
The Omnibus Budget Reconciliation Act of 1993 (OBRA) contained several measures to
encourage investment, including an extension of th e research and experimentation tax credit, greater
expensing for tax purposes of investment made by smaller businesses and targeted capital gains
incentives for equity investments in small corporations.  Additional information on specific budget
proposals can be found annual U.S. budget documents, at www.whitehouse.gov/omb, and through the
Office of Science and Technology Policy at www.whitehouse.gov.
G2. (Canada) On Environmental Issues (p. 14, para. 53)  The Report indicates that it will seek
“the elimination of subsidies that contribute to over -fishing”.  What criteria would be used to identify
such subsidies?
We have no fixed views at this point in time on the criteria for identifying subsidies that
contribute to over fishing.  We would very much like to work with other countries to develop agreed
criteria.  At the same time, we believe that any solution to this problem should not be over broad andthat there are government subsidy programs that have beneficial effects in addressing over fishing.
G3. (Japan) (i) The Government Report states that the most recent severe decline in personal saving
in the United States is widely perceived to be related to the sharp increase in the market value of
financial assets in the U.S. over th e last two years and, therefore, is  likely to be temporary in nature
(p. 7, para. 15).  However, if there is a rapid decline in the market price of monetary assets, when
over-consumption is made under an unrealized capita l gain, there would be a high possibility of the
American Economy crash landing.  Please explain w hat measures the United States would take if
such a rapid decline in the assets price would actually happen.
The Asian financial crisis, combined with low growth and limited investment opportunities in
a number of U.S. trade partners, contributed to incr easing net inflows of foreign capital to the United
States over the last two years.  This in turn, cont ributed to a reduction in domestic interest rates and
increases in domestic consumption and investment.  The concurrent widening of the U.S. current
account deficit with the increase of net capital inflows over the last two years, of course, meant that
the United States played the major role in absorbing the sharp balance-of-payments adjustments
occurring in Asia and elsewhere.  As recovery begins and/or progresses outside U.S. borders, some of
factors affecting the U.S. balance of payments over the last two years will undoubtedly reverse with
eventually lowered net capital inflows, declining current account deficits and recovery of personal
saving rates.  There is little reason to believe, how ever, that such a transition would be disorderly for
U.S. financial asset markets.  Strong fundamentals and earnings growth undergird U.S. financial asset
markets and support an orderly evolution of the U.S. balance of payments position.  Were the United
States to find itself in a position to need to bolster the domestic economy, one which is not currently
foreseen, low rates of domestic price inflation, fiscal surpluses and declining federal debt levels assurea great deal of scope for appropriate government action.
G4. (Japan) (ii) The trend in stock prices also  has a great impact on personal consumption and
household savings.  Please explain how the United States' Government evaluates the present trend of
stock prices, as well as the future prospects.WT/TPR/M/56/Add.1
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The U.S. Government does not have an official evaluation of trends and prospects for
domestic equity prices.  Such valuations are determined in the private sectors, adjusting constantly tothe steady stream of new, relevant market information.  Nevertheless, the scope and strength of
current technological advance in the United States and the ability of the new technologies to create
additional value in private sector enterprises appear  to be fundamental sources of strength for equity
valuations, possibly making those valuations less dependent on cyclical factors than would otherwise
be the case.
G5. (EU) (para. 52) Could the U.S. elaborate further on the position they have outlined in para. 52.
How do they envisage this being taken forward in the New Round?  In particular, does the U.S. agree
that there is need for clarification of the relationship between MEAs and WTO rules.  And, how do
President Clinton's comments relate to the U.S. position in the (suspended) on-going negotiations of
the Biosafety Protocol to the Convention on Biodiversity?  And to biotechnology in general?
Among the steps we will be taking to ensure that we do not overshoot the mark in pursuing
trade liberalization and inappropriately constrain the ability of Members to pursue other legitimate
policy goals will be close coordination between trade officials and environment/health officials,
providing opportunities for input from all stakeholders and conducting an environmental review of the
new round.  We believe that multilateral environmental agreements are important for addressingenvironmental challenges of concern to all humankind.  In this connection, trade measures can be a
critical means of achieving internationally-agreed environmental goals and objectives when carefully
tailored and appropriately applied, as exemplified,  inter alia, in the Convention on International Trade
in Endangered Species and the Montreal Protocol.  With respect to the EU’s proposal for work on the
MEAs issue, we would note that MEAs are alr eady broadly accommodated under WTO rules.  We
believe that WTO Members strongly support international cooperative efforts through MEAs and that
we should all ensure that this is widely understood.
We do not understand the connection that th e EU’s question appears to draw between
President Clinton’s statement and the Biosafety Prot ocol negotiations.  There is no conflict between
the objectives of the WTO and the Protocol and WTO rules clearly do not pose any impediment to an
effective and workable agreement.  At the national level, President Clinton’s remarks apply to all
products, regardless of the process by which they were produced.
G6. (EU) (para. 53) We agree that identifying po sitive synergies between trade and environment is
important, especially as regards market access.  Will the U.S. be supportive of the Community's
proposal for reducing tariffs for LDCs at Seattle?
As the EU is aware, on December 17,  Presidents Clinton and Prodi announced their commit
to maximizing the benefits developing countries gain from being in the WTO.  As part of thatcommitment, they announced their agreement to take  forward a preferential market access initiative
for the least developed WTO members, working initially with QUAD partners.
G7. (EU) (para. 53) Does the U.S. envisage includi ng the elimination of export credits when removing
or reducing trade distorting measures in the agriculture sector?
We do not envision the total elimination of export credit programs.  However, we are working
in the OECD to establish credit disciplines to fulfil obligations under the Agreement on Agriculture.
G8. (EU) (para. 54) Has the U.S. any specific idea s on how to ensure close working links between
trade and environment officials at an interna tional level?  How does the U.S. ensure such
co-ordination within the U.S. Administration?WT/TPR/M/56/Add.1
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One important way of ensuring close working links between trade and environment officials
at the international level is to endeavor to ensu re participation of environmental experts in WTO
meetings, such as those of the CTE, and the participation of trade experts in international
environmental meetings.  This is a standard practice for our government.  At the national level, we
ensure close coordination through a number of interagency groups.  For instance, environmental
agencies are active participants in the interagency process that sets trade policy.  Similarly, trade
experts participate actively in the interagency groups that prepare for environmental negotiationswhenever it appears that there may be trade-related issues.  We have found these coordinating
processes to be of tremendous value in ensuring policy coherence.  In addition, an Executive Order on
Environmental Reviews was signed by the President in November of 1999 requiring careful
assessment and consideration of the environmental impacts of trade agreements, including through
detailed written reviews of major environmentally significant trade agreements.  This Executive Orderinstitutionalizes procedures to ensure the timel y consideration of environmental issues in the
development of U.S. positions for trade agreements.
G9. (Turkey) With respect to the dispute settlement, the U.S. has been the biggest beneficiary of the
WTO system in obtaining successful results against its foreign trading partners.  In fact in the U.S.
Government Report, p. 9, it is stated that U.S. has be en the most active user of dispute settlement in
the WTO and it has reached favourable results in 20 of the 22 cases so far for either by successfulsettlement or panel ruling.
This being the case, how does the U.S. reconcile  unilateral actions that may be taken under
Section 301 of the U.S. Trade Act against its trading partners, with the WTO provisions especiallythose provisions relating to Dispute Settlement Understanding?  We are aware that the U.S. has
seldom resorted to this measure.  Would the U.S. clarify its justifications in this regard?
The question does not refer to specific examples of allegedly unilateral action under
Section 301, and it is therefore difficult to respond to the question.  The United States notes, however,
that the panel in United States - Sections 301-310 of the Trade Act of 1974  concluded that neither the
EC nor the third parties to the dispute had rebutted the U.S. explanation that it had never pursuant to
that legislation made a determination of another’s Member’s WTO violation that was itself
inconsistent with WTO rules.
FROM SECRETARIAT REPORT (WT/TPR/S/56)
1. Economic Environment
(a) Main Economic Developments, (p. 4, para. 5)
1.1 (Canada) The Report states that foreign investme nt increased during the review period.  To what
extent are investment incentives used to promote foreign investment?  Is this another factor in theincrease in foreign investment?  Which states or regions benefited most from increased investment?
Business investment in plant and equipment grew remarkably rapidly during the 1990's.
Although the pace of investment depends on decisions  made by myriad individual firms, each reacting
to a variety of forces, at least four general factors that have contributed to the recent surge in
investment can be identified:
- plethora of good investment opport unities/strong investment demand;
- safety and Soundness of the U.S. economy;
- the rapid growth of output during the past several years;
- robust corporate profits;
- plentiful external capital - the availability of external funding, in particular the
dramatic reduction in Federal Government borrowing;  and
- falling computer prices.WT/TPR/M/56/Add.1
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Additional information on foreign investment in the United States can be found at
www.bea.doc.gov.
2. Miscellaneous Issues
2.1 (Switzerland) Bilateral agreements/United States-European Union Transatlantic Economic
Partnership (pp. 42-43, paras 91-92)
Has the Transatlantic Consumer Dialogue (TACD) already brought concrete results which could also
be of interest for non participating countries?  Are positive or negative effects to be expected for thesecountries?
Important companions to the Transatlantic Economic Partnership (TEP) initiative are the
various private dialogues among European and Am erican businesses, labour organizations and
environmental and consumer groups.  The Transatl antic Business Dialogue (TABD), Transatlantic
Labor Dialogue (TALD), Transatlantic Consumer Dialogue (TACD), and Transatlantic Environment
Dialogue (TAED start from a similar premise, i.e.  that corresponding organizations on both sides of
the Atlantic should share views and, where possible, present joint recommendations to governments in
both the U.S. and the EU on how to improve transatlantic relations and to elevate the debate among
countries in multilateral fora.  All of these dialogues held meetings in 1999, from which emerged a
number of recommendations related to trade policy issues.  The United States is committed to the fullparticipation of civil society in the trade policy process and intends to cooperate closely with all the
dialogues as it works to implement the TEP initiative.
2.2 (Switzerland) Trade policies and practices by measure/Overview (p. 46, para. 6)
The Report indicates that potential distortions of competition may arise as a consequence of various
forms of assistance provided by federal and state Go vernments to some sectors (notably agriculture).
Could the U.S. delegation give an evaluation of the po tential distortions of competition resulting from
assistance provided by the federal level compared with the assistance provided by the state level?
The United States is not aware of any information source or data base which would permit
U.S. to attempt a reliable evaluation comparing the nature and intensity of all forms of federal and
sub-federal government assistance to U.S. economic actors and deducing any distortions of
competition which may result therefrom.  As a general observation, however, it is probably fair to say
that U.S. public assistance tends to be generalized across sectors at both the federal and sub-federallevels - whether as a result of deliberate policy choices or the aftermath of political accommodation.
Should any significant distortions of competition ensue, moreover, these are remediable at both the
federal and state level through the application of U.S. antitrust laws and other laws, regulations and
policies that are designed to protect consumer interest.
2.3 (Canada) There is very little information on state-level government activities.  Can you provide a
summary of fiscal or government assistance/incentives at the state level?
See response to 2.2.
2.4 (Japan) Negotiating Competence for Tariff Reductions (p. 31, para. 51) It is understood that tariff
reductions exceeding the tariff rates of the Uruguay Round Agreement are admitted to some sectors
under Article 111 of the Implementation of the Ur uguay Round Agreement Bill, without having any
further approval from the U.S. Congress sin ce mandate was given during the Uruguay Round
negotiations.  The nine sectors discussed under the ATL initiative include environmental goods,
energy, food, rubber, gems and jewellery.  These sectors were not included in the tariff duty sectorsWT/TPR/M/56/Add.1
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which were mandated for negotiations during th e Uruguay Round.  Under which mandate is the
Government of the United States carrying out this tariff negotiation?
The President has existing authority to implemen t the results of many of the items in the ATL
package, but not all items.  We will be working with  Congress to obtain any additional authority that
is needed.
2.5 (Japan) At the end of 1998, fast-track related bills were not approved by the Congress.  What is
the prospect of these bills being approved this year?  If these bills are not approved this year, will theGovernment of the United States be negotiating the next round only by way of the mandate given
during the Uruguay Round?
As Ambassador Esserman stated in her response to delegations during the review, legislative
authority is not required to conduct trade negotiations.  Nor does fast track set the U.S. trade agenda ;
rather it establishes procedures for Executive - Congressional coordination during trade negotiationsas well as rules applicable to the consideration and enactment of implementing legislation.
2.6 (EU ) (para. 9, p. 20) Since the legal regime for services, investment and intellectual property and
to some extent also for goods is a mix of federal and state laws and regulations, is the U.S.
Administration prepared to seek the necessary negotiating and legislative authority in those areas
where this would be necessary in order to conduct the next round of WTO negotiations?
See answer to 2.5.
2.7 (Poland) About 50% of Poland’s exports to the U.S. is covered by the U.S. GSP.  The system
expired at the end of last month.  Its renewal will be dependant on decisions by the U.S. Congress and
by the U.S. President.  Poland is concerned that such decisions will be taken only after the summer
recess which would result in a suspension of the system for a period of three to four months and in
consequence in a decrease in export of some goods.  Please provide information on when a final
decision on the matter can be expected and whether the system will be renewed by one year(financial) or by two or three years.
On 17 December 1999, President Clinton signed legislation to renew the U.S. GSP program.
The legislation extended the program to 30 September 2001 and retroactively to 1 July 1999.
2.8 (New Zealand) Export controls – The U.S. ma intains export controls on unprocessed timber
originating from non-federal public lands in the we stern continental United States under the Forest
Conservation and Shortage Relief Act (S/III, p. 80, para. 98).
What is the economic rationale for maintaining this prohibition?  Is this measure for purely
conservation reasons, or does it have the effect of increasing domestic supply? How does the U.S.
assess the impact of these measures on negotiations in the WTO on forestry?
The Forest Resources Conservation and Shortage Relief Act, signed into law on
20 August 1990 (last amended in 1996), is designed to mitigate the impact of setting aside large tracts
of "old growth" forests to maintain bio-diversity, as well as to protect the northern spotted owl.  As a
result of the Act, approximately 5 million cubic meters of logs (mostly softwood logs) harvested from
state lands are no longer available for export.  The export volume affected by the legislation is
substantially lower, however, since only a portion of the volume harvested annually in the past wasexported.  Moreover, harvest levels on federal forest lands in the region in the coming decade are only
expected to be 10-15% of what they were in the late 1980s.  In contrast, trading partners still haveWT/TPR/M/56/Add.1
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unrestricted access to over 200 million cubic meters of logs that are harvested annually in the
United States.
2.9 (Norway) Shipbuilding (p. 106) The OECD Shipbuilding Agreement concluded in 1994, which is
meant to eliminate all direct support and to combat injurious pricing practices, is mentioned in the
Secretariat Report on p. 106.  Norway would appreciat e some information on the current status of the
ratification process of this agreement in the U.S?
The U.S. Administration remains committed to the OECD Shipbuilding Agreement and its
entry into force with U.S. participation.  However, the number of opponents to the Shipbuilding
Agreement in the Senate has grown.  While trade legislation was considered by Congress last year,
shipbuilding legislation was not included.  The U.S. Administration worked very hard with the
Department of Defense and key members of the Sena te to develop acceptable legislation which would
allow the United States to ratify the Shipbuilding Agreement.  However, we were unable to overcome
the opposition in the Senate.  The U.S. Administration will continue to work with the Congress this
year to better assess the situation, but it is not clear whether there will be Congressional support for
the legislation in the future.
2.10 (Chile) What policy will the United States adopt with respect to the port charges it applies to
imports?
See response to 8.2.
2.11. (Malaysia) Restriction on Tropical Timber - Currently, there are proposed bills in the City
Councils of New York, Los Angeles and Long Beach seek ing to disallow use of tropical timber in their
areas of jurisdiction, unless it is certified by the organizations approved by the Forest Stewardship
Council, U.S.  These proposed bills are discriminatory as they only single out tropical timber for
certification.  Temperate and boreal timbers are not subjected to certification.
Why are temperate and boreal timbers are not subjected to the certification?  What is the basis for
discriminatory certification on tropical timber?
The proposed bills by the municipal governments  are inconsistent with the U.S. commitment and
obligations in the WTO.  What are the measures and actions taken by the U.S. Government to ensure
the state and municipal governments’ observanc e and compliance to the U.S. commitments and
obligations in the WTO?
The United States Government shares the concern of the Government of Malaysia regarding
the need for improved market access for timber and timber products.  As a member of the
International Tropical Timber Organization (ITTO), the United States supports the objective set out in
article 1(E) of the International Tropical Timber Agreement (ITTA) and has long worked for the
reduction of barriers to trade in all forest products.  In recent years, the United States has been astrong supporter of tariff non-tariff barrier elimination for all forest products through co-sponsorship
of APEC’s Early Voluntary Sectoral Liberalization initiative on forest products and more recently,
through the Accelerated Tariff Liberalization (ATL) initiative in the WTO.
With respect to the proposed procurement legislation cited by the Government of Malaysia,
the Government of the United States notes that none of the cities in question - the City of New York,the City of Los Angeles, or the City of Long Beach - are entities covered by the WTO Government
Procurement Agreement and that Malaysia is not a Party to that Agreement.  Therefore, there does not
appear to be any WTO provisions applicable to this specific case.WT/TPR/M/56/Add.1
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2.12. (India) The U.S. GSP Programme appears to build in grant of benefits with retrospective effect
as well as their withdrawal with retrospective effect.  The list of articles and countries are reviewedannually.  The numerous circumstances under which the programme can effectively be modified are
set out in para. 72.  Para. 76 sets out that discriminatory treatment among beneficiary countries by
products is enabled by section 504(c) of the Trade Act of 1974.  These create uncertainty for traders
from beneficiary countries.  Since investment and trade decisions are predicated on predictability,
what do the U.S. authorities propose to do to make this programme effective and of greater benefit toeligible countries and entities?  What is the share of imports of GSP in total imports of USA and what
have been the underlying trends since its inception in 1976?
See response to 2.7.  US$16 billion in goods entered under GSP in 1998, the most recent year
for which full-year data is available.
2.13. (Mauritius) Could the delegation provide information on its GSP programme which is now part
of the Omnibus Appropriation Bill of FY 1999, in particular as regards the date of entry into force of
the current programme and the new product coverage?  Could the U.S. equally indicate the criteria
used to determine the eligibility of countries benefiting from GSP?
See response to 2.7.  Further information on the U.S. GSP program can be found on the
USTR website at www.ustr.gov.
2.14. (Mauritius) The Report indicates that tr ade has grown substantially among the NAFTA
countries since the implementation of the Agreem ent.  Could the delegation provide statistical
information on the sectors.
Extensive statistical information was provided by the NAFTA parties to the Committee on
Regional Trade Agreements as part of the review of the NAFTA.  See documents in the WT/REG4
series.
2.15 (Colombia) Duty and tax concessions affecting exports - The drawback system for commerce and
manufacturing industry allows for the refund of customs duties, internal taxes or fees.
Could the United States provide more informatio n about the kinds of internal taxes which are
refundable? As far as fees ("otros derechos") are concerned, do these include anti-dumping and
countervailing duties and those imposed as a result of a safeguard investigation? Are all exports
entitled to benefit from the drawback system?
Drawback is paid only on a duty or tax that is imposed by reason of importation.  Internal
taxes are not imposed by reason of importation and are not eligible for drawback.  Anti-dumping and
countervailing duties are no longer eligible for drawback as a result of a change in U.S. law in 1988.
There are certain restrictions on drawback imposed under Article 303 of the NAFTA.  These
amount to limiting drawback to the lesser of the duty paid or owed on importation and the amount ofduties paid to a party on the good upon exportation.  These restrictions  are currently in effect between
the U.S. and Canada.  They will become effective among all the NAFTA parties on 1 January 2001.
3. Measures Affecting Exports
3.1 (Canada) Export prohibitions and licensing (p. 79, para. 97) Economic sanctions include
unilateral measures with extra-territorial application, which have continued to attract significantattention.  The U.S. Administration is on record as supporting the enactment of comprehensiveWT/TPR/M/56/Add.1
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sanctions reform legislation, including a waiver for Title IV of the Cuban Liberty and Democratic
Solidarity (LIBERTAD) Act.  What action does the Administration intend to that effect?
On 17 July 1999, President Clinton announced his decision to suspend for an additional six
months implementation of provisions of Title III of the LIBERTAD Act that allow legal action
against firms trafficking in confiscated properties in  Cuba.  With regard to obtaining waiver authority
for Title IV, consultations with the Congress are continuing.
Section 301 and Related Measures3.2 (Korea) (p. 85, paras 122, 123) Under the section 301(a) and (b), if the USTR does not reach an
agreement with a foreign country, it may decide to suspend, withdraw or prevent the application of
trade agreement concessions, apparently unilaterally.  Does the U.S. believe that these provisions are
consistent with the principle of multilateralism?
The USTR administers Section 301 of the Trade Act of 1974 in a manner that is fully
consistent with U.S. international obligations, such as those arising out of the WTO Agreements.
Indeed, if a foreign government practice raises questions about a country’s fulfilment of its WTO
obligations, Section 301 requires that the Administration pursue those questions in WTO dispute
settlement proceedings.  The United States has never determined unilaterally that another country has
violated its WTO obligations.
3.3 (Korea) (p. 93, para. 141) Under Super 301 procedures, the investigation period for practices
involving a WTO Agreement is 18 months, while the investigation period for other practices is
12 months.  Why is there a difference in the time allowe d for investigations?  What is its justification? 
Would it not be more consistent to have a single 18-month investigation period for all?  Similarly, in
para. 152, Title VII states that the investigation period for government procurement practices
involving the WTO Government Procurement Agreement is 18 months while the investigation period
for government procurement practices not covered  by the WTO GPA is 12 months.  Again, why is
there a difference in time allowed for inve stigations, and what is its justification?
Korea is mistaken in identifying the time frames for investigations under Section 302 of the
Trade Act of 1974 as "Super 301" and "Title VII" investigations.  In Section 302 investigations,
matters involving an allegation of a trade agreemen t violation are given more time because they must
be referred to dispute settlement proceedings under the dispute settlement provisions (if any) of thattrade agreement.
3.4 (Japan) Section 301 of the Trade Act of 1974 (pp. 84-90, paras 117-129) At the entry into force of
the WTO Agreement, the United States announced that it had amended its Trade Act of 1974 in order
to respect the procedures of the enhanced Dispute Settlement system.  The amendment, however, has
proved to be insufficient.  The discretion of the USTR is not clear under the Act, and the Act has apossibility to be implemented not in compliance with the WTO Agreement.  If the United States
determines under the Act whether another Member denies the rights or benefits of the United States
under the WTO Agreement without following the necessary procedures under the Dispute Settlement
Mechanism, it is inconsistent with Article 23 of the DSU.  It is very unlikely that the discretion of the
USTR and the specific direction of the President is to be exercised consistently with the WTOAgreement.  This fact seriously damages the Dispute Settlement Mechanism within the framework of
the WTO.  Therefore, the United States should amend its Trade Act of 1974 to ensure that it fully
complies with its obligations under the DSU.WT/TPR/M/56/Add.1
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The panel in United States - Sections 301-310 of the Trade Act of 1974  agreed with the United
States that Section 301 of the Trade Act is not inconsistent with U.S. WTO obligations.  It is thusunnecessary to make changes to this law.
3.5 (Japan) "Super 301", "special 301" and Sect ion 1371-1382 and Title VII of the Omnibus Trade
and Competitiveness Act of 1988 - The United States Government re-instituted, as of March this year,
the "Super 301" (Provision added to Section 301 of the Trade Act of 1974 by Section 1302 of the
Omnibus Trade and Competitiveness Act of 1988) and Title VII of the Omnibus Trade andCompetitiveness Act of 1988.  These provisions have strengthened procedures under Section 301 of
the Trade Act of 1974, which can lead to adopting unilateral measures by automatically identifying
foreign actions, policies and practices as a priority foreign country practice or a discriminatory
practice in the case of government procurement.  Such re-institution shows that the United States has
not altered its attitude towards its trading partners, including Japan, as it continues to conduct tradedisputes to its advantage through the threat of taking unilateral trade measures.  Japan is greatly
concerned that such a U.S. policy will seriously  damage the WTO framework.  How can the United
States justify such an approach under the WTO Agreement?
Japan is also concerned about the use of the "Super 301" and the review under Section 1377 of the
Omnibus Trade and Competitiveness Act of 1988, which will seriously damage the WTO framework.These provisions again show that the United States has not changed its attitude of forcing trading
partners to concede to concessions by reviewing the trade measures of trading partners unilaterally
and by threatening them with retaliatory measures.
See response to 3.2.
Dispute Settlement
3.6 (Japan) WTO Dispute Settlement (p. 28, para. 42)  EC-banana case:  U.S. reaction against the
new measures adopted by the EC
(a) Has the U.S. measure, "withholding liquidation", effective as of 3 March 1999, been
terminated as a result of the authorization by the DSB of the U.S. suspension of concessions
or other obligations?
(b) The U.S. decided to begin withholding liquidation on 3 March when the DSB had not yet
authorized the U.S. to suspend concessions and related obligations.  Did the U.S. make such adecision because the U.S. Government was required to take certain action by the date
provided for in Section 301 of the U.S. Trade Act?
(a) The United States took no action on 3 March 1999 which "withheld liquidation."
Entries of merchandise continued to be liquidated based on the normal time frames employed by the
U.S. Customs Service.  The United States did, however, review bonding levels on certain entries.This was a one-time action unaffected by subsequent events.
(b) The United States decision of March 3 to review bonding levels for certain entries
was unrelated to Section 301 of the Trade Act of 1974.
3.7 (Japan) EC-Hormones case:  EC-Measures Af fecting Meat and Meat Products (Hormones)
Regarding the banana case, the Government of Japan expressed its view that it very much regretted
that the U.S. had decided to be gin withholding liquidation, effective 3 March 1999, on selected
products from the EU, thereby causing an effect equivalent to the U.S. taking unilateral action.  TheWT/TPR/M/56/Add.1
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Government of Japan, therefore, requests that the U.S. and EC act in good faith regarding the
Hormones case, in accordance with the rules and regu lations of the WTO.  Please explain the U.S.
view on this point.
U.S. actions suspending concessions in response to EC non-compliance in the Beef Hormones
dispute – like those in the Bananas dispute – were in accordance with DSU rules.  Those actions are
described in Federal Register notices published on 25 March 1999 and 27 July1999 (64 Fed.
Reg. 14486 ;  64 Fed. Reg. 40639).
3.8 (Japan) Regional Trade Agreements:  FTAA (p. 31, para. 53)
(a) With regard to the FTAA, please explain the relationship among the FTAA, the NAFTA and
the Mercosur.  How does the United States envisage a free-trade area which already contains
another free-trade area and a customs union.
When the Mercosur, which is a customs union, join s the FTAA, how will the common external tariff be
treated?  Will the common external tariff of the Mercosur only be applied to non-FTAA countries? In
other words, will the Mercosur join the FTAA by itself?
(b) When establishing the FTAA, can the United States assure that the provisions of rules of
origin will not become further restrictive?  Can the United States also assure that the
members of the FTAA would not increase local content requirements?
With respect to (a), this question is appropr iately addressed in discussions underway among
FTAA countries.  With respect to both (a) and (b ), the FTAA will be consistent with WTO rules.
3.9 (Japan)(2) NAFTA
(i) (p. 33, para. 56) Regional trade agreements are exceptions to the principles of the WTO, which is
to maintain the free and non-discriminatory principles of the multilateral trading system, especially
the MFN.  The establishment of such regional trade agreements is, therefore, only admitted when this
will promote trade and contribute to the world.
Regarding the NAFTA, an issue of conformity with Article XXIV of the GATT has been pointed out
several times and concerns have been expressed on the complex and strict application of the rules of
origin on automobiles, which may be considered as re strictive measures from the point of view of the
third parties.
Please explain how much imports on automobile par ts from the non-parties increased upon and after
establishment of the NAFTA?
(ii) (p. 33, para. 59) According to the Understanding on the Interpretation of Article XXIV of the
GATT, the time frame for the establishment of regional integration is, in principle, ten years.
Establishing a 15-year transitional period for elimi nation of tariffs and non-tariff measures seems to
not be in conformity with Article XXIV of the GATT.  Please explain the rationale for this longertransitional period?
Safeguard measures are also to be applied in the free trade area.  Will the safeguard measures also
be applied to external trade?  Please explain its conformity with the GATT Article XXIV.
The issues raised by Japan in both (i) and (ii) have been discussed in the Committee on
Regional Trade Agreements, both in the context of the review of the NAFTA (see WT/REG4 series)and in other work of the Committee (see WT/REG/M series).WT/TPR/M/56/Add.1
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3.10 (Norway) Section 301 (p. 84) Section 301 of the Trade Act of 1974, provides relatively
comprehensive power of attorney to impose trade me asures on foreign countries, in cases where U.S.
authorities believes that foreign countries maintain an act, policy or practice that violates U.S. rights
or benefits under trade agreements, or is unjustifiable, unreasonable or discriminatory and burdens
or restricts U.S. commerce.  We would like to express our concern over this legislation, as it provides
opportunities to impose trade measures in an arbitrary way.
Although it appears that no question is posed by Norway, the response to 3.2 addresses a
similar point.
3.11 (Colombia) Section 301 and related measures (par as 135-138) The Secretariat Report describes
the review process to which some countries are subject under "Special 301".  According to the
Report, each year the USTR must identify the countries that deny adequate and effective protection of
intellectual property rights or fair and equitable market access to United States persons that relyupon such protection.  The Report adds that a country may be found to deny adequate and effective
protection of intellectual property rights even if it complies with its obligations under the TRIPS
Agreement.
Colombia is included in the "watch list" and has been subject to two reviews so far in 1999 and very
possibly will be subject to a further review in December 1999 as a developing country.
In the light of the terms of Article 23 of the DSU which specifies that no Member shall make unilateral
determinations with regard to the consistency of a measure adopted by another Member except
through recourse to the dispute settlement system, could the United States explain how "Special 301"
incorporates these provisions?
Following the interim out-of-cycle reviews of 19 February 1999, Colombia, although
benefitting from the TRIPS transitional period, was not removed from the watch list.  Could the
United States explain the legal basis for this action?
Could the United States explain what these reviews consist of and why it is necessary to subject a
country to repeated reviews?
The Special 301 provisions of the Trade Act of 1974, as amended (“Trade Act”), are fully
consistent with Article 23 of the DSU.  Under the Special 301 statute, the U.S. Trade Representative
must identify annually as “Priority Foreign Countries” only those foreign countries (1) that have themost onerous or egregious acts, policies or practices that deny adequate and effective intellectual
property rights, or deny fair and equitable market access to United States persons that rely upon
intellectual property rights;  and (2) whose acts, policies or practices have the greatest adverse impact
on relevant U.S. products, and (3) that are not entering into good faith negotiations, or making
significant progress in bilateral or multilateral negotiations to provide adequate and effectiveprotection of intellectual property rights.  Under the Trade Act, when a country is designated as a
“Priority Foreign Country,” the U.S. Trade Represen tative has discretion to initiate an investigation of
that country under the so-called “Section 301" provisions of the Trade Act.  The Section 301 statute is
fully consistent with the obligations of the United States under the Dispute Settlement Understanding
– a fact recently confirmed by a WTO dispute settlement panel.   See United States - Sections 301-310
of the Trade Act of 1974, WT/DS 152.
As a matter of administrative practice, the U.S. Trade Representative has also used the
opportunity of the annual Special 301 review to signal concern about intellectual property laws and
practices of U.S. trading partners that deny adequate and effective intellectual property protection to
U.S. right holders, but may not satisfy the criteria for designation as a “Priority Foreign Country”.WT/TPR/M/56/Add.1
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The concerns of the Trade Representative are generally expressed under two headings in the annual
Special 301 press release, titled Watch List and Priority Watch List.
4. Tariffs
4.1 (Korea) (p. 46, para. 9) Though average U.S. tariff rates are as low as 5.7% in 1999, tariff peaks
in certain industries, such as footwear and precision instruments, appear exceedingly high.  Tariffs on
those industries will still remain high even afte r the full implementation of the Uruguay Round.  What
is the US' long-term plan for harmonizing "tariff peaks"?
The United States has indicated a willingness to engage in comprehensive market access
negotiations on goods to complement the negotiations on agriculture and services mandated by the
WTO’s built-in agenda.  In 1999, the United States initiated the necessary domestic procedures to
prepare for such negotiations.  Specifically, USTR requested that the U.S. International Trade
Commission prepare a report on the probable economic effects of various scenarios of tariffreductions for all dutiable items.
4.2 (Korea) Duty-free items substantially increased in 1999, compared with 1998 and 1996.  What
kinds of industries became tariff free in 1999?
Many of the reciprocal duty elimination initiatives from the Uruguay Round were fully
implemented on 1 January 1999, including agricult ural and construction equipment, medical
equipment, and furniture.  Additionally, the 1999 data reflect final tariff reductions/elimination on
products subject to five-year staging in the Uruguay Round.
4.3 (Korea) As discussed in Box III.1, specific duties cause greater economic inefficiency than
ad-valorem tariffs, and conceal high ad-valorem equivalents, though specific duties are relatively
simple to administer.  Is the U.S. considering reducing the high share (12.9% in 1999) of specific
duties out of all tariff lines?
The WTO does not prohibit the use of specific duties.  Many WTO Members, including the
United States and Korea, employ specific rates on certain products.  We disagree with the implication
that our use of specific rates prevents WTO Members from assessing the ad valorem  equivalent of
these duties.  The United States provides annually the ad valorem  equivalent of our specific rates to
the WTO’s Integrated Data Base.
4.4 (Japan) Tariff Peaks (p. 11, para. 12)  The United States is implementing MFN tariff reductions
on a number of products in accordance with the Ur uguay Round commitments.  However, tariff peaks
for such products as textiles and clothing, etc. still remain.  Please explain the reasons for
maintaining such tariff peaks and the future prospects for reducing such peaks.
See response to 4.1.
4.5 (Japan) Tariffs (p. 46, para. 8) Tariff rates of trucks (motor vehicles for the transport of goods)
The U.S. imposes high tariff rates, such as 25% on most truck items (HS 8704).  In comparison with
the tariff rates of other WTO Members (e.g. free for Japan, 0 to 22% for EC, 5 to 20% for Australia),
this figure remains considerably high.
Japan would like to know the reason why the U.S. impos es 10 times higher tariff rates on trucks than
on passenger vehicles (concession rate at 2.5%), and, in addition, would like to request elimination of
this tariff peak.
See response to 4.1.WT/TPR/M/56/Add.1
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4.6 (Japan) HS96 - The U.S. has not yet finished the process of rectifying and modifying its Schedule
in order to introduce the HS96.  Japan brought up the same point at the last  TPRM for the U.S. two
years ago.  It is, therefore, regrettable to see that there has been no change in the situation and Japanwould like to request an early finalization.  When is the U.S. finalizing the process?
The United States will respect the deadlines established by the Committee on Market Access.
Like many others, we have resolved issues with many countries and in the process of completing theexercise with others.
4.7 (Japan) Method of Tariff Determination for Watches (p. 47, para. 12) Regarding the method for
determining tariffs on watches, the U.S. does not just apply one single tariff rate for completed
watches, but rather, applies different rates on various parts.  Wrist watches (generally classified
under Chapter 91), for example, are subject to this method.  Under this method, exporters mustsubmit not only the value of the completed products, but also the value of the various parts contained
therein.  Since this system is imposing a great burden on exporters, Japan requests that the U.S.
improves the current system and adopts a single tariff to apply to completed products.  Japan also
requests the U.S. to simplify its customs procedures  by adopting a HS 6-digit system.  Please explain
the U.S. view on this point.
See response to 4.1 and 5.2.
4.8 (New Zealand) Tariffs - The Secretariat Report notes that, notwithstanding the U.S.' low overall
level of tariff protection, 5% of MFN tariffs involve rates exceeding three times the overall average.
Goods affected by such tariff "peaks" include some  food and agricultural products, textiles, clothing
and footwear (S/III, p. 45, para. 2).  The U.S. has stated that its policy is based "strongly on the
premise that removing barriers and distortions to global trade enhances higher wage job creation,
incomes, living standards and growth potential, for the U.S. and its trading partners"(G/V, p. 17, para. 75).
In view of this, what is the U.S.' justification for maintaining high tariff protection in these
areas, and what programme does it have for the reduction and eventual elimination of such tariffs?
See response to 4.1.
4.9 (Chile) The application of specific duties affords greater protection to lower-value products,
thereby making it possible to stabilize domestic prices against fluctuations in the international pricesof those products.  If a country intensively exports agricultural products and their price falls, that
country, instead of being able to benefit from its greater competitiveness, finds that its exports to the
United States have become more expensive, since it has to pay a specific duty whose ad valorem
equivalent varies from approximately 40 to 232%.  Does the United States intend to stop applying
specific duties within the near future?
See response to 4.3.
4.10 (Chile) It is stated that the dispersion of tariff rates encourages exporters and importers to
reclassify products within the Harmonized System (HS) so that they are subject to lower tariffs.  What
is the procedure for reclassifying products in the HS?
We do not understand the question.  We would be happy to work with Chile to better
understand the question.
4.11 (Chile) Could the United States please explain the tariff and non-tariff treatment accorded to
used goods?WT/TPR/M/56/Add.1
Page 18
The United States does not maintain a single regime for used goods.  Used goods are dutiable
according to the individual tariff chapters in which they fall.  Two examples follow:
Used autos, for example, are generally dutiable at the same rate as new autos.
Used clothing and used textiles are provided for in headings 6309 and 6310 of the
Harmonized System, respectively.  In 2000, the tariff rate assessed on used clothing imports
in HTS 6309 is 0.7%.  The tariff rate on sorted used textile imports in HTS 6310 is 2.5 cents
per kilogram.  Imports in headings 6309 and 6310 are not subject to quotas under the WTO
Agreement on Textiles and Clothing.
4.12 (Brazil) Tariffs peaks - According to the Report by the Secretariat the simple average applied
MFN tariff rate is 5.7% in 1999 and expected to fall to 4.6% once the Uruguay Round and ITA tariff
cuts are fully implemented.  Notwithstanding, 5% of the MFN tariffs involve rates that exceed threetimes the overall average.  Such tariff peaks affect agricultural and food products and textiles,
clothing and footwear (p. 45, para. 2).
The average for agriculture is 10.8%, and 42% of the duties applied are non ad valorem.  The results
are that these products are benefiting from higher than average protection and higher percentage of
tariff peaks (p. 163, para. 3).  Tariff quotas also apply to agricultural products, with simple averagetariff rate estimated at 9.5%, while corresponding average out of quota tariff is set at 55.8% (p. 163,
para. 4).
Brazil is a traditional exporter of agricultural and food products as well as textiles and footwear as
many other developing countries.  Since one of the main objective of the WTO is to guarantee a better
market access to developing countries, we would like to know whether, either now or in the context ofa new round, the U.S. could offer some solution to this systemic question of market access.
Recent press report sustain that the U.S. authorities would not favor a new round in tariffs based on
automatic tariff cuts, by means of formulas or bands, because the U.S. wants to preserve the existing
tariff peaks.  This of course would constitute a major disincentive for developing countries to engage
in negotiations.
Is the U.S. planning to maintain tariff peaks at current levels?  If the statement is correct would it also
apply to products listed as agricultural ones?
See response to 4.1.
4.13 (Brazil) Tariff escalation - The magnitudes of the simple averages of applied MFN tariffs shows
that tariff protection in 1999 was higher for finished goods than for semi-finished and for raw
materials.  Tariff escalation means that the level of effective tariff protection increases as goods
undergo further processing, and tends to promote pr imary and semi-finished goods, slowing the move
to higher value added production (p. 52, para. 19).
Brazil is exporting to the U.S. many products affected by tariff escalation.  Since this is another
systemic question in the area of market access, Brazil wants to express its concern with a practice
that is impeding developing countries to move to a more valued added type of exports.  Is there any
plan from the U.S. to handle this situation
Is the U.S. open to consider proposals that tend to establish a level playing field for these products or
cluster of products?
See response to 4.1.WT/TPR/M/56/Add.1
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4.14. (India) Under the APEC ATL initiatives, the United States has been a party to the identification
of nine sectors for tariff reductions.  What was the basis for such selection?  The introduction of theseinitiatives in the WTO as proposed by APEC, with the product scope, end dates and end-rates for
tariff cutting, precludes consideration of specific interests of WTO Members other than those that are
also APEC Members.  Is this form of regionalism consistent, in the view of the United States, with the
objectives, principles and modalities of nego tiations implicit in the WTO Agreements?
In November 1998, APEC Ministers agreed to seek support in the WTO to eliminate or
harmonize of tariffs in eight sectors.  This Accelerated Tariff Liberalization (ATL) initiative covers
chemicals, energy, environmental equipment, fish, forest products, gems/jewelry, medical/scientific
equipment, and toys.  Malaysia, on behalf of APEC members, presented this objective WTO
Members in the Committee on Market Access in 1998, and New Zealand, in its capacity as APEC
chair, presented additional information on the ATL sectors in 1999.  Sectoral tariff initiatives, such asthe ATL, are entirely consistent with WTO rules and procedures.  The United States stands ready to
work with others to realize these initiatives in the WTO.
4.15 (India) It has been reported that one in every seven duties on imports are specific or
non-ad valorem, and that spec ific duties account or as many as 86 of the top 100 MFN tariffs.  Since
this serves to restrict imports from economies such as India relative to the more developed countriesthat typify a high-price regime, when and how does the United States intend to reduce the implicit
bias in its tariff structure?  What is the rationale for continuing to impose specific duties on such a
large number of tariff lines?
See response to 4.3.
4.16 (Colombia) Tariffs - The Secretariat Report mentions the principal characteristics of the United
States tariff structure.  These include specific duties, higher dispersion and tariff escalation, features
which are more apparent in relation to products such as textiles, clothing, footwear and agriculturalproducts.  These characteristics make the tariff more opaque and impede access to the North
American market.
Could the United States provide information about its plans to give its tariff a more even and neutral
structure?
See response to 4.1.
5. Rules of origin, marking, and labelling
5.1 (Canada) (p. 54, para. 25) In 1998, there were several legislative proposals in the U.S. Congress
to require country-of-origin labelling for foreign meat and meat products imported into the US.
However, no legislation on country-of-origin labeling for meat was enacted.  In the current
106
th Congress, similar proposals are once again being discussed.  What steps is the U.S. taking to
ensure that any country-of-origin labeling requirements for imported meat and meat products are not
trade distorting and are consistent with WTO obligations?
The U.S. continues to encourage a open, participatory debate on such issues as country of
origin labeling.  The U.S. believes the healthiest approach for assuring that no inappropriate trade
distorting actions are undertaken is to assure that a wide group of stakeholders are able to activelyengage in such focused discussions.
5.2 (Switzerland) (p. 54, para. 26) In the U.S. special  country-of-origin marking requirements are in
force in particular in the area of watches.  According to these marking requirements the bracelet, theWT/TPR/M/56/Add.1
Page 20
movement and the case must be marked separately even though the watch is imported as a whole.
Such requirements are very burdensome form alities for the importation of watches.
What is the background of such a specific marking requirement in particular under the aspect of trade
facilitation?
Are there any efforts underway to facilitate the rather complicated tariff structure in this area
(compound duties)?
The United States has had specific marking requirements for imported watches since at
least 1930.  The requirements were enacted in the original Tariff Act of 1930.  Those requirements
were subsequently incorporated into the former Tariff Schedule of the United States (in effect from
1962 to 1988), and they are currently provided for in additional U.S. Note 4 to chapter 91 of the
Harmonized Tariff Schedule of the United States.  There have been some slight modifications to the
marking requirements over the years, and, contrary to the supposition in the question presented,“bracelets” do not have to marked separately.  In general, however, the specific marking requirements
for watches have been continuously in force in the United States for more than 60 years.
The U.S. International Trade Commission has initiated a study to determine whether it would
be feasible and appropriate to simplify the Harmonized Tariff Schedule of the United States.  This
study is ongoing, and it is not expected to result in any changes in rates of duty.  An initial draft of theproposed simplified HTS is available online at http ://www.usitc.gov/taffairs.h tm.  The initial draft
includes some modest changes to the tariff structur e for watches in chapter 91 of the HTS, and retains
most of the existing compound rates of duty for imported watches.  In a written submission to the
ITC, dated 30 June 1999, the American Watch Association, which includes U.S. and foreign watch
producers, expressed support for the “moderate simplification proposed by the Commission”.
5.3 (Switzerland) (p. 55, para. 28) As of 1 July 1996 there are new rules of origins in the area of
textiles in place despite a standstill clause in the WTO Agreement on Rules of Origin.  We haveexpressed our concerns already in the course of the 1996 trade policy review.  It is interesting to
learn, that the EU, with which the U.S. have a sp ecial preferential arrangement dealing with the
marking of silk products, has requested consultations with the US.
What are the U.S. plans to bring these rules into conformity with WTO or at least to find a solution
which would allow everybody to benefit from a labeling scheme as granted to the EU?
The United States takes its WTO obligations very seriously, and believes that the rules of
origin established by the Uruguay Round Agreements Act fully comply with our obligations under the
relevant WTO agreements.
As set forth in detail in the URAA Statement of Administrative Action, the objectives served
by the July 1996 implementation of the rules of origin pertained to improving the overall tradingenvironment by diminishing confusion and bringing  about more uniformity.  Implementation of the
rules of origin moved the United States into closer  alignment with the origin determinations of its
major trading partners.
As a result of a recent amendment (PL106-36 Section 2423) to our country of origin statute
(19 U.S.C. 1304), imported silk scarves and silk fa brics from any country, not just from EU countries,
are exempted from the compulsory origin marking under the statute, although  mention of the country
of origin on the label is still possible.
5.4 (Korea) (p. 55, para. 28) Can the agreement with th e E.U to prevent the new rules from affecting
imports of silk products be used as a basis for the MFN treatment by the other countries?WT/TPR/M/56/Add.1
Page 21
As a result of a recent amendment (PL106-36 Section 2423) to our country of origin statute
(19 U.S.C. 1304), imported silk scarves and silk fa brics from any country, not just from EU countries,
are exempted from the compulsory origin marking under the statute, although  mention of the countryof origin on the label is still possible.
This marking/labeling change is available for all countries but does not affect origin;
therefore MFN status will not change.
5.5 (Japan) Local content requirement on automobiles (p. 54, para. 24) It is mentioned that,
"[f]or automotive products, the regional-content requirement is 56%, to be increased to 62.5%in 2002".  What is the reason for increasing the requirement?
Rules of origin are regarded as an "other regulation in commerce" as stated in Article XXIV:5(b) of
the GATT.  Such substantial strengthening of the rules of origin may well violate Article XXIV:5which stipulates that, "duties and other restrictive regulations of commerce shall not be higher or
more restrictive than the corresponding duties and other regulations of commerce existing in the
same constituent territories prior to the formation of the free trade area, or interim agreement".  What
is the United States' view on this point?
This topic has been discussed extensively in the Committee on Regional Trade Agreements.
Please refer to the document series WT/REG4.
5.6 (Japan) Rules of origin in NAFTA (p. 54, para. 24)  Under the rules of origin in NAFTA, in order
for a textile product to be considered of NAFTA origin, the production process of yarns or cotton
must be made within the NAFTA.  Textile products  using textiles imported from Japan are, therefore,
not considered of NAFTA origin, thereby a higher tariff rate is applied when distributed in theNAFTA.  This being so, rules of origin in the N AFTA constitute a barrier to investment from Japan
into the NAFTA countries and also has the effect of excluding the exports of non-parties, thereby
resulting in discrimination.  The rules of origin  of the NAFTA are substantially stricter rules
compared to those of the United States-Canada Fr ee Trade Agreement.  The Committee on Regional
Trade Agreement is now in the process of examin ing the NAFTA but has not yet clearly addressed its
views.  However, it cannot be denied that such  an agreement may conflict with the provisions of
Article XXIV of the GATT.  Japan would like to request the United States to amend the rules of origin
in the NAFTA to the extent of similar rules of origin in the United States and also to improve market
access for non-parties.  What is the U.S. view on this point?
This topic has been discussed extensively in the Committee on Regional Trade Agreements.
Please refer to the document series WT/REG4.
5.7 (Japan) Changes in the U.S. rules of origin fo r textiles and apparel products:  In November 1998,
the European Communities requested consultations with the United States pursuant to Article 8.4 of
the Agreement on Textiles and Clothing, Article 7 of the Agreement on Rules of Origin, Article 14.1 of
the Agreement on Technical Barriers to Trade and Article XXII of the GATT 1994, in regard to this
issue.  On 15 January 1999 the first meeting for consultations, in which Japan participated as a third
party, was held.  Since then there seems to have been no progress.
What are the current U.S. rules of origin for textiles and apparel products? (Are the changed rules,
which entered into force on 1 July 1996, being implemented at present?)
What is the latest situation regarding the consultations between the United States and the European
Communities?WT/TPR/M/56/Add.1
Page 22
Which rules of origin will the U.S. authorities apply for textiles and apparel products from now on?
(Will the U.S. authorities return to the rules of origin which were valid before the change inJuly 1996?)
(a) The current rules for textile and apparel products are contained in Federal Register,
Volume 60, No. 171, Tuesday, 5 September 1995, pp. 46188-204.  These rules were codified as a
result of the Act implementing the Uruguay Round Agreements in the United States, and entered into
force on 1 July 1996.
(b) The U.S. and the European Union reached agreement resolving this dispute on
16 August 1999.
(c) The U.S. will continue to apply the rules of origin contained in the above-mentioned
Federal Register notice, as these are the rules that are required by statute in the United States.(In 1998, the U.S. proposed to Congress that the rules of origin affecting certain fabric be changed to
permit the processes of dyeing and printing (plus two additional processes) to confer origin, as was
permitted prior to 1 July 1996.  This proposal was opposed by some of our trading partners, and
ultimately was not enacted by Congress.)
5.8 (Japan) Rules of Origin for Watches (p. 54, para. 26) Exporters are obliged to indicate the
country of origin for each major part when import ing watches into the US.  Furthermore, the formula
for the indication of origin is very complicated.   Such a system imposes a heavy burden on exporters.
Japan requests that the U.S. simplifies its system in order to only oblige indication of a single origin
for completed watches, and in order to allow exporters to determine the appropriate way for
indicating the origin.  What is  the U.S. view on this point?
See answer to 5.2.
5.9 (Japan) Labelling of Automobiles (p. 54, para. 27) The "American Automobile Labelling Act"
mandates labels for passenger cars and light trucks sold in the U.S. that include a certain ratio ofparts made in the U.S. or Canada.  This law impl icitly encourages the use of domestic products and
could be inconsistent with the principles of national treatment.
Moreover, since the labelling requirement applies only to automobiles with a greater non-US/Canada
ratio, this system provides a heavy administrative burden for calculating such a ratio on
foreign-affiliated manufacturers, which generally have a higher non-US/Canada ratio, as well as thedealers of such automobiles.  This could be deemed as a de facto barrier to imports.  Japan,
therefore, requests that this system be revised to secure fair competition.  Please explain the U.S. view
on this point.
The American Automobile Labeling Act of 1992 (Labeling Act) is neutral.  The same
labeling requirements apply regardless of where a vehicle is manufactured, and thus do not createspecial burdens for imported vehicles.  The Labeling Act neither directly nor indirectly establishes
any requirements about minimum domestic parts or labour content.  Providing consumers information
about origin of vehicles and their components does not hinder fair competition between imported and
domestic automobile parts or vehicles.
The Labeling Act also does not treat foreign manufacturers less favorably than domestic
manufacturers with respect to the administrative burden of calculation.
5.10 (Chile) With regard to the application of its rules of origin, could the United States provide
information on the verification proceedings that have been carried out?  In particular, we would liketo know what, in actual practice, is the activating procedure, what products have been affected and
their origin, and the frequency of the proceedings.WT/TPR/M/56/Add.1
Page 23
Since the inception of NAFTA, on 1 January 1994, the U.S. has conducted verifications with
respect to a wide variety of commodities to determine whether or not the goods met the rule of originand qualified for NAFTA.  These commodities represent virtually every chapter of the HarmonizedSystem.
The verifications are conducted either by questionnaire, by letter or by an audit.  Some
verifications have included visits to an exporter or producer's premises.
The process for conducting a NAFTA verifications is  spelled out in the provisions of
chapter 5 of the NAFTA and in the uniform regulations .  A Certificate of Origin is requested from the
importer.  Once received, the Customs officer reviews it for validity and formulates the questions to
be posed to  the exporter.  Such questions are then sent to the exporter.  Exporter responses are
analyzed for compliance with the applicable rule of origin.  A determination of origin results.
Candidates for verification are selected either under the Customs compliance measurement
program or by individual officers in the ports.  The number of verifications that are  required to be
performed is formulated in advance.
5.11. (Turkey) Although it was originally envisaged that the Harmonization Work Programme for
non-preferential Rules of Origin would be completed within three years of initiation, negotiations tothis end have not been able to bring about the final re sults.  The lack of common understanding in this
regard has prolonged the settlement of a number of legal and practical problems, which are a source
of concern to the Turkish Delegation.
It is the view of this delegation that until the Work Programme is completed, Members should refrain
from introducing national arrangements that create restrictive, distorting and disruptive effects oninternational trade.  Frequent changes to these arrangements could also give rise to uncertainty for
the exporters.  We, therefore, attach importance to the successful completion of the Harmonization
Work Programme.
Within this context, we would like to ask the U.S. what is the current situation for the implementation
of the U.S. requirements on non-preferential rules of origin so far as textiles and clothing are
concerned and what are the future plans for th em?  Likewise, could the U.S. briefly state its
assessment regarding ongoing efforts towards harmonizing non-preferential rules of origin?
See responses to 5.3 and 5.4.  The U.S. also attaches importance to the successful completion
of the Harmonization Work Programme.
5.12 (Malaysia) Rules Of Origin, Marking And Labelling - Under the Textile Fibre Products
Identification Act, all textile products must be labelled or marked and the name of the manufacturer
and where the textile products were processed are required to be indicated.  For products that requireminimal cutting and assembly, origin is confer red by the country where the fabric was woven.
Malaysia is concerned with this rule as exports of products such as tablecloth and bedlinen from third
countries whose fabrics whose fabrics are made from Malaysia are considered as products of
Malaysian origin.  Malaysia’s acceptance in 1997 of the U.S. proposal to drop quota and visa
requirements is only applicable to certain dyed and printed fabric in category 611.
Why does the U.S. assume that the issue of Rules of Origin has been resolved when the acceptance
only covers certain dyed and printed fabric in category 611?WT/TPR/M/56/Add.1
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The U.S. is making no blanket assumptions regarding the concerns of our trading partners on
the issue of rules of origin, or other issues.  If Malaysia has specific concerns on this matter, we wouldbe pleased to work with Malaysia to understand these concerns.
6. Non-Tariff Measures
Import licensing
6.1 (Hong Kong) (p. 57, para. 38) We note that importation of natural gas or liquefied natural gas is
authorized only if it is consistent with the public interest and a finding of public interest is required
except for imports originating in a country with which the U.S. has a free-trade agreement (FTA).  It
is also mentioned that currently, virtually all natural gas imports originate in FTA partners.  We are
interested to know how "public interest" is de fined and based on what criteria public interest is
determined.  Have any applications for authorizat ion to import from non-FTA countries been rejected
on the grounds of "public interest"?  Would the U.S. share with U.S. if it has any plan to relax the
import requirements for non-FTA parties?
Please refer to G/LIC/N/3/USA/2 for a full description of the requirements that apply to
imports of natural gas, including information on the “public interest” provisions of U.S. law related to
NG and LNG imports.
6.2 (Korea) (p. 57, para. 38) Importation of natural gas or liquefied natural gas is authorized only if
it is consistent with the public interest.  An assessment of public interest is required except for imports
originating in a country with which the United St ates has a free-trade agreement.  Why does U.S.
relate importation of natural gas or liquefied natural gas with the public interest?  Why not petroleum
and other natural resources?  In addition, the concept of public interest could be arbitrary.  What
does U.S. mean by public interest in this case?
See response to 6.1.
6.3 (Korea) The U.S. Customs Authority made publi c on 31 March 1999 new guidelines for customs
clearance concerning import document conservati on requirement and fine imposition in case of
non-conservation (19 U.S.C 1508(a), (c);  1509(g)(1)) .  In the case of non-compliance, the importer
shall be fined from US$5,000 up to US$100,000 and this is applicable retrospectively from
15 July 1996.
What is the rationale for the U.S. to apply a procedure designed for customs fraud to this kind of
negligence of document conservation, instead of making separate rules specific to this category?
What justifies the retrospectivity?
On 31 March 1999, U.S. Customs published proposed guidelines for the mitigation of
penalties for persons who fail to comply with lawful demands for the production of entry records.Comments by the public were invited, and these comments are currently under review.
Title 19, United States Code section 1509,  provides penalties for failure to comply with such
demands.  Penalties are provided which vary according to whether the failure is the result of a wilful
failure to maintain, store or retrieve the demanded information or whether it is the result of
negligence.  These penalties were part of the Customs Modernization Act which was signed into lawon 8 December 1993.
The effect date of 15 July 1996 for the proposed guidelines was chosen  because that was the
date that notice was given to the public in the Federal Register of the specific records to be kept.WT/TPR/M/56/Add.1
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6.4 (Australia) We note the finding in the June  1999 OECD Economic Outlook "Trends in Market
Openness" that, notwithstanding improvement over recent years, NTMs still have a high frequency in
the U.S. (16.8% of tariff lines, against 19.1% fo r the EU and 10.7% for Japan).  How does the U.S.
propose to further decrease the incidence of NTMs in its market?
See response to 4.1.
6.5 (Japan) Iran and Libya Sanctions Act of 1996 (p. 31, para. 55) In 1996, the United States enacted
the Iran and Libya Sanctions Act.  The scope of the sanction covers parties investing in excess ofUS$20 million a year that, under judgement from the President, contribute directly and markedly to
the development of oil resources in Iran and Libya.  The sanction measures include those regarding
Export-Import Bank assistance, export licences, loans or credit provided by U.S. financial
institutions, U.S. government debt instruments, government procurement and imports.  The Act may
come under the extraterritorial application of a U.S. internal law and may contain someinconsistencies with the WTO Agreement.  Japan strongly requests the United States to apply the law
in a diligent manner to ensure consistency with international law.  To add, in light of the fact that the
sanction measure is waived for three enterprises, enterprises in all countries, including Japan, should
not be treated discriminatorily.  Please explain the U.S. view on this point.
The Iran-Libya Sanctions Act of 1996 (ILSA) does not prohibit activities that occur outside
the territory of the United States.  Rather, ILSA provides for the denial of certain U.S. benefits to
companies that engage in certain conduct that is contrary to the national security and foreign policy
interests of the United States.  The United States has said that we intend to implement ILSA in a
deliberate and fair manner, taking into consideration our international obligations.  In 1998, the
Secretary of State decided, as provided for in the law, to waive the imposition of sanctions against the
firms participating in the development of the South Pars gas field.  We have stated that, in any ILSA
case, whatever the nationality of the firm involved, we would proceed in the same manner:  theSecretary would first evaluate the facts and determine if sanctionable activity had occurred.  If it had,
the Secretary would then decide in light of our national interests what action, among the options
provided for in the statute, to take, i.e. whether to impose sanctions, to waive them, or to enter into
consultations with the government in question.
6.6 (Japan) The Helms Burton Act - The Helms-Burton Act includes such measures as those which
allow a U.S. national to sue for damages any person who traffics in property confiscated by the
Cuban Government at the time of the Cuban Revolution, as well as those which restrict the entry of
corporate officers from such companies, and thereb y may be in violation of the GATT and the GATS.
In May 1998, the United States and the EU agreed to waiver application of this law.  Japan requests
the United States, therefore, to extend the same tr eatment as the EU to third countries, including
Japan.  Please explain the U.S. view on this point.
The United States believes that the Cuban Liberty and Democratic Solidarity (LIBERTAD)
Act is consistent with U.S. obligations under the GATT and the GATS.  Since the enactment of the
LIBERTAD Act, the President has exercised his authority under Title III of the Act to suspend the
right of U.S. nationals to file suit against persons that are trafficking in confiscated property in Cuba.That suspension remains in effect.  In 1998, the United States and the European Union reached an
Understanding with Respect to Disciplines for the Strengthening of Investment Protection.  That
Understanding provides that the United States would continue consultations with the Congress with a
view to obtaining an amendment of Title IV of  Helms-Burton that would provide authority for a
waiver that would apply, with respect to the EU , without a specific time limit, so long as the
Understanding was in effect.  Application of the disciplines in the Understanding and the exercise of
such waiver authority is to be simultaneous.  Consultations with the Congress on this issue areWT/TPR/M/56/Add.1
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continuing.  Therefore, the disciplines in the Understanding are not yet in effect.  The United States
would be prepared to discuss with Japan or other countries measures to deter investment in property,
in Cuba or elsewhere, that was confiscated in contravention of international law.
6.7 (Japan) Tariff quota of sugar (p. 57, para. 36) Japan is interested in the U.S. tariff rate quota for
sugar as it thinks that the administration of such ta riff quota is rather unclear.  Could the U.S. explain
such administration, including the criteria for issuing a CQE (Certificate of Quota Eligibility)?
Certificates of Quota Eligibility (CQE) are issu ed to countries that receive allocations under
the raw cane sugar tariff rate quota (TRQ).  CQE’s are official forms that are generated at the U.S.
Department of Agriculture and issued to Governme nt Officials in exporting countries who certify that
the raw sugar exported to the United States was pr oduced in the exporting country.  The completed
CQE must be presented to U.S. Customs in order for imported raw sugar to receive low-tier tariff
treatment.  The regulations governing the issuance of CQE’s are contained in Subpart A of Part 2011of Title 15 (15 CFR 2011) of the U.S. Code of Federal Regulations.
6.8 (New Zealand) Import licensing - The Secretariat Report notes that import permits are required
for most plants and plant products to protect against the introduction of pests and diseases, and to
protect endangered plant species (S/III, para. 35, p. 56).  The report further notes that if the country is
free of the disease or pest in question, APHIS  will issue the import permit (footnote 35).
In light of this, how does the U.S. justify the longstanding delay in resolving New Zealand's request
for access to the U.S. for live honeybee and honeybee semen, when, in view of New Zealand's superior
honeybee health status, there is no scientific basis for denying such access of SPS grounds?
Honeybees are not considered plant pests, and their import is not regulated under the Plant
Pest Act or Plant Quarantine Act.  Their import is regulated under the Federal Honeybee Act, which
does not currently have provisions for import of honeybees, except by USDA researchers.  A Federal
Register Notice is now out, requesting public comment on a Risk Assessment for the importation ofNew Zealand honeybees.  After appropriate review of the Notice comments, USDA will publish a
Proposed Rule that would allow commercial importa tion of honeybees from those countries where a
risk assessment shows low or no risk.
6.9 (Chile) The Secretariat Report indicates that import permits for plants and some plant products
are issued only to firms or individuals resident in the United States.  What is the reason for this?
Please provide a better explanation of the APHIS criteria for issuing import permits.
What is the justification for the special treatment granted to Canada exempting it from these permits,
in as much as the four reasons given do not seem to be totally objective?
According to the regulations, persons applying for an import permit must have a United States
address.  This ensures that someone is responsible for the arriving shipments.  Regulations aboutwhich products may be entered are based on pest risk assessments.  For fruits and vegetables, a
commodity is prohibited until a risk assessment has been done.  For nursery stock, commodities are
restricted based on the pests and diseases in the country of origin, and the risk the importation poses to
U.S. agriculture and natural resources.  These restrictions are codified in Title 7, Chapter 319.37 of
the Code of  Federal Regulations.  In the case of Canada, various risk assessments have concludedthat the risks in the products requested to be exported to the U.S. were low.
6.10. (Colombia) Non-tariff measures - The country of importation sugar quota is based on a
reference period which is often not representative.WT/TPR/M/56/Add.1
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Is the United States in a position to revise this reference period if a country, such as Colombia, can
show that the period is not representative of its exports?
The U.S. raw cane sugar TRQ is allocated by country, in accordance with WTO rules
(Article XIII of the GATT 1994), based on the shares supplied during a previous representative period
that reflects what trade shares would normally be in the absence of a tariff-rate quota.  The base
period used for these country specific allocations is 1975-81, which was the last period wherein U.S.
trade in raw cane sugar was unrestricted by quotas.  In addition, this year, we made an allocation ofraw cane sugar of 25,000 tonnes to Mexico in  order to satisfy our NAFTA obligations.
The current historical tariff-rate quota allocation scheme is transparent, and allows the United
States to maintain its commitments under internat ional agreements.  Any decision to change the
method of allocation which did not provide for the involvement of all other WTO members parties
having a substantial interest in supplying the sugar could also disturb trade relations with thosecountries.  (Over 40 countries receive allocations of the raw cane sugar TRQ.)
6.11. (Colombia) The Report mentions that the importation of liquefied natural gas is authorized only
if it is consistent with the public interest, except in the case of imports originating in a country with
which the United States has a free trade agreement.
Could the United States please define the nature of the public interest criterion.Has the United States approved imports of gas from countries with which it does not have trade
agreements?
See response to 6.1.
7. Contingency measures
7.1 (Canada) (p. 71)  Chart III.6 shows an increase in the number of countervail cases initiated from
1996 to 1998.  What are the factors related to this trend?  Is the number of initiations expected to
continue increasing?
The overwhelming majority of countervail cases initiated over this period have involved steel
products.  Any explanation we would attempt to give for this trend - or its possible continuation -
would be mere speculation, as the intensity of petition filings is undoubtedly driven by a number of
changing factors over time.  For the most part, however, the petition filings and resulting initiations
have coincided with last year’s unprecedented surge in steel imports.  Where subsidies havecontributed to this, and where increased volumes of subsidized imports cause or threaten to cause
material injury to a domestic industry, then such industries are well within their rights to seek redress
under the carefully prescribed procedures permitted by WTO rules.
7.2 (Korea) (p. 60, para. 47) Under section 311(a)  of the NAFTA Implementation Act, NAFTA
countries are excluded from the application of safeguard measures, unless they are among the top fivesuppliers and it is shown that they make an important contribution to serious injury.  However, it may
be argued that such a regulation is inconsistent with the most fundamental principle of the WTO
i.e. MFN.  What is the U.S. position on such  view, and how many times has the U.S. invoked such
regulation?
Under section 202 of the Trade Act of 1974, the U.S. global safeguard law, the USITC
determines whether a product is being imported in such increased quantities as to cause or threaten to
cause serious injury to a domestic industry producing a like or directly competitive product.  If theWT/TPR/M/56/Add.1
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USITC makes an affirmative determination under section 202, it then conducts a second and separate
causation analysis with respect to NAFTA imports.  Under section 311(a) of the NAFTAImplementation Act and pursuant to U.S. obligations in Article 802 of NAFTA, the USITC must find
whether imports from a NAFTA country account for a substantial share of total imports and have
contributed importantly to the serious injury or threat of serious injury.  The USITC then reports its
determination under section 202 and findings under section 311(a) to the President, together with any
remedy recommendations.  The President makes the final decision with respect to whether to apply asafeguard measure and, if so, whether to include NAF TA imports.  If he decides to apply a measure
but makes a negative decision with respect to imports from one or both NAFTA countries, he must
exclude imports from the NAFTA country or countries from the safeguard measure.
Nothing in the Safeguards Agreement proscribes an independent causation analysis for
imports originating in the territory of another free-trade area participant or, indeed, suggests that onlya single causation analysis is appropriate.  Article 4.2(b) of the Agreement, which addresses causation
procedures generally, says nothing about the number or sequence of causation analyses that the
competent authority may undertake.
Article 2.2 of Safeguards Agreement establishes a general rule that “[a] safeguard measure
shall be applied to a product being imported irrespective of its source”.  In addition, Article 5.2establishes specific rules for allocating safeguard quotas.  Neither article makes specific reference to
application of safeguard measures by the participants of customs unions and FTAs to imports from
other countries participating in the union or FTA.
Specific provisions addressing these issues are found in footnote 1 of the Safeguards
Agreement, appended to Article 2.1.  The last sentence of footnote 1 states that “Nothing in this
Agreement prejudges the interpretation of the relationship between Article XIX and para. 8 of
Article XXIV of GATT 1994.”  Footnote 1 establishes two important principles.  First, itdemonstrates that the framers of the Safeguards Agreement recognized a connection
(“the relationship”) between safeguards measures (Article XIX) and customs unions and FTAs, as
defined in Article XXIV:8.  Second, the footnote makes clear that the negotiators of the Safeguards
Agreement sought to avoid any implication that th e provisions of the Safeguards Agreement could be
invoked to change that nexus (“Nothing in this Agreement prejudges the interpretation”).
Thus, to determine Members’ rights and obligations regarding the application of  a safeguard
measure in the context of an FTA, one must look to the applicable provisions of the GATT 1994,
namely Articles XIX and XXIV:8 in the first instance.  In particular, the footnote makes clear that the
non-discrimination requirement of  Article 2.2 of the Safeguards Agreement, and the quota allocation
rules of Article 5.2, are not pertinent in assessing the safeguards treatment accorded by a customsunion or FTA member to goods originating in other  participant countries.
To sum up, the question of how an FTA member may (or must) treat imports from its FTA
partners when it applies a safeguard measure cannot be answered by reference to the Safeguards
Agreement.  Rather, the answer is to be found in the rights and obligations associated with FTAs as
those rights and obligations may apply in the context of safeguards measures contemplated byArticle XIX.
GATT Article XXIV:8(b) provides as follows:
A free-trade area shall be understood to mean a group of two or more customs territories in
which the duties and other restrictive regulations of commerce (except, where necessary, those
permitted under Articles XI, XII, XIII, XIV, XV and XX) are eliminated on substantially all the tradebetween the constituent territories in pr oducts originating in such territories.WT/TPR/M/56/Add.1
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That the NAFTA constitutes a free trade area for purposes of Art. XXIV:8 is well
documented in the relevant working party reports.  The safeguard exemptions set out Article 802 ofthat agreement, were introduced upon the formation of the NAFTA.  The importance the NAFTA
parties attached to this provision is illustrated by the fact that NAFTA Article 802 was also included,
in slightly different form, in Article 1102 of the 1988 United States-Canada Free-Trade Agreement.
Article 1102 required Canada and the United States to exempt each other’s products from any  global
safeguard measures they imposed while the agreement was in effect, subject to the same sort ofexceptions included in NAFTA Article 802.
1
7.3 (Korea) (p. 64, para. 62) In the DRAMs case, i.e. the dispute between Korea and the U.S.regarding the U.S. anti-dumping measures on DRAMs from Korea, the Panel recommended that the
United States bring "section 353.25(a)(2)(ii) of the Department of Comme rce regulations, and the
Final Results of the Third Review, into conformity  with its obligations" under the Agreement.  The
WTO Panel agreed with Korea that the “not like ly” criterion in the U.S. anti-dumping revocation
regime violates Article 11.2 of the Anti-Dumping Agr eement.  Specifically, the Panel rejected the U.S.
practice, finding that it improperly shifted the burden of proof to the repondent companies and
required them to prove a negative – that they are “n ot likely” to dump in the future.  The Panel found
that whenever an investigating authority conducts a revocation review, the authority bears the burdenof proof and, to maintain a duty, must affirmatively find that dumping is “likely” to continue or recur
if the anti-dumping duties were removed.
In addition to invalidating the U.S. regulation, th e Panel also found that the decision of the U.S.
Department of Commerce not to revoke the anti-dumping order on DRAMs from Korea based on the
“not likely” criterion was inconsistent with Article 11.2 of the Agreement.  Therefore, to implement
the Panel’s recommendations, the United States is obliged both to amend its revocation regulation
and to revoke the DRAMs anti-dumping order because, as the Panel found, it has no legal basis.
Although this appears to be a statement rather than a question, the United States notes that on
15 April 1999, it informed the DSB that the United States intends to implement the recommendations
and rulings of the DSB in the DRAMs dispute.  On June 3, the Department of Commerce published a
Notice of Proposed Rulemaking which would amend the relevant anti-dumping regulation.  As for
Korea’s assertion that the anti-dumping orde r on DRAMs must be revoked, the DRAMs panel
expressly rejected revocation of the order as the exclusive means of implementation.  Instead, the
panel noted that there was a “range of possible wa ys in which the United States could appropriately
implement [the panel’s] recommendation ...”.
7.4 (Korea) (p. 76, para. 87) In determining the likelihood of continuation or recurrence of dumping
if anti-dumping duties are revoked, the competent authority's finding should be based on objective
and unbiased facts, and reliance on mere conjecture is not permitted under the AD agreement. Whatever the method used for that purpose, it seems that the determination by the ITA and the USITC
of the likelihood may involve a high degree of conjecture.  In that respect, we believe that a zero or
de-minimis level of dumping margin for three consecutive years should be a fairly sufficient evidencethat dumping is not likely to recur in the near future.  What is the U.S. view on this?
                                                     
1 Article 1102 of the U.S.-Canada FTA provides in relevant part:
1. With respect to an emergency action taken by a Party on a global basis, the Parties shall retain their
respective rights and obligations under Article XXI of the General Agreement on Tariffs and Trade subject to
the requirement that a Party taking such action shall exclude the other Party from such global action unlessimports from that Party are substantial and are contributing importantly to the serious injury or threat thereofcaused by imports.  For purposes of this paragraph, imports in the range of 5% to 10% or less of total importswould normally not be considered substantial.WT/TPR/M/56/Add.1
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The United States disagrees with Korea’s unsupported assertion that determinations by the
ITA on the likelihood of continuation or recurrence of dumping involve “a high degree of conjecture”.U.S. law requires that such determinations be based on “substantial evidence”.  More generally, the
DRAMs panel acknowledged that a likelihood determination involves a prospective analysis and that
“analysis involving prediction can scarcely aspire to a standard of inevitability”.  ¶ 6.43.  As for
Korea’s assertion concerning zero or de minimi s dumping margins, the DRAMs panel rejected the
notion that the absence of current dumping preclude d a finding that dumping would recur.  Instead,
the panel simply noted that the absence of dumping and the length of time that situation has existedmight be a factor to consider.  ¶ 6.34 and note 489.
7.5 (Australia) Given that the WTO Safeguards Agreement already provides for the application of
temporary trade restrictions in certain specific circumstances and that legislative proposals before
the U.S. Congress would significantly lower the U.S. domestic legal standard for obtaining import
relief, what plans does the United States have for preventing Section 201 of the 1974 Trade Act from
being used by U.S. industries faced with unsubsidi sed import competition to avoid making competitive
adjustments?
Australia has a number of reservations and questions  about the USITC S.201  report on lamb meat
which it has put to the United States.  We consider that safeguards action would be unjustifiable in
this instance and would send the wrong signal to others in relation to safeguards action in relation to
threat alone.
The United States has not amended the causation provision in its safeguards law.  While
several bills have been introduced in the Congress that would amend the provision, all remain in the
early stages of the legislative process.  Thus, the final form of any amendment is unknown at this
time.  Also, it should be recognized that a stat utory amendment is likely to be just one of the
considerations that an industry takes into account in deciding whether to file a petition.  Accordingly,
even if one of the bills had been enacted, it would be difficult if not impossible to predict the effectthat it would have on the nature and volume of petitions filed.
Australia has joined New Zealand in requesting establishment of a panel to review the U.S.
safeguard measure on imports of lamb meat.  The United States has already expressed the view that it
believes the U.S. measure satisfies the requirements of the Safeguards Agreement in all respects.
7.6 (Japan) Anti-Dumping (p. 64, paras 53-) Overview:  Japan wishes to stress that AD measures
should be applied in a WTO-consistent manner and that they should be administered fairly and
rationally.
The number of petitions for AD measures and the impos ition of AD duties are said to be decreasing in
the US.  In actual fact, the number of investigati ons initiated has recently been decreasing, with the
peak cumulating at 84 cases in 1992.  However, in 1998, the number was again up reaching 36 cases.All in all, the number of investigations initiated in the U.S. rate among the highest in the world.  There
are also cases where a specific industry seems to be  using this system as a tool for protectionism.
Recently, a WTO panel found that a U.S. AD measure against Korean DRAMs was WTO-inconsistent.
This, in the view of Japan, is an example of the arbi trary administration of the AD regime in the US.
AD measures are exceptions to the principles of MFN and to the rule where tariffs must not be raised
above bound levels.  Abuse of AD measures in a protectionist manner adversely affects trade.
Moreover, any initiation of an investigation itself has a chilling effect on exporters and importers.  Inlight of these trade-distorting effects inherent in AD measures, as has been demonstrated through
Japan's request, in the Japan-US Dialogue on Deregul ation, for improving AD procedures, it is our
view that the utmost care must be taken in invo king AD measures.  Therefore, Japan requests the U.S.
to administer the AD system adequately.  Pl ease explain the U.S. view on this point.WT/TPR/M/56/Add.1
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Anti-dumping measures are not exceptions to GATT principles.  Article VI, the article
pursuant to which such measures may be imposed, is a fundamental part of the balance of rights andobligations to which all WTO Members subscribe.  Article VI recognizes that distortions to
international competition caused by dumping can be so severe that an effective remedy to curb such
practices is essential.  In fact, Article VI expressly states that injurious dumping is to be condemned.
There is no other commercial practice addressed in the GATT for which its drafters chose such strong
language.
The United States agrees that WTO Members should take anti-dumping actions consistently
with the provisions of Article VI and the Anti-dumping Agreement.  The United States takes great
care in administering its anti-dumping laws to meet these requirements.  We also recognize the right
of all Members to request the establishment of dispute settlement panels, in order to determine
whether a Member’s interpretations of the Agreement are permissible.  In the recent dispute involvingDRAMs, a U.S. regulation was found not to reflect a permissible interpretation of the Anti-dumping
Agreement.  Accordingly, the United States has announced that it is taking steps to implement the
panel’s findings.
7.7 (Japan) Anti-dumping Act of 1916 (p. 64, para. 61) The Anti-dumping Act of 1916 is causing a
trade-chilling effect.  For example, Japanese trading firms are being sued under this Act.  Even anAmerican court has ruled that this Act has a prot ectionist component.  Such a WTO-inconsistent law
must be abolished as soon as possible.  Japan is now requesting establishment of a panel on this issue
and is awaiting adequate reaction from the U.S. side.
Far from causing a "trade-chilling" effect, there have been no recoveries under the 1916 Act
in its 84 year history.  In the view of the United States, the 1916 Act is fully WTO-consistent and the
United States intends to defend vigorously the statute before the WTO.
7.8 (Japan) Steel (p. 68, para. 69) On June 2, the U.S. steel industry filed an AD petition against the
imports of cold-rolled carbon steel flat products  from several countries, including Japan.  It is
surprising that such a petition has been filed at a time when the U.S. steel market is recovering, both
in terms of production and price, and when imports  from Japan have decreased to a historic level.
Japan is concerned that political pressure from the steel industry and labor unions could hamper a
fair and objective handling of the case.  Japan shall closely monitor the handling of this issue by theDOC and the ITC.  This petition, together with the steel industry's support for a protectionist tradebill, is most alarming to Japan as it could lead to a general momentum of protectionism in the US.
In 1998, steel imports from Japan and a number of other countries increased by more than
100%, in part because ours was one of the few open markets to which foreign exporters recovering
from the global financial crisis could turn.  In response to this unprecedented surge the steel industry
filed a number of anti-dumping cases, including the cold-rolled case.
All actions taken by the USG in conducting these cases have been fully in accordance with
our statute, established procedures and our WTO requirements.
As you know, the filing of petitions is at the discretion of the domestic industry.  If dumping
petitions filed by the U.S. steel industry meet our legal requirements, which are, in turn, reflective of
WTO requirements,  we are obligated to initiate these investigations.  Naturally, we will conduct these
cases in accordance with the law and our WTO obligations.
In its preliminary determination, the Commission observed that U.S. demand for the
cold-rolled steel products at issue was relatively strong over the period examined.  It found, however,that the subject imports were having an adverse impact on U.S. cold-rolled steel industry on the basis
of increases of subject import volumes, declining sales prices, underselling by the subject imports andWT/TPR/M/56/Add.1
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adverse trends in the financial condition of the domestic industry.  It is continuing to examine these
issues in the final phases of its investigation.
Regarding the concern you raise about protectionism and steel legislation, the Administration
vigorously opposed the steel quota bill.  The vote against the quota bill in the Senate on June 22 was a
reaffirmation of our commitment to open markets and to a strong economy.
7.9 (Japan) Export ban and import licensing (p. 80, para. 98) In the US, exports of logs from
state-owned forests, which are located on the we st-hand side of the 100 West longitude, are banned
eternally for the purpose of protecting northern spotted owls, etc.  However, Japan thinks that this
measure is rather an export quantitative restriction for protecting domestic sawmillers as, first of all,
protection of spotted owls must be done through regulating log-cuts and not by export bans.
Secondly, only export restrictions have been introduced, whereas no regulations have beenestablished for the domestic transactions of logs.  Moreover, the U.S. promotes its exports of timber
products.  Japan would, therefore, like to request the U.S. to remedy this measure in accordance with
the WTO Agreement.  Please expla in the U.S. view on this point.
Generally speaking, not only regarding forestry products but also regarding agricultural products,
Japan is concerned about the export quantitative restrictions, which are regulated laxly incomparison with import quantitative restrictions that have been tariffied under the Uruguay Round
agreements.
See response to 2.8.
7.10 (EU) (p. 64, para. 60) It may be useful to pr ovide further explanati on on how AD/CVD sunset
reviews are conducted and how the changes in market conditions are taken into consideration, also inlight of the fact that there are some measures, still in force, which date back over two decades.
U.S. law requires the U.S. International Trade Commission to determine in a five-year review
proceeding whether revocation of an anti-dumping or countervailing duty order, or termination of a
suspended investigation, “would be likely to lead to continuation or recurrence of material injury
within a reasonably foreseeable time”.  It provides that the Commission is to “consider the likely
volume, price effect, and impact of imports of the subject merchandise on the industry if the order is
revoked”, and directs the Commission to take into account its prior injury determination, whether any
improvement in the state of the industry is related to the order under review, and whether the industry
is vulnerable to material injury if the order is revoked.
2
In evaluating the likely volume of imports of subject merchandise if the finding under review
is revoked, U.S. law directs the Commission to consider whether the likely volume of imports would
be significant either in absolute terms or relative to production or consumption in the United States.3
In doing so, the Commission must consider “a ll relevant economic factors”, including four
enumerated factors:  (1) any likely increase in production capacity or existing unused productioncapacity in the exporting country ;  (2) existing inventories of the subject merchandise, or likely
increases in inventories ;  (3) the existence of barriers to the importation of the subject merchandise
into countries other than the United States ;  and (4) the potential for product shifting if production
facilities in the foreign country, which can be used to produce the subject merchandise, are currently
being used to produce other products.
4
U.S. law directs the Commission, in evaluating the likely price effects of subject imports if
the anti-dumping finding is revoked, to consider whether there is likely to be significant underselling
                                                     
2 See 19 U.S.C. para. 1675a(a)(1).
3 See 19 U.S.C. para. 1675a(a)(2).
4 See 19 U.S.C. para. 1675a(a)(2)(a)-(d).WT/TPR/M/56/Add.1
Page 33
by the subject imports as compared with domestic like products and whether the subject imports are
likely to enter the United States at prices that would have a significant depressing or suppressingeffect on the prices of domestic like products.
In evaluating the likely impact of imports of subject merchandise if the finding is revoked,
U.S. law directs the Commission to consider all relevant economic factors that are likely to have a
bearing on the state of the industry in the United States, including but not limited to:  (1) likely
declines in output, sales, market share, profits, productivity, return on investments, and utilization of
capacity ;  (2) likely negative effects on cash flow, invent ories, employment, wages, growth, ability to
raise capital, and investment ;  and (3) likely negative effects on the existing development and
production efforts of the industry, including efforts to develop a derivative or more advanced version
of the domestic like product.  All relevant economic factors are to be considered within the context of
the business cycle and the conditions of competition that are distinctive to the industry.
5  In examining
conditions of competition, the Commission customarily considers whether and how these conditionshave changed since the entry of the order under review.
7.11 (EU) (p. 64, para. 62) How do the United States intend to implement the recommendation of the
panel on Dynamic Random Access Memory Semiconductors (DRAMs) of one megabit or above fromKorea (WTO document WT/DS99/R of 29 Januar y 1999) that the United States “bring
section 353.25(a)(2)(ii) of the DOC regulations, and the Final Results Third Review, into conformity
with its obligations under Article 11.2 of the AD Agreement”?
See response to 7.5.
7.12 (New Zealand) Safeguards We note that, while the number of anti-dumping and countervailing
duty investigations has declined in the U.S. duri ng the period under review, the number of safeguard
investigations has increased (S/III, p. 46, para. 45).  This trend could be interpreted as suggesting
that safeguard actions are being relied on by certain domestic industries as an easy response to the
natural and foreseen consequences of the greater market access opportunities that followed in the
wake of the Uruguay Round.  In this connection, New Zealand is particularly concerned about thesafeguard action initiated on lamb exports.
Would the U.S. comment on these aspects?
The Secretariat Report states that import measures, including safeguard measures are designed to
counteract trade practices such as export subsidies and the dumping of products onto the U.S. market(S/III, p. 45, para. 4).
Given this policy, it would seem inconsistent to impose safeguard measures where there is no question
of the product concerned being subsidized, dumped or unfairly traded.  Would the U.S. comment onthis?
The Secretariat Report also notes that the U.S. In ternational Trade Commission (ITC) evaluates the
economic effectiveness and welfare effects of U.S. trade policy measures (S/III, p. 45, para. 1).
What measures are taken by the U.S. ITC, and by the President in deciding on a safeguards remedy,
to ensure that the economic effectiveness and consumer welfare effects of imposing non-trade
restrictive measures as opposed to trade restrictive measures are taken into account?
In determining a remedy can the U.S. explain what me asures it has in place to ensure that the remedy
imposed is necessary to prevent serious injury or the threat of serious injury?
                                                     
5 See 19 U.S.C. para. 1675a(a)(4).WT/TPR/M/56/Add.1
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The United States has conducted an average of about one safeguard investigation per year in
recent years, a level that is largely unchanged from the level conducted since 1985, and much lowerthan the 1975-85 level.  The United States has instituted a total of 70 safeguard investigations
since 1975, but only 15 since 1985.  The United States has completed six safeguards investigations
since the Uruguay Round Agreements entered into force on 1 January 1995, or an average of about
one per year ;  a seventh investigation was terminated at the request of the petitioner without a final
determination.  The current level is in contrast with the average of five per year during 1975-85.
The inference that safeguard measures are specifically designed to counteract subsidies or
dumping is incorrect.  Safeguard measures are designed to address serious injury or the threat of
serious injury caused by increased imports ;  no finding of a subsidy or dumping is required as a
precondition to applying a safeguard measure.
7.13 (Norway) Anti-dumping and countervailing measures (p. 62) The distribution of countervailing
orders by product category are shown in Chart II I.7.  The dominance of base metals in particular
suggest that certain industries for too long have been allowed to set the U.S. agenda in this area.
This slows down the introduction of new and more cost-efficient technology directly by penalizing
imports based on more modern technology.  There is also an indirect negative effect as the mere
existence of the anti-dumping instruments creates a threat that acts as an impediment to theintroduction to the U.S. market of new products.  In this context, it is also disturbing to note that there
was an increase in new cases in 1998, once again initiated mainly by sunset industries, after three
years when the number of new cases had been encouragingly low.  On this basis, while regretting that
the Secretariat Report was somewhat superficial on this issue, we would like to ask the U.S.
representatives what is currently being done in order to limit the influence of sunset industries on U.S.anti-dumping policies?
The U.S. anti-dumping law is available to all U.S. industries on an equal basis, and the U.S.
does not identify any particular industry as a “sunset” industry.  Consequently, no set of industriesexercises any particular influence over the U.S. anti-dumping law.  U.S. anti-dumping policies are
carried out in strict compliance with U.S. anti- dumping laws, which are WTO-consistent.  A wide
range of industries, from agriculture to basic manufacturing to chemicals and electronics, has found it
over the course of time necessary to resort to such remedies.  The extent to which the U.S. economy
has remained vibrant and driven by technological progress in recent years is testimony to the fact thatU.S. trade laws have in no way been a drag in technological change and product innovation in the
United States.
7.14 (Chile) What types of economic/econometric analyses are used for assessing injury?
Under the bifurcated system of the United States, the U.S. Commerce Department determines
dumping and the U.S. International Trade Commission determines whether a domestic industry in theU.S. is materially injured, threatened with materi al injury, or the establishment of an industry is
materially retarded by reason of subject imports .  As part of the staff work in each injury
investigation, the U.S. International Trade Commission’s Office of Economics prepares comparative
static analyses presenting ranges of possible aggregate effects of imports on the domestic industry
based on alternative assumptions.  These analyses become part of the record that the Commissioners
consider, and their opinions occasionally cite such analyses as part of the evidence supporting their
determinations.  As U.S. law does not require any particular means of economic analysis, but ratherconsideration of economic factors, whether and th e extent to which Commissioners rely in any
particular case on those staff analyses is within the Commissioners’ discretion.
What methodology is used for calculating the exporter’s profit margin?WT/TPR/M/56/Add.1
Page 35
The U.S. International Trade Commission does not calculate the exporter’s profit margin in
assessing injury.  Consequently, the United States interprets this question to be asking how the U.S.Commerce Department calculates profit in determining the constructed export (“CEP”) price.
Commerce undertakes a two-step process in determining the amount of profit to deduct from all CEP
transactions.  It first calculates the “total actual profit” for all sales of the subject merchandise and the
foreign like product.  Total actual profit is nor mally derived from the company’s own financial
records and constitutes the total profit earned by the foreign producer/exporter and their U.S. affiliatedparties, with respect to sales of the same merchandise for which we determine total expenses.
Commerce then allocates the total profit derived in step one to individual CEP sales transactions
based on a ratio of total U.S. expenses to total expenses.  Total expenses are all expenses incurred by
or on behalf of the foreign producer/exporter of the subject merchandise, and those incurred by or on
behalf of the U.S. seller affiliated with the producer/exporter in the production and sale of thatmerchandise.
6
Do the injury analyses include the effect on third parties, such as industrial users, consumer, andothers?
The regulations of the U.S. International Trade Commission expressly accord industrial users
and, when merchandise under investigation is sold at the retail level, representative consumerorganizations, the ability to participate as parties in anti-dumping and countervailing duty
investigations.
7  As parties, such entities can submit information and argument to the Commission
which is relevant to their investigations concerning material injury and causality.  The Commission
will consider such information in its investigation of whether a domestic industry is materially injured
or threatened with material injury, or whether the establishment of a domestic industry is materially
retarded, by reason of subject imports.  Under U.S. law, the Commission’s determination concerns the
effects of the subject imports on the domestic industry, as opposed to the effects of the subject importson other entities.
Are databases or information other than that provided in the petitions and by the parties available for
the injury analysis?
In anti-dumping and countervailing duty investigations, the Commission typically sends
questionnaires to producers of the domestic like product, U.S. importers of the subject merchandise,U.S. purchasers of the domestic like product and the subject merchandise, and foreign producers of
the subject merchandise.  The recipients of those questionnaires typically include both parties and
non-parties.  The Commission considers the responses to these questionnaires, publicly-available data,
and other information compiled by its staff in addi tion to the information provided in the petition or
by the parties in their testimony or submissions to the Commission.
What is the constructed price criterion used in  investigations under Article 2.2 of the Anti-Dumping
Agreement?  Is there any preference as regards the use of the constructed price or the third country
market criterion?
The Commerce Department uses the constructed price criterion (“constructed value”) in
investigations where the exporting country or third country does not constitute a viable market,meaning that the aggregate quantity or value of the foreign like product sold by the exporter or
producer does not constitute 5% or more of the aggregate quantity (or value) of its sales of the subject
merchandise to the United States.  Commerce normally calculates normal value based on sales to a
                                                     
6 See 19 U.S.C. para. 1677a(d)(3) and 1677a(f).
7 See 19 C.F.R. para. 201.11(a).WT/TPR/M/56/Add.1
Page 36
third country rather than on constructed value if adequate information is available and verifiable in the
third country.8
What sampling methods are used?
U.S. International Trade Commission
The U.S. International Trade Commission generally does not use sampling in conducting its
injury investigations.  Instead, the Commission usually sends producer questionnaires to all U.S. firms
manufacturing the domestic like product, and foreign producer questionnaires to all foreignmanufacturers of the imported merchandise under investigation, especially if they are exporting to the
United States.  The Commission also sends importer questionnaires to all significant U.S. importers of
the imported merchandise under investigation.
When the industry producing the domestic like product contains hundreds of producers,
however, the Commission will use sampling technique s.  In such circumstances, the Commission will
use a stratified sampling technique in which it divides the firms to be sampled into groups on the basis
of the size of each firm and then selects a different proportion of each group.  Typically, all of the
largest group of firms, a proportion of the middle-sized firms, and a smaller proportion of the
smallest-size firms would receive questionnaires.
U.S. Commerce Department
In determining dumping margins, the Commerce Department normally finds an individual
weighted-average dumping margin for each known exporter or producer under investigation.
However, like the Anti-dumping Agreement, U.S. law does permit sampling where a large number ofexporters and producers is involved in an investigation or review.  In such situations,  the Department
can limit its examination to either (1) a sample of exporters, producers or types of products that is
statistically valid based on the information available to it at the time of selection ;  or (2) to exporters
and producers accounting for the largest volume of the subject merchandise from the exporting
country that can reasonably be examined.
9
Is the United States prepared to eliminate anti-du mping measures in a possible free trade agreement
of the Americas (FTAA)?
This question is appropriately addressed in discussions underway among FTAA countries.  In
that context, the United States repeatedly has made clear that the proposition to eliminateanti-dumping measures is unacceptable.
7.15 (Chile) Chile would like more information ab out the "sunset review" procedure and wishes to
know whether the United States envisages expediting the review process in order to get results more
quickly.  It is specifically concerned about the case of Chilean carnations since for the last 12 years
these have been the subject of an anti-dumping measure and countervailing duties which haveexcluded them totally from the United States market and are now the subject of a full review.
U.S. law authorizes the U.S. International Trade Commission and the U.S. Department of
Commerce to conduct expedited proceedings in five-year reviews “[i]f interested parties provide
inadequate responses to a notice of initiation”.
10  If responses are adequate, the agencies are to
conduct full reviews.
                                                     
8 See 19 C.F.R. para. 351.404.
9 See 19 U.S.C. para. 1677(c)(2).
10 See 19 U.S.C. para. 1675(c)(3)(b).WT/TPR/M/56/Add.1
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In the preamble to its notice of final rulemaking (NOFR) concerning procedures in five-year
reviews, which was published both in the U.S. Federal Register and notified to the WTO11, the
Commission extensively discussed the circumst ances under which it would conduct expedited
five-year reviews on the basis of inadequate interested party responses (63 Fed. Reg. 30599, 30602-05
(5 June 1998)).  The Commission noted in the NOFR that “[w]hen interested parties do not show a
sufficient willingness to participate in a review and submit requested information, conducting a full
review may not be an efficient exercise of the resources of either the Commission or the parties”(63 Fed. Reg. at 30603).
The NOFR also noted that, because the statute states that the Commission “may issue” an
expedited determination when interested party responses are inadequate, “the Commission has the
discretion to conduct full reviews when the domestic and/or interested party responses are inadequate”
(63 Fed. Reg. at 30604).  The NOFR provided se veral instances of when the Commission might
exercise its discretion in such a manner.  Id.
Additionally, the Commission now issues stat ements in individual five-year reviews
indicating why it has determined to conduct a full review or an expedited review.  These may be
accessed through the Commission’s World Wide Web site at http://www.usitc.gov.  In several ofthese statements, the Commission has stated that it has exercised its discretion to conduct a full review
notwithstanding inadequate interested party group responses.
The Commission issued a statement explaining its decision to conduct a full review
concerning the anti-dumping and countervailing duty orders on standard carnations  from Chile
notwithstanding that it found that domestic interested party response to the notice of institution wasinadequate.  In its statement, the Commission observed that the Floral Trade Council (FTC), a U.S.
trade association that provided an individually adequate response with respect to the standard
carnation domestic like product, consisted in large part of wholesalers.  The Commission found that
the responses to the notices of institution did not provide a basis to evaluate fairly the extent of
participation and role of the interested party wholesalers because the notice of institution did notrequest quantitative information that could be used to determine the adequacy level of wholesalers’
responses.  Additionally, the FTC’s response co ntained information, including statements of
willingness to participate in the reviews, from some growers which were not members of the FTC and
did not file individual responses.  In light of these circumstances and the fairly large number of
growers in the pertinent industries, the Commission determined there was an adequate willingness by
domestic interested parties to participate in the review, and that a full review was appropriate.
Standard Carnations from Chile, Inv. Nos. 701-TA-276, 731-TA-328 (Review), Explanation ofCommission Determinations on Adequacy (June 1999).
With respect to the U.S. Commerce Department’s sunset reviews of the anti-dumping and
countervailing duty orders on standard carnations from Chile, the Department determined to expedite
these reviews on the basis that there was no respondent participation, either from producers/exporters
subject to the orders or, in the case of the countervailing duty order, from the Government of Chile.
These reviews were initiated in February 1999.  Do mestic interested parties subsequently withdrew
their participation in the sunset reviews of the anti-dumping and countervailing duty orders on
standard carnations from Chile.  As a result, on 30 August 1999, the Department issued a final
determination revoking these orders.  The effective date of revocation was 1 January 2000.  As a
result of the Department’s action, the Commission has terminated its five-year reviews of the orders
on standard carnations from Chile.
                                                     
11 See Section-by-section analysis of 19 C.F.R. §207.62 in G/ADP/N/1/USA/1/Suppl.3
G/SCM/N/1/USA/1/Suppl.3 (June 30, 1998).WT/TPR/M/56/Add.1
Page 38
Subsidies
7.16 (Chile) According to para. 109 of the Secretariat Report, several federal government agencies,
as well as a number of State and local ones, are assisting exporters by providing guarantees, loans,etc.  To what extent is this aid consistent with WTO rules?
To our knowledge, all such assistance is consistent with WTO rules.
7.17 (Chile) The Government of Chile feels obliged to express its disquiet and concern at the existing
subsidy situation at all levels of government admin istration.  Chile would like to receive information
from the United States about the future of its export subsidies, whether or not notified to the WTO.
Similarly, it would like to know how the United States proposes to deal with the question of subsidies
in the multilateral negotiations on agriculture in the WTO and the FTAA.
In the context of the FTAA, the United States has also proposed the elimination of export
subsidies.  However, this must be accompanie d by a mechanism to prevent unfair subsidized
competition from sources outside the hemisphere.  The most efficient way to accomplish all of these
objectives is to reach agreement on the elimination of export subsidies globally in the WTO, and that
is our objective.
7.18 (Chile) Would the United States please explain  the operation of the Foreign Sales Corporations
and demonstrate their consistency with the WTO Agreements.
Please see the response to Question 8.3 insofar as the operation of the FSC provisions and
their consistency with the SCM Agreement are concerned.
7.19 (Turkey) How do the U.S. anti-dumping authorities examine, during a review investigation
initiated under Articles 11.2 and 11.3 (sunset review) of the Anti-Dumping Agreement, whether the
injury will continue or recur if the definitive anti-dumping duty is terminated?  What are the criteria
used under these circumstances?
See response to 7.8.
7.20 (Turkey) In Article 15 of the Anti-Dumping Agr eement it is stated that special regard must be
given by developed country Members to the special situation of developing country Members when
considering the application of anti-dumping measures under the Anti-Dumping Agreement.  Turkey
would like to know how the U.S. interprets this provision.  In relation to this Article, Turkey would
like to know also how the U.S. anti-dumping authorities interpre t Article 9.1 of the Anti-Dumping
Agreement with respect to the application of lesser duty rule.  Turkey would like to know how the U.S.
interprets this provision.  In relation to this Ar ticle, Turkey would like to know also how the U.S.
anti-dumping authorities interpret Article 9.1 of the Anti-Dumping Agreement with respect to the
application of [the] lesser duty rule.
Application of Article 15 has not been raised in a U.S. anti-dumping proceeding and,
therefore, the U.S. has not had the opportunity to interpret that provision.  With respect to Article 9.1.,
the decision whether to impose duties equal to the full amount of dumping or less is left to the
discretion of individual Members.  U.S. law has no provision for applying a lesser duty rule.  The
absolute discretion recognized under Article 9.1 is not limited by Article 15, nor is it clear that
Article 15 is even intended to be interpreted in reference to Article 9.1.
7.21 (Turkey) Under the provisions of Statement of Administrative Action (SAA) 888-89, if companies
have a long track record of not using a subsidy programme, the mere availability of the programme
should not, by itself, indicate likelihood of continuation or recurrence of a countervailable subsidy.WT/TPR/M/56/Add.1
Page 39
Nevertheless, SAA 888 also provides that as long as a subsidy programme continues to exist, the
Department should not consider "company" or "industry" specific renunciations of countervailablesubsidies by themselves, as an indication that continuation or recurrence of countervailable subsidies
is unlikely.  Could the U.S. provide clarification on how the U.S. authoritie s determine the likelihood
of continuation or recurrence of a countervailable subsidy in a sunset investigation, if the companies
in question have a long track record of not using a subsidy programme?
As the Commerce Department noted in its Sunset Policy Bulletin (63 Fed. Reg. 18871, 18874
(16 April 1999)), where a company has a long track record of not using a program, including during
the investigation, the Department normally will determine that the mere availability of the program
does not, by itself, indicate likelihood of continuation or recurrence of a countervailable subsidy.
Additionally, we stated that where a subsidy prog ram continues to exist, we normally will not
consider company-specific or industry-specific renunciation of countervailable subsidies under thatprogram, by themselves, as an indication that continuation or recurrence of a countervailable subsidy
is unlikely.
Determinations on likelihood will be made on the basis of the particular record of each
review.  In general terms, the Department normally will find no likelihood of a countervailable
subsidy in cases where producers and exporters have never used a countervailable program absentevidence or argument that such producers and exporters will use the program if the order were
revoked.  However, if producers/exporters have received countervailable subsidies under a program
and, for example, the year before the sunset review renounce the use of the program, it may be more
likely that such producers and exporters would resume using the program were the order to be
revoked.
7.22 (Turkey) Could the U.S. explain whether or not the Department of Commerce makes adjustments
to the net countervailable subsidy rates for programmes that exist, but were modified subsequent tothe CVD order, in a sunset investigation?  If so, how are these adjustments made?
The Department of Commerce generally will adjust the net countervailable subsidy rate in
three instances:  (1) when the program has been terminated ;  (2) when there has been a program-wide
change ;  and (3) when a new program has been introduced.  In certain circumstances, a program that
exists, but was modified subsequent to the CVD order, would be classified as a program-wide change.In such cases, an adjustment would be made where the modification results in a measurable change in
the amount of countervailable subsidies provided under the program in question, where the change is
not limited to an individual firm or firms and where the change is effected by an official act.  In
general, adjustments to the net countervailable su bsidy rate will not be made where a program has
been temporarily suspended or only partially terminated (e.g. where the program is still in effect but isno longer available for exports to the United States).
7.23 (Turkey) The U.S. initiated dumping and subsidy investigations on certain import products from
Turkey simultaneously, and consequently imposed tw o sets of additional levies as anti-dumping and
countervailing duties concurrently.  Would the U.S. clarify its methodology for calculating the
margins for additional duties simultaneously for the same product so far as dumping and subsidyinvestigations are concerned?  What criterions has  the U.S. established in calculating simultaneously
these two separate margins for the same product in a transparent manner?
Countervailing duty investigations are frequently initiated simultaneous with anti-dumping
investigations;  however, the two types of investigations are conducted independently.  The two types
of investigations examine very different issues and any duties resulting from the two types ofinvestigations reflect these differences.  A countervailing duty investigation examines the extent to
which exports to the United States have benefitted from unfair subsidies and any resultingWT/TPR/M/56/Add.1
Page 40
countervailing duties are intended to offset the injurious effects of such subsidies.  Anti-dumping duty
investigations, on the other hand, measure the extent to which the exports are unfairly priced (i.e. soldbelow normal value) and are intended to offset the injurious effects of such unfair pricing.  Of course,
U.S. methodology for calculating anti-dumping duties recognizes that export subsidies may account
for a portion of an exporter’s reduction in price and that imposing both countervailing duties and anti-
dumping duties to offset that reduction in price would amount to double counting.  Consequently,
U.S. statute mandates that the amount of anti-dumping duties calculated for a company be reduced bythe amount of any countervailing duties attributable to export subsidies received by that company.
The Commerce Department adheres to strict procedural and methodological regulations to ensure that
the calculation of anti-dumping and countervailing duties is consistent and transparent.  Parties have
the opportunity to review and comment on margin cal culations to ensure that errors have not been
made and that no double counting has occurred.
7.24 (Turkey) (p. 68, para. 69) The Secretariat Report points the fact that of the 72 anti-dumping
investigations initiated between 1996 and 1998, 54% of the total cases involved steel products.
We would welcome further comment from the U .S. on this subject as many members may have
concern over the trend for protectionism in the U.S.
See previous response to question 7.12.  The filing of petitions is at the discretion of the
domestic industry.  If dumping petitions filed by  the U.S. steel industry meet necessary legal
requirements, the Commerce Department is obligated to initiate these investigations.
7.25 (Malaysia) Anti-Dumping - The Administrative Re view of the existing AD duty in the U.S. is
carried out at the request of the local industry or interested parties.  This is done annually.  The
review allows for the retroactive application of the AD duties and the difference between the existing
rate and the newly determined rate is then applied on the Malaysian manufacturer.  If the new
AD duty is lower, the difference is returned w ith interest and if the new AD duty is higher, the
difference is paid by the Malaysian manufacturer.
If the Administrative Review is requested by th e U.S. industry, what is the standard of evidence
required of the local industry in the U.S. to request for an administrative review?  Does a mere
request without evidence by the local industry to ca rry out the review suffice for the initiation of a
review?
The industry must be an interested party under U.S. anti-dumping law (meaning, for example,
a manufacturer, producer, or wholesaler in the U.S. of the domestic like product) and must request, in
writing, that the Commerce Department conduct an administrative review of specified individual
exporters or producers covered by the anti-dumping duty order.  Under U.S. anti-dumping regulations,
the industry must state why it wants the review to cover these particular exporters or producers.
12
There is no evidentiary standard other than these requirements that must be met by the domestic
industry in order to request an administrative review .  Once initiated, the review itself provides a
forum for the submission of evidence on du mping during the relevant review period.
7.26 (Malaysia) Article 9.3.1 of the WTO AD Agreement requires that:  “Any refund shall be made
promptly and normally in not more than 90 days fo llowing the determination of final liability made
pursuant to this subparagraph.  In any case, where a refund is not made within 90 days, the
authorities shall provide an explanation if so requested.”
                                                     
12 See 19 C.F.R. para. 351.213(b)(1).WT/TPR/M/56/Add.1
Page 41
We have come to understand that in practice the return of the refund takes longer than 90 days.  What
is the period taken by the U.S. in refunding and how does the U.S. expect to improve on this?
Consistent with its obligations under Article 9 of the Anti-dumping Agreement, the United
States has taken steps to ensure that refunds of anti-dumping and countervailing duty deposits are
made promptly and normally not more than 90 days  following the determination of final assessment
of liability.
Article 9.3.1 states:  “Any refund shall be made promptly and normally in not more than
90 days following the determination of final liability made pursuant to this sub-paragraph.  In any
case, where a refund is not made within 90 days the authorities shall provide an explanation if so
requested.”
U.S. law provides that liquidation shall be made promptly and, to the greatest extent
practicable, within 90 days after the instructions to Customs are issued, and to explain any delay, if sorequested.  A determination of final assessment of  liability occurs when Commerce issues instructions
to the U.S. Customs Service.  Commerce and Customs use an electronic communication system to
minimize delay in the transmission of instructions to the ports where liquidation of suspended entries
will occur.  The United States is not aware of any request for explanation concerning a delay in
making a refund of anti-dumping or countervailing duties.
The Agreement provides for an exception to the time-limits established in Article 9.3.1 where
there is judicial review.
13  Notwithstanding the exception under Article 9, where an investigation or
review is subject to judicial proceedings, U.S. law provides for a determination of final assessment of
liability within 10 days after the completion of the judicial proceedings.  The U.S. Customs Service is
then required to make refunds within 90 days from the date on which Commerce issues instructions toCustoms.
7.27. (Colombia) Special measures – The Report mentions that all the countervailing duty
investigations were initiated with a parallel anti-dumping investigation.
Does this mean that if no subsidy is determined, the authorities continue the investigation in order to
determine the existence of dumping?
No.  This means that all petitions filed by domestic industries requesting the initiation of a
countervailing duty investigation were filed simultaneous with petitions requesting the initiation of
anti-dumping duty investigations.  However, these are separate proceedings.  Decisions regarding
whether to initiate an investigation as well as preliminary and final findings of subsidization ordumping are made without regard to findings in the companion AD or CVD investigation.
8. Taxation and investment
8.1 (Canada) (pp. 96-98, paras 154-158) In June 1992, the GATT adopted the Report of the Panel on
U.S. “Measures Affecting Alcoholic and Malt Beverages”.  The Panel found that elements of the U.S.Federal excise tax and dozens of State-level measures contravened the General Agreement by
discriminating against imported beer and wine.  To date, the offending elements in the Federal excise
tax, as well as the great majority of State-level measures, have not been amended.  What plans does
the U.S. Administration have to arrange the remova l of the discriminatory elements of these
measures, including at the State level?
                                                     
13 The footnote to Article 9, sub-paragraph 3.1, expressly states:  It is understood that the observance of
the time-limits mentioned in this sub-paragraph and in sub-paragraph 2 may not be possible where the product issubject to judicial review proceedings.WT/TPR/M/56/Add.1
Page 42
Under the applicable GATT 1947 procedures, the United States repeatedly made concerted
attempts to bring the relevant U.S. federal and sub-federal measures into compliance with the GeneralAgreement.
8.2 (Korea) (p. 98 para. 158) The current harbour maintenance tax (HMT) taxes only exports to the
U.S., but does not tax exports originating from the U .S.  In that sense, the recently proposed user fee
for the HMT by the Administration has the potential to  rectify this imbalance.  When is the user fee
expected to be implemented and will this user fee be levied on both exports from and imports to the
U.S.?
The proposed Harbor Services User Fee was not considered by Congress in its first session.
The Administration intends to pursue this legislation in conjunction with appropriations legislation
that will be submitted in February 2000.  The user fee will be levied on vessel operators, not importersor exporters.
8.3 (Korea) (p. 102, para. 165) The FSC (foreign sales corporation) provisions of the U.S. Internal
Revenue Code may constitute a subsidy in violation of the WTO Agreement on Subsidies and
Countervailing Measures (SCM), because they give direct financial assistance to exports of U.S.
companies through tax concessions.  However, the United States maintains that the FSC is fullyconsistent with its WTO obligations.  What is the basis for the U.S. belief that the FSC provisions donot violate the WTO SCM?
The FSC provisions of the U.S. Internal Revenue Code provide a partial tax exemption for
foreign-source income earned by a Foreign Sales Corporation in export-related transactions.  Under
the FSC provisions, income is allocated to a FSC – a foreign corporation – in a manner that, in the
aggregate, achieves results consistent with the arm’s length principle.  As such, the FSC provisions
conform in full to the multilaterally recognized principles which determine how tax treatment of
foreign-source income is supposed to square with GATT and WTO subsidy disciplines.
These principles are set forth in footnote 59 of the SCM Agreement, a footnote attached to
para. (e) of the SCM Agreement’s Illustrative List of Export Subsidies.  Footnote 59 recognizes that
foreign-source income may be exempted from tax, even if such exemption is specifically related to
exports.  The second sentence of footnote 59 – which requires that, for tax purposes, Members adhere
to the arm’s length principle with respect to relate d party transactions involving exports – is based on
the assumption that foreign-source income earned in export-related transactions may be exemptedfrom tax.  If this were not the case, there would be no need for an arm’s length requirement, because
income would have to be taxed regardless of whether it was domestic- or foreign-source income.
Similarly, the last sentence of footnote 59 states that “para. (e) is not intended to limit a
Member from taking measures to avoid the double taxation of foreign-source income earned by its
enterprises or the enterprises of another Member”.  The tax exemption provided by the FSC
constitutes an internationally accepted method of avoiding double taxation of foreign-source income.
The principles of footnote 59 described above grew out of an earlier GATT dispute involving
the interface between tax and trade rules, the so-called Tax Legislation Cases .  These principles were
first articulated in footnote 2 of the Tokyo Round Subsidies Code’s Illustrative List, and then were
reiterated in an authoritative interpretation by the GATT Council in 1981, a decision which served as
a basis for settling the Tax Legislation Cases and which was described by the Council as constituting
guidance of general application.
Because the FSC provisions were intended to, and do, conform to the principles of
footnote 59, those provisions do not constitute an export subsidy under the Illustrative List.  In
addition, because the FSC provisions do not constitute a subsidy under the Illustrative List, by virtue
of footnote 5 of the SCM Agreement they are not prohibited under any provision of the SCM
Agreement.WT/TPR/M/56/Add.1
Page 43
Non-tax measures
8.4 (Hong Kong) (p. 103, paras 168, 170) We learn from the Secretariat Report that the US'
foreign direct investment regime contains long -standing exceptions from the WTO principles of
NT and MFN (e.g. sector-specific reciprocity provisions and blanket restrictions on foreign
ownership in telecommunications and energy secto rs).  Does the U.S. Government have any plans to
remove such exceptions progressively and if so, would appreciate if the U.S. could provide more
details on these plans.
The United States does not have any plans at this time to revise its energy investment policy.
With respect to telecommunications, please refer to  U.S. responses in the telecommunications section
of this document.
8.5 (Japan) The relationship between the multilateral framework on investment and bilateral
investment treaties (BITs) (p. 44, para. 98):  This paragraph indicates, "BITs lay the policygroundwork for broader multilateral initiatives in the OECD and, eventually, the WTO".  What is the
U.S. view on the relationship between such multil ateral frameworks as the GATS (including the
possible multilateral framework to be negotiated in the future) and the BITs?
If the question is what would be the relationship between the U.S. BIT program and
multilateral investment negotiations in the WTO, the United States would continue to pursue bilateralinvestment treaties given that higher standards and increased liberalization is more likely in bilateral
arrangements.  Given the uncertainty regarding investment rules in the WTO, let alone what they
would look like, we could not speculate as to what “relationship” questions their coexistence with
U.S. BITs would raise.
8.6 (Japan) Exemption from Nationa l Treatment on investment (p. 103, para. 168) This paragraph
indicates that the U.S. maintains some reciprocity co nditions on investment.  Please list the provisions
that are exceptions to the principle of National Treatment.
Please refer to the United States model BIT, the U.S. exceptions to the OECD investment
instruments, or the NAFTA for the details of exce ptions that the United States takes for national
treatment in investment.
8.7 (Chile) With reference to NAFTA Chapter 11, we would like to know the position of the
United States as regards a possible modification or interpretation of the rules relating toexpropriation and the possibility of appeal and compensation.  How does the Government of the
United States assess the functioning of the NAFTA investment chapter?
We believe that the NAFTA commitments provide a secure, transparent, and fair regulatory
environment for foreign investors, and that they must not be interpreted or applied in a way that
undermines the NAFTA parties' well-r ecognized right to regulate to protect the environment, health,
and safety.  The United States remains sensitive to the concern that those provisions could be
misconstrued, and the United States is developing its position on whether a clarification of the
provisions is warranted.
8.8 (Chile) Could the United States explain th e relationship between NAFTA and other agreements,
for example the Softwood Lumber Agreement between Canada and the United States?  How does the
United States propose to approach this question in future agreements?WT/TPR/M/56/Add.1
Page 44
There is no relationship between NAFTA and the Softwood Lumber Agreement (SLA).
Under the SLA, Canada collects an export fee on e xports of certain products.  The SLA provides for
procedures for handling disputes under that agreement, separate from those of NAFTA.
8.9 (Chile) What tax concessions (e.g. exemption from income tax) are enjoyed by companies
established in foreign-trade zones?
No special tax concessions are accorded to companies located in a foreign trade zone.
U.S. foreign trade zone procedures allow companies located in zones to defer the payment of federalCustoms duties/excise taxes on merchandise while stored in zones.  Payment of such duties/excise
taxes would be due, however, when the merchandise leaves a zone for domestic commerce.  Foreign-
trade zones are not tax-exempt enclaves, and the businesses located in zones are under the taxing
authority of the federal government as well as the states and municipalities in which they are located.
As such, businesses located in zones pay federal taxes (such as income taxes) and state and local taxesthat would be applicable to businesses outside of zones.  The U.S. Foreign-Trade Zones statute,
however, specifies that taxes applied to merchandise by some local governments (i.e. inventory taxes)
should not be assessed on products while they are stored in zones because such merchandise is
considered to be in international commerce until it leaves the zone.  Once merchandise leaves the
foreign-trade zone, these taxes would become due as well.
8.10 (Colombia) (para. 108) The Secret ariat Report states that under special income tax provisions, a
portion of the export income of an eligible foreign sales corporation is exempt from U.S. income tax.
Is the income tax exemption on part or all of the tax?
Only a portion of the foreign-source income allocated to a Foreign Sales Corporation is
exempt from U.S. taxation.
9. Trade-related intellectual property rights
Patents
9.1 (Korea) (p. 108, para. 186) The U.S. is the only country using a first-to-invent patent system, as
opposed to the first-to-file system followed by the re st of the world.  The difference has often created
interface problems.  What is the U.S. view on this matter?
The United States has followed the first-to-invent system throughout the history of its
patent law.  The first-to-invent system is in fu ll conformity with U.S. obligations under the TRIPs
Agreement, as is the rest of the U.S. patent law.
9.2 (Switzerland) (p. 109, para. 190) In the case of public non-commercial use (article 31 (b) TRIPS),
please indicate whether there is any measure (e.g. notification, publication or piece of legislation)
taken by the competent authorities calling the attention of governmental agencies or contractors to
the TRIPS obligation to “promptly” inform the right holder of the use of his patented inventionwhenever they know or have demonstrable grounds to  know that they are using a valid patent without
making a patent search.
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.WT/TPR/M/56/Add.1
Page 45
FAR 27.209 notifies contracting officers of U.S. agencies that Article 31 of TRIPS applies
where the law of a member country allows for the use of patents without authorization and advises thecontracting officers to consult with legal counsel regarding questions under this section.
9.3 (Korea) (p. 111, para. 197) Under Article 16.2 of the TRIPS, the well-known trademark shall be
protected by being taken into account in determining likelihood of confusion.  However, the fact that
the U.S. lacks any listing of the well-known tradema rks may lead to improper protection.  What is the
U.S. position on this issue?
For a variety of reasons, the U.S. has never supported the idea of creating a list of its
well-known marks.  First, the TRIPs Agreement and the Paris Convention mandate that well-known
marks must be protected without the requirement of registration.  Thus having a "special" list for
well-known marks might create a situation where the owner of the mark must seek inclusion on the
list in order to protect its well-known mark.  S econd, if such a "well-known marks list" exists, the
owner may be obligated to register not only on the trademark register but then to seek a second
“registration” on the well-known marks "list".  Third, it is not apparent what standards would exist for
creating such a list and who would create the list.  Fourth, inasmuch as some marks may be famous
and then become obscure, it is not apparent what procedures would be used for purging such a list.
All of these points have convinced the U.S. that the possible benefits of such a list would notoutweigh its possible detriments.
9.4 (Switzerland) (p. 116, para. 219) Parallel imports of goods can generally be prevented by the
holder of intellectual property right.  Only in the case of trade marks parallel imports are allowed
under certain circumstances.  Exceptions to this are cases when the parallel imports embody physical
differences to the goods trade marked in the United States.  What is the reason for not applying the
principle of the international exhaustion in the area of trade marks?  Where is the risk of allowing the
parallel import of original product being trade marked in the U.S.?
Current U.S. law provides owners of U.S. registered trademarks with the legal basis to stop
parallel imports, and therefore, prevents the application of the international exhaustion principle in thearea of trademarks.
9.5 (Canada) On Section 337 Investigations (pp. 117-118, para. 224) the Report asserts that s. 337 of
the United States Tariff Act of 1930, has been brought into compliance with WTO obligations.  We
appreciate that an effort was made, as part of the URAA, to implement the earlier GATT Panel Report
which found that s. 337 was inconsistent with GATT, Art. III:4.  However it is still the case that
foreign nationals face more onerous procedural burdens in having to defend cases of alleged
intellectual property breaches in both the IT C and domestic courts, compared to U.S. nationals who
would be subject only to infringement actions in the domestic courts.  How can such continuing
differential treatment be reconciled with the USA's national treatment obligations under TRIPS,
Art. 3?
The United States amended section 337 of the Tariff Act of 1930, 19 U.S.C. para. 1337, as
part of U.S. implementation of the Uruguay Round results.  As stated in the "Statement of
Administrative Action" accompanying the Uruguay Round Agreements Act, the amendments topara. 337 brought U.S. procedures into conformity with U.S. national treatment obligations, while
providing for effective enforcement of intellectual property rights at the border.
The TRIPS Agreement, which was negotiated after the GATT panel report finding that
certain aspects of section 337 were inconsistent with Article III of GATT 1947, recognizes that it may
be necessary to treat domestic and imported products differently to enforce intellectual property rightseffectively in respect of imported goods.WT/TPR/M/56/Add.1
Page 46
The 1994 amendments to section 337 made the following changes to ITC procedures:
- Eliminated the requirement that the USITC issue a final determination within a fixed
period of time.  Instead, the amendment provides that the ITC must complete itsinvestigation "at the earliest practicable time".  To promote rapid adjudication, the
USITC must, within 45 days of initiating an investigation, establish a "target date" for
its completion.  See 19 U.S.C. para. 1337(b)(1).  These requirements parallel the
procedures set out in Rule 16 of the Federal Rules of Civil Procedure providing
district courts with various mechanisms for expediting litigation.  They are alsoconsistent with 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 infringement proceedings being brought against imported
goods in two fora simultaneously.  A district court hearing an infringement case is
required to stay its proceedings, at the request of a respondent in a section 337
proceeding, in respect of any claim involving the same issues as those pending before
the ITC.  Such issues would include questions of patent validity, infringement, andany defenses that might be raised in both proceedings.  The district court may, in its
discretion, stay any other claims in the case.  In addition, the statute provides for the
record in an ITC proceeding to be transferred to the Federal district court for its use,
with the intended benefit of eliminating an y duplication of effort or expense;  and
- Resolved the problem regarding counterclaim s that the GATT panel identified in its
report.  A respondent in a section 337 action may file with the USITC any
counterclaim that may be filed with a federal court.  If the claim is of the form of a
defense to the alleged violation of section 337, the USITC will consider the matter.  If
the party raising the counterclaim seeks a remedy such as damages, the amendments
now make that remedy available.  Moreover, the amendments ensure that the partyraising the counterclaim is not prejudiced by any delay or payment of fees.  See
19 U.S.C. para. 1337(c).
9.6 (Canada) The Supreme Court of the United States, in its decisions in Florida Prepaid
Postsecondary Education Expense Board v. College Savings Bank et al. and College Savings Bank v.
Florida Prepaid Postsecondary Education Expens e Board et al., indicates that individuals and
corporations cannot sue states [or state agencies] in state courts for the infringement of certain
intellectual property rights.  Our understanding is that it had been previously been held that states
[and state agencies] cannot be sued in federal courts for such infringements.  Please explain how the
United states complies with Article 44(2).
As you know, this is a recent decision by our Supreme Court.  Therefore, we are still
analyzing it fully.  However, we believe that adequate remedies, as required by the TRIPS Agreement,
are available in the United States.
Geographical indications
9.7 (Switzerland) (p. 11, para. 200) In its reply to the Switzerland Delegation‘s questions regarding
the U.S. legislative practice and jurisprudence relating to the deceptively misdescriptive use of the
term "Switzerland" in trademarks, the followi ng reply was given:  "To establish a goods-place
association the examining attorney must only show  that is reasonable to believe that the goods or
services could have emanated from the named place.  There is no need to establish that the particular
geographic area name is ‘known for‘ the goods or  service in question" (doc. IP/Q/USA/1, p. 20).WT/TPR/M/56/Add.1
Page 47
Kindly indicate the standard applied in determining what is "reasonable" and, if possible, provide
examples of the same.  Please also indicate if, in the individual case, the examiner may, ex officio,pose questions to the applicant regarding the "right" to use the term "Switzerland" (e.g. that the firm
involved is Switzerland or that the goods in question are of Switzerland origin.
Please describe, in greater detail, the "stricter" standard applied since 1993 concerning the
registration of geographic terms, in particular regarding the use of the term "Switzerland".
The following extract from the Trademark Manual of Examining Procedure describes the
standard used by examining attorneys to makes a good place association for geographic terms.
Goods/Place or Services/Place Association
Refusal of registration because a mark is primarily geographically descriptive, primarily
geographically deceptively misdescriptive, or geographically deceptive requires that there be a
goods/place or services/place association such that the public is likely to believe that the goods orservices originate in the place identified in the mark.  There is no requirement that the place identified
in the mark be well known or noted for the goods or services in order to find the existence of a
goods/place or services/place association under §2(e)(2) or (3) of the Trademark Act.  In re
Nantucket, Inc., 677 F.2d 95, 105-06, 213 USPQ 889, 898 (C.C.P.A. 1982) (Nies, J., concurring).  If
the place identified in the mark is well known or noted for the goods or services specified and theapplicant's goods or services do not originate from that place, the mark is likely to be deceptive under
§2(a)of the Trademark Act.  See In re Loew 's Theatres, Inc., 769 F.2d 764, 768 n.6, 226 USPQ 865,
868 n.6 (Fed. Cir. 1985).
In the case of goods or services that origin ate from the place identified in the mark, the
goods/place or services/place association may ordinarily be presumed where there is no genuine issue
that the geographic significance of a term is its primary significance and where the geographic place
is neither obscure nor remote.
As to whether an examiner may ex officio , pose questions to the applicant regarding the "right
to use the term 'Switzerland', examining attorneys have broad discretion to question applicants.  The
examining attorney has complete authority to ask if  an applicant has the right to use 'Switzerland' or
any other geographic term."
The "new standard" concerning the registration of geographic terms is described in the
following extract from the Trademark Manual of Examining Procedure:
Extract from 15 U.S.C. §1052.  "No trademark by which the goods of the applicant may be
distinguished from the goods of others shall be refused registration on the principal register on
account of its nature unless it:
(a) Consists of or comprises ... deceptive ... matter;(e) Consists of a mark which ... (2) when used on or in connection with the goods of the
applicant is primarily geographically descriptive of them, except as indications of
regional origin may be registrable under section 4, (3) when used on or in connection
with the goods of the applicant is primarily geographically deceptively misdescriptive
of them ..."WT/TPR/M/56/Add.1
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Section 2(e)(2) of the Trademark Act, 15 U.S.C. §1052(e)(2), prohibits registration on the
Principal Register of a mark which is primarily geographically descriptive of the goods or servicesnamed in the application.  A mark refused registration pursuant to §2(e)(2) may be considered
for registration on the Principal Register with a showing of acquired distinctiveness in accordance
with §2(f), 15 U.S.C. §1052(f), or on the Supplemental Register in accordance with 15 U.S.C. §1091.
See TMEP §1210.05.
Section 2(e)(3) of the Trademark Act, 15 U.S.C. §1052(e)(3), prohibits registration on the
Principal Register of a mark which is primarily geographically deceptively misdescriptive of the
goods or services named in the application.  Such a mark may not be registered on either the Principal
Register or the Supplemental Register, except in cases where the mark acquired distinctiveness or was
in lawful use in commerce prior to 8 December 1993, the date of enactment of the North American
Free Trade Agreement Implementation Act, Pu blic Law 103-182, 107 Stat. 2057.  A mark which is
unregistrable under §2(e)(3) may be considered for registration on the Principal Register in
accordance with §2(f) only upon a showing that the mark became distinctive of the applicant's goods
or services in commerce before 8 December 1993.  15 U.S.C. §§1052(e)(3) and 1052(f).  A mark
which is unregistrable under §2(e)(3) may be considered for registration on the Supplemental
Register, in accordance with §23, only if it has been in lawful use in commerce by the owner sincebefore 8 December 1993.  15 U.S.C. §§1052(e)(3) and 1091.  See TMEP §1210.06.
Section 2(a) of the Trademark Act, 15 U.S.C. §1052(a), is an absolute bar to the registration
of a mark which is deceptive.  Therefore, a mark refused registration pursuant to §2(a) may not be
registered on either the Principal Register or the Supplemental Register.  See TMEP §§1203.02 and
1210.07.
9.8 (Australia) Could the U.S. explain its understanding  of  the TRIPS consistency of section 110(5) of
the U.S. Copyright Act (homestyle  exemption) in en suring the protection of the legitimate interests of
composers and publishers of musical works.
This matter is being addressed by a WTO panel.  The United States believes that
section 110(5) of the U.S. Copyright Act  is fully consistent with the TRIPs Agreement.
9.9 (Japan) First-to-Invent System (p. 108, para. 186) The United States is the only country using a
"first-to-invent system", and, above all, the U.S. does not adopt the early publication system that otherdeveloped countries adopt.  Regarding the patent system, the U.S. is rather unique.  Many countries,
including Japan, have pointed out that such uniqueness results in a barrier which foreign companies
face when they enter the U.S. business community.  Such a practice to maintain a first-to-invent
system is not necessarily against the TRIPS Agreement.  However, the United States should adopt a
first-to-file system in view of the necessity to have a transparent and stable system, as well as to
reduce the burdens which users bear due to the difference of systems.  Japan continues to request
improvement of the patent sy stems that restrict trade in the US.  Please explain the U.S. view on this
point.
See answer to question 9.1.
9.10 (Japan) "Submarine" Patent (p. 108, para. 186) The  lack of an early publication system in the
United States is not  necessarily against the TRIPS Agreement, but is rather one of the reasons  for
the "submarine" patent.  This may lead to a dupli cation of research and  development investment by
the third party as such a party cannot know, at  the outset, which application has already been filed
by others and what exactly conflicts with the party's interests.  This deteriorates  transparency and theWT/TPR/M/56/Add.1
Page 49
expectation of the patent system, and is also a  factor for preventing smooth trade and investment and
business activities.  An interference proceeding is a burden for the party concerned with regard  topreparing documentation and the cost for attorneys.  Although the patent  terms were corrected in the
Uruguay Round Agreement Act (and the United States  confirmed in 1994 under the Framework Talks
started in 1993 that it was  introducing an early publication system), pending applications already
filed in the U.S. Patent Trademark Office at the ti me of the amendment of  the law benefit from a 17-
year patent term from the date of the patent grant.  There is a possibility that a patentee still benefitsfrom a 17-year patent term after a long period of examination.  In addition, although Japan has
implemented faithfully what was confirmed u nder the Framework Talks, the U.S. has not yet
implemented some of the issues, including intr oduction of an early  publication system.  Japan
acknowledges that the Comprehensive Patent Bill,  including these issues, was submitted to the House
of Representatives in the 106th Congress.  Japan  would like to have the latest information on the
deliberations in the House of Representatives, and whether or not a  similar bill shall be submitted to
the Senate.  Japan expects further efforts to be  made by the U.S. Government towards its early
implementation.
The United States enacted Public Law 106-113 on 29 November 1999.  Included within the
act is a requirement is to publish, within 18 months, most applications filed in the United States.  TheU.S. Patent and Trademark Office is currently drafting regulations to implement this new
requirement.
9.11 (Japan) The United States Patent Law (p. 108, para. 185) Thanks to an amendment to the U.S.
Patent Law brought about through  the Uruguay Round Agreement Act, any person in the process
who decides who made the invention first may prove and rely on the same date of invention in a
foreign country.  This solves the discriminatory  treatment in the proces s between U.S. citizens and
foreign citizens.  However, according to Section 10 2(g) of the U.S. Patent law, which provides that,
"a person shall be entitled to a patent unless before the applicant's invention thereof the invention was
made in this country by another who had not abandoned, suppressed, or concealed it", only the
invention made in the U.S. can be granted a patent as an invention made first, to prevent a grant of a
patent to other inventors.  This is a substantial discrimination against inventions made outside the
United States and should be corrected.  Please explain the U.S. view on this point.
Section 4806 of the American Inventors Protect ion Act of 1999 amended 35 U.S.C. 102(g) to
read as follows:  "A person shall be entitled to a patent unless – (g)(1) during the course of an
interference conducted under section 135 or section 291, another inventor involved therein
establishes, to the extent permitted in section 104, that before such person's invention thereof the
invention was by such other inventor  and not abandoned, suppressed or concealed ..."  The effectivedate of this change to para. 102(g) is the date of  enactment, 29 November 1999.  Accordingly, an
inventor who is involved in  an interference proceeding under 35 U.S.C 135 or 291 may establish a
date of invention under para. 104. 35 U.S.C.  104, as amended by GATT (Public Law  103-465, 108
Stat. 4809 (1994)) and NAFTA (Public Law 103- 182, 107 Stat. 2057 (1993)), provides that an
applicant can establish a date of invention in a NAFTA member country on or after 8 December 1993or in WTO Member country other than a NAF TA member country on or after 1 January 1996.
9.12 (Japan) Priority in the Paris Convention (In re Hilmer) (p. 109, para. 190) There is a "Hilmer"
doctrine in the United States.  Foreign applicants usually file applications, first in their own country
and subsequently in the United States, thereby claiming priority under the  Paris Convention.  Due to
the "Hilmer" doctrine, such foreign applicants cann ot 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 thereby may suffer a disadvantage.  This is against Article 4B of the Paris
Convention which states that acts by a third party in the priority period "cannot give rise to any  thirdWT/TPR/M/56/Add.1
Page 50
party right or any right of personal possession".  This is also against Article 2.1 of the TRIPS
Agreement which requires compliance with  Article 4 of the Paris Convention.  Please explain theU.S. view on this point.
The definition of the effective date as a prior art reference under the so-called "Hilmer"
doctrine is not inconsistent with the obligations of Article 4B of the Paris Convention, as it does not
affect the ability of an applicant to obtain a patent where the applicant has made a priority claim that
establishes an effective filing date prior to the effective prior art date of the patent.
9.13 (Japan) Copyrights (pp. 113-116, paras 203-215) (i) It  is stated in p. 113, para. 204, that the
U.S. ratified the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty in
March 1999.  However, Japan understands that a notification of ratification for these treaties by the
U.S. has not yet been circulated to the member  countries of the WIPO.  Japan would like to confirm
whether the U.S. has  already ratified the two treaties as stated in the Secretariat Report.
On 21 October 1998, the United States Senate gave its advice and consent to ratify both the
WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty.  With this consent, the
United States deposited its instruments of ratification to both the on 14 September 1999.  WIPO
issued its notified Member States of the receipt by the  Director General of these instruments on the
same day (WCT Notification No. 10 and WPPT Notification No. 8, respectively).
9.14 (Japan) Japan would like to request the U.S. to accede to the International Convention for the
Protection of Performers, Producers of Phonog rams and Broadcasting Organizations (Rome
Convention, 1961), which has been ratified and acceded to by many developed countries, including
Japan and the member states of the EC, as soon as possible in  order to improve protection of the
rights of performers and broadcasting organizations.
The United States provides protection for performers, producers of phonograms and
broadcasting organizations under its Copyright Law.  Additional protection for performers is providedunder labour law and collective bargaining agreements between the performers' unions and the
production studios.  Such protection meets or exceeds Rome Convention standards.  Moreover, the
Rome Convention standards have been updated by the WIPO Performances and Phonograms Treaty,
to which the United States does belong.  Accordingly since adequate and effective protection of these
authors is provided under U.S. law, the United States does not presently find that accession to theRome Convention is necessary.
9.15 (Japan) Japan would also like to request the U.S. to confirm its protection of the moral rights of
authors so that it will be in full compliance with  the obligations under the Bern Convention for the
Protection of Literary and Artistic Works to which the U.S. became party in 1989.
Moral rights are protected in the United States not under a single law, but rather through the
exercise of provisions in the copyright law, the common law and other Federal and state laws.  Many
aspects of moral rights, however, are intimately associated with rights protected under the copyright
law.  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.
Bilateral and Regional Intellectual Property Agreements9.16 (Japan) (p. 117, para. 220)  It is reported that "the United States has signed a number of bilateral
intellectual property agreements", and that "clauses related to intellectual property in these
Agreements are tailored  to the TRIPS Agreement;  in some cases they go beyond the provisions of theWT/TPR/M/56/Add.1
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TRIPS Agreement".  Regarding "Japan Actions to be taken by the Patent Office" between the
Japanese Patent Office and the U.S. Patent and Trademark Office (as specified in Table AIII.4), theseactions are to be considered as those which the U.S. and Japan confirmed to undertake in the
Framework Talks.  Japan has fait hfully implemented what was co nfirmed  under the Framework
Talks.  However, on the contrary, the U.S. has  implemented neither the introduction of an early
publication system, nor  the improvement of reex amination, for the past three and half years, even
after the time limit promised by th e US. Japan strongly requests the United States to implement these
issues completely and promptly.
The United States amended its patent law to  address a number of issues by enacting Public
Law 106-113 on 29 November 1999.  This law contains  a provision to publish, within 18 months,
most patent applications filed in the United States.  The law also adds new opportunities for third
parties to participate in reexaminations, including de terminations made by the patent examiner to the
Board of  Patent Appeals and Interferences.  The U.S. Patent and Trademark Office is currently
drafting regulations to implement these new requirements.
9.17 (EU) (p. 108, para. 186) Please explain how the U.S. Government ensures adequate
remuneration for use of patents by U.S. Government authorities?
The United States routinely seeks licences or permission to use the patented invention from
the patentee.  In the unlikely event a patentee believes the United States is using the patented
invention without permission of the patentee, the United States has waived its sovereign immunity to
suits against the United States for infringement  of patents.  Section 1498, of Title 28, United States
Code codifies the explicit waiver.
9.18 (EU) (p. 112, paras 200-202) Are geographical indications that are not registered under the
Federal Principal Register entitled to protection under relevant laws and regulations on labels?
What are the administrative and enforcement competences of the BATF, the Food and Drug
Administration and the U.S.  Department of Agriculture in relation to the protection of geographical
indications?
The United States provides protection for geographical indications in a variety of ways,
including by unfair competition law, by federal and state statute, and by regulation.
Applications For Federal Trademark Registration:  With respect to the federal registration of
trademarks, Section 2(a) of the Trademark Act,  15 U.S.C. §1052(a), incorporates the prohibitions
contained in TRIPs Articles 23.1, 23.2, and 23.3, in the following manner.  Section 2(a) prohibits, in
pertinent part:  [registration of marks which consist of or comprise] a geographical indication which,
when used on or in connection  with wines or spirits, identifies a place other than the origin of the
goods and is first used on or in connection with wines or spirits by the applicant on or after one yearafter the date on which the WTO Agreement (as defined in section 2(9) of the Uruguay Round
Agreements Act) enters  into force with respect to the United States.
In addition, Section 2(e)(3) of the Trademark Act, 15 U.S.C.  §1052(e)(3), prohibits
registration on the Principal Register of a mark  which is primarily geographically deceptively
misdescriptive of the goods  or services named in the application.  Such a mark may not be registeredon either the Principal Register or the Supplemental Register, except in  cases where the mark
acquired distinctiveness or was in lawful use in  commerce prior to 8 December 1993, the date of
enactment of the North American Free Trade Ag reement Implementation Act, Public Law 103-182,
107 Stat. 2057.  A mark which is unregistrable under §2(e)(3) may be considered for registration on
the Principal Register in accordance with §2(f) only upon a showing that the mark became distinctiveWT/TPR/M/56/Add.1
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of the applicant's goods or services in commerce before 8 December 1993.  15 U.S.C. §§1052(e)(3)
and 1052(f).  A mark which is unregistrable under §2(e)(3) may be considered for registration on theSupplemental Register, in accordance with §23, only if it has been in lawful use in commerce by the
owner since before 8 December 1993.  15 U.S.C. §§1052(e)(3) and 1091.  See TMEP §1210.06.
Thus, the mere presence of a misdescriptive geographical indication in a mark used to identify
wines or spirits requires a refusal to register under Sections 2(a) and 2(e)(3) of the Trademark Act,
because the misdescriptive term (with respect to wines and spirits) is presumptively deemeddeceptive.
Use on Labels Controlled by the Bureau of Alcohol, Tobacco, and Firearms (ATF):  Even if a
party does not apply for federal registration of a trademark incorporating a misdescriptive
geographical indication, such use on labels is proscribed by the relevant regulations promulgated by
the Bureau of Alcohol, Tobacco, and Firearms (ATF).  The Bureau of Alcohol, Tobacco andFirearms, a law enforcement agency under the U.S. Department of the Treasury, is charged with the
administration and enforcement of federal laws re lating to the taxation, labeling and advertising of
alcoholic beverage products.  Among these laws, the Federal Alcohol Administration Act, 27 U.S.C.
§§201, et. seq., prohibits the sale of alcohol beverage products that are not labelled in conformity with
regulations intended to prohibit consumer deception and to provide the consumer with adequateinformation about the identity of the product.  ATF regulations promulgating section 205, as
pertaining to wines and distilled spirits, are in 27 C.F.R. Parts 4 and 5, respectively.
Wines:  Labeling Title 27, C.F.R. section 4.39 enumerates prohibited practices with respect to
labeling of wine.  Under 27 C.F.R. §4.39(a)(1), labe ls of wine may not contain "any statement that is
false or untrue in any particular, or that, irrespective of falsity, directly or by ambiguity, omission or
interference, or by the addition of scientific or technical matter, tends to create a misleading
impression".
Furthermore, under 27 C.F.R. §4.39(i), generally, a brand name of viticultural significance
may not be used unless the wine meets  the appellation of origin requirements for the geographic area
named.  A name has viticultural significance when it is the name of a state or county (or the foreign
equivalents), when approved as a viticultural area, or by a foreign government, or when found to have
viticultural significance by the Director of ATF.  27 C.F.R. §4.39(i)(3).
In addition, under 27 C.F.R. §4.39(j), product names with specific geographical significance
may not be used on labels, unless the Director of ATF finds that, because of their long usage, such
names are recognized by consumers as fanciful product names and not representative of origin.  In
such cases, the product names must be qualified with the word "brand" immediately following the
product name, in the same size of type, and as conspicuous as the product name itself.  Also, in suchcases, the label must bear an appellation of origin and, if required by the Director, a statement
disclaiming the geographical reference as a representation as to the origin of the wine.
In addition, 27 C.F.R. §4.39(k) prohibits on wine labels the use of "[o]ther statements,
designs, devices or representations which indicate or infer an origin other than the true place of origin
of the wine".
Note that under 27 C.F.R. §4.33, brand names on wine labels that are misleading as to age,
origin, identity or other characteristics of the product are prohibited.WT/TPR/M/56/Add.1
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Wines:  Advertisements
Title 27, C.F.R. section 4.64 enumerates prohibited practices with respect to advertising for
wines.  Under 27 C.F.R. §4.64(a)(1), a wine advertisement may not contain "any statement that is
false or untrue in any material particular, or that, irrespective of falsity, directly, or by ambiguity,
omission or inference, or by the  addition of irrelevant, scientific or technical matter, tends to create amisleading impression".
In addition, 27 C.F.R. §4.64(g), sets forth that "[n]o statement, design, device, or
representation which tends to create the  impression that the wine originated in a particular place orregion, shall appear in any advertisement unless the label of the advertised product bears an
appellation of origin, and such appellation of origin appears in the advertisement in direct conjunction
with the class and type designation".
Spirits:  Labeling
Under 27 C.F.R. §5.34, no label of distilled sp irits may contain any brand name, which
standing alone, or in association with other pr inted or graphic matter, creates any impression or
inference as to the age, origin, identify or other characteristics of the product.
In addition, under 27 C.F.R. §5.42(a), statements on labels of distilled spirits may not contain
"[a]ny statement that is false or untrue in any particular, or that, irrespective of falsity, directly or by
ambiguity, omission or interference, or by the addition of scientific or technical matter, tends to create
a misleading impression".
All labels of distilled spirits products must disclose the products' class and type.
27 C.F.R. §5.32.  As such, geographical names for distinctive types of distilled spirits may not apply
to any distilled spirits produced in any other place than the particular region indicated by the name.
27 C.F.R. §5.22(k)(1).  There are several exceptions to this rule.  For instance, if in direct conjunction
with the name there appears the word "type" or the word "American" or some other adjective
indicating the true place of production, in letters substantially as conspicuous as such name,such geographical name may be allowed.  27 C.F. R. §5.22(k)(1).  Or, if the Director of ATF
specifically finds that such geographical name has, by usage and common knowledge lost its
geographical significance to such extent that it has become generic, such name may also be used.
27 C.F.R. §5.22(k)(2).  ATF applies these rules in a manner authorized by and consistent with TRIPs
Article 24.
However, under 27 C.F.R. §5.22(k)(3), geographical names that are not names for distinctive
types of distilled spirits, that have not become generic, shall not be applied to distilled spirits
produced in any other place than the particular place or region indicated by that name.
Spirits:  Advertisements
Title 27, C.F.R. section 5.65 enumerates prohibited  practices with respect to advertising of
spirits.  Specifically, 27 C.F.R. §5.65(a)(1) prohibits use of "[a]ny statement that is false or untrue in
any particular, or that, irrespective of falsity, directly, or by ambiguity, omission, or inference, or by
the addition of irrelevant,  scientific or technical matter, tends to create a misleading impression".
Rights Established Through Actual Use – "Com mon Law" Rights:  Although not a system of
protection, rights in a geographical indication may be created through actual use and without applying
for recognition either as a trademark or certification mark.WT/TPR/M/56/Add.1
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The Food and Drug Administration and the U.S. Department of Agriculture both have the
responsibility to prevent misleading or false claims on labels.  See:  21 USC 451, 457 for poultry ;
21 USC 602 for meats;  21 USC 343(a)(1), for all other foods.  The FDA and the USDA will not
approve labels or will  recall labels that contain a geographic term that misleads the public or is false.
In response to this question, the United States also refers  to answers presented with respect to
the TRIPS Article 24.2 WTO questionnaire, circulated on 12 May 1998 as WTO document
IP/C/W/102.
9.19 (EU) (p. 113, para. 204) Please explain how the U.S. implemented Article 6bis of the Berne
Convention to which it is a party?
No implementation was necessary.  See answer to  question 9.15.
9.20 (Norway)  Norway is considering introducing a system  of differential patent application fees
depending on the size of the  enterprise.  We have been told that the USPTO already practice asimilar  system.  What experiences has the USPTO in general drawn from this practice?  Has the
practice led to any problems because applicants have  claimed that they belong to a different category
to save application fees?
The United States has reduced the majority of fees by 50% for small businesses, independent
inventors and  nonprofit organizations.  The United States has been very pleased with the practice ofreduced fees, because such reduced fees have allowed many applications from persons or
organizations that may have foregone the patent process due to the inability to pay the higher fees.
The increased  applications by such organizations have stimulated economic development
In general, the U.S. Patent and Trademark Office has not experienced problems with
applicants claiming an incorrect status.  However, the U.S. Patent and Trademark Office does not
investigate the  propriety of claims for reduced fee status.  Applicants can correct errors  in payments
by paying the higher amount for large entities or by requesting a refund if the applicant erroneouslypaid the large entity status within a set deadline.   However, regulations inform the applicant  that
fraudulent submissions are considered fraud on the Office.  Such fraud could render any issued patent
as unenforceable.  Additionally, false statements made to an agency of the United States are
sanctionable by criminal penalty.
10. Standards, sanitary requirements & environmental regulations
10.1 (Korea) (p. 121, para. 231) With regard to the adoption of international standards, while the
U.S. claims that national standards are "technically equivalent" to international ones, it has a
relatively low level of direct use of standards set by international standardizing bodies.  Does the U.S.
have any plans to review existing standards and achieve full alignment with international standards?
As a matter of practice and law, U.S. standardizing bodies and agencies review existing
standards and consider whether international standards (if relevant ones exist) are appropriate and
effective for meeting domestic needs.  The United States does not agree with the assertion that there is
a “relatively low level of direct use of standards set by international standardizing bodies” and we are
unaware of any quantitative data that would support such an assertion.
10.2 (Japan) TBT (p. 121, para. 230) How many standards in total existed in the U.S. at the end
of 1998 (including those which are incorporated into technical regulations)?WT/TPR/M/56/Add.1
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The U.S. Government does not collect comprehensive data on the number of standards in
existence.
10.3 (Japan) According to para. 233, federal agencies are directed to use voluntary consensus
standards in lieu of government standards.  Could the U.S. explain the reason behind this policy?
The policy is intended to reduce to a minimum the reliance by U.S. agencies on
government-unique standards for procurement and regulatory needs.  Many voluntary consensus
standards are appropriate or adaptable for the Government’s purposes.  The use of such standards,whenever practicable and appropriate, is intended to achieve the following goals:
(a) eliminate the cost to the Government of developing its own standards and decrease
the cost of goods procured and the burden of complying with agency regulation;
(b) provide incentives and opportunities to establish standards that serve national needs;
(c) encourage long-term growth for U.S. enterprises and promote efficiency and
economic competition through harmonization of standards;
(d) further the policy of reliance upon the private sector to supply government needs for
goods and services.
10.4 (Japan) According to para. 236, firms from NAFTA countries can participate in the development
process of standards of another NAFTA country.  Since non-NAFTA firms do not benefit from this
privilege, can not such a privilege be considered as a discriminatory or unnecessary trade barrier?
We are unaware of any international trade obligation that requires the right and opportunity
for direct participation in the process for developing standards.  The rights and obligations under the
Agreement on Technical Barriers to Trade, for example, afford only an opportunity for indirect
participation through the process of providing comments on proposed standards and technicalregulations.
10.5 (Canada) Internal Measures, (iv) Standards, sanitary requirements & environmental regulations
(p. 128, para. 264) A U.S. Congressional Research Service report of 6 April 1999, acknowledges thatthe Marine Mammal Protection Act (MMPA) prohibits trade in marine mammal products regardless
of species’ conservation status and therefore appears to be inconsistent with U.S. WTO obligations.
For example, under the Convention on International Trade in Endangered Species (CITES), neither
ringed nor harp seals are considered threatened or endangered in any way and therefore no
monitoring or trade restrictions are justified on th e movement of products from either species.  Yet,
under the MMPA, both species are restricted, so that no import of these species is allowed into the
United States.  We also note that the MMPA would appear to be in violation of the national treatment
provisions of the WTO by allowing domestic production in Alaska and commercial sales in the U.S. of
products which are otherwise banned by the MMPA while denying the same rights to native
inhabitants in Canada and other countries.  What  action is the U.S. Government contemplating to
bring the MMPA into conformity with its obligations under the WTO?
We do not agree with Canada’s suggestion that there is a conflict between the MMPA and our
obligations under the WTO.  Contrary to the de scription of the MMPA provided in question 10.1.4,
this law does not prevent the importation of ringed seal or harp seal products.  The MMPA authorizes
persons seeking to import marine mammal products to apply to the Secretary of Commerce for a
waiver of the statutory moratorium on importation.  This law applies equally to U.S. citizens and
foreign nationals seeking to import marine mammal products for commercial purposes.  Prior toWT/TPR/M/56/Add.1
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issuing a permit for importation of such seal products, the Secretary must determine that the animals
were taken “in accordance with sound principles of resource conservation” and the nation of originhas a “program for taking marine mammals” that is “consistent with the provisions and policies of the
[MMPA]”.  We find hard to understand the implication of Canada’s question that countries should
only engage in conservation actions once species are already threatened or endangered.
10.6 (EU) (p. 121, para. 231) This paints a much too positive picture of U.S. transposition of ISO and
IEC standards.  The ISO 9000 family of standards  consists, at the moment, of approximately
20 standards.  This should be compared to ISO to tal catalogue of standards, which is over 5,000, and
the U.S. has a very bad track record of transposing them.  QS 9000 is also a good example of how
U.S. automotive industry has departed from establishe d international best practice and it is not until
recently that QS 9000 has been aligned to ISO 9000.
We disagree with these assertions.
Sanitary and Phytosanitary Measures
10.7 (Canada) (p. 123, para. 239) In addition to U.S. De partment of Agriculture (USDA) Veterinary
Services' requirements, individual U.S. states have animal health certification requirements for
imports.  Although USDA recognizes Canada's animal he alth status, certain states continue to require
that Canadian cattle be tested and/or vaccinated fo r brucellosis or tuberculosis.  Given that Canada's
cattle herd is free of these diseases, why are Canadian cattle subjected to testing and/or vaccination?
Canada cites U.S. federal regulations that allow cattle from Canada to enter the United States
if accompanied by a certificate issued or endorsed stating the cattle are from tuberculosis-free herds or
brucellosis certified-free herds.
The United States Constitution provides that the regulation of foreign commerce is the
province of the federal government.  Consequently, standards regarding the importation of foreign
plants and animals into the United States are set by the federal government.
In some instances, sub-federal entities attempt to regulate foreign commerce.  It has been
federal policy not to initiate litigation when this occurs.  Historically, an importer or exporter has filed
suit or defended against prosecution for a violation of the sub-entity regulation by claiming federal
pre-emption.  In such cases, the court may request the opinion of the federal government or the federal
government may request the opportunity to file an amicus brief setting forth the federal government’sposition.
10.8 (Korea) (p. 124, para. 246) Through the Korea-U.S. Work Plan in August of 1995, the U.S.
Government has permitted the import of Cheju citrus on the condition that phytosanitary safety
measures for prohibited disease and pests (Citrus Canker Disease) be carried out.  However, the
importation of Cheju citrus into the five major citrus producing states (California, Florida, Arizona,Louisiana and Texas) is still prohibited.  As Korea is taking the appropriate measures in its
inspections, what is the justification of such discrimination by the citrus producing states and will the
U.S. federal government address this issue?
The United States considers destination as a risk factor in the case of certain pests and
diseases when it assesses the risks associated w ith the import of a foreign commodity.  For example,
the presence of citrus canker on citrus from Korea which is destined for Minnesota poses minimal risk
as the conditions do not exist (i.e. climatic conditions, no citrus being grown) which would allow
citrus canker to be established.  Conversely, in the citrus producing states the risk is quite high.  KoreaWT/TPR/M/56/Add.1
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has requested permission to export Cheju citrus to the five major citrus producing states and APHIS is
in the process of conducting a phytosanitary risk as sessment in response to that request.  The results
of that risk assessment will be used to determine whether additional mitigation procedures are
necessary before Cheju citrus can be imported into the citrus producing states.
10.9 (Switzerland) In para. 235 it is stated that third-party certification is becoming increasingly
important and approval of certifiers or of product s by government agents, such as the Occupational
Safety and Health Administration (OSHA), is m andatory for selected products.  It would be
interesting to learn for which products mandatory approval by OSHA is needed?
See response to 10.10. Additional information on OSHA regulations can be found at
www.osha.gov.
10.10 (Switzerland) To the best of our knowledge OSHA recognizes Nationally Recognized Testing
Laboratories (NRTLs) to test products according to test standards specifically recognized by OSHA.According to our information these standards are all US-based standards, such as those issued by the
American National Standards Institute and Underwriters Laboratories.  In this context OSHA does
not recognize Nationally Recognized Testing Laborat ories for non US-based test standards, such as
those issued by ISO/IEC standards or  EU standards.  In this context we would like to mention that the
U.S. so far has notified 124 technical regulations to WTO naming the agencies responsible for the
notification of such technical regulations.  OSHA is not listed.
Could the U.S. delegation confirm that standards recognized by OSHA and being incorporated in
technical regulations are in accordance with the technical content of relevant international standards
such as ISO and IEC?
In the United States, ISO and IEC standards can be adopted as “American National
Standards” which are maintained by the American National Standards Institute.  This is one vehicle
by which OSHA may recognize ISO and IEC standards in its NRTL program.  With respect to themore general question of “whether standards recognized by OSHA and being incorporated in
technical regulations are in accordance with the t echnical content of relevant international standards
such as ISO and IEC”, the response is no.  This is a very broad question.  The WTO does not require
agencies to use international standards that are not effective or appropriate for legitimate regulatory
objectives.
Notifications to the WTO of technical regulations proposed by OSHA are made at the time
they are published in the Federal Register.  There were no proposals published during 1998 which met
the notification criteria under the TBT Agreement.
10.11 (Japan) In para. 239, reference is made to the fact that sanitary and phytosanitary measures
which apply to domestic foodstuffs also apply to imported foodstuffs.  Does this mean that additional
safety criteria could be applied to imported foods?
No.  The U.S. continues to actively review its food safety system to appropriately assure
public health and safety.  Any new proposed safety criteria (i.e. regulations) apply equally to domestic
and imported products.
10.12 (Japan) In para. 241, it is stated that, "[a]ny products that might be harmful to consumers are
subject to regulatory action whether or not they exceed the defect levels", when referring to "Food
Defect Action Levels".  Can we understand that an objective definition of "harmful" is required in this
guideline? Does the U.S. Government set down a time-limit for fulfilling its scientific verification of
whether it be "harmful" or not?WT/TPR/M/56/Add.1
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The statement in para. 241 is wrong.  Food Defect Action Levels are established on the basis
of not being hazardous to health.  Therefore, products exceeding the Food Defect Action Levels arenot likely to be harmful.  The purpose of the Food Defect Action Levels is to demonstrate compliancewith good manufacturing practice.
10.13 (Japan) In para. 253, it is stated that, "[c]ertain agricultural commodities must meet United
States import requirements related to grade, size, quality and maturity".  Could the U.S. explain the
grounds on which it establishes these regulations?  Does these regulations constitute inappropriate
trade obstacles which are not in compliance with the WTO Agreement?
Section 8e of the Agricultural Marketing Agreement Act of 1937 (7 U.S.C. 608e-1, AMAA),
provides that whenever certain specified commodities are regulated under a Federal marketing order,
imports of those commodities must meet the same grade, size, quality and maturity requirements asthose in effect for the domestically produced commodity.
The U.S. believes that these regulations fully comply with World Trade Organization
requirements.  The grade, size, quality and maturity requirements specify minimums only, do not limit
the volumes of such commodities which may be imported, do not apply a tariff or quota to such
imports, and are in effect only during the same periods of time as domestic production is regulated.These requirements are limited to grade, size, quality and maturity.  Domestic production is often
required to meet additional requirements related to pack and container, container marking, volume
controls, and assessments to fund administrative costs for marketing order operations.
Applying these minimum requirements to domestic production and imports of those
commodities creates buyer and consumer confidence in the quality of goods marketed.  Suchconfidence results in increased demand for and purchases of the commodities, benefitting both
domestic producers and importers.
10.14 (Japan) Japan has proposed quarantine measures on the export of oranges from Japan.  As the
U.S. has not yet replied to our proposal, we would like to know the prospects of removing the bans on
the export of oranges from Japan?
The U.S. is continuing to study the Japanese request on a scientific basis.  Upon completion
of this review, Japan will be notified immediately.
10.15 (Brazil) Bovine and swine meat-Sanitary and Phytosanitary measures - In the U.S.,
responsibility for food safety is shared among several federal government agencies and departments
in cooperation with state and local governments (p. 123).  Meat and poultry products can only be
imported from countries and plants approved by the U.S., with the Federal Meat Inspection Act
requiring countries to impose inspections requir ements equivalent to the U.S. (p. 125, para. 249).
Brazil is a traditional exporter of bovine meat, but the U.S. is not accepting Brazil as free from animal
diseases, neither accepting some states as disease free zones as the Office of Epizootics is doing.
How is the process of adapting the U.S. legislation to  the rules of the SPS Agreement in the area of
regional certification?
APHIS Veterinary Services is currently reviewing the status of two Brazilian states with
respect to Foot and Mouth Disease, in response to Brazil’s request to be able to export uncooked beef
to the United States.WT/TPR/M/56/Add.1
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10.16 (Malaysia) Standards, sanitary requirements and environmental regulations - There are
numerous technical regulations and standards imposed by the U.S. on grounds of consumer
protection, public health, safety and the environment.  Numerous jurisdictions and agencies
administer these, which contributes to the compl exity of conformance to these regulations.  This
situation lend themselves to costly delays in obtaining approvals and bringing the products in
conformity with these standards.  Para. 231 of the report note that there are 50,000 standards in
existence established by about 400 organizations.  The National Standards and CertificationInformation (NSCI) of the National Institute of Standards and Technology (NIST) is the designated
enquiry point for the WTO TBT Agreement.  Is it sufficient to approach the NSCI alone to get all
information on regulations and standards pertaining to a specific product and is these information
collated by product description to make it easily retrievable and accessible to foreign exporters?
Yes, it is sufficient to contact NIST’s National Center for Standards and Certification
Information (NCSCI) to obtain all information on U. S. industry standards and government technical
regulations.  Center staff conduct searches by product or subject area and provide a listing of all
relevant U.S. industry standards (organization acronym, document number and document title) along
with information on how to obtain  copies and/or additional information.  Copies of relevant U.S.
government technical regulations are provided.
10.17 (Malaysia) As at 31 December 1998, the U.S. notified 124 technical regulations to the WTO for
health and safety reasons.  Do regulations so notified include all regulations imposed at the federal,
state and local level?
The U.S. has and continues to be a leader in providing other members with early drafts of
proposed regulations, which reflects our obligation and the spirit of the WTO agreements relative to
TBT and SPS transparency.  The U.S. thanks those members who have taken time to review and
comment on proposed U.S. regulatory actions.  Not infrequently, our proposals have beenqualitatively improved or substantively changed due to comments from our trading partners.  The U.S.
continues to strive to provide WTO members with the widest appropriate scope of proposed measures,
be these from the federal, state or local levels.
10.18 (India) Various studies in the U.S. suggest that the system of testing, standards, labelling and
conformity assessment are too costly, burdensome and complex, and that typically the requirements
are set at levels higher than international norms.  The quality requirements stipulated for edible oilsby the U.S. are much higher than those set by 'Codex Alimentarius' for instance.  The Fastener
Quality Act regulations discriminate against non-NAFTA suppliers in various ways.  Procedural
hassles also abound as the original laboratory testing report or certified copy thereof has to be
attached to each lot and the fastener parts logo mu st be registered with the U.S. patent and trademark
office.  What is the rationalization for continuing such practices and regulations?
The Fastener Quality Act was substantially amended in June of 1999 to eliminate unnecessary
requirements.  The amendments included:  limiting coverage to only high-strength fasteners ;
encouraging the use of recognized industry quality assurance systems ;  and, streamlining paperwork
reporting by allowing companies to transmit and store reports electronically.  On 15 December 1999,
a notice of proposed rulemaking on the procedures for implementation of the fastener quality act was
circulated for public comment in the Federal Register.  The proposed changes include the elimination
of testing and paperwork requirements and of NIST's role in evaluating and approving bodies that
accredit laboratories and registrars.  In addition, the changes set forth procedures under which NISTwill accept petitions for approval of certain documents and self-declarations for accreditation bodies.The comment period on the proposed changes will end on 28 January 2000.WT/TPR/M/56/Add.1
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11. Government procurement
11.1 (Canada) (p. 132, paras 274-275)  (a) The United States notes the value of, and trends in, U.S.
federal procurement spending, and notes certain laws and regulations that restrict certain contractsfrom foreign competition.  Canada notes that beyo nd these provisions, Congress also specifies or
"earmarks" certain contracts for specific contract ors.  What value of U.S. federal procurement was
"earmarked" in appropriations for the most recent fiscal year for which the United States hasrecords?
U.S. Government statistics are not collected on th e basis of "earmarks" in appropriations laws.
11.2 (Canada)  In para. 274 and the U.S. responses to Canada’s questions in the 1996 U.S. trade
policy review, the referenced documents outlin e U.S. federal government expenditure relative to
GDP, note that set-asides account for only 6-7% of the value of items covered under the TokyoRound, and remind readers that many awards to small business are made through open competition
that do not involve set-asides.
We observe that the 1996 State of Small Business:  A Report of the President indicates that
in FY 1995, small businesses won US$66.7 billion in federal contract awards, including
US$42.9 billion in direct awards from the federa l government and US$23.8 bi llion awarded to small
businesses as subcontractors to prime contractors working directly for the federal government.  The
US$66.7 billion amounts to 33% of the US$202.3 billion in contract actions awarded in FY 1995.  If
American small business is winning one third of the contract dollars spent by the U.S. federal
government, the vast majority of those contracts without the benefit of set-asides, why are small
business set-asides necessary at all?
Set asides contribute to a range of important U.S. social and economic policy objectives.
These objectives include affirmative action on behalf of historically disadvantaged minorities,
maintaining and strengthening a diversified array of domestic industrial suppliers to the military, and
promoting economic development in historically underutilized business zones.
11.3 (Canada) We also observe that the U.S. Government may reserve for small business set-asides
any contract that the contracting officer has a reasonable expectation that two or more small
businesses are qualified to supply.  Foreign supp liers, like their U.S. competitors, must develop
contacts and pursue bid opportunities many months prior to CBD publication, but have no way of
knowing whether the contracting officer will event ually decide to reserve the contract for small
business, thus excluding the foreign firms from the competition.  How does the U.S. consider this
requirement to be “predictable”?
U.S. procurement entities fully implement the provisions of the GPA relating to time-limits
for tendering, including in situations where procurements may be subject to small or minority
business set-asides.
11.4 (Canada) On federally-funded state and local transportation contracts, (para. 277, pp. 132-133)
Under what legal definition does the U.S. consid er transit equipment purchases and transportation
infrastructure contracts to be state or local procurements when, since 1964, U.S. federaltransportation grants typically account for well over half and often up to 80% of the total cost of such
projects?  If federally-funded transportation systems and infrastructure contracts are considered to be
state or local purchases, then why may state or local government not determine which procurement
preferences, if any, apply as they do in other state and local contracts?WT/TPR/M/56/Add.1
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In the United States and other federal systems, state and local procurement entities are
frequently responsible for conducting procurements for highway and other infrastructure projectsalthough, as Canada notes, a considerable amount of the funding for those projects may come from
Federal sources.  The U.S. Congress may attach conditions on the use of such funding, such as the
requirement that Federally-funded highway construction projects use domestic steel and other bulk
construction materials (which typically account for about 5% of the total value of such projects).  The
United States’ Appendix I to the GPA includes specific exceptions for these requirements, which arepart of the overall balance of negotiated coverage commitments under the Agreement.
11.5 (Korea) (pp. 138-139, paras 294-295) There is a discrepancy between the definition of "US made
end product" as defined in the Trade Agreement Act and "domestic end product" as defined in the Buy
American Act.  The Secretariat Report states t hat the U.S. is seeking an amendment to the Federal
Acquisition Regulation (FAR) to rectify the discrepancy by introducing the definition of "US made end
products" as products that are manufactured or substa ntially transformed in th e US, regardless of the
source of the components, thus allowing the purc hase by federal agencies of all U.S. made end-
products, whether or not they are defined as "domestic end products" under the Buy American Act.
(The United States takes note of the comment.  The response to 11.6 addresses a related
point.)
11.6 (Korea) How far has this amendment got in the legislative process?  When is this amendment
likely to take effect?  Also, if the "US made end product" satisfies the definition in the amended FAR
but does not satisfy the definition of the Buy American Act, would it be subject to the price margin
requirement or other requirements as set by the Buy American Act?  (In other words, would the FAR
amendment legally or effectively render useless th e definition of "domestic end products" as defined
in the Buy American Act?)
The definition of "domestic end product" under the Buy American Act (BAA) is not relevant
to the implementation of the GPA, since the BAA is  waived for all procurements that are covered by
the Agreement.  For the purposes of implementing the GPA, U.S. regulations define “U.S.-made end
product” as those products that are substantially transformed in the United States.  The same test
(i.e. "substantial transformation") is used in determin ing the eligibility of foreign offers (i.e. whether a
product is the product of another GPA Party) under the Agreement.
The Administration is in the process of revising FAR Part 25.  The revisions provide
inter alia  that, for procurements subject to the GPA, price differentials may not be applied to
"U.S. made end products" (i.e. products that are substantially transformed in the United States)
regardless of the amount of domestic content.  This revision, which will come into effect on22 February 2000, will have no affect on the offers by suppliers of other GPA Parties.
11.7 (Canada) On tendering and purchasing procedur es, (pp. 135-136, paras 282-287) Certain U.S.
federal procurement regulations, including those on small business subcontracting plans and past
performance, do not apply to foreign bidders in certain circumstances.  The U.S. Federal Acquisition
Regulations (FAR) on small business subcontracting plans (FAR Part 19) and past performance(FAR Part 15) specify that if these bid evaluation fa ctors do not apply to a specific bid, these factors
are to be considered as neutral in the evaluation.  We are concerned that foreign firms who are not
required to provide certain information in their bi ds may be nonetheless disadvantaged if government
buyers have inadequate guidance on how  to implement this requirement for neutral evaluation.  Many
agencies have published agency-specific bid evaluation guidelines.  In some bid evaluation matrices,these factors (particularly past performance) are heavily weighted.  How does the United States
ensure that the internal practices of individual agencies are consistent with the federal requirement
for neutral consideration?WT/TPR/M/56/Add.1
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The Federal Acquisition Regulations (FAR) require that central government entities follow
uniform policies and procedures in procuring goods and services.  The FAR does not permit agencyacquisition regulations that unnecessarily repeat, paraphrase, or otherwise restate the FAR, limits
agency acquisition regulations to those necessary to implement FAR policies and procedures within
an agency, and provides for coordination, simplicity, and uniformity in the USG acquisition process.
The General Accounting Office undertakes reviews of agencies and their procurement practices and
issues reports on the agencies' adherence to USG procurement policies.  In addition, the Congressmonitors agencies' implementation of USG procurement policies through informal congressional
reviews.
11.8 (Hong Kong) (pp. 131-141, paras 273-300) We understand that the U.S. Government provides
assistance or preference to small business concerns.  While we note that para. 1 of the General Notes
of the US' schedule of commitments in Appendix I to the GPA states that "this Agreement will not
apply to set asides on behalf of small and minority businesses";  and para. 2 of the Notes to Annex 2
to Appendix I states that "the Agreement shall not a pply to preferences or restrictions associated with
programs promoting the developm ent of distressed areas and businesses owned by minorities,
disabled veterans and women", we would like to know if the U.S. has any plan to remove these
preferences, which are not in line with the principle of non-discrimination.
We would like to seek detailed information on the operation of these assistance programmes including
set aside and subcontracting plan requirements.  We are also interested to know how such assistance
operates vis-à-vis the principle of non-discrimination in areas such as:
- whether these assistance programmes distinguish between the U.S. and non-US small
business suppliers or among non-US suppliers;
- whether there are threshold values above or below which these assistance
programmes will not be applicable;
- what measures have been put in place to ensure that domestic and foreign suppliers
are put on equal footing in bidding for contracts to which these assistance
programmes are applicable;
- whether the requirements under these assistance programmes form part of the criteria
for qualification or selection of suppliers;
- whether preferential treatment is given to those bids with sub-contracting plans;  and
- under the sub-contracting plan requirement, what measures have been put in place to
ensure that domestic and foreign subcontractors are put on equal footing in bidding
for subcontracts.
Job creation is one of the United States’ top economic policy objectives.  Between
1993-1995, U.S. small business played a key role in generating 20 million new, high quality jobs and
in reducing unemployment to record low levels.  These gains have been shared by all major sub-
groups of the population, including historically disadvantaged minorities.  Federal and state economic
policies and programs seek to support this process, including through procurement set asides for small
and minority owned businesses.  The United States currently has no plans to remove those programs.
The coverage of the GPA, in the General Notes and other parts of Appendix I, reflects a
careful balance of negotiated market access opportunities.  The General Notes of each Party’s
schedule are, of course, an integral part of that balance.
Detailed information on the operation of small business programs, including set-aside and
subcontracting plan requirements can be found on the Small Business Administration's website atwww.sba.gov.WT/TPR/M/56/Add.1
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Sub-tic one:  see response to 11.2  The assistance programs referred to distinguish between
U.S. and non-US small business suppliers and among non-US suppliers.
Sub-tic two:  Threshold values have been set for assistance programs.  Generally, these
programs apply to procurements between US$2,50 0 and US$100,000.  There are some variations of
these thresholds depending on the size standards of the industry in which goods or services are being
procured.  These thresholds can be found in Part 19 and 121 of the Federal Acquisition Regulations at
www.arnet.gov.
Sub-tic three and four:  These procurements are excluded from GPA coverage and are not
open to foreign suppliers.
Sub-tic five and six:  The requirements for a subcontracting plan are contained in
Subpart 19.7 of the Federal Acquisition Regulation.  Subpart 19.702 clarifies the requirement for
subcontracting plans and exempts contracts that would be performed entirely outside of any state,territory, or possession of the United States, the District of Columbia and the Commonwealth of
Puerto Rico.  For example, if a Hong Kong firm bid on a Federal contract and planned to perform the
entire contract in Hong Kong, the firm would not be required to submit a subcontracting plan, and it
would not be penalized for not doing so.  On th e other hand, if the Hong Kong firm decided to
perform a portion of the contract in the United States, it would be required to submit a subcontractingplan (assuming that the contract solicitation included such a provision, which not all solicitations do),
and it would then be on an equal footing with other offerors.  The purpose of the subcontracting plan
requirement is to ensure "maximum practicable opport unity" for small businesses to participate in the
performance of Federal contracts.
11.9 (Hong Kong) We note a number of Party-specific  non-application and reciprocity provisions in
General Notes 5 to 9 of the US' schedule of commitments in Appendix I to the GPA.  These provisions
are derogations from the fundamental principle of non-discrimination of the multilateral trading
system.  We would appreciate an update on the progress in working towards the removal of suchprovisions and what plans the U.S. has to remove such provisions.
See the response to question 11.8.
Since the GPA entered into effect three years ago, the United States has reached bilateral
agreements with a number of the other Parties leading to the reciprocally balanced removal of some of
these provisions.  Without prejudice to its positions on particular elements of existing coverage, the
United States continues to be ready to work with th e other Parties to seek to identify areas in which
there may be additional scope for reciprocally balanced expansion of GPA coverage.
11.10 (Canada) (p. 132, para. 274) This paragraph provides U.S. statistics on overall government
procurement for 1998.  Yet, the U.S. has not yet submitted statistical reports on its WTO AGP-covered
procurement.  Would the U.S. please indicate th e total value of AGP-covered procurement at the
federal level and the total value of procurement set-aside under the small and minority business
set-aside programs that would otherwise have been covered by the AGP?  May we have the same
information for AGP-covered pr ocurement at the state level?
In calendar year 1998, contract actions by the Federal Government that were covered by the
GPA amounted to approximately US$63 billion.  Of that total, actions valued at approximately
US$5.6 billion (about 9% of the total)  were subject to small and minority business set asides.  These
statistics are currently not available for the states, many of which do not have small business orminority set aside programs.WT/TPR/M/56/Add.1
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11.11 (Canada) (pp. 136-138, paras 289-291) This section includes extensive information on the Buy
American provisions of the U.S. Government.  Set- aside provisions may also have a significant impact
on the scope and predictability of coverage under the AGP.  At the 1996 TPRM, it was suggested by
Canada that the U.S. give further consideration to  the elimination and circumscription of these
exclusions and exemptions.  What progress has the U.S. made in eliminating or circumscribingexclusions to the AGP, such as the small and minority set-aside programs?
See the response to question 11.9.  Of course, as the Parties to the GPA continue to explore
whether there is potential for further expansion of GPA coverage, it is important to consider the extentto which they have implemented their existing commitments.
11.12 (Australia) The U.S. government procurement market remains highly restricted under the Trade
Agreements and Buy American Acts, and additionally through the plurilateral nature of theGovernment Procurement Agreement, to which Austra lia is not party.  What measures does the U.S.
envisage adopting in domestic arrangements to improve access and increase the competitiveness of
the U.S. market?  Does the U.S. see the scheduled review of the Governmen t Procurement Agreement
leading to a revamped GPA II which establishes a proper MFN basis for internationally competitive
government procurement, with full regard to prin ciples of non-discrimination and national treatment?
If so, is the U.S. prepared to negotiate on elements  of its domestic regime as part of the review?
The United States provides full national and MFN treatment to the suppliers of other GPA
Parties within the scope of that Agreement.  In order to encourage reciprocal and balanced
liberalization of international trade in procurement markets, the longstanding policy of the United
States is to offer such treatment to trading partners who are prepared to participate in the GPA or, in
some circumstances, who otherwise provide reciprocal market access opportunities to U.S. suppliers.
In addition, the United States unilaterally provides least developed country suppliers access to
procurement opportunities covered by the GPA.
Since the principles of national and MFN treatment are fundamental to the GPA, the United
States views the Agreement as a good basis for achieving broader international application of those
principles in WTO Members’ procurement markets.  For the United States, an important element of
the ongoing review of the GPA is the opportunity to streamline provisions of the Agreement which
may be out-dated or overly complex and burdensome.  This exercise should facilitate other Members’participation in the GPA.  Review of the coverage of the Agreement is another element of this review.
The United States stands ready to consider further expansion of its own commitments, on the basis of
reciprocally balanced commitments from the other Participants.
11.13 (Australia) Australia supports the develo pment of a principles-based Agreement on
Transparency in Government Procurement, which does not negate, obviate or replace the need for aproper review and renegotiation of the Government Pr ocurement Agreement.  Is this also the view of
the U.S. Government?
Like many other Members, the United States strongly supports WTO Members’ efforts to
conclude a multilateral Agreement on Transparency in Government Procurement.  All Members
would benefit tremendously from such an Agreement.   There is broad international recognition that
transparency is an indispensable element of the poli cies and practices that are needed to ensure that
procurement decisions produce the best value for money and the most efficient use possible of scarce
public sector resources.  Members also appreciate that transparent government practices, including in
relation to procurement, are extremely important in building public confidence in economic
management and in establishing a stable and predictable economic and commercial environment thatwill encourage private sector investment and provide a solid foundation for future growth and
development.WT/TPR/M/56/Add.1
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11.14 (Japan) Value of government procurement (para. 274) The share of the production of the
government procurement sector to GDP in the United States stands at more than 30%, although therehas been a slight decrease in this figure during the 1990s (34.4% for 1992 and 32% for 1998).
Combined with the scale and steady growth of th e U.S. economy, we cannot overlook the implication
that this sector has on international trade.  Also, the value of goods procured by state-level
governments amounts to 2.66 times higher than that procured by the federal government
(federal-level:  35.5 billion U.S. dollars, state-level:  94.5 billion U.S. dollars), and this even if only37 States currently open their government procurement markets to foreign suppliers.
We, therefore, hope that quick offers will also be made with regard to the remaining 13 States
that are not in the scope of the WTO Government Procurement Agreement (the GPA), as well as with
regard to seven major cities, i.e. Boston, Chicago, Dallas, Detroit, Indianapolis, Nashville and
San Antonio, whose markets the United States has undertaken to open according to the bilateralmemorandum of understanding with the European Union.  Please explain if the U.S. has any intention
to make an offer with regard to these States and cities.
See the responses to questions 11.8, 11.9, and 11.11.
11.15 (Japan) Tendering procedures (paras 282-287)  We recognize that electronic tendering
procedures by way of computer networks have considerably developed in the United States.  On theother hand, the United States specifies the "Commerce Business Daily (or state journal in the case of
state governments)" in Appendix II to the GPA, as the publication that the Contracting Parties utilize
for the public notice of intended procurement under Article 9.1 of the Agreement, as well as for public
notice after award of a contract under Article 18.1.  For our part, we believe that existing Article 13.1
must be amended if we are to allow tendering procedures through electronic means only.
Are the electronic tendering procedures, that are in place in the US, only available in addition to, or
as an option for, the original announcement of procurement opportunities through publication andthe original tendering system in writing?
The official publication for the dissemination of federal procurement opportunity information
and contract award information is the Commerce Business Daily (CBD).  This is a subscription-based
paper publication, which is also available free of charge over the Internet at:  cbdnet@gpo.gov.  At
this time, the United States has no plans to discontinue publishing the paper copy of the CBD.
With regard to the United States’ utilization of electronic tendering procedures, at this time
the United States does not widely offer the ability for suppliers to submit tenders electronically.  In
many instances, however, specific entities make tender documentation available electronically overthe Internet.
The United States supports giving Parties th e flexibility to utilize electronic means of
disseminating procurement opportunity information as  an alternative to traditional “paper-based”
methods.  However, in order to ensure that the GPA remains accessible to developing and least
developed WTO Members that may not be in a position to utilize electronic means of information
dissemination, the United States does not support mandating the electronic publication of notices ofintended procurement and notices of contract award.
11.16 (Japan) Domestic review mechanism - As fo r the domestic review mechanisms regarding
procurements by the federal and state governments  that are subject to the GPA, including cases
where a review body is a tribunal, how are these made public? What kind of cases have been brought
to the review mechanisms with respect to gover nment procurements covered by the GPA, and how
have these been dealt with?WT/TPR/M/56/Add.1
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The mechanism for making procurement protests public vary depending on the level of
government and the type of review sought.  At the Federal level, the General Accounting Office(GAO), an arm of the United States Congress, is vested with the authority to review protests in
accordance with Title 31 of the United States Code Section 3552.  Protests also can be made through
the U.S. courts.  Bid protest decisions by the GAO are available electronically on the GAO website
(www.gao.gov) and the Acquisition Reform Network (ARNET) website (www.arnet.gov).  Decisions
made by the U.S. courts are also publicly available through a variety of mediums such as the internet,
legal research entities and the public library.  At the state level, bid protest decisions are made
publicly available through the internet and state journals.
11.17 (Japan) Buy American Act (p. 136, paras 288-291) In the United States, there exist such rules
that explicitly favor domestic products, e.g. the "Buy American Act", state laws restricting the use of
foreign steel materials in public works and the Federal Land Transportation Aid Act regarding thepriority use of U.S. steel materials.  It is reported that the Trade Act of 1979 secures these rules to be
consistent with the GPA, and thus the Buy Am erican Act only applies to certain government
procurements that fall outside of the Agreement (para. 288).  In this regard, we would like to confirm
that government procurements subject to the GPA are excluded from the application of the Buy
American Act, including the "Buy State Provision".
Also, in view of the GPA's objective to allow the non-discrimination principle fully prevail by way of
ensuring transparency with respect to governmen t procurements exceeding certain limits, Japan
strongly urges the U.S. to abolish this kind of protectionist rules as soon as possible.  And this is somuch more so when one takes into account the U .S. role and responsibility as a major player in the
international free trade arena.  Lastly, from th e viewpoint of ensuring the non-discriminatory
principle in the field of government procurement, we request that the U.S. list all of its state procuring
agencies in the Annex of the GPA.
As noted in response to question 11.12, the United States provides full national and MFN
treatment to the suppliers of other GPA Parties within the negotiated scope of the Agreement.
With respect to the second part of this question, please refer to the responses to
questions 11.8, 11.9, and 11.11.
11.18 (Japan) Panel on the Massachusetts State Government Procurements (para. 299, p. 140)
The Panel on the Massachusetts State Government Procurement Act was established based on therequests from Japan and the European Union, which claim that the Act regulating state contracts
with companies doing business with or in Myanmar or  Burma violates the provisions of the GPA.  The
Panel has currently been suspended since a federal regional court has decided that the Act is
unconstitutional (on 22 June 1999, a federal high court supported this decision), resulting in the Act
losing effect and thus discriminatory procurements  by the State being suspended.  For our part, we
shall continue to watch carefully the future de velopments of the domestic court judgement on this
issue, even after suspension of the Panel.  If any changes occur to the status quo situation regarding
the effectiveness of the Act, including the case where a decision by the federal regional court may be
reversed, we intend to request the immediate resumption of the Panel.
Furthermore, we understand that, on political or diplomatic grounds, there exist other states in the
United States that have similar laws or provisions  requiring procuring state agencies not to transact
business with, or to discriminate against, suppliers that do business with certain countries.  We insistthat states that are covered by the GPA should ab olish this kind of discriminatory provision if any.
Finally, if suppliers from a contracting country to the GPA are excluded from state procurements
according to these laws, how does the U.S. foresee consistency with the non-discriminatory principle
in the Agreement?WT/TPR/M/56/Add.1
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Without prejudice to its views on any specific measures addressed under this question, the
United States is committed to full implementation of its GPA obligations.
11.19 (EU) (p. 132, para. 275) At a sub-governmental level the number of entities covered by the GPA
could be increased, with a positive effect of expanding the global coverage and effectiveness of the
Agreement.  Are there any ongoing discussions between U.S. federal authorities and sub-federal and
other entities in order to encourage them to join the GPA?
The Administration makes regular use of its trade policy Point of Contact system and its close
contacts with a number of state and national organizations representing state interests, including the
National Governors’ Association, the National Conference of State Legislators, the National
Association of State Procurement Officials, and the National Association of State Development
Agencies, to consult closely on international procurement policy issues.  Such consultations include
exchanges of information on the benefits to the United States of trade opportunities created under theGPA’s current coverage and under the potential expansion of that coverage.  Please refer to the
responses to questions 11.8, 11.9, and 11.11.
11.20 (EU) (p. 136, para. 288 et seq.) “Buy American”, and other similar rules represent several
billion dollars worth of lost market opportunities to EU companies.  These exceptions have trade
distorting effects on a free and efficient market.  Is the U.S. prepared to review and roll back“Buy American” restrictions in the context of further negotiations?
Please refer to the responses to questions 11.8, 11.9, and 11.11.
11.21 (EU) (p. 138, para. 292) The sanctions maintained by the U.S. vis-à-vis most EC Member States
appear to have been motivated by the applicability of Article 36 of the EC Utilities Directive to the
telecommunications sector.  On 3 June 1999 the European Commission issued a notice effectively
excluding virtually the whole telecommunications sector from the scope of the Directive.  In view of
this development, could the United States indicate the rationale for continuing its sanctions?  Couldthe United States indicate when it will abolish them?
The United States notes that several outstand ing questions appear to remain regarding the
3 June 1999 Commission notice and its effect on EC discrimination against GPA and other foreign
suppliers in the telecommunications sector.  For example, the Commission announcement appears to
omit several Member States from the list of exemptions, which suggests that telecommunicationsoperators from these Member States still may be required to discriminate against non-EU companies.
The United States further notes that, as of the date of this review, the Commission had not
notified the United States of these developments or formally approached U.S. to suggest
consultations.  The United States is prepared to meet with EU officials to discuss the June 3
Commission notice and its effect on the applicability of Article 36 of the EC Utilities Directive, and toexplore solutions that would enable both the Unit ed States and the EU to lift their sanctions.
11.22 (EU) (p. 140, para. 299) The Burma/Massachusetts dispute in the WTO has been suspended.
Nevertheless, the EC remains concerned about the wider issue of sub-federal selective purchasing
measures, which continue to exist.  Could the U. S. provide further inform ation on the mechanisms
used by the federal authorities to avoid sub-federal authorities adopting legislation inconsistent withthe GPA?
Please refer to the responses to questions 11.18 and 11.19.WT/TPR/M/56/Add.1
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11.23 (Malaysia) Buy American Act - The Buy Am erican Act is applied to government funded
purchases and contains various forms of measures  against products and services produced in other
countries.  These include measures such as compliance with established local content requirements
and giving preferential price terms to local companies.
The Act has the effect of restricting market access for foreign goods and discouraging U.S. companies
from using foreign goods in their bidding to supply goods and services to government agencies.  A
U.S. company for example, which has been buying Malaysian latex and nitrile gloves since 1988 wasdenied the opportunity to become a supplier of the same products to the U.S. government agencies.
The United States notes that it provides non-discriminatory treatment, within an agreed scope,
to suppliers of WTO Members who are prepared to provide reciprocally balanced opportunities to
U.S. and other international suppliers wishing to pa rticipate in their government procurement markets,
through participation in the GPA or ot her similar international commitments.
11.24 (Norway) Government Procurement (p. 131) Since th e last review of the GPA, the United States
has concluded agreements with both Norway and Switzerland, and these two countries are no longer
exempt from MFN treatment for procurement of goods and services at the sub-federal government
and public utilities level.  Will the U.S. initiate agreements with other countries as well in an attempt
to abolish exceptions from the MFN treatment for procurement of goods and services at thesub-federal and public utilities level?
See response to 11.9.
11.25 (Norway) Buy American Act (p. 136) With rega rd to government procur ement, the U.S. has in
force legislation which gives preferential treatm ent to domestic products and suppliers.  This
legislation seems to violate the basic principle of  non-discrimination often advocated by the U.S. in
different WTO-fora.  Will the U.S. amend this legislation in line with commonly accepted principles of
international trade?
See response to 11.17.
11.26 (Norway) Article XXIII is the general exemption article of the Agreement on Government
Procurement.  Will the U.S., as a matter of transparency, issue a list of all products and procurements
classified as "indispensable (exempt) for national security or for national defence purposes"?
Many factors must often be considered in making determinations of the applicability of the
Agreement under Article XXIII, some of which may vary with the circumstances.  As a matter of
practicality, the United States has questions as to whether it would be feasible for GPA Parties to
make definitive decisions on this issue in advance.  This question has not been addressed as part of the
current review of GPA.  In that context, the United  States would be prepared to examine this issue in
more detail if the other Parties believe that such a discussion would be productive.
11.27 (Colombia) Government procurement (para. 288) The Report refers to preferences in the area
of government procurement being applied to the products and services of all least-developed
countries and certain products and services of th e Caribbean Basin countries.  Could the United
States provide further information about this preference programme and indicate whether it intends to
extend it to other Caribbean Basin countries?
Under the Trade Agreements Act of 1979, as amended, the President may waive the
application of the Buy American Act or other domestic procurement restrictions for, inter alia , aWT/TPR/M/56/Add.1
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country, other than a major industrial country, that is not Party to the GPA but which provides
“appropriate reciprocal competitive government procurement opportunities to United States productsand suppliers of such products”.  Since 1986, the United States has used this authority to waive the
application of such measures to suppliers of CBI countries competing for certain Federal procurement
contracts.  This waiver is subject to regular review.  The United States is ready to explore the
possibilities for extending this waiver to other WTO Members who meet the conditions specified in
this legislation or are prepared to take steps to do so.
11.28 (Colombia) What plans has the United States for preventing the Buy American Act and other
similar trade legislation (e.g. the Small Business Ac t) from discriminating against exports from third
countries and, in particular, developing countries?
See responses to 11.17 and 11.27.
12. Competition policies
12.1 (Korea) (p. 144, para. 312) Under the Clayton Act, foreigners are granted national treatment
and may therefore sue for the same amount (as the national entities), but this does not apply to
foreign states, which may recover only an amount equal  to the damage inflicted plus the cost of the
suit.  On what basis (or rationale) is this distinction made?  And how are foreign parastatal
(e.g. government invested corporations) entities treated under the Clayton Act regarding damagerecovery?
The Clayton Act was amended in 1982 in order to modify the results of a 1978 Supreme
Court decision permitting treble damages claims by foreign states.  The 1982 legislation allowed
foreign states – as governments – to claim only single damages, just as the U.S. Government could
then claim only single damages.  (In 1990, the law was amended to allow it to recover treble
damages.)  However, the 1982 legislation enabled commercial instrumentalities of foreign
governments, in whatever form, to seek treble damages.  Section 4(b) of the Act (15 U.S.C. para. 15)provides the details.  Many foreign governments, of course, enact and enforce their own competition
laws to discipline conduct that has adverse effects on their markets.
Government-owned commercial corporations are  likely to be treated as if they were private
enterprises, and thus be able to claim treble damages.  (See Section 4(b), and 28 U.S.C. §1603.)
12.2 (Korea) (p. 144, para. 313), (p. 142, para. 305) The FTC Act covers areas that are covered
under the Sherman Act, the Clayton Act as well as cases that do not fall precisely under these two
acts.  When foreigners are involved in cases that can be covered under the Sherman Act or the
Clayton Act, under which Act (i.e. under either of the two Acts or the FTC Act) will the foreigner sue
or be sued?  On what basis will the distinction be made and what difference will it make to theforeigner whether he/she is treated under one act rather than the other?  Some states have laws
different from the Federal Law.  In cases where fo reign entities are involved, under which jurisdiction
will the cases be covered – under district, state or federal level?
Private persons cannot commence enforcement proceedings under the FTC Act ;  only the
FTC can do so.  Private persons can enforce the Sherman Act through private Clayton Act suits for
damages and/or injunctive relief.  Private persons can and should provide information concerningsuspected anticompetitive conduct to the U.S. antitr ust authorities at the Department of Justice and/or
the FTC.  Federal antitrust law makes no distinction based on nationality as to which jurisdiction
(agency or law) might be involved.  To our knowledge, the same is true of state antitrust laws.WT/TPR/M/56/Add.1
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12.3 (Korea) (p. 146, para. 320) What is the extent of the immunity granted and what are the criteria
for the grant for the "limited i mmunity" in certain sections mentioned in this paragraph under the
Exporting Company Act and Webb-Pomerene Act?  What will the U.S. position be when other nations
applied their own competition laws to U.S. entities with immunities under these Acts for violating
competition regulations in their jurisdictions?  It seems that export cartels and price fixing can alsobe granted immunity under the Act in certain sectors.
The Webb-Pomerene and Export Trading Company Acts provide limited immunity from U.S.
antitrust laws for joint export activities by co mpeting firms.  These immunities do not extend to
conduct that has anticompetitive effects in the United States or that injures domestic competitors of
the export association or export trading company.  These laws, of course, provide no immunity from
prosecution under foreign antitrust laws.
12.4 (Hong Kong) (p. 149, para. 323) It is stated that the Project American Jobs Through the Foreign
Antitrust Improvements Am endments Act of 1998 seeks to provid e for actions against anti-competitive
conduct involving foreign trade based on harm to U.S. exporters without regard to the effect of such
conduct on U.S. consumers.  To what extent is th is Act compatible with the widely recognised
competition goal of promoting economic efficiency and market contestability?
The particular bill referenced in this question (the "Protect American Jobs through the Foreign
Antitrust Improvements Amendments Act of 1998") is one of a number of bills introduced in the
current Congress to deal with unfair trade practices and trade barriers.  It would not be appropriate or
useful to comment on such bills here.  The Administration has not commented to Congress on the
proposed legislation mentioned in the question.
12.5 (Japan) The Protect American Jobs Through ... Amendments Act of 1998 (para. 323, p. 149)
This paragraph indicates that the Act provides for the actions to be taken when harm is done to U.S.
exports through anti-competitive conducts.  Please explain the details of this Act.  For example, what
are the criteria for judging whether U.S. exports have actually been harmed?  What are the measures
to be taken in such cases?
Please explain in detail which measures the U.S. competition authorities would take with regard to
the monopolistic or oligopolistic situations in overseas market caused by anti-competitive practices.
How can one judge whether, in such cases, the situation concerned has actually harmed the U.S.trade?  What are the U.S. views on using not only  bilateral and plurilateral co-operation agreements,
but also a multilateral framework when dealing with these anti-competitive practices that have
transborder dimensions.
Please see the answer to 12.4.  This question poses a number of hypotheticals that it would
not be appropriate to answer.  Considerable inform ation on current U.S. antitrust enforcement policies
can be found at the Justice Department and Federal Trade Commission Internet web-sites
(“www.usdoj.gov/atr” and “www.ftc.gov/ftc/antitrust.htm”).  The United States does not understand
the question regarding use of a “multilateral framework”.
12.6 (Japan) Competition policy (p. 142) Japan recogni zes that the U.S. Department of Justice has
adopted a policy of applying U.S. Anti-trust laws to those practices that have been carried out outsidethe United States and that are considered to be harming the interests of U.S. exporters.  However,
such a conduct should be regarded, from the vi ewpoint of its influence on the U.S. market, as an
extra-territorial application of the U.S. Anti-trust laws on practices which merely have an indirect
effect on the U.S. market.  Such an extra-territorial application impinges upon the sovereignty and
interests of an importing country and is not allowed under international law.  Japan, therefore,strongly hopes that the U.S. will refrain from making such an extra-territorial application.WT/TPR/M/56/Add.1
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In order to strengthen its competition policy, Japan has been conducting an overall review of all of its
exemptions from the application of the Anti-monopoly Act.  Through this process, numerousexemptions have been already abolished or modified to limit their scopes.  The remaining exemptions
are also now under review for modifying their scope.  Japan would, thus, like to urge the U.S. to
reduce its exemptions from the application of the Anti -trust laws, both at a federal and a state level.
Please also explain the current status of review for the U.S. exemptions, as well as the policy for
review in the future.
This item is mainly a statement, not an question.  In response to the question about U.S.
review of antitrust exemptions, we note that exceptions to the application of U.S. antitrust laws exist
for certain activities in some sectors.  In many cases a specialized regulatory agency with
sector-specific responsibilities applies competition rules analogous to the federal antitrust laws, and
the antitrust agencies retain an advisory, competition advocacy role.  Sectors that retain some form ofexemption from, or special treatment under, the anti trust laws are identified in the Secretariat’s
Report.  The clear trend is to reduce such exceptions, which are narrowly construed by the courts;  the
vast bulk of U.S. commerce remains subject to antitrust disciplines.
13. Textiles
13.1 (Hong Kong) (p. 160, para. 6) We would like to seek clarification on the visa requirement for
products integrated under Stage 2 which have been el iminated as from 1 January 1999.  Could the
U.S. confirm that the visa arrangement for products to be integrated under the subsequent stages in
accordance with Article 2.8 of the ATC will also be eliminated at the same time of the integration?
The decision to eliminate visa requirements for products which were subject to Stage II
integration was taken pursuant to a request from Hong Kong and other trading partners.  As shown in
the Federal Register, Volume 63, No. 194, pp. 53881-53883, and as communicated to the TMB, the
decision was specific to those products.
13.2 (Korea) (p. 161, para. 11) On 19 November 1998, the EU requested consultations with the
United States on the latter's alleged failure to implement co mmitments under a 1997 agreement
regarding U.S. rules of origin.  The revision of rules of origin on textile products (effective
1 July 1996) may violate Article 2 a, c, d, of WTO agreement on rules of origin.  What is the U.S. view
of this possible violation?
The United States takes its WTO obligations very seriously, and believes that the rules of
origin established by the Uruguay Round Agreements Act fully comply with our obligations under the
relevant WTO agreements.
U.S. rules of origin are not used as instruments to pursue trade objectives inconsistent with
WTO obligations.  As set forth in detail in the URAA Statement of Administrative Action, theobjectives served by the July 1996 implementation of the rules of origin pertained to improving the
overall trading environment by diminishing c onfusion and bringing about more uniformity.
Implementation of the rules of origin moved the Unit ed States into closer alignment with the origin
determinations of its major trading partners.
13.3 (Korea) U.S. customs procedures require excessively perforating sample sign for textile products
which damages the samples.  U.S. also requires impor t visa for the small amount of samples of textile
products and clothing to be re-exported after the exhibition.  These practices are restrictions to
market access.  Does the U.S. have a plan to remove these measures?WT/TPR/M/56/Add.1
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Sample shipments of textile products to the U.S. need not be mutilated, nor do they require an
import visa.  The U.S. allows "properly marked" commercial sample shipments, valued up to US$800,entry without visas and without charging quotas.  In  addition, "fashion samples" were exempted from
quota and visa requirements effective 11 April 1999.
We would be happy to work with Korea to understand their concerns, but given that we had
not, until this Review, heard a complaint about these measures, we do not have at present a plan to
remove them.
13.4 (Japan) Quantitative Restraints carried over from MFA (p. 161, para. 8) A number of WTO
Members, especially developing country Members, have expressed concern that the proportion of
integrated textile and apparel products under restraint was very limited and that the U.S. integration
programmes for the first and second stages are not commercially meaningful.  Japan hopes that the
United States will make positive commitments to an effective integration for a third stage integrationprogramme, recalling that the process of integration should be "progressive in character", as
envisioned in the Agreement on Textiles and Clothing.
On 1 May 1995, the United States published in the Federal Register the products to be
integrated into GATT 1994 in the second, third, and final phases of the integration required under
Article 2 of the Agreement on Textiles and Clothing.  This integration program is fully consistent with
our obligations under that Agreement, is progressive in character, and is entirely transparent.
According to our analysis, the products that we re selected for integration in the U.S. were
very much in line with the products that were selected for integration in other major importing
countries.  Very few quotas were eliminated entirely by importing countries in the first and second
stage of integration, and by and large, sensitive products have not yet been integrated by any major
importing country (and very few exporting countries).
In response to the questions posed by Japan, the ATC does not require Members maintaining
quantitative restraints to integrate any predetermined percentage of these restraints in stages 1-3.  The
ATC is also silent on the question of whether these integrated products should be commercially
meaningful.  The reason why the ATC does not specify these issues is because it was clearly
understood at the time of negotiation that integration was not the only means by which liberalization
would be accomplished.  This liberalization is being accomplished through the ATC’s acceleratedgrowth provisions on top of the growth rates alr eady mandated by the bilateral agreements notified
under the ATC.  For example, one of the largest textile exporting countries has seen its textile exports
to the U.S. grow by 118% in the life of the ATC.
13.5 (Poland) Please provide information whether th e U.S. intends to maintain the import quotas for
textiles and clothing from Poland and from other WTO Members until 2004 (in accordance with theATC) or will the U.S. fully liberalize some categories of products especially clothing at an earlierdate.
The U.S. will comply fully with its ATC oblig ations, including the requirement to increase
quota growth rates for WTO Members and to integrate textile products pursuant to the ATC schedule.
According to our integration schedule, 43 categories of apparel will be integrated before the
end of the transition period.WT/TPR/M/56/Add.1
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13.6 (Norway) Textiles (p. 159) U.S. quantitative measures on textiles and clothing remain substantial
and their liberalization falls short of liberalizati ons implemented by other countries, including
Norway.  On this basis we would like to ask if fu rther measures are being contemplated by the U.S.
authorities in order to open up the U.S. market for such products?
See responses to 13.4 and 13.5.
13.7 (Brazil) Textiles - The ATC provides for the gradual and complete integration of textiles and
clothing products into WTO rules over a ten years transition period.  While integrating products fromthe four required categories in the first and second stages, the integration of products was
concentrated in yarns and was least noticeable in clothing (only 12,4% of the volume of imports
integrated).  In the first integration stage, the products involved were not subject to quotas and hence
no restriction was eliminated.  In the second stage 24 categories have been integrated some of them of
interest to Brazil (p. 161, para. 8).
Is the U.S. planning to incorporate more categories related to clothing in the third stage of the ATC
program?
See responses to 13.4 and 13.5.
13.8 (Brazil) Textiles - According to the Secretariat Report, new textile rules of origin became
effective 1 July 1996, for products requiring a certain degree of assembly (where the final garment
was assembled), and for products that require minimal cutting and assembly, as towels and sheets
(where the fabric was woven) (p. 55, para. 28).  An agreement was reached with the EU in 1997, but
was subject to bilateral consultations in the WTO, because under the new rule some products were no
longer recognized as having EU origin (p. 161, para. 11).
An agreement between the U.S. and the EU that remo ves quotas to Asian fabrics and allows imports
of European products without discrimination will har m Brazilian products, a traditional exporter of
these products.
How will the U.S. evaluate the impact of this decision on traditional exporters?  Will the U.S. consult
with interested parties?
The U.S. held extensive consultations with trading partners who felt that the 1996 rules of
origin had an impact on their trade, as provided for in the WTO Agreement on Textiles and Clothing.
In addition, a number of WTO Members participated as third parties in the bilateral consultations held
between the U.S. and the EU under the framework of the WTO Dispute Settlement Understanding.
13.9 (Malaysia) Quantitative Restriction on Textile and Clothing - The WTO Agreement on Textiles
and Clothing stipulates a progressive removal of quotas so that by 1 January 2005, there would be
quota free trade in textiles and apparel.
The U.S. has so far only removed quotas on items of little commercial interest, and items of
significant trade interest are being kept under quota until the end of transition period.  In the case of
Malaysia, the U.S. has yet to liberalize item s such as T-shirt, trousers and fabrics.
Will the U.S. be in the position to remove all quantitative restrictions as mandated in the WTO
Agreement on Textiles and Clothing?
See responses to 13.4 and 13.5.WT/TPR/M/56/Add.1
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13.10 (India) The signing of the Marrakesh Agreemen t creating the WTO resulted in the Agreement
on Textiles and Clothing (ATC) which envisaged the gradual integration of the Multi-Fibre
Arrangement (MFA) into the multilateral trading system within a period of ten years of the taking
effect of the agreement.  ATC provides for a transitional safeguard mechanism (TSG) during the
transition period.  The transitional safeguards have been invoked by the U.S. extensively in as many
as over 26 cases since 1995 against various countries.  Against India the transitional safeguard
mechanism has been invoked thrice.  While these sa feguards have been revoked, in two instances after
the invocation of the dispute settlement mechanism,  a lot of damage has already been done to the
market access that had been gained by India in the U.S.  In this scenario, what are the U.S.' plans to
ensure meaningful integration, in order to provid e due market access to Indian exporters.  Besides,
the safeguard measures earlier initiated by the U.S. were on items already under restraint and such
measures create an atmosphere of uncertainty for exporters and hinder market access.  Can the U.S.assure India that no safeguard action would be taken against any product already under restraint in
light of the ATC requirement to use safeguard action only sparingly?
See answer to 13.4.  Also, in cases where the U.S. textile industries are suffering serious
damage or actual threat thereof, the U.S. will exercise its right under Article 6 of the ATC to establish
a transitional safeguard.
14. Agriculture
14.1 (Switzerland) Agencies involved in trade policy formulation and implementation (p. 22, para. 20)
The Foreign Agricultural Service operates agricultural export and import programmes such as the
Dairy Export Incentive Program (DEIP).  Could the U.S. delegation elaborate on the legal basis, the
support coverage and the effects of such a programme?
The DEIP was established by the Sec. 153 of the Food Security Act of 1985(P.L. 99-198).  It
was most recently extended through December 2002 by Sec. 148 of the Federal AgricultureImprovement And Reform Act of 1996.
The Dairy Export Incentive Program (DEIP) he lps exporters of U.S. dairy products meet
prevailing world prices for targeted dairy products and destinations.  Under the program, the U.S.
Department of Agriculture pays cash to exporters as  bonuses, allowing them to sell certain U.S. dairy
products at prices lower than the exporter's costs of acquiring them.  The major objective of theprogram is to develop export markets for dairy products where U.S. products are not competitive
because of the presence of subsidized products from other countries.
14.2 (Switzerland) Trade policies and practices by measure/Overview (p. 46, para. 6)
The Report indicates that potential distorsions of competition may arise as a consequence of various
forms of assistance provided by federal and state Go vernments to some sectors (notably agriculture).
Could the U.S. delegation give an evaluation of the po tential distorsions of competition resulting from
assistance provided by the federal level compared with the assistance provided by the state level?
All available information on state and federal assistance to agriculture is included
in the U.S. notifications to the Committee on Agriculture (notific ations G/AG/N/USA/10,
G/AG/N/USA/17, G/AG/N/USA/27) and the Committee on Subsidies and CountervailingMeasures (G/SCM/N/3/USA/Suppl.1, G/SCM/ N/16/USA/Suppl.1, G/SC M/N/25/USA/Suppl.1,
G/SCM/N/38/USA).  Any federal or  state agricultural program that does not meet the criteria
for exemption under Annex 2 (“green box”) is included in the AMS calculation.  All support is
provided in a manner that is consistent with the United States’ WTO obligations.WT/TPR/M/56/Add.1
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14.3 (Switzerland) (p. 164, para. 5) Were all the cases of applied safeguard measures notified?  If no,
for which reasons?
All cases in which Special Agricultural Safeguards were applied have been notified to the
Committee on Agriculture.  The U.S. submitted:  5 notifications (summary of safeguard actions)
covering calendar years 1995, 1996, 1997 and 1998.
14.4 (Canada) (pp. 163-166, paras 3-7) (a) We note that of the 44 U.S. tariff quotas listed in Annex
table III.2.2,  a total of 34 of the tariff quotas (or 77%) were less than 95% filled in 1998.  Could theU.S. explain the reason for the large number of quotas that were underfilled?  Of the tariff quotas that
were underfilled, how many of these are tariff quotas that involve allocations to specific countries or
regions?  Where tariff quotas are allocated to specific countries or regions, does the U.S. have any
plans to introduce greater flexibility in its TRQ administration that would allow all WTO Members
access to underfilled quotas?
Most of the underfilled quotas are either completely first-come/first-served, or have
substantial portions that are on a fist-come/first-served basis.  Underfill in these tariff quotas is related
to market conditions, rather than any institutional barriers.
14.5 (Korea) (p. 163, para. 4) As seen in Annex table III.2.2, there are several items whose quota are
underfilled below 30%.  What explains this?
Since there are no measures in place that restrict access to these quotas, it is clear that
underutilization is related to market conditions.  Most of our tariff rate quotas are operated on a
first-come/first-served basis.
14.6 (Korea) U.S. have country quota system in some dairy products, which is arguable in connection
with  non-tariff barrier.  Does U.S. have any room to  study to introduce the global quota system in the
future?
We do not intend to alter the administration of our TRQs for dairy products.  There is no
scope to change the system negotiated in the Uruguay Round prior to a new round of negotiations.
14.7 (Canada) Support programmes, (pp. 167-171, paras 8-26)
(a) With regard to the U.S. Export Credit Guar antee Program, what steps is the U.S. federal
government taking to ensure that the provision of export credit for agriculture commodities
do not distort trade in third country markets?
Unlike food aid donations under the Food Aid Convention, export credit guarantee programs
are not under any international agreement disciplines as they may relate to trade distortion in third
country markets.  Nonetheless, the United States believes that it's export credit guarantee programs
serve to create additional purchasing capacity for importing countries that might not otherwise exist
because of a lack of liquidity in the importing country's financial market.
14.8 (Canada)
b. The US, in addition to non-recourse loans, offers producers loan deficiency payments (LDPs),
which in the past two years have entailed sign ificant expenditures by the USDA.  Could the
U.S. delegation indicate how much has been spent in support of each commodity under the
LDPs?WT/TPR/M/56/Add.1
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For marketing years 1995-1997, please refer to U.S. notifications to the Committee on
Agriculture on domestic suppor t (G/AG/N/USA/10, G/AG/N/USA/17, and G/AG/N/USA/27).
Outlays for other eligible crops were negligible or zero.
14.9 (Canada)
c. The U.S. Congress last year voted significant increases in PFC payments, as well as a range
of other measures to compensate producers for income decreases from falling prices and
shrinking demand.  Could the U.S. delegation explain where these payments should beclassified under the WTO's categories of domestic support?
The United States has notified the Emerge ncy Crop Loss program as a new or modified
“green box” measure to the Committee on Agricult ure (G/AG/N/USA/25).  All relevant support
programs authorized by the FY 1999 Omnibus legislation will be notified as part of the United States’
DS:1 notifications for marketing years 1998 and 1999.
14.10 (Canada)
d. The U.S. also currently offers significant support through a variety of  insurance programs
authorized by the USDA's Risk Management Agency, including crop and revenue insurance.
At the same time, the U.S. is considering how  risk management tools for producers might be
either improved or enriched.  Could the U.S. delegation provide any information on the
proposals being considered and how they might impact on USDA domestic support
expenditures?
Strengthening the farm safety-net is a high priority for the United States.  There are various
proposals being put forth, both by the Administration and the Congress.  It is not possible at this time
to know specifically what kind of new programs, if any, will be established.
14.12 (Korea) (p. 168, para. 16) It is said that the U.S. Government added approximately
US$6 billion to the Product Flexibility Contract payment programme in the FY 1999 with a view to
supporting farmers suffering from price falls or natural disaster.  What’s the contents of this measureand its criteria for payment?
In 1998, President Clinton and Congress approved an emergency relief package for family
farmers and ranchers, who suffered heavy losses in 1998 due to natural disasters and weak export
markets.  This emergency relief, which totaled nearly US$6 billion, is fully consistent with the United
States’ WTO obligations.  Nearly half of this support will be channelled through natural disaster relief
payments.  The package also included US$2.8 billion in market loss payments, which will be paid tofarmers as an increase in their 1998 production flexibility contract payments.
14.13 (Korea) (p. 169, para. 21) It is reported that small-size pork farmers have been directly paid
US$50 million in total through the Small Hog Oper ation Payment Program since February 1999 and
also benefitted from tax refund since March 1999.  Will these measures be included in the calculation
of Aggregate Measure of Support (AMS) as these are having impact on market prices, and subject to
reduction provided for in the Agreement on Agriculture?
The Small Hog Operation Payment Program will be included in the United States’
DS:1 notification for 1999.
14.14 (Korea) What is the scope of the Emergency Crop Loss Program introduced in 1999 for the
purpose of compensating farmers that suffered agr icultural losses in 1998?  Is this programWT/TPR/M/56/Add.1
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consistent with the criteria for relief support to  natural disaster permitted under the Agreement on
Agriculture?  Is there similar program applicable to livestock such as beef and pork?
See G/AG/N/USA/25.  There is no program for beef and pork.
14.15 (Switzerland) (p. 169, para. 21) The Report indicates that the net lending costs (including
marketing assessment receipts) during the fiscal year 1997 were US$110.0 million and US$970.4
million during FY 1998.  How do you explain this rise of the "net lending cost"?
“Net lending costs” are equal to loans made minus loan repayments minus marketing
assessments.  The primary reason net lending costs increased in FY 1998 was due to larger
nonrecourse marketing assistance loan outlays.  However, the loans made in FY 1998 will be repaidin FY 1999.
14.16 (Australia) Agriculture Domestic Support Arrangements  In the 1996 Federal Agricultural
Improvement and Reform (FAIR) Act the United St ates made a significant positive change to the
provision of domestic support arrangements to grains and oilseeds.  Previous price supports, which
were linked to current production levels, were largely removed and replaced by a decoupled system of
direct payments under the Agricultural Market Transition Act (AMTA).  This provide an good
example for other countries to follow in liberalising domestic support regimes.  We note that in 1998
the U.S. Congress approved payments to farmers in the form of additional AMTA payments of
US$3.5 billion, explicitly as a response to the low commodity prices, and enabled farmers to bring
forward the payment of the scheduled AMTA amount s, also in response to low commodity prices.
This would appear to mean that both the scheduled AMTA payments and the supplemental payments
are, in fact, linked to changes in current commodity prices.  We would like to ask the U.S. whether it
regards each set of payments made in 1998 as falling within the "green box" or "amber" box and
whether it intends to increase AMTA payments during years of low commodity prices?
Last year, President Clinton and Congress approved an emergency relief package for family
farmers and ranchers who suffered heavy losses in 1998 due to natural disasters and weak export
markets.  This emergency relief, which totaled nearly US$6 billion, is fully consistent with the United
States’ WTO obligations.  Nearly half of this support will be channelled through natural disaster relief
payments.  The package also included US$2.8 billion in market loss payments, which will be paid to
farmers as an increase in their 1998 production flexibility contract payments.  All of these programswill be notified to the WTO Committee on Agriculture as part of the DS:1 notification for marketing
years 1998 and 1999.
14.17 (Australia) Agriculture Export Subsidy Roll-overs - We note that on 14 May 1999 the U.S.
announced that it would be making available an add itional 45,177 mt of nonfat dry milk, 7,500 mt of
whole milk powder and 1,270 mt of cheese, being the difference between Uruguay Round limits and
actual quantity of product subsidised in years pr ior to 1998-99.  This will mean that the U.S. will
likely exceed its WTO export subsidy commitments in both 1998-99 and 1999-00.  Could the U.S.
explain how the allocation of these additional quantities is consistent with its obligations under
Articles 9 and 10 of the Agreement on Agriculture?
In 1998/99, the United States employed the flexibility provision in Article 9.2(b) of the
Agreement on Agriculture and remained within our Uruguay Round export subsidy commitment.
14.18 (Australia) Export Credits - Article 10.2 of the Agreement on Agriculture requires that:
"Members undertake to work toward the development of internationally agreed disciplines to govern
the provision of export credits, export credit guarantees or insurance programmes and, after
agreement on such disciplines, to provide export credits, export credit guarantees or insuranceWT/TPR/M/56/Add.1
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programmes only in conformity therewith."  We are concerned that negotiations in the OECD have
not yet reached completion as we are about to commence a new round of negotiations on agriculture.Does the U.S. expect that negotiations will be able to be completed in the next six months and is theU.S. intending to improve its o ffers on export credit reforms?
The U.S. has made a good faith effort to negotiate disciplines for officially supported credit
guarantee programs in the OECD in Paris.  In September of this year we submitted a far reaching
proposal that would have a significant impact on our GSM credit guarantee programs.  In addition, the
U.S. proposal calls for comprehensive quarterly reporting on credit transactions.  We believecomprehensive reporting will be key to meaningful enforcement of a credit agreement.  The extent of
our flexibility in implementing any new agreement will depend on whether other OECD members
provide detailed information on their current practices.  Only then can we ensure that agreed
disciplines are meaningful, and cover the entire range of officially supported export credit and credit
guarantee programs.
Shrimp
14.19 (Australia)  What is the basis for continued denial of access to the U.S. market for shrimp from
the Spencer Gulf of Australia (i.e. where turtles are not found) and from the Northern Prawn Fishery(under "shipment-by-shipment" provisions).  Ho w and when will the U.S. remove such restrictions?
On 8 July 1999, the United States Department of State issued revised guidelines
implementing our Shrimp/Turtle law.  On the basis of the revised guidelines, in response to a request
from the Government of Australia, the United States has approved imports from the Spencer Gulf
Region of Southern Australia.  Based on complete and well documented information presented by theGovernment of Australia and the State of Southern Australia, the Department of State, in consultation
with the U.S. National Marine Fisheries Service, f ound that the shrimp trawl fishery in the Spencer
Gulf does not pose a threat of the incidental taking of sea turtles.
With respect to the Northern Prawn Fishery, we understand that the GOA will not implement
a TEDs program in that fishery until 1 April 2000.  At that time, we would expect to allow, undercurrent rules, shipments of shrimp from that fisher y into the United States, provided that the other
requirements are met (e.g. that the Government of Australia has a system in place to segregate shrimp
from that fishery from shrimp from other fisheries).
14.20 (Australia) Sugar  We note that access to the U.S. market for raw sugar, governed by a tariff
rate quota, is now at near record low levels, and in the current year only just exceeds the U.S.'s WTO
minimum access commitment.  We note also that the differential between the world market price for
sugar and the U.S. price is now at near record level s, with the U.S. price nearly four times the world
market price.  With the sugar program continuing to send the wrong market signals to U.S. producers
who are expanding production at a time of low world prices, how does the U.S. intend to meet the
expectation of unsubsidised foreign producers, such as Australia, that access to the U.S. market will
be progressively liberalised?
As a result of the Uruguay Round, the United States agreed to minimum WTO access of
1,117,195 million metric tons for raw sugar and 22,000 metric tons for refined sugar.  We can assure
Australia that the United States will continue to meet our minimum access commitment on sugar.
14.21 (Japan) Export Enhancement Program (p. 80, para. 100):  The Report explains that the Export
Enhancement Program (EEP) is assessed according to 5 criteria, for example, "the potential to
develop, expand or maintain markets for U.S. agricu ltural commodities".  Could the U.S. explain in
detail the practical administration of this assessment by using such criteria?  Regarding theWT/TPR/M/56/Add.1
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budgetary outlays of the EEP, this has been fluctuating substantially from year to year (in 1996, the
outlay of the EEP was US$339.5 million;  in 1997 the amount became zero;  and in 1998 the amountrebounded to US$2.06 million).  Could the U.S. explain the reason for such fluctuation?  Is it due to
the assessment of the EEP as mentioned above?
EEP initiatives are reviewed for their potential to further the U.S. trade policy strategy of
opposing competitors' subsidies and other unfair trade practices by displacing other countries'
subsidized exports in targeted countries.  Targeted countries are typically those where U.S. sales havebeen non-existent, displaced, reduced, or threatened because of competition from subsidized exports.
Generally, the guidelines used in evaluating proposed EEP initiatives include the following:
EEP initiatives should demonstrate their potential to develop, expand, or maintain markets for U.S.
agricultural commodities while considering the U.S. historical market share and long-term
commercial relationships.  Efforts will be concentrated on export sales of those commodities thatwould be competitive if other suppliers did not use export subsidies.  Individual EEP initiatives
should not have more than a minimal effect on non-subsidizing exporters in the market.
USDA compares the subsidy requirements of EEP initiatives to expected benefits cited above.
The overall program level for the EEP, as well as the amount of bonus awards under individual EEP
initiatives, will be maintained at the minimum levels necessary to achieve these expected benefits.
The last major year of significant EEP activity was our FY 1995.  Since that time, except in
isolated cases, due to domestic and international market conditions and the expected benefits cited
above, the U.S. decision has been that a broader use of the EEP was not warranted.
14.22 (Japan) Dairy Export Incentive Program (p. 80, para. 102) The U.S. argues to abolish export
subsidies.  Does the U.S. think that it could stop using the Dairy Export Incentive Programme (DEIP)
completely?  If so, there is a risk that its dairy exports will decline, and as the U.S. does not have any
production-limiting programs for dairy products, its domestic dairy prices will also decline.  On theother hand, Japan understands that the U.S. will abolish the price support for milk for processing at
the end of 1999.  Does the U.S. plan to take fundamental policy measures for these anticipated
situations?
Recent legislation extended the price support program for milk for an additional year or
through 2000.  On 1 January 2001, the price support program will be replaced with a recourse loanprogram that was previously scheduled to begin on 1 January 2000.  We believe that if all countries
eliminated their dairy export subsidies, U.S. dairy products will be more competitive, even without
export subsidies.
14.23 (Poland) Please provide information whether the U.S. intends to introduce changes to the
present system of administration of tariff quotas on import of cheese from various countries including
Poland.  Poland’s specific interest is focused on the possibility of making more flexible the way the so
called historic tariff quotas are utilised.  Poland considers that the present regulations and rules
excessively protect those to whom the quotas have been allocated.
The United States is meeting its WTO market access obligations and cannot consider
increasing or adjusting its Tariff Rate Quotas (TRQs) for any country until the next round of WTOtrade negotiationsWT/TPR/M/56/Add.1
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14.24 (New Zealand) Export credits - Could the U.S. pl ease advise what steps it is taking to mitigate
the effect that its use of government financed export credit and export guarantee programmes has onother exporters?
The U.S. has made a good faith effort to negotiate disciplines for officially supported credit
guarantee programs in the OECD in Paris.  In September of this year we submitted a far reaching
proposal that would have a significant impact on our GSM credit guarantee programs.  In addition, the
U.S. proposal calls for comprehensive quarterly reporting on credit transactions.  We believecomprehensive reporting will be key to meaningful enforcement of a credit agreement.  The extent of
our flexibility in implementing any new agreement will depend on whether other OECD members
provide detailed information on their current practices.  Only then can we ensure that agreed
disciplines are meaningful, and cover the entire range of officially supported export credit and credit
guarantee programs.
Contrary to the view that these programs have an adverse effect on other exporters, we
believe that credits provide liquidity and purcha sing power to countries who would otherwise be
unable to purchase necessary farm products.  This was apparent during the recent financial crisis in
Asia.  As such, credits expand total global demand for agricultural products, not just for products from
those countries that are the providers of such credits.
14.25 (New Zealand) U.S. Dairy Policies - New Zealand welcomes the confirmation in the conclusion
to the U.S. Government's statement on its trade policy, that "open, competitive markets – both
internally and at the border – have contributed to our economic efficiency and prosperity"
(G/II, para. 22, p. 9).  However, certain U.S. industries, such as dairy, with its complex system of
import licensing and quota administration regulating dairy imports, dairy compacts, export subsidies,
price supports and milk marketing orders, appear to be not quite so open and competitive.  How does
the U.S. reconcile maintaining a highly protected dairy sector, with its commitment to "genuinelyopen markets for trade in agriculture, goods and services"? (G/(I, para. 1, p. 5)  In particular, what
justification does the U.S. have for the continued use of export subsidies under the DEIP, when these
have a price-distorting effect in an already depressed global commodity market, and which are
contradictory to the U.S.' declared objective of the elimination of export subsidies in a new round of
agriculture negotiations?  What measures are envisaged to reform the U.S. dairy industry to make itmore open and competitive by submitting it to the same market disciplines as other industries?
Recent legislation extended the price support program for milk for an additional year or
through 2000.  On 1 January 2001, the price support program will be replaced with a recourse loan
program that was previously scheduled to begin on 1 January 2000.  We are currently working with
the U.S. Congress to rationalize milk marketing orders.  Regarding DEIP, the U.S. is in compliancewith its WTO commitments, and is utilizing this prog ram to counter subsidized competition.  In the
next round of negotiations, the U.S. has as a goal, the elimination of all export subsidies.
14.26 (Norway) Agriculture (pp. 163-169, para. 4) With regard to methods of tariff quota
administration, could the U.S. delegation describe the system as such including whether the same
methods are used for all product categories?
Some tariff rate quotas are administered on a first-come/first-served basis, while others are
allocated based on licences and country-specific allocations.  Please see our notifications concerning
administration of tariff quotas  (G/AG/N/USA/2,  G/AG/N/US A/2/Add.1, G/ AG/N/USA/2/A dd.2) and
G/LIC/N/3/USA/2.WT/TPR/M/56/Add.1
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14.27 (Norway) (para. 6) How can import permits for plants, animals and animal products be
obtained;  which criteria is to be fulfilled, validity period, etc.?
See WT/TPR/S/56, paragraphs 34  and 35 and G/LIC/N/3/USA.
14.28 (Norway) (para. 7)  Could the U.S. delegation provide more details on the licensing system for
sugars and certain dairy products?
See WTO notifications pertaining to the administration of tariff rate quotas (table MA:1)
G/AG/N/US A/2, G/AG/N/USA/ 2/Add.1, and G/AG/N/USA /2/Add.2.  Also see WT/TPR/S/56 (p. 56)
for information on sugar imports.
14.29 (Norway) (para. 10)  Could the U.S. Delegation provide more information with regard to the
funding of costs of overseas marketing and pr omotional activities, both of brand and generic
promotions?
The MAP is authorized under section 203 of the Agricultural Trade Act of 1978, as amended,
and MAP regulations are set forth in 7 CFR part 1485.  Under the MAP, CCC enters into agreements
with eligible participants to share the costs of certain overseas marketing and promotion activities.
MAP participants may receive assistance for either generic or brand promotion activities (branded
limited to small businesses).  To participate in the MAP, an applicant must be:  A nonprofit U.S.
agricultural trade organization, a nonprofit state regional trade group (an association of StateDepartments of Agriculture), a U.S. agricultural cooperative, a State agency, or a small-sized U.S.
commercial entity (other than a cooperative or producer association).
14.30 (Norway) (para. 23) Exemptions of excise taxes;  which types?
See WTO document G/SCM/N/38/USA.
14.31 (Norway) Preferential agreements (p. 36–Box II.2) Which agricultural products with MFN
tariff rates exceeding 0% are subject to zero duties under the GSP scheme or other preferential
agreements?
Are there any quotas or quantitative limits within these schemes?Are there any differences in the preferential schemes granted to the different groups of countries
mentioned in Box II.2, p. 36?  And if so, which ones?
The list of products which meets the first criteria is too long to list here.  That information is
provided on a tariff line basis in U.S. notifications to the Integrated Database, is available in the U.S.
national tariff schedule which is available in the WTO library or can be found on the USITC websiteat www.usitc.gov.  Further information on U.S. preference programs can be at the two latter sites,
specifically in the headnotes to the U.S. national tariff schedule.  Specific information on tariff rates
and other limits as part of free trade agreements to which the United States is a participant have been
notified to the Committee on Regional Trade Agreements.  Additional information on the U.S. GSP
program is available on the USTR website, www.ustr.gov.
14.32 (Chile) The simple average MFN tariff rate applied by the United States fell from 6.4% in 1996
to 5.7% in 1999.  However, in the same period tariff protection increased for agricultural products,
prepared food, live animals, beverages and tobacco, which means increased protection for a largeproportion of Chile's exports.  This is a result of the process of quota tariffication undertaken in
accordance with WTO commitments.  Chile would like to know whether the MFN tariff applicable to
agricultural products will go on increasing in the future.WT/TPR/M/56/Add.1
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Nominal tariffs for all agricultural products are the same or lower than the levels in 1996 as a
result of our Uruguay Round reduction commitments.  The increases noted by Chile are in thead valorem  equivalents (AVEs) of our tariffs, reflecting the lower value of agricultural products
imported into the U.S. in the most recent period.  Because it is impossible to predict prices of
agricultural products, it is impossible to predict whether the AVEs of our tariffs will increase ordecrease.
14.33 (Chile) Tariff protection for a broad range of agricultural products, including live animals,
meat products, prepared food, beverages and tobacco, increased between 1996 and 1999 to reach thecurrent level of 10.7%.  This is more than twice the average for industrial products which amounts to
4.7%.  These measures are seriously affecting the developing countries which export agricultural
products and especially those which add value to these exports.  What is the United States doing toopen up its market uniformly to all products coming from abroad?
As noted in the TPRM report, for MFN countries,  the level of overall tariff protection in the
U.S. is among the lowest in the world.  In addition, the United States offers preferential access fordeveloping countries through GSP and other arrangements.
14.34 (Chile) The United States applies a system of marketing orders to certain agricultural products,
including grapes, kiwi and other fruit, under which restrictions are imposed on their marketingthrough the application of minimum quality requirements which are checked at the port of entry.  Is
the United States considering modifying this system so that market conditions are not artificially
affected?
Section 8e of the Agricultural Marketing Agreement Act of 1937 (7 U.S.C. 608e-1), provides
that whenever certain specified commodities are regulated under a Federal marketing order, imports
of those commodities must meet the same grade, size, quality and maturity requirements as those in
effect for the domestically produced commodity.
The U.S. believes that these regulations fully comply with World Trade Organization
requirements.  The grade, size, quality and maturity requirements specify minimums only, do not limit
the volumes of such commodities which may be imported, do not apply a tariff or quota to such
imports, and are in effect only during the same periods of time as domestic production is regulated.
These requirements are limited to grade, size, quality and maturity.  Domestic production is oftenrequired to meet additional requirements related to pack and container, container marking, volumecontrols, and assessments to fund administrative costs for marketing order operations.
The United States does not believe that such minimum requirements “artificially affect” the
market.  Rather, applying these minimum requirements to domestic production and imports of those
commodities creates buyer and consumer confidence in the quality of goods marketed.  Such
confidence results in increased demand for and purchases of the commodities, benefitting bothdomestic producers and importers.
14.35 (Brazil) Orange juice-Specific duties - Specific and compound duties are a feature of the U.S.
tariff.  In 1999 they account for 12.9% of all tariffs and apply mainly to agricultural products,
prepared food, footwear and headgear, chemicals and chemical products, textiles and base metals.
More than 80 of the top ad valorem equivalent duties range from 40.6% to 232.2% (p.48, para. 12).
The main problem of Brazil in this area is related to orange juice.  Imports of this product in the U.S.
are subject to the application of a specific tariff related to volume, corresponding to an ad valoremtariff of around 49%.  This measure, aimed to protect domestic producers, is obstructing imports and
hampering internal consumption.  Is the U.S. envisa ging any measure to reduce these distortions?  Or
is this issue "unnegotiable" as was the case in the Uruguay Round?  Again, in the case of Brazil, such
an attitude would undermine the value of any future negotiations.WT/TPR/M/56/Add.1
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Overall, U.S. MFN tariffs are among the lowest in  the world.  One of the goals for the U.S. in
the next round of WTO negotiations is to improve market access through lower tariffs in all membercountries.
14.36 (Brazil) Sugar - Sugar is subject to the raw cane sugar tariff rate quota or to the refined sugar
tariff rate quota.  To be eligible for a TRQ countries must obtain a Certificate of Quota Eligibility or
a Special Sugar Certificate (p. 57, para. 36).  With  minimum price guarantees to domestic producers
and through tariff quotas to imports, the U.S. is supporting an artificially high price for sugar,protecting and promoting internal production of beet sugar, but also distorting international prices.
Brazil, one of the largest producers and the biggest exporter of cane sugar, is being discriminated in
the administration of the quota allocation system.  This system is allocating to the three main world
producers only 25% of the sugar cane quota, but is allowing non-traditional exporters to buy sugar in
the international market to re-export to the U.S.  Is the U.S. planning to address this discriminating
system that is rewarding dubious practices and disregarding the competitiveness of the suppliers?  Is
there any plan to deregulate the U.S. sugar market?
There are no plans to significantly alter the current U.S. sugar program.
14.37 (Brazil) Fruits - In addition to strict regulations, the safety of U.S. food products is safeguarded
through pre-market clearances, mandatory production practices, inspections, and random ongoingsampling.  The food safety standards that apply to domestically produced foods also apply to
imported foods (p. 123, para. 239).
Brazil is a traditional competitive fruit exporter, but excessive phytosanitary measures and import
licensing requirements practically banned imports of these products from Brazil to the U.S.  The main
problem in this area is the long process to obtain the risk free certificate.  The case of papayas is a
good example of the difficulties of the whole process, taking almost six years, when similar process
for other countries takes only three years.  This delay in the certification process is becoming animportant barrier to trade, since its costs and time length impede the flow of trade.
How does the U.S. plan to address this situation that is discriminating products that are highly
competitive in the international market?
Each year APHIS issues over 5,000 permits for imports of plants and plant products.  Many
requests are for the initiation of trade in a new commodity or for commodities from a new sourcecountry or region.  When this is the case, the decision to import must be based on a science-based
evaluation of the production situation in the requesting country ;  that is, a pest risk assessment.  This
process may be lengthy if the factors for consideration are complex.  Although the lengthy process
may be perceived as discriminatory by the requesting country, it is consistent with the obligation of all
countries signatory to the WTO, and ensures that commodities imported or transiting the UnitedStates presents a minimal risk to American plant resources.
14.38 (Brazil) Shrimps - Following the environm ental regulation enforced under the Endangered
Species Act it is prohibited to import shrimps and shrimps products harvested with commercial
fishing technology that may adversely affect sea turtles.  Shrimps imports are prohibited unless the
USDA certifies that the nation has adopted a comparabl e program to protect sea turtles.  Imports not
certified are allowed by boats using turtle excluder devices provided they are accompanied by
certification from the harvester and the government of the exporting country.  This practice has been
the object of a dispute in the WTO that found that  the ban was inconsistent with GATT rules.  The
period of implementation would be 13 months  from 25 November 1998 (p. 129, para. 266).WT/TPR/M/56/Add.1
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Brazil is under the certification system, since 1992, but was excluded for exports several times after
the visit of technical missions, despite the fact that the Brazilian Government has implemented aspecific law through IBAMA obliging Brazilian boats to use TEDs.  After the WTO panel, Brazilian
exports are under a waiver and under the submission of periodic verification.
The uncertainty created under this situation is affecting exporters and undermining the evolution of
trade relation between Brazil and the U.S., since the USTR declare that it is committed to ensuring
that U.S. environment laws remain firmly in place.
How does the U.S. intend to address the persisting negative effects of this practice?  Does the U.S.
intend to fully comply with the results of the panel?
As reported to the DSB, the United States has taken the necessary steps to comply with the
results of this dispute.  One element of this implementation has been the issuance by our Department
of State of revised guidelines implementing our Shrimp/Turtle law.  The revised guidelines, inaccordance with the recommendations and rulings of th e DSB are intended to:  (1) introduce greater
flexibility in considering the comparability of foreign programs and the U.S. program and
(2) elaborate a timetable and procedures for certification decisions.  These latter changes are designed
to increase the transparency and predictability of  the certification process and to afford foreign
governments seeking certification.
14.39 (Brazil) Poultry meat and soya beans and soya oil-Support programs - The Export
Enhancement Program-EEP was re-authorized until the year 2001.  The purpose of the program is to
enable exporters to offer prices that are competitive with those being offered by other countries'
exporters in selected foreign markets.  Commodities eligible for assistance are wheat, wheat flour,
feedgrains, rice, vegetable oil, frozen poultry, barley malt, pork and eggs (p. 167, para. 8).  Brazil is
also one of the biggest exporters of poultry meat, but its exports, mainly to the Middle East, have been
heavily affected by the EEP export subsidy, re-int roduced in 1998 allegedly to compensate the EC's
export subsidies.  How does the U.S. envisage to handle this situation that discriminates against a
country that is exporting agricultural products without subsidies?  Other area of concern to Brazil is
the use of the EEP to support exports of soya oil.  Brazil is a leading exporter of this product, but has
been affected by U.S. subsidies in the past.  How does the U.S. plan to avoid the negative and trade
distorting effects of these subsidies?  Does the U .S. agree to support a "subsidies war" in detriment of
developing countries' participation in international trade?
Individual EEP initiatives will not be approved if they might have more than a minimal effect
on non-subsidizing exporters in the target market.  EEP initiatives should have the potential to further
the U.S. trade policy strategy of opposing competitors' subsidies and other unfair trade practices by
displacing other countries' subsidized exports in targeted countries.  Targeted countries are those
where U.S. sales have been non-existent, displaced, reduced, or threatened because of competitionfrom subsidized exports.  EEP initiatives must demonstrate their potential to develop, expand, or
maintain markets for U.S. agricultural commodities wh ile considering the U.S. historical market share
and long-term commercial relationships.  Efforts will be concentrated on export sales of those
commodities that would be competitive if other suppliers did not use export subsidies.  No vegetable
oil has been subsidized under the EEP since 1994.
14.40 (Malaysia) Pepper-Non Acceptance of Mala ysian Grades and Stringent Mould Standard
Malaysian pepper encounters difficulties in penetrating the U.S. market.  With the exception of
Standard Malaysia Pepper No. 1, the U.S. does not accept other specifications of standards andgrades of pepper from Malaysia.  However, these grades are acceptable in other markets such as EU
and Japan.  This technical barrier has restricted the entry of other grades of pepper into the U.S.
market.  Malaysian pepper has to comply with American Spice Trade Association (ASTA) QualityWT/TPR/M/56/Add.1
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Specification which is more stringent than the spec ification and standards imposed by EU and Japan.
Malaysian pepper has technically met the international standard and quality specification as othercountries such as Japan, EU and Australia have accepted the grades and quality of Malaysian
pepper.  What is the basis for U.S. non-acceptance of other grades of Malaysian pepper?
The Food and Drug Administration (FDA) administers regulations based on the Food, Drug
and Cosmetic Act, as amended.  Imports of all spices, seeds and herbs into the United States are
subject to the health and regulation standards of the FDA.  These regulations are intended to assure
the consumer that foods are pure and wholesome, safe to eat and have been produced under sanitary
conditions.  Examination is carried out by the FDA at the time of arrival.  Laboratory test may be
requested by the FDA to detect problems such as pesticide residues, salmonella, bacteria, molds, orother disease-causing organisms.
At present, spices traded on an American Spice Trade Association (ASTA) contract must be
accompanied by a certificate of analysis.  ASTA Cleanliness Specifications and their related
requirements are intended to ensure that spices, seeds, and herbs as raw unprocessed agricultural
commodities have been properly handled and stored.  Generally, only imported spice products aretested for ASTA compliance when there is a requir ement in the purchase contract or the customer of
the importer requires the certificate.
14.41 (Malaysia) Malaysian pepper has to comply with the standard and quality specifications
imposed by the U.S. Government (US FDA) and th e U.S. Spice Trade Association (ASTA).  This
two-layer process has created uncertainties in trade as well as increased the cost of exporting to the
Malaysian exporters.  What is the basis for Malaysian pepper to be subjected to the two inspectionprocesses;  one by the Government and another one by the spice trade association?
See response to 14.40.
14.42 (Malaysia) U.S. Subsidy for Export of Ag ricultural Products - Currently, several U.S.
agricultural products are subsidized through programmes such as the Export Enhancement
Programme, the Sunflower Oil Assistance Pr ogramme and the Cottonseed Oil Assistance
Programme.  These programmes are targeted at markets which are also markets for Malaysian
products, especially palm oil.  The programmes are also aimed at facilitating U.S. agricultural
exports to countries experiencing hard currency constraints that may be unable to purchase U.S.agricultural commodities without credit.  As most of these countries are also the export markets for
Malaysian palm oil, subsidized exports of U.S. veg etable oils under these programmes have the effect
of displacing Malaysian palm oil exports.  What is the U.S. targeted performance of exports of
agricultural products to the market concerned, and shall the subsidies be withdrawn once the U.S.
exporters meet the targeted performance?
No vegetable oil has been subsidized under the Export Enhancement Program (EEP)
since 1994.  In addition, the Sunflower Oil Assistance Program (SOAP) and the Cottonseed Oil
Assistance Program (COAP) have not been funded since 1996, and no product has been committed
under these programs since 1994.
14.43. (Mauritius) Could the United States indicate whether the Special Safeguard provided for
agricultural products is applied on a discretionary basis by the U.S. authorities?  Or is this applied
automatically as laid down in the WTO Agreement?
The system for implementing price-based special agricultural safeguards is automatic, and is
implemented at the time of importation by U.S. Customs.  Trigger levels for all products subject to
price-based safeguards are available in WTO documents G/AG/N/USA/1  and G/AG/N/USA/1/Add.1.
In addition, the specific price ranges and applicable safeguard duties are clearly described inWT/TPR/M/56/Add.1
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Subsection IV of Chapter 99 of the U.S. tariff schedule (HTS), which is available on the USITC
website www.usitc.gov.  Volume-based safeguards may be imposed when imports of a productexceed the three-year average of imports, as described in Article 5 of the Agreement on Agriculture.
The decision to impose the volume-based safeguard is made following an assessment of market
conditions.
15. Steel
15.1 (Korea) (p. 178, para. 15) How would the Early Warning System work?  What would be the
"extraordinary circumstances" which w ould activate the Early Warning System?
(Korea) (p. 178, para. 16) Under the Action Plan, steel companies experiencing losses may be
allowed to offset these losses against the taxes paid  during the prior five years instead of the current
two year carry-back periods, allowing steel companies to obtain refunds for prior taxable years,
reaching periods before the Asian financial crisis.  Would this act constitute a subsidy for steelcompanies?  Also, is this act consistent with the efficient operation and possible restructuring of the
U.S. steel industry?
If the question refers to the early public release of the preliminary U.S. Census import data,
our decision to release this data publicly was taken in the interest of improving the timeliness of the
data.  This has helped all interested parties to better assess import trends and the likely effect on theU.S. market.
We have the discretion to make preliminary data available when we feel this is in the U.S.
interest.
Our import monitoring program is based on the in-depth analysis of public data concerning
imports and market indicators.  These analyses have not led to any self-initiated cases.
15.2 (Canada) We note that the sharp increase in imports, at the end of last year, created
considerable pressure in Congress for further legislation, over and above the trade remedy lawsbeing enforced by the Executive Branch.  While the recent, effective, defeat of steel quota legislation
in the Senate is to be welcomed, has the Administration concluded its review and satisfied itself on the
WTO-consistency of alternative legislation, such as the Steel Trade Enforcement Act?
As you may know, the Administration has vigorously opposed the steel quota bill and worked
hard to ensure that it would not become law.  We made clear that our opposition to that bill was basedin part on the fact that it would not have conformed to WTO requirements and that other,
WTO-consistent mechanisms are available under U.S. law to address the steel import issues.
While we have not undertaken a formal review of the WTO-consistency of the other
steel-related bills pending before the Congress, the Administration has made plain that it will not
support any changes in U.S. trade laws that would contravene U.S. obligations under the WTO.
15.3 (Canada) (p. 178, para. 16) notes that tax relief measures are being introduced for steel
companies.  Given that these measures appear to be specific, have they been notified as per ASCM
requirements?  If not, will they be notified in the future?  How long are these tax relief measures
expected to be in place?
These tax measures have not yet been included in any U.S. subsidies notification under
Article 25 of the SCM Agreement because (i) we have not, ourselves, made a judgment as to whether
they would meet the relevant notification requiremen ts;  and (ii) in any event, they would not fallWT/TPR/M/56/Add.1
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within even the reporting period applicable for a notification to be made in 1999.  We will, of course,
review the measures for possible notification in the future;  the United States consistently attempts tonotify measures erring on the side of transparency when there is some doubt about whether a measure
falls within the scope of the notification requirement.
15.4 (Japan) Steel (p. 174, Annex III.3) The increase of steel imports in 1998 was due to the strong
U.S. domestic demand and the lack of capacity of the American steel industry.  It is Japan's
understanding that, currently, the steel market has recovered, both in terms of production and price.
An arbitrary use of AD measures impede sound trade, thus Japan requests an adequate handling of
the case by the U.S. authorities.  Japan understands the political background surrounding this issue.
Nonetheless, it is concerned about the apparent tendency toward protectionism, including the
submission of a bill that limits the import of st eel into the US.  Japan requests an adequate handling
of the issue.
See response to 15.2.  While the United States is not self-sufficient in producing steel, an
import penetration surge from a level of 23% in early 1998 to almost 37% by November 1998 of that
year was clearly not led by strong U.S. demand, but rather by sudden excess supply in Asia in the
aftermath of the late 1997 Asian financial crisis.  Although imports were down in 1999, the U.S.
market did not fully recover from the import surge;  despite continued strong U.S. demand, pricesremain depressed.
The filing of anti-dumping petitions is at the discretion of the domestic industry.  If dumping
petitions filed by the U.S. steel industry meet legal requirements, the Department of Commerce is
obligated to initiate these investigations.  These cases are conducted in accordance with the law and
our WTO obligations.  The Administration has fully demonstrated its determination to fight
WTO-inconsistent quota initiatives in the U.S. Congress.  The vote against the quota bill in the Senate
on June 22 was a reaffirmation of our commitment to respect WTO rules, to keep the U.S. marketopen, and to a strong U.S. and global economy.
15.5 (Brazil) Steel - Of the 72 anti-dumping investigations initiated between 1996 and 1998, 54%
involved steel products, following a pattern observed in the past 20 years (pp. 68, 69).  The number of
anti-dumping duty orders in effect on 1 January 1999 was 297, 41% of these were on iron and steel
(p. 70).
There were 18 countervailing duty investigations initiated between 1996 and 1998, and 13 of these
involved steel products.  There were 51 CVD orders in effect on 1 January 1999, and 58% of them
applied to steel product (pp. 72, 74).
How does the U.S. explain such a concentration of AD and CVD on the steel sector?  Would this not
indicate simply that the U.S. steel industry is not competitive as compared to producers from differentcountries and continents?
Brazil views this situation as an example of a prot ectionist policy toward an industry that is loosing
competitiveness.  Does the U.S. plan to increase the level of exposure of its steel sector to
international competition?
As you know, the filing of petitions is at the discretion of the domestic industry.  If dumping
petitions filed by the U.S. steel industry meet our legal requirements, we are obligated to initiate these
investigations.  We conduct these investigations in accordance with the law and our WTO obligations.
All actions taken by the USG in conducting these cases have been fully in accordance with our
statute, established procedures and our WTO requirements.WT/TPR/M/56/Add.1
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Regarding the concern you raise about protectionism, the U.S. steel market is fully exposed to
foreign competition.  For example, import penetrati on in the United States in 1997 (just prior to the
steel crisis) was 23.2%.  This is four times higher than import penetration in Brazil which totalled
5.1% in 1997.  Moreover, the Administration vigorously opposed the steel quota bill proposed in the
U.S. Congress.  The vote against the quota bill in the Senate on June 22 was a reaffirmation of our
commitment to open markets and to a strong economy.
16. Financial services/Banking services (p. 182, para. 11)
16.1 (Switzerland) The Report indicates that as of April 1998, 13 States permit inter-state branching
by de novo establishment of branches based on the Riegle-Neal Interstate Banking and Branching
Act.  Have since that time other states opted in and permit interstate banking by de novo
establishment of branches? What States are these?  What is the reason for not having bound interstate
branching by de novo establishment under GATS?
16.2 (Hong Kong) We note that the establishment of a branch, agency or subsidiary bank by a foreign
bank is prohibited if the foreign bank is not subject to comprehensive consolidated supervision (CCS)
by home country authorities.  Would the U.S. provide more information on the CCS?
In the U.S., the Foreign Bank Supervisio n Act (FBSEA), enacted in 1991, requires a
determination by the Federal Reserve Board that a foreign bank is subject to consolidated supervisionby its home country supervisor in order to establish a branch, agency, or a subsidiary in the U.S.  In
determining whether a foreign bank is subject to comprehensive supervision on a consolidated basis,
an assessment is made to the extent to which the home country supervisor:
- Ensures that the foreign bank has adequate procedures for monitoring and controlling
its activities worldwide;
- Obtains information on the condition of the foreign bank and its subsidiaries and
offices outside the home country through regular reports of examination, auditreports, or otherwise;
- Obtains information on the dealings and relationships between the foreign bank and
its affiliates, both foreign and domestic;
- Receives from the foreign bank financial reports that are consolidated on a world
wide basis;  and
- Evaluates prudential standards, i.e. capital adequacy and risk asset exposure, on a
worldwide basis.
There are also discretionary standards that may be taken into account:
- Consent of home country supervisor to establish the proposed entity;
- Financial resources of the foreign bank;
- Managerial resources regarding competency, experience, and integrity;  and
- Sharing of information with supervisors.
If it is determined that the foreign bank is  NOT subject to comprehensive supervision, an
application may still be approved if the appropriate authorities in the home country of the foreignbank are actively working to establish arrangements for the consolidated supervision of such bank.
Comprehensive consolidated supervision is also addressed in the Minimum Standards for the
Supervision of International Banking Groups and their Cross-Border Establishments, issued by the
Basel Committee on Banking Supervision in July 1992 and updated by Supervision of Cross Border
Banking in 1996.  These standards establish four main principles:WT/TPR/M/56/Add.1
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1. All international banks should be supervised by a home country authority that
capably performs consolidated supervision.
2. The creation of a cross-border banking establishment should receive the prior consent
of both the host country and home country authority.
3. Home country authorities should possess the right to gather information from their
cross-border banking establishments.
4. If the host country authority determines that any of these three standards is not being
met, it could impose restrictive measures or prohibit the establishment of bankingoffices.
These principles were endorsed by over 130 countries at the 1998 International Conference of
Banking Supervisors, in Sydney, Australia, and we encourage all countries to implement theprinciples as soon as possible.
Comprehensive consolidated supervision is also addressed in the Basle Core Principles (1997)
and expands on the earlier principles.
Principle
23. Banking supervisors must practice global consolidated supervision over their
internationally active banking organizations, adequately monitoring and applyingappropriate prudential norms to all aspect of the business conducted by these banking
organizations worldwide, primarily at their foreign branches, joint ventures and
subsidiaries.
24. A key component of consolidated supervision is establishing contact and information
exchange with the various other supervisors involved, primarily host country
supervisory authorities.
25. Banking supervisors must require the local operations of foreign banks to be
conducted to the same high standards as are required of domestic institutions and
must have powers to share information needed by home country supervisors of those
banks for the purpose of  carrying out consolidated supervision.
There has been widespread endorsement of the principles and many countries are in the
process of implementing them.  The U.S. has already done so, and it may be helpful for othercountries if the U.S. implementation is described in more detail.
16.3 (Hong Kong) (p. 186, para. 17) It is mentioned that under limited circumstances, foreign
broker-dealers are exempted from registration requ irements under U.S. laws.  What would be these
limited circumstances?
- Exchange Act Rule 15a-6 exempts from registration foreign broker-dealers that
engage in certain activities involving U.S. investors and U.S. securities markets.
- These activities include "nondirect" contacts by foreign broker-dealers with U.S.
investors and markets, through execution of unsolicited securities transactions and
provision of research to certain U.S. institutional investors.
- The exempted activities also include certain "direct" contacts, involving the execution
of transactions through a registered broker-dealer intermediary with or for certain
U.S. institutional investors, and without su ch an intermediary with or for registered
broker-dealers;  banks acting in a broker or dealer capacity;  certain international
organizations;  foreign persons temporarily present in the United States;  U.S. citizens
resident abroad;  and foreign branches and agencies of U.S. persons.WT/TPR/M/56/Add.1
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16.4 (Hong Kong) (p. 187, para. 20) We note that foreig n-owned dealers would be accorded national
treatment as long as U.S. firms operating in the go vernment debt markets of the foreign country are
accorded "the same competitive opportunities" as  domestic companies.  Will the U.S. Government
review such reciprocity requirements and consider removing this arrangement from the list of MFN
Exemptions?
This provision has been in effect under U.S. law since 1988.  It contains neither a “sunset”
nor a review provision and therefore should continue in effect until repealed.  We are not aware of anyefforts to remove this provision.  However, we note that this provision applies to a narrow subset of
securities providers in the United States, those institutions designated as primary dealers.  While
approximately 2,000 domestic and foreign securities brokers and dealers are registered to operate in
the government securities market, only thirty are designated as primary dealers as of October 1999.
Moreover, the majority of primary dealers are foreign-owned, and this provision has never been usedto deny a foreign-owned firm the role of a primary dealer.
Financial services/Insurance services (p. 188, para. 25)
16.5 (Switzerland) Can you elaborate in the initiati ve of State Regulation 2000 (SR 2000)?  Does it
aim to issue guidelines that the insurance commissioners can follow on a voluntary basis?  One of the
goals is to eliminate licensing and approval barrie rs.  What barriers are manly targeted to be
eliminated?  What is the timefr ame for implementation of SR 2000?
State Regulation 2000 includes the following programs:
Producer Database (PDB) is an electronic database consisting of information relating to
insurance agents and brokers (producers).  The PDB links participating state regulatory licensing
systems into one common system establishing a re pository of producer information.  The PDB will
also access  other information sources such as the National Association of Securities Dealers (NASD),
the Regulatory Information Retrieval System and others.  The PDB will also send an electronicnotification to state users if administrative action is taken against a licensed producer in their state or
if a producer no longer holds an active resident licence.  Fifteen States are now regularly sending data
to the Producer Database, amounting to approximately 70% of the producers in this country.  More
states are expected to be added soon.
The key benefits of PDB are:
- Immediate access to detailed disciplinary history;
- Immediate electronic notification of administrative action;  and
- Verify licensure and good standing in all participating States.
Producer Information Network (PIN) – PIN is  an electronic communication network that
links state insurance regulators with the entities th ey regulate to facilitate the electronic exchange of
producer information.  Data standards will be developed for the exchange of licence application,
licence renewal, appointment and termination information.  All data flowing over PIN will conform to
these standards.  The key benefits of PIN are:
- Reduction in paperwork and data entry;
- Development of national standards regarding electronic transmission of licensing
data;  and
- Faster turnaround time.WT/TPR/M/56/Add.1
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System for Electronic Rate and Form Filing (SERFF) – The System for Electronic Rate and
Form Filing is a project designed to provide effici ency through technology relating to the rate and
form filing process.  SERFF enables insurers to s ubmit rate and form fillings electronically to state
reviewers, reducing the time and cost involved in making regulatory filings.  State reviewers use
SERFF to facilitate the management, analysis, disposition, and storage of the filings.
SERFF is unique in that it is a joint, cooperative initiative between the state insurance
departments and the insurance industry.  Both insurers and regulators benefit from the electroniccommunication that SERFF provides.
Accelerate Licensure Evaluation and Review Techniques (ALERT) – will streamline the state
admission process for insurance companies by creating a standardized format and procedure for
company admissions.  The Uniform Certificate of Authority Application process is designed to allow
foreign  insurers (U.S. insurers domiciled outside a specific state) to file copies of the sameapplication for admission in numerous states.  While each Uniform State still performs its own,
independent review of each application, the need to file different applications, in different formats,
has been eliminated for all states that accept the uniform application.
Uniform Treatment Project – addresses industry's concern that some jurisdictions have laws
and regulations for the licensing and conduct of non-resident producers which may, at present, imposeadditional conditions and barriers on non-resident applicants or producers based solely on the
applicant/producer's non-resident status.  It seeks to address this concern by granting all equally
qualified non-resident producers the same rights and privileges afforded resident producers in the
major lines of insurance procured through the admitted market.
The Declaration of Uniform Treatment is a common statement of principles
concerning non-resident licensing.  By signing the Declaration, a state commits itself to treating
resident and non-resident producers in the same way and commits to accepting the uniformapplications as the only non-resident licensing applications.  Under the new system, a producer
residing in a state that participates in the uniform treatment project will be able to take advantage of a
more streamlined, efficient licensing system.  A producer will only need to complete one uniform
application that can be filed in his/her resident state, as well as in other states that have agreed to
accept the uniform application.  All producers must continue to meet and fulfill the state specificlicensing requirements that may be in place in the other participating states.
Complaints Database System is a nationwide database used for referencing and analyzing
consumer complaints filed with state insurance departments.  Complaints reported to the insurance
departments are submitted to the NAIC database enabling regulators to review this information during
market conduct exams and to compare complaint experience with premium volume and otherinsurance companies.
1. Does it aim to issue guidelines that the insurance commissioners can follow on a voluntary
basis?
While all of the programs that form part of the State Regulation 2000 (SR 2000) initiative are
voluntary, the goal is to achieve nationwide involvement in the various programs as quickly aspossible.
2. One of the goals is to eliminate licensing and approval barriers.  What barriers are mainly
targeted to be eliminated?WT/TPR/M/56/Add.1
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The barriers that are targeted are principally administrative.  The inefficiencies presented by
different forms and procedures for companies seeking licensing and product approval on a multi-statebasis are part of the focus of SR 2000.  In addition, the initiatives that centralize regulatory
information in national databases eliminates the n eed for individual state regulators and companies to
gather this information independently from other states.
3. What is the timeframe for implementation of SR 2000?
SR 2000 is an on-going project, and NAIC members are actively seeking to expand its reach
among the states.  In fact, in just the past year, state participation has almost doubled in many of the
programs, and success at achieving new participant states is continuing at a very strong pace in all
areas of the project.
Financial services/Financial market integration (p. 191, para. 36)
16.6 (Switzerland) Can you elaborate on the main differences between the two proposed bills on
financial modernization legislation?  What are the chances for finding a compromise on the financial
modernization legislation bill in the current session of Congress?
Please see answer to question 16.7.
16.7 (Hong Kong) (p. 191, para. 36 and Footnote 41) Note that financial services modernisation
legislation is being proposed, with a view to enhancing market access and providing national
treatment for foreign services suppliers.  We understand that the legislation is being considered in the
current Congress session.  It would be useful to know the latest state of play.
We are pleased to note that comprehensive financial services modernization legislation,
known as the Gramm/Leach/Bliley Act, passed Congress last fall and was signed into law by the
President on 12 November 1999.
16.8 (Japan) Supervision of foreign banks (p. 183, para. 14) In the United States, foreign banks are
supervised by both the federal and the state governments.  We welcome that the financial inspectionsof those banks are now jointly conducted by the FRB and other related supervisory authorities in
accordance with the "FBO Financial Supervision Prog ram".  However, the points raised by the
various supervisors differ, and Japan would like to  request further improvem ents in this respect,
including harmonization of the relevant rules and regulations.  Please explain the U.S. view on this
point.
Initially, we note that foreign banks have a choice of federal or state charters with respect to
their U.S. branches, agencies and bank subsidiaries.  The type of charter would affect the extent to
which the rules and regulations are affected by the offices located in different states.  Moreover, there
have been further improvements in the coordination of supervision of foreign banks in the United
States by federal and state authorities.
In that regard, in November 1998, agreements were signed that provided for better
coordination of supervision of multi-state operations of foreign banking organizations (“FBOs”).
Under the agreements, one state supervisor is chosen as the State Coordinator for the U.S. operations
of the FBOs based upon several factors, including any preferences of bank management.  The State
Coordinator acts as the single point of contact fo r coordination of the supervision and examination of
the state-licensed and state-chartered operations of the FBO.  The State Coordinator cooperates with
the other state and federal bank supervisors to develop a written supervisory and examination planWT/TPR/M/56/Add.1
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that focuses on ensuring that examinations are risk-focussed and that functions or activities affecting
more than one U.S. office of an FBO are not covered repeatedly in different examinations.  In thatregard, the appropriate federal bank supervisor and the State Coordinator jointly develop a
comprehensive supervisory plan for the FBOs operating in more than one state.
Moreover, under the agreements the State and Federal bank supervisors are directed to work
towards common application forms and requirements, such as  concurrent processing periods, to the
extent practicable under Federal and State law.
16.9 (Japan) Citizenship requirement for directors of financial institutions (p. 190, para. 31)  While
all directors of banks licensed under U.S. national laws should, in principle, be U.S. citizens, this
requirement may be eased for branches or affiliated companies of foreign banks at the discretion of
the Comptroller of the Currency.  Specifically, the Comptroller would only require more than half of
the directors of those entities to be U.S. citizens.  At the state level, some of state authorities havelifted this kind of citizenship requirement.  However, some states have more restrictive regulations
and Japan requests that these regulations be thoroughly abolished.  Please explain the U.S. view on
this point.
Residency requirements for bank board members are listed among the United States’ GATS
derogations.  No action on this issue is being contemplated at this time.
16.10 (Japan) Japan-U.S. Insurance Agreement (p. 190, para. 32) The United States insists that, out
of the five criteria for terminating measures to avoid any radical change in the so-called third
insurance sector – as set out in the "1996 Supplementary Measures by the Government of Japan and
the Government of the United States regarding Insurance" –, those criteria relating to the reform of
the rating organization system and to product approval within the standard 90-day period have not
been met.  Japan would like to stress, however, that Japan has been faithfully implementing the
bilateral insurance arrangement and have satisfied all five criteria upon implementation of the ratingorganization reform as of 1 July 1998.  Japan would also like to point out that liberalization in the
third sector will be completed by January 2001.
In this regard, both countries confirmed that, if neither side could conclude by having a common view
as to whether or not the criteria had been met, each  side would preserve its right to act in conformity
with its own view.
The United States takes note of the comment.
16.11 (Japan) Liberalization of cross-state operations (p. 182, para. 11) Whereas Japan appreciates
that there is an increasing tendency for state authorities to allow a cross-state opening of branches by
banks, Japan urges for the complete liberalization to be realized as soon as possible.
The United States takes note of the comment.
16.12 (Canada) Financial services (p. 182, para. 11) The Report indicates that though interstate
branching by de novo establishment is permitted only in 13 States, the District of Columbia, and
Puerto Rico, it is anticipated by the U.S. authorities that additional states will permit de novo
branching as consolidation continues in the banking system.  Could the U.S. provide a more precise
indication as to when it anticipates that additional states will permit de novo establishment?
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 established a
federal framework for interstate banking and branching in the United States for both domestic and
foreign banks.  The Riegle-Neal Act provides three avenues of interstate expansion for foreign anddomestic banks:WT/TPR/M/56/Add.1
Page 94
- interstate banking by multistate acquisition of banks;
- interstate branching by acquiring and consolidating banks or bank branches in more
than one state;  and
- interstate branching by establishing de novo branches or agencies in more than one
state.
With regard to interstate branching, foreign banks operating in the United States have the
same opportunities as those afforded to domestic banks:
- Opportunities for acquiring a U.S. bank located in a state other than the home state of
the bank holding company or for merging with U.S. banks having different home
states, are available to foreign banks to the same extent as to U.S. bank holding
companies;
- A foreign bank in general may establish and operate a branch or agency in any state
outside its home state to the same extent as a domestic bank with the same home state
as the foreign bank;  and
- A U.S. bank controlled by a foreign bank may establish branches outside its home
state to the same extent as other U.S. banks.
In addition, foreign banks may conduct business through an agency (a wholesale branch that
cannot accept any retain deposits) – a form of establishment not available to domestic banks.
With regard to de novo  branching:  legislation has been passed in 13 States (plus Puerto Rico
and the District of Columbia) permitting some form (mostly on a reciprocal basis) of de novo
interstate branching.
This framework is the result of the dual banking system in the United States and the
prerogative that states have in legislating and regulating certain financial activities within their
boarders.
17. Telecommunication Services/WTO Basic Telecommunication Agreement
(p. 194, para. 46 and p. 195, para. 49 and pp. 195-196, para. 50 and p. 196, para. 51)
17.1 (Korea) (pp. 194-195, paras 45-46) In international telecommunications services, the Federal
Communications Commission (FCC) has  considerable discretion in either granting or denying an
application under causes of "very high risk to competition or public interest factors" by both
Section 214 and 310 of the Communications Act. Na tional security, law-enforcement issues, foreign
policy and other "public interest factors" can be also taken into consideration in determining whether
to grant an application.  As these factors are potential entry barriers to foreign competition, the
Korean Government would like to hear the views of the U.S. on this matter.
We have addressed this question numerous times with many of our trade partners.  Since
entry into force of the WTO Basic Telecom Agreement, over forty foreign carriers have been licensed
to operate in the United States, and none has been denied.  At the same time, licensing procedures
have been radically streamlined, speeding the process considerably.
17.2 (Switzerland) (p. 194, para. 46) The US's commitments in telecommunications services are
described in para. 46.  The U.S. Scheduled "none" for direct limitations in mode 3 in the market
access column.  The paragraph indicates that there are no restrictions on indirect ownership of a
common carrier radio licence.  What about non-radio licences?  Are there also no restrictions on
indirect ownership?WT/TPR/M/56/Add.1
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Apart from narrow exceptions relating to rural telecommunications cooperatives, the United
States imposes no limitations on the indirect ownership of wireline telecommunications carriers.
17.3 (Hong Kong) (p. 194, para. 47) It is mentioned that the exclusive right of the Communications
Satellite Corporation (Comsat) to provide link-ups with Intelsat and Inmarsat has ended after
Inmarsat privatised in April 1999.  We would like to know the progress of privatisation and whether
foreign suppliers may participate in providing these satellite services.
With the privatization of INMARSAT, Comsat's statute-based access-exclusivity has ended.
Access to INMARSAT in the U.S. is through either U.S. or foreign land earth station operators which
may acquire service directly from INMARSAT under recently implemented  privatization
arrangements.
Since INTELSAT has not yet been privatized, the issue of direct access to this entity remains
as stated in the U.S. GATS schedule – i.e. only Comsat can currently provide such access from theUnited States until either the FCC decides in a cu rrent rulemaking proceeding to permit direct access
in the United States, or INTELSAT is privatized.
17.4 (Switzerland) (p. 195, para. 49) This paragraph describes the Foreign Participation Order of
November 1997 that guarantees an open entry standard for applicants from the WTO Members
(no effective competitive opportunities test any more).  The order left discretion to the FCC to attach
conditions or deny an application in case of the new carrier poses a "very high risk to competition".
Please, could you specify the term "very high risk to competition"?  Further the FCC can take "public
interest factors" into consideration, such as national security, law-enforcement issues, foreign policyand trade concerns.  Please could you specify what do you mean with law-enforcement issues and
foreign policy and trade concerns?  (To be conform with para. 6 of the reference paper the answer
must allow an objective, timely, transparent and non-discriminatory allocation of resources.)
See the answer to question 17.1 above.  Regarding the last point made in this question,
allocation of resources is an independent obligation which is separate from the FCC’s evaluation ofrisk to competition or public interest factors.
17.5 (Hong Kong) (pp. 195-196, paras 49, 51) We note that the Federal Communications Commission
(FCC) reserves the right to attach conditions to granting of authority or denying application for
provision of international telecommunications, and in allowing foreign satellite services when "a very
high risk to competition" is posed or "public interest" is affected.  We would like to know more
information on what circumstances will be consid ered as constituting "high risk to competition".
See answer to 17.1.
17.6 (Switzerland) (para. 50) The Foreign Participa tion order of 1995 is described in this paragraph.
Are there similar rules in the order of 1997?
This paragraph describes the Foreign Carrier Entry Order, issued in 1995, which established
the “effective competitive opportunities” analysis.  The Foreign Participation Order, issued in 1997,
abolishes the “effective competitive opportunities” analysis for WTO Member countries and replacesit with an open entry standard.  FCC 97-398, Report and Order, issued 25 November 1997.
17.7 (Switzerland) (p. 196, para. 51) In the description of the International Satellite Service Order the
U.S. mention also the FCC's discretionary power to take "public interest factors" into consideration.
The term is described in the footnote 65.  Please could you these items enlighten and give some
examples?WT/TPR/M/56/Add.1
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In general, the U.S. deems that market entry that increases competition and provides broader
consumer choice is in the public interest.
17.8 (Hong Kong) (p. 196, para. 52) The Benchmark Settlement Rate Policy attaches conditions to
foreign participation in the U.S. telecom market since the FCC considers international settlement
rates pay to foreign carriers constitute a subsidy to these foreign carriers.  It is mentioned that a
reform is being contemplated, and a final Order is  expected in the second quarter of 1999.  We would
like to know more details about those attached conditions.  Also, would the U.S. provide moreinformation on the formulation and implementation of the reform, su ch as the content and time frame
etc.?
The FCC adopted its International Settlements Policy (ISP) Reform Order on 15 April 1999.
The full text of this Order is available at http://www.fcc.gov/Bureaus/International/Orders/1999/
fcc99073.pdf.  This Order reforms the policy that has generally applied to arrangements between U.S.and foreign telecommunication carriers for the exchange of public switched traffic.  In the past, the
FCC required that all U.S. carriers’ dealings with foreign carriers be made public and precluded any
U.S. carrier from entering into an arrangement with a foreign carrier that was preferential to a
particular U.S. carrier.  The ISP Reform Order removes these requirements as they apply to
arrangements with foreign carriers that lack market power and with foreign carriers that havesettlement rates that are 25% below the applicable benchmark settlement rate.  The ISP Reform Order
does not alter the manner in which the Benchmarks policy is applied, nor does it affect the conditions
adopted in the Benchmarks Order.
17.9 (Australia) What is the basis for restrictions on foreign companies wishing to invest in radio
telecommunications infrastructure and/or provide mobile and satellite services?  What plans are
there for liberalisation of these restrictions?
Restrictions on direct ownership of radio licences are based on Section 310 of the
1934 Communications Act, as amended.  Since indirect investment in such licences is unlimited, theserestrictions pose no practical barrier to WTO Members’ ability to participate in the U.S. market.
17.10 (Japan) Harmonization of regulations at the state level (p. 193, para. 40)  Telecommunications
services are regulated at both the federal and the state level.  Japan is concerned that each State has
different procedures as well as different terms and conditions for certification and that the applicants
must adapt themselves to the regulations of both federal level, as well as of all the States, in which
they wish to provide services.  These differences de facto constitute a market entry barrier for carriers
wishing to enter the U.S. telecommunications market.  The Government of the United States should
take initiatives to integrate the state regulations in light of the trends to liberalize and globalize thissector.  Please explain the U.S. view on this point.
There are currently no plans to address the di stinctions in regulatory authority of the
individual states and the federal government.  Since all carriers – foreign and domestic – face the
same conditions, there is no discrimination inherent to such a system.  Furthermore, we are unaware
of any state that has a certification regime as onerous as Japan’s licensing system.
17.11 (Japan) Regulations on Dominant Carriers (p. 195, para. 50)  Even if a foreign carrier has
"market power" in a particular foreign market, this does not necessarily mean that the carrier has
"market power" in the U.S. market.  Therefore, regulations on a foreign carrier due to their
dominance in another foreign market have no rationale and may result in unjustified discriminatory
treatment against foreign carriers.  Such regulations may also have the effect to unfairly restrictforeign direct investment.  These regulations under the U.S. domestic law, which have no basis under
the WTO Agreement, may be inconsistent therewith .  Please explain the U.S. view on this point.WT/TPR/M/56/Add.1
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We disagree and urge Japan to put greater effort into understanding and applying dominant
carrier regulation in its own market.
The FCC has long recognized that market power in a market for a bottleneck service or
facility may be used by a vertically integrated firm  to the detriment of participants that compete in a
downstream market that are dependent on such bottleneck services or facilities.  The FCC therefore
imposes dominant carrier regulations on U.S. telecommunications carriers that are affiliated with
foreign carriers that possess market power in foreign markets in order to ensure that such carriers donot compete unfairly in the U.S. market for international telecommunications services.  These rules
apply to all carriers that are affiliated with foreign carriers possessing market power.
17.12 (Japan) International Charging Arrangements of the Internet (para. 53)  All costs for
international leased circuits for the internati onal Internet backbone between the U.S. and non-U.S.
countries are charged to non-U.S. telecommunications operators and ISPs.  This provides animpediment to reducing the cost of the Internet access in countries other than the U.S.  The cost of
network linking two countries is, in general, shared equally by both countries.  Nine
telecommunications operators in the Asia-Pacific region released a statement on the cost sharing of
the international Internet interconnection link between the U.S. and the Asia-Pacific region.  The
APEC is also initiating a study on traffic flow and on the cost structure of the Internet.  This unfairbusiness behaviour where non-U.S. telecommunications operators and ISPs are charged for all costs
on international leased circuits is impeding fair competition and thus should be changed and
improved.  Please explain the U.S. view on this point.
Regulating the Internet under the guise of cost-sharing in order to support the interests of a
cartel of dominant national carriers would be a terrible mistake.  Japan should recognize that the
success of the Internet has stemmed precisely from the lack of such regulation.
At this time, the United States believes that there is no need for government intervention into
relationships between ISPs.  During this time of rapid telecommunications liberalization and
technology innovation, the United States believes that cost efficient arrangements for Internet traffic
will continue to be worked out most quickly if th e market is not hampered by government regulation.
Unnecessary regulation could stifle the global development and expansion of Internet infrastructure
and services.
Because the United States has the most developed Internet infrastructure, routing Internet
traffic through the United States often offers the speediest access to global Internet locations, which,
in turn, causes the traffic imbalance.  Fortunately, le asing facilities to the United States is relatively
inexpensive, compared to leasing facilities to almo st any other country.  Elsewhere, high leased-line
costs have restrained the expansion of Internet infrastructure and electronic commerce.  This isgenerally the result of the lack of telecom compet ition.  Countries should focus on addressing this
aspect of the Internet, which has a much greater impact on end-user prices than international charging
arrangements.
17.13 (Japan) Foreign participation in the U.S. telecommunications market (p. 192, para. 49) A new
FCC rule which took effect in February 1998 on the entry of foreign service suppliers basicallyexempts WTO Members from "Economic Competitive Opportunity (ECO)" test.  However, restrictions
on foreign indirect investment of common radio stati on licences remains.  Relevant sections of the
Communications Act should be amended in light of  ensuring implementation of the commitments of
the U.S. under the WTO Basic Telecom Agreement.  Japan is also concerned about several
substantial barriers, listed below, to a foreign carrier's entry into the U.S. market and would like toseek improvement.  Please explain the U.S. view on these points.WT/TPR/M/56/Add.1
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(1) With regard to Section 214 for certification and Section 310 for a radio station licence, the
criteria such as "public interest" and "very high risk of competition" are not clear and theFCC has wide discretion to be able to refuse market entry for these reasons.
(2) Although such factors as "foreign policy" and "trade concerns" are listed as elements of
"public interest", licences could be refused for these reasons unrelated to the applications.
(3) Competing carriers are allowed to file petitions for licences without rational reason, thus
needlessly prolonging the application procedures.
See 17.1 and 17.9.  In addition, the Commission recently streamlined its application
procedures for international services.  No longer will opposition to particular applications prolong the
application process.
17.14 (Japan) Benchmark Rules  In August 1997, th e FCC adopted Benchmark Rules which set down
an upper limit (benchmark) for the settlement rate of calls originating in the US.  This regulation tookeffect in January 1998, with a grace period of 1 to 5 years depending on the stage of development of
the country in which the carrier is domiciled.  It took effect for Japan and other developed countries
in January this year.  The FCC has announced that it will take mandatory measures against carriers
that are unable to meet the benchmark standards.  Japan would like to request the U.S. to abolish
such Benchmark Rules as there are certain pr oblems on, for example, the following points:
- they could become a de facto barrier to entry into the U.S. market;
- they allow the U.S. Government to set down one-sided settlement rates in connection
with its policy of regulations on new entry, whereas the settlement rate should be
determined commercially;  and
- there is doubt about their consistency with the various principles of the WTO
Agreement, such as the MFN treatment.
Please explain the view of the U.S. on these points.
The FCC’s Section 214 authorization conditions apply to all U.S. carriers, whether U.S. or
foreign-owned, and apply to all routes.  All facilities-based carriers operating in the United States
would face the same conditions on service to routes on which they have affiliation on the foreign end.
Similarly, the resale condition applies to all carriers, U.S. or foreign-owned, seeking to provide
switched services over resold international facilities -based or private lines.  Moreover,  the conditions
do not discriminate among services and service suppliers of different countries or discriminate in
favor of U.S.-owned service suppliers.  The conditions apply equally to all routes.  The fact that the
universally-applied conditions may be met on some routes and not on others does not mean that the
conditions are inconsistent with the United States’ MFN and national treatment obligation.  We
disagree with those who assert that our benchmarks conditions are more burdensome than necessaryand are an effective barrier to entry.  Rather, we believe that such conditions are necessary to protect
competition in the U.S. market for international service.  Above-cost settlement rates create a
potential for distortion in the U.S. market.  C onsistent with our GATS obligations, we are taking
measures to protect competition in the U.S. mark et by adopting authorization conditions to prevent
these market distortions created by above-cost settlement rates.
17.15 (Canada) Telecommunications Services, (ii) Market structure, (p. 193, paras 40-41)
According to the WTO's report, the 1996 Telecommunications Act was intended to introduce more
competition in the broadcasting and cable market.  However, many sections of the Act loosened cross-
ownership regulations leading to industry conso lidation.  Foreign programming services have long
complained of the lack of access to U.S. cable ma rkets due to the fact that the major U.S. cableWT/TPR/M/56/Add.1
Page 99
providers also own many of the services they are carrying, thus making the access to these cable
markets difficult.  What steps have the FCC and the federal government undertaken to ensure fair
market access by smaller U.S. and foreign firms to ensure carriage in the U.S. cable market?
We are delighted that Canada is seeking to address issues relating to market access for
cultural products in the WTO and look forward to similar discussions with Canada regarding access to
its market.
First, it should be noted that the United States, like most WTO members, has no market
access commitments either with regard to television cable infrastructure services or television
programming packages via cable.  Furthermore, how such services would be scheduled in the GATS
is unclear.  We would welcome the opportunity to improve the classification system to better address
these services.
Nevertheless, Canada will be happy to know that U.S. law and regulation does address the
issue of unreasonable or discriminatory access for program carriage, and limits the amount of
programming a cable operator can supply from an affiliate.  We would be happy to provide Canada
with further details in the future.
17.16 (Canada) Telecommunications Services, (iii) WTO Basic Telecom Agreement, (pp. 193-197,
paras 44-55)
a. The U.S. commitments under the WTO Agr eement on Basic Telecommunications, the U.S.
Foreign Participation Order, and the International Satellite Services Order, issued by the
FCC on 26 November 1997, state that foreign policy reasons and trade concerns may be
raised as reasons to deny applications for licences by foreign telecoms service providers.  The
GATS makes no provision for trade and foreign policy grounds to be raised as reasons to
deny licences, neither in its general provisions nor in the Reference Paper which is specific to
basic telecommunications services.  How does the United States reconcile these aspects ofthe FCC's order with U.S. trade obligations?
See 17.1 above.
b. Can the U.S. confirm that its cross-border (mode 1) commitments on basic
telecommunications services have been implemen ted?  Can the U.S. confirm that, as required
by U.S. mode 1 commitments, foreign service su ppliers are indeed allowed to provide mobile
satellite services to points in the U.S. using gateways outside the US?  Have any licences been
granted to provide such services?  If no, please explain.
The U.S. commitments on cross-border (mode 1) commitments on basic telecommunications
services for satellite services were implemented by FCC adoption of its DISCO-II order in
November 1997.  Licences to provide such services have been granted, e.g. to New Skies of theNetherlands.  No application has been denied.
c. GATS Article VI requires that “[w]here authorization is required for the supply of a service
on which a specific commitment has been made, the competent authorities of a Member shall,
within a reasonable period of time after the submission of an application considered complete
under domestic laws and regulations, inform the applicant of the decision concerning theapplication.”  Similarly, the Reference Paper on Regulatory Principles that applies to basic
telecoms services requires that when a licence is required, all the licensing criteria and the
period of time required to reach a decision on a licence application, shall be made public.  InWT/TPR/M/56/Add.1
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the context of applications for the provision of cross-border satellite services, has the relevant
information been made public and what period of time would the U.S. consider "reasonable"
for the consideration of an application?
By U.S. law, U.S. licensing criteria is made available to the public.  Regulations are published
in the U.S. Code of Federal Regulations and decisions by the FCC are published in the FCC Record
and generally are made available on the Internet.  The rules that the FCC adopted in implementing the
U.S. commitments are contained in the FCC's written DISCO II Order, which was released to thepublic in November 1997.  As part of the licensing process, applications to provide satellite services
in the United States generally are placed on public notice for a period of time to allow public
comment prior to action on an application.  There are a large variety of earth station applications to
provide satellite services in the United States, including applications to do so via a non-U.S. licensed
satellite.  The period of time for consideration of applications varies depending on an  applicant'sspecific proposal and on the nature and complexity of any technical or other issues raised.  The U.S.
satellite services market, which has developed based on this licensing process, is the largest and most
competitive market in the world.
17.17 (EU) (p. 196, para. 51) In the field of satellite communications and allocation of frequencies,
the market access policy should result in an open, timely and non discriminatory licensing.  It wouldappear that the licensing process should not:
- be based on broad and vague conditions and criteria;
- subject foreign satellite systems to over regulation;
- delay the entry of systems ready to enter the market as a result of burdensome
conditions, like an excessive relocation cost burden;
- treat differently like services.
It would be helpful if the U.S. could elabora te on the implementation of the WTO Basic
Telecommunications Agreement in these respects.
The United States agrees with the EU points and notes that U.S. practices are fully consistent
with these principles.   As stated previously,  the U.S. satellite services market, which has developed
based on this licensing process, is the largest and most competitive market in the world.
18. Transportation services/Maritime transport services (pp. 199-203)
18.1 (Switzerland) Domestic water borne trade (paras 59, 61-62, 73) The Jones act provides a
protected market not only for U.S. domestic ship ope rators, but also for U.S. shipbuilders, who are
the sole supplier of ships on domestic routes.  Is there any intention to modify the Jones Act in the
near future? If so, to what extent?
There have been proposals in Congress to change U.S. cabotage laws (also referred to
collectively as the “Jones Act”).  None of these proposals have been enacted into law.  The
Administration supports U.S. cabotage laws, in their present form, as an essential part of U.S.
maritime policy.
18.2 (Korea) (p. 201, para. 65) The ten-year maritime Security Program provides funding up to
US$100 million annually for up to 47 vessels and U.S. citizens owning or leasing vessels may obtain
tax benefits through the Capital Construction Fund and various other channels.  How do you explain
this apparent inconsistency with the fundamen tal principles of MFN and National Treatment?WT/TPR/M/56/Add.1
Page 101
The purpose of the MSP is to enlist militarily useful U.S. flag vessels, having national defense
features, to provide essential transportation support to the nation in times of war and nationalemergency.  The owners/operators of vessels selected to participate in the MSP are compensated forproviding this service.  There is no inconsistency of this program and U.S. GATS obligations.
18.3 (Korea) (p. 201, para. 66) The U.S.-flag fleet is also supported by cargo preference requirements
for certain types of cargos.  And the Alaska Power Administration Sale Act of 1995 retained the
preexisting U.S.-flag vessel carriage requirement for Alaska crude oil exports.  These regulations
appear to be inconsistent with the basic principles of the WTO.  What is the U.S. position concerningthis matter?
Lifting the prohibition against exporting Alaskan oil removed a significant distortion of the
oil market, which yields economic benefits, and is consistent with International Energy Agency
recommendations.  Even with the requirement to tran sport the oil on U.S. flag ships, eliminating the
prohibition has had on balance a beneficial trade liberalizing effect.  The United States does not
believe that the legislation raises any difficulty with obligations in the WTO with respect to the
negotiations on maritime transport services.
18.4 (Switzerland) "The United States, like most of its trading partners, exempts the shipping sector
from otherwise applicable antitrust laws.  Under the Shipping Act, liner operators can enter into
agreements to fix prices (Aconferences@), to discuss pricing policies (Adiscussion agreements@), or
to share assets or co-operate on operational matters (Aconsortia@ or Aalliance agreements@)."
How do the U.S. judge the exemption of these agreements from antitrust prosecution from an
economic point of view?  What are the U.S. experie nces with regard the right of the FMC (Federal
Maritime Commission) to ask that a federal court enjoin the agreement operations?
All of our major trading partners have some exemption or special treatment under their
competition laws for liner shipping.  Antitrust immunity facilitates two broad categories of carrier
concerted action.  The first is operational cooperation, i.e. the formation of vessel sharing alliancesand consortia, and cooperative ventures involving inland transport, information systems, or equipment
interchange.  The second is price cooperation, through conferences and discussion agreements.  The
federal Maritime Commission (FMC), an independe nt government agency, is responsible for the
regulation of shipping in the foreign trades of the United States.  The FMC has the statutory authority
to investigate, upon its own motion or upon filing or complaint, discriminatory, unfair, orunreasonable rates, charges, classifications, and practices of ocean common carriers, terminal
operators, and freight forwarders operating in the foreign commerce of the United States.  The FMC
also reviews agreements among ocean common carriers or marine terminal operators and monitors
them to assure that they are not substantially anti-competitive or otherwise violative of the Shipping
Act of 1984, as amended by the Ocean shipping Reform Act of 1998.  If the FMC finds that anagreement is likely, by a reduction in competition, lead to an unreasonable increase in transportation
cost or in service, the FMC may ask a federal trial court to enjoin the agreement’s operations.  In such
a proceeding, the burden rests on the agency.  The FMC has never taken such a step ;  in the few cases
it had indicated an intention to pursue such a case, it has negotiated satisfactory changes with the
agreement parties.
18.5 (Hong Kong) (p. 200, para. 62), (p. 203, para. 73) The Jones Act protects the domestic water-
borne trade such that it is exclusively reserved fo r U.S. vessels.  Studies by the U.S. International
Trade Commission showed that repeal of the Act could reduce shipping services cost and increase
benefit to consumers.  The issue has been discussed in the Senate and the Congress in 1998.  It would
be appreciated if the U.S. could brief U.S. on the progress of discussion and if the U.S. has any plan
to amend the Act.WT/TPR/M/56/Add.1
Page 102
See response to 18.1.  As to the deficiencies in the cost calculations in the U.S. International
Trade Commission reports, see response 18.25, below.
18.6 (Hong Kong) (p. 203, para. 72) Regulatory changes under the Ocean Shipping Reform Act has
enhanced the powers of the Federal Maritime Co mmission (FMC) to review rates of foreign
government carriers and guard against foreign-government backed pricing.  Actions may be taken
against owners, operators, agents or masters of foreign vessels that engage in pricing practices that
create "conditions unfavourable to U.S. shipping".  We are interested to know more information on
what constitutes "unfavourable conditions" and what are the possible actions.
The Ocean Shipping Reform Act clarified the existing authority of the Federal Maritime
Commission (FMC) to take action against pricing practices unfavourable to shipping.  There are no
recent examples of actions taken by the FMC in this area, although the standard has existed for
several decades.  The FMC has indicated that it will apply this standard to individual complaints on a
case-by-case basis, should any arise, rather than launching investigations or issuing rules on its own
initiative.  One of the few pricing practices reviewed by the agency (in the 1960’s era cases) was
differential pricing, where a carrier commits to pric e its services at a fixed percentage lower than any
other carrier.  Examples of the measures that the FMC can take against a carrier for such practices are
listed in Section 19 of the Merchant Marine Act of 1920.
18.7 (Hong Kong) (pp. 207-208, para. 82) We note that different standards exist in the certification of
domestic and foreign aircraft repair stations.  Certification for foreign station is subject to annual
and biennial reviews whilst domestic stations are valid till surrendered or revoked.  Proposed
legislation to bring the standards into conformity failed to pass through the Congress.  We are
interested to know whether the policy will be reviewed again in the future.
While DOT cannot predict whether new legislation will be introduced in the Congress, the
Federal Aviation Administration has independently proposed a revision of its repair station rule thatwould bring its provisions up-to-date with industry practices.  In its Notice of Proposed Rulemaking
(NPRM) issued in June 1999 (64 FR 33142-33173, 21 June 1999), the FAA said,
"... with few exceptions, no basic distinction exists between the regulations governing
operations of domestic repair stations and those governing operations of foreign repair
stations.  Therefore, the FAA proposes to remove the distinction between domestic andforeign repair stations, except for a few instances where differences exist."
With respect to the specific issue of cert ificate duration, the NPRM would maintain the
indefinite term for “domestic” repair stations, including mode 3 establishments operated by foreign
entities, and proposes to extend the current 12-month period for repair stations located outside the
United States to 24 months.  The United States, like all signatories to the Chicago Convention, is
ultimately responsible for the airworthiness of aircraft on its registry, and thus must have a program
for assuring the quality of repair work done on those aircraft.  See the discussion of proposed
section 145.7 at 64 F.R. 33152.  Domestic repair stations can have indefinite certificates, because they
are under virtually continuous surveillance by the FAA district offices to which they are assigned.
The fixed term for U.S.-certificated repair stations in other countries reflects the practical differencein their accessibility to inspectors.
The NPRM and the more than 530 comments submitted can be viewed at
http://dms.dot.gov/search/ by entering the docket number, 5836.WT/TPR/M/56/Add.1
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18.8 (Australia) We note that U.S. laws governing coastwise shipping, the 1920 Merchant Marine Act
and the 1885 Passenger Services Act, effectively preclude foreign involvement in the U.S. maritimesector, leaving this the only U.S. transport sector so protected.  How does the U.S. intend to liberalisethe unusually restrictive laws on the provision of maritime services in the U.S.?
Cabotage is practiced by many nations and not just in the maritime transport sector.  With
respect to U.S. cabotage practices in maritime transport (the Jones Act), the Administration supports
domestic maritime fleet and the essential link it provides to our national transportation network and
readiness capability.
18.9 (Australia) In view of the U.S. Government's st rong support for the negotiation in the OECD of
disciplines on shipbuilding subsidies, what plans does the United States have for liberalising the
domestic maritime sector to the benefit of  U.S. consumers and agricultural producers?
See response to 18.1 and 18.8.
18.10 (Japan) FMC  In para. 60, although actions taken by the FMC are only mentioned as measures
to "correct or counterbalance adverse, unfair or discriminatory foreign practice", the actions, which
are unilaterally taken by the US, should be regarded as having a character against the spirit of theWTO which gives priority to the principle of multilateralism.  Japan would like to seek the U.S. viewson this problem.
The actions taken by the United States with respect to restrictive shipping practices are fully
within the authority of U.S. maritime statutes, whose stated objective is the removal of barriersunfavourable to shipping and are based on the principle of reciprocity.
18.11 (Japan) Restriction on maritime transport services (Domestic water-borne trade, paras 61-62)
What sort of restrictions are there on maritime domestic transport services, except for requirements
for shipbuilding, ownership and crewing, for example, licence/permit for accession,
admission/submission of fares, etc.?
The practices referred to relate generally to U.S. cabotage laws and national-flag vessel
registration requirements.  See 18.1.
18.12 (Japan) The Passenger Services Act of 1886 (p. 199, para. 61)  The Report states, "In general,
the same requirement apply to the domestic passenger service under the Passenger Services Act
of 1886".  Are the regulations on passenger transportation services entirely the same as those oncargo transportation services?
In general, the cabotage requirements for passenger vessels are same as for cargo vessels.
Two basic exceptions include the ability of the Maritime Administration to waive the domestic build
requirement for vessels carrying 12 or fewer passengers, and the non-applicability of passenger
cabotage to the U.S. trades with Puerto Rico.
18.13 (Japan) The Merchant Marine Act of 1920 (The Jones Act) (pp. 199-200, paras 61-62,)  Ships
for coastal shipping services are required to be built in the US.  However, it is disadvantage for
foreign shipbuilders to prohibit shipping compan ies from making use of ships built in foreign
countries.  It is also disadvantageous to clie nts, such as in case of long distance maritime
transportation from the mainland of the U.S. to the Hawaii islands due to the increase in cost for
maritime transport by using the comparatively expensive US-flag fleet.  Such restrictions should be
removed and the problem raised in the course of reviewing exemptions concerning domestic maritime
transport based on paragraph 3.(b) of the GATT 1994.  The U.S. Government is expected to activelycontribute to ensuring a steady implementation of the review work.
The United States takes note of the comment.WT/TPR/M/56/Add.1
Page 104
18.14 (Japan) The Maritime Security Program (MSP) (p. 201, para. 65)  It is obvious that
continuation of the enormous subsidy of US$100 million annually over a period of ten years willdistort free and fair competition.  Thus, the subsidy must be abolished.  Please explain the U.S. view
on this point.
See response to 18.2.  In view of the service these vessels provide in support of U.S. national
security interests, we view the payments justifiable and necessary.
18.15 (Japan) The Cargo Preference Measures, including the Alaska Power Administration Sale Act
(p. 201, para. 66)  According to the Alaska Power Administration Sale Act of 1995, the export of
Alaska crude oil must be carried by US-flag vesse ls and crew members should be U.S. citizens.  The
Act is condemned by a lot of countries as it is against the Ministerial Decision on Negotiations on
Maritime Transport Services of 15 December 1993, which decided not to introduce new measures
during the terms of negotiation, and also against the Decision on Maritime Transport Service of theCouncil on Trade in Services on 28 June 1996, which again decided not to introduce new measures
during the terms of negotiation.
At the last TPRM for the U.S., the U.S. explaine d that such legislation did not violate the U.S.
international obligations and that it would not im prove its negotiation position, since oil from Alaska
could not previously be transported in foreign ves sels.  However as the Ministerial Decision states
that participants "shall not apply any measures affecting trade in maritime transport services", no
measures shall be applied whether it improves the U.S. negotiation position or not.  Japan requests
that this measure be abolished.
The U.S. should abolish the Cargo Preference Measures which advantage the US-flag vessels, and is
consequently extremely protective.
For the reason of transparency, details and quantity should be announced concerning the cargoes
subject to cargo preference requirements and concerning the cargoes actually carried on US-flagvessels.
The United States takes note of the comment.
18.16 (Japan) Retaliatory action by Federal Mar itime Commission(FMC) (p. 199)  The FMC is
statutorily authorised to take retaliatory actions, based on the Merchant Marine Act of 1920, against
foreign shipping practices that adversely affect U.S. shipping.
In September 1997, the FMC imposed unilateral s anctions against three Japanese shipping carriers,
imposing fines of US$100,000 for each visit to U.S. port s, on the grounds of allegations with regard to
the previous consultation system of Japanese ports.  It actually collected US$1.5 million (fines
occurring in September) from those Japanese carriers in October 1997.
Although the U.S. and Japanese Governments reached an agreement on the Japanese port issue, the
FMC did not take any other measures than free zing the action indefinitely.  Therefore, Japan
requested the U.S. to completely withdraw the retaliatory action, which violates the MFN and
national treatment clause of the Treaty of Fr iendship, Commerce and Navigation between Japan and
the U.S., and then carried out bilateral meetings based on the clause of the Treaty in January and
July of 1998.WT/TPR/M/56/Add.1
Page 105
On 28 May 1999, the FMC decided to remove the final rule and to order the Japanese and U.S.
shipping companies to report Japanese port practices, but Japan's insistence that such retaliatoryaction is illegal was not changed.  Appropriate measures by the U.S. Government are requested.
The question is unclear.  In fact, Japan has failed to carryout the commitments it undertook in
the 1997 Agreement and Japan’s restrictive port practices still effectively prohibit foreign
participation in this important maritime transportation activity.
18.17 (Japan) Restrictions of customs brokerage services (para. 69, p. 202) What other kinds of
restrictions on customs brokerage services are there than the condition that at least one person in a
business entity must hold a customs broker's licence?
Certain requirements attach to becoming a licensed customs broker and to conducting
customs business for clients.  To become a licensed customs broker, corporations or partnerships must
have at least one officer or member who possesses an individual customs broker's licence.  Individuallicensees must be U.S. citizens.  However, the entity itself does not have to be a U.S. company.  Once
licensed a customs brokerage firm must obtain a permit to operate in a particular customs broker
district.  It must also open an office within the customs broker district in which the customs business
transactions will he performed.  The legal authority for the laws and regulations governing customs
brokers is found in 19 U.S.C. Section 1641 and 19 CFR Part 111.
18.18 (Japan) The Ocean Shipping Reform Act of 1998 (p. 202, para. 71) The Act remains a scope for
the FMC to excessively intervene tariffs.  Based on the principle for the freedom of shipping in
international trade, the government provision for shipping activities on a commercial basis should be
limited to a minimum.  Japan should, therefore, continue to carefully observe the FMC's actions to
ensure that there is no excessive intervention by the FMC after the Act's entry into force.
The United States takes note of the comment.
18.19 (Canada) Trade Policies in Services, (p. xiii, para. 21) The aggressive pursuit of open skies
aviation agreements by the US, as highlighted by th e report, stands in marked contrast to the U.S.'
continued efforts to protect domestic maritime transportation services from international competition.
Could the U.S. explain the rationale for th ese apparently inconsistent policy objectives?
See previous responses concerning cabotage.  Th ere is no inconsistency of U.S. policy, since
cabotage regimes exist in other transportation sectors, including aviation.  There are more than
40 countries that have cabotage regimes in maritime transport.
18.19 (Canada) General question on the implementa tion of U.S. WTO commitments Paragraph 3(a)
of the GATT 1994 states that A The provisions of Part II of GATT 1994 shall not apply to measures
taken by a Member under specific mandatory legislat ion, enacted by that Member before it became a
contracting party to GATT 1947, that prohibits the use, sale or lease of foreign-built or
foreign-reconstructed vessels in commercial applications between points in national waters or thewaters of an exclusive economic zone ...  The U.S. notified measures covered by this exemption on
20 December 1994.
Paragraph 3(c) states that AA Member whose measures are covered by this exemption shall annually
submit a detailed statistical notification consisting of a five-year moving average of actual and
expected deliveries of relevant vessels as well as additional information on the use, sale, lease or
repair of relevant vessels covered by this exemption.WT/TPR/M/56/Add.1
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Canada notes that the US, in a letter dated 21 December 1998 to the Director-General, included a
summary statistical table on actual and expected deliveries of relevant vessels.  Can the United Statesprovide Members with copies of the earlier annual submissions made by the United States as requiredby paragraph 3(c)?
Canada would also like to suggest that reference to  the U.S. exemption as provided by paragraph 3(a)
of GATT 1994 and information on the notifications prov ided by the United States in fulfilment of its
obligations under paragraph 3(c) of GATT 1994 be added  to the Secretariat Report, possibly in the
section dealing with measures affecting exports and in Table AII:2 - Status of selected notificationrequirements to the WTO.
The United States has fulfilled the annual notification requirements of the provision.  See
documents WT/L/341, WT/L/293, WT/L/257, WT/L/201, and WT/L/112.
18.20 (Canada) Transportation Services, (ii) Maritime transport services
a. With respect to para. 59, p. 199:  It is interesting to note that the growth rate forecast for
1997-2002 for international water-borne trade, an area in which the U.S. maintains a fairly
open regime, is nearly three times greater (3.3%) than that forecast for the domestic trade(only 1.2%), an area which the Report notes is exclusively reserved for US-vessels under the
Jones Act.  As demonstrated by the dramatic growth that has resulted from the deregulation
of the domestic air industry and more recently from open skies initiatives, liberalization of the
US' domestic maritime cabotage regime could pr ovide a significant impetus for growth in this
area and at the same time remove an important im pediment to trade.  As an initial measure, is
there any possibility for a waiver system (such as in Canada) wherein upon determination
that there is no suitable domestic flag vessel available for a domestic movement, a foreign
flag vessel could be authorized subject to relevant duty and crewing requirements?
b. With respect to p. 203, para. 74:  We believe that the fact that the U.S. did not table an offer
in the WTO negotiations on maritime transport services is a major reason why thenegotiations were suspended.  We encourage the U.S. to make an offer when the negotiations
resume.  Does the U.S. support the resumption of the WTO negotiations on maritime
transport services as scheduled in 2000 and, if so, does it plan to table a substantive offer at
that time, which would be very helpful in moving the negotiations forward?
c. The Secretariat Report is silent on the US' inability to ratify the OECD Shipbuilding
Agreement, which would impose significant disciplines on subsidies for shipbuilding.  Is the
Administration still actively supporting the OECD Shipbuilding Agreement and, if so, what is
it doing to convince Congress to ratify it?
a. Under recently implemented regulations, the Maritime Administration can waive the
domestic-build requirement for passenger vessels carrying operating in the domestic trade.  Sixtysmall vessel waivers were legislatively implemented in 1998.  Broader waiver authority is also
available in circumstances involving national defe nse.  Approximately 154 waivers to U.S. cabotage
laws have been granted under this authority.
b. In the NGMTS the United States participat ed in developing meaningful commitments
that would yield true liberalization of maritime transport services.  The United States seeks broad
participation in the next GATS round and looks to all Members to contribute to the round’s
objectives.WT/TPR/M/56/Add.1
Page 107
c. While the Administration supports adoption of the OECD Shipbuilding agreement,
the chances of passage of implementing legislation during this session of Congress appears to besmall.
18.21 (Norway) Maritime transport services (pp. 200-203, para. 62) The Jones Act provides a
protected market not only for U.S. domestic ship operators, but also for U.S. shipbuilders.  However,
as an exemption to the rule, there is in para. 62 referred to that foreign companies are allowed to
establish shipping companies in the United States as long as they meet the Jones Act requirements.Could the U.S. delegation give information to what  extent such foreign shipping companies actually
are present in the U.S?
No detailed information on the number of such companies is available.
18.22 (Norway) (para. 64)  In para. 64 the cost and tax disadvantages of flying the U.S. flag are
described.  To what extent does the manning rules i.e. the number of seafarers required on board U.S.vessels, contribute to creating the cost differential?
Vessel manning levels are established on the basis of safety.  U.S. law requires that the safe
navigation of the vessel is of paramount importance in setting manning levels, not cost.
18.23 (Norway) (paras 69, 72) In para. 69 it is stated that "there are no measures limiting the
provision of maritime transport auxiliary services except for the provision of a brokerage services".However, in para. 72 last sentence, it is stated also that non-vessel-operating common carriers
(NVOCCs) that are not in the U.S., must  meet a higher bond amount (US$150,000 versus
US$75,000).  Could the U.S. delegation comment on this, as the latter requirement may have a
potential for being discriminatory?
Under the provisions of the Ocean Shipping Reform Act (OSRA), U.S.-based NVOCCs have
to be licensed by the Federal Maritime Commission (FMC), but foreign-based ones do not.  In this
sense, foreign NVOCCs are treated better than U.S. NVOCCs.  However, under the FMC’s rules, theforeign-based companies are required to establish a higher bond amount, to cover the increased cost
of recovering against a company with no licence and no U.S. presence.  To avoid the higher bonding
costs foreign NVOCCs are permitted unrestricted rights to establish a commercial presence in the
United States.  This presence may take the form of an office (not a corporation).  The additional cost
of obtaining a bond is about US$1,500 more for a foreign firm with no U.S. presence.
18.24 (Norway) (paras 70, 72)  The Ocean Shipping Reform Act of 1998 (OSRA) was passed in
October 1998 and put into effect from 1 May 1999.  This new law is aimed at being pro-competitive,
and is based on immunity from antitrust prosecution.   We would like to have confirmation from the
U.S. whether they consider this new legislation to represent the most appropriate solution, and that
there neither for the time being, nor in the near futu re, will be a need for reviewing this legislation?
The Administration fully supports OSRA.  We are confident that there will be no need in the
near term for changes to this new legislation.
18.25 (Norway) (para. 73) We have with interest noted that the questions of lifting some of the Jones
Act restrictions have been raised from time to time by interested parties in the U.S. as described in
para. 73  We have seen various figures regarding the extra cost incurred by maintaining the JonesAct restrictions, and would therefore be interested to know if the U.S. administration has produced
such figures?WT/TPR/M/56/Add.1
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The Administration has not agreed upon figures.  While the International Trade Commission
conducted several studies of U.S. cabotage laws, the data in these studies did not reflect importantlegal, tax, labour and environmental considerations.
18.26 (Norway) (para. 74) According to para. 74, the U.S. is observing a standstill agreement.
However, it is questioned whether the restrictions on transportation of Alaskan oil are in conformity
with the WTO standstill agreement.  In addition to advocating adherence to the standstill commitment
and principle, we would appreciate any information on how this trade has developed since 1995?
See 18.3.  On 7 July 1999, the GAO released a report (volume 103, number 129) addressing
the effects of lifting the export ban on Alaskan North Slope Oil.  The report, which makes no
conclusions, discusses a wide range of effects of lifting the ban, including on the maritime sector.
19. Services - General
19.1 (Australia) What measures or reforms does the U.S. intend to take to ensure that State-level
regulations of professional and business services (particularly skills and residency-testing
procedures), do not create unnecessary impediments to market access, particularly in accountancy,
law, engineering and architecture?
The United States does not believe that its or its states’ regulation of professional and
business services creates impediments to market access.  With respect to accountancy, the U.S.participated in development of the disciplines for regulation in the accountancy sector, which
provides, inter alia, that regulations should fulfill legitimate objectives, such as consumer protection,
and that regulations should not be more burdensome than necessary to fulfill those objectives.  The
U.S. is prepared to work with other WTO Members to undertake development of mutually acceptable
disciplines for regulation in other sectors, such as law, engineering and architecture.
19.2 (Japan) Professional Services (p. 211, paras 89, 91) Uniformity should be established among
states with respect to license and qualification:  requirements for each profession when acceptingforeign professional service suppliers.
(a) Please explain how the United States envisages to cope with this point.
(b) Japan requests the United States to present the current status of mutual recognition
arrangements at state level.
(c) Residency and citizenship requirements in certain states, with respect to professional
services, should be abolished.  Does the United States have any intention to abolish these
requirements?
The U.S. is not aware of any GATS requirement for uniformity among a Member’s
sub-central entities regarding qualifications and licensing.
(a) As mentioned in the text of the TPR, major professions in the United States are
moving toward uniformity through Model Rules or Uniform Acts, which serve as models for state
regulation.  Such rules adopted by the states apply equally to American and foreign service suppliers.
(b) As stated in the text of the TPR, th e U.S.-Canada MRA for architects is being
implemented by 41 states ;  the U.S.-Canada MRA for accountants is being implemented by 39 States ;
the U.S.-Australia MRA for accountants (a more recent agreement) is being implemented by24 States ;  and the NAFTA MRA for engineers is being implemented by one state (see pp. 42, 43
and 44 of the TPR).WT/TPR/M/56/Add.1
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(c) The federal government has consulted with the states on residency and citizenship
requirements.  Very few states maintain citizenship requirements for licensing of professionals.  Somestates maintain residency requirements for purposes of consumer protection and to assure legal reach.
The U.S. is continuing to consult with the States.
19.3 (Japan) Legal Services (p. 213, paras 89, 90)
(a) It should be noted that, in the United States, foreign lawyers are allowed to practice in only
about 20 states, as well as the District of Columbia.  In all of these 20 States, plus the Districtof Columbia, a certain period of practicing ex perience is required.  Only two States require
three years of experience, another two States require four years of experience and the
15 other States, plus the District of Columbia, require five years of experience.  Two States
only allow inclusion of experience periods in a third country, whereas the others do not:  they
only allow inclusion of the period of practice in the country where the person is qualified.
For the purpose of promoting the liberalization of trade in services, all the states should accept
foreign qualified lawyers and all the states, plus th e District of Columbia, should reduce the period of
practice to three years.  Japan welcomes the explanation on the current status of liberalization efforts.
(b) The last sentence of para. 96 states, "foreign lawyers may enter into partnerships with
American lawyers in any U.S. States."  Does this mean that foreign lawyers are entitled toenter into partnership with American lawye rs without being qualified as FLCs or U.S.
lawyers?  If so, what kind of activities are such foreign lawyers allowed to do?
(a) Foreign lawyers are permitted to practice in all states, provided that they meet all
state requirements and pass the bar examination.  We presume the reference to 20 States in the
question pertains to the practice of foreign legal consultants, which allows licensed lawyers to practice
their home country law without having to pass the bar examination.  This liberal treatment of foreign
lawyers, which is described in the TPR text, thus far has been adopted by 23 states and the District ofColumbia.  These jurisdictions are the most commercially significant in the United States.  The years-
of-experience requirement is optional to the states that have adopted the ABA Model Rule (see
footnote 142).
(b) To practice law and to enter into a law partnership, a lawyer must typically be a
member of the state bar.  However, we believe that foreign lawyers who become members of the barafter qualifying by taking the bar exam, where applicable, and foreign lawyers who qualify as foreign
legal consultants may become partners with American lawyers.
19.4 (Canada) Professional Services, (ii) Legal services (pp. 213-214, para. 96) The Report indicates
that foreign lawyers may be entitled to practice law in the U.S. by meeting the same state licensing
requirements as U.S. nationals.  Footnote 139 to para. 96 mentions that, in this context, New YorkState is the only jurisdiction which allows individuals to practice without having studied law in the
US, provided they have studied or practised in a country whose jurisprudence is based on English
common law.  Can the U.S. indicate whether other states are envisaging changes to their regulatory
regime so as to recognize foreign legal education when setting the criteria for admission to their
respective bars?
Footnote 139 states that New York State allows those with prior education and practice in a
jurisdiction whose jurisprudence is based on English common law to take the bar exam without
additional legal education.  It does not allow them to practice without passing the bar examination.
We are not aware of any other state that is considering this.WT/TPR/M/56/Add.1
Page 110
19.5 (Colombia) Air transport services (para. 79) How can the full exploitation of open skies
agreements be reconciled with the practice of unilaterally decertifying the air transport services ofthird countries on non-trade grounds and, in the case of Colombia, on the basis of a safety-oriented
criterion?
Signatories to the Chicago Convention undertake responsibility for adherence to international
safety standards by their flag air carriers (wherever they fly), and by all aircraft within their territories
(Article 12 of the Convention).  Open-skies agreements, like nearly all air services agreements,explicitly acknowledge the importance of safety in air transportation and provide for correction of
safety problems.  In the typical open-skies agreement, Article 6, Safety, reads, in pertinent part:
“2. Either Party may request consultations concerning the safety standards maintained by
the other Party relating to aeronautical facilities, aircrews, aircraft, and operation of the
designated airlines.  If, following such consultations, one Party finds that the other Party doesnot effectively maintain and administer safety standards and requirements in these areas that
at least equal the minimum standards that may be established pursuant to the (Chicago)
Convention, the other Party shall be notified of such findings and the steps considered
necessary to conform with these minimum standards, and the other Party shall take
appropriate corrective action.  Each Party reserves the right to withhold, revoke, or limit theoperating authorization or technical permission of an airline or airlines designated by the
other Party in the event the other Party does not take such appropriate corrective action within
a reasonable time.”
Two aspects of the question are unclear.  The reference to "unilaterally decertifying" suggests
action by fiat.  However, in the case of findings by  the United States, other states’ actions of which we
are aware, and findings under the developing safety review program of the International Civil
Aviation Organization (ICAO), no action is taken without extensive consultation, the offer oftechnical assistance, and an opportunity for corrective action, the need for which is generally
acknowledged by all parties.
The reference to third countries also is not clear.  If the reference is to “wet-leasing”
(i.e. leasing aircraft with crew and maintenance) from a third country, that fairly common practice
does not alter the responsibility of each open-skies partner for adherence to international safetystandards by its flag air carriers, as set forth in the agreement.  It also does not represent any exception
to Article 33 of the Chicago Convention, which only obliges States to recognize as valid those
licences and airworthiness certificates that equal or exceed the minimum standards established
pursuant to the Convention.
19.6. (Colombia) Professional services (paras 89, 90)  What plans has the United States for ensuring
that the commitments made by the Federal Government, in this and other similar cases, are duly
respected at all decision-making levels in the United States, including State and local authority
levels?
The United States is not aware of any concerns that have been raised with respect to states’
and local governments’ respecting of the United States’ commitments on professional services.
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