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[House Report 107-245]
[From the U.S. Government Publishing Office]

107th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    107-245

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             EXTENSION OF GENERALIZED SYSTEM OF PREFERENCES

                                _______
                                

October 16, 2001.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

    Mr. Thomas, from the Committee on Ways and Means, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 3010]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 3010) to amend the Trade Act of 1974 to extend the 
Generalized System of Preferences until December 31, 2002, 
having considered the same, report favorably thereon without 
amendment and recommend that the bill do pass.

                                CONTENTS

                                                                   Page
 I. Introduction......................................................2
          A. Purpose and Summary.................................     2
          B. Background..........................................     2
          C. Legislative History.................................     3
II. Explanation of Bill...............................................3
III.Votes of the Committee............................................3

IV. Budget Effect.....................................................4
          A. Committee Estimate of Budgetary Effects.............     4
          B. Statement Regarding New Budget Authority and Tax 
              Expenditures.......................................     4
          C. Cost Estimate Prepared by the Congressional Budget 
              Office.............................................     4
 V. Other Matters To Be Discussed Under the Rules of the House........6
          A. Committee Oversight Findings and Recommendations....     6
          B. Summary of Findings and Recommendations of the 
              Committee on Government Reform and Oversight.......     6
          C. Constitutional Authority Statement..................     6
VI. Changes in Existing Law, as Reported..............................6

                            I. INTRODUCTION

                         A. Purpose and Summary

    H.R. 3010 would reinstate, without further change, the 
Generalized System of Preferences (GSP) through December 31, 
2002, and retroactively to October 1, 2001.

                             B. Background

    Title V of the Trade Act of 1974, as amended, grants 
authority to the President to provide duty-free treatment on 
imports of eligible articles from designated beneficiary 
developing countries (BDCs), subject to certain conditions and 
limitations. To qualify for GSP privileges, each beneficiary 
country is subject to various mandatory and discretionary 
eligibility criteria. Section 505(a) of the Trade Act of 1974, 
as amended, provides that no duty-free treatment under Title V 
shall remain in effect after September 30, 2001.
    The purpose of the GSP program is to promote three broad 
policy goals: (1) to foster economic development in developing 
economies through increased trade rather than foreign aid; (2) 
to promote U.S. trade interests by encouraging beneficiary 
countries to open their markets and comply more fully with 
international trading rules; and (3) to help maintain U.S. 
international competitiveness by lowering costs for U.S. 
business, as well as lowering prices for American consumers.

Statutorily-exempt articles

    Under section 503(a)(1), the President may not designate 
any article as GSP-eligible within the following categories:
          (1) Textiles and apparel articles which were not 
        eligible articles for purposes of this title on January 
        1, 1994;
          (2) Watches, except watches entered after June 30, 
        1989 that the President determines will not cause 
        material injury to watch or watch band, strap or 
        bracelet manufacturing and assembly operations in the 
        United States or U.S. insular possessions;
          (3) Import-sensitive electronic articles;
          (4) Import-sensitive steel articles;
          (5) Footwear, handbags, luggage, flat goods, work 
        gloves, and leather wearing apparel which were not GSP-
        eligible articles on January 1, 1995;
          (6) Import-sensitive semimanufactured and 
        manufactured glass products; and
          (7) Any other articles the President determines to be 
        import-sensitive in the context of GSP.

Least-developed developing countries

    Under section 502(a)(2), the President is authorized to 
designate any article that is the growth, product, or 
manufacture of a least-developed beneficiary developing country 
(LDBDC) as an eligible article with respect to imports from 
LDBDCs, if the President determines the article is not import-
sensitive in the context of imports from the LDBDCs.

Sub-Saharan African countries

    Section 114 of The Africa Growth and Opportunity Act (P.L. 
106-200) enacted on May 18, 2000, amended section 506 of the 
Trade Act of 1974, as amended, by extending GSP benefits 
through September 30, 2008, for qualified sub-Saharan African 
countries. The extension applies to sub-Saharan African 
countries receiving either regular or LLDC GSP benefits.

                         C. Legislative History

Committee action

    H.R. 3010 was introduced on October 3, 2001, by 
Representative Crane and referred to the Committee on Ways and 
Means.

Legislative hearing

    None.

                      II. EXPLANATION OF THE BILL

Expired law

    Section 505 of the Trade Act of 1974, as amended, provides 
that no duty-free treatment under Title V (the Generalized 
System of Preferences) shall remain in effect after September 
30, 2001.

Explanation of the provision

    H.R. 3010 amends section 505 of the Trade Act of 1974 to 
authorize an extension through December 31, 2002. It also 
provides retroactive relief in that, notwithstanding section 
514 of the Tariff Act of 1930 or any other provision of law, 
the entry of any article to which duty-free treatment under 
Title V of the Trade Act of 1974 would have applied if the 
entry had been made on September 30, 2001, and was made after 
September 30, 2001, and before the enactment of this Act, shall 
be liquidated or reliquidated as free of duty and the Secretary 
of the Treasury shall refund any duty paid, upon proper request 
filed with the appropriate Customs officer, within 180 days 
after the date of enactment.

Reasons for the provision

    The Committee believes GSP has been a highly effective 
program in meeting its goals of fostering development in 
developing economies through trade, promoting U.S. trade 
interests by encouraging beneficiary countries to open their 
markets and comply with international trade rules, and 
maintaining U.S. competitiveness by lowering costs for U.S. 
businesses and lowering prices for U.S. consumers. The 
Committee also believes that short-term extensions of the 
program are highly disruptive to U.S. companies who rely on GSP 
products and the economic development of beneficiary countries. 
Further, to prevent an unintended gap in duty-free treatment, 
the Committee provides for a retroactive extension of the 
program.

                      III. VOTES OF THE COMMITTEE

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statements are made 
concerning the votes of the Committee on Ways and Means in its 
consideration of H.R. 3010.

                       motion to report the bill

    The resolution, H.R. 3010, was ordered favorably reported, 
by voice vote, with a quorum being present.

                           IV. BUDGET EFFECTS

               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d)(2) of rule XIII of the Rules 
of the House of Representatives, the following statement is 
made concerning the effects on the budget of this resolution, 
H.R. 3010 as reported: The Committee agrees with the estimate 
prepared by CBO which is included below.

    B. Statement Regarding New Budget Authority and Tax Expenditures

    In compliance with subdivision 3(c)(2) of rule XIII of the 
Rules of the House of Representatives, the Committee states 
that the provisions of H.R. 3010 would reduce customs duty 
receipts due to lower tariffs imposed on goods from beneficiary 
countries under the Generalized System of Preferences.

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, requiring a cost estimate 
prepared by the Congressional Budget Office, the following 
report prepared by CBO is provided.

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, October 11, 2001.
Hon. William ``Bill'' M. Thomas,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3010, a bill to 
amend the Trade Act of 1974 to extend the Generalized System of 
Preferences until December 31, 2002.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Erin 
Whitaker.
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

H.R. 3010--A bill to amend the Trade Act of 1974 to extend the 
        Generalized System of Preferences until December 31, 2002

    Summary: H.R. 3010 would extend the period in which 
preferential treatment provided to certain products of 
countries under the Generalized System of Preferences (GSP) is 
in effect. Under current law, GSP treatment expired on 
September 30, 2001. The bill would allow imports under the 
program to enter the United States free of duty until December 
31, 2002. Any imports made after September 30, 2001, and before 
the date of enactment would be eligible for duty-free treatment 
and refunds of any duty paid. The Congressional Budget Office 
estimates that enacting the bill would reduce revenues by $332 
million in 2002 and by $419 million over the 2002-2003 period. 
Because enacting H.R. 3010 would affect receipts, pay-as-you-go 
procedures would apply. CBO has determined that H.R. 3010 
contains no private-sector or intergovernmental mandates as 
defined in the Unfunded Mandates Reform Act (UMRA) and would 
not affect the budgets of state, local, or tribal governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 3010 is shown in the following table

----------------------------------------------------------------------------------------------------------------
                                                                    By fiscal year, in millions of dollars--
                                                               -------------------------------------------------
                                                                  2002      2003      2004      2005      2006
----------------------------------------------------------------------------------------------------------------
                                               CHANGES IN REVENUES

Estimated Revenues............................................      -332       -87         0         0         0
----------------------------------------------------------------------------------------------------------------

    Basis of estimate: The estimated impact of this extension 
is based on recent data on imports from GSP beneficiary 
countries. With enactment of H.R. 3010, CBO expects that GSP 
imports would enter the U.S. duty-free, generating a loss in 
customs duties. In addition, CBO expects that extension of GSP 
treatment would displace imports from other countries that 
would occur in the absence of such treatment. In the absence of 
specific data on this substitution effect, CBO assumes that an 
amount equal to one-half of the future imports from GSP 
beneficiary countries would displace imports from other 
countries. The losses of revenues from customs duties are 
projected using a trade-weighted duty rate with respect to 
beneficiary countries adjusted for tariff reductions scheduled 
by the World Trade Organization (WTO). Certain imports from 
sub-Saharan Africa will continue to receive GSP treatment under 
the African Growth and Opportunity Act (AGOA). Based on 
information from the International Trade Commission and other 
trade sources, CBO estimates that enacting H.R. 3010 would 
reduce revenues by $332 million in 2002 and by $419 million 
over the 2002-2003 period.
    Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act sets up procedures for 
legislation affecting receipts or direct spending. The net 
changes in governmental receipts that are subject to pay-as-
you-go procedures are shown in the following table.

----------------------------------------------------------------------------------------------------------------
                                                         By fiscal year, in millions of dollars--
                                        ------------------------------------------------------------------------
                                           2002    2003    2004   2005   2006   2007   2008   2009   2010   2011
----------------------------------------------------------------------------------------------------------------
Changes in receipts....................     -332     -87      0      0      0      0      0      0      0      0
Changes in outlays.....................                               Not applicable
----------------------------------------------------------------------------------------------------------------

    Intergovernmental and private-sector impact: The bill 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would not affect the budgets of state, 
local, or tribal governments.
    Estimate prepared by: Federal Revenues: Erin Whitaker. 
Impact on State, Local, and Tribal Governments: Elyse Goldman. 
Impact on Private Sector: Cecil McPherson.
    Estimate approved by: Roberton Williams, Deputy Assistant 
Director for Tax Analysis.

     V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE

          A. Committee Oversight Findings and Recommendations

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives (relating to oversight findings), 
the Committee, based upon information from the Administration, 
concluded that it is appropriate and timely to consider the 
resolution as reported.

    B. Summary of Findings and Recommendations of the Committee on 
                    Government Reform and Oversight

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, no oversight findings or 
recommendations have been submitted to the Committee by the 
Committee on Government Reform and Oversight with respect to 
the subject matter contained in H.R. 3010.

                 C. Constitutional Authority Statement

    With respect to clause 3(d)(1) of rule XIII of the Rules of 
the House of Representatives, relating to Constitutional 
Authority, the Committee states that the Committee's action in 
reporting the bill is derived from Article I of the 
Constitution, Section 8 (``The Congress shall have power to lay 
and collect taxes, duties, imposts and excises, to pay the 
debts and to provide for * * * the general Welfare of the 
United States * * *'').

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

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                  SECTION 505 OF THE TRADE ACT OF 1974

SEC. 505. DATE OF TERMINATION.

    No duty-free treatment provided under this title shall 
remain in effect after [September 30, 2001] December 31, 2002.

                                
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