WORLD TRADE  
ORGANIZATION  G/C/W/570 
3 January 2007 
 
 (07-0014) 
Council for Trade in Goods Original:   English 
   
UNITED STATES - FORMER TRUST TERRITORY OF THE PACIFIC ISLANDS 
 
Request for Extension of Waiver
 
  
 The following communication, dated 22 December 2006, is being circulated at the request of 
the delegation of the United States.   
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 By the Decision of the CONTRACTING PARTIES of the GATT 1947 of 8 September 1948 (BISD II/9), the United States was granted a waiver of its obligations under pa ragraph 1 of Article 1 
of the GATT 1947, for the provision of duty-free treatme nt to products of the Trust Territory of the 
Pacific Islands (TTPI) imported into the customs te rritory of the United States.  The waiver was 
granted for an indefinite period.  Pursuant to paragraph 1(b)(iii) of the GATT 1994, the waiver 
became part of the GATT 1994 wh en the Marrakesh Agreement Establishing the World Trade 
Organization (“WTO Agreement”) entered into for ce on 1 January 1995.  That waiver was extended 
on October 14, 1996 (WT/L/183).  As provided for by that Decision, the waiver extension expires on 
December 31, 2006. 
  The United States requests Members to extend the waiver through December 31, 2016, to 
waive US obligations under paragraph 1 of Article  I of the GATT 1994 to the extent necessary to 
permit the United States to provide preferential tariff  treatment to eligible products from the Republic 
of the Marshall Islands, the Federated States of Micronesia, the Commonwealth of the Northern 
Mariana Islands, and the Republic of Palau.  
1. Background 
 On 18 July 1947, the United States undertook the administration of the United Nations Trust 
Territory of the Pacific Islands which included th e Marshall, Caroline, and Mariana Islands (except 
Guam).  These islands were formerly held by Jap an under mandate.  During 1986, the Covenant 
establishing the Commonwealth of the Northern Mari ana Islands (“Covenant”), an insular area of the 
United States, and Compacts of Free Associati on (“Compacts”) with the United States for the 
Republic of the Marshall Islands, a nd the Federated States of Micronesia came into effect.  In 1994, 
the Compact of Free Association with the United Stat es for the Republic of Palau came into effect.  
With the entry into effect of the Compact with Pa lau and the agreement of the Trusteeship Council of 
the United Nations, the Trusteeship of the Pacifi c Islands was terminated on 1 October 1994.   
 
Article I:2 of the GATT 1947 permits certain hist orical preferences in respect of duties and 
charges not in excess of the levels permitted under Article I:4.  Article I:2 permits historical 
preferences “in force exclusively between two or  more territories which on July 1, 1939, were 
connected by common sovereignty or relations of protection or suzerainty and which are listed in 
Annexes B, C, D.”  Under this provision, the United States provides historical preferences to the US 
Virgin Islands, Guam and American Samoa, whic h were US possessions on 1 July 1939, and which 
are included in Annex D.  G/C/W/570 
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   However, upon becoming the Administering Authority for the former Trusteeship areas in 
1947, the United States sought to accord TTPI states tariff preferences similar to those accorded to 
insular areas included in Annex D.  The exports of the TTPI states were therefore made eligible for 
duty-free treatment in the customs territory of the United States, upon which such exports were 
substantially dependent.  This treatment has been  continued under the Covenant and Compacts that 
replaced the TTPI.  
 
2. Description of the Measure 
Under General Note 3(a)(iv) and 10 of the Ha rmonized Tariff Schedules of the United States, 
duty-free treatment is accorded to all products of  the former TTPI states, with some exceptions.  
Watches and watch movements, and certain fishery products are subject to quantity limitations, and 
buttons, certain textile, apparel, f ootwear and luggage products are subject to duty in some or all of 
the former TTPI states.  Duty-free treatment is onl y accorded to the in-quota  quantity of agricultural 
products subject to a tariff- rate quota.  3. Specific Policy Objectives of the Measure 
The United States established the system of prefer ential entry for the exports of these islands 
into the market of the United Stat es as a means to ensure that th e economies of the islands were not 
destabilized as a result of the change in administer ing authority from Japan to the United States.  Over 
the longer term, the primary purpose of the system ha s been to promote the expansion of trade and the 
economic development of the beneficiaries in a ma nner consistent with the objectives of the GATT 
and with the trade, financial and development need s of the beneficiary countries.  This purpose has 
become all the more important as each of the former Trusteeship areas have become self-governing entities.  
4. Circumstances Justifying the Waiver 
The former TTPI, a group of islands with long- standing historical connection to the United 
States, face critical development challenges that ca nnot be fully met through measures consistent with 
US obligations under the GATT as amended in 1994.  Under a Trusteeship Agreement with the U.N. 
Security Council in 1947, the United States assu med the obligation to ensure the security and 
economic development of the former TTPI states.  In addition, many of the approximately 270,000 
residents of the former TTPI states are US citizens.   
 
Given these connections, the United States is  committed to providing exceptional access to 
the US market, even though these small island states are not within the US customs territory.  Taken 
together, exports to the United States in 2005 from th e Republic of the Marshall Islands, the Republic 
of Palau, the Federated States of Micronesia and the Commonwealth of the Northern Mariana Islands 
totalled about US$696.3 million. ( See Annex I.)  This represents a marked decline of former TTPI 
state exports to the US that had exceeded US$1 billion as recently as 2000 and demonstrates the need 
for continued economic reform, diversification of  the TTPI economies and development assistance by 
the US to former TTPI states.   
5. Conclusion 
 The United States is seeking an extension of its waiver from paragraph 1 of Article I of 
GATT 1994 in order to continue to accord historical preferences to the former Trust Territory of the 
Pacific Islands consistent with its  international obligations.  The pr eferential treatment covered by the 
waiver ordinarily would have been covered by Ar ticle I:2 and Annex D but for the timing of the UN 
decision placing the islands under trusteeship.  Th e waiver granted in 1948 under GATT 1947 and 
continued under the Decision of 14 October 1996 is  recognition of these exceptional circumstances, 
circumstances which continue to this day.   G/C/W/570 
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The United States requests Members to give exped itious consideration to this request, and to 
decide to extend the waiver of the provisions of paragraph 1 of Article I of GATT 1994 for the period 
ending 31 December, 2016.  The United States is prepared  to enter into consultations and to cooperate 
fully in providing additional information about the historical preferences granted to the former Trust 
Territory of the Pacific Islands and discussing the specific terms of the waiver. 
   G/C/W/570 
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ANNEX 1 
 
US Imports from the Former Trust Territory of the Pacific  Islands
 
 
(Values in millions of dollars) 
 
Source 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
 
Total US Imports 
  
581  
663  
744  
795  
871  
1,013 
1,085 
1,059 
967  
856  
851  
836  
696.3
Republic of the Marshall Islands  
 11 8 11 4 7 4 10 5 6 9 9 12 17.2
Federated States of Micronesia  
 14 13 13 11 12 13 10 14 21 15 14 11 1.6 
Republic of Palau  
 1 3 6 9 13 14 16 14 15 15 2 1.5 .5 
Commonwealth of the Northern
Mariana Islands 308 332 428 556 799 980 1,049 1,026 925 817 826 811 677 
 
   G/C/W/570 
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   UNITED STATES -- FORMER TRUST TERRITORY OF THE PACIFIC ISLANDS 
 
Draft Decision of . . .  
 
The General Council,  
 
 Taking note  of the request of the Government of the United States for an extension of the waiver 
from its obligations under paragraph 1 of Article I of the General Agreement which was granted by the 
CONTRACTING PARTIES of the GATT 1947 on 8 Se ptember 1948 for provision of preferential 
treatment for eligible imports into the United Stat es from the Marshall, Caroline and Mariana Islands 
(other than Guam) and extended by th e Decision of 14 October 1996 (WT/L/183). 
  Recognizing  that these islands were formerly held  by Japan under mandate and by agreement 
with the Security Council of the United Natio ns approved on 2 April 1947, were placed under the 
trusteeship system of the United Nations with the United States as the Administering Authority;  
 
 Recognizing further that, with the entry-into-force in 1986 of the Covenant establishing the 
Commonwealth of the Northern Mariana Islands, and th e Compacts of Free Association with the United 
States for the Republic of the Mars hall Islands, the Federa ted States of Micronesi a, and in 1994 of the 
Compact of Free Association with the United States for the Republic of Palau, the Trusteeship of the 
Pacific Islands was terminated;  
 Considering  further that, since the establishment of the trusteeship under the administration of 
the United States, and continuing unde r the Covenant and Compacts of Fr ee Association, the exports of 
such islands have been entitled to preferential trea tment in the market of th e United States, upon which 
such exports are subs tantially dependent; 
 
 Considering  also that the preferential treatment provide d to these islands is designed to promote 
the expansion of trade and economic development of the beneficiaries in a ma nner consistent with the 
objectives of the GATT 1994 and with the trade, fina ncial and development needs of the beneficiaries; 
  Considering  further that the system of preferential entr y into the market of the United States has 
not, in view of the nature and small volume of the production and trade involved and of the underlying 
economic factors affecting such production and trade, resulted in substantial injury to the trade of any of the members and is not likely to do so in the future;   Recognizing  that, unless extended, the waiver of 8 September 1948 that was extended by the 
Decision of 14 October 1996 will expire on 31 December 2006; 
   Noting , furthermore, the assurances given by the United States Government that it will, upon 
request, promptly enter into consultations with any interested Member with respect to any difficulty or 
matter that may arise as a result of the implementation of preferential treatment for the beneficiaries; and  
 Having  regard  to the Guiding Principles to be followed in considering applications for waivers 
adopted on 1 November 1956 and the Understanding in Respect of Waivers of Obligations under the 
General Agreement on Tariffs and Trade 1994;    Members, acting pursuant to the provisions of paragraph 3 of Article IX of the WTO 
Agreement, 
 G/C/W/570 
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   Decide  that: 
 1. Subject to the terms and conditions  set out hereunder, the provisions  of paragraph 1 of Article I 
of the GATT 1994 shall be waived until 31 Decemb er 2016, to the extent necessary to permit 
the United States Government to  accord preferential  treatment to eligible products of the 
Republic of the Marshall Islands, the Federated States of Micronesia, the Commonwealth of the 
Northern Mariana Islands, and the Republic of Palau imported into the customs territory of the United States. 
 2. The United States will submit to the General Council an annual report on the operation of these 
preferences with a view to facilitating the a nnual review provided for in paragraph 4 of 
Article IX of the Marrakesh Agreement Establishing the World Trade Organization. 
 3. The United States will, upon request, promptly enter into consultations  with any interested 
Member with respect to any difficulty or matter that may arise as a result of the implementation 
of these preferences.  If a Member considers that any benefit accruing to it under the GATT 
1994 may be or is being impaired unduly as a resu lt of such implementation, such consultation 
shall examine the possibility of action for a satisfac tory adjustment of the matter.  This Decision 
does not affect Members’ rights as set forth in  the Understanding in Respect of Waivers of 
Obligations under the GATT 1994.   
 
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