39–006 

109TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 109–182 

DOMINICAN REPUBLIC-CENTRAL AMERICA-UNITED 

STATES FREE TRADE AGREEMENT IMPLEMENTATION 

ACT 

JULY 25, 2005.—Committed to the Committee of the Whole House on the State of 

the Union and ordered to be printed 

Mr. THOMAS, from the Committee on Ways and Means, 

submitted the following 

R E P O R T 

together with 

ADDITIONAL AND DISSENTING VIEWS 

[To accompany H.R. 3045] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Ways and Means, to whom was referred the 

bill (H.R. 3045) to implement the Dominican Republic-Central 

America-United States Free Trade Agreement, having considered 

the same, report favorably thereon without amendment and recommend that the bill do pass. 

CONTENTS 

Page 

I. Introduction .................................................................................................... 2 

A. Purpose and Summary .................................................................... 2 

B. Background ....................................................................................... 2 

C. Legislative History ........................................................................... 8 

II. Section-by-Section Summary ........................................................................ 10 

A. Title I: Approval and General Provisions ....................................... 10 

B. Title II: Customs Provisions ............................................................ 12 

C. Title III: Relief from Imports .......................................................... 19 

D. Title IV: Miscellaneous .................................................................... 23 

III. Vote of the Committee ................................................................................... 27 

IV. Budget Effects of the Bill .............................................................................. 27 

A. Committee Estimate of Budgetary Effects ..................................... 27 

B. Budget Authority and Tax Expenditures ....................................... 28 

C. Cost Estimate Prepared by the Congressional Budget Office ...... 28 

V. Other Matters to be Discussed Under the Rules of the House .................. 31 

2 

A. Committee Oversight Findings and Recommendations ................ 31 

B. Statement of General Performance Goals and Objectives ............ 32 

C. Constitutional Authority Statement ............................................... 32 

D. Information Relating to Unfunded Mandates ............................... 32 

VI. Changes in Existing Law Made by the Bill, as Reported ........................... 32 

VII. Views ............................................................................................................... 39 

I. INTRODUCTION 

A. PURPOSE AND SUMMARY

H.R. 3045 would implement the August 5, 2004 Agreement establishing a free trade area between the United States, the Dominican Republic, Costa Rica, El Salvador, Guatemala, Honduras, and 

Nicaragua (DR–CAFTA or Agreement). 

B. BACKGROUND

I. The United States-Dominican Republic-Central America Free 

Trade Agreement 

The Committee believes that the Agreement meets the objectives 

and priorities set forth in the Bipartisan Trade Promotion Authority Act of 2002 (TPA). The Agreement covers all agricultural and 

industrial sectors, opens DR–CAFTA markets to U.S. services, contains robust protections for U.S. investors and intellectual property 

rights holders, and includes strong labor and environment provisions. In addition to the new commercial opportunities, DR–CAFTA 

will help cement many of the recent democratic, legal, and economic reforms in the DR–CAFTA countries. 

Consumer and industrial goods.—More than 80 percent of U.S. 

exports of consumer and industrial products to the DR–CAFTA 

countries will be duty-free immediately upon entry into force of the 

Agreement, with remaining tariffs phased out over ten years. Key 

U.S. exports, such as information technology products, agricultural 

and construction equipment, chemicals, and medical and scientific 

equipment will gain immediate duty-free access to Central America 

and the Dominican Republic. 

Agriculture.—More than half of U.S. agricultural exports to DR–

CAFTA countries will immediately receive duty-free treatment, and 

most other tariffs will be phased out within twenty years. The current average Central American and Dominican Republic tariff on 

agriculture goods ranges from 35–60 percent. Nearly every major 

U.S. agricultural sector will benefit from expanded market access 

under CAFTA–DR, with gains in such sectors as feed grains, 

wheat, rice, soybeans, poultry, pork, beef, dairy, fruits, vegetables, 

and processed products. The American Farm Bureau estimates that 

the Agreement will increase U.S. farm exports by $1.5 billion per 

year. 

With respect to sugar, the United States will provide increased 

market access for DR–CAFTA countries of only about 1.2 percent 

of current U.S. sugar consumption in the first year, incrementally 

growing over 15 years to about 1.7 percent of current consumption. 

Textiles and apparel.—The Agreement contains a general yarnforward rule of origin for textiles that is already met by over 90 

percent of existing textile trade. Goods satisfying the yarn-forward 

rule will receive duty-free treatment retroactive to January 1, 2004. 

Limited exceptions to the yarn-forward rule include a tariff prefVerDate Aug 04 2004 14:35 Jul 26, 2005 Jkt 039006 PO 00000 Frm 00002 Fmt 6659 Sfmt 6602 E:\HR\OC\HR182.XXX HR182
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erence level of 100 million square meter equivalents (SMEs) for 

Nicaragua, and cumulation of inputs from Mexico and Canada for 

certain woven apparel subject to a 100 million SMEs annual cap. 

This cumulation cap can grow to 200 million SMEs, as long as 

CAFTA trade grows. This cumulation provision benefits American 

companies with investments in Mexico and Canada and helps to integrate production in the region. The Committee requests semiannual reports for the first three years on the operation of the textile and apparel provisions in the Agreement, including any recommendations on how these provisions can be improved. 

Services.—The Agreement will provide broader market access 

and greater regulatory transparency in most services industries. 

The Agreement utilizes a negative list for coverage with very few 

reservations, which means that all services are covered unless specifically excluded. The Agreement offers new access in sectors such 

as telecommunications, express delivery, computer and related 

services, tourism, energy, transport, construction and engineering, 

financial services, insurance, audio/visual and entertainment, professional, environmental, and other sectors. The Agreement also 

mandates transparency and non-discriminatory application in the 

regulation of service industries. 

Intellectual Property Rights.—Because the WTO Agreement on 

Trade-Related Aspects of Intellectual Property Rights (TRIPs) contains minimum international standards for intellectual property 

protection, bilateral free trade agreements (FTAs) are an important 

means of raising international practices to higher U.S. standards. 

Specifically, U.S. authors, performers, inventors, and other producers of creative material will benefit from the improved standards the FTA requires for protecting intellectual property rights 

such as copyrights, patents, trademarks, and other intellectual 

property and the enhanced means for enforcing those rights. The 

Agreement lengthens terms for copyright protection, covering electronic and digital media, and strengthens enforcement obligations. 

Each party is obliged to provide appropriate civil and criminal remedies, and parties must provide legal incentives for service providers to cooperate with rights holders, including limitations on liability. 

Investment.—The Agreement contains an investor-state dispute 

settlement provision, which allows investors alleging a breach in 

investment obligations to seek binding arbitration with the country. These investor protections give U.S. investors in these developing countries access to objective arbitration. These provisions 

level the playing field for U.S. investors by giving them legal protections in Central America and the Dominican Republic comparable to the protections that foreign investors already receive in 

the United States. 

The Committee believes that there have been significant misrepresentations about investment protection provisions in this and 

other free trade agreements. Nothing in the Agreement or any 

other free trade agreement or bilateral investment treaty interferes 

with a state or local government’s right to regulate. An investor 

cannot enjoin regulatory action through arbitration, nor can arbitral tribunals. Also, the Agreement makes improvements over 

former FTAs by incorporating standards in the expropriation provisions drawn directly from U.S. Supreme Court decisions and by 

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taking regulatory interests fully into account. Consistent with U.S. 

law, for example, the DR–CAFTA specifies that nondiscriminatory 

regulatory actions designed and applied to protect the public welfare do not constitute indirect expropriations ‘‘except in rare circumstances.’’ Moreover, the arbitration process under the Agreement is more open and transparent, and hearings and documents 

would be public, and amicus curiae submissions are expressly authorized. 

Building on experience under the North American Free Trade 

Agreement (NAFTA), the DR–CAFTA investment chapter includes 

checks to help ensure that investors cannot abuse the arbitration 

process. The Agreement includes a special provision (based on U.S. 

court rules) that allows tribunals to dismiss frivolous claims at an 

early stage of the proceedings, and it expressly authorizes awards 

of attorneys’ fees and costs if a claim is found to be frivolous. 

The Committee believes that the allegations and anti-trade rhetoric surrounding NAFTA Chapter 11 investor-state cases are exaggerated. The United States has never lost a single case under 

NAFTA or any other FTA or bilateral investment treaty (BIT), nor 

has the United States ever paid to settle such a case. 

Labor and environment.—The Agreement contains obligations 

under which each government commits to effectively enforce its domestic labor and environmental laws, as required by TPA. The 

Agreement also provides that parties shall strive to continue to improve their domestic labor and environmental laws. The Agreement 

makes clear that it is inappropriate to weaken or reduce labor or 

environmental protections to encourage trade or investment. The 

Environment Chapter provides for a public participation mechanism whereby civil society may submit information relating to concerns or specific problems with enforcement of environmental laws. 

Civil society will be able to make submissions to an independent 

secretariat concerning effective enforcement of environmental laws 

in Central America and the Dominican Republic. DR–CAFTA is the 

first FTA to include such a mechanism within the Agreement. The 

Agreement also reinforces efforts to promote transparency and public participation in government decision-making by including a specific obligation for each party to convene a new or consult existing 

national consultative or advisory committees to provide views on 

matters related to the implementation of the Environment Chapter. 

The DR–CAFTA countries and the United States negotiated an 

Environmental Cooperation Agreement (ECA) in parallel with the 

FTA. The ECA’s main objectives are to protect, improve, and conserve the environment, including natural resources, in Central 

America and the Dominican Republic. 

The Agreement also contains a cooperative mechanism to promote respect for the principles embodied in the International Labor 

Organization (ILO) Declaration on Fundamental Principles and 

Rights at Work, and compliance with ILO Convention 182 on the 

Worst Forms of Child Labor. 

Almost all of the DR–CAFTA countries have ratified the ILO 

Fundamental Conventions on forced labor, freedom of association 

and right to organize, right to organize and collective bargaining, 

equal remuneration, abolition of forced labor, discrimination, minimum work age, and worst forms of child labor. The only exception 

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is El Salvador, which has not ratified the two ILO Conventions related to freedom of association and collective bargaining because of 

a constitutional ruling by its Supreme Court limiting unions in the 

public sector. Nonetheless, El Salvador remains subject to the scrutiny of ILO’s Committee on Freedom of Association, which issues 

reports, findings, and recommendations on any complaints with regard to these rights. Moreover, under the Constitutions of all of the 

DR–CAFTA countries, the core conventions of the ILO, once ratified, become part of the body of national law and provide a basis 

for workers to challenge labor law provisions that might otherwise 

conflict with the country’s ILO obligations. 

The Committee believes that concern that labor provisions are 

weaker than in other free trade agreements such as the United 

States-Jordan Free Trade Agreement (Jordan FTA) is unfounded. 

The Jordan FTA, for example, which passed the House by voice 

vote in 2001, contains the same labor obligations as DR–CAFTA, 

uses a weaker dispute settlement mechanism than DR–CAFTA, 

and does not include the vigorous capacity building provisions of 

DR–CAFTA. DR–CAFTA clarifies what was implicit in the Jordan 

FTA: the only provision subject to dispute settlement is the requirement that a party enforce its own laws. Indeed, President 

Clinton, when he transmitted the Jordan agreement to Congress, 

stated, ‘‘It is important to note that the FTA does not require either country to adopt any new laws in these [labor and environment] areas, but rather includes commitments that each country 

enforce its own labor and environmental laws.’’ DR–CAFTA explicitly incorporates President Clinton’s statement, as do all other 

FTAs under TPA in the past several years. 

Moreover, DR–CAFTA has a more developed and conclusive dispute settlement mechanism than the Jordan FTA. The Jordan 

FTA’s dispute settlement mechanism is underdeveloped, lacks 

strict time limits, and allows complaints to be blocked in perpetuity. By contrast, DR–CAFTA contains detailed and developed 

procedures. DR–CAFTA’s dispute settlement leads to monetary assessments and the possible suspension of tariff benefits, while side 

letters to the Jordan FTA state that the parties do not intend or 

expect to use trade sanctions. DR–CAFTA contains a more robust 

capacity-building mechanism than the Jordan FTA, including the 

establishment of a Labor Affairs Council that will oversee a Labor 

Cooperation and Capacity-Building Mechanism. 

Labor under DR–CAFTA as compared with preference programs.—The labor provisions of the Agreement are superior to 

those applicable to these countries under the Generalized System 

of Preferences (GSP) and the Caribbean Basin Economic Recovery 

Act (CBERA) preference programs in three ways. First, DR–

CAFTA contains stronger obligations on worker rights. Under DR–

CAFTA, Central American countries publicly commit to effectively 

enforce their laws that recognize and protect internationally recognized labor rights. The labor laws a country is obligated to effectively enforce under DR–CAFTA cover all of the internationally 

recognized worker rights used as eligibility criteria for GSP and 

CBERA. While the DR–CAFTA requires countries to effectively enforce their labor laws, the eligibility requirements for GSP and 

CBERA in contrast require a country only to be ‘‘taking steps’’ to 

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afford internationally recognized worker rights. This is a far weaker obligation than under DR–CAFTA. 

Second, DR–CAFTA offers a better enforcement mechanism for 

the United States to consider labor law reforms in the Agreement 

countries. Under DR–CAFTA, if a country is found to not adequately enforce its labor laws, the government would pay a significant fine until the situation is remedied, with trade sanctions as 

a last resort. In contrast, the only option under our trade preference programs is to suspend or withdraw trade benefits offered 

through the programs. This has never occurred. Withdrawal of 

GSP/CBERA benefits is a blunt instrument, which could harm the 

very workers whose rights the United States seeks to protect. 

Third, CAFTA offers a more constructive way to solve labor problems by ensuring access to fair, equitable, and transparent tribunals for labor law enforcement, and to promote public awareness. 

Unlike DR–CAFTA, the GSP/CBERA programs contain no options 

other than trade sanctions to address the situation: no formal consultation mechanism, no fines, and no capacity-building assistance. 

DR–CAFTA offers various ways to solve labor problems by working 

together, including consultation provisions. If fines are imposed, 

funds would be spent on initiatives aimed at improving enforcement of labor laws in the Central American country. 

Government procurement.—The government procurement commitments in the DR–CAFTA are significant because none of the 

Central American countries is a party to the WTO Agreement on 

Government Procurement, and the DR–CAFTA provides comparable benefits to U.S. interests. Specifically, the Agreement 

grants non-discriminatory rights to bid on most contracts offered by 

Central American ministries, agencies, and departments. It calls 

for transparent and fair procurement procedures including clear, 

advance notice of purchases and effective review. As with government procurement commitments at the state level in all prior U.S. 

trade agreements, DR–CAFTA state commitments cover only those 

states which agreed to be covered before the Agreement was 

signed. 

Dispute settlement.—The Agreement sets out detailed procedures 

for the resolution of disputes, with high standards of openness and 

transparency. Dispute settlement procedures promote compliance 

through consultation and trade-enhancing remedies, rather than 

relying solely on trade sanctions. The Agreement’s dispute settlement procedures also provide for ‘‘equivalent’’ remedies for commercial and labor or environmental disputes. In addition to the use of 

trade sanctions in commercial disputes, the Agreement provides 

the parties the option of using monetary assessments to enforce 

commercial, labor, and environmental obligations of the Agreement, with the possibility that assessments from labor or environmental cases may be used to fund labor or environmental initiatives. If a party does not pay its annual assessment in a labor or 

environmental dispute, the complaining party may suspend tariff 

benefits, while bearing in mind the objective of eliminating barriers 

to trade and while seeking not to unduly affect parties or interests 

not party to the dispute. 

Access to medicines.—The Agreement provides protections for developers and manufacturers of innovative pharmaceutical drugs 

consistent with U.S. law and recent trade agreements. Consistent 

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with the WTO TRIPs Agreement, countries must provide that a 

drug innovator’s data submitted for the purpose of obtaining marketing approval must be protected from unfair commercial use by 

competitors. The Agreement expressly states that nothing in the 

intellectual property chapter affects the countries’ ability to protect 

public health by promoting access to medicines for all. Nor will the 

Agreement prevent effective utilization of the recent WTO consensus allowing developing countries that lack pharmaceutical 

manufacturing capacity to import drugs under compulsory licenses. 

Stronger patent and data protection increases the willingness of 

companies to release innovative drugs in free trade partners’ markets, potentially increasing, rather than decreasing, the availability 

of medicines. For example, the Jordan FTA, signed in 2000, contained an intellectual property chapter that covered data protection. Since 2000, there have been over 40 new innovative product 

launches in Jordan, a substantial increase in the rate of approval 

of innovative drugs, helping facilitate Jordanian consumers’ access 

to medicines. Since enactment of the FTA, the Jordanian drug industry has begun to flourish. The Committee emphasizes that this 

is an example of how strong intellectual property protection can 

bring substantial benefits to developing countries. 

Democracy, freedom, security, and rule of law.—The Committee 

notes that as recently as the 1980s, Central America was plagued 

by civil war and Communist insurgencies and today remains vulnerable from anti-reform forces. Moreover, U.S. security is connected to development in the region because criminal gangs, drug 

trafficking, and trafficking in persons create dangerous 

transnational networks that focus on breaches of U.S. borders. Poverty remains a powerful incentive for people in the region to leave 

their homes to come to the United States illegally. DR–CAFTA offers a way to address the sources of these problems. 

The democratically elected Presidents of Central America and 

Dominican Republic have repeatedly emphasized that economic liberalization through the Agreement will strengthen the foundations 

of democracy by promoting growth and cutting poverty, creating 

equality of opportunity, fighting crime, and reducing corruption. It 

will help in accomplishing these broad social goals by securing concrete benefits through economic freedom, i.e., tangible improvements in people’s daily life. Given the relatively few trade liberalizing steps required of the United States through the Agreement 

(over and beyond what the United States currently gives these 

countries through trade preference laws), the Agreement represents a remarkable opportunity to stabilize the region for the 

benefit of the United States as well as other countries and also assist people in all economic levels. 

Conclusion.—DR–CAFTA is a marked improvement over existing 

law for both the economies of Central America, the Dominican Republic, and the United States. The existing preference programs 

garnered large support in the House on May 4, 2000, when 309 

House Members voted to support the DR–CAFTA countries, among 

others, in the CBTPA, by enhancing the Caribbean Basin Initiative 

preference program and unilaterally opening the U.S. market to 

goods from Central America and the Caribbean Basin. DR–CAFTA 

would enhance benefits for these Central American countries and 

the Dominican Republic because the current CBTPA program is 

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temporary (ending in 2008), excludes many products, restricts use 

of regional inputs, and requires burdensome documentation procedures on beneficiaries. In contrast, DR–CAFTA makes trade benefits permanent, covers all products that meet the rule of origin, allows regional inputs, and permits use of simple electronic documentation procedures. DR–CAFTA also changes the current unilateral nature of benefits to these CBTPA beneficiaries into mutually 

reciprocal trade benefits for Americans under DR–CAFTA. While 

the current unilateral program makes 80% of exports from these 

countries to the United States duty-free, DR–CAFTA provides U.S. 

exporters with equal treatment by granting immediate duty free 

access to 80% of U.S. exports. The remainder of trade is liberalized 

over 15–20 years. 

II. TPA process 

As noted above, this legislation is being considered by Congress 

under TPA procedures. As such, the Agreement has been negotiated by the President in close consultation with Congress, and it 

can be approved and implemented through legislation using 

streamlined procedures. Pursuant to TPA requirements, the President is required to provide written notice to Congress of the President’s intention to enter into the negotiations. Throughout the negotiating process, and prior to entering into an agreement, the 

President is required to consult with Congress regarding the ongoing negotiations. 

The President must notify Congress of his intent to enter into a 

trade agreement at least 90 calendar days before the agreement is 

signed. Within 60 days after entering in the Agreement, the President must submit to Congress a description of those changes to existing laws that the President considers would be required to bring 

the United States into compliance with the Agreement. After entering into the Agreement, the President must also submit to Congress the formal legal text of the agreement, draft implementing 

legislation, a statement of administrative action proposed to implement the Agreement, and other related supporting information as 

required under section 2105(a) of TPA. Following submission of 

these documents, the implementing bill is introduced, by request, 

by the Majority Leader in each chamber. The House then has up 

to 60 days to consider implementing legislation for the Agreement 

(the Senate has up to an additional 30 days). No amendments to 

the legislation are allowed under TPA requirements. 

III. Status of implementation by DR–CAFTA countries 

Three out of the six DR–CAFTA partner countries have ratified 

the Agreement: El Salvador, Guatemala, and Honduras. Nicaragua 

and the Dominican Republic have both introduced legislation to implement the Agreement. The Costa Rican president has said that 

Costa Rica will introduce legislation to ratify the Agreement. 

C. LEGISLATIVE HISTORY

On October 1, 2002, the United States Trade Representative 

(USTR) formally notified the Congress of its intention to pursue a 

free trade agreement with Costa Rica, El Salvador, Guatemala, 

Honduras, and Nicaragua (CAFTA). On August 4, 2003, USTR notified the Congress of its intention to initiate free trade agreement 

9 

negotiations with the Dominican Republic with the purpose of integrating it into the CAFTA. On February 20, 2004, the President 

formally notified the Congress of his intent to sign a free trade 

agreement with the five Central American countries. On March 24, 

2004, the President formally notified the Congress of his intent to 

sign a free trade agreement with the DR. On May 28, 2004, Ambassador Zoellick signed the CAFTA, and on August 5, 2004, he 

signed the DR–CAFTA with the Dominican Republic and the five 

Central American countries. 

In accordance with TPA requirements, President Bush submitted 

to Congress on October 1, 2004, a description of the changes to existing U.S. laws that would be required to bring the United States 

into compliance with the Agreement. 

Legislative hearing 

On April 21, 2005, the Committee held a hearing on the implementation of the DR–CAFTA. The hearing focused on Congressional consideration of the DR–CAFTA and the benefits that this 

agreement will bring to American businesses, farmers, workers, 

consumers, and to the U.S. economy. At the hearing, Deputy U.S. 

Trade Representative Peter Allgeier and representatives from the 

private sector expressed their views on the benefits of the Agreement. There was widespread support expressed for the Agreement. 

Committee action 

On June 15, 2004, the Committee on Ways and Means considered in an informal markup session draft legislation to implement 

DR–CAFTA to provide guidance to the Administration on the implementing bill and statement of administrative action. The Committee approved the Chairman’s amendment in the nature of a 

substitute without further amendment by a vote of 25–16. The 

Chairman’s substitute included a requirement that the Administration report on activities conducted by the DR–CAFTA countries and 

the United States to build capacity on labor issues. The substitute 

also included a provision noting that DR–CAFTA will have a very 

positive impact on the U.S. services industry. The substitute requires that the Administration examine after one year the effect 

the Agreement has had on the services industry, and requires the 

Administration to make recommendations as to how the Trade Adjustment Assistance program should be amended if the DR–CAFTA 

has led to negative effects on the services industry. 

On June 23, 2005, President Bush formally transmitted to Congress the legal text of the DR–CAFTA, implementing legislation, a 

statement of administrative action proposed to implement the 

Agreement, and other related supporting information as required 

under section 2105(a) of TPA. Following this transmittal, on June 

23, 2005, Majority Leader DeLay introduced, by request, H.R. 3045 

to implement the Agreement. The bill was referred to the Committee on Ways and Means. 

On June 30, 2005, the Committee on Ways and Means formally 

met to consider H.R. 3045. The Committee ordered H.R. 3045 favorably reported to the House of Representatives by a vote of 25–

16, without amendment; under the requirements of TPA, amendments were not permitted. 

10 

II. SECTION-BY-SECTION SUMMARY 

TITLE I: APPROVAL AND GENERAL PROVISIONS 

SECTION 101: APPROVAL AND ENTRY INTO FORCE

Current law 

No provision. 

Explanation of provision 

Section 101 states that Congress approves the Agreement and 

the Statement of Administrative Action. It also provides that when 

the President determines that other countries that have signed the 

Agreement have taken measures necessary to comply with those 

obligations that are to take effect at the time the Agreement enters 

into force, the President is authorized to provide for the Agreement 

to enter into force with respect to those countries that provide for 

the agreement to enter into force for them. 

Reason for change 

Approval of the Agreement and the Statement of Administrative 

Action is required under the procedures of section 2103(b)(3) of 

TPA. The remainder of section 101 provides for entry into force of 

the Agreement. 

SECTION 102: RELATIONSHIP OF THE AGREEMENT TO U.S. AND STATE

LAW

Current law 

No provision. 

Explanation of provision 

Section 102 provides that U.S. law is to prevail in a conflict and 

that the Agreement does not preempt state rules that do not comply with the Agreement. Only the United States is entitled to bring 

a court action to resolve a conflict between a state law and the 

Agreement. 

Reason for change 

Section 102 is necessary to make clear the relationship between 

the Agreement and federal and state law, respectively. 

SECTION 103: IMPLEMENTING ACTIONS IN ANTICIPATION OF ENTRY

INTO FORCE AND INITIAL REGULATIONS

Current law 

No provision. 

Explanation of provision 

Section 103(a) provides that after the date of enactment, the 

President may proclaim actions and issue regulations as necessary 

to ensure that any provision of this Act that takes effect on the 

date that the Agreement is entered into force is appropriately implemented, but not before the date the Agreement enters into force. 

Section 103(b) establishes that regulations necessary or appropriate to carrying out the actions proposed in the Statement of AdVerDate Aug 04 2004 14:35 Jul 26, 2005 Jkt 039006 PO 00000 Frm 00010 Fmt 6659 Sfmt 6602 E:\HR\OC\HR182.XXX HR182
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ministrative Action shall, to the maximum extent feasible, be 

issued within one year of entry into force or the effective date of 

the provision. 

Reason for change 

Section 103 provides for the issuance of regulations. The Committee strongly believes that regulations should be issued in a 

timely manner in order to provide maximum clarity to parties 

claiming benefits under the Agreement. As noted in the Statement 

of Administrative Action, the regulation-issuing agency will provide 

a report to Congress not later than thirty days before one year 

elapses on any regulation that is going to be issued later than one 

year. 

With respect to textiles and apparel, the Committee directs that 

the executive branch, particularly the Committee for the Implementation of Textile Agreements (CITA), the Bureau of Customs 

and Border Protection (Customs) of the Department of Homeland 

Security, and the Department of Commerce, to issue all guidelines, 

regulations, and procedures necessary for the implementation of 

the textile and apparel provisions of this agreement in an expeditious manner. The Committee further directs these agencies to ensure that the implementing legislation and such regulations and 

guidelines be interpreted and enforced broadly so as to maximize 

opportunities for textile and apparel trade under this agreement. 

SECTION 104: CONSULTATION AND LAYOVER FOR PROCLAIMED ACTIONS

Current law 

No provision. 

Explanation of provision 

Section 104 provides that if the President intends to implement 

an action under this proclamation authority, the President may 

proclaim the action only after he has: obtained advice from the 

International Trade Commission and the appropriate private sector 

advisory committees; submitted a report to the Ways & Means and 

Finance Committees concerning the reasons for the action; and consulted with the Committees. The action takes effect after 60 days 

have elapsed. 

Reason for change 

The bill gives the President certain proclamation authority but 

requires extensive consultation with Congress before such authority may be exercised. The Committee believes that such consultation is an essential component of the delegation of authority to the 

President and expects that such consultations will be conducted in 

a thorough manner. 

SECTION 105: ADMINISTRATION OF DISPUTE SETTLEMENT

PROCEEDINGS

Current law 

No provision. 

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Explanation of provision 

Section 105 authorizes the President to establish an office within 

the Commerce Department responsible for providing administrative 

assistance to any panels that may be established under the Agreement and authorizes appropriations for the office and for payment 

of the U.S. share of expenses. 

Reason for change 

The Committee believes that the Commerce Department is the 

appropriate agency to provide administrative assistance to panels. 

SECTION 106: ARBITRATION OF CLAIMS

Current law 

No provision. 

Explanation of provision 

Section 106 authorizes the United States to resolve certain 

claims covered by the investor-state dispute settlement procedures 

set forth in the Agreement. 

Reason for change 

This provision is necessary to meet U.S. obligations under Section B of Chapter 10 of the Agreement. 

SECTION 107: EFFECTIVE DATES; EFFECT OF TERMINATION

Current law 

No provision. 

Explanation of provision 

The effective date of this Act is the date the Agreement enters 

into force with respect to the United States except that sections 1–

3 and Title I take effect upon the date of enactment. During any 

period in which a country ceases to be a CAFTA–DR country, the 

provisions of this Act cease to have effect with respect to that country. The provisions of the Act terminate on the date on which the 

Agreement terminates with respect to the United States. 

Reason for change 

Section 107 implements provisions of the Agreement. 

TITLE II: CUSTOMS PROVISIONS 

SECTION 201: TARIFF MODIFICATIONS

Current law 

No provision. 

Explanation of provision 

Section 201(a) provides the President with the authority to proclaim tariff modifications to carry out the Agreement. Sections 

201(a)(2) and 201(a)(3) terminate each CAFTA–DR country’s status 

as a beneficiary of the Generalized System of Preferences and the 

Caribbean Basin Economic Recovery Act (CBERA) once the agreement enters into force with respect to that country. 

13 

Under section 201(a)(3)(B) three exceptions apply to withdrawal 

under the CBERA; the United States will continue to treat 

CAFTA–DR countries as beneficiary countries: (1) to preclude the 

International Trade Commission from cumulating CBERA imports 

in antidumping and countervailing duty investigations according to 

article 8.8.1 of the Agreement; (2) to implement duty free treatment for certain ethyl alcohol provided under paragraph 12 of Appendix I of the General Notes to the Schedule of the United States 

to Annex 3.3 of the Agreement; and (3) for purposes of taxpayer deductions for business trips to CBERA countries. 

Section 201(b) gives the President the authority to proclaim further tariff modifications, subject to consultation and layover, as the 

President determines to be necessary or appropriate to maintain 

the general level of reciprocal and mutually advantageous concessions with respect to CAFTA–DR countries provided for by the 

Agreement. 

Section 201(c) allows the President, for any goods for which the 

base rate is a specific or compound rate of duty, to substitute for 

the base rate an ad valorem rate to carry out the tariff modifications in subsections (a) and (b). 

Reason for change 

Section 201(a) is necessary to put the United States in compliance with the market access provisions of the Agreement. The 

three exceptions under section 201(a)(3)(B) are also consistent with 

the Agreement and allow DR–CAFTA countries to continue to (1) 

be exempt from cumulation in antidumping and countervailing 

duty investigations; (2) receive duty free treatment for certain ethyl 

alcohol; and (3) be eligible for certain taxpayer deductions for business trips to CBERA countries. 

Section 201(b) gives the President flexibility to maintain the 

trade liberalizing nature of the Agreement. The Committee expects 

the President to comply with the letter and spirit of the consultation and layover provisions of this Act in carrying out this subsection. Section 201(c) allows the President to convert tariffs to ad 

valorem rates to carry out the tariff modifications in the Agreement. 

SECTION 202: ADDITIONAL DUTIES ON CERTAIN AGRICULTURAL GOODS

Current law 

No provision. 

Explanation of provision 

Section 202 of the bill implements the agricultural safeguard provisions of article 3.15 and Annex 3.15 of the Agreement. Article 

3.15 permits the United States to impose an ‘‘agricultural safeguard measure,’’ in the form of additional duties, on imports of certain goods of Agreement countries specified in the Schedule of the 

United States to Annex 3.15 of the Agreement that exceed the volume thresholds set out in that annex. Under the Agreement, the 

sum of the duties assessed under an agricultural safeguard and the 

applicable rate of duty in the Schedule of the United States to 

Annex 3.3 of the Agreement may not exceed the general Normal 

Trade Relations (NTR) rate of duty. No additional duty may be apVerDate Aug 04 2004 14:35 Jul 26, 2005 Jkt 039006 PO 00000 Frm 00013 Fmt 6659 Sfmt 6602 E:\HR\OC\HR182.XXX HR182
14 

plied on a good if, at the time of entry, the good is subject to a safeguard measure under the procedures set out in Subtitle A of Title 

III of the bill or under the safeguard procedures set out in Chapter 

1 of Title II of the Trade Act of 1974. 

Section 202(b) provides for the Secretary to impose agricultural 

safeguard duties in any year when the volume of imports of the 

good from an Agreement country exceeds 130 percent of the inquota quantity allocated to that country for the good in that calendar year in the Schedule of the United States to Annex 3.3 of 

the Agreement. The additional duties remain in effect only until 

the end of the calendar year in which they are imposed. 

Reason for change 

Section 202 implements the agricultural safeguard provisions of 

article 3.15 and Annex 3.15 of the Agreement and provides important security to U.S. farmers. 

SECTION 203: RULES OF ORIGIN

Current law 

No provision. 

Explanation of provision 

Section 203 codifies the rules of origin set out in chapter 4 of the 

Agreement. Under the general rules, there are three basic ways for 

a good of a CAFTA–DR country to qualify as an ‘‘originating good’’

and therefore be eligible for preferential tariff treatment when it 

is imported into the United States. A good is an originating good 

if: (1) it is ‘‘wholly obtained or produced entirely in the territory of 

one or more of the CAFTA–DR countries’’; (2) those materials used 

to produce the good that are not themselves originating goods are 

transformed in such a way as to cause their tariff classification to 

change or meet other requirements, as specified in Annex 4.1 of the 

Agreement; or (3) it is produced entirely in the territory of one or 

more CAFTA–DR countries exclusively from originating materials. 

Under the rules in chapter 4 and Annex 4.1 of the Agreement, 

an apparel product must generally meet a tariff shift rule that implicitly imposes a ‘‘yarn forward’’ requirement. Thus, to qualify as 

an originating good imported into the United States from another 

CAFTA–DR country, an apparel product must have been cut (or 

knit to shape) and sewn or otherwise assembled in one or more 

CAFTA–DR country from yarn, or fabric made from yarn that originates in a CAFTA–DR country. However, Annex 3.27 of the Agreement provides a 2–year exception to this general rule for 500,000 

square meter equivalents (SMEs) of certain wool apparel goods assembled in Costa Rica. These goods will be subject to a rate of duty 

that is 50 percent of the NTR rate of duty. Annex 3.28 of the 

Agreement provides an exception to this general rule allowing access for 100 million SMEs of apparel assembled in Nicaragua in 

the first 5 years of the Agreement, phasing down over the next 4 

years and eliminated in year 10. The Agreement also allows for the 

cumulation of inputs from Mexico and Canada for certain woven 

apparel subject to a 100 million SMEs annual cap. This cumulation 

cap can grow to 200 million SMEs, if CAFTA trade grows. 

15 

Section 203(o)(2) provides authority for the President to add fabrics or yarns to a list of products that are unavailable in commercial quantities (i.e., in ‘‘short supply’’) in a timely manner, and such 

products are treated as if they originate in an Agreement country, 

regardless of their actual origin, when used as inputs in the production of textile or apparel goods. Section 203(o)(4) provides a 

process by which the President may modify that list at the request 

of interested entities, defined as Agreement countries and potential 

and actual suppliers and purchasers of textile or apparel goods. 

The remainder of section 203 sets forth more detailed rules for 

determining whether a good meets the Agreement’s requirements 

under the second method of qualifying as an originating good. 

These provisions include rules pertaining to de minimis quantities 

of non-originating materials that do not undergo a tariff transformation, transformation by regional content, and the alternative 

methods for calculating regional value content. Other provisions in 

section 203 address valuation of materials and determination of the 

originating or non-originating status of fungible goods and materials. 

Reason for change 

Rules of origin are needed in order to confine Agreement benefits, such as tariff cuts, to parties to the Agreement and to prevent 

third-country goods from being transshipped through DR–CAFTA 

countries and claiming benefits under the Agreement. Section 203 

puts the United States in compliance with the rules of origin provisions of the agreement. The Committee directs the Administration 

to ensure that such regulations and guidelines necessary for the 

implementation of these rules be published expeditiously and interpreted and enforced broadly so as to maximize opportunities for 

textile and apparel trade under this agreement. 

The Committee welcomes the inclusion of cumulation provisions 

in this agreement and urges their inclusion in future agreements 

to ensure better integration among the United States and its current and future free trade and trade preference partners. The Committee notes that the cumulation provision in the Agreement will 

not take effect until after further negotiations are completed with 

Canada and Mexico in areas relating to customs cooperation and 

reverse cumulation benefits. USTR is directed to undertake these 

negotiations expeditiously and to provide regular updates to the 

Committee on the status of these talks and on the implementation 

of this provision. The Committee also notes that under Article 

3.25.1 of the Agreement, parties may seek modifications to the 

rules of origin, and USTR has already publicly announced its intention to seek such a modification with respect to pockets. USTR is 

directed to report regularly with the Committee on any consultations it conducts pursuant to Article 3.25.1 of the Agreement, and 

to ensure input from all affected U.S. textile and apparel interests 

in such consultations. 

With respect to the short supply provisions, the Committee believes that maintaining a current short supply list under the DR–

CAFTA is integral to the effective functioning of the rule of origin 

for textiles and apparel. The Committee further notes that items 

considered to be in short supply under the North American Free 

Trade Agreement and U.S. trade preference programs are reflected 

16 

in the short supply list for this Agreement. The Committee believes 

such a short supply approach and process should be a model for future FTAs. The Committee clarifies that the process under section 

203(o)(4) by which the President may remove an item from the 

DR–CAFTA short supply list (or impose a restriction on its use) applies only to new items added in an unrestricted quantity to the 

list under DR–CAFTA and does not include items that were included in the original short supply list that the Parties negotiated. 

This unique removal process has not been included in previous 

FTAs or trade preference programs and was added with the express understanding that the threshold to approve items in short 

supply for DR–CAFTA is less arduous than other FTAs and trade 

preference programs. The Committee is disappointed that the Administration has considered removing products from short supply 

status under CBTPA after designating them as being in short supply. The Committee continues to intend that once an item designated in short supply under other FTAs (other than DR–CAFTA) 

and trade preference programs, it is permanently designated as 

such because there is no express authority provided by the statute, 

unlike DR–CAFTA. 

With regard to the short supply procedures to be published by 

CITA, the Committee considers it important that all parties be able 

to participate in an open and transparent system. CITA should 

publish procedures that clearly explain the criteria it uses to make 

its determinations on whether and why a good is or is not available 

in commercial quantities. At the very least, when CITA determines 

that a good is available in commercial quantities, a sample of the 

good should be readily available for physical inspection by all parties as well as evidence of some effort to market the good in the 

United States. Moreover, all parties should have open access to the 

full evidence being considered by CITA as well as the opportunity 

to respond to the full evidence before a determination is made. 

SECTION 204: CUSTOMS USER FEES

Current law 

Section 58c of the Title 19 lays out various user fees applied by 

customs officials to imports, including the merchandise processing 

fee (MPF), which is applied on an ad valorem basis subject to a 

cap. 

Explanation of provision 

Section 204 of the bill implements U.S. commitments under Article 3.10.4 of the Agreement, regarding the exemption of the merchandise processing fee on originating goods. This provision is similar to those included in the implementing legislation for the North 

American Free Trade Agreement, the U.S.-Singapore Free Trade 

Agreement, the U.S.-Chile Free Trade Agreement, and the U.S.- 

Australia Free Trade Agreement. The provision also prohibits use 

of funds in the Customs User Fee Account to provide services related to entry of originating goods, in accordance with U.S. obligations under the General Agreement on Tariffs and Trade 1994. 

17 

Reason for change 

As with other free trade agreements, the Agreement eliminates 

the merchandise processing fee on qualifying goods from DR–

CAFTA countries. Other customs user fees remain in place. Section 

204 is necessary to put the United States in compliance with the 

user fee elimination provisions of the Agreement. The Committee 

expects that the President, in his yearly budget request, will take 

into account the need for funds to pay expenses for entries under 

the Agreement given that MPF funds will not be available. 

SECTION 205: RETROACTIVE APPLICATION FOR CERTAIN LIQUIDATIONS

AND RELIQUIDATIONS OF TEXTILE OR APPAREL GOODS

Current law 

No provision. 

Explanation of provision 

Section 205 implements Article 3.20 of the Agreement and provides that, notwithstanding section 514 of the Tariff Act of 1930, 

the Secretary of the Treasury must liquidate or reliquidate entries 

of textile or apparel goods of an eligible Agreement country made 

between January 1, 2004, and the date the Agreement enters into 

force with respect to that country, provided that the goods would 

have been considered originating goods if the Agreement had been 

in force at that time. 

Reason for change 

Section 205 is necessary to put the United States into compliance 

with Article 3.20 of the Agreement. 

SECTION 206: DISCLOSURE OF INCORRECT INFORMATION

Current law 

No provision. 

Explanation of provision 

Section 206 implements Articles 4.15.3 and 4.20.5 of the Agreement. The provision prohibits the imposition of a penalty upon importers who make an invalid claim for preferential tariff treatment 

under the Agreement if the importer acts promptly and voluntarily 

to correct the error. If an importer so acts more than once, falsely 

or without substantiation, U.S. authorities may suspend preferential treatment with respect to identical goods imported by that 

importer. 

Reason for change 

Section 206 is necessary to put the United States into compliance 

with Articles 4.15.3 and 4.20.5 of the Agreement. 

SECTION 207: RELIQUIDATION OF ENTRIES

Current law 

No provision. 

18 

Explanation of provision 

Section 207 implements Article 4.15.5 of the Agreement and provides authority for the Customs Service to reliquidate an entry to 

refund any excess duties (including any merchandise processing 

fees) paid on a good qualifying under the rules of origin for which 

no claim for preferential tariff treatment was made at the time of 

importation if the importer so requests, within one year after the 

date of importation. 

Reason for change 

Article 4.15.5 of the Agreement anticipates that private parties 

may err in claiming preferential benefits under the Agreement and 

provides a one-year period for parties to make such claims for preferential tariff treatment even if the entry of the goods at issue has 

already been liquidated, i.e., legally finalized by customs officials. 

Section 207 is necessary to put the United States into compliance 

with Article 4.15.5 of the Agreement. 

SECTION 208: RECORDKEEPING REQUIREMENTS

Current law 

No provision. 

Explanation of provision 

Section 208 of the bill implements Article 4.19 of the Agreement 

and provides that an exporter or producer issuing a certification of 

origin for a good shall maintain, for a period of five years, records 

and supporting documents related to the origin of the good. 

Reason for change 

Section 208 is necessary to put the United States in compliance 

with the recordkeeping requirement provisions of the Agreement at 

Article 4.19. 

SECTION 209: ENFORCEMENT RELATING TO TRADE IN TEXTILE OR

APPAREL GOODS

Current law 

No provision. 

Explanation of provision 

Section 209 implements the customs cooperation provisions in 

Article 3.24 of the Agreement. Under section 209(a), the President 

may direct the Secretary of the Treasury to take ‘‘appropriate action’’ while a verification that the Secretary has requested is being 

conducted. Such appropriate action may include: (i) suspending 

preferential tariff treatment for textile or apparel goods that the 

person subject to the verification has produced or exported if the 

Secretary believes there is insufficient information to sustain a 

claim for such treatment; (ii) denying preferential tariff treatment 

to such goods if the Secretary decides that a person has provided 

incorrect information to support a claim for such treatment; (iii) detaining such goods if the Secretary considers there is not enough 

information to determine their country of origin; and (iv) denying 

19 

entry to such goods if the Secretary determines that a person has 

provided erroneous information on their origin. 

Under section 209(c), the President may also direct the Secretary 

to take ‘‘appropriate action’’ after a verification has been completed. 

Depending on the nature of the verification, the action may include: (i) denying preferential tariff treatment to textile or apparel 

goods that the person subject to the verification has exported or 

produced if the Secretary considers there is insufficient information 

to support a claim for such treatment or determines that a person 

has provided incorrect information to support a claim for such 

treatment; and (ii) denying entry to such goods if the Secretary decides that a person has provided erroneous information regarding 

their origin or that there is insufficient information to determine 

their origin. Unless the President sets an earlier date, any such action may remain in place until the Secretary obtains enough information to decide whether the exporter or producer that was subject 

to the verification is complying with applicable customs rules or 

whether a claim that the goods qualify for preferential tariff treatment or originate in an Agreement country is accurate. 

Under section 209(e), the Secretary may publish the name of a 

person that the Secretary has determined: (i) is engaged in intentional circumvention of applicable laws, regulations, or procedures 

affecting trade in textile or apparel goods; or (ii) has failed to demonstrate that it produces, or is capable of producing, textile or apparel goods. 

Reason for change 

In order to avoid textile transshipment, special textile enforcement provisions were included in the Agreement. Section 209 is 

necessary to authorize these enforcement mechanisms for use by 

U.S. authorities. 

SECTION 210: REGULATIONS

Current law 

No provision. 

Explanation of provision 

Section 210 provides that the Secretary of the Treasury shall 

prescribe regulations to carry out the tariff-related provisions of the 

bill, including the rules of origin and customs user fee provisions. 

Reason for change 

Because the implementing bill involves lengthy and complex implementation procedures by customs officials, section 210 is necessary in order to authorize the Secretary of the Treasury to carry 

out provisions of the implementing bill through regulations. 

TITLE III: RELIEF FROM IMPORTS 

Subtitle A: Relief From Imports Benefiting From the Agreement 

(Sections 301–316) 

Current law 

No provision. 

20 

Explanation of provision 

Sections 301–316 authorize the President, after an investigation 

and affirmative determination by the U.S. International Trade 

Commission (ITC), to impose specified import relief when, as a result of the reduction or elimination of a duty under the Agreement, 

a CAFTA–DR product is being imported into the United States in 

such increased quantities and under such conditions as to be a substantial cause of serious injury or threat of serious injury to the domestic industry. Section 301 defines key safeguard terms for Subtitle A. 

Section 311 provides for the filing of petitions with the ITC and 

for the ITC to conduct safeguard investigations initiated under 

Subtitle A. Section 311(a) provides that a petition requesting a 

safeguard action may be filed with the ITC by an entity that is 

‘‘representative of an industry.’’ As under section 202(a)(1) of the 

Trade Act of 1974, the term ‘‘entity’’ is defined to include a trade 

association, firm, certified or recognized union, or a group of workers. Section 311(b) sets out the standard to be used by the ITC in 

undertaking an investigation and making a determination in Subtitle A safeguard proceedings. 

Section 311(c) defines ‘‘substantial cause’’ and applies factors in 

making determinations in the same manner as section 202 of the 

Trade Act of 1974. Section 311(d) exempts from investigation under 

this section CAFTA–DR articles that have previously been the 

basis for according relief under Subtitle A to a domestic industry. 

Under sections 312(b) and (c), if the ITC makes an affirmative 

determination, it must find and recommend to the President the 

amount of import relief that is necessary to remedy or prevent serious injury and to facilitate the efforts of the domestic industry to 

make a positive adjustment to import competition. 

Under section 313(a), the President may provide import relief to 

the extent that the President determines is necessary to remedy or 

prevent the injury found by the ITC and to facilitate the efforts of 

the domestic industry to make a positive adjustment to import 

competition. Under section 313(b), the President is not required to 

provide import relief if the relief will not provide greater economic 

and social benefits than costs. 

Section 313(c) sets forth the nature of the relief that the President may provide. In general, the President may take action in the 

form of: a suspension of further reductions in the rate of duty to 

be applied to the articles in question; or an increase in the rate of 

duty on the articles in question to a level that does not exceed the 

lesser of the existing NTR (MFN) rate or the NTR (MFN) rate of 

duty imposed on the day before the Agreement entered into force. 

Under section 313(c)(2), if the relief the President provides has a 

duration greater than one year, the relief must be subject to progressive liberalization at regular intervals over the course of its application. 

Section 313(d) states that the import relief that the President is 

authorized to provide may not exceed four years. However, if the 

initial period of import relief is less than four years, the President 

may extend the period of import relief (to a maximum aggregate 

period of four years). Section 313(e) specifies that on the termination of relief, the rate of duty for the remainder of the calendar 

year is that rate scheduled to have been in effect one year after the 

21 

initial provision of import relief. For the remainder of the duty 

phase-out period, the President may set the rate called for in the 

Agreement or choose to eliminate the duty in equal annual stages 

until the end of the phase-out period. 

Section 313(f) exempts from relief any article that is: (i) subject 

to import relief under the global safeguard provisions in U.S. law 

(chapter 1 of Title II of the Trade Act of 1974); or (ii) the product 

of a de minimis supplying country. 

Section 314 provides that no relief may be provided under this 

subtitle after ten years from the date the Agreement enters into 

force, unless the tariff elimination for the article under the Agreement is greater than ten years, in which case relief may not be provided for that article after the period for tariff elimination for that 

article ends. 

Section 315 authorizes the President to provide compensation to 

CAFTA–DR countries consistent with article 8.5 of the Agreement. 

Section 316 provides for the treatment of confidential business information. 

Reason for change 

The Committee believes that it is important to have in place a 

temporary, extraordinary mechanism if a U.S. industry experiences 

injury by reason of increased import competition from DR–CAFTA 

countries in the future, with the understanding that the President 

is not required to provide relief if the relief will not provide greater 

economic and social benefits than costs. The Committee intends 

that administration of this safeguard be consistent with U.S. obligations under Section A of Chapter Eight (Trade Remedies) of the 

Agreement. 

Subtitle B: Textile and Apparel Safeguard (Sections 321–328) 

Current law 

No provision. 

Explanation of provision 

Section 321 provides that a request for safeguard relief under 

this subtitle may be filed with the President by an interested party. 

The President is to review the request and determine whether to 

commence consideration of the request. If the President determines 

to commence consideration of the request, he will publish a notice 

commencing consideration and seeking comments. The notice is to 

include a summary of the request. 

Under section 321(b), if the President determines that the request contains information necessary to warrant consideration on 

the merits, the President must provide notice that the request will 

be considered and seek public comments on the request. 

Section 322(a) of the Act provides for the President to determine, 

pursuant to a request by an interested party, whether, as a result 

of the elimination or reduction of a duty provided under the Agreement, a CAFTA–DR textile or apparel article is being imported into 

the United States in such increased quantities, in absolute terms 

or relative to the domestic market for that article, and under such 

conditions as to cause serious damage, or actual threat thereof, to 

a domestic industry producing an article that is like, or directly 

22 

competitive with, the imported article. The President must make 

this determination within 30 days after the completion of consultations held pursuant to article 3.23.4. 

Section 322(b) identifies the relief that the President may provide, which is the lesser of the existing NTR/MFN rate or the NTR/ 

MFN rate imposed when the Agreement entered into force. 

Section 323 of the bill provides that the period of relief shall be 

no longer than three years. If the initial relief period is less than 

three years, the President may extend the relief, but the aggregate 

period of relief, including extensions, may not exceed three years. 

Section 324 provides that relief may not be granted to an article 

under this safeguard if relief has previously been granted under 

this safeguard, or the article is subject to import relief under subtitle A of title III of this bill or under chapter 1 of title II of the 

Trade Act of 1974. 

Under section 325, after a safeguard expires, the rate of duty on 

the article that had been subject to the safeguard shall be the rate 

that would have been in effect but for the safeguard action. 

Section 326 states that the authority to provide safeguard relief 

under this subtitle expires five years after the date on which the 

Agreement enters into force. Section 327 of the Act gives authority 

to the President to provide compensation to CAFTA–DR countries 

if he orders relief. Section 328 provides for the treatment of confidential business information. 

Reason for change 

The Committee intends that the provisions of subtitle B be administered in a manner that is in compliance with U.S. obligations 

under Article 3.23 of the Agreement. In particular, the Committee 

expects that the President will implement a transparent process 

that will serve as an example to our trading partners. For example, 

in addition to publishing a summary of the request for safeguard 

relief, the Committee notes that the President plans to make available the full text of the request, subject to the protection of business confidential data, on the Department of Commerce, International Trade Administration’s website. In addition, the Committee encourages the President to issue regulations on procedures 

for requesting such safeguard measures, for making determinations 

under section 322(a), and for providing relief under section 322(b). 

Subtitle C: Cases Under Title II of the Trade Act of 1974 (Section 

331) 

Current law 

The President has no authority under Title II of the Trade Act 

of 1974 (‘‘section 201’’) to exclude articles from DR–CAFTA countries from the application of a safeguard remedy. A similar authority is granted with respect to Singaporean articles in section 331 

of the United States-Singapore Free Trade Agreement Implementation Act, to articles from Jordan in section 221 of the U.S.-Jordan 

Free Trade Area Implementation Act, and to articles from Australia in section 331 of the U.S.-Australia Free Trade Agreement 

Implementation Act. 

23 

Explanation of provision 

Section 331(a) provides that if the ITC makes an affirmative determination, or a determination that the President may consider to 

be an affirmative determination, in a global safeguard investigation 

under section 202(b) of the Trade Act of 1974, the ITC must find 

and report to the President whether imports of the article of each 

DR–CAFTA country considered individually that qualify as originating goods under section 203(b) are a substantial cause of serious 

injury or threat thereof. Under section 331(b), if the ITC makes a 

negative finding under section 331(a), the President may exclude 

any imports that are covered by the ITC’s finding from the global 

safeguard action. 

Reason for change 

This provision implements Article 8.6.2 of the Agreement. 

TITLE IV: MISCELLANEOUS 

SECTION 401: GOVERNMENT PROCUREMENT

Current law 

U.S. procurement law (the Buy American Act of 1933 and the 

Buy American Act of 1988) discriminates against foreign suppliers 

of goods and services in favor of U.S. providers of goods and services. Most discriminatory purchasing provisions are waived with respect to a country that is a party with the United States to a bilateral or multilateral procurement agreement, such as the WTO 

Agreement on Government Procurement and the NAFTA. 

Explanation of provision 

Section 401 amends the definition of ‘‘eligible product’’ in section 

308(4)(A) of the Trade Agreements Act of 1979. As amended, section 308(4)(A) provides that, for a DR–CAFTA country, an ‘‘eligible 

product’’ means a product or service of that country that is covered 

under the Agreement for procurement by the United States. 

Reason for change 

This provision implements U.S. obligations under Chapter Nine 

of the Agreement. 

SECTION 402: MODIFICATIONS TO THE CARIBBEAN BASIN ECONOMIC

RECOVERY ACT

Current law 

The Agreement countries are currently beneficiaries under the 

Caribbean Basin Economic Recovery Act (CBERA) and the Caribbean Basin Trade Partnership Act (CBTPA). As such, goods from 

these countries receive preferential trade treatment when entering 

the United States subject to various requirements. Inputs from 

such countries may be used by other CBERA and CBTPA beneficiaries (i.e., may be cumulated) in goods that qualify for benefits 

under the programs. 

Explanation of provision 

Section 402 of the bill makes several amendments to the CBERA 

in light of the fact that the Agreement countries will no longer be 

24 

beneficiary countries for purposes of the CBERA or CBTPA once 

the Agreement takes effect for them. 

Subsection 402(b) of the bill amends section 212(b) of the CBERA 

to delete the Agreement countries from the list of countries that 

the President may designate as beneficiary countries. Section 

402(a) of the bill amends section 212(a)(1) of the CBERA to define 

the term ‘‘former beneficiary country’’ to mean a country that 

ceases to be designated as a beneficiary country because the country has become a party to a free trade agreement with the United 

States. 

Section 402(c) of the bill amends section 213(a)(1) of the CBERA, 

which establishes the permissible source of materials and processing for benefits. Specifically, the bill provides that the term 

‘‘beneficiary country’’ also includes ‘‘former beneficiary countries’’ for purposes of determining whether the rules of origin under Section 213(a)(1) of CBERA have been satisfied. 

Section 402(d) of the bill adds subparagraphs (G) and (H) to 

213(b)(5) of the CBERA. Subparagraph (G) defines the term 

‘‘former CBTPA beneficiary country’’ to mean a country that ceases 

to be designated as a CBTPA beneficiary country because the country has become a party to a free trade agreement with the United 

States. 

Subparagraph (H) seeks to preserve benefits under currently recognized co-production operations and ensure that the remaining 

CBTPA beneficiary countries may continue to obtain preferential 

treatment for their goods even if the goods contain inputs of an 

Agreement country or the goods undergo processing in an Agreement country. Specifically, the subparagraph provides that a 

‘‘former CBTPA beneficiary country’’ will be considered a CBTPA 

beneficiary country for purposes of determining the eligibility of a 

good for preferential treatment under section 213(b)(2) of the 

CBERA (for certain textile and apparel articles) and section 

213(b)(3) of the CBERA, provided that the good undergoes some 

production in one of the remaining beneficiary countries. Subparagraph (H) also provides that a good that meets the requirements 

of the subparagraph will not be ineligible for preferential treatment 

under section 213(b)(2) or (3) because the good was imported directly from a former CBTPA beneficiary country. However, because 

Agreement countries will no longer be CBTPA beneficiary countries, subparagraph (H) provides that a good considered a good of 

an Agreement country under U.S. non-preferential rules of origin 

is not eligible for preferential treatment pursuant to subparagraph 

(H). This limitation does not apply to certain goods of the Dominican Republic that undergo production in Haiti, again for the purpose of preserving benefits for existing co-production operations. 

Reason for change 

Under the CBTPA, inputs of, and processing operations performed in, one or more CBTPA beneficiary countries may be combined in establishing that a good is eligible for preferential tariff 

treatment under the program. Section 402(d) is necessary because 

when the DR–CAFTA is implemented, the Central American countries and the Dominican Republic will lose their status as CBTPA 

beneficiary countries. Therefore, without an amendment to the law, 

the remaining CBTPA beneficiary countries would be unable to use 

25 

inputs of, or processing performed in, the DR–CAFTA countries in 

establishing that a good qualifies for preferential tariff treatment 

under the CBTPA program. Given the existing production relationships with the DR–CAFTA countries (such as apparel processing in 

which producers in one country cut fabric into components and producers in another country assemble the components into apparel), 

the Committee intends to allow remaining CBTPA beneficiary 

countries to continue to use inputs of, or processing performed in, 

former CBTPA beneficiary countries in establishing the eligibility 

for CBTPA preferential treatment of goods that are produced 

through a combination of operations (sometimes referred to as ‘‘coproduction’’) in remaining CBTPA beneficiary countries and former 

CBTPA beneficiary countries. 

In fashioning this section, the Committee, together with USTR, 

carefully analyzed existing commercial operations developed under 

CBERA and CBTPA to avoid disrupting the existing benefit structure created by Congress and relied upon by firms and beneficiary 

countries when making investments in the region. The amendment 

does not provide new benefits for the remaining CBTPA beneficiary 

countries or the former CBTPA beneficiary countries; rather the 

amendment preserves benefits the remaining CBTPA beneficiary 

countries already have under the CBTPA. 

General rule under section 402(d).—Clause (i) of subparagraph 

(H) provides that for purposes of determining the eligibility of an 

article for CBTPA preferential treatment, the term ‘‘CBTPA beneficiary country’’ includes a former CBTPA beneficiary country. 

Thus, any type of production activity that may, under the CBTPA, 

take place in a remaining CBTPA beneficiary country may also 

take place in a former CBTPA beneficiary country, subject to the 

country of origin limitation described below. For example, the 

CBTPA provides (in section 213(b)(2)(A)(ii)) duty-free treatment for 

apparel that is assembled in one or more CBTPA beneficiary countries from U.S. fabric that is cut into components in one or more 

CBTPA beneficiary countries. Under the general rule, this apparel 

article would not be disqualified from CBTPA preferential treatment because the fabric from which it was made was cut into components in a former CBTPA beneficiary country, instead of in a remaining CBTPA beneficiary. Similarly, an article using regionally 

produced fabric (from U.S. yarn), which is now eligible for duty-free 

treatment under CBPTA, would continue to satisfy the general rule 

because the article underwent production in a remaining CBPTA 

beneficiary country. For example, knit apparel made from Honduran knit fabric (from U.S. yarn) that is cut in Honduras but 

sewed or assembled in Jamaica would continue to be eligible under 

CBPTA. 

Imported directly.—Under CBERA, goods must be imported directly from a beneficiary country to obtain CBTPA preferential 

treatment. Clause (ii) of subparagraph (H) provides that a good will 

not be disqualified from CBTPA preferential treatment because it 

is imported directly from a former CBTPA beneficiary country. 

Country of origin limitation.—Clause (iii) of subparagraph (H) 

limits the scope of the general rule in clauses (i) and (ii). Specifically, clause (iii) provides that if a good is a good of a former 

CBTPA beneficiary country under the non-preferential rules of origin that the United States applies in the normal course of trade, 

26 

then the good is not eligible for CBTPA preferential treatment 

under the general rule. For example, under U.S. non-preferential 

rules of origin for textile and apparel goods, the country in which 

an apparel article is assembled is the country of origin. Therefore, 

an apparel article that is assembled in a former CBTPA beneficiary 

country would not qualify for CBTPA preferential treatment under 

the general rule because the article would be a good of the former 

CBTPA beneficiary country under U.S. non-preferential rules of origin. 

Haiti-DR exception.—Clause (iii) of subparagraph (H) makes an 

exception to the country of origin limitation in the case of a good 

that is co-produced in Haiti and the Dominican Republic. Under 

this exception, origin-conferring activities may take place in the 

Dominican Republic as long as the good contains inputs of, or undergoes processing in, Haiti. Using the example from above, if U.S. 

fabric is cut into components in Haiti, and the components are 

sewed and assembled in the Dominican Republic, the resulting apparel item will be eligible for CBTPA preferential treatment—even 

though the apparel item would be a good of the Dominican Republic under U.S. non-preferential rules of origin. 

SECTION 403: PERIODIC REPORTS AND MEETINGS ON LABOR

OBLIGATIONS AND LABOR CAPACITY-BUILDING PROVISIONS

Current law 

No provision. 

Explanation of provision 

Section 403 creates periodic report and meeting requirements on 

labor provisions of DR–CAFTA and the White Paper prepared by 

Agreement countries, in particular activities conducted by the DR–

CAFTA countries and the United States on capacity building on 

labor issues. 

Reason for change 

This provision was not included in the original preliminary draft 

of the implementing bill but was added by the Committee in the 

Chairman’s amendment in the nature of a substitute. These new 

provisions, providing for bi-annual progress reports on the implementation of DR–CAFTA’s labor provisions and the DR–CAFTA 

Trade and Labor Ministers’ ‘‘White Paper’’ and periodic meetings of 

the Secretary of Labor with the Ministers of Labor of the CAFTA–

DR countries, show the deep interest of the Committee in ensuring 

that the labor efforts described in the Agreement are closely monitored and vigorously implemented. Overall, these provisions will 

ensure that the Congress and Administration closely track the 

progress made by the nations that are parties to DR–CAFTA in 

promoting important, shared goals in protecting labor rights. 

The Committee notes with approval the recent letter dated June 

28, 2005, from Ambassador Portman to Senator Bingaman committing to significant funding for capacity building work that will improve enforcement of labor laws and compliance with the Agreement and the Trade and Labor Ministers’ ‘‘White Paper’’ as well as 

economic development assistance in the region. In particular, the 

Administration’s letter supports the recent increase in environVerDate Aug 04 2004 14:35 Jul 26, 2005 Jkt 039006 PO 00000 Frm 00026 Fmt 6659 Sfmt 6602 E:\HR\OC\HR182.XXX HR182
27 

mental and labor law enforcement capacity building funding in the 

FY 2006 Foreign Operations Appropriations bill from $20 million 

to $40 million and maintaining this level through FY09, a combined total of $160 million in that period. Moreover, the letter 

points to $390 million of U.S. Millennium Challenge Account funds 

for Honduras and Nicaragua, and pledges $150 million of additional Millennium Challenge Account funds in the next several 

years to the remaining Agreement countries. The Committee 

strongly believes that these meaningful funding commitments will 

improve compliance with the Labor obligations of the Agreement 

and will assist DR–CAFTA countries in meeting the development 

needs of rural populations as they adjust. 

III. VOTE OF THE COMMITTEE 

In compliance with clause 3(b) of rule XIII of the Rules of the 

House of Representatives, the following statements are made concerning the vote of the Committee on Ways and Means in its consideration of the bill, H.R. 3045. 

MOTION TO REPORT THE BILL

The bill, H.R. 3045, was ordered favorably reported by a rollcall 

vote of 25 yeas to 16 nays (with a quorum being present). The vote 

was as follows: 

Representatives Yea Nay Present Representative Yea Nay Present 

Mr. Thomas ........................... X ........... ............. Mr. Rangel ........................... ........... X .............

Mr. Shaw ............................... X ........... ............. Mr. Stark .............................. ........... X .............

Mrs. Johnson ......................... X ........... ............. Mr. Levin .............................. ........... X .............

Mr. Herger ............................. X ........... ............. Mr. Cardin ............................ ........... X .............

Mr. McCrery ........................... X ........... ............. Mr. McDermott ..................... ........... X .............

Mr. Camp .............................. X ........... ............. Mr. Lewis (GA) ..................... ........... X .............

Mr. Ramstad ......................... X ........... ............. Mr. Neal ............................... ........... X .............

Mr. Nussle ............................. X ........... ............. Mr. McNulty .......................... ........... X .............

Mr. Johnson ........................... X ........... ............. Mr. Jefferson ........................ X X .............

Mr. English ........................... ........... X ............. Mr. Tanner ............................ X ........... .............

Mr. Hayworth ......................... X ........... ............. Mr. Becerra .......................... ........... X .............

Mr. Weller .............................. X ........... ............. Mr. Doggett .......................... ........... X .............

Mr. Hulshof ........................... X ........... ............. Mr. Pomeroy ......................... ........... X .............

Mr. Lewis (KY) ...................... X ........... ............. Ms. Tubbs Jones .................. ........... X .............

Mr. Foley ............................... X ........... ............. Mr. Thompson ...................... ........... X .............

Mr. Brady .............................. X ........... ............. Mr. Larson ............................ ........... X .............

Mr. Reynolds ......................... X ........... ............. Mr. Emanuel ......................... ........... X .............

Mr. Ryan ............................... X ........... ............. .............................................. ........... ........... .............

Mr. Cantor ............................. X ........... ............. .............................................. ........... ........... .............

Mr. Linder ............................. X ........... ............. .............................................. ........... ........... .............

Mr. Beauprez ......................... X ........... ............. .............................................. ........... ........... .............

Ms. Hart ................................ X ........... ............. .............................................. ........... ........... .............

Mr. Chocola ........................... X ........... ............. .............................................. ........... ........... .............

Mr. Nunes ............................. X ........... ............. .............................................. ........... ........... .............

IV. BUDGET EFFECTS OF THE BILL 

A. COMMITTEE ESTIMATE OF BUDGETARY EFFECTS

In compliance with clause 3(d)(2) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the effects on the budget of this bill, H.R. 3045 as reported: 

The Committee generally agrees with the analysis prepared by 

CBO which is included below. 

28 

B. STATEMENT REGARDING NEW BUDGET AUTHORITY AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee states that enactment of 

H.R. 3045 would reduce customs duty receipts due to lower tariffs 

imposed on goods from DR–CAFTA countries 

C. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET

OFFICE

In compliance with clause 3(c)(3) of rule XIII of the Rules of the 

House of Representatives, requiring a cost estimate prepared by 

the Congressional Budget Office, the following report prepared by 

CBO is provided. 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, July 18, 2005. 

Hon. WILLIAM ‘‘BILL’’ M. THOMAS, 

Chairman, Committee on Way and Means, 

House of Representatives, Washington DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 3045, the Dominican Republic-Central America-United States Free Trade Agreement Implementation Act. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Annabelle Bartsch. 

Sincerely, 

DOUGLAS HOLTZ-EAKIN, Director. 

Enclosure. 

H.R. 3045—Dominican Republic-Central America-United States 

Free Trade Agreement Implementation Act 

Summary: H.R. 3045 would approve the Dominican RepublicCentral America-United States Free Trade Agreement (CAFTA–

DR) between the government of the United States and the governments of the Dominican Republic and five Central American countries. The agreement, which was entered into with Costa Rica, El 

Salvador, Guatemala, Honduras, and Nicaragua on May 28, 2004, 

and with the Dominican Republic on august 5, 2004, would provide 

for tariff reductions and other changes in law related to implementation of the agreement. 

The Congressional Budget Office estimates that implementing 

the agreement would reduce revenues by $3 million in 2006, about 

$1.1 billion over the 2006–2010 period, and about $4.4 billion over 

the 2006–2015 period, net of income and payroll tax offsets. CBO 

estimates the it also would increase direct spending by $27 million 

in 2006, $245 million over the 2006–2010 period, and $621 million 

over the 2006–2015 period. 

CBO has determined that H.R. 3045 contains no intergovernmental or private-sector mandates as defined in the Unfunded 

Mandates Reform Act (UMRA) and would not directly affect the 

budgets of state, local, or tribal governments. 

29 

Estimated cost to the Federal Government: The estimated budgetary impact of H.R. 3045 over the 2005–2015 period is shown in 

the following table. 

By fiscal year, in millions of dollars— 

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 

CHANGES IN REVENUES 

Estimated Revenues ............. 0 ¥3 ¥5 ¥7 ¥525 ¥556 ¥582 ¥608 ¥646 ¥689 ¥733 

CHANGES IN DIRECT SPENDING 

Effect on Farm Programs: 

Estimated Budget Authority ...................... 0 24 35 41 49 55 55 57 59 61 64 

Estimated Outlays ....... 0 24 35 41 49 55 55 57 59 61 64 

Merchandise Processing Fee: 

Estimated Budget Authority ...................... 0 3 4 4 15 15 20 20 20 20 0 

Estimated Outlays ....... 0 3 4 4 15 15 20 20 20 20 0 

Trade Adjustment Assistance: 

Estimated Budget Authority ...................... 0 * * * * * * * * * * 

Estimated Outlays ....... 0 * * * * * * * * * * 

Total Changes: 

Estimated Budget Authority ...................... 0 27 39 45 64 70 75 77 79 81 64 

Estimated Outlays ....... 0 27 39 45 64 70 75 77 79 81 64 

Notes.—* = Less than $500,000. Negative changes in revenues and positive changes in direct spending correspond to increases in budget 

deficits. 

Basis of estimate 

Revenues 

Under the agreement, tariffs on U.S. imports from the Dominican Republic, Costa Rica, El Salvador, Guatemala, Honduras, and 

Nicaragua would be phased out over time. The tariffs would be 

phased out for individual products at varying rates according to 

one of several different timetables ranging from immediate elimination on January 1, 2006, to gradual elimination over 20 years. 

According to the U.S. International Trade Commission (USITC), 

the United States collected $518 million in customs duties in 2004 

on $17.7 billion of imports from those six countries. Those imports 

consist mostly of various types of apparel articles and produce. 

Nearly 80 percent of all imports from the region entered the United 

States duty-free because the United States has normal trading relations with those six countries or because the goods are imported 

under one of several U.S. trade programs. 

However those programs are scheduled to expire in the next 

three years. The Generalized System of Preferences will expire on 

September 30, 2006, and the Caribbean Basin Initiative will expire 

on September 30, 2008. 

CAFTA–DR would afford imports from the region preferential 

treatment similar to what they currently receive. Based on data 

from USITC and CBO’s most recent forecast of U.S. imports, CBO 

estimates that phasing out tariff rates as outlined in the agreement 

wou1d reduce revenues by $3 million in 2006, about $1.1 billion 

over the 2006–2010 period, and about $4.4 billion over the 2006– 2015 period, net of income and payroll tax offsets. 

This estimate includes the effects of increased imports from the 

region that would result from the reduced prices of imported prodVerDate Aug 04 2004 14:35 Jul 26, 2005 Jkt 039006 PO 00000 Frm 00029 Fmt 6659 Sfmt 6602 E:\HR\OC\HR182.XXX HR182
30 

ucts in the United States, reflecting the lower tariff rates. It is likely that some of the increase in U.S. imports from the six countries 

would displace imports from other countries. In the absence of specific data on the extent of this substitution effect, CBO assumes 

that an amount equal to one-half of the increase in U.S. imports 

from the region would displace imports from other countries. 

Direct spending 

Effect on Department of Agricultural Sugar Programs. CAFTA– DR would provide the six countries with guaranteed minimum access to the U.S. sugar market. Imports of sugar from these countries would be tariff-free and could increase over time. By increasing the amount of sugar supplied to the U.S. by exporting countries, CBO estimates that the cost of the federal sugar program 

would likely increase. 

Federal government programs support the income of sugar growers primarily by limiting the supply of sugar through domestic 

marketing allotments—permission to market domestically produced 

sugar—and import quotas. In addition, a system of nonrecourse 

price-support loans is used to guarantee sugar growers a minimum 

price, if the domestic and import restrictions do not result in a sufficiently high market price. The nonrecourse loan program allows 

producers to pledge their sugar as collateral against a loan from 

the government at the price-support loan rate. The ‘‘nonrecourse’’ aspect allows them to forfeit their sugar to the government in lieu 

of repaying the loan when prices are low, resulting in a quantity 

of sugar being removed from the market, thus supporting the price. 

The government attempts to limit the supply of sugar through domestic allotments and import quotas to avoid costs in the price-support loan system in most years. Unexpected market events have resulted in substantial costs for the price-support loan program in 

some recent years (for example, sugar program costs were $465 

million in 2000 and $61 million in 2004). 

In addition, trade agreements and other commitments have provided other sugar-producing countries with minimum access guarantees to our markets, and tariffs on over-quota U.S. imports from 

Mexico are scheduled to drop to zero in 2008. Furthermore, if the 

total amount of U.S. sugar imports in any year exceeds (or is estimated to exceed) a legislated quantity of 1,532 million short tons 

(excluding some categories, for instance, re-exported sugar), domestic marketing allotments must be canceled under current law, 

meaning that marketing of domestically produced sugar would be 

unrestrained. 

CBO estimates that by providing additional import access guarantees in compliance with CAFTA–DR, the sugar program will 

likely cost an additional $500 million over the 2006–2015 period. 

Annual estimates are shown in the table above. As with programs 

for most agricultural commodities, conditions in domestic and 

world markets are highly variable, making estimates of program 

costs for sugar somewhat uncertain. Actual costs could be either 

higher or lower in any given year, and these estimated costs represent our best estimate of expected costs over the estimation period. Consistent with the current budget resolution (H. Con. Res. 

95), this estimate is relative to CBO’s March 2005 assumptions 

about sugar market conditions. More current information conVerDate Aug 04 2004 14:35 Jul 26, 2005 Jkt 039006 PO 00000 Frm 00030 Fmt 6659 Sfmt 6602 E:\HR\OC\HR182.XXX HR182
31 

cerning that market indicates that the cost of this legislation would 

likely be lower in 2006 and possibly lower in 2007, with no significant change in later years. 

Merchandise Processing Fee. This legislation would exempt certain goods imported from the Dominican Republic, Costa Rica, El 

Salvador, Guatemala, Honduras, and Nicaragua from merchandise 

processing fees collected by the Department of Homeland Security. 

Such fees are recorded as offsetting receipts (a credit against direct 

spending). Based on the value of goods imported from those countries in 2004, CBO estimates that implementing this provision 

would reduce fee collections by about $3 million in fiscal year 2006 

and by a total of $120 million over the 2006–2014 period, with no 

effect thereafter because the authority to collect merchandise processing fees expires at the end of 2014. 

Trade Adjustment Assistance. Implementing CAFTA–DR could 

have a negligible effect on the Trade Adjustment Assistance program (TAA). TAA provides extended unemployment compensation, 

job training, and health insurance tax credits for individuals who 

lose their job due to increases in imports. Based on information 

from the International Trade Commission regarding projected employment losses in various industries, CBO estimates that the 

added costs to TAA would be less than $5 million over the 2006–

2015 period, and less than $500,000 in each year over that period. 

Estimated impact on State, local, and tribal governments: The 

bill contains no intergovernmental mandates as defined in UMRA 

and would not affect the budgets of state, local, or tribal governments. 

Estimated impact on the private sector: CBO estimates that 

under the bill, the tariff rates would be no greater than under current law. Consequently, this bill would not impose any private-sector mandates as defined in UMRA. 

Previous CBO estimate: On July 18, 2005, CBO also transmitted 

a cost estimate for S. 1307, identical legislation passed by the Senate on June 30, 2005. The two cost estimates are identical. 

Estimate prepared by: Federal Revenues: Annabelle Bartsch and 

Emily Schlect. Federal Spending: Mark Grabowicz, David Hull, and 

Christi Hawley-Sadoti. Impact on State, Local, and Tribal Governments: Melissa Merrell. Impact on the Private Sector: Selena 

Caldera. 

Estimate approved by: G. Thomas Woodward, Assistant Director 

for Tax Analysis; and Peter H. Fontaine, Deputy Assistant Director 

for Budget Analysis. 

V. OTHER MATTERS TO BE DISCUSSED UNDER THE 

RULES OF THE HOUSE 

A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

With respect to clause 3(c)(1) of rule XIII of the Rules of the 

House of Representatives (relating to oversight findings), the Committee, based on public hearing testimony and information from 

the Administration, concluded that it is appropriate and timely to 

consider the bill as reported. In addition, the legislation is governed 

by procedures of the Bipartisan Trade Promotion Authority Act of 

2002. 

32 

B. STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

With respect to clause 3(c)(4) of rule XIII of the Rules of the 

House of Representatives, the Committee advises that the bill H.R. 

3045 makes de minimis authorization of funding, and the Administration has in place program goals and objectives, which have been 

reviewed by the Committee. 

C. CONSTITUTIONAL AUTHORITY STATEMENT

With respect to clause 3(d)(1) of rule XIII of the Rules of the 

House of Representatives, relating to Constitutional Authority, the 

Committee states that the Committee’s action in reporting the bill 

is derived from Article 1 of the Constitution, Section 8 (‘The Congress shall have power to lay and collect taxes, duties, imposts and 

excises, to pay the debts and to provide for * * * the general Welfare of the United States.’) 

D. INFORMATION RELATING TO UNFUNDED MANDATES

This information is provided in accordance with section 423 of 

the Unfunded Mandates Act of 1995 (P.L. 104–4). 

The Committee has determined that the bill does not contain 

Federal mandates on the private sector. The Committee has determined that the bill does not impose a Federal intergovernmental 

mandate on State, local, or tribal governments. 

VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS 

REPORTED 

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

existing law in which no change is proposed is shown in roman): 

SECTION 13031 OF THE CONSOLIDATED OMNIBUS 

BUDGET RECONCILIATION ACT OF 1985 

SEC. 13031. FEES FOR CERTAIN CUSTOMS SERVICES. 

(a) * * * 

(b) LIMITATIONS ON FEES.—(1) * * * 

* * * * * * * 

(15) No fee may be charged under subsection (a) (9) or (10) 

with respect to goods that qualify as originating goods under 

section 203 of the Dominican Republic-Central America-United 

States Free Trade Agreement Implementation Act. Any service 

for which an exemption from such fee is provided by reason of 

this paragraph may not be funded with money contained in the 

Customs User Fee Account. 

* * * * * * * 

TARIFF ACT OF 1930 

* * * * * * * 

33 

SEC. 508. RECORDKEEPING. 

(a) * * * 

* * * * * * * 

(g) CERTIFICATIONS OF ORIGIN FOR GOODS EXPORTED UNDER THE

DOMINICAN REPUBLIC-CENTRAL AMERICA-UNITED STATES FREE

TRADE AGREEMENT.— (1) DEFINITIONS.—In this subsection: 

(A) RECORDS AND SUPPORTING DOCUMENTS.—The term ‘‘records and supporting documents’’ means, with respect to 

an exported good under paragraph (2), records and documents related to the origin of the good, including— (i) the purchase, cost, and value of, and payment for, 

the good; 

(ii) the purchase, cost, and value of, and payment 

for, all materials, including indirect materials, used in 

the production of the good; and 

(iii) the production of the good in the form in which 

it was exported. 

(B) CAFTA–DR CERTIFICATION OF ORIGIN.—The term 

‘‘CAFTA–DR certification of origin’’ means the certification 

established under article 4.16 of the Dominican RepublicCentral America-United States Free Trade Agreement that 

a good qualifies as an originating good under such Agreement. 

(2) EXPORTS TO CAFTA–DR COUNTRIES.—Any person who completes and issues a CAFTA–DR certification of origin for a good 

exported from the United States shall make, keep, and, pursuant to rules and regulations promulgated by the Secretary of 

the Treasury, render for examination and inspection all records 

and supporting documents related to the origin of the good (including the certification or copies thereof). 

(3) RETENTION PERIOD.—Records and supporting documents 

shall be kept by the person who issued a CAFTA–DR certification of origin for at least 5 years after the date on which the 

certification was issued. 

ø(g)¿ (h) PENALTIES.—Any person who fails to retain records and 

supporting documents required by subsection (f) or (g) or the regulations issued to implement øthat subsection¿ either such subsection shall be liable for the greater of—

(1) * * * 

* * * * * * * 

SEC. 514. PROTEST AGAINST DECISIONS OF THE CUSTOMS SERVICE. 

(a) * * * 

* * * * * * * 

(h) DENIAL OF PREFERENTIAL TARIFF TREATMENT UNDER THE DO- MINICAN REPUBLIC-CENTRAL AMERICA-UNITED STATES FREE TRADE

AGREEMENT.—If the Bureau of Customs and Border Protection or 

the Bureau of Immigration and Customs Enforcement finds indications of a pattern of conduct by an importer, exporter, or producer 

of false or unsupported representations that goods qualify under the 

rules of origin set out in section 203 of the Dominican Republic-Central America-United States Free Trade Agreement Implementation 

Act, the Bureau of Customs and Border Protection, in accordance 

34 

with regulations issued by the Secretary of the Treasury, may suspend preferential tariff treatment under the Dominican RepublicCentral America-United States Free Trade Agreement to entries of 

identical goods covered by subsequent representations by that importer, exporter, or producer until the Bureau of Customs and Border Protection determines that representations of that person are in 

conformity with such section 203. 

* * * * * * * 

SEC. 520. REFUNDS AND ERRORS. 

(a) * * * 

* * * * * * * 

(d) GOODS QUALIFYING UNDER FREE TRADE AGREEMENT RULES

OF ORIGIN.—Notwithstanding the fact that a valid protest was not 

filed, the Customs Service may, in accordance with regulations prescribed by the Secretary, reliquidate an entry to refund any excess 

duties (including any merchandise processing fees) paid on a good 

qualifying under the rules of origin set out in section 202 of the 

North American Free Trade Agreement Implementation Act øor 

section 202 of the United States-Chile Free Trade Agreement Implementation Act¿, section 202 of the United States-Chile Free 

Trade Agreement Implementation Act, or section 203 of the Dominican Republic-Central America-United States Free Trade Agreement 

Implementation Act for which no claim for preferential tariff treatment was made at the time of importation if the importer, within 

1 year after the date of importation, files, in accordance with those 

regulations, a claim that includes—

(1) * * * 

(2) copies of all applicable NAFTA Certificates of Origin (as 

defined in section 508(b)(1)), or other certificates or certifications of origin, as the case may be; and 

* * * * * * * 

SEC. 592. PENALTIES FOR FRAUD, GROSS NEGLIGENCE, AND NEGLIGENCE. 

(a) * * * 

* * * * * * * 

(c) MAXIMUM PENALTIES.—

(1) * * * 

* * * * * * * 

(9) PRIOR DISCLOSURE REGARDING CLAIMS UNDER THE DOMINICAN REPUBLIC-CENTRAL AMERICA-UNITED STATES FREE TRADE

AGREEMENT.—An importer shall not be subject to penalties 

under subsection (a) for making an incorrect claim that a good 

qualifies as an originating good under section 203 of the Dominican Republic-Central America-United States Free Trade 

Agreement Implementation Act if the importer, in accordance 

with regulations issued by the Secretary of the Treasury, 

promptly and voluntarily makes a corrected declaration and 

pays any duties owing. 

ø(9)¿ (10) SEIZURE.—If the Secretary has reasonable cause to 

believe that a person has violated the provisions of subsection 

(a) and that such person is insolvent or beyond the jurisdiction 

of the United States or that seizure is otherwise essential to 

35 

protect the revenue of the United States or to prevent the introduction of prohibited or restricted merchandise into the customs territory of the United States, then such merchandise 

may be seized and, upon assessment of a monetary penalty, 

forfeited unless the monetary penalty is paid within the time 

specified by law. Within a reasonable time after any such seizure is made, the Secretary shall issue to the person concerned 

a written statement containing the reasons for the seizure. 

After seizure of merchandise under this subsection, the Secretary may, in the case of restricted merchandise, and shall, in 

the case of any other merchandise (other than prohibited merchandise), return such merchandise upon the deposit of security not to exceed the maximum monetary penalty which may 

be assessed under subsection (c). 

* * * * * * * 

(h) FALSE CERTIFICATIONS OF ORIGIN UNDER THE DOMINICAN REPUBLIC-CENTRAL AMERICA-UNITED STATES FREE TRADE AGREEMENT.—

(1) IN GENERAL.—Subject to paragraph (2), it is unlawful for 

any person to certify falsely, by fraud, gross negligence, or negligence, in a CAFTA–DR certification of origin (as defined in 

section 508(g)(1)(B) of this Act) that a good exported from the 

United States qualifies as an originating good under the rules 

of origin set out in section 203 of the Dominican Republic-Central America-United States Free Trade Agreement Implementation Act. The procedures and penalties of this section that apply 

to a violation of subsection (a) also apply to a violation of this 

subsection. 

(2) PROMPT AND VOLUNTARY DISCLOSURE OF INCORRECT INFORMATION.—No penalty shall be imposed under this subsection 

if, promptly after an exporter or producer that issued a CAFTA–

DR certification of origin has reason to believe that such certification contains or is based on incorrect information, the exporter or producer voluntarily provides written notice of such 

incorrect information to every person to whom the certification 

was issued. 

(3) EXCEPTION.—A person may not be considered to have violated paragraph (1) if—

(A) the information was correct at the time it was provided in a CAFTA–DR certification of origin but was later 

rendered incorrect due to a change in circumstances; and 

(B) the person promptly and voluntarily provides written 

notice of the change in circumstances to all persons to 

whom the person provided the certification. 

* * * * * * * 

SECTION 202 OF THE TRADE ACT OF 1974 

SEC. 202. INVESTIGATIONS, DETERMINATIONS, AND RECOMMENDATIONS BY COMMISSION. 

(a) PETITIONS AND ADJUSTMENT PLANS.—

(1) * * * 

* * * * * * * 

36 

(8) The procedures concerning the release of confidential 

business information set forth in section 332(g) of the Tariff 

Act of 1930 shall apply with respect to information received by 

the Commission in the course of investigations conducted 

under this chapter, part 1 of title III of the North American 

Free Trade Agreement Implementation Act, title II of the 

United States-Jordan Free Trade Area Implementation Act, 

title III of the United States-Chile Free Trade Agreement Implementation Act, title III of the United States-Singapore Free 

Trade Agreement Implementation Act, title III of the United 

States-Australia Free Trade Agreement Implementation Act, 

øand¿ title III of the United States-Morocco Free Trade Agreement Implementation Act, and title III of the Dominican Republic-Central America-United States Free Trade Agreement 

Implementation Act. The Commission may request that parties 

providing confidential business information furnish nonconfidential summaries thereof or, if such parties indicate that the 

information in the submission cannot be summarized, the reasons why a summary cannot be provided. If the Commission 

finds that a request for confidentiality is not warranted and if 

the party concerned is either unwilling to make the information public or to authorize its disclosure in generalized or summarized form, the Commission may disregard the submission. 

* * * * * * * 

SECTION 308 OF THE TRADE AGREEMENTS ACT OF 1979 

SEC. 308. DEFINITIONS. 

As used in this title—

(1) * * * 

* * * * * * * 

(4) ELIGIBLE PRODUCTS.—

(A) IN GENERAL.—The term ‘‘eligible product’’ means, 

with respect to any foreign country or instrumentality that 

is—

(i) * * * 

(ii) a party to the North American Free Trade 

Agreement, a product or service of that country or instrumentality which is covered under the North American Free Trade Agreement for procurement by the 

United States; øor¿ 

(iii) a party to a free trade agreement that entered 

into force with respect to the United States after December 31, 2003, and before January 2, 2005, a product or service of that country or instrumentality which 

is covered under the free trade agreement for procurement by the United Statesø.¿; or 

(iv) a party to the Dominican Republic-Central 

America-United States Free Trade Agreement, a product or service of that country or instrumentality which 

37 

is covered under that Agreement for procurement by the 

United States. 

* * * * * * * 

CARIBBEAN BASIN ECONOMIC RECOVERY ACT 

TITLE II—CARIBBEAN BASIN INITIATIVE 

SEC. 201. SHORT TITLE. 

This title may be cited as the ‘‘Caribbean Basin Economic Recovery Act’’. 

* * * * * * * 

SEC. 212. BENEFICIARY COUNTRY. 

(a)(1) For purposes of this title—

(A) * * * 

* * * * * * * 

(F) The term ‘‘former beneficiary country’’ means a country that ceases to be designated as a beneficiary country 

under this title because the country has become a party to 

a free trade agreement with the United States. 

* * * * * * * 

(b) In designating countries as ‘‘beneficiary countries’’ under this 

title the President shall consider only the following countries and 

territories or successor political entities: 

Anguilla 

Antigua and Barbuda 

Bahamas, The 

Barbados 

Belize 

Cayman Islands 

øCosta Rica¿ 

Dominica 

øDominican Republic¿ 

øEl Salvador¿ 

Grenada 

øGuatemala¿ 

Guyana 

Haiti 

øHonduras¿ 

Jamaica 

Montserrat 

Netherlands Antilles 

øNicaragua¿ 

Panama 

Saint Lucia 

Saint Vincent and the Grenadines 

Suriname 

Trinidad and Tobago 

Saint Christopher-Nevis 

Turks and Caicos Islands 

Virgin Islands, British 

In addition, the President shall not designate any country a beneficiary country under this title—

(1) * * * 

* * * * * * * 

SEC. 213. ELIGIBLE ARTICLES. 

(a)(1) Unless otherwise excluded from eligibility by this title, and 

subject to section 423 of the Tax Reform Act of 1986, and except 

as provided in subsection (b)(2) and (3), the duty-free treatment 

provided under this title shall apply to any article which is the 

growth, product, or manufacture of a beneficiary country if— (A) * * * 

* * * * * * * 

For purposes of determining the percentage referred to in subparagraph (B), the term ‘‘beneficiary country’’ includes øthe CommonVerDate Aug 04 2004 14:35 Jul 26, 2005 Jkt 039006 PO 00000 Frm 00037 Fmt 6659 Sfmt 6601 E:\HR\OC\HR182.XXX HR182
38 

wealth of Puerto Rico and the United States Virgin Islands¿ the 

Commonwealth of Puerto Rico, the United States Virgin Islands, 

and any former beneficiary country. If the cost or value of materials 

produced in the customs territory of the United States (other than 

the Commonwealth of Puerto Rico) is included with respect to an 

article to which this paragraph applies, an amount not to exceed 

15 per centum of the appraised value of the article at the time it 

is entered that is attributed to such United States cost or value 

may be applied toward determining the percentage referred to in 

subparagraph (B). 

* * * * * * * 

(b) IMPORT-SENSITIVE ARTICLES.—

(1) * * * 

* * * * * * * 

(5) DEFINITIONS AND SPECIAL RULES.—For purposes of this 

subsection— (A) * * * 

* * * * * * * 

(G) FORMER CBTPA BENEFICIARY COUNTRY.—The term ‘‘former CBTPA beneficiary country’’ means a country that 

ceases to be designated as a CBTPA beneficiary country 

under this title because the country has become a party to 

a free trade agreement with the United States. 

(H) ARTICLES THAT UNDERGO PRODUCTION IN A CBTPA

BENEFICIARY COUNTRY AND A FORMER CBTPA BENEFICIARY

COUNTRY.—(i) For purposes of determining the eligibility of 

an article for preferential treatment under paragraph (2) or 

(3), references in either such paragraph, and in subparagraph (C) of this paragraph to—

(I) a ‘‘CBTPA beneficiary country’’ shall be considered to include any former CPTPA beneficiary country, 

and 

(II) ‘‘CBTPA beneficiary countries’’ shall be considered to include former CBTPA beneficiary countries, 

if the article, or a good used in the production of the article, 

undergoes production in a CBTPA beneficiary country. 

(ii) An article that is eligible for preferential treatment 

under clause (i) shall not be ineligible for such treatment 

because the article is imported directly from a former 

CBTPA beneficiary country. 

(iii) Notwithstanding clauses (i) and (ii), an article that 

is a good of a former CBTPA beneficiary country for purposes of section 304 of the Tariff Act of 1930 (19 U.S.C. 

1304) or section 334 of the Uruguay Round Agreements Act 

(19 U.S.C. 3592), as the case may be, shall not be eligible 

for preferential treatment under paragraph (2) or (3), unless—

(I) it is an article that is a good of the Dominican 

Republic under either such section 304 or 334; and 

(II) the article, or a good used in the production of 

the article, undergoes production in Haiti. 

* * * * * * * 

(39) 

VII. VIEWS 

ADDITIONAL VIEWS OF REPRESENTATIVE JEFFERSON 

As a Democrat with a firm commitment to eliminate poverty and 

to improve the lives of workers both here and abroad, I believe it 

is important to discuss the important policy implications contained 

in the proposed U.S.–FTA with the Dominican Republic and the 

countries of Central America (DR–CAFTA). In supporting the DR– CAFTA, I have determined the United States can best promote improvements both to working conditions and labor standards in 

those countries with the commitments and the supporting capacitybuilding provisions of this Agreement. 

For years Democrats have promoted democracy in Central America and have spoken about the need to secure commitments from 

developing countries on core international labor standards and 

labor enforcement; we have sought U.S. commitments to substantive and comprehensive labor capacity-building programs; and 

we have sought to ensure a role for the International Labor Organization (ILO) in these efforts. With this unprecedented Agreement, we have all of these things. 

There are many important reasons why Democrats should vote 

for greater economic integration with our Central American friends 

and neighbors: • First, DR–CAFTA promotes economic opportunity for the 

workers of the region who are facing massive competition from 

Asia and elsewhere in the most significant formal source of 

economic livelihood—textile and apparel production. With 

nearly half the population of these countries living in severe 

poverty without formal employment, the continued competitiveness of the textile and apparel industry and other industries DR–CAFTA can promote is critical. I’ve heard my colleagues suggest that the DR–CAFTA textile and apparel rules 

remain too strict to really make a difference. But the countries 

and the companies who invest and purchase from the region 

believe differently. Many of us had hoped for more flexibility, 

but those whose livelihoods depend on these issues believe that 

the new flexibilities DR–CAFTA provides are critical to support an industry that provides some of the best-paying jobs in 

the region (and that also purchases significant U.S. inputs). 

Without DR–CAFTA, these jobs will ebb away, as many have 

already started to do, since the elimination of global textile and 

apparel quotas at the beginning of the year. • Equally important are the strong investment ties that can 

be bolstered by this agreement that are critical to support 

much-needed economic growth. We all know that investment 

flows around the world far out-value bilateral or even multilatVerDate Aug 04 2004 14:35 Jul 26, 2005 Jkt 039006 PO 00000 Frm 00039 Fmt 6604 Sfmt 6604 E:\HR\OC\HR182.XXX HR182
40 

1The 1988 ILO Declaration defines the core labor principles as: 

• Freedom of association and the right to collective bargaining; 

• The elimination of forced and compulsory labour; • The abolition of child labour, and; 

eral aid. Helping these countries improve their investment climate through a more permanent relationship with the United 

States and many of the provisions of the DR–CAFTA—including increased transparency, curbs on corruption, and provisions 

that promote the rule of law—could in fact be the single most 

important driver to improve the lives of our neighbors in Central America and the Dominican Republic. • And finally, there are the Agreement’s labor provisions— both the commitments made by each country in the labor chapter to enforce domestic laws (provided for in their constitutions 

and ratified treaties, such as the core ILO conventions these 

countries have largely ratified) and the capacity-building program built in to the DR–CAFTA, which the six governments 

recently relied upon in undertaking an unprecedented commitment to improve labor standards and enforcement in each of 

their countries in very concrete ways. These provisions are also 

strengthened by the DR–CAFTA countries’ commitments to the 

Inter-American Development Bank (IDB) and the ILO outlined 

in the ‘‘White Paper’’. But, despite all of these provisions and commitments, it is argued that the DR–CAFTA’s labor provisions are a backwards step 

and that the DR–CAFTA should not be supported because of the 

DR–CAFTA countries’ history of weak labor laws and suppressing 

worker rights. 

DR–CAFTA’S LABOR COMMITMENTS ARE STRONG AND ENFORCEABLE

The DR–CAFTA commits each of the countries to enforce domestic labor laws, subject to binding, time-limited dispute settlement 

and monetary fines of up to $15 million per occurrence, per year, 

that the United States and Labor Affairs Council must decide how 

the country will spend to improve labor law enforcement. If the offending country does not provide the funds, the United States can 

impose trade sanctions. Chapter 16.8 of the DR–CAFTA defines ‘‘Labor Law’’ to be a Party’s statutes or regulations, or provisions 

thereof, which are directly related to the following internationally 

recognized labor rights: 

• The right of association; 

• The right to organize and bargain collectively; 

• A prohibition on the use of any form of forced or compulsory labor; 

• A minimum age for the employment of children and the 

prohibition and elimination of the worst forms of child labor; 

and 

• Acceptable conditions of work with respect to minimum 

wages, hours of work, and occupational safety and health. 

A careful reading of the 1998 ILO Declaration on Fundamental 

Rights and Principles at Work, which promotes the observance of 

the ILO’s core labor principles, demonstrates that this definition 

adequately incorporates the ILO core principles into the DR–

CAFTA.1

41 

• The elimination of discrimination in the workplace. 2 All but one of the DR–CAFTA countries has already ratified all eight of the core ILO conventions (EI Salvador has ratified two), which are in fact incorporated into their domestic laws. All 

of the countries have extensive labor codes and a tripartite process (including the government, 

labor and business) that must work together in proposing any changes to those laws. 

The DR–CAFTA’s labor provisions are stronger than those of the 

NAFTA, which has labor protections in a side agreement and does 

not provide dispute settlement subject to monetary fines or trade 

sanctions for violations of core labor laws. The Agreement’s labor 

provisions are also stronger than the Jordan FTA, which does not 

have binding dispute settlement and under which the offending 

country can block even the formation of an objective panel to review its labor laws. Finally, these labor provisions are indeed 

stronger than current preference programs, such as CBI, which requires the President to deny all preferential benefits if the country 

‘‘has not [taken] or is not taking steps to afford internationally recognized worker rights’’. Such a standard does not even require the 

enforcement of existing labor laws. 

Critics have argued that the DR–CAFTA countries can weaken 

their laws since the DR–CAFTA commitment not to weaken labor 

laws is explicitly made not subject to dispute settlement. DR– CAFTA and the Jordan FTA contain almost identical language on 

this Issue, stating: 

each Party shall strive to ensure that it does not waive or 

otherwise derogate from, or offer to waive or otherwise 

derogate from, such laws in a manner that weakens or reduces adherence to the internationally recognized labor 

rights referred to an Article 16.8 as an encouragement for 

trade with the another Party, or as an encouragement for 

the establishment, acquisition, expansion, or retention of an 

investment in its territory. (Italicized language is only 

found in DR–CAFTA, not in the Jordan FTA) 

This obligation was not explicitly exempt from dispute settlement 

in the Jordan FTA, although the hortatory nature of the commitment undercuts the notion that this is a standard justiciable by formal dispute settlement. The Parties agreed to ‘‘strive to ensure’’ not 

to weaken law, a far different type of commitment than the ‘‘enforce your own laws’’ standard found in both DR–CAFTA and Jordan. In fact, this type of hortatory standard in Jordan, DR–CAFTA 

and all the other recent FTAs, is one of political will, not a justiciable standard that is subject to dispute settlement. But political 

will remains an extremely potent force. 

Much more importantly, these countries’ labor standards are embedded in their democratic systems in a manner that makes them 

not subject to precipitate change. Consider that for most of the six 

countries, all of the core ILO protections are explicitly, albeit generally, included in their Constitutions—obviously not subject to 

change at whim.2

As we know from our own democratic system, labor law issues 

are complex and subject to many factors. They simply are not and 

cannot be changed overnight. 

The structure of the monetary fines for labor (and environmental) violations in the DR–CAFTA is quite innovative and will 

provide more than adequate incentives for countries to enforce 

42 

their laws and improve upon their ability to afford internationally 

recognized worker rights. Consider: • The fines (up to $15 million per occurrence) are fairly significant given these governments’ annual budgets; • The fines can be applied annually if the problem is not 

fixed; and • Most significantly, the fines collected will be re-invested 

and focused on addressing the failure of enforcement, which is 

oftentimes due to insufficient resources or lack of capacity, 

which the fines can more effectively address than trade sanctions. 

Trade sanctions in the form of revoking trade benefits often 

cause disruptions in investment flows and hurt U.S. importers 

working with these trading partners. For us, the greater concern 

is the uncertainty and dislocation that would come from the revocation of trade benefits that will negatively impact the workers in the 

DR–CAFTA countries. 

DR–CAFTA REPRESENTS A MARKED IMPROVEMENT OVER UNILATERAL

PREFERENCE PROGRAMS FOUND IN EXISTING LAW (GS, CBI, AND

CBPTA)

The unilateral trade preference programs require the President 

(unless an exemption applies) to withdraw all of the unilateral 

preference benefits if he finds that a country ‘‘has not [taken] or 

is not taking steps to afford internationally recognized worker 

rights.’’ Here, the U.S. government is not required to do anything 

to help countries improve their capacity to afford or enforce worker 

rights. In part, for this reason, the use of trade sanctions under 

many of the unilateral preference programs has rarely been used. 

I am convinced that the approach in DR–CAFTA’s Labor Chapter 

is likely to be far more effective in promoting worker rights in the 

DR–CAFTA countries. DR–CAFTA provides for a neutral, time-limited dispute settlement panel process, unlike the wholly Administration-driven process of GSP, CBI and CBTPA, where reviews can 

be prolonged for many years. DR–CAFTA also provides for focused 

penalties, rather than the all-or-nothing approach of GSP, CBI and 

CBPTA, which has rarely produced sanctions. Finally, the DR–

CAFTA requires each country to enforce its labor laws, in their 

constitutions and on their books. GSP, CBI and CBTPA simply do 

not do have that requirement. 

Last, but not least, is the issue of whether the DR–CAFTA countries’ laws are good enough. 

While the DR–CAFTA countries’ laws can certainly be improved 

in several areas, these countries in fact have the most basic labor 

protections in their constitutions and in their laws. Even a cursory 

review of the two International Labor Organization reports on the 

DR–CAFTA countries’ labor laws reveals that each of these countries respects the core ILO standards in their laws, oftentimes with 

general constitutional protections, as well as detailed provisions on 

everything from providing for union registration to prohibitions on 

anti-union or anti-organizing discrimination. 

Even more significantly, by operation of their constitutions and 

their civil law systems, the DR–CAFTA countries’ legal systems, in 

fact, incorporate ratified conventions, such as the core ILO convenVerDate Aug 04 2004 14:35 Jul 26, 2005 Jkt 039006 PO 00000 Frm 00042 Fmt 6604 Sfmt 6602 E:\HR\OC\HR182.XXX HR182
43 

tions these countries have ratified, into their domestic law. For 

Costa Rica, such conventions are constitutionally considered superior to the constitution; for the others, such conventions are considered part of their domestic law. Notably, several constitutions explicitly provide that the conventions are superior to their domestic 

law. 

The biggest labor issue for the DR–CAFTA countries is, in fact, 

the inadequacy of their enforcement of existing labor laws. Indeed, 

this is where many of the 20-plus labor problems the critics identify/allege actually fall; they are issues of enforcement, not the existing labor law. And that is where DR–CAFTA can do the most 

good. 

I am pleased that the Administration has committed to substantial and sustained labor and environmental capacity-building funding to support and strengthen the DR–CAFTA’s capacity-building 

framework. For the first time ever in connection with a free trade 

agreement (FTA), dedicated and substantial funding for labor and 

environmental capacity building has been provided. These funds 

will help make concrete DR–CAFTA’s already robust labor and environmental capacity-building commitments. 

This funding, coupled with the six countries’ commitments to improve labor standards and labor enforcement in their April 2005 

White Paper, represents a bold step forward in ensuring that the 

DR–CAFTA will improve labor conditions and promote greater adherence to and enforcement of worker’s rights in the Central American region. In particular: 

• For FY 2005, Congress appropriated $20 million for labor 

and environmental capacity building for the six DR–CAFTA 

countries. For FY 2006 Administration has committed to support a doubling of this funding—to $40 million—as reported by 

the House Appropriations Committee. 

• For FY 2007 through FY 2009, the Administration will 

propose and support $40 million in labor and environmental 

capacity-building funds for the DR–CAFTA countries. 

Numerous commitments in addition to those already contained in 

the DR–CAFTA and the April 2005 White Paper will provide powerful and public action-forcing events to promote continued and 

concrete work by the Administration and the six DR–CAFTA countries to improve labor standards and enforcement. I believe the ILO 

monitoring and reporting committed to by the Administration and 

the Administration reporting and periodic labor meeting requirements added to the implementing legislation provide unprecedented catalysts for advancements in labor conditions in the region. 

• Biannual Administration report for 15 years on the 

progress made by the DR–CAFTA countries in implementing 

the labor provisions of the FTA and the April 2005 White 

Paper, as well as U.S. labor capacity-building efforts. This provision, included in the DR–CAFTA implementing bill, includes 

specific requirements for the solicitation and inclusion of public 

comments in the report. 

• Meetings of the U.S. Secretary of Labor with labor ministers from each of the DR–CAFTA countries on a periodic 

basis to discuss the operation of the DR–CAFTA labor chapter 

44 

and progress made on implementing the White Paper commitments. • ILO Monitoring and Six-Month Reporting. The Administration has made a commitment to fund the International 

Labor Organization’s on-the-ground monitoring mechanism, 

which includes a requirement for reports every six months on 

the DR–CAFTA countries’ progress on implementing the White 

Paper from FY 2006 through FY 2009. 

Finally, it is important to note that the Administration also 

made specific commitments to give high priority to negotiating Millennium Challenge Compacts (MCCs) with the Dominican Republic, El Salvador and Guatemala. (Honduras and Nicaragua have already been designated to receive substantial MCC funds.) The Administration has also committed an additional $10 million per 

country per year for transitional rural assistance for up to five 

years or until the country concludes a MCC. These funds are an 

important corollary to help ensure a positive adjustment to DR– CAFTA’s new rules, particularly in the agricultural sector. 

WILL THE DR–CAFTA COUNTRIES FOLLOW-THROUGH ON THEIR LABOR

COMMITMENTS, GIVEN THEIR SPOTTY ENFORCEMENT RECORDS?

For the first time, all of the DR–CAFTA countries have expressed strong support and a determined commitment to affording 

and enforcing worker rights. Has this not been THE goal of tying 

labor rights to trade agreements? Their commitment to the DR– CAFTA’s labor standards and more was enriched by their commitment to address their enforcement capacity as outlined in the IDB/ 

ILO White Paper. In so doing, these countries are not only making 

commitments on labor enforcement to the United States, but they 

are making them to international organizations. This commitment 

will include timelines, benchmarks, and clear objectives. Never before have I seen an FTA partner take such extraordinary steps to 

demonstrate their seriousness of purpose regarding affording workers core international labor protections. To simply ignore these 

commitments flies in the face of the democratic ideals our Party 

has promoted in trade policy over the last 10 years. 

Of course the DR–CAFTA countries can improve their labor 

laws—and through this process these countries have committed in 

fact to seeking improvements through their own democratic and 

tripartite processes. But the fact that there are deficiencies in some 

of these laws is not a reason to vote ‘‘no’’ on DR–CAFTA. We didn’t 

vote ‘‘no’’ on the Jordan FTA despite the even more significant deficiencies in Jordan’s labor code (such as the lack of a right of any 

employee to strike without government approval or the fact that a 

large number of workers, including foreign workers and many agricultural workers, are excluded from labor code protections). We 

didn’t vote ‘‘no’’ on the Jordan FTA even though former President 

Clinton made it explicitly clear that ‘‘the FTA does not require either country to adopt any new laws.’’ Congress made the right decision then and we should do so here. 

Given the significant commitments to core labor protections and 

capacity building incorporated into the CAFTA, I believe that this 

is an Agreement that reflects Democrats’ own core values and concerns. The terms of the Agreement, including its enhanced enforceVerDate Aug 04 2004 14:35 Jul 26, 2005 Jkt 039006 PO 00000 Frm 00044 Fmt 6604 Sfmt 6602 E:\HR\OC\HR182.XXX HR182
45 

ment provisions, in combination with the countries’ earnest commitment to improving the lives of their workers, as well as the Administration’s agreement to provide significant resources for capacity building in the DR–CAFTA countries should engender confidence that this Agreement will not only create economic opportunities for the United States and the DR–CAFTA countries but that 

it will also promote greater adherence to core labor standards 

throughout our hemisphere. 

That said, I welcome continued dialogue on these issues and look 

forward to every Member’s consideration of the important ways 

that supporting DR–CAFTA will have on improving workers’ lives 

and working conditions in the six DR–CAFTA countries, and in improving our economy and job prospects here at home. 

WILLIAM J. JEFFERSON. 

(46) 

DISSENTING VIEWS 

The Dominican Republic-Central America-United States Free 

Trade Agreement Implementation Act, H.R. 3045, considered by 

the Committee on June 30, 2005, represents a missed opportunity. 

The Administration had an opportunity to negotiate and submit to 

Congress for approval an agreement that would have ensured that 

the benefits of trade flow broadly to working people, small farmers 

and society at large, as well as to larger businesses. The Administration had an opportunity to submit a world class, cutting edge 

agreement that would have helped to close the widening gap between the rich and poor, and lead to the development of a middle 

class in the Central American countries and the Dominican Republic, which can afford to purchase U.S. goods and services. The Administration had an opportunity to craft a lasting, bipartisan approach to U.S. trade policy. Instead, the Administration negotiated 

a free trade agreement with Central America and the Dominican 

Republic (CAFTA) and submitted a bill to Congress that does little 

to ensure that our trade policy raises living standards in the 

United States and abroad, and that exacerbates, rather than 

bridges, differences in views among the Members of this Committee. 

The vote earlier this month on U.S. participation in the World 

Trade Organization (‘‘WTO’’) demonstrates clearly that issues of 

international trade can be, and traditionally have been, in the 

main, broadly bipartisan. This conclusion is only buttressed by previous votes on free trade agreements with Jordan (2001), Chile 

(2003), Singapore (2003), Australia, (2004), and Morocco (2004); the 

enhanced Caribbean Basin Initiative and Africa Growth and Opportunity Act (2000); and, legislation granting Permanent Normal 

Trade Relations (PNTR) to China (2000). These votes demonstrate 

that the opposition to CAFTA of virtually every Democrat is not 

based on a rejection of the view that trade holds the potential for 

generating economic growth and increased standards of living. 

To the contrary, most Democratic Members of the Committee 

continue to support that view, and strongly support a CAFTA—the 

right CAFTA. We believe in the power of trade as a tool for promoting economic growth and enhancing bilateral relationships between the United States and its trading partners. We believe that 

a trade agreement, drafted correctly, would benefit the United 

States on the one hand, and the countries of Central America and 

the Dominican Republic, on the other. 

47 

I. CAFTA LACKS BASIC, INTERNATIONALLY-RECOGNIZED LABOR

STANDARDS

A. The Right CAFTA Would Include Basic Labor Standards 

The right CAFTA would ensure that Central American workers 

have the ability to bargain for better working conditions and 

wages, so that they can raise themselves and their families out of 

poverty and so that they can earn enough to become consumers of 

U.S. goods. The right CAFTA would ensure that U.S. firms and 

workers are not asked to compete against companies in Central 

America that gain a competitive advantage by suppressing their 

workers. The right CAFTA would not promote a race to the bottom. 

The changes that would be necessary to make the CAFTA an 

agreement that a broad majority of Democratic Committee Members could support are few, but significant. The amendment introduced by Ranking Member Rangel during the informal markup on 

June 15, 2005, set forth these changes. First, the right CAFTA 

would require each party to the agreement to commit to (1) bring 

its labor laws into compliance with the basic standards of the 

International Labor Organization (ILO) within 3 years; and (2) subject this commitment to meet ILO labor standards and other obligations set forth in the CAFTA Chapter on Labor to the regular 

dispute settlement mechanisms that apply to all other commercial 

provisions in the agreement. 

In addition, Democrats have consistently called on the Administration to provide meaningful technical assistance to assist the 

CAFTA countries to meet these goals. In that regard, it is particularly disappointing that the Administration continues to cut foreign 

aid rather than increase it. For example, even as the Administration this week promised in a letter to Congress to provide additional technical assistance of $40 million for ‘‘labor and environmental’’ goals, the House of Representatives passed in the LaborHHS Appropriations bill the Administration’s proposal to cut the 

budget of the principal agency that supports foreign labor standards technical assistance by $82 billion. 

B. CAFTA Represents a Step Backward From Current U.S. Law 

These changes would ensure that U.S. trade policy moves forward—rather than backward—to build upon existing U.S. trade 

preference programs (e.g., the Generalized System of Preferences, 

Caribbean Basin Initiative (CBI), and Caribbean Basin Trade Partnership Act (CBPTA)). These preferential trade programs have for 

more than 20 years conditioned trade benefits to countries in Central America and the Caribbean on the countries’ making steady 

progress toward achieving basic ILO standards. More recently, over 

the last five years, the CBTPA program has conditioned its more 

ambitious trade benefits on the countries actually achieving those 

standards. 

Notably, U.S. law further authorizes the President to deny trade 

benefits to countries that are not in compliance with these basic 

labor standards. The United States has the programs to deny trade 

benefits. Since 1984, the United States has made effective use of 

the labor criteria in GSP/CBI/CBPTA programs to improve labor 

standards in CAFTA countries. The track record is as follows. 

48 

First, the United States U.S. has ‘‘suspended trade benefits’’ 19 

times since 1984: 4 times for intellectual property issues, 1 time for 

drug trafficking issues, and 14 times for labor issues. Second, the 

United States has suspended benefits to CAFTA countries twice: 

(1) in 1987, President Reagan suspended benefits to Nicaragua, for 

failure to meet the labor rights eligibility criteria; and (2) in 1998, 

President Clinton suspended benefits to Honduras for failure to 

meet the intellectual property eligibility criteria. 

Third, the United States has repeatedly used the potential for 

suspension of benefits as leverage to promote improvements in 

CAFTA countries’ labor laws. Examples described below involve 

Costa Rica, El Salvador and Guatemala. Reliance on potential suspension of benefits is (1) good trade policy (achieve goal without 

disruption of trade), and (2) parallels use of GATT/WTO dispute 

settlement, in which vast majority of cases are resolved without 

need for formal adjudication and even higher percentage of such 

cases are resolved without the use of trade sanctions. 

The CAFTA is a major step backwards from 20 years of U.S. law 

and enforcement efforts. As currently negotiated, the CAFTA does 

not require that CAFTA countries continue to improve their labor 

laws to conform with basic international labor standards—in fact, 

it does not require that the countries’ laws meet any standard, or 

even that the countries have a law relating to the basic standards. 

The only enforceable provision in the CAFTA Chapter on Labor requires that member countries ‘‘enforce their own laws,’’ no matter 

how weak. This provision is substantially weaker than current U.S. 

law. 

The CAFTA countries currently receive unilateral trade benefits 

under three preference programs: (1) the Caribbean Basin Initiative (CBI) enacted in 1984; (2) the Generalized System of Preferences (GSP), enacted in 1976, and modified in 1984 to include a 

labor condition; and (3) the Caribbean Basin Trade Preferences Act 

(CBTPA) enacted in 2000. Approximately 50% of all imports from 

the CAFTA countries already enter duty-free under these three 

programs. (An additional 30% of products enter duty-free under 

regular U.S. tariff rates.) 

The CBI, CBTPA and GSP programs each condition a country’s 

eligibility for trade benefits (i.e., duty-free access to the U.S. market) on, among other things, whether the country is making 

progress toward implementing basic international labor standards. 

More specifically, when determining whether a country should be 

designated a beneficiary country or maintain its eligibility for benefits, the President must make the following determinations under 

each program. For CBI and GSP, the President must determine 

that the country is ‘‘taking steps to afford internationally recognized worker rights.’’ For CBTPA, the President must take into account ‘‘the extent to which the country provides internationally recognized worker rights.’’

CAFTA would drop even these minimum requirements. Unlike 

current U.S. law, CAFTA does not contain any condition requiring 

a country to achieve—or even move towards achieving—a basic 

level of worker rights. 

Although the GSP, CBI and CBTPA programs all condition the 

eligibility of countries for trade benefits on their progress on workVerDate Aug 04 2004 14:35 Jul 26, 2005 Jkt 039006 PO 00000 Frm 00048 Fmt 6604 Sfmt 6602 E:\HR\OC\HR182.XXX HR182
49 

er rights, the formalized process for the public to petition the Administration for withdrawal of benefits is contained in the umbrella 

program (GSP). Accordingly, the United States has utilized the 

labor rights condition under the GSP program more than the conditions in the Caribbean-specific programs. 

The United States has suspended GSP benefits 19 times since 

1984. Fourteen of those suspensions were tied to the failure of the 

beneficiary country to meet the program’s eligibility criteria on 

worker rights. Four suspensions were due to a country’s failure to 

comply with the program’s eligibility requirements regarding intellectual property rights, and one suspension was due to a failure to 

comply with the eligibility criteria regarding drug trafficking. 

Among the CAFTA countries, Nicaragua and Honduras have had 

their benefits curtailed for failure to meet eligibility criteria. In the 

case of Nicaragua, President Reagan terminated the country’s eligibility for the program in 1987, due to worker rights issues, and the 

country remains ineligible for the program today. In the case of 

Honduras, President Clinton suspended benefits under both the 

GSP and CBI programs in 1998, due to the country’s failure to 

meet the programs’ eligibility criteria regarding the protection of 

intellectual property rights. 

Typically, the United States has used the potential for suspension of GSP/CBI/CBTPA benefits to promote improvements in our 

trading partners’ labor laws. In fact, most of the labor law reforms 

of the past twenty years in the CAFTA countries has been due to 

the leverage of the workers rights conditionality under GSP/CBI/ 

CBPTA. The following examples illustrate this fact. 

In June 1993, a GSP petition against Costa Rica led to reform 

of its Labor Code in October 1993, to provide protections for union 

organizers and prohibiting solidarity associations from engaging in 

collective bargaining. Similarly, in June 1992, a petition against 

Guatemala resulted in recognition of a maquila union for the first 

time in six years in August 1992. During the period 1993–1997 

when Guatemala was under GSP review, the government raised 

the minimum wage, established new labor courts and streamlined 

the legal recognition process. 

In 2000, Guatemala’s status under GSP was reopened due to the 

firing of banana plantation workers at a Del Monte company. In 

April 2001, Guatemala passed a labor reform bill that granted new 

rights to farm workers. Finally, in 1992, EI Salvador was put on 

continuing GSP review for workers rights violations. In 1994, El 

Salvador changed its laws to make it easier for unions to be recognized without employer interference. 

The changes proposed by Ranking Member Rangel would eliminate both the backsliding as compared with current U.S. law and 

the double standard created under the CAFTA with regard to the 

enforcement of the agreement’s labor provisions versus other commercial provisions. As negotiated, the CAFTA provides that labor 

provisions are enforceable primarily through a weak system of 

fines, which the offending country effectively pays to itself. In comparison, the agreement’s other commercial provisions are enforceable using trade sanctions. Mr. Rangel’s amendment would correct 

this imbalance to ensure that the rights of workers receive the 

same protection as the rights of corporations under the agreement. 

50 

As stated, we consider that meaningful technical assistance must 

be an integral part of U.S. trade policy with the CAFTA countries, 

and others. In Central America, such assistance needs to be used 

to improve existing laws (so that they meet ILO standards) as well 

as to strengthen enforcement. 

‘‘Unfortunately, the technical assistance prosed by the Administration—whatever its other weaknesses—requires only that countries enforce the laws they have on their books—even if the law on 

the books is weak or there is no existing law. Even the best enforcement of inadequate laws can never yield acceptable results. Indeed, Congress would never approve an agreement that requires 

merely that our trading partners enforce their existing laws in 

other areas, such as intellectual property rights. Would any Administration ever provide technical assistance for countries to enforce 

laws that allow or promote piracy of American patents, copyrights 

or trademarks? Requiring only that countries ‘‘enforce their own 

laws’’ with regard to labor standards is equally inappropriate. 

II. CAFTA COULD DEFEAT COUNTRIES’ ABILITY TO RESPOND TO PUBLIC

HEALTH EMERGENCIES

We also continue to have reservations about sections of the 

CAFTA (as well as other recently negotiated U.S. free trade agreements (FTAs)) that affect the availability of affordable drugs in developing countries. In particular, we are concerned about test data 

requirements in the CAFTA, which could prevent the CAFTA countries from addressing public health problems and delay the introduction of generic pharmaceuticals into the Central American market, thereby making pharmaceuticals less affordable in the region. 

In particular, Article 15.10.1 of the CAFTA requires parties to 

protect certain test data submitted to obtain regulatory marketing 

approval of a drug. The provisions operate as follows: if a government requires submission of test data in order to obtain marketing 

approval for a drug (e.g., FDA approval), the government may not 

allow any other company to use these test data as the basis of obtaining marketing approval for a similar drug for a period of 5 

years. The company first submitting the data has the right to prevent anyone else from using those data to enter the market for that 

period. Test data rights are separate and distinct from patent 

rights, and can exist for drugs not covered by a patent. 

The key issue raised by the test data requirements in the CAFTA 

is whether they can be waived if a CAFTA country wants to approve a producer other than the test data owner to produce and sell 

a drug in the CAFTA country during the test data protection period. The following example illustrates the issue: 

Assume Guatemala decides that it needs to increase the 

supply of an HIV/AIDS drug in its market. Company A 

owns the patent on the HIV/AIDS drug, and also is the 

only producer to have obtained marketing approval for the 

drug in the Guatemalan market. If Guatemala is unable to 

convince Company A to produce more of the HIV/AIDS 

drug at a reasonable price, Guatemala could issue a compulsory license to another drug manufacturer, Company B. 

However, the compulsory license, which is allowed under 

51 

the FTA, is an exception only for the patent rights related 

to the HIV/AIDS drug. The compulsory license does not affect Company A’s right to prevent any other company from 

receiving marketing approval for the drug based on the 

data it submitted. 

Obviously, if the United States invoked its right to test 

data protection as to the drug in question, the compulsory 

license would be useless—and Guatemala’s right under 

specified circumstances pursuant to WTO rules to issue 

such a license would be defeated. 

Notably, the above analysis applies even if the HIV/AIDS drug is 

not covered by a patent. The only difference is that Guatemala 

would not need to issue a compulsory license. 

The Intellectual Property Chapter of the Agreement (Chapter 15) 

does not include any specific exception that would allow Guatemala 

or any other CAFTA countries to waive the test data requirements 

to address a public health need. As such, our concern is that the 

test data requirements could effectively undermine the CAFTA 

countries’ ability to use compulsory licenses. As such, we believe 

that the CAFTA violates at a least the spirit of the November 2001 

World Trade Organization Declaration on the TRIPS Agreement 

and Public Health (‘‘Doha Declaration’’), because the key flexibility 

identified in that Declaration was the ability of developing countries to use compulsory licensing to ‘‘protect public health’’ and 

‘‘promote access to medicines for all.’’

We were heartened by the comments of Ambassador Allgeier, the 

Deputy United States Trade Representative, at the mock markup 

held by the Committee on June 15. At the mock markup, Ambassador Allgeier stated that the ‘‘Understanding Regarding Certain 

Public Health Concerns,’’ which was adopted by the parties as a 

side agreement to the CAFTA, allows a country to waive test data 

requirements in order to market a drug produced under a compulsory license. The portion of the side agreement that Ambassador 

Allgeier apparently relied on for this interpretation states, in relevant part, that ‘‘[t]he obligations of [the Intellectual Property 

Chapter] do not affect a Party’s ability to take necessary measures 

to protect public health by promoting access to medicines for all. 

***’’

In our view, the side agreement is not sufficiently clear as to 

whether it provides an exception to the test data protection provisions. Accordingly, we urge USTR to ensure that Ambassador 

Allgeier’s interpretation is given express legal effect in all future 

trade agreements, by making the exception explicit. 

III. CAFTA AND THE ENVIRONMENT

We also have reservations about the CAFTA Chapter on Environment, which includes only minimal commitments. The agreement 

includes no benchmarks for countries to meet in improving their 

environmental laws and practices, and instead requires only that 

the countries enforce their existing laws. In addition, although the 

CAFTA includes commitments by the countries to engage in cooperative activities to improve and conserve the environment, these obVerDate Aug 04 2004 14:35 Jul 26, 2005 Jkt 039006 PO 00000 Frm 00051 Fmt 6604 Sfmt 6602 E:\HR\OC\HR182.XXX HR182
52 

ligations are largely rhetorical, as the CAFTA also includes no commitments for funding such activities. 

IV. INVESTOR-STATE PROVISIONS COULD ALLOW FOREIGN INVESTORS

TO HAVE GREATER RIGHTS THAN U.S. INVESTORS IN THE UNITED

STATES

Another area of concern is the so-called ‘‘investor-state’’ dispute 

settlement mechanism provided for in the CAFTA Chapter on Investment. The investor-state mechanism can be a useful tool to ensure that U.S. investors overseas are protected against unfair 

treatment. 

However, if not properly crafted to reflect current U.S. laws, the 

investor-state mechanism can provide foreign investors greater 

rights than U.S. investors in the U.S. market. Congress recognized 

the potential for this problem during debate over the Trade Act of 

2002 (P.L. 107–210), and included a mandate to USTR that U.S. 

trade agreements ensure that ‘‘foreign investors in the United 

States are not accorded greater substantive rights with respect to 

investment protections than [U.S.] investors in the United States.’’ Unfortunately, the CAFTA still leaves out key elements of U.S. 

law, notwithstanding that it arguably is an improvement over the 

standard contained at Chapter 11 of the NAFTA. The result is to 

empower CAFTA panels to issue decisions that could go well beyond U.S. law—allowing foreign investors to receive greater rights 

than U.S. investors in the U.S. market. Given the aggressive reasoning of some arbitration panels that have considered claims 

brought under the NAFTA, it is particularly important that the investor-state provisions included in free trade agreements closely 

track U.S. constitutional and Supreme Court jurisprudence in 

order to ensure that legitimate U.S. laws and regulations are not 

threatened—and there is no chilling effect on local, state or federal 

authorities. 

V. U.S. TRADE PRIORITIES

Finally, we believe that, in general, bilateral free trade agreements have a legitimate place in U.S. trade policy. If the agreements are properly negotiated and free trade partners are properly 

selected in coordination with Congress, these agreements can contain significant benefits for the United States in helping to set the 

global trade agenda and in other ways. 

Nonetheless, we urge the Administration to recognize that the 

most important U.S. trade priorities should be the ongoing negotiations in the World Trade Organization and opening markets that 

achieve the largest gains for Americans. We are concerned that the 

Administration has focused too heavily on FTAs. In the case of 

CAFTA, we are concerned that Congress as well has had to dedicate enormous resources and attention to this agreement at the expense of other important trade priorities, largely because the 

CAFTA negotiated by the Administration could not attract broad, 

bipartisan support. 

CHARLES B. RANGEL. 

PETE STARK. 

JIM MCDERMOTT. 

RICHARD E. NEAL. 

53 

XAVIER BECERRA. BENJAMIN CARDIN. SANDER LEVIN. JOHN LEWIS. MICHAEL R. MCNULTY. JOHN B. LARSON. 

Æ