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[Senate Report 109-128]
[From the U.S. Government Publishing Office]

109th Congress                                                   Report
                                 SENATE
 1st Session                                                    109-128

======================================================================

 
 DOMINICAN REPUBLIC-CENTRAL AMERICA-UNITED STATES FREE TRADE AGREEMENT 
                           IMPLEMENTATION ACT

                                _______
                                

                August 31, 2005.--Ordered to be printed

  Filed, under authority of the order of the Senate of July 29, 2005.

                                _______
                                

  Mr. Grassley, from the Committee on Finance, submitted the following

                              R E P O R T

                         [To accompany S. 1307]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Finance, to which was referred the bill 
(S. 1307) to implement the Dominican Republic-Central America-
United States Free Trade Agreement, having considered the same, 
reports favorably thereon without amendment and recommends that 
the bill do pass.

                                CONTENTS

                                                                   Page
 I.  Report and Other Materials of the Committee......................2
        A. Report of the Committee on Finance....................     2
        B. Summary of Congressional Consideration of the 
            Dominican Republic-Central America-United States Free 
            Trade Agreement......................................     2
            1. Background........................................     2
            2. Trade Promotion Authority Procedures in General...     3
            3. Notification Prior to Negotiations................     4
            4. Notification of Intent to Enter Into an Agreement.     5
            5. Development of the Implementing Legislation.......     5
            6. Formal Submission of the Agreement and 
                Implementing Legislation.........................     8
            7. Committee and Floor Consideration.................     8
        C. Trade Relations with the Dominican Republic and 
            Central America......................................     9
            1. United States-Dominican Republic-Central America 
                Trade and Investment.............................     9
            2. Tariffs and Trade Agreements......................    11
            3. U.S. International Trade Commission Study.........    12
        D. Overview of the Dominican Republic-Central America-
            United States Free Trade Agreement...................    13
            1. Overview of the Agreement.........................    13
            2. USTR Summary of the Agreement.....................    13
        E. General Description of the Bill to Implement the 
            Dominican Republic-Central America-United States Free 
            Trade Agreement......................................    40
           Title I--Approval of, and General Provisions Relating 
            to, the Agreement....................................    41
           Title II--Customs Provisions..........................    42
           Title III--Relief From Imports........................    48
           Title IV--Miscellaneous...............................    54
        F. Vote of the Committee in Reporting the Bill...........    55
II. Budgetary Impact of the Bill.....................................55
III.Regulatory Impact of the Bill and Other Matters..................59

IV. Changes in Existing Law Made by the Bill, as Reported............59

             I. REPORT AND OTHER MATERIALS OF THE COMMITTEE

                 A. Report of the Committee on Finance

    The Committee on Finance, to which was referred the bill 
(S. 1307) to implement the Dominican Republic-Central America-
United States Free Trade Agreement, having considered the same, 
reports favorably thereon without amendment and recommends that 
the bill do pass.

  B. Summary of Congressional Consideration of the Dominican Republic-
           Central America-United States Free Trade Agreement

1. Background

    President George W. Bush announced his intention to explore 
the possibility of entering into a free trade agreement with 
Central America (i.e. Costa Rica, El Salvador, Guatemala, 
Honduras, and Nicaragua) on January 16, 2002. On August 6, 
2002, President Bush signed the Trade Act of 2002 (Pub. L. 107-
210), which grants the President the authority to enter into 
trade agreements and provides expedited procedures for 
consideration of legislation implementing trade agreements that 
meet certain specified objectives. On October 1, 2002, 
Ambassador Robert B. Zoellick, United States Trade 
Representative, formally notified Congress of the President's 
intention to enter into negotiations for a free trade agreement 
with Central America. On January 8, 2003, Ambassador Zoellick 
and ministers from the Central American countries announced the 
launch of those negotiations. On August 4, 2003, Ambassador 
Zoellick notified Congress of the President's intention to 
enter into negotiations for a free trade agreement with the 
Dominican Republic and to seek to integrate the Dominican 
Republic into the free trade agreement with Central America. On 
November 18, 2003, Ambassador Zoellick announced that those 
negotiations would start in January 2004. The first round of 
negotiations with the Government of the Dominican Republic took 
place in Santo Domingo from January 12-16, 2004.
    On February 20, 2004, President Bush notified Congress of 
his intention to enter into a free trade agreement with Central 
America. On March 24, 2004, President Bush notified Congress of 
his intention to enter into a free trade agreement with the 
Dominican Republic. On May 28, 2004, Ambassador Zoellick and 
trade ministers from the Central American countries signed the 
U.S.-Central America Free Trade Agreement (``CAFTA''). On July 
22, 2004, the day after the U.S. Senate passed the U.S.-Morocco 
Free Trade Agreement Implementation Act by a vote of 85 to 13, 
Senator Charles E. Grassley, Chairman of the Senate Committee 
on Finance, called upon President Bush to send CAFTA to 
Congress ``at the earliest opportunity.'' Chairman Grassley 
also vowed to work with the President and Members of the Senate 
to lay the groundwork for a successful vote later that year. On 
August 5, 2004, the Dominican Republic joined the agreement in 
a subsequent signing of the Dominican Republic-Central America-
United States Free Trade Agreement (the ``Agreement'' or 
``CAFTA-DR agreement'') by all parties. On October 4, 2004, 
Ambassador Zoellick transmitted to Congress a description of 
changes to existing U.S. laws required to comply with the terms 
of the CAFTA-DR agreement.
    On September 20, 2004, Chairman Grassley wrote letters to 
the President of the Dominican Republic, His Excellency Leonel 
Fernandez Reyna, and to the President of the Senate of the 
Dominican Republic, The Honorable Andres Bautista Garcia, to 
express concerns regarding the incompatibility of a proposal 
contained in tax reform legislation (i.e. to impose a 25 
percent tax on beverages containing high-fructose corn syrup 
(``HFCS'')) with the obligations of the Dominican Republic as a 
member of the World Trade Organization (``WTO'') and as a party 
to the CAFTA-DR agreement. Chairman Grassley shared the letters 
with Ambassador Zoellick and raised concerns about proceeding 
with implementation of the CAFTA-DR agreement should the HFCS 
beverage tax become law. In October 2004, the Dominican 
Republic passed the tax reform legislation into law, including 
the 25 percent HFCS beverage tax. On November 3, 2004, Chairman 
Grassley identified passage of the CAFTA-DR agreement as a 
priority for the Finance Committee during the first session of 
the 109th Congress. On November 16, 2004, Ambassador Zoellick 
sent Chairman Grassley a letter confirming that the 25 percent 
HFCS beverage tax was incompatible with the commitments of the 
Dominican Republic under the CAFTA-DR agreement and outlined 
plans to drop the Dominican Republic from the Agreement should 
the HFCS beverage tax remain in place. On November 17, 2004, 
Chairman Grassley vowed to strongly oppose any trade agreement 
with the Dominican Republic as long as the HFCS beverage tax 
remained in place. In early January 2005, President Fernandez 
signed into law legislation repealing the 25 percent HFCS 
beverage tax, thereby bringing the Dominican Republic into 
compliance with its WTO obligations and CAFTA-DR commitments. 
Chairman Grassley welcomed this development on January 5, 2005, 
and pledged to work toward implementation of the Agreement. On 
January 25, 2005, Chairman Grassley stated that he hoped for 
Senate passage of the CAFTA-DR agreement by the summer of 2005.

2. Trade promotion authority procedures in general

    Article I, section 8 of the Constitution of the United 
States vests Congress with the authority to regulate 
international trade. Congress has periodically delegated a 
portion of this authority to the President, in order to advance 
the economic interests of the United States. This delegation 
represents a compact between Congress and the executive by 
which Congress guarantees it will vote on a trade agreement 
entered into by the executive without amendment and the 
executive guarantees close consultation with Congress during 
the negotiation of the trade agreement in order to achieve 
objectives identified by Congress. Thorough and timely 
consultation by the executive with Congress is the essential 
bedrock upon which Congress' delegation of constitutional 
authority rests. This compact has successfully resulted in the 
negotiation and implementation of numerous trade agreements 
that have substantially contributed to the economic growth and 
prosperity of the United States for decades.
    The most recent incarnation of this compact is found in the 
Bipartisan Trade Promotion Authority Act of 2002, which was 
included in the Trade Act of 2002 (the ``Act'') (Pub. L. 107-
210). The Act includes prerequisites for congressional 
consideration of a trade agreement under expedited procedures 
(known as Trade Promotion Authority (``TPA'') procedures), 
which are found in sections 2103 through 2106 of the Act (19 
U.S.C. Sec. Sec. 3803-3806) and section 151 of the Trade Act of 
1974 (19 U.S.C. Sec. 2191). Section 2103 of the Act authorizes 
the President to enter into reciprocal trade agreements with 
foreign countries to reduce or eliminate tariff or nontariff 
barriers and other trade-distorting measures. Section 2102 of 
the Act outlines the negotiating objectives the President is to 
achieve if the President intends to use TPA procedures to 
implement a trade agreement. Section 151 of the Trade Act of 
1974 sets out expedited procedures for congressional 
consideration of a trade agreement without amendment. The 
President's authority under section 2103 extends to trade 
agreements entered into on or before June 30, 2007.

3. Notification prior to negotiations

    Under section 2104(a)(1) of the Act, the President must 
provide written notice to the Congress at least 90 calendar 
days before initiating negotiations. On October 1, 2002, 
Ambassador Zoellick sent letters to The Honorable Robert C. 
Byrd, President Pro Tempore, United States Senate, and The 
Honorable J. Dennis Hastert, Speaker, United States House of 
Representatives, to notify Congress of the President's 
intention to initiate negotiations for a free trade agreement 
with the CAFTA countries. Those negotiations were initiated on 
January 8, 2003. On August 4, 2003, Ambassador Zoellick sent 
letters to The Honorable Ted Stevens, President Pro Tempore, 
United States Senate, and The Honorable J. Dennis Hastert, 
Speaker, United States House of Representatives, to notify 
Congress of the President's intention to initiate negotiations 
for a free trade agreement with the Dominican Republic and to 
integrate the Dominican Republic into CAFTA. Negotiations with 
the Dominican Republic were initiated in January 2004.
    Section 2104(a)(2) of the Act requires the President, 
before and after submission of the notice, to consult regarding 
the negotiations with the relevant committees of Congress and 
the Congressional Oversight Group established under section 
2107 of the Act. The Administration engaged in extensive 
consultations with the Committee on Finance and the 
Congressional Oversight Group (``COG''), including appearances 
by Ambassador Zoellick at meetings of the COG on January 7, 
2003, April 11, 2003, July 24, 2003, May 6, 2004, and September 
8, 2004, and by Deputy USTR Peter Allgeier and Deputy USTR 
Josette Shiner at meetings of the COG on February 2, 2005.

4. Notification of intent to enter into an agreement

    Section 2105(a)(1)(A) of the Act requires the President, at 
least 90 days before entering into an agreement, to notify 
Congress of his intention to enter into the agreement. On 
February 20, 2004, President Bush notified Congress of his 
intention to enter into a free trade agreement with the 
governments of the CAFTA countries. The CAFTA agreement was 
signed on May 28, 2004. On March 24, 2004, President Bush 
notified Congress of his intention to enter into a free trade 
agreement with the Government of the Dominican Republic. The 
CAFTA-DR agreement, which integrates the Dominican Republic 
into the CAFTA agreement, was signed by all parties on August 
5, 2004.

5. Development of the implementing legislation

    Section 2105(a)(1)(B) of the Act requires the President, 
within 60 days of signing an agreement, to submit to Congress a 
description of changes to existing U.S. laws that the President 
considers would be required to bring the United States into 
compliance with such agreement. On October 4, 2004, Ambassador 
Zoellick transmitted to Congress a description of changes to 
existing U.S. laws required to comply with the terms of the 
CAFTA-DR agreement.
    Under TPA procedures, Congress and the Administration work 
together to produce the legislation to implement a free trade 
agreement. Draft legislation is developed in close consultation 
between the Administration and the committees with jurisdiction 
over the laws that must be enacted or amended to implement the 
agreement. The committees may then hold informal meetings to 
consider the draft legislation and to make non-binding 
recommendations to the Administration, if any. The 
Administration then finalizes implementing legislation for 
formal submission to Congress and referral to the committees of 
jurisdiction. These procedures are meant to ensure close 
cooperation between the executive and legislative branches of 
government to develop legislation that faithfully implements 
the agreement. The final legislation should include only those 
provisions that are necessary or appropriate to implement 
faithfully the agreement.
    On November 3, 2004, Chairman Grassley identified passage 
of the CAFTA-DR agreement as a priority for the Finance 
Committee during the first session of the 109th Congress. On 
March 14, 2005, the Finance Committee set a date for hearing 
testimony on the CAFTA-DR agreement. On April 6, 2005, Chairman 
Grassley hosted a Finance Committee Members Meeting with the 
Ministers of Trade and Ministers of Labor from the CAFTA-DR 
countries. At that meeting, participants discussed a White 
Paper released by the Inter-American Development Bank that 
outlined additional steps that CAFTA-DR countries could take to 
improve labor laws in those countries. The recommendations 
contained in the White Paper were endorsed by the Ministers for 
Trade and Ministers for Labor from the CAFTA-DR countries.
    The Finance Committee held its hearing on the CAFTA-DR 
agreement on Wednesday, April 13, 2005. During the hearing, a 
broad and diverse group of witnesses from the agriculture, 
business, and environmental communities expressed strong 
support for the Agreement. Additional witnesses representing 
labor and sugar interests expressed concerns with the 
Agreement. One week later, on April 21, 2005, the House 
Committee on Ways and Means considered testimony on the CAFTA-
DR agreement. On April 27, 2005, Chairman Grassley hosted a 
rally with Secretary of Agriculture Mike Johanns and a wide 
array of representatives from U.S. business and agriculture to 
demonstrate broad support for the Agreement. On May 9, 2005, 
Chairman Grassley hosted a media event with representatives 
from U.S. food processing companies which highlighted the 
importance of comprehensive trade agreements to many sectors of 
the U.S. economy.
    Prior to informal committee consideration of draft 
implementing legislation for the Agreement, a number of 
Senators expressed concern that the CAFTA-DR agreement would 
harm the existing U.S. sugar program. The Administration argued 
that these concerns were unfounded as the Agreement provides 
for only a minimal increase in sugar imports from CAFTA-DR 
countries and includes a number of unprecedented protections 
for the U.S. sugar industry. Still, for several months, the 
U.S. sugar industry and a number of U.S. Senators vowed to 
oppose the CAFTA-DR agreement unless the Agreement was 
renegotiated to exclude any new sugar imports. However, the 
vast majority of U.S. agriculture producers and food processors 
supported the CAFTA-DR agreement precisely because the 
Agreement is comprehensive, i.e. with no sector of agriculture 
excluded from the Agreement. These groups fear that, if the 
United States excludes an import sensitive agricultural 
commodity from a trade agreement, our negotiating partners 
would reciprocate by seeking to exclude U.S. agricultural 
exports from an agreement that are import sensitive to them. 
Chairman Grassley agreed that the CAFTA-DR agreement should be 
comprehensive, i.e. with no exclusions, and thus successfully 
resisted efforts to remove sugar from the Agreement.
    The Finance Committee subsequently met in open executive 
session on Tuesday, June 14, 2005, to informally consider draft 
implementing legislation for the CAFTA-DR agreement. Committee 
Members filed 34 amendments to the draft implementing 
legislation. Sixteen of these amendments sought to exclude 
sugar from the Agreement (and thus require renegotiation of the 
Agreement). However, few amendments were offered. And none of 
the amendments which sought to exclude sugar from the agreement 
were offered or debated, presumably due to a lack of majority 
support. In fact, only two amendments were offered. The first 
amendment offered (i.e. Amendment #32) extended Trade 
Adjustment Assistance (``TAA'') programs to include service 
workers and firms in the services sector. The amendment also 
doubled the annual authorization of the TAA for Workers 
program, from $220 million to $440 million, as well as the 
annual authorization of the TAA for Firms program, from $16 
million to $32 million. In addition, the amendment contained 
data collection and reporting requirements. Chairman Grassley 
noted that Amendment #32 would essentially establish an 
entirely new program that was not contemplated by the 
underlying trade agreement, and thus the amendment was not 
necessary or appropriate to implement the CAFTA-DR agreement. 
Chairman Grassley also raised concerns regarding certain 
aspects of the substance of Amendment #32. Chairman Grassley 
offered to work with the proponents of Amendment #32 to further 
develop the substance of the amendment in a more appropriate 
legislative forum. The Chairman's offer was not accepted, and 
despite the concerns raised by the Chairman, Amendment #32 was 
approved by voice vote, a quorum being present.
    The second amendment offered (i.e. Amendment #30) called 
for renegotiation of the dispute settlement provisions in the 
Agreement to provide that violations of the Agreement would be 
subject to identical remedies regardless of subject matter. 
However, the negotiating objectives that Congress attached to 
TPA procedures call for violations of a trade agreement to be 
subject to equivalent, rather than identical remedies. This 
distinction, which is found in section 2102 of the Act, 
recognizes that some non-compliance practices may be better 
addressed through cooperation and technical assistance rather 
than through rote application of trade sanctions. Amendment #30 
thus contravened this negotiating objective. In addition, 
because the amendment required renegotiation of the CAFTA-DR 
agreement, it was on its face neither necessary nor appropriate 
in implementing the Agreement. The Chairman called for a roll 
call vote on the amendment, a quorum being present. Amendment 
#30 was not approved by the Committee on a vote of 10 ayes (one 
by proxy), 10 nays (five by proxy).
    With all of the amendments disposed of, the Chairman 
subsequently called for a vote on the Committee's informal 
recommendation, as amended, a quorum being present. The 
Committee voted to approve the informal recommendation, as 
amended, to implement the CAFTA-DR agreement, by recorded vote, 
a quorum being present, 11 ayes, 8 nays (with one additional 
nay vote by proxy). Ayes: Grassley, Hatch, Lott, Kyl, Thomas, 
Santorum, Frist, Smith, Bunning, Lincoln, Wyden. Nays: Snowe, 
Crapo, Baucus, Rockefeller, Conrad, Jeffords, Bingaman (proxy), 
Kerry, Schumer.
    The next day, on Wednesday, June 15, 2005, the House Ways 
and Means Committee met to consider informally the draft 
implementing legislation. The Ways and Means Committee voted 
25-16 for approval of a Chairman's amendment in the nature of a 
substitute to the draft implementing legislation. The 
Chairman's amendment added two non-binding provisions to the 
draft implementing legislation: (1) a provision to create 
periodic reporting and meeting requirements on labor provisions 
of the CAFTA-DR agreement, particularly with respect to 
capacity-building efforts; and, (2) a provision to require the 
President to prepare a report that would examine after one year 
whether the CAFTA-DR agreement has had a net negative effect on 
the services industry--if there were a finding of negative 
effects on the services industry, the provision would further 
require the President to recommend how the TAA programs should 
be amended to respond to such negative effects.
    The Senate Finance Committee and House Ways and Means 
Committee subsequently sent their respective recommendations to 
the President. The committees did not conduct a formal ``mock 
conference'' to reconcile the different versions of informal 
non-binding recommendations that had been approved by the two 
committees. Committee precedent does not mandate that a formal 
``mock conference'' take place to reconcile differences in 
informal recommendations. For example, the two committees 
approved different versions of draft implementing legislation 
for the North American Free Trade Agreement, but there is no 
record of a formal mock conference taking place to reconcile 
the differences. In contrast, the committees did proceed with a 
formal mock conference to reconcile different versions of draft 
implementing legislation for the Uruguay Round Agreements Act. 
The need for a formal ``mock conference'' depends upon the type 
and degree of differences between the informal recommendations. 
In this case, the Office of the United States Trade 
Representative consulted with each committee, and based upon 
those consultations, the President reconciled the two versions 
of the draft implementing bill by including the provision 
relating to periodic reporting requirements on the labor 
provisions of the Agreement and omitting those provisions 
relating to TAA programs for service workers.

6. Formal submission of the agreement and implementing legislation

    When the President formally submits a trade agreement to 
Congress under section 2105 of the Act, the President must 
include in the submission the final legal text of the 
agreement, together with implementing legislation, a statement 
of administrative action (describing regulatory and other 
changes that are necessary or appropriate to implement the 
agreement), a statement setting forth the reasons of the 
President regarding how and to what extent the agreement makes 
progress in achieving the applicable policies, purposes, 
priorities, and objectives set forth in the Act, and a 
statement setting forth the reasons of the President regarding 
how the agreement serves the interests of U.S. commerce.
    The implementing legislation is introduced in both Houses 
of Congress on the day it is submitted by the President and is 
referred to Committees with jurisdiction over its provisions. 
President George W. Bush transmitted the final text of the 
CAFTA-DR agreement, along with implementing legislation, a 
Statement of Administrative Action, and other supporting 
information, as required under section 2105 of the Act, to 
Congress on June 23, 2005. The identical legislation was 
introduced that same day in both the House (H.R. 3045) and the 
Senate (S. 1307).
    To qualify for TPA procedures, the implementing bill itself 
must contain provisions formally approving the agreement and 
the statement of administrative action. Further, the 
implementing bill must contain only those provisions necessary 
or appropriate to implement the Agreement. The implementing 
bill reported here--which approves the CAFTA-DR agreement and 
the accompanying Statement of Administrative Action and 
contains provisions necessary or appropriate to implement the 
CAFTA-DR agreement into U.S. law--was referred to the Senate 
Committee on Finance.

7. Committee and floor consideration

    When the requirements of the Act are satisfied, 
implementing revenue bills such as the Dominican Republic-
Central America-United States Free Trade Agreement 
Implementation Act (``Implementation Act'') are subject to the 
legislative procedures of section 151 of the Trade Act of 1974. 
The following schedule for congressional consideration applies 
under these procedures:
          (i) House committees have up to 45 calendar days in 
        session in which to report the bill; any committee 
        which does not do so in that period will be 
        automatically discharged from further consideration.
          (ii) A vote on final passage by the House must occur 
        on or before the 15th calendar day in session after the 
        committees report the bill or are discharged from 
        further consideration.
          (iii) Senate committees must act within 15 calendar 
        days in session of receiving the implementing revenue 
        bill from the House or within 45 calendar days in 
        session of Senate introduction of the implementing 
        bill, whichever is later, or they will be discharged 
        automatically.
          (iv) The full Senate then must vote within 15 
        calendar days in session on the implementing bill.
    Thus, Congress has a maximum of 90 calendar days in session 
to complete action on the bill. Once the implementing bill has 
been formally submitted by the President and introduced, no 
amendments to the bill are in order in either House of 
Congress. Floor debate in each House is limited to no more than 
20 hours, to be equally divided between those favoring the bill 
and those opposing the bill.
    Although the Implementation Act is a revenue measure, and 
thus must ultimately originate in the House, the Senate Finance 
Committee led congressional action on the measure. The Finance 
Committee met in open executive session on Tuesday, June 28, 
2005, to consider favorably reporting S. 1307. In order to 
allow Members ample opportunity to voice their views on the 
Implementation Act in committee, the Chairman held the meeting 
open until the following day. On Wednesday, June 29, 2005, the 
Chairman reconvened the open executive session of the 
Committee, during which the Committee favorably reported S. 
1307 by voice vote, a quorum being present (Senator Thomas 
voted no). Later that day the Senate agreed to a motion to 
proceed to consider S. 1307 by a vote of 61-34. Pursuant to TPA 
procedures, on Thursday, June 30, 2005, the Senate voted to 
approve S. 1307 by a vote of 54-45, whereupon the bill was held 
at the desk. The House Ways and Means Committee took up H.R. 
3045 on Thursday, June 30, 2005, and voted 25-16 to report the 
measure favorably. The Chairman of the House Ways and Means 
Committee did not report H.R. 3045 until Monday, July 25, 2005. 
The House passed H.R. 3045 on Thursday, July 28, 2005, by a 
vote of 217-215, whereupon the bill was transmitted to the 
Senate. The Senate took up H.R. 3045 that same day, passing the 
bill by a vote of 55-45. H.R. 3045 was signed into law by 
President Bush on August 2, 2005 (Public Law 109-53).

   C. Trade Relations With the Dominican Republic and Central America

1. United States-Dominican Republic-Central America trade and 
        investment

    The CAFTA-DR countries together make up the 2nd largest 
market for U.S. exports in Latin America, behind only Mexico. 
U.S. exports total more than $15 billion annually, making it 
the 10th largest export market worldwide. The United States is 
the largest trading partner of the CAFTA countries, accounting 
for some 56 percent of exports from the CAFTA countries and 44 
percent of imports into the CAFTA countries. The United States 
is also the largest trading partner of the Dominican Republic, 
accounting for 80 percent of exports from the Dominican 
Republic and 50 percent of imports into the Dominican Republic. 
Over the past 5 years, U.S. exports to the CAFTA-DR countries 
grew by over 25 percent, while U.S. imports from the CAFTA-DR 
countries grew by more than 15 percent.
    The following tables summarize the top U.S. merchandise 
exports to the CAFTA-DR countries and the top U.S. merchandise 
imports from the CAFTA-DR countries during the past six years.

                                U.S. EXPORTS TO THE CAFTA-DR COUNTRIES, 1999-2004
                                          [In millions of U.S. dollars]
----------------------------------------------------------------------------------------------------------------
  Top 15 product descriptions, by HTS chapter      1999       2000       2001       2002       2003       2004
----------------------------------------------------------------------------------------------------------------
85. Electrical Machinery......................    1,390.8    1,329.2    1,229.2    1,664.1    1,812.9    1,938.0
84. Machinery.................................    1,250.8    1,293.6    1,249.2    1,206.6    1,092.3    1,141.1
52. Cotton yarns and fabrics..................      172.7      287.9      594.7      762.5      812.4    1,076.1
61. Knit apparel..............................    1,609.5    2,121.8    1,680.4    1,269.0    1,163.2      999.5
27. Fuels.....................................      255.8      431.7      327.8      387.2    1,004.8      988.8
98. Special classifications...................      666.2      644.4      706.8      695.0      796.3      937.3
39. Plastics..................................      458.6      574.8      675.0      763.1      799.6      870.7
60. Knit fabrics..............................       80.7       92.5      251.0      515.9      785.3      836.8
10. Cereals...................................      441.5      459.8      506.6      559.2      603.2      742.5
62. Woven apparel.............................    1,594.2    1,596.7    1,050.4      890.6      731.0      572.0
48. Paper and paperboard......................      484.3      501.0      507.3      507.6      517.2      553.9
90. Optical and medical instruments...........      269.4      291.4      318.6      337.8      394.2      376.9
87. Vehicles..................................      382.8      392.2      312.5      330.2      312.0      343.1
55. Manmade fibers, yarns, and fabrics........       57.2       66.1      166.8      238.2      282.8      278.6
58. Special fabrics and trimmings.............      133.2      186.2      331.2      402.1      214.4      247.9
                                               -----------------------------------------------------------------
    Subtotal for top 15 products..............    9,247.6   10,269.2    9,907.4   10,529.2   11,321.6   11,903.2
                                               -----------------------------------------------------------------
    Subtotal for all other products...........    2,904.4    2,932.9    3,117.2    3,002.4    3,050.1    3,076.8
                                               =================================================================
        Total U.S. exports to the DR-CAFTA       12,152.0   13,202.2   13,024.6   13,531.6   14,371.7   14,980.0
         countries............................
----------------------------------------------------------------------------------------------------------------
Note.--HTS is the Harmonized Tariff Schedule of the United States.
Source.--U.S. International Trade Commission Dataweb.

                               U.S. IMPORTS FROM THE CAFTA-DR COUNTRIES, 1999-2004
                                          [In millions of U.S. dollars]
----------------------------------------------------------------------------------------------------------------
  Top 15 product descriptions, by HTS chapter      1999       2000       2001       2002       2003       2004
----------------------------------------------------------------------------------------------------------------
61. Knit apparel..............................    4,266.6    4,894.2    5,020.4    5,307.8    5,593.7    5,998.5
62. Woven apparel.............................    3,898.3    4,151.7    4,046.8    3,822.5    3,628.8    3,562.6
85. Electrical machinery......................      691.1      895.9      892.0    1,040.1    1,352.3    1,375.7
 8. Fruits and nuts...........................      795.6      878.3      991.9    1,013.4    1,049.2    1,064.6
90. Optical and medical instruments...........      448.9      550.5      664.1      729.9      939.5      909.4
 9. Coffee and tea............................      595.2      735.1      398.2      394.1      463.6      512.7
71. Precious metals...........................      304.3      240.5      315.1      404.6      420.2      499.5
98. Special classifications...................      236.4      242.5      264.7      388.6      355.2      378.8
24. Tobacco...................................      296.4      307.1      303.2      313.9      305.6      334.5
 3. Fish......................................      294.0      351.9      321.7      325.5      295.2      294.4
17. Sugar.....................................      221.9      185.2      174.3      187.1      254.0      256.6
27. Fuels.....................................       94.2      161.4      102.9      167.1      186.8      182.5
39. Plastics..................................       83.9       88.2      110.4      124.9      170.3      178.6
84. Machinery.................................    1,484.1      849.5      122.2      144.1      137.8      176.4
72. Steel.....................................       51.7       80.8       36.4       83.7      105.7      173.2
                                               -----------------------------------------------------------------
    Subtotal for top 15 products..............   13,762.8   14,612.8   13,764.2   14,447.4   15,257.7   15,897.8
                                               -----------------------------------------------------------------
    Subtotal for all other products...........    1,533.3    1,537.0    1,540.2    1,565.3    1,604.1    1,764.8
                                               =================================================================
    Total U.S. imports from the DR-CAFTA         15,296.1   16,149.7   15,304.4   16,012.7   16,861.8   17,662.6
     countries................................
----------------------------------------------------------------------------------------------------------------
Note.--HTS is the Harmonized Tariff Schedule of the United States.
Source.--U.S. International Trade Commission Dataweb.

    The United States is the largest foreign investor in each 
of the CAFTA-DR countries. Total U.S. foreign direct investment 
(``FDI'') in the CAFTA-DR countries averaged between $4 billion 
and $5 billion annually during the period 1999-2003. The CAFTA 
countries are negligible sources of FDI in the United States. 
The Dominican Republic accounted for $57 million of FDI in the 
United States in 2002.

2. Tariffs and trade agreements

    In 2002 and 2003, about 80 percent of U.S. imports from the 
CAFTA-DR countries entered the United States duty free. Today, 
about 99 percent of U.S. imports of food and agriculture 
products from the CAFTA-DR countries enter the United States 
duty free. In contrast, U.S. exports of food and agriculture 
products to the CAFTA-DR countries face an average 11 percent 
tariff, with some tariffs ranging as high as 150 percent. With 
respect to manufactured goods, a number of important U.S. 
exports to the CAFTA-DR countries face tariffs ranging from 10 
to 20 percent. Under the Agreement, duties on 80 percent of 
U.S. exports of manufactured goods to the CAFTA-DR countries 
would be eliminated immediately, with the rest phased out over 
a period of up to 10 years. For agricultural goods, duties on 
over 50 percent of U.S. exports to the CAFTA-DR countries would 
be eliminated immediately, with the rest phased out over a 
period of up to 20 years. For the CAFTA-DR countries, 100 
percent of non-textile and non-agricultural exports would enter 
the United States duty free immediately. For other products, 
the United States retains safeguards during the applicable 
period of duty phase-out under the Agreement.
    The CAFTA-DR countries are each members of the WTO. They 
also participate in the following regional trade agreements: 
Central America Common Market (``CACM'') (all but the Dominican 
Republic); Costa Rica-Caribbean Community (``CARICOM'') Free 
Trade Agreement (signed 2004) (CARICOM members are Antigua and 
Barbuda, the Bahamas, Barbados, Belize, Dominica, Grenada, 
Guyana, Haiti, Jamaica, Montserrat, Saint Lucia, Saint Kitts 
and Nevis, St. Vincent and the Grenadines, Suriname, and 
Trinidad and Tobago); Costa Rica-Canada Free Trade Agreement 
(effective 2002); Central America-Chile Free Trade Agreement 
(signed 1999, effective 2002 with respect to Costa Rica and El 
Salvador, others pending implementation); Central America-
Panama Free Trade Agreement (signed 2002); Central America-
Dominican Republic Free Trade Agreement (signed 1998, effective 
2001 with respect to El Salvador, Guatemala, and Honduras, and 
effective 2002 with respect to Costa Rica); El Salvador, 
Guatemala, and Honduras Free Trade Agreement with Mexico 
(effective 2001); Nicaragua-Mexico Free Trade Agreement 
(effective 1998); and the Dominican Republic-CARICOM Free Trade 
Agreement (signed 1998).
    Each of the CAFTA-DR countries receives unilateral trade 
preferences from the United States (under the Caribbean Basin 
Economic Recovery Act and the Caribbean Basin Trade Partnership 
Act; in addition, all but Nicaragua are designated beneficiary 
countries under the Generalized System of Preferences) and the 
European Union (under the European Union's Generalized System 
of Preferences; in addition, the Dominican Republic is included 
among the African, Caribbean, and Pacific (``ACP'') countries 
that traditionally have enjoyed nonreciprocal preferential 
access to the European Union market).

3. U.S. International Trade Commission study

    In August 2004, the United States International Trade 
Commission (``ITC'') released the results of its investigation 
(Investigation No. TA-2104-13) into the probable economic 
effects of a United States-Central America-Dominican Republic 
Free Trade Agreement (USITC Publication 3717). The ITC 
concluded that the economy-wide effects of the Agreement's 
tariff reductions alone are likely to result in an increase in 
overall U.S. welfare in the range of $135.3 million to $248.2 
million. The ITC projected that U.S. exports to the CAFTA-DR 
countries would increase by about $2.7 billion, and U.S. 
imports from the CAFTA-DR countries would increase by about 
$2.8 billion. The ITC further concluded that as a result of the 
Agreement, total U.S. exports to the world are likely to 
increase by approximately $1.9 billion and total U.S. imports 
from the world are likely to increase by about $1.2 billion, 
with minimal impact on U.S. employment and output. In other 
words, the ITC found that full implementation of the CAFTA-DR 
agreement would likely reduce the overall U.S. trade deficit by 
about $700 million.
    At the sectoral level, the ITC report concluded that some 
sectors of the U.S. economy are likely to experience increased 
import competition from the CAFTA-DR countries, while other 
sectors are likely to experience increased export opportunities 
to the markets of the CAFTA-DR countries. The ITC provided more 
detailed analyses for the following sectors: textiles and 
apparel, sugar and sugar-containing products (``SCPs''), and 
grains (i.e. corn and rice). The ITC concluded that the 
Agreement is likely to result in a moderate increase in the 
quantity of U.S. imports of textiles and apparel from the 
CAFTA-DR countries, with most of the increase displacing 
imports from other countries. Consequently, the ITC concluded 
that the Agreement is likely to result in only a small increase 
in total U.S. imports of textiles and apparel. Second, the ITC 
concluded that the Agreement is likely to result in a small 
increase in imports of sugar and SCPs into the United States. 
In particular, the ITC found that increases in the volume of 
sugar imports under the Agreement likely will not trigger the 
suspension of domestic marketing allotments under the current 
U.S. sugar program. The ITC estimated that the U.S. price of 
sugar would decline by about 1 percent as a result of increased 
sugar imports under the Agreement. Third, the ITC concluded 
that by the end of the 15-20 year phase-out of tariff-rate 
quotas on corn and rice imports in the CAFTA-DR countries, U.S. 
exports would increase by at least 20 percent, or $120 million 
(based on 2003 prices), offering significant market 
opportunities for U.S. corn growers and U.S. rice growers. The 
ITC also examined the impact of the Agreement on the services 
sector. The ITC found that the Agreement improves upon 
commitments scheduled by the CAFTA-DR countries under the WTO 
General Agreement on Trade in Services (``GATS'') by, in many 
instances, guaranteeing market access and national treatment in 
areas where the countries previously had no commitments. The 
ITC further found that in addition to according substantial 
market access across the entire CAFTA-DR services regime, the 
Agreement also provides improved regulatory transparency and 
establishes a secure and predictable framework for U.S. 
investors operating in the CAFTA-DR countries.

  D. Overview of the Dominican Republic-Central America-United States 
                          Free Trade Agreement

1. Overview of the agreement

    The Dominican Republic-Central America-United States Free 
Trade Agreement establishes a plurilateral free trade area that 
eliminates tariffs on most merchandise trade. The Agreement 
liberalizes trade in services and contains provisions that 
cover investment, intellectual property, environment, labor, 
government procurement, and competition policy. The Agreement 
also contains a mechanism for settling disputes that arise 
under the Agreement. Throughout the Agreement there are 
important provisions that promote plurilateral consultation and 
cooperation, procedural and substantive due process, 
administrative and judicial review, transparency, and the rule 
of law.

2. USTR summary of the agreement

    The Office of United States Trade Representative (``USTR'') 
prepared a summary of the CAFTA-DR agreement, which was 
distributed to Members of the Senate Finance Committee to aid 
in their consideration of legislation to implement the 
Agreement. This summary, which is available on the USTR 
website, is reprinted below:

    THE DOMINICAN REPUBLIC-CENTRAL AMERICA-UNITED STATES FREE TRADE 
                               AGREEMENT

                        Summary of the Agreement

    This summary briefly describes key provisions of the 
Dominican Republic-Central America-United States Free Trade 
Agreement (``Agreement'' or ``CAFTA-DR'') that the United 
States has concluded with Costa Rica, El Salvador, Guatemala, 
Honduras, and Nicaragua (collectively ``Central America'') and 
the Dominican Republic.

                                Preamble

    The Preamble to the Agreement provides the Parties' 
underlying objectives in entering into the Agreement and 
provides context for the provisions that follow.

                    CHAPTER ONE: INITIAL PROVISIONS

    Chapter One sets out provisions establishing a free trade 
area, describing the objectives of the Agreement, and providing 
that the Parties will interpret and apply the Agreement in 
light of these objectives. The Parties affirm their existing 
rights and obligations with respect to each other under the 
Marrakesh Agreement Establishing the World Trade Organization 
(WTO) and other agreements to which they are all party. The 
Parties also agree that they will give effect to the Agreement, 
including, in the case of the United States, by taking steps 
necessary to ensure observance of provisions applicable to 
state governments.

                    CHAPTER TWO: GENERAL DEFINITIONS

    Chapter Two defines certain terms that recur in various 
chapters of the Agreement.

     CHAPTER THREE: NATIONAL TREATMENT AND MARKET ACCESS FOR GOODS

    Chapter Three and its relevant annexes and appendices set 
out the Agreement's principal rules governing trade in goods. 
It requires each Party to treat products from another Party in 
a non- discriminatory manner, provides for the phase-out and 
elimination of tariffs on ``originating'' goods (as defined in 
Chapter Four) traded between the Parties, and requires the 
elimination of a wide variety of non-tariff trade barriers that 
restrict or distort trade flows.
    Tariff Elimination. Chapter Three provides for the 
elimination of customs duties on originating goods traded 
between the Parties. Duties on most tariff lines covering 
industrial and consumer goods will be eliminated as soon as the 
Agreement enters into force. Duties on other goods will be 
phased out over periods of up to 10 years. Some agricultural 
goods will have longer periods for elimination of duties or be 
subject to other provisions, including, in some cases, the 
application of preferential tariff-rate quotas (TRQs). The 
General Notes to the U.S. Schedule to Annex 3.3 include 
detailed provisions on staging of tariff reductions and 
application of TRQs for certain agricultural goods. The Chapter 
provides that the Parties may agree to speed up tariff phase-
outs on a product-by-product basis after the Agreement takes 
effect. Annex 3.3.6 of the Agreement establishes additional 
tariff commitments that apply between the Central American 
Parties and the Dominican Republic. These commitments largely 
reflect tariff commitments these Parties have under an earlier 
free trade agreement between them.
    Waiver of Customs Duties. Chapter Three provides that 
Parties may not adopt new duty waivers or expand existing duty 
waivers conditioned on the fulfillment of a performance 
requirement. However, Costa Rica, the Dominican Republic, El 
Salvador, and Guatemala are permitted to maintain such measures 
through 2009, provided they do so in accordance with the WTO 
Subsidies and Countervailing Measures (SCM) Agreement. Honduras 
and Nicaragua are permitted to maintain such measures 
indefinitely, provided they do so in accordance with the SCM 
Agreement. Chapter Three defines the term ``performance 
requirements'' so as not to restrict a Party's ability to 
provide duty drawback on goods imported from the other Parties.
    Temporary Admission. Chapter Three requires the Parties to 
provide duty-free temporary admission for certain products. 
Such items include professional equipment, goods for display or 
demonstration, and commercial samples. The Chapter also 
includes specific provisions on transit of vehicles and 
containers used in international traffic.
    Import/Export Restrictions, Fees, and Formalities. The 
Agreement clarifies that restrictions prohibited under the 
General Agreement on Tariffs and Trade (GATT) 1994 and this 
Agreement include export and import price requirements (except 
under antidumping and countervailing duty orders) and import 
licensing conditioned on the fulfillment of a performance 
requirement. In addition, a Party must limit all fees and 
charges imposed on or in connection with importation or 
exportation to the approximate cost of services rendered. The 
United States agreed not to apply its merchandise processing 
fee on imports of originating goods. The Central American 
Parties and the Dominican Republic agreed not to require a 
person of another Party to have or maintain a relationship with 
a ``dealer'' as a condition for allowing the importation of a 
good. These Parties also agreed not to prohibit or restrict the 
importation of any good of another Party as a remedy for a 
violation or alleged violation of any law, regulation, or other 
measure relating to the relationship between a ``dealer'' in 
its territory and a person of another Party.
    Distinctive Products. The Central American Parties and the 
Dominican Republic agreed to recognize Bourbon Whiskey and 
Tennessee Whiskey as ``distinctive products'' of the United 
States, meaning these Parties will not permit the sale of any 
product as Bourbon Whiskey or Tennessee Whiskey unless it was 
manufactured in the United States in accordance with applicable 
laws and regulations.
    Committee on Trade in Goods. Chapter Three also establishes 
a Committee on the Trade in Goods to consider matters arising 
under Chapters Three, Four, and Five. The functions of the 
Committee are to promote and address barriers to trade in goods 
and to provide advice and recommendations on trade capacity 
building with respect to matters covered by Chapters Three, 
Four, and Five.

Agriculture

    TRQs. Chapter Three requires that TRQs be administered in a 
manner that is transparent, non-discriminatory, responsive to 
market conditions and minimally burdensome on trade and allows 
importers to fully utilize import quotas. In addition, the 
Chapter provides that Parties may not condition application 
for, or utilization of, import licenses or quota allocations on 
the re-export of an agricultural good.
    Export Subsidies. Each Party will eliminate export 
subsidies on agricultural goods destined for another CAFTA-DR 
country. Under Article 3.14, no Party may introduce or maintain 
a subsidy on agricultural goods destined for another Party 
unless the exporting Party believes that a third country is 
subsidizing its exports to that other Party. In such a case, 
the exporting Party may initiate consultations with the 
importing Party to develop measures the importing Party may 
adopt to counteract such subsidies. If the importing Party 
agrees to such measures, the exporting Party must refrain from 
applying export subsidies to its exports of the good to the 
importing Party.
    Safeguards. Chapter Three sets out a transitional 
agricultural safeguard mechanism that allows a Party to impose 
a temporary additional duty on specified agricultural products 
if imports exceed an established volume ``trigger''. The 
safeguard measure will remain in force until the end of the 
calendar year in which the measure applies. A Party may not 
apply an agricultural safeguard on a good after the date that 
the good is subject to duty-free treatment under the Party's 
Schedule to Annex 3.3 of the Agreement.
    A Party may not apply a safeguard measure to a good that is 
already the subject of a safeguard measure under either Chapter 
Eight (Trade Remedies) of the Agreement or Article XIX of GATT 
1994 and the WTO Safeguards Agreement. All agricultural 
safeguard measures must be applied and maintained in a 
transparent manner and the Party applying such a measure must, 
upon request, consult with the other Party concerning the 
application of the measure.
    No Party may impose safeguard duties pursuant to the WTO 
Agreement on Agriculture on originating goods.
    Sugar. The Agreement contains several unique features 
applicable to imports of sugar into the United States. First, 
imports under the TRQs created in the Agreement will be limited 
to the lesser of (i) the quantity established in the TRQ, or 
(ii) the exporting Party's trade surplus in specific sugar 
goods. (A Party's ``trade surplus'' is the amount by which its 
exports to all destinations exceed its imports from all sources 
in specified sugar and sweetener goods, except that a Party's 
exports of sugar to the United States and its imports of high 
fructose corn syrup from the United States are not included in 
the calculation of its trade surplus.) The aggregate quantities 
established in the TRQs are modest--107,000 metric tons in the 
first year. The maximum quantities increase to approximately 
151,000 metric tons in year 15 of the Agreement. The United 
States will also establish a quota for specialty sugar goods of 
Costa Rica in the amount of 2,000 metric tons annually. Second, 
unlike other commodities, the United States will not eliminate 
its over-quota duty on sugar imports under the Agreement. 
Lastly, the Agreement includes a mechanism that allows the 
United States, at its option, to provide some form of 
alternative compensation to CAFTA-DR country exporters in place 
of imports of sugar.
    Ethanol. In the General Notes to the Schedule of the United 
States to Annex 3.3 of the Agreement, the United States agreed 
to continue to treat the Central American countries and the 
Dominican Republic as beneficiary countries under the Caribbean 
Basin Initiative (CBI) preference program with respect to 
ethanol imports. Accordingly, the Central American countries 
and the Dominican Republic will continue to share in the duty-
free quota that the United States makes available to CBI 
beneficiary countries. The United States also agreed to 
establish country-specific allocations for Costa Rica and El 
Salvador, but did not increase the total quantity allowed under 
the CBI quota.
    Additional Provisions. Chapter Three provides for the 
creation of a Committee on Agricultural Trade. The Committee 
will be established within 90 days of entry into force of the 
Agreement and will provide a forum for promoting cooperation in 
the implementation and administration of the Agreement, as well 
as for consultations on matters related to the agricultural 
provisions of the Agreement. The Chapter also provides for the 
establishment of an Agriculture Review Commission. The 
Commission will be established 14 years after entry into force 
of the Agreement and will review the implementation and 
operation of the Agreement as it relates to trade in 
agricultural goods, including whether to extend the 
agricultural safeguard mechanism. Further, the Chapter provides 
that the Parties will consult on and review the operation of 
the Agreement as it relates to trade in chicken nine years 
after entry into force of the Agreement.

Textiles and apparel

    Chapter Three also sets out various provisions specifically 
addressing trade in textile and apparel goods.
    Tariff Elimination. Duties on nearly all originating 
textile or apparel goods will be eliminated when the Agreement 
enters into force. Moreover, the preferential duty treatment 
under the Agreement may, on a reciprocal basis, be made 
retroactive to January 1, 2004.
    Safeguards. The Chapter establishes a transitional 
safeguard procedure for textile and apparel goods, under which 
an importing Party may temporarily impose additional duties up 
to the level of the normal trade relations/most-favored-nation 
(NTR/MFN) duty rates on imports of textile or apparel goods 
that cause, or threaten to cause, serious damage to a domestic 
industry as a result of the elimination or reduction of duties 
under the Agreement. An importing Party may impose a textile 
safeguard measure only once on the same textile or apparel 
good. The measure may not be in place for more than three 
years. The ability to impose textile safeguards lapses five 
years after the entry into force of the Agreement. A Party may 
not apply a textile safeguard measure to a good while the good 
is subject to a safeguard measure under (i) Chapter Eight 
(Trade Remedies), or (ii) Article XIX of the GATT 1994 and the 
WTO Agreement on Safeguards.
    A Party imposing a safeguard measure must provide the 
exporting Party with mutually agreed-upon compensation in the 
form of trade concessions for textile or apparel goods that 
have substantially equivalent value to the increased duties 
resulting from application of the safeguard measure. If the 
Parties cannot agree on compensation, the exporting Party may 
raise duties on any goods from the importing Party in an amount 
that has substantially equivalent value to the increased duties 
resulting from application of the safeguard measure.
    Rules of Origin and Related Matters. Under the Agreement, a 
textile or apparel good will generally qualify as an 
``originating good'' only if all processing after fiber 
formation (e.g., yarn-spinning, fabric production, cutting, and 
assembly) takes place in the territory of the United States or 
another CAFTA-DR Party, or if there is an applicable change in 
tariff classification under the specific rules of origin 
contained in Annex 4.1 of the Agreement.
    Chapter Three sets out special rules for determining 
whether a textile or apparel good is an ``originating good,'' 
including a de minimis exception for non-originating yarns or 
fibers, a process for designating inputs not available in 
commercial quantities, a rule for treatment of sets, an 
exception for use of certain nylon filament yarn, and 
consultation provisions.
    The de minimis rule applies to goods that ordinarily would 
not be considered originating goods because certain of their 
fibers or yarns do not undergo an applicable change in tariff 
classification. Under the rule, the Parties will consider a 
good to be originating if such fibers or yarns constitute ten 
percent or less of the total weight of the component of the 
good that determines origin. This special rule does not apply 
to elastomeric yarns.
    Annex 3.25 of the Agreement sets out a list of fabrics, 
yarns, and fibers that the Parties have determined are not 
available in commercial quantities in a timely manner from 
producers in the United States or the other CAFTA-DR countries. 
A textile or apparel good that includes the fabrics, yarns, or 
fibers included in this list will be treated as if it is 
originating for purposes of the specific rules of origin in 
Annex 4.1 of the Agreement, regardless of the actual origin of 
those inputs. Chapter Three establishes procedures under which 
the United States will determine whether additional fabrics, 
yarns, or fibers are not available in commercial quantities in 
the United States or the other CAFTA-DR countries. The United 
States may also remove a fabric, yarn, or fiber from the list 
if it determines that the fabric, yarn, or fiber has become 
available in commercial quantities.
    Appendix 4.1-B of the Agreement provides that for purposes 
of determining whether woven apparel (of chapter 62 of the HTS) 
is originating, materials used in the production of the article 
that are produced in Canada or Mexico will be treated as if the 
materials were produced in a CAFTA-DR country, provided that 
Canada and Mexico, respectively: (i) provide reciprocal 
treatment for U.S.-produced inputs under their free trade 
agreements with the other CAFTA-DR countries; and (ii) agree 
with the United States to textile verification procedures that 
are substantially similar to the procedures under the CAFTA-DR.
    This treatment of woven apparel made with Canadian or 
Mexican materials is subject to an overall quantitative limit, 
which is set initially at 100 million square meter equivalents, 
and to sublimits for trousers and skirts, jeans, and tailored 
wool apparel. The overall limit may increase to a maximum of 
200 square meter equivalents, with corresponding increases in 
the sublimits, based on the percentage increase in U.S. imports 
of originating woven apparel from the other CAFTA-DR countries. 
The overall limit may also increase as a result of negotiations 
between the Parties following entry into force of the 
Agreement.
    Customs Cooperation. Chapter Three commits each Party to 
cooperate to enforce or assist in enforcing laws related to 
trade in textile and apparel goods, to ensure the accuracy of 
claims of origin, and to prevent circumvention of laws of the 
Parties or agreements affecting trade in textile and apparel 
goods. The Parties also agreed that, under certain 
circumstances, the exporting Party must conduct a verification 
to determine that a claim of origin is accurate, or to 
determine compliance with relevant laws. Such a verification 
may include site visits to the premises of the exporter or 
producer of the goods in question. If there is insufficient 
information to make the relevant determination, or if an 
enterprise provides incorrect information, the importing Party 
may take appropriate action, which may include denying 
application of preferential tariff treatment or denying entry 
to the goods in question. Further, any Party may convene 
consultations to resolve technical or interpretive issues 
arising with respect to customs cooperation or may request 
technical assistance from another Party in implementing the 
customs cooperation provisions.
    Additional Provisions. Chapter Three provides for duty-free 
treatment for goods that an importing Party and exporting Party 
agree qualify as handmade, hand-loomed, or traditional folklore 
goods. Separately, the Chapter establishes that, for the first 
two years of the Agreement, the United States will charge 
duties that are half the NTR/MFN rate for a limited quantity of 
tailored wool apparel goods assembled in Costa Rica regardless 
of the origin of the fabric used to make the goods. Moreover, 
for the first ten years of the Agreement, the United States 
shall provide preferential tariff treatment to cotton and man-
made fiber apparel goods assembled in Nicaragua that do not 
qualify as ``originating'' goods. The United States also agreed 
that goods assembled in CAFTA-DR countries from U.S. components 
with U.S. thread that do not qualify as ``originating'' goods 
will be subject to NTR/MFN duties on only the value of the 
assembled good minus the value of U.S. components used in the 
good.

          CHAPTER FOUR: RULES OF ORIGIN AND ORIGIN PROCEDURES

    To benefit from various trade preferences provided under 
the Agreement, including reduced duties, a good must qualify as 
an ``originating good'' under the rules of origin set out in 
Chapter Four and Annex 4.1. These rules ensure that the special 
tariff and other benefits of the Agreement accrue primarily to 
firms or individuals that produce or manufacture goods in the 
Parties' territories.
    Key Concepts. Chapter Four provides general criteria under 
which a good may qualify as an ``originating good'':
           When the good is wholly obtained or produced 
        in the territory of one or more of the Parties (e.g., 
        crops grown or minerals extracted in the United 
        States); or
           When the good: (1) is manufactured or 
        assembled from non-originating materials that undergo a 
        specified change in tariff classification in one or 
        more of the Parties; or (2) meets any applicable 
        ``regional value content'' requirement (see below); and 
        (3) satisfies all other requirements of Chapter Four, 
        including Annex 4.1; or
           When the good is produced in one or more 
        Parties entirely from ``originating'' materials.
    De Minimis. Even if a good does not undergo a specified 
change in tariff classification, it will be treated as an 
originating good if the value of non-originating materials that 
do not undergo the required tariff shift does not exceed 10 
percent of the adjusted value of the good, and the good 
otherwise meets the criteria of the Chapter. This de minimis 
requirement does not apply to certain agricultural and textile 
goods.
    Regional Value Content. Some origin rules under the 
Agreement require that certain goods meet a regional value 
content test in order to qualify as ``originating,'' meaning 
that a specified percentage of the value of the good must be 
attributable to originating materials. In general, the 
Agreement provides two methods for calculating that percentage: 
(1) the ``build-down method'' (based on the value of non-
originating materials used); and (2) the ``build-up method'' 
(based on the value of originating materials used). The 
regional value content of certain automotive goods, however, 
may be calculated on the basis of the net cost of the good. 
Finally, accessories, spare parts, and tools delivered with a 
good are considered part of the material making up the good so 
long as these items are not separately classified or invoiced 
and their quantities and values are customary. The de minimis 
rule does not apply in calculating regional value content.
    Claims for Preferential Treatment. Under the Chapter, 
importers who wish to claim preferential tariff treatment for 
particular goods must be prepared to submit, on the request of 
the importing Party's customs authority, a statement explaining 
why the good qualifies as an originating good. A Party may only 
deny preferential treatment in writing, and must provide legal 
and factual findings. The Chapter establishes a procedure for 
filing post-importation claims for preferential treatment up to 
one year from importation and for seeking a refund of any 
excess duties paid. Chapter Four also provides that a Party 
will not penalize an importer if the importer promptly and 
voluntarily corrects an incorrect claim and pays any duties 
owed within one year of submission of the claim.
    Verification. For purposes of determining whether a good is 
an originating good, each Party must ensure that its customs 
authority may conduct verifications. Where an importing Party 
determines through verification that an importer, exporter, or 
producer has engaged in a pattern of conduct in providing false 
or unsupported statements, declarations, or certifications that 
a good is an originating good, the Party may suspend 
preferential tariff treatment to identical goods covered by 
subsequent statements, declarations, or certifications by that 
importer, exporter, or producer until the importing Party 
determines that the importer, exporter, or producer is in 
compliance with the Chapter.
    Additional Rules. Chapter Four further delineates specific 
rules with respect to the treatment of (1) packing materials 
and containers; (2) indirect materials; (3) fungible goods; and 
(4) sets of goods. The Chapter provides that Parties may not 
treat a good as originating if the good undergoes production 
outside the territories of the Parties or does not remain under 
the control of customs authorities in the territory of a non-
Party. Chapter Four also calls for the Parties to publish 
guidelines for interpreting, applying, and administering 
Chapter Four and the relevant provisions of Chapter Three.

      CHAPTER FIVE: CUSTOMS ADMINISTRATION AND TRADE FACILITATION

    Chapter Five establishes rules designed to encourage 
transparency, predictability, and efficiency in the operation 
of each Party's customs procedures and to provide for 
cooperation between the Parties on customs matters.
    General Principles. Chapter Five commits each Party to 
observe certain transparency obligations. Each Party must 
promptly publish its customs measures, including on the 
Internet, and, where possible, solicit public comments before 
amending its customs regulations. Each Party must also provide 
written advance rulings, on request, to its importers and to 
exporters and producers of another Party, regarding whether a 
product qualifies as an ``originating'' good under the 
Agreement, as well as on other customs matters. In addition, 
each Party must guarantee importers access to both 
administrative and judicial review of customs decisions. The 
Parties must release goods from customs promptly and 
expeditiously clear express shipments. The Chapter provides a 
transition period of between one and three years to comply with 
several of these obligations in the case of the Central 
American Parties and the Dominican Republic.
    Cooperation. Chapter Five also is designed to enhance 
customs cooperation. It encourages the Parties to give each 
other advance notice of customs developments likely to affect 
the Agreement. The Chapter calls for the Parties to cooperate 
in securing compliance with each other's customs measures 
related to the implementation and operation of the provisions 
of the Agreement governing importations and exportations. It 
includes specific provisions requiring the Parties to share 
customs information where a Party has a reasonable suspicion of 
unlawful activity relating to its laws and regulations 
governing the importation of goods.

            CHAPTER SIX: SANITARY AND PHYTOSANITARY MEASURES

    Chapter Six defines the Parties' obligations to each other 
regarding sanitary and phytosanitary (SPS) matters. It reflects 
the Parties' understanding that implementation of existing 
obligations under the WTO Agreement on the Application of 
Sanitary and Phytosanitary Measures (SPS Agreement) is a shared 
objective.
    Key Concepts. SPS measures are laws or regulations that 
protect human, animal, or plant life or health from certain 
risks, including plant- and animal-borne pests and diseases, 
additives, contaminants, toxins, or disease-causing organisms 
in food and beverages.
    Cooperation. Under Chapter Six, the Parties will establish 
an SPS Committee consisting of relevant trade and regulatory 
officials. The objectives of the Committee are to (i) help each 
Party to implement the WTO SPS Agreement; (ii) assist each 
Party to protect human, animal, or plant life or health; (iii) 
enhance consultation and cooperation between the Parties on SPS 
matters; and (iv) facilitate trade between the Parties. The 
Committee will also provide a forum for enhancing mutual 
understanding of each Party's SPS measures and the regulatory 
processes that relate to those measures; consulting on SPS 
matters that may affect trade between the Parties; and 
consulting on issues, agendas, and positions for meetings of 
certain international organizations.
    Dispute Settlement. Neither Party may invoke the 
Agreement's dispute settlement procedures for a matter arising 
under Chapter Six. Instead, any SPS dispute between the Parties 
must be resolved under the applicable agreement(s) and rules of 
the WTO.

               CHAPTER SEVEN: TECHNICAL BARRIERS TO TRADE

    Under Chapter Seven, the Parties will build on WTO rules 
related to technical barriers to trade to promote transparency, 
accountability, and cooperation between the Parties on 
regulatory issues.
    Key Concepts. The term ``technical barriers to trade'' 
(TBT) refers to barriers that may arise in preparing, adopting, 
or applying voluntary product standards, mandatory product 
standards (``technical regulations''), and procedures used to 
determine whether a particular good meets such standards, i.e., 
``conformity assessment'' procedures.
    International Standards. The principles articulated in the 
WTO TBT Committee Decision on Principles for the Development of 
International Standards, Guides and Recommendations emphasize 
the need for openness and consensus in the development of 
international standards. Under Chapter Seven, the Parties will 
apply these principles and consult on pertinent matters under 
consideration by international or regional bodies.
    Cooperation. Chapter Seven sets out multiple means for 
cooperation between the Parties to reduce barriers and improve 
market access, and provides for a Committee on Technical 
Barriers to Trade to oversee implementation of the Chapter and 
facilitate cooperation. The Committee's specific functions 
include: (i) enhancing cooperation in the development and 
improvement of standards, technical regulations, and conformity 
assessment procedures; (ii) facilitating sectoral cooperation 
between governmental and non-governmental conformity assessment 
bodies; (iii) exchanging information on developments in non-
governmental, regional, and multilateral fora engaged in 
activities related to standards, technical regulations, and 
conformity assessment procedures; and (iv) consulting, at a 
Party's request, on any matter arising under the Chapter.
    Conformity Assessment. Chapter Seven provides for a 
dialogue between the Parties on ways to facilitate the 
acceptance of conformity assessment results. Chapter Seven 
further provides that Parties shall recognize conformity 
assessment bodies in the territories of the other Parties on no 
less favorable terms than it accords conformity assessment 
bodies in its own territory.
    Transparency. Chapter Seven contains various transparency 
obligations, including obligations on each Party to: (i) allow 
persons of the other Parties to participate in the development 
of technical regulations, standards, and conformity assessment 
procedures on a non-discriminatory basis; (ii) transmit 
regulatory proposals notified under the TBT Agreement directly 
to the other Parties; (iii) describe in writing the objectives 
of and reasons for regulatory proposals; and (iv) consider 
comments on regulatory proposals and respond in writing to 
significant comments it receives.

                     CHAPTER EIGHT: TRADE REMEDIES

    Safeguards. Chapter Eight establishes a safeguard procedure 
that will be available to aid domestic industries that sustain 
or are threatened with serious injury due to increased imports 
resulting from tariff reductions or elimination under the 
Agreement. The Chapter does not affect the Parties' rights or 
obligations under the WTO's safeguard provisions (global 
safeguards) or under other WTO trade remedy rules.
    Chapter Eight authorizes each Party to impose temporary 
duties on an imported originating good if, as a result of the 
reduction or elimination of a duty under the Agreement, the 
good is being imported in such increased quantities and under 
such conditions as to constitute a substantial cause of serious 
injury, or threat of serious injury, to a domestic industry 
producing a ``like'' or ``directly competitive'' good. Unlike 
agricultural and textile or apparel safeguard measures, which 
will apply bilaterally, safeguard measures under Chapter Eight 
will apply with respect to all imports of an originating good, 
other than imports from a Party whose import market share is de 
minimis (i.e., a market share of less than three percent of 
total imports of the originating good, unless the import market 
share of all such Parties exceeds nine percent).
    A safeguard measure may be applied on a good only during 
the Agreement's ``transition period'' for phasing out duties on 
the good. A safeguard measure may take one of two forms--a 
temporary increase in duties to NTR/MFN levels or a temporary 
suspension of duty reductions called for under the Agreement. A 
Party may not impose a safeguard measure under Chapter Eight 
more than once on any good. A safeguard measure may be in place 
for a total of four years, including any extensions of the 
measure. A Party may extend a measure if it determines that the 
industry is adjusting and the measure remains necessary to 
facilitate adjustment and prevent or remedy serious injury. If 
a measure lasts more than one year, the Party must scale it 
back at regular intervals. Annex 8.3 sets out the procedural 
and substantive investigation requirements that Parties must 
follow in conducting safeguard investigations.
    If a Party imposes a safeguard measure, Chapter Eight 
requires it to provide offsetting trade compensation to the 
other Parties whose goods are subject to the measure. If the 
Parties cannot agree on the amount or nature of the 
compensation, a Party entitled to compensation may unilaterally 
suspend ``substantially equivalent'' trade concessions that it 
has made to the importing Party.
    Global Safeguards. Chapter Eight maintains each Party's 
right to take action against imports from all sources under 
Article XIX of GATT 1994 and the WTO Agreement on Safeguards. A 
Party may exclude imports of an originating good from another 
Party from a global safeguard measure if such imports are not a 
substantial cause of serious injury or threat thereof. A Party 
may not apply a safeguard measure under Chapter Eight at the 
same time that it applies a safeguard measure on the same good 
under the WTO Agreement on Safeguards.
    Antidumping and Countervailing Duties. Chapter Eight 
confirms that the Parties retain their rights and obligations 
under the WTO agreements relating to the application of 
antidumping and countervailing duties. Antidumping and 
countervailing duty measures may not be challenged under the 
Agreement's dispute settlement procedures. The Chapter provides 
that the United States will continue to treat the other CAFTA-
DR countries as CBI beneficiary countries for purposes of 
Sections 771(7)(G)(ii)(III) and 771(7)(H) of the Tariff Act of 
1930 (19 U.S.C. Sec. 1677(7)(G)(ii)(III) and 1677(7)(H)), which 
preclude the U.S. International Trade Commission from 
aggregating (or ``cumulating'') imports from CBI beneficiary 
countries with imports from non-beneficiary countries in 
determining in antidumping and countervailing duty 
investigations whether imports of a particular product from 
such beneficiary countries are injuring or threaten to injure a 
U.S. industry.

                  CHAPTER NINE: GOVERNMENT PROCUREMENT

    Chapter Nine provides comprehensive obligations requiring 
each Party to apply fair and transparent procurement procedures 
and rules and prohibiting each government and its procuring 
entities from discriminating in purchasing practices against 
goods, services, and suppliers from the other Parties. The 
rules of Chapter Nine are broadly based on the rules of the WTO 
Agreement on Government Procurement.
    General Principles. Chapter Nine establishes a basic rule 
of ``national treatment,'' meaning that each Party's 
procurement rules and the entities applying those rules must 
treat goods, services, and suppliers of such goods and services 
from the other Parties in a manner that is ``no less 
favorable'' than the domestic counterparts. The Chapter also 
bars discrimination against locally established suppliers on 
the basis of foreign affiliation or ownership. Chapter Nine 
also provides rules aimed at ensuring a fair and transparent 
procurement process.
    Coverage and Thresholds. Chapter Nine applies to purchases 
and other means of obtaining goods and services valued above 
certain dollar thresholds by those government departments, 
agencies, and enterprises listed in each Party's schedule. 
Specifically, the Chapter applies to procurements by listed 
``central'' (i.e., national or U.S. Federal) government 
agencies of goods and services valued at $58,550 or more and 
construction services valued at $6,725,000 or more. The 
equivalent thresholds for purchases by listed ``sub-central'' 
government entities (i.e., Central American and Dominican 
Republic municipalities and U.S. state government agencies) are 
$477,000 and $6,725,000, for goods and services and 
construction services, respectively. For the three-year period 
following entry into force of the Agreement, the Chapter 
applies, in the case of the Central American Parties and the 
Dominican Republic, to purchases of goods and services by 
central government agencies valued at $117,100 or more and by 
sub-central government agencies valued at $650,000 or more and 
purchases of construction services by either central or sub-
central government agencies valued at $8,000,000 or more. The 
Chapter's thresholds for listed ``government enterprises'' are 
either $250,000 or $538,000 for goods and services, and 
$6,725,000 for construction services, except that for the 
three-year period following entry into force of the Agreement, 
the threshold for construction services in the Central American 
Parties and the Dominican Republic is $8,000,000. All 
thresholds are subject to adjustment every two years for 
inflation. (Separate annexes to Chapter Nine establish special 
coverage rules with respect to procurement between (i) the 
Central American Parties, and (ii) each Central American Party 
and the Dominican Republic.)
    Transparency. Chapter Nine establishes rules designed to 
ensure transparency in procurement procedures. Each Party must 
publish its laws, regulations, and other measures governing 
procurement, along with any changes to those measures. 
Procuring entities must publish notices of procurement 
opportunities in advance. The Chapter also lists minimum 
information that such notices must include.
    Tendering Rules. Chapter Nine provides rules for setting 
deadlines on ``tendering'' (bidding on government contracts). 
It requires procuring entities to give suppliers all the 
information they need to prepare tenders, including the 
criteria that procuring entities will use to evaluate tenders. 
Entities must also, where appropriate, base their technical 
specifications (i.e., detailed descriptions of the goods or 
services to be procured) on performance-oriented criteria and 
international standards. Chapter Nine provides that procuring 
entities may not write technical specifications to favor a 
particular supplier, good, or service. It also sets out the 
circumstances under which procuring entities are allowed to use 
limited tendering, i.e., award a contract to a supplier without 
opening the procurement to all interested suppliers.
    Award Rules. Chapter Nine requires that to be considered 
for an award, a tender must be submitted by a qualified 
supplier. The tender must meet the criteria set out in the 
tender documentation, and procuring entities must base their 
award of contracts on those criteria. Procuring entities must 
publish information on awards, including the name of the 
supplier, a description of the goods or services procured, and 
the value of the contract. Chapter Nine also calls for each 
Party to ensure that suppliers may bring challenges against 
procurement decisions before independent reviewers.
    Additional Provisions. Chapter Nine builds on the anti-
corruption provisions of Chapter Eighteen, including by 
requiring each Party to maintain procedures to declare 
suppliers that have engaged in fraudulent or other illegal 
procurement actions ineligible for participation in the Party's 
procurement. It establishes procedures under which a Party may 
modify its coverage under the Chapter, such as when a Party 
privatizes an entity whose purchases are covered under the 
Chapter. It also provides that Parties may adopt or maintain 
measures necessary to protect: (1) public morals, order, or 
safety; (2) human, animal, or plant life or health, including 
environmental measures necessary to protect human, animal, or 
plant life or health; or (3) intellectual property. Parties may 
also adopt measures relating to goods or services of 
handicapped persons, philanthropic institutions, or prison 
labor.

                        CHAPTER TEN: INVESTMENT

    Chapter Ten establishes rules to protect investors from one 
Party against unfair or discriminatory government actions when 
they make or attempt to make investments in another Party's 
territory. Its provisions reflect traditional standards 
incorporated in earlier U.S. investment agreements (including 
those in the North American Free Trade Agreement and U.S. 
bilateral investment treaties) and in customary international 
law, and contain several innovations that were incorporated in 
the free trade agreements with Chile and Singapore as well as 
others.
    Key Concepts. Under Chapter Ten, the term ``investment'' 
covers all forms of investment, including enterprises, 
securities, debt, intellectual property rights, licenses, and 
contracts. It includes both investments existing when the 
Agreement enters into force and future investments. The term 
``investor of a Party'' encompasses U.S., Central American, and 
Dominican Republic nationals as well as firms (including 
branches) established in one of the Parties.
    General Principles. Investors enjoy six basic protections: 
(1) non-discriminatory treatment relative to domestic investors 
as well as investors of non-Parties; (2) limits on 
``performance requirements''; (3) free transfer of funds 
related to an investment; (4) protection from expropriation 
other than in conformity with customary international law; (5) 
a ``minimum standard of treatment'' in conformity with 
customary international law; (6) and the ability to hire key 
managerial personnel without regard to nationality. (As to this 
last protection, a Party may require that a majority of the 
board of directors be of a particular nationality, as long as 
this does not prevent the investor from controlling its 
investment.)
    Sectoral Coverage and Non-Conforming Measures. With the 
exception of investments in or by regulated financial 
institutions (which are treated in Chapter Twelve), Chapter Ten 
generally applies to all sectors, including service sectors. 
However, each Party has listed in annexes to the Chapter 
particular sectors or measures for which it negotiated an 
exemption from the Chapter's rules relating to national 
treatment, most favored nation treatment, performance 
requirements, or senior management and boards of directors. All 
current state and local laws and regulations are exempted from 
these rules. A Party may liberalize a measure that it has 
exempted, but it may not make such measures more restrictive.
    Investor-State Disputes. Chapter Ten provides a mechanism 
for an investor of a Party to submit to binding international 
arbitration a claim for damages against another Party. The 
investor may assert that the Party has breached a substantive 
obligation under the Chapter or that the Party has breached an 
investment agreement with, or an investment authorization 
granted to, the investor. ``Investment agreements'' and 
``investment authorizations'' are particular types of 
arrangements between an investor and a host government based on 
contracts and authorizations, respectively. These terms are 
defined in Chapter 10.
    Chapter Ten affords public access to information on the 
Chapter's investor-State proceedings. For example, Chapter Ten 
requires that hearings will generally be open to the public and 
that key documents will be publicly available, with exceptions 
for confidential business information. The Chapter also 
authorizes tribunals to accept amicus submissions from the 
public. In addition, the Chapter includes provisions similar to 
those used in U.S. courts to dispose quickly of frivolous 
claims. Finally, an annex to Chapter Ten calls on the Parties, 
within three months of the date of entry into force of the 
Agreement, to initiate negotiations to develop an appellate 
body to review arbitral awards rendered by tribunals under the 
Chapter.
    Chapter Ten also provides that, ``except in rare 
circumstances,'' nondiscriminatory regulatory actions designed 
and applied to meet legitimate public welfare objectives, such 
as public health and the environment, are not expropriatory.

             CHAPTER ELEVEN: CROSS-BORDER TRADE IN SERVICES

    Chapter Eleven governs measures affecting cross-border 
trade in services between the Parties. Certain provisions also 
apply to measures affecting investments to supply services. 
Chapter provisions are drawn in part from the services 
provisions of the NAFTA and the WTO General Agreement on Trade 
in Services (GATS), as well as priorities that have emerged 
since those agreements.
    Key Concepts. Under the Agreement, cross-border trade in 
services covers supply of a service:
           from the territory of one Party into the 
        territory of another Party (e.g., electronic delivery 
        of services from the United States to Costa Rica);
           in the territory of a Party by a person of 
        that Party to a person of another Party (e.g., a 
        Guatemalan company provides services to U.S. visitors 
        in Guatemala); and
           by a national of a Party in the territory of 
        another Party (e.g., a U.S. lawyer provides legal 
        services in El Salvador).
    Chapter Eleven should be read together with Chapter Ten 
(Investment), which establishes rules pertaining to the 
treatment of service firms that choose to provide their 
services through a local presence, rather than cross-border. 
Chapter Eleven applies where, for example, a service supplier 
is temporarily present in a territory of a Party and does not 
operate through a local investment.
    General Principles. Among Chapter Eleven's core obligations 
are requirements to provide national treatment and MFN 
treatment to service suppliers of the other Parties. Thus, each 
Party must treat service suppliers of another Party no less 
favorably than its own suppliers or those of any other country. 
This commitment applies to state and local governments as well 
as the federal government. Chapter provisions relate to the 
rights of existing service suppliers as well as those who seek 
to supply services, subject to any reservations by a Party. The 
Chapter also includes a provision prohibiting the Parties from 
requiring firms to establish a local presence as a condition 
for supplying a service on a cross-border basis. In addition, 
certain types of market access restrictions to the supply of 
services (e.g., that limit the number of firms that may offer a 
particular service or that restrict or require specific types 
of legal structures or joint ventures with local companies in 
order to supply a service) are also barred. The Chapter's 
market access rules apply both to services supplied on a cross-
border basis and through a local investment.
    Sectoral Coverage and Non-Conforming Measures. Chapter 
Eleven applies across virtually all services sectors. The 
chapter excludes financial services (which are addressed in 
Chapter Twelve), except that certain provisions of Chapter 
Eleven apply to investments in unregulated financial services 
that are covered by Chapter Ten (Investment). In addition, 
Chapter Eleven does not cover air transportation, although it 
does apply to specialty air services and aircraft repair and 
maintenance.
    Each Party has listed in annexes measures in particular 
sectors for which it negotiated exemptions from the chapter's 
core obligations. All existing state and local laws and 
regulations are exempted from these obligations. Once a Party, 
including a state or local government, liberalizes a measure 
that it has exempted, however, it must, in most cases, 
thereafter maintain the measure at least at that level of 
openness.
    Specific Commitments. Chapter Eleven includes a 
comprehensive definition of express delivery services that 
requires each Party to provide national treatment, MFN 
treatment, and additional benefits to express delivery services 
of the other Parties. The Chapter provides that the Central 
American Parties and the Dominican Republic may not adopt or 
maintain any restriction on express delivery services that was 
not in place on the date the Agreement was signed. The Chapter 
also addresses the issue of postal monopolies directing 
revenues derived from monopoly postal services to confer an 
advantage on express delivery services. Costa Rica, the 
Dominican Republic, El Salvador, Guatemala, and Honduras also 
made commitments regarding their ``dealer protection'' regimes. 
Under existing ``dealer protection'' regimes, U.S. firms may be 
tied to exclusive or inefficient distributor arrangements. The 
commitments under the Agreement give U.S. firms and their 
Central American and Dominican Republic partners more freedom 
to contract the terms of their commercial relations and 
encourage the use of arbitration to resolve disputes between 
parties to dealer contracts.
    Transparency and Domestic Regulation. Provisions on 
transparency and domestic regulation complement the core rules 
of Chapter Eleven. The transparency rules apply to the 
development and application of regulations governing services. 
The Chapter's rules on domestic regulation govern the operation 
of approval and licensing systems for service suppliers. Like 
the Chapter's market access rules, its provisions on 
transparency and domestic regulation cover services supplied 
both on a cross-border basis and through a local investment. An 
annex to Chapter Eleven sets out specific commitments that 
individual Parties have agreed to undertake.
    Exclusions. Chapter Eleven excludes any service supplied 
``in the exercise of governmental authority''--that is, a 
service that is provided on a non-commercial and non-
competitive basis. Chapter Eleven also does not generally apply 
to government subsidies, although the Parties have undertaken a 
commitment relating to cross-subsidization of express delivery 
services.

                   CHAPTER TWELVE: FINANCIAL SERVICES

    Chapter Twelve provides rules governing each Party's 
treatment of: (1) financial institutions of another Party; (2) 
investors of another Party, and their investments, in financial 
institutions; and (3) cross-border trade in financial services.
    Key Concepts. The Chapter defines a ``financial 
institution'' as any financial intermediary or other 
institution authorized to do business and regulated or 
supervised as a financial institution under the law of the 
Party where it is located. A ``financial service'' is any 
service of a financial nature, including, for example, 
insurance, banking, securities, asset management, financial 
information and data processing services, and financial 
advisory services.
    General Principles. Chapter Twelve's core obligations 
parallel those in Chapters Ten (Investment) and Eleven (Cross-
Border Trade in Services). Specifically, Chapter Twelve imposes 
rules requiring national treatment and MFN treatment, prohibits 
certain quantitative restrictions on market access of financial 
institutions, and bars restrictions on the nationality of 
senior management. As appropriate, these rules apply to 
measures affecting financial institutions, investors and 
investments in financial institutions of another Party, and 
services companies that are currently supplying and that seek 
to supply financial services on a cross-border basis. As 
between the Central American Parties and the Dominican 
Republic, obligations pertaining to banking services, or as 
between Guatemala and the Dominican Republic, financial 
services generally, do not apply until two years after entry 
into force of the Agreement.
    Non-Conforming Measures. Similar to Chapters Ten and 
Eleven, each Party has listed in an annex to Chapter Twelve 
particular financial services measures for which it negotiated 
exemptions from the Chapter's core obligations. Existing non-
conforming U.S. state and local laws and regulations are 
exempted from these obligations. Once a Party, including a 
state or local government, liberalizes one of these non-
conforming measures, however, it must, in most cases, maintain 
the measure at least at that new level of openness.
    Other Provisions. Chapter Twelve also includes provisions 
on regulatory transparency, ``new'' financial services, self-
regulatory organizations, and the expedited availability of 
insurance products.
    Relationship to Other Chapters. Measures that a Party 
applies to financial services suppliers of another Party, other 
than regulated financial institutions, that make or operate 
investments in the Party's territory are covered principally by 
Chapter Ten (Investment) and certain provisions of Chapter 
Eleven (Cross-Border Trade in Services). In particular, the 
core obligations of Chapter Ten apply to such measures, as do 
the market access, transparency, and domestic regulation 
provisions of Chapter Eleven. Chapter Twelve incorporates by 
reference certain provisions of Chapter Ten, such as those 
relating to transfers and expropriation.

                  CHAPTER THIRTEEN: TELECOMMUNICATIONS

    Chapter Thirteen creates disciplines beyond those imposed 
under Chapters Ten (Investment) and Eleven (Cross-Border Trade 
in Services) on regulatory measures affecting 
telecommunications trade and investment between the Parties. It 
is designed to ensure that service suppliers of each Party have 
non-discriminatory access to public telecommunications networks 
in the territories of the other Parties. In addition, the 
Chapter requires each Party to regulate its dominant 
telecommunications suppliers in ways that will ensure a level 
playing field for new entrants. Chapter Thirteen also seeks to 
ensure that telecommunications regulations are set by 
independent regulators applying transparent procedures, and is 
designed to encourage adherence to principles of deregulation 
and technological neutrality.
    Key Concepts. Under Chapter Thirteen, a ``public 
telecommunications service'' is any telecommunications service 
that a Party requires to be offered to the public generally. 
The term includes voice and data transmission services. It does 
not include the offering of ``information services'' (e.g., 
services that enable users to create, store, or process 
information over a network). A ``major supplier'' is a company 
that, by virtue of its market position or control over certain 
facilities, can materially affect the terms of participation in 
the market.
    Competition. Chapter Thirteen establishes rules promoting 
competition in telecommunications services. It also provides 
flexibility to account for changes that may occur through new 
legislation or regulatory decisions. The Chapter includes 
commitments by each Party to:
           ensure that all service suppliers of another 
        Party that seek to access or use a public 
        telecommunications network in the Party's territory can 
        do so on reasonable and non- discriminatory terms 
        (e.g., El Salvador must ensure that its public phone 
        companies do not provide preferential access to 
        Salvadoran banks or Internet service providers, to the 
        detriment of U.S. competitors);
           give another Party's telecommunications 
        suppliers, in particular, the right to interconnect 
        their networks with public networks in the Party's 
        territory;
           ensure that telecommunications suppliers of 
        another Party that seek to build physical networks in 
        the Party's territory have access to key physical 
        facilities where they can install equipment, thus 
        facilitating cost-effective investment;
           ensure that telecommunications suppliers of 
        another Party enjoy the right to lease lines to 
        supplement their own networks or, alternatively, 
        purchase telecommunications services from domestic 
        suppliers and resell them in order to build a customer 
        base; and
           impose disciplines on the behavior of 
        ``major suppliers.''
    Regulation. The Chapter addresses key regulatory concerns 
that may create barriers to trade and investment in 
telecommunications services. In particular, the Parties:
           will adopt procedures that will help ensure 
        that they maintain open and transparent 
        telecommunications regulatory regimes, including 
        requirements to publish interconnection agreements and 
        service tariffs;
           will require their telecommunications 
        regulators to explain their rule-making decisions and 
        provide foreign suppliers the right to challenge those 
        decisions;
           may elect to deregulate telecommunications 
        services when competition emerges and certain standards 
        are met; and
           will avoid impeding telecommunications 
        suppliers from choosing technologies they consider 
        appropriate for supplying their services.
    Costa Rica. Costa Rica's obligations with respect to 
telecommunications are contained in a separate annex to Chapter 
13. The annex recognizes the unique nature of Costa Rica's 
social policy on telecommunications and commits Costa Rica to 
undertake certain obligations as of January 1, 2006. These 
obligations include ensuring that enterprises have access to, 
and use of, public telecommunications services, and that 
suppliers of public communications services are provided 
interconnection with major suppliers.

                 CHAPTER FOURTEEN: ELECTRONIC COMMERCE

    Chapter Fourteen establishes rules designed to prohibit 
discriminatory regulation of electronic trade in digitally 
encoded products such as computer programs, video, images, and 
sound recordings. The Chapter represents a major advance over 
previous international understandings on this subject.
    Customs Duties. Chapter Fourteen provides that a Party may 
not impose customs duties on digital products of another Party 
transmitted electronically and will determine the customs value 
of an imported carrier medium bearing a digital product based 
on the value of the carrier medium alone, without regard to the 
value of the digital product stored on the carrier medium.
    Non-Discrimination. Chapter Fourteen requires the Parties 
to apply the principles of national treatment and MFN treatment 
to trade in electronically-transmitted digital products. Thus, 
a Party may not discriminate against electronically-transmitted 
digital products on the grounds that they have a nexus to 
another country, either because they have undergone certain 
specific activities (e.g., creation, production, first sale) 
there or are associated with certain categories of persons of 
another Party or a non-Party (e.g., authors, performers, 
producers). Nor may a Party provide less favorable treatment to 
digital products that have a nexus to another Party than it 
gives to like products that have a nexus to a third country. 
The non-discrimination rules do not apply to non-conforming 
measures adopted under Chapters Ten (Investment), Eleven 
(Cross-Border Trade in Services), or Twelve (Financial 
Services).
    Cooperation. Chapter Fourteen provides for future 
cooperation between the Parties, including exchanging 
information in areas such as data privacy and cyber-security.

             CHAPTER FIFTEEN: INTELLECTUAL PROPERTY RIGHTS

    Chapter Fifteen complements and enhances existing 
international standards for the protection of intellectual 
property and the enforcement of intellectual property rights, 
consistent with U.S. law.
    General Provisions. Under Chapter Fifteen the Parties are 
obligated to ratify or accede to several agreements on 
intellectual property rights, including, by the date of entry 
into force of the Agreement, the WIPO Copyright Treaty and WIPO 
Performances and Phonograms Treaty, and, within specified time 
frames, the International Convention for the Protection of New 
Varieties of Plants, the Trademark Law Treaty, the Brussels 
Convention Relating to the Distribution of Programme-Carrying 
Satellite Signals, and the Patent Cooperation Treaty. The 
United States is already a Party to these Agreements. National 
treatment requirements apply broadly.
    Trademarks and Geographical Indications. Chapter Fifteen 
establishes that marks include marks in respect of goods and 
services, collective marks, and certification marks, and that 
geographical indications are eligible for protection as marks. 
It sets out rules with respect to the registration of marks and 
geographical indications. Each Party must provide protection 
for marks and geographical indications, including protecting 
preexisting trademarks against infringement by later 
geographical indications. Furthermore, the Parties must provide 
efficient and transparent procedures governing the application 
for protection of marks and geographical indications. The 
Chapter also provides for rules on domain name management that 
require a dispute resolution procedure to prevent trademark 
cyber-piracy.
    Copyright and Related Rights. Chapter Fifteen provides 
broad protection of copyright and related rights, affirming and 
building on rights set out in several international agreements. 
For instance, each Party must provide copyright protection for 
the life of the author plus 70 years (for works measured by a 
person's life), or 70 years (for corporate works). The Chapter 
clarifies that the right to reproduce literary and artistic 
works, recordings, and performances encompasses temporary 
copies, an important principle in the digital realm. It also 
calls for each Party to provide a right of communication to the 
public, which will further ensure that right holders have the 
exclusive right to make their works available online. The 
Chapter specifically protects the rights of performers and 
producers of phonograms.
    To curb copyright piracy, government agencies of the 
Parties must use only legitimate computer software, setting an 
example for the private sector. The Chapter also includes 
provisions on anti-circumvention, under which the Parties 
commit to prohibit tampering with technology used to protect 
copyrighted works. In addition, Chapter Fifteen sets out 
obligations with respect to the liability of Internet service 
providers in connection with copyright infringements that take 
place over their networks. Finally, recognizing the importance 
of satellite broadcasts, Chapter Fifteen ensures that each 
Party will protect encrypted program-carrying satellite 
signals. It obligates the Parties to extend protection to the 
signals themselves, as well as to the content contained in the 
signals.
    Patents. Chapter Fifteen also includes a variety of 
provisions for the protection of patents. The Parties agree to 
make patents available for any invention, subject to limited 
exclusions, and confirm the availability of patents for new 
uses or methods of using a known product. The Chapter provides 
for protection to stop imports of patented products when the 
patent owner has placed restrictions on import by contract or 
other means. To guard against arbitrary revocation of patents, 
each Party must limit the grounds for revoking a patent to the 
grounds that would have justified a refusal to grant the 
patent. Under Chapter Fifteen, Parties must provide adjustments 
to the patent term to compensate for unreasonable delays that 
occur while granting the patent, as well as unreasonable 
curtailment of the effective patent term as a result of the 
marketing approval process for pharmaceutical products.
    Certain Regulated Products. Chapter Fifteen includes 
specific measures relating to certain regulated products, 
including pharmaceuticals and agricultural chemicals. Among 
other things, it protects test data that a company submits in 
seeking marketing approval for such products by precluding 
other firms from relying on the data. It provides specific 
periods for such protection--five years for pharmaceuticals and 
ten years for agricultural chemicals. This means, for example, 
that during the period of protection, test data that a company 
submits for approval of a new agricultural chemical product 
could not be used without that company's consent in granting 
approval to market a combination product. The Chapter also 
requires Parties to implement measures to prevent the marketing 
of pharmaceutical products that infringe patents.
    Enforcement Provisions. Chapter Fifteen also creates 
obligations with respect to the enforcement of intellectual 
property rights. Among these, the Parties, in determining 
damages, must take into account the value of the legitimate 
goods as well as the infringer's profits. The Chapter also 
provides for damages based on a fixed range (i.e., ``statutory 
damages''), at the option of the right holder or alternatively 
additional damages in cases involving copyright infringement.
    Chapter Fifteen provides that the Parties' law enforcement 
agencies must have authority to seize suspected pirated and 
counterfeit goods, the equipment used to make or transmit them, 
and documentary evidence. Each Party must give its courts 
authority to order the forfeiture and/or destruction of such 
items. Chapter Fifteen also requires each Party to empower its 
law enforcement agencies to take enforcement action at the 
border against pirated or counterfeit goods without waiting for 
a formal complaint. Chapter Fifteen provides that each Party 
must apply criminal penalties against counterfeiting and 
piracy, including end-user piracy.
    Transition Periods. Most obligations in the Chapter take 
effect upon the Agreement's entry into force. However, the 
Central American Parties and the Dominican Republic may delay 
giving effect to certain specified obligations for periods 
ranging from six months to four years from the date of entry 
into force of the Agreement.

                         CHAPTER SIXTEEN: LABOR

    Chapter Sixteen sets out the Parties' commitments and 
undertakings regarding trade-related labor rights. Chapter 
Sixteen draws on the North American Agreement on Labor 
Cooperation (the supplemental NAFTA labor agreement) and the 
labor provisions of other recent U.S. FTAs, including those 
with Jordan, Chile, Singapore, Australia, and Morocco. The 
Chapter goes further than these prior FTAs, however, in that it 
contains the most comprehensive set of commitments and 
undertakings regarding trade-related labor rights. As described 
below, the Chapter (i) includes detailed provisions to ensure 
that labor law enforcement is fair, equitable, and transparent; 
(ii) requires Parties to provide for public input on labor 
matters; and (iii) establishes a detailed framework that will 
assist Parties to develop the institutional capacity to fulfill 
the goals of the Chapter.
    General Principles. Under Chapter Sixteen, the Parties 
reaffirm their obligations as members of the International 
Labor Organization (ILO) and under the 1998 ILO Declaration on 
Fundamental Principles and Rights at Work. Each Party must 
strive to ensure that its law recognizes and protects the 
fundamental labor principles spelled out in the ILO Declaration 
as listed in the Chapter. Each Party also must strive to ensure 
that it does not derogate from or waive the protections of its 
labor laws to encourage trade with or investment from another 
Party. The Parties also commit to afford procedural guarantees 
that ensure workers and employers have access to fair, 
equitable, and transparent procedures in the enforcement of 
labor laws. While committing each Party to effective 
enforcement of its labor laws, the Chapter also recognizes each 
Party's right to establish its own labor laws, exercise 
discretion in investigatory, regulatory, prosecutorial, and 
compliance matters, and allocate enforcement resources.
    Effective Enforcement. In Chapter Sixteen each Party 
commits not to fail to effectively enforce its labor laws on a 
sustained or recurring basis in a manner affecting trade 
between the Parties. The Chapter defines labor laws to include 
those related to: (1) the right of association; (2) the right 
to organize and bargain collectively; (3) a prohibition of 
forced or compulsory labor; (4) a minimum age for the 
employment of children and elimination of the worst forms of 
child labor; and (5) acceptable conditions of work with respect 
to wages, hours, and occupational safety and health. For the 
United States, ``labor laws'' includes federal statutes and 
regulations addressing these areas, but it does not cover state 
or local labor laws.
    Procedural Guarantees. In Chapter Sixteen, the Parties also 
commit to afford procedural guarantees that ensure workers and 
employers have access to fair, equitable, and transparent 
procedures in the enforcement of labor laws. To this end, each 
Party must ensure that workers and employers have access to 
tribunals for the enforcement of its labor laws and that 
decisions of such tribunals are in writing, made publicly 
available, and based on information or evidence in respect of 
which the parties were offered the opportunity to be heard. In 
addition, hearings in such proceedings must be open to the 
public, except where the administration of justice otherwise 
requires. Chapter Sixteen also commits each Party to make 
remedies available to ensure the enforcement of its labor laws. 
Such remedies might include orders, fines, penalties, or 
temporary workplace closures.
    Dispute Settlement. Chapter Sixteen provides for 
cooperative consultations if a Party believes that another 
Party is not complying with the obligations in this Chapter. If 
the matter concerns a Party's compliance with its obligation 
not to fail to effectively enforce its labor law, the 
complaining Party may, after an initial 60-day consultation 
period under Chapter Sixteen, invoke the provisions of Chapter 
Twenty (Dispute Settlement) by requesting additional 
consultations or a meeting of the Agreement's cabinet-level 
Free Trade Commission under that Chapter. If the Commission is 
unable to resolve the dispute, the matter may be referred to a 
dispute settlement panel. The Parties will maintain a roster of 
experts to serve on any dispute settlement panel convened to 
hear disputes regarding a Party's obligation to effectively 
enforce its labor laws.
    Cooperation and Capacity Building. Chapter Sixteen 
establishes a cabinet-level Labor Affairs Council to oversee 
the Chapter's implementation and to provide a forum for 
consultations and cooperation on labor matters. The Chapter 
requires each Party to designate a contact point for 
communications with the other Parties and the public regarding 
the Chapter. Each Party's contact point must provide 
transparent procedures for the submission, receipt, and 
consideration of any communications from the public relating to 
the provisions of the Chapter.
    The Chapter also creates a labor cooperation and capacity 
building mechanism through which the Parties will work together 
to strengthen each Party's institutional capacity to fulfill 
the goals of the Labor Chapter. In particular, the mechanism 
will assist the Parties to establish priorities for, and carry 
out, bilateral and regional cooperation and capacity building 
activities relating to such topics as: the effective 
application of fundamental labor rights; legislation and 
practice relating to compliance with ILO Convention 182 on the 
worst forms of child labor; strengthening labor inspection 
systems and the institutional capacity of labor administrations 
and tribunals; mechanisms for supervising compliance with laws 
and regulations pertaining to working conditions; and the 
elimination of gender discrimination in employment.

                     CHAPTER SEVENTEEN: ENVIRONMENT

    Chapter Seventeen sets out the Parties' commitments and 
undertakings regarding environmental protection. Chapter 
Seventeen draws on the North American Agreement on 
Environmental Cooperation and the environmental provisions of 
other recent U.S. FTAs, including those with Jordan, Chile, 
Singapore, Australia, and Morocco. The Chapter goes further 
than these prior FTAs, however. In particular, the CAFTA-DR is 
the first U.S. FTA that includes a process for public 
submissions on environmental enforcement matters in the body of 
the FTA.
    General Principles. Under Chapter Seventeen, the Parties 
must ensure that their laws provide for high levels of 
environmental protection. Each Party also must strive not to 
weaken or reduce its environmental laws to encourage trade with 
or investment from another Party. Chapter Seventeen further 
includes commitments to enhance cooperation between the Parties 
in environmental matters and encourages the Parties to develop 
voluntary, market-based mechanisms as one means for achieving 
and sustaining high levels of environmental protection.
    Effective Enforcement. In Chapter Seventeen each Party 
commits not to fail to effectively enforce its environmental 
laws on a sustained or recurring basis in a manner affecting 
trade between the Parties. At the same time, the Chapter 
recognizes the right of each Party to: (1) establish its own 
environmental laws; (2) exercise discretion in regulatory, 
prosecutorial, and compliance matters; and (3) allocate 
enforcement resources in a bona fide manner. For the United 
States, ``environmental laws'' includes federal environmental 
statutes and regulations enforceable by the federal government.
    Procedural Matters. Chapter Seventeen commits each Party to 
make judicial, quasi-judicial, or administrative proceedings 
available to sanction or remedy violations of its environmental 
laws. Each Party must ensure that such proceedings are fair, 
equitable, and transparent, and, to this end, comply with due 
process of law and are open to the public, except where the 
administration of justice otherwise requires. The Chapter 
requires each Party to ensure that interested persons may 
request the Party's competent authorities to investigate 
alleged violations of its environmental laws and that each 
Party's competent authorities give such requests due 
consideration. Chapter Seventeen also commits each Party to 
make appropriate and effective remedies available for 
violations of its environmental laws. Such remedies may 
include, for example, fines, injunctions, or requirements to 
take remedial action or pay for damage to the environment.
    Public Submissions. Chapter Seventeen commits each Party to 
provide for the receipt and consideration of public submissions 
on matters related to the Chapter. In addition, the Chapter 
provides that any person of a Party may file a submission with 
a secretariat asserting that a Party has failed to effectively 
enforce its environmental laws. The secretariat will review the 
submission according to specified criteria and in appropriate 
cases recommend to the Environmental Affairs Council that a 
factual record concerning the matter be developed. The 
secretariat will prepare a factual record if one member of the 
Environmental Affairs Council instructs it to do so. The 
Council will consider the record and, where appropriate, 
provide recommendations to an environmental cooperation 
commission that will be created under a related environmental 
cooperation agreement. U.S. persons who consider that the 
United States is failing to effectively enforce its 
environmental laws may invoke the comparable public submissions 
process under the North American Agreement on Environmental 
Cooperation. Pursuant to a separate understanding between the 
Parties, a new environmental unit within the Secretariat for 
Central American Economic Integration (SIECA) will serve as the 
secretariat for the receipt of public submissions.
    Dispute Settlement. Chapter Seventeen provides for 
cooperative consultations if a Party believes that another 
Party is not complying with its obligations under the Chapter. 
If the matter concerns a Party's compliance with its obligation 
not to fail to effectively enforce its environmental law, the 
complaining Party may, after an initial 60-day consultation 
period under Chapter Seventeen, invoke the provisions of 
Chapter Twenty (Dispute Settlement) by requesting additional 
consultations or a meeting of the Agreement's cabinet-level 
Free Trade Commission under that Chapter. If the Commission is 
unable to resolve the dispute, the matter may be referred to a 
dispute settlement panel. The Parties will maintain a roster of 
experts to serve on any dispute settlement panel convened to 
hear disputes regarding a Party's obligation to effectively 
enforce its environmental laws.
    Institutional arrangements and cooperation. Chapter 
Seventeen establishes a cabinet-level Environment Affairs 
Council to oversee the implementation and operation of the 
Chapter. Opportunities will be provided at Council meetings for 
the public to express views on the implementation of Chapter 
Seventeen and cooperative work between the Parties. The Parties 
also agree under Chapter Seventeen to continue to seek ways to 
enhance the mutual supportiveness of multilateral agreements 
and trade agreements to which they are all party, and to 
consult as appropriate on negotiations in the WTO regarding 
multilateral environmental agreements. In addition, to 
facilitate cooperation efforts, the Parties will enter into a 
separate environmental cooperation agreement.

                     CHAPTER EIGHTEEN: TRANSPARENCY

    Chapter Eighteen sets out requirements designed to foster 
openness, transparency, and fairness in the adoption and 
application of administrative measures covered by the 
Agreement. For example, it requires that, to the extent 
possible, each Party must promptly publish all laws, 
regulations, procedures, and administrative rulings of general 
application concerning subjects covered by the Agreement, and 
give interested persons a reasonable opportunity to comment. 
Wherever possible, each Party must provide reasonable notice to 
the other Parties' nationals and enterprises that are directly 
affected by an agency process, including an adjudication, 
rulemaking, licensing, determination, and approval process. A 
Party is to afford such persons a reasonable opportunity to 
present facts and arguments prior to any final administrative 
action, when time, the nature of the process, and the public 
interest permit.
    Chapter Eighteen also provides for independent review and 
appeal of final administrative actions. Appeal rights must 
include a reasonable opportunity to present arguments and to 
obtain a decision based on evidence in the administrative 
record.
    Chapter Eighteen also affirms the Parties' resolve to 
eliminate bribery and corruption in international trade and 
investment. To this end, Parties are obligated to make it a 
criminal offense to offer or accept a bribe in exchange for 
favorable government action in matters affecting international 
trade or investment. Parties must also endeavor to protect 
persons who, in good faith, report acts of bribery or 
corruption and to work together to encourage and support 
initiatives in relevant international fora to prevent bribery 
and corruption.

 CHAPTER NINETEEN: ADMINISTRATION OF THE AGREEMENT AND TRADE CAPACITY 
                                BUILDING

    Chapter Nineteen creates a Free Trade Commission to 
supervise the implementation and overall operation of the 
Agreement. The Commission will be comprised of the Parties' 
trade ministers. It will meet annually and make decisions by 
consensus. The Commission will assist in the resolution of any 
disputes that may arise under the Agreement. The Commission may 
issue interpretations of the Agreement and agree to accelerate 
duty elimination on particular products and adjust the 
Agreement's product-specific rules of origin.
    Chapter Nineteen requires each Party to designate an office 
to provide administrative assistance to dispute settlement 
panels and perform such other functions as the Commission may 
direct.
    Chapter Nineteen also establishes a Committee on Trade 
Capacity Building, comprised of representatives of each Party. 
The overall objective of the Committee is to assist the Central 
American Parties and the Dominican Republic to implement the 
Agreement and adjust to liberalized trade. Particular functions 
of the Committee include: seeking the prioritization of trade 
capacity building projects at the national and regional level 
within Central America and the Dominican Republic; inviting 
international donor institutions, private sector entities, and 
non-governmental organizations to assist in the development and 
implementation of trade capacity building projects in 
accordance with each country's national trade capacity building 
strategy; and monitoring and assessing progress in implementing 
trade capacity building projects.

                   CHAPTER TWENTY: DISPUTE SETTLEMENT

    Chapter Twenty sets out detailed procedures for the 
resolution of disputes between the Parties over compliance with 
the Agreement. Those procedures emphasize amicable settlements, 
relying wherever possible on bilateral cooperation and 
consultations. When disputes arise under provisions common to 
the Agreement and other agreements (e.g., the WTO agreements), 
the complaining government may choose the forum for resolving 
the matter. The selected forum is the exclusive venue for 
resolving that dispute.
    Consultations. A Party may request consultations with 
another Party on any actual or proposed measure that it 
believes might affect the operation of the Agreement. Any other 
Party having a substantial trade interest in the matter may 
participate in the consultations. If the Parties cannot resolve 
the matter through consultations within a specified period 
(normally 60 days), any consulting Party may refer the matter 
to the Free Trade Commission, which will attempt to resolve the 
dispute.
    Panel Procedures. If the Commission cannot resolve the 
dispute within a specified period (normally 30 days), any 
consulting Party may refer the matter, if it involves an actual 
measure, to a panel comprising independent experts that the 
Parties select. Any party that participated in the 
consultations may participate in the panel proceedings as a 
complaining Party. Any other Party may participate in the panel 
proceedings as a third party.
    The Parties will set rules to protect confidential 
information, provide for open hearings and public release of 
submissions, and allow an opportunity for the panel to accept 
submissions from non-governmental entities in the Parties' 
territories.
    Unless the disputing Parties agree otherwise, a panel is to 
present its initial report within 120 days after the last 
panelist is selected. This period can be extended to 180 days 
in certain circumstances. Once the panel presents its initial 
report containing findings of fact and a determination on 
whether a Party has met its obligations, the Parties will have 
the opportunity to provide written comments to the panel. When 
the panel receives these comments, it may reconsider its report 
and make any further examination that it considers appropriate. 
Within 30 days after it presents its initial report, the panel 
will submit its final report. The Parties will then seek to 
agree on how to resolve the dispute, normally in a way that 
conforms to the panel's determinations and recommendations. 
Subject to protection of confidential information, the panel's 
final report will be made available to the public 15 days after 
the Parties receive it.
    Suspension of Benefits. In disputes involving the 
Agreement's ``commercial'' obligations (i.e., obligations other 
than enforcement of labor and environmental laws), if the 
disputing Parties cannot resolve the dispute after they receive 
the panel's final report, the disputing Parties will seek to 
agree on acceptable trade compensation. If they cannot agree on 
compensation, or if the complaining Party believes the 
defending Party has failed to implement an agreed resolution, 
the complaining Party may provide notice that it intends to 
suspend trade benefits equivalent in effect to those it 
considers were impaired, or may be impaired, as a result of the 
disputed measure.
    If the defending Party considers that the proposed level of 
benefits to be suspended is ``manifestly excessive,'' or 
believes that it has modified the disputed measure to make it 
conform to the Agreement, it may request the panel to reconvene 
and decide the matter. The panel must issue its determination 
no later than 90 days after the request is made (or 120 days if 
the panel is reviewing both the level of the proposed 
suspension and a modification of the measure).
    The complaining Party may suspend trade benefits up to the 
level that the panel sets or, if the panel has not been asked 
to determine the level, up to the amount that the complaining 
Party has proposed. The complaining Party cannot suspend 
benefits, however, if the defending Party provides notice that 
it will pay an annual monetary assessment to the other Party. 
The amount of the assessment will be established by agreement 
of the disputing Parties or, failing that, will be set at 50 
percent of the level of trade concessions the complaining Party 
was authorized to suspend.
    Labor and Environment Disputes. Equivalent compliance 
procedures apply to disputes over a Party's conformity with the 
labor and environmental law enforcement provisions of the 
Agreement. If a panel determines that a Party has not met its 
enforcement obligations and the disputing Parties cannot agree 
on how to resolve the dispute, or the complaining Party 
believes that the defending Party has failed to implement an 
agreed resolution, the complaining Party may ask the panel to 
determine the amount of an annual monetary assessment to be 
imposed on the defending Party. The Panel will establish the 
amount of the assessment, subject to a $15 million annual cap, 
taking into account relevant trade- and non-trade-related 
factors. The assessment will be paid into a fund established by 
the Commission for appropriate labor and environmental 
initiatives. If the defending Party fails to pay an assessment, 
the complaining Party may take other appropriate steps, which 
may include suspending tariff benefits, as necessary to collect 
the assessment, while bearing in mind the Agreement's objective 
of eliminating barriers to trade and while seeking to avoid 
unduly affecting parties or interests not party to the dispute.
    Compliance Review Mechanism. If, at any time, the defending 
Party believes it has made changes in its laws or regulations 
sufficient to comply with its obligations under the Agreement, 
it may refer the matter to the panel. If the panel agrees, the 
dispute ends and the complaining Party must withdraw any 
offsetting measures it has put in place. Concurrently, the 
defending government will be relieved of any obligation to pay 
a monetary assessment.
    The Parties will review the operation of the compliance 
procedures for both commercial and labor and environment 
disputes either five years after the entry into force of the 
Agreement or within six months after benefits have been 
suspended or assessments paid in five proceedings initiated 
under this Agreement, whichever occurs first.
    Settlement of Private Disputes. The Parties will encourage 
the use of arbitration and other alternative dispute resolution 
mechanisms to settle international commercial disputes between 
private parties. Each Party must provide appropriate procedures 
for the recognition and enforcement of arbitral awards, for 
example by complying with the 1958 United Nations Convention on 
the Recognition and Enforcement of Foreign Arbitral Awards or 
the 1975 Inter-American Convention on International Commercial 
Arbitration.

                     CHAPTER TWENTY-ONE: EXCEPTIONS

    Chapter Twenty-One sets out general provisions that apply 
to the entire Agreement with the following exception. Article 
XX of the GATT 1994 and its interpretive notes are incorporated 
into and made part of the Agreement, mutatis mutandis, and 
apply to those Chapters related to treatment of goods. 
Likewise, for the purposes of Chapters Eleven (Cross-Border 
Trade in Services), Thirteen (Telecommunications), and Fourteen 
(Electronic Commerce), GATS Article XIV (including its 
footnotes) is incorporated into and made part of the Agreement. 
For both goods and services, the Parties understand that these 
exceptions include certain environmental measures.
    Essential Security. Chapter Twenty-One allows each Party to 
take actions it considers necessary to protect its essential 
security interests.
    Taxation. An exception for taxation limits the field of tax 
measures subject to the Agreement. For example, the exception 
generally provides that the Agreement does not affect a Party's 
rights or obligations under any tax convention. The exception 
sets out certain circumstances under which tax measures are 
subject to the Agreement's: (1) national treatment obligation 
for goods; (2) national treatment and MFN obligations for 
services; (3) prohibitions on performance requirements; and (4) 
expropriation rules.
    Balance of Payments. Chapter Twenty-One establishes 
criteria that a Party must follow if it applies a balance-of-
payments measure on trade in goods.
    Disclosure of Information. The Chapter also provides that a 
Party may withhold information from another Party where such 
disclosure would impede domestic law enforcement, otherwise be 
contrary to the public interest, or prejudice the legitimate 
commercial interests of particular enterprises.

                  CHAPTER TWENTY-TWO: FINAL PROVISIONS

    Chapter Twenty-Two provides that (i) the annexes, 
appendices, and footnotes are part of the Agreement, (ii) the 
Parties may amend the Agreement subject to applicable domestic 
procedures, and (iii) the English and Spanish texts are both 
authentic. It also provides for consultations if any provision 
of the WTO Agreement that the Parties have incorporated into 
the Agreement is amended.
    Chapter Twenty-Two provides for the entry into force of the 
Agreement, and establishes procedures under which a Party may 
withdraw from the Agreement. The Chapter provides that any 
other country or group of countries may accede to this 
agreement on terms and conditions that are agreed with the 
Parties and approved according to each Party's domestic 
procedures. Finally, the Chapter provides that the original 
texts of the Agreement shall be deposited with the Organization 
of American States.

E. General Description of the Bill to Implement the Dominican Republic-
           Central America-United States Free Trade Agreement

Sec. 1. Short title; table of contents

    This section provides that the short title of the act 
implementing the Dominican Republic-Central America-United 
States Free Trade Agreement (the ``Agreement'') is the 
``Dominican Republic-Central America-United States Free Trade 
Agreement Implementation Act'' (``Implementation Act''). 
Section 1 also provides the table of contents for the 
Implementation Act.

Sec. 2. Purposes

    This section provides that the purposes of the 
Implementation Act are: to approve and implement the Agreement; 
to strengthen and develop economic relations between the United 
States, Costa Rica, the Dominican Republic, El Salvador, 
Guatemala, Honduras, and Nicaragua; to establish free trade 
between the United States, Costa Rica, the Dominican Republic, 
El Salvador, Guatemala, Honduras, and Nicaragua, through the 
reduction and elimination of barriers to trade in goods and 
services and to investment; and to lay the foundation for 
further cooperation to expand and enhance the benefits of the 
Agreement.

Sec. 3. Definitions

    This section defines the terms ``Agreement,'' ``CAFTA-DR 
country,'' ``Commission,'' ``HTS,'' and ``textile or apparel 
good.''

TITLE I--APPROVAL OF, AND GENERAL PROVISIONS RELATING TO, THE AGREEMENT

Sec. 101. Approval and entry into force of the agreement

    This section provides congressional approval for the 
Agreement and its accompanying Statement of Administrative 
Action. Section 101 also provides that, once the President 
determines that other countries that have signed the Agreement 
have taken measures necessary to comply with their obligations 
under the Agreement, 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.

Sec. 102. Relationship of the agreement to United States and state law

    This section establishes the relationship between the 
Agreement and U.S. law. It clarifies that no provision of the 
Agreement will be given effect under domestic law if it is 
inconsistent with federal law; this would include provisions of 
federal law enacted or amended by the bill.
    Section 102 provides that no state law may be declared 
invalid on the ground that the law is inconsistent with the 
Agreement, except in an action brought by the United States for 
the purpose of declaring such law invalid. Section 102 also 
precludes any private right of action against the federal 
government or a state government based on the provisions of the 
Agreement.

Sec. 103. Implementing actions in anticipation of entry into force and 
        initial regulations

    This section provides that, following the enactment of the 
Implementation Act, the President may proclaim such actions, 
and other appropriate officers of the federal government may 
issue such regulations, as may be necessary to ensure that 
provisions of the legislation that take effect on the date the 
Agreement enters into force are appropriately implemented on 
such date. Section 103 provides that, with respect to any 
action proclaimed by the President that is not subject to the 
consultation and layover provisions contained in section 104, 
such action may not take effect before the 15th day after the 
date on which the text of the proclamation is published in the 
Federal Register. The 15-day restriction is waived, however, to 
the extent that it would prevent an action from taking effect 
on the date the Agreement enters into force. Section 103 also 
provides that, to the maximum extent feasible, initial 
regulations necessary or appropriate to carry out the actions 
required by the Implementation Act or the Statement of 
Administrative Action shall be issued within one year of the 
date the Agreement enters into force. In accordance with the 
accompanying Statement of Administrative Action, any agency 
unable to issue a regulation within one year must provide a 
report 30 days prior to the end of the one-year period to the 
Finance Committee outlining the reasons for the delay and 
stating the expected date for issuance of the regulation.

Sec. 104. Consultation and layover provisions for, and effective date 
        of, proclaimed actions

    This section sets forth consultation and layover steps that 
must precede the President's implementation of any duty 
modification by proclamation. Under the consultation and 
layover provisions, the President must obtain the advice of the 
relevant private sector advisory committees and the U.S. 
International Trade Commission on a proposed action. The 
President must submit a report to the Senate Committee on 
Finance and the House Committee on Ways and Means setting forth 
the action proposed, the reasons for the proposed action, and 
the advice of the private sector advisors and the International 
Trade Commission. Section 104 sets aside a 60-day period 
following the date of transmittal of the report for the 
President to consult with the Senate Committee on Finance and 
the House Committee on Ways and Means on the action.

Sec. 105. Administration of dispute settlement proceedings

    This section authorizes the President to establish or 
designate within the Department of Commerce an office 
responsible for providing administrative assistance to dispute 
settlement panels established under Chapter 20 of the 
Agreement. This section also authorizes the appropriation of 
funds to support this office.

Sec. 106. Arbitration of claims

    This section authorizes the United States to use binding 
arbitration to resolve claims by investors of Agreement 
countries under article 10.16.1 (a)(i)(C) or article 
10.16.1(b)(i)(C) of the Agreement, pursuant to the investor-
state dispute settlement procedures set forth in section B of 
chapter 10 of the Agreement.

Sec. 107. Effective dates; effect of termination

    This section provides that the provisions of the 
Implementation Act take effect on the date that the Agreement 
enters into force with the exceptions of sections 1 through 3 
and Title I, which take effect on the date of enactment. During 
any period in which a country ceases to be a CAFTA-DR country, 
the provisions of the Implementation Act will no longer have 
effect with respect to that country. This section also provides 
that the provisions of the Implementation Act will cease to 
have effect if the United States withdraws from the Agreement 
or if the Agreement terminates.

                      TITLE II--CUSTOMS PROVISIONS

Sec. 201. Tariff modifications

    This section provides that the President may proclaim the 
modification, continuation, or imposition of duties, or the 
continuation of duty-free treatment, as the President 
determines to be necessary or appropriate to carry out terms of 
the Agreement. Section 201 requires the President to terminate 
the designation of each CAFTA-DR country as a beneficiary 
country for purposes of the Generalized System of Preferences 
(``GSP'') on the date the Agreement enters into force with 
respect to that country.
    This section also requires the President to terminate the 
designation of each CAFTA-DR country as a beneficiary country 
under the Caribbean Basin Economic Recovery Act (19 U.S.C. 
Sec. 2701 et seq.) (``CBERA'') on the date the Agreement enters 
into force with respect to that country. However, there are 
three exceptions by which each such country shall continue to 
be considered a beneficiary country under CBERA. The exceptions 
are: (1) that the ITC will continue to treat a CAFTA-DR country 
as a beneficiary country under CBERA for the purpose of not 
cumulating imports from CBERA beneficiary countries with 
imports from non-beneficiary countries in determining whether a 
U.S. industry is materially injured or threatened with material 
injury by reason of dumped or subsidized imports in antidumping 
and countervailing duty investigations; (2) that the CAFTA-DR 
countries will continue to be treated as beneficiary countries 
under CBERA for the purpose of implementing the duty-free 
treatment 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) that the status quo will be 
maintained for each CAFTA-DR country with respect to existing 
taxpayer deductions for business travel to CBERA countries.
    Section 201(b) authorizes the President, subject to the 
consultation and layover provisions of section 104, to proclaim 
the continuation, modification, or addition of tariffs, or the 
continuation of duty-free treatment, 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.
    With respect to any good for which the base rate in the 
Schedule of the United States to Annex 3.3 of the Agreement is 
a specific or compound rate of duty, section 201(c) authorizes 
the President to substitute for the base rate an ad valorem 
rate that the President determines to be equivalent to the base 
rate.

Sec. 202. Additional duties on certain agricultural goods

    Section 202 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. The categories of goods that may be subject to an 
agricultural safeguard measure are: certain dairy products, 
certain peanut butter, and certain peanuts.
    Under the Agreement, the sum of the duties assessed under 
an agricultural safeguard plus 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/most-favored 
nation (``NTR/MFN'') rate of duty. Pursuant to section 
202(a)(5), no additional duty may be applied on a good under 
the agricultural safeguard if, at the time of entry, the good 
is subject to a bilateral safeguard measure under the 
procedures set out in subtitle A of Title III of the 
Implementation Act or to a global safeguard measure under the 
procedures set out in chapter 1 of Title II of the Trade Act of 
1974 (19 U.S.C. Sec. 2251 et seq.). The agricultural safeguard 
provision ceases to apply with respect to a good on the date on 
which duty-free treatment must be provided to the good under 
the Schedule of the United States to Annex 3.3 of the 
Agreement.
    Section 202(b) provides for the Secretary of the Treasury 
to impose agricultural safeguard duties if the Secretary 
determines that the volume of imports of the good from an 
Agreement country exceeds 130 percent of the in-quota 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. Under the Agreement, an agricultural safeguard 
measure may be maintained only until the end of the calendar 
year in which it is imposed.

Sec. 203. Rules of origin

    This section implements the general rules of origin set 
forth in chapter 4 of the Agreement. Under the general rules, 
there are three basic means by which a good of an Agreement 
country can qualify as an originating good, and thus be 
eligible for preferential treatment when imported into the 
United States.
    First, a good is originating if it is ``wholly obtained or 
produced entirely in the territory of one or more of the CAFTA-
DR countries.'' For purposes of section 203 only, the term 
``CAFTA-DR country'' is defined to include the United States. 
For all other sections of the Implementation Act, the United 
States is not included within the definition of ``CAFTA-DR 
country.'' Second, the general rules of origin provide that a 
good is ``originating'' if the good is produced in one or more 
of the CAFTA-DR countries and the 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 
and to meet other requirements, as specified in Annex 4.1 of 
the Agreement. Third, the general rules of origin provide that 
a good is ``originating'' if the good is produced entirely in 
the territory of one or more of the CAFTA-DR countries 
exclusively from materials that themselves qualify as 
originating goods.
    The remainder of section 203 sets forth additional rules 
concerning whether a good meets the Agreement's specific 
requirements to qualify as an originating good. Section 203(c) 
implements provisions of Annex 4.1 of the Agreement that 
require that certain goods have at least a specified percentage 
of ``regional value content'' to qualify as originating goods. 
Section 203(f) provides that a good is not disqualified as an 
originating good if it contains de minimis quantities of non-
originating materials that do not undergo a change in tariff 
classification. Section 203(d) addresses how materials are to 
be valued when calculating the regional value content of a good 
under section 203(c) and for purposes of applying the de 
minimis rules of section 203(f). Section 203(g) addresses how 
to determine whether fungible goods and materials qualify as 
originating goods.
    Section 203(o)(1) authorizes the President to proclaim as 
part of the HTS the provisions set out in Annex 4.1 of the 
Agreement, as well as any additional subordinate rules 
necessary to carry out the customs provisions of the 
Implementation Act consistent with the Agreement. Section 
203(o)(3) authorizes the President to modify certain of the 
Agreement's rules of origin by proclamation, subject to the 
consultation and layover provisions of section 104 of the bill. 
But section 203(o)(3) limits the President's authority to 
modify by proclamation specific rules of origin pertaining to 
textile or apparel goods (listed in Chapters 50 through 63 of 
the HTS and identified in Annex 4.1 of the Agreement)--those 
rules of origin may be modified by proclamation only within one 
year of enactment and only for the purpose of correcting 
typographical, clerical, or other non-substantive technical 
errors.
    Section 203 also implements the fabrics, yarns, and fibers 
``short supply'' provisions of the Agreement. Section 203(o)(2) 
provides authority for the President to carry out the provision 
in article 3.25.4(e) of the Agreement pursuant to which the 
United States will add materials to the list (the ``Short 
Supply List'' of Annex 3.25) that it has determined are 
unavailable in commercial quantities in a timely manner in the 
United States under its regional trade preference programs 
(i.e. the African Growth and Opportunity Act (``AGOA''), the 
Andean Trade Preference Act (``ATPA''), and CBERA) before the 
Agreement enters into force. Section 203(o)(4) implements the 
provisions of article 3.25 of the Agreement that provide for 
the United States to make modifications to the Short Supply 
List of Annex 3.25 of the Agreement after the Agreement enters 
into force. Under section 203(o)(4)(C), an ``interested 
entity'' (i.e. a potential or actual purchaser or seller or the 
government of a CAFTA-DR country) may request that the 
President determine that a fabric, yarn, or fiber is not 
available in commercial quantities in a timely manner in the 
CAFTA-DR countries and add the material to the Short Supply 
List of Annex 3.25 in a restricted or unrestricted quantity.
    Section 203(o)(4)(C) provides that if the President 
determines that the material is not commercially available in a 
timely manner in the region, or if no interested entity has 
objected, the President may issue a proclamation adding the 
material to the Short Supply List in a restricted or 
unrestricted quantity. Under section 203(o)(4)(C), the 
President may issue a proclamation within 30 days of the 
submission of a request, or within 44 days if there is 
insufficient information to make the determination within 30 
days. This section states that such proclamations shall take 
effect on the date on which they are published in the Federal 
Register. Section 203(o)(4)(C) also provides that within six 
months of adding a fabric, yarn, or fiber to the Short Supply 
List of Annex 3.25 in a restricted quantity, the President may 
eliminate the restriction upon determining that the material is 
not available in commercial quantities in a timely manner in 
the CAFTA-DR countries. Under section 203(o)(4)(D), in the 
unlikely event that the President takes no action in response 
to a request to add a material to the Short Supply List of 
Article 3.25, the material is automatically added in an 
unrestricted quantity beginning 45 days after the request was 
submitted or, if the President has determined under section 
203(4)(C) that sufficient information is not available to make 
the determination within 30 days, then beginning 60 days after 
the request was submitted.
    Under section 203(o)(4)(E), an interested entity may 
request that the President limit the amount of any fabric, 
yarn, or fiber that the United States has included in an 
unrestricted quantity on the Short Supply List of Annex 3.25, 
or the interested entity may request that the material be 
removed from the list. An interested entity may submit such a 
request beginning six months after the product was placed on 
the list in an unrestricted amount. The President must 
determine within 30 days of the request whether the material is 
available in commercial quantities in a timely manner in the 
CAFTA-DR countries. If the determination is affirmative, the 
President is authorized to issue a proclamation carrying out 
the request; such a proclamation may take effect no earlier 
than six months after it is published in the Federal Register.
    Other provisions in section 203 provide specific rules with 
respect to determining origin for accessories, spare parts, or 
tools; packaging materials; indirect materials; and goods 
classifiable as goods put up in sets.

Sec. 204. Customs user fees

    This section provides for the immediate elimination of the 
merchandise processing fee for goods qualifying as originating 
goods under the Agreement. Processing of goods qualifying as 
originating goods will be financed by money from the General 
Fund of the Treasury.

Sec. 205. Retroactive application for certain liquidations and 
        reliquidations of textile or apparel goods

    This section provides that the United States must liquidate 
or reliquidate entries of textile or apparel goods of an 
eligible Agreement country made between January 1, 2004, and 
the date that 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. The Secretary of the Treasury shall refund any 
excess customs duties paid with respect to such entries.

Sec. 206. Disclosure of incorrect information; false certifications of 
        origin; denial of preferential tariff treatment

    This section provides for the imposition of penalties on 
exporters and producers that issue false CAFTA-DR 
certifications of origin through fraud, gross negligence, or 
negligence. These penalties do not apply, under certain 
circumstances, where an exporter or producer voluntarily 
corrects an error and pays any duties owing.

Sec. 207. Reliquidation of entries

    This section implements U.S. obligations under article 
4.15.5 of the Agreement by amending section 520(d) of the 
Tariff Act of 1930 (19 U.S.C. Sec. 1520(d)) to allow an 
importer to claim preferential tariff treatment for originating 
goods within one year of their importation.

Sec. 208. Recordkeeping requirements

    This section sets forth the requirement that a U.S. 
exporter or producer who completes and issues a CAFTA-DR 
certification of origin for a good exported from the United 
States must keep copies and records of the certification and, 
if requested pursuant to rules and regulations promulgated by 
the Secretary of the Treasury, render these materials for 
examination and inspection. Under section 208, the copies and 
records must be kept by the exporter or producer for five 
years.

Sec. 209. Enforcement relating to trade in textile or apparel goods

    Under article 3.24 of the Agreement, the United States may 
request that a government of an Agreement country conduct a 
verification to determine the accuracy of claims of origin for 
textile or apparel goods and to determine that exporters and 
producers are complying with applicable laws and regulations 
regarding trade in textile and apparel goods. The United States 
may assist in the verification or, at the request of the other 
government, conduct the investigation itself. The United States 
may take appropriate action during and after a verification 
pursuant to article 3.24 of the Agreement.
    Section 209 implements article 3.24 of the Agreement. Under 
section 209(a), if the Secretary of the Treasury requests that 
the government of a CAFTA-DR country conduct a verification, 
the President may direct the Secretary to take ``appropriate 
action'' while the verification is underway. Under section 
209(b), such an ``appropriate action'' includes: the suspension 
of preferential tariff treatment under the Agreement for any 
textile or apparel goods exported or produced by the person 
subject to the verification if the Secretary determines that 
there is insufficient information to support any claim for 
preferential tariff treatment; the denial of preferential 
tariff treatment under the Agreement for any textile or apparel 
goods exported or produced by the person subject to the 
verification if the Secretary determines that the person has 
provided incorrect information to support a claim for 
preferential tariff treatment; the detention of textile or 
apparel goods if the Secretary considers that there is 
insufficient information with which to determine their country 
of origin; and the denial of entry to such goods if the 
Secretary determines that the person subject to the 
verification has provided incorrect information as to the 
country of origin of such goods.
    Under section 209(c), following the completion of a 
verification the President may also direct the Secretary of the 
Treasury to take ``appropriate action.'' Under section 209(d), 
such an ``appropriate action'' includes: the denial of 
preferential tariff treatment under the Agreement for any 
textile or apparel goods exported or produced by the person 
that is the subject of a verification if the Secretary 
determines either that there is insufficient information to 
support a claim for preferential treatment or that the person 
has provided incorrect information to support a claim for 
preferential treatment; and the denial of entry of any textile 
or apparel goods exported or produced by the person that is the 
subject of the verification if the Secretary determines either 
that there is insufficient information to determine the country 
of origin of the textile or apparel goods or that the person 
has provided incorrect information regarding their country of 
origin. Unless the President sets an earlier termination date, 
any such action may remain in place until the Secretary obtains 
sufficient information to determine whether the exporter or 
producer that was subject to the verification is complying with 
applicable customs laws, regulations, and procedures, or 
whether an accurate claim was made that textile or apparel 
goods qualify for preferential tariff treatment or originate in 
an Agreement country.
    The Secretary of the Treasury may, under section 209(e), 
publish the name of any person that the Secretary has 
determined is engaged in intentional circumvention of 
applicable laws or regulations affecting trade in textile or 
apparel goods, or any person that has failed to demonstrate 
that it produces, or is capable of producing, textile or 
apparel goods.

Sec. 210. Regulations

    This section authorizes the Secretary of the Treasury to 
prescribe regulations necessary to carry out the rules of 
origin and customs user fee provisions in the Implementation 
Act, as well as the President's proclamation authority with 
respect to fabrics, yarns, or fibers.

                     TITLE III--RELIEF FROM IMPORTS

Sec. 301. Definitions

    This section defines the terms ``CAFTA-DR article,'' 
``CAFTA-DR textile or apparel article,'' ``de minimis supplying 
country,'' and ``relevant CAFTA-DR article,'' for purposes of 
the general bilateral safeguard provision contained in chapter 
8 of the Agreement and the textile and apparel bilateral 
safeguard provision contained in chapter 3 of the Agreement. 
The term ``CAFTA-DR article'' is defined as an article that 
qualifies as an originating good under section 203(b) of the 
Implementation Act. The term ``CAFTA-DR textile or apparel 
article'' is defined as a textile or apparel good that is 
listed in the Annex to the Agreement on Textiles and Clothing 
referred to in section 101(d)(4) of the Uruguay Round 
Agreements Act (19 U.S.C. Sec. 3511(d)(4)), other than a good 
listed in Annex 3.29 of the Agreement, that qualifies as an 
originating good under section 203(b) of the Implementation 
Act.
    The term ``de minimis supplying country'' is defined as a 
CAFTA-DR country whose share of imports of the relevant CAFTA-
DR article into the United States does not exceed 3 percent of 
the total volume of such imports during the most recent 12-
month period for which data are available that precedes the 
filing of a general bilateral safeguard petition. However, if 
there is more than one CAFTA-DR country that satisfies the 
foregoing criterion, an additional limitation applies--i.e. a 
CAFTA-DR country shall not be considered to be a de minimis 
supplying country if the aggregate share of imports from all 
CAFTA-DR countries that satisfy the foregoing criterion exceeds 
9 percent of total imports of the relevant CAFTA-DR article 
during the applicable 12-month period. Finally, the term 
``relevant CAFTA-DR article'' is defined as a CAFTA-DR article 
with respect to which a general bilateral safeguard petition 
has been filed.

    Subtitle A.--Relief From Imports Benefitting From the Agreement

Sec. 311. Commencing of action for relief

    This section requires the filing of a petition with the 
U.S. International Trade Commission (``Commission'') by an 
entity, including a trade association, firm, certified or 
recognized union, or group of workers, that is representative 
of an industry in order to commence a bilateral safeguard 
investigation.
    Section 311(b) provides that, upon the filing of a 
petition, the Commission shall promptly initiate an 
investigation to determine whether, as a result of the 
reduction or elimination of a duty provided for under the 
Agreement, a CAFTA-DR article is being imported into the United 
States in such increased quantities, and under such conditions, 
that imports of the CAFTA-DR article constitute a substantial 
cause of serious injury, or threat of serious injury, to the 
domestic industry producing an article that is like, or 
directly competitive with, the imported article.
    Section 311(c) extends certain provisions (both substantive 
and procedural) contained in subsections (b), (c), and (i) of 
section 202 of the Trade Act of 1974 (19 U.S.C. Sec. 2252(b), 
(c), and (i)) to any bilateral safeguard initiated under the 
Agreement. These provisions include, inter alia, the 
requirement that the Commission publish notice of the 
commencement of an investigation; the requirement that the 
Commission hold a public hearing at which interested parties 
and consumers have the right to be present, to present 
evidence, and to respond to the presentations of other parties 
and consumers; the factors to be taken into account by the 
Commission in making its determinations; and authorization for 
the Commission to promulgate regulations to provide access to 
confidential business information under protective order to 
authorized representatives of interested parties in an 
investigation.
    Section 311(d) precludes the initiation of a bilateral 
safeguard investigation with respect to any CAFTA-DR article 
for which import relief has already been provided under this 
bilateral safeguard provision.

Sec. 312. Commission action on petition

    This section establishes deadlines for Commission 
determinations following the initiation of a bilateral 
safeguard investigation. Section 312(b) applies certain 
statutory provisions that address an equally divided vote by 
the Commission in a global safeguard investigation under 
section 202 of the Trade Act of 1974 (19 U.S.C. Sec. 2252) to 
Commission determinations under this section. If the Commission 
renders an affirmative injury determination, or a determination 
that the President can consider to be an affirmative 
determination in the event of a divided vote by the Commission, 
section 312(c) requires that the Commission also find and 
recommend to the President the amount of import relief that is 
necessary to remedy or prevent the injury found by the 
Commission and to facilitate the efforts of the domestic 
industry to make a positive adjustment to import competition. 
Section 312(d) specifies the information to be included by the 
Commission in a report to the President regarding its 
determination. Upon submitting the requisite report to the 
President, section 312(e) requires the Commission to make 
public promptly such report, except for confidential 
information contained in the report.

Sec. 313. Provision of relief

    This section directs the President, not later than 30 days 
after receiving the report from the Commission, to provide 
relief from imports of the article subject to an affirmative 
determination by the Commission, or a determination that the 
President considers to be an affirmative determination in the 
event of a divided vote by the Commission, to the extent that 
the President determines necessary to remedy or prevent the 
injury 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 President determines that the provision of the 
import relief will not provide greater economic and social 
benefits than costs.
    Section 313(c) specifies the nature of the import relief 
that the President may impose to include: the suspension of any 
further reduction in duty provided for under Annex 3.3 of the 
Agreement; and an increase in the rate of duty imposed on such 
article to a level that does not exceed the lesser of (1) the 
NTR/MFN duty rate imposed on like articles at the time the 
import relief is provided, or (2) the NTR/MFN duty rate imposed 
on like articles on the day before the date on which the 
Agreement enters into force. Section 313(c) also requires that, 
if the period for which import relief is provided exceeds one 
year, the President shall provide for the progressive 
liberalization (described in article 8.2.3 of the Agreement) of 
such relief at regular intervals during the period of its 
application.
    Section 313(d) provides that any import relief that the 
President imposes in a bilateral safeguard action may not, in 
the aggregate, exceed four years. If the initial period of 
import relief is less than four years, the President may extend 
the effective period of such import relief to a total of no 
more than four years if the Commission first determines and 
reports to the President whether import relief continues to be 
necessary to remedy or prevent serious injury and whether there 
is evidence that the domestic industry is making a positive 
adjustment to import competition. If the Commission reports an 
affirmative determination, or a determination that the 
President considers to be an affirmative determination in the 
event of a divided vote by the Commission, then the President 
can extend the effective period of import relief to a total of 
no more than four years if the President determines that import 
relief continues to be necessary to remedy or prevent serious 
injury and to facilitate adjustment by the domestic industry to 
import competition, and that there is evidence that the 
domestic industry is making a positive adjustment to import 
competition.
    Section 313(e) provides that upon termination of import 
relief under the bilateral safeguard provision, the rate of 
duty to be applied in the calendar year of termination is the 
rate of duty that would have been in effect one year after the 
provision of import relief according to the Schedule of the 
United States to Annex 3.3 of the Agreement. The rate of duty 
to be applied thereafter shall be, at the discretion of the 
President, either (1) the applicable rate of duty for that 
article set out in the Schedule of the United States to Annex 
3.3 of the Agreement, or (2) the rate of duty resulting from 
the elimination of the tariff in equal annual stages ending on 
the date set out in the Schedule of the United States to Annex 
3.3 of the Agreement for the elimination of the tariff.
    Section 313(f) provides that no import relief may be 
provided under the bilateral safeguard mechanism on any article 
that is subject to import relief under the global safeguard 
mechanism provided for in chapter 1 of Title II of the Trade 
Act of 1974 (19 U.S.C. Sec. 2251 et seq.). Section 313(f) 
further provides that no import relief may be provided under 
the bilateral safeguard mechanism on imports of a CAFTA-DR 
article from a CAFTA-DR country that is a de minimis supplying 
country with respect to that article.

Sec. 314. Termination of relief authority

    This section provides that the President's authority to 
impose import relief under the bilateral safeguard mechanism 
ends after the date that is 10 years after the date on which 
the Agreement enters into force, or, if the period for tariff 
elimination (set out in the Schedule of the United States to 
Annex 3.3 of the Agreement) for an article subject to import 
relief is greater than 10 years, after the date on which such 
period ends.

Sec. 315. Compensation authority

    This section authorizes the President, under section 123 of 
the Trade Act of 1974 (19 U.S.C. Sec. 2133), to grant CAFTA-DR 
countries new concessions as compensation for the imposition of 
import relief in a bilateral safeguard investigation in order 
to maintain the general level of reciprocal concessions under 
the Agreement.

Sec. 316. Confidential business information

    This section applies the same procedures for the treatment 
and release of confidential business information by the 
Commission in a global safeguard investigation under chapter 1 
of Title II of the Trade Act of 1974 (19 U.S.C. Sec. 2251 et 
seq.) to bilateral safeguard investigations under subtitle A of 
Title III of the Implementation Act.

          Subtitle B.--Textile and Apparel Safeguard Measures

Sec. 321. Commencement of action for relief

    This section requires the filing of a request with the 
President by an interested party in order to commence action 
for relief under the textile and apparel safeguard provision. 
Upon the filing of a request, the President shall review the 
request to determine, from the information presented in the 
request, whether to commence consideration of the request. 
Section 321(b) provides that, if the President determines that 
the request provides the information necessary for the request 
to be considered, the President shall cause to be published in 
the Federal Register a notice of commencement of consideration 
of the request, and notice seeking public comments regarding 
the request. The notice shall include a summary of the request 
and the dates by which comments and rebuttals must be received.
    The Committee notes that our regulatory processes should be 
administered in an open and transparent manner that can serve 
as a model for our trading partners. For example, in addition 
to publishing a summary of a request for safeguard relief, the 
Committee notes that the President plans to make available the 
full text of the request on the website of the International 
Trade Administration of the U.S. Department of Commerce, 
subject to the protection of business confidential information. 
The Committee encourages this and similar efforts to enhance 
government transparency. In particular, the Committee 
encourages the President to issue regulations on procedures 
for: requesting a textile and apparel safeguard measure under 
section 321(a) of the Implementation Act; making a 
determination under section 322(a) of the Implementation Act; 
providing safeguard relief under section 322(b) of the 
Implementation Act; and, extending safeguard relief under 
section 323(b) of the Implementation Act.

Sec. 322. Determination and provision of relief

    This section provides that following the President's 
commencement of consideration of a request, the President shall 
determine whether, as a result of the reduction or elimination 
of a duty under the Agreement, a CAFTA-DR textile or apparel 
article of a specified CAFTA-DR country is being imported into 
the United States in such increased quantities 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 competitive with, the imported article.
    Section 322(a) provides that in making a determination the 
President shall examine the effect of increased imports on the 
domestic industry's output, productivity, capacity utilization, 
inventories, market share, exports, wages, employment, domestic 
prices, profits, and investment, none of which is necessarily 
decisive. Section 322(a) also provides that the President shall 
not consider changes in technology or consumer preference as 
factors supporting a determination of serious damage or actual 
threat thereof. The President must make a determination no 
later than 30 days after the completion of any consultations 
held pursuant to article 3.23.4 of the Agreement.
    Section 322(b) authorizes the President, in the event of an 
affirmative determination of serious damage or actual threat 
thereof, to provide import relief to the extent that the 
President determines necessary to remedy or prevent the serious 
damage and to facilitate adjustment by the domestic industry to 
import competition. Section 322(b) also specifies the nature of 
the import relief that the President may impose to consist of 
an increase in the rate of duty imposed on the article to a 
level that does not exceed the lesser of (1) the NTR/MFN duty 
rate imposed on like articles at the time the import relief is 
provided, or (2) the NTR/MFN duty rate imposed on like articles 
on the day before the date on which the Agreement enters into 
force.

Sec. 323. Period of relief

    Section 323(a) provides that any import relief that the 
President imposes under the textile and apparel safeguard 
mechanism may not, in the aggregate, exceed three years. If the 
initial period of import relief is less than three years, then 
under section 323(b) the President may extend the effective 
period of such import relief to a total of no more than three 
years if the President determines that the import relief 
continues to be necessary to remedy or prevent serious damage 
and to facilitate adjustment by the domestic industry to import 
competition, and that there is evidence that the domestic 
industry is making a positive adjustment to import competition.

Sec. 324. Articles exempt from relief

    This section precludes the President from providing import 
relief under the textile and apparel safeguard mechanism with 
respect to any article to which import relief has already been 
provided under subtitle B of Title III of the Implementation 
Act, or any article that is subject to import relief under 
either the bilateral safeguard mechanism under subtitle A of 
Title III of the Implementation Act or the global safeguard 
mechanism set forth in chapter 1 of Title II of the Trade Act 
of 1974 (19 U.S.C. Sec. 2251 et seq.).

Sec. 325. Rate after termination of import relief

    This section provides that the duty rate applicable to a 
textile or apparel article after termination of the import 
relief shall be the duty rate that would have been in effect 
but for the provision of such import relief.

Sec. 326. Termination of relief authority

    This section provides that the President's authority to 
provide import relief under the textile and apparel safeguard 
mechanism terminates after the date that is five years after 
the date on which the Agreement enters into force.

Sec. 327. Compensation authority

    This section authorizes the President, under section 123 of 
the Trade Act of 1974 (19 U.S.C. Sec. 2133), to grant a CAFTA-
DR country new concessions as compensation for the imposition 
of import relief in a textile and apparel safeguard proceeding, 
in order to maintain the general level of reciprocal 
concessions under the Agreement.

Sec. 328. Confidential business information

    This section precludes the President from releasing 
information received in a textile and apparel safeguard 
proceeding that the President considers to be confidential 
business information unless the party submitting the 
confidential business information had notice, at the time of 
submission, that such information would be released by the 
President, or such party subsequently consents to the release 
of the information. This section also provides that, to the 
extent a party provides confidential business information, the 
party shall also provide a nonconfidential version of the 
information in which the confidential business information is 
summarized or, if necessary, deleted.

       Subtitle C.--Cases Under Title II of the Trade Act of 1974

Sec. 331. Findings and action on goods of CAFTA-DR countries

    If the Commission initiates an investigation under the 
global safeguard mechanism provided for in chapter 1 of Title 
II of the Trade Act of 1974, and the Commission reports to the 
President an affirmative determination in that investigation, 
or a determination that the President can consider to be an 
affirmative determination in the event of a divided vote by the 
Commission, then section 331(a) requires the Commission to 
include in its report to the President a finding as to whether 
imports of the investigated article from each CAFTA-DR country 
that qualify as originating goods under the Agreement's rules 
of origin are a substantial cause of serious injury or threat 
thereof. Pursuant to section 331(b), the President may then 
exclude from any global import relief goods of a CAFTA-DR 
country with respect to which the Commission made a negative 
finding under section 331(a).

                        TITLE IV--MISCELLANEOUS

Sec. 401. Eligible products

    This section amends section 308(4)(A) of the Trade 
Agreements Act of 1979 (19 U.S.C. Sec. 2518(4)(A)) to implement 
the government procurement provisions of the Agreement.

Sec. 402. Modifications to the Caribbean Basin Economic Recovery Act

    This section amends sections 212 and 213 of the Caribbean 
Basin Economic Recovery Act (19 U.S.C. Sec. Sec. 2702-03) 
(``CBERA'') to reflect that parties to the Agreement are no 
longer eligible to be designated as beneficiary countries under 
CBERA or under the Caribbean Basin Trade Partnership Act 
(``CBTPA''), which amended CBERA. Section 402 further provides, 
however, that the remaining CBERA and CBTPA beneficiary 
countries (i.e. non CAFTA-DR countries) may continue to utilize 
inputs from a CAFTA-DR country in satisfying the rules of 
origin under CBERA and CBTPA. Section 402 is thus intended to 
avoid disrupting the existing benefit structure under CBERA and 
CBTPA for the remaining CBERA and CBTPA beneficiary countries 
(i.e. non CAFTA-DR countries).
    Section 402(d) provides that if, under the non-preferential 
rules of origin that the United States applies in the normal 
course of trade, a good is determined to be a good of a CAFTA-
DR country that has implemented the Agreement, then the good is 
not eligible for preferential tariff treatment under CBTPA. 
However, section 402(d) includes an exception with respect to a 
good that is co-produced in Haiti and the Dominican Republic. 
Specifically, if a good is determined to be a good of the 
Dominican Republic under U.S. non-preferential rules of origin, 
and the good either contains inputs of Haiti or underwent 
processing in Haiti, the resulting apparel item will continue 
to be eligible for CBTPA preferential treatment. This exception 
is thus intended to avoid disrupting investment in co-
production relationships in Haiti and the Dominican Republic.

Sec. 403. Periodic reports and meetings on labor obligations and labor 
        capacity-building provisions

    This section provides that not later than two years after 
the Agreement enters into force, and not later than the end of 
each two-year period thereafter during the succeeding 14 years, 
the President shall report to Congress on the progress of the 
CAFTA-DR countries in implementing the labor provisions of the 
Agreement and the April 2005 report of the Working Group of the 
Vice Ministers Responsible for Trade and Labor in the Countries 
of Central America and the Dominican Republic entitled ``The 
Labor Dimension in Central America and the Dominican Republic--
Building on Progress: Strengthening Compliance and Enhancing 
Capacity.'' Section 403 also provides that the Secretary of 
Labor should take the necessary steps to meet periodically with 
the labor ministers of the CAFTA-DR countries to discuss the 
operation of the labor provisions of the Agreement, progress on 
the labor commitments made by the CAFTA-DR countries, the work 
of the International Labor Organization (``ILO'') in the CAFTA-
DR countries, and such other matters as the Secretary of Labor 
and the labor ministers of the CAFTA-DR countries deem 
appropriate.

             F. Vote of the Committee in Reporting the Bill

    In compliance with section 133 of the Legislative 
Reorganization Act of 1946, the Committee states that on June 
29, 2005, S. 1307 was ordered favorably reported, without 
amendment, by voice vote, a quorum being present (Senator 
Thomas voted no).

                    II. BUDGETARY IMPACT OF THE BILL

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 18, 2005.
Hon. Charles E. Grassley,
Chairman, Committee on Finance,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1307, 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.

S. 1307--Dominican Republic-Central America-United States Free Trade 
        Agreement Implementation Act

    Summary: S. 1307 would approve the Dominican Republic-
Central 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 it also would increase direct 
spending by $35 million in 2006, $245 million over the 2006-
2010 period, and $621 million over the 2006-2015 period.
    CBO has determined that S. 1307 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.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of S. 1307 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 Program:
    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      11      15      16       17       17       18       19       20       21        0
    Estimated Outlays....................................       0      11      15      16       17       17       18       19       20       21        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 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.
    This estimate includes the effects of increased imports 
from the region that would result from the reduced prices of 
imported products 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 concerning 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: 
S. 1307 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 act, the tariff rates would be no greater than under 
current law. Consequently, S. 1307 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 H.R. 3045, an identical bill 
that was ordered reported by the House Committee on Ways and 
Means on June 30, 2005. The two cost estimates are identical.
    Estimate prepared by: Federal Revenues: Annabelle Bartsch 
and Emily Schlect. Federal Spending: Mark Grabowicz and David 
Hull. 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; Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

          III. REGULATORY IMPACT OF THE BILL AND OTHER MATTERS

    Pursuant to the requirements of paragraph 11(b) of rule 
XXVI of the Standing Rules of the Senate, the Committee states 
that S. 1307 will not significantly regulate any individuals or 
businesses, will not affect the personal privacy of 
individuals, and will result in no significant additional 
paperwork.
    The following information is provided in accordance with 
section 423 of the Unfunded Mandates Reform Act of 1995 
(``UMRA'') (Pub. L. No. 104-04). The Committee has reviewed the 
provisions of S. 1307 as approved by the Committee on June 29, 
2005. In accordance with the requirement of Pub. L. No. 104-04, 
the Committee has determined that the bill contains no 
intergovernmental mandates, as defined in the UMRA, and would 
not affect the budgets of State, local, or tribal governments.

       IV. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    Pursuant to the requirements of paragraph 12 of rule XXVI 
of the Standing Rules of the Senate, 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 italics, 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

           *       *       *       *       *       *       *

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 Republic-Central 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.
  [(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 [that 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 
Dominican 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 with regulations issued by the 
Secretary of the Treasury, may suspend preferential tariff 
treatment under the Dominican Republic-Central 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 [or 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.
          [(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 
        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) * * *

           *       *       *       *       *       *       *

          (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, [and] 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; 
                        [or]
                          (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 
                        States[.]; 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 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
[Costa Rica]
Dominica
[Dominican Republic]
[El Salvador]
Grenada
[Guatemala]
Guyana
Haiti
[Honduras]
Jamaica
Montserrat
Netherlands Antilles
[Nicaragua]
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 
[the Commonwealth 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 CBTPA 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.

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