U.S. International Trade Commission

Robert A. Rogowsky

Director of Operations

COMMISSIONERS

Address all communications to

Secretary to the Commission

United States International Trade Commission

Washington, DC 20436

Deanna Tanner Okun, Vice Chairman

Jennifer A. Hillman

Charlotte R. Lane

Daniel R. Pearson

Shara L. Aranoff

Karen Laney-Cummings

Director of Industries

Stephen Koplan, Chairman

Project Leader

Cynthia B. Foreso, Office of Industries

Deputy Project Leaders

Alan Treat and Eric Land, Office of Industries

Economist

Walker Pollard, Office of Economics

Digest Authors

Edmund Cappuccilli, Vincent DeSapio, Alfred Forstall, Renee Johnson, and John Reeder

Office of Industries

Assisted by

Brenda Carroll, Office of Industries
U.S. International Trade Commission

Washington, DC 20436

November 2005

www.usitc.gov

Publication 3819

Advice Concerning Possible Modifications

to the U.S. Generalized System of

Preferences, 2005 Review

Investigation No. 332--470

CLASSIFIED BY: United States Trade Representative, Letter Dated August 9, 2005

DECLASSIFIED BY: United States Trade Representative, Letter Dated August 9, 2005

NOTICE

THIS REPORT IS A PUBLIC VERSION OF THE REPORT SUBMITTED TO THE

UNITED STATES TRADE REPRESENTATIVE ON NOVEMBER 10, 2005. ALL

CONFIDENTIAL NATIONAL SECURITY INFORMATION AND CONFIDENTIAL

BUSINESS INFORMATION HAS BEEN REMOVED AND REPLACED WITH

ASTERISKS (***).

OMB No.: 3117--0188

11/05

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Advice Concerning Possible Modifications to the U.S.

Generalized System of Preferences, 2005 Review

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Advice Concerning Possible Modifications to

the U.S. Generalized System of Preferences,

2005 Review
CONTENTS

Page

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

Digest structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv

Digest summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi

Dried mangoes and other dried tropical fruit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Carrageenan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Ibuprofen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Softwood plywood . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Certain travertine dimension stone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Appendix A

U.S. Trade Representative’s request letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

Appendix B

U.S. International Trade Commission’s notice of investigation . . . . . . . . . . . . . . . . . . . . . . . . . B-1

Appendix C

List of witnesses appearing before the U.S. International Trade Commission

at the hearing on September 29, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1

Appendix D

Model for evaluating probable economic effects of changes in GSP status . . . . . . . . . . . . . . . . D-1

1

 The information in these digests is for the purpose of this report only. Nothing in this report should be construed to

indicate how the Commission would find in an investigation conducted under any other statutory authority.

INTRODUCTION1

On August 9, 2005, the Commission received a request from the United States Trade Representative

(USTR) for an investigation under section 332(g) of the Tariff Act of 1930 for the purpose of providing

advice concerning possible modifications to the U.S. Generalized System of Preferences (GSP). The

USTR request letter is included in appendix A. Following receipt of the request, the Commission

instituted investigation No. 332-470 to provide as follows--

(a.) advice as to the probable economic effect on U.S. industries producing like or directly

competitive articles, and on consumers, of the elimination of U.S. import duties for all

beneficiary countries under the GSP for HTS subheading 1302.39.0010. In providing its

advice on these articles, the USTR asked that the Commission assume that the benefits of the

GSP would not apply to imports that would be excluded from receiving such benefits by virtue

of the competitive need limits;

(b.) advice as to the probable economic effect on U.S. industries producing like or directly

competitive articles, and on consumers, of the restoration of duty-free status for India for HTS

subheading 2916.39.15; and

(c.) advice on whether any industry in the United States is likely to be adversely affected by a

waiver of the competitive need limits for the Philippines for HTS subheading 0804.50.80; for

Brazil for HTS subheading 4412.19.40; and for Turkey for HTS subheadings 6802.21.10 and

6802.91.20. The competitive need limit is $115,000,000.

The Commission instituted the investigation on August 15, 2005, and indicated that it would provide

its advice no later than November 10, 2005, as requested by the USTR. The Commission’s notice of

investigation is contained in appendix B.

All interested parties were afforded an opportunity to provide the Commission with written

comments and information. In addition, the Commission held a public hearing on the investigation in

Washington, DC, on September 29, 2005 (see appendix C for the list of hearing witnesses).

iii
DIGEST STRUCTURE

This report contains 5 digests covering 6 HTS subheadings with each digest containing the

following sections:

I. Introduction: This section provides basic information on the item, including description

and uses, rate of duty, and an indication of whether there was a like or directly competitive article

produced in the United States on January 1, 1995.

II. Probable economic effect advice: This section provides advice on the short- to near-term

(1 to 5 years) impact of the proposed GSP-eligibility modifications in three areas: (1) U.S. imports, (2)

U.S. industries producing like or directly competitive articles, and (3) U.S. consumers. The probable

economic effect advice, to a degree, integrates and summarizes the data provided in other sections of the

digests with particular emphasis on the price sensitivity of import supply and demand. For example, if

the price elasticity of demand for imports from the beneficiary in the United States and the price elasticity

of supply in the exporting beneficiary country are both relatively high, then the elimination of even a

moderate-level tariff suggests the possibility of large increases in imports from the beneficiary country. 

Appendix D provides a brief textual and graphic presentation of the model used for evaluating the

probable economic effect of changes in the GSP.

It should be noted that the probable economic effect advice with respect to changes in import levels

is presented in terms of the degree to which GSP modifications could affect the level of U.S. trade with

the world. Consequently, if GSP beneficiaries supply a very small share of the total U.S. imports of a

particular product or if imports from beneficiaries readily substitute for imports from developed countries,

then the overall effect on U.S. imports could be minimal.

The digests contain a coded summary of the probable economic effect advice. The coding scheme is

as follows:

FOR “ADDITION/RESTORATION” AND “COMPETITIVE-NEED-LIMIT WAIVER”

DIGESTS:

Level of total U.S. imports:

Code A: Little or no increase (0 to 5 percent).

Code B: Moderate increase (6 to 15 percent).

Code C: Significant increase (over 15 percent).

Code N: No impact.

U.S. industry and employment:

Code A: Little or no adverse impact.

Code B: Significant adverse impact (significant proportion of workers unemployed, declines

in output and profit levels, and departure of firms; effects on some segments of the

industry may be substantial even though they are not industry wide).

Code C: Substantial adverse impact (substantial unemployment, widespread idling of

productive facilities; substantial declines in profit levels; effects felt by the entire

industry).

Code N: None.

iv
2

 Price elasticity is a measure of the changes in quantities supplied or demanded that result from a percent change in

price. Generally, price elasticities of supply are positive and price elasticities of demand are negative. For the purposes of this

report, the elasticity is considered low when its absolute value is less than 1.0 because the change in quantity demanded or

supplied is less than proportional to the change in price. The elasticity is moderate when its absolute value is between 1.0 and

2.0, with percentage changes in quantity being one to two times greater than the change in price. The elasticity is high when its

absolute value exceeds 2.0, as percentage changes in quantities exceed percentage changes in price by more than two times. It

should be noted that the elasticity levels (low, moderate, and high) are estimates based on staff analysis of industry.

v

U.S. consumer:

Code A: The bulk of duty saving (greater than 75 percent) is expected to be absorbed by the

foreign suppliers. The price U.S. consumers pay is not expected to fall

significantly.

Code B: Duty saving is expected to benefit both the foreign suppliers and the domestic

consumer (neither absorbing more than 75 percent).

Code C: The bulk of duty saving (greater than 75 percent) is expected to benefit the U.S.

consumer.

Code N: None.

III. U.S. market profile: This section provides information on U.S. producers, employment,

shipments, exports, imports, consumption, import market share, and capacity utilization. When exact

information is not obtainable, estimates based on the following coding system may be provided:

* = Based on partial information/data adequate for estimation with a moderately high degree of 

confidence, or 

** = Based on limited information/data adequate for estimation with a moderate degree of 

confidence.

IV. GSP import situation, 2004: This section provides 2004 U.S. import data, including

imports from all countries and certain GSP-eligible country-specific data.

V. Competitiveness profiles, GSP suppliers: This section provides background information

on GSP-eligible countries for the digest, their ranking as an import source, the price elasticities of supply

and demand, and the price and quality of the imports versus U.S. and other foreign products.2

VI. Position of interested parties: This section provides brief summaries of the petition filed

with the USTR, testimony presented at the Commission’s hearing, and any written submissions to the

Commission from interested parties.

Import and export data are provided at the end of each digest. Import data is provided for each

individual HTS item number included in the digests covering multiple subheadings. 
DIGEST SUMMARY

HTS

subheading

Digest title

Action Petitioner(s)

Col. 1

rate of

duty as

of 7/1/05

U.S.

production?

Probable

effect

advice

0804.50.80 Dried

mangoes and

other dried

tropical fruit

Waiver

(Philippines)

Government of

the Philippines;

Philippines Dried

Mangos Industry

0.5%1 (

2

) ***

1302.39.0010 Carrageenan Addition Government of

the Philippines;

Seaweed Industry

Association of the

Philippines

3.2% Yes ***

2916.39.15 Ibuprofen Restoration

(India)

Shasun

Chemicals and

Drugs, Ltd., India;

Shasun USA, Inc.,

NJ

6.5% Yes ***

4412.19.40 Softwood

plywood

Waiver

(Brazil)

Industria de

Compansados

Guararapos Ltda.,

Brazil

8.0% Yes ***

6802.21.10

 6802.91.20

 

Certain

travertine

dimension

stone

Waiver

(Turkey)

Istanbul Mineral

and Metals

Exporters’ Assoc.,

Turkey

4.2%

4.2%

Yes

Yes

***

***

 1

 The compound rate of duty for this HTS subheading is 1.5 cents/kg.

 2

 There is little or no commercial production of the products covered in this HTS subheading.

vi
1

Dried Mangoes and Other Dried Tropical Fruit

Digest No. 0804.50.80

I. Introduction

 X Competitive-need-limit waiver: Philippines

HTS subheading(s) Short description

Col. 1 rate of

duty (1/1/05)

Like or directly

competitive article

produced in the United

States on Jan. 1, 1995?

Percent ad

valorem

0804.50.801 Guavas, mangoes and mangosteens, dried 0.52 (

3

)

1

 The Philippines has been proclaimed by the President as non-eligible for GSP treatment for articles included

under HTS subheading 0804.50.80, effective July 1, 2005. 2

 The compound rate of duty for this HTS subheading is 1.5 cents/kg.

3

 According to industry officials, there is little or no U.S. commercial production of the types of dried tropical

fruits covered by this digest.

Description and uses.–The dried tropical fruits covered in this digest are consumed as a fruit snack or used

as an ingredient for bakery goods, desserts, condiments, sauces, drink mixes and beverages, and certain other

processed food products, including international-style foods and food preparations. Dried mango is principally

consumed as a snack item, either in the form of dried mango slices or as diced fruit pieces.

II. Probable economic effect advice – Competitive-need-limit waiver: Philippines

* * * * * *
3

 Telephone interviews by Commission staff with university and extension service staff at the University of Florida’s

Institute of Food and Agricultural Sciences (UF/IFAS) Tropical Research and Education Center, the University of Hawaii’s

College of Tropical Agriculture and Human Resources, and the University of Puerto Rico’s Recinto Universitario de Mayagüez.

Other information was obtained from USDA’s National Agriculture Statistics Service (NASS), the California Rare Fruit

Growers, Inc., representing U.S. farms producing organic tropical fruits, and U.S. distributors of dried tropical fruit. 4

 USDA, NASS; USDA’s Agricultural Marketing Service; and University of Florida Extension Service. More than 90

percent of all U.S. mango production is in Florida. Mangoes are also grown in California but given the small number of

producers, data are not reported to protect confidential business information. 5

 USDA, NASS; and Puerto Rico’s Department of Agriculture.

2

III. U.S. market profile

Profile of U.S. industry and market, 2000-04

Item 2000 2001 2002 2003 2004

Producers (number) ................. (1

) (1) (1) (1) (1)

Employment (1,000 employees)........ (1

) (1) (1) (1) (1)

Shipments (1,000 dollars) ............ (1

) (1) (1) (1) (1)

Exports (1,000 dollars) .............. (2

) (2) (2) (2) (2)

Imports (1,000 dollars)

3 . . . . . . . . . . . . . . 5,372 5,793 10,377 15,434 21,356

Consumption (1,000 dollars)

1 ......... (1

) (1) (1) (1) (1)

Import-to-consumption ratio (percent)... (1

) (1) (1) (1) (1)

Capacity utilization (percent).......... (

4

) (4) (4) (4) (4)

1

 According to industry officials there is little or no U.S. commercial production of the types of dried tropical

fruits covered by this digest. Thus, imports roughly approximate U.S. consumption and the import-to-consumption

ratio is near 100 percent. 2

 The export data cover an assortment of products, most of which are not included in this digest (HTS 0804.50

covers both dried and fresh mangoes, guavas, and mangosteens). Given the likely negligible U.S. commercial

production of these types of dried tropical fruits, exports of these products are assumed to be nonexistent. Therefore,

no digest-level export data are presented at the end of this digest. 3

 The import data for HTS subheading 0804.50.80 include dried mangoes, guavas and mangosteens. U.S. import

data likely reflect mainly imports of dried mangoes, with imports of dried guavas and mangosteens likely accounting

for a small share. 4

 Not applicable.

Comment.– Most dried mangoes sold by U.S.-owned businesses are grown and dried by foreign suppliers

and shipped to the United States for domestic distribution and sale. According to industry officials, there is little or

no U.S. commercial production of the types of dried tropical fruits covered by this digest.3

 In general, most U.S.

tropical fruit production is sold for fresh-market use, mainly for local consumption, with negligible amounts

processed as juice, frozen pulp, jelly, paste, and other processed products. A small number of local farmers have

been reported to grow and sell dried mango locally under an organic or “Hawaii” brand label. However, drying

mangoes for commercial sale is usually limited by low overall production and high demand in the fresh market. 

All U.S. commercial mango production, located mainly in Florida and Hawaii, totals approximately 6

million pounds annually.4

 Puerto Rico’s mango production is reported to be between 30-40 million pounds annually.5

Virtually all U.S. mango production is consumed fresh in-country with very little exported fresh. Most of Puerto

Rico’s mango production is either exported fresh to the United States and Europe or consumed fresh locally with 

less than 1 percent undergoing further processing.
3

IV. GSP import situation, 2004

U.S. imports and share of U.S. consumption, 2004

Item Imports

Percent

 of total

imports

Percent 

of GSP

imports

Percent 

of U.S.

consumption

1,000

dollars

Grand total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,356 100 (1

) 100

Imports from GSP-eligible countries:

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,766 79 100 79

Philippines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,674 55 70 55

1

 Not applicable.

Comment.–The duty rate for U.S. imports covered under this HTS subheading is 0.5 percent ad valorem

equivalent. As noted above, the import data for HTS 0804.50.80 covers dried mangoes, guavas, and mangosteens. 

However, the majority of imports likely are dried mangoes, with imports of dried guava and dried mangosteen

accounting for a small share of imports. The Philippines is the primary GSP-eligible source of U.S. imports of these

products, accounting for about 70 percent of total GSP-eligible imports and 55 percent of total U.S. imports from all

sources. Thailand accounts for 20 percent of total U.S. imports of these dried tropical fruits.
4

V. Competitiveness profile, Philippines

Ranking as a U.S. import supplier, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . 1 

Aggregate demand elasticity (price elasticity of U.S. demand for the product from all sources, foreign and domestic):

Is the product a finished product for final sale to consumers? . . . . . . . . . . . . . . . Yes X No 

Is the product an intermediate good used as an input in the production of

another good? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes X No 

Is the product an agricultural or food product? . . . . . . . . . . . . . . . . . . . . . . . . . . Yes X No 

What is the aggregate price elasticity of U.S. demand? . . . . . . . . . High Moderate X Low 

Substitution elasticity:

What is the similarity of product characteristics (such as quality, physical specifications, shelf-life, etc.) between

imports from this supplier and:

Imports from other suppliers? . . . . . . . . . . . . . . . . . . . . . . . . High Moderate X Low 

U.S. producers? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . High Moderate N/A Low 

What is the similarity of conditions of sale and distribution (such as lead times between order and delivery

dates, payment terms, product service, minimum order size, variations in availability, etc.) between imports

from this supplier and:

Imports from other suppliers? . . . . . . . . . . . . . . . . . . . . . . . . . High Moderate X Low 

U.S. producers? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . High Moderate N/A Low 

What is the substitution elasticity? . . . . . . . . . . . . . . . . . . . . . . . . High Moderate X Low 

Supply elasticity for affected imports:

Can production in the country be easily expanded or contracted in the short

 term? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes No X 

Does the country have significant export markets besides the United States? . . Yes X No 

Could exports from the country be readily redistributed among its foreign

export markets? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes X No 

What is the price elasticity of supply for affected imports? . . . . High Moderate X Low 

Price level compared with--

U.S. products ......................................... Above Equivalent N/A Below 

Other foreign products ................................. Above Equivalent X Below 

Quality compared with--

U.S. products ......................................... Above Equivalent N/A Below 

Other foreign products ................................. Above Equivalent X Below 

Comment.– Dried tropical fruits may be marketed either as a finished or as an intermediate product,

although most dried mango and other dried tropical fruits are sold as a finished snack food. These products are

relatively high-priced food items with limited but increasing demand. According to industry officials, there is little or

no U.S. commercial production of the types of dried tropical fruits covered by this digest. Information is not

available to precisely contrast product attributes and market characteristics between imported and domestic dried

tropical fruits that may be produced.
6

 Except as noted, information provided in this section is derived from the petition filed with the USTR as well as

testimony and written submissions of interested parties to the Commission in connection with this investigation. 7

 Petitions were filed with the USTR on or before June 15, 2005.

5

VI. Position of interested parties6

Petitioner.--The Government of the Republic of the Philippines states in the petition7 to the USTR that

waiving the competitive need limit on imports under HTS subheading 0804.50.80 is necessary to maintain the price

competitiveness of Philippine product in the U.S. market relative to other foreign suppliers. The petitioner states that

the loss of GSP eligibility as of July 1, 2005, raised the cost of Philippine dried mangoes and caused U.S. importers

to source from other competitively priced suppliers. Since the United States is the Philippines’ top export market for

dried mango, the petitioner claims that loss of GSP eligibility is of paramount concern. The petitioner claims that

without GSP eligibility, dried mangoes from the Philippines cannot compete against product from Thailand in terms

of price; matching the price of dried mango from Thailand would require Philippine exporters to sell their product

below the break-even price. The petitioner asserts that the high cost of imported machinery and equipment needed to

upgrade its production operations inhibits it from offering more competitive prices. Because product from Thailand

is eligible for GSP treatment, the petitioner claims that Thailand will gain an advantage over the Philippines in the

U.S. dried mango market. The petitioner further notes that most of the top 10 suppliers of dried mango to the United

States are eligible for duty-free access either under the GSP program or under other U.S. assistance programs and

free trade agreements (FTA) initiatives. In addition to Thailand, these countries include Mexico, Colombia, Costa

Rica, Honduras, South Africa, and India.

No other statements were received in support of or in opposition to the proposed modifications to the

GSP considered in this digest.
D

Table 1.–Dried mangoes and other tropical fruit (HTS subheading 0804.50.80): U.S. imports for consumption, by princip

2000-2004, January-June 2004, and January-June 2005Source 2000 2001 2002 2003 2004 January - J

2004 

 - - - - - - - - - - - - - - - - - - - - - - - - - - - In Actual Dollars - - - - - - - - - - - - - - - - - - - 

 Philippines 726,134 2,098,266 5,293,163 8,669,844 11,674,130 6,187,7 Mexico 1,277,379 1,231,007 1,574,083 2,638,702 4,335,320 816,8 Thailand 1,547,723 1,699,468 3,031,294 3,400,002 4,215,418 2,027,5 Colombia 19,210 17,017 33,121 255,534 438,241 116,7 Costa Rica 11,481 36,342 169,532 244,951 169,963 103,0 South Africa 59,805 80,861 90,787 42,004 124,566 82,3 China 10,392 0 0 3,209 103,498 33,6 Honduras 0 2,419 0 0 74,919  Greece 0 0 0 0 51,480  Vietnam 0 2,508 0 21,054 31,892  All other 1,719,600 625,344 184,813 158,497 136,350 65,4 Total 5,371,724 5,793,232 10,376,793 15,433,797 21,355,777 9,433,4Imports from GSP-eligible countries: Philippines 726,134 2,098,266 5,293,163 8,669,844 11,674,130 6,187,7 Thailand 1,547,723 1,699,468 3,031,294 3,400,002 4,215,418 2,027,5

All other 1,604,728 710,782 410,804 669,219 876,434 346,5

 Total 3,878,585 4,508,516 8,735,261 12,739,065 16,765,982 8,561,8

Source: Compiled from official statistics of the U.S. Department of Commerce.

6
8

 Hearing transcript, p. 29.

9

 U.S. imports of all types of seaweed imported under HTS 1212.20 amounted to $48 million in 2004; the seaweed

carrageen is believed to be imported from Canada, Chile, the Philippines, Indonesia, France, and Norway, which together

supplied about $13 million of these products in 2004. 10 Hearing transcript, p. 32.

7

Carrageenan

Digest No. 1302.39.0010

I. Introduction

 X Addition

HTS subheading(s) Short description

Col. 1 rate of

duty (1/1/05)

Like or directly

competitive article

produced in the United

States on Jan. 1, 1995?

Percent ad

valorem

1302.39.0010 Mucilages and thickeners derived from vegetable

products: Carrageenan

3.2 Yes

Description and uses.–Carrageenan is a thickening and gelling extract derived from carrageen seaweed and

from other related seaweeds. The leading uses of carrageenan are as food gums and stabilizers in cocoa mixes and

chocolate milk, ice cream and frozen desserts, cereal (granola) bars, prepared meats and poultry products (such as

turkey roll), and canned pet food. An estimated three-quarters of its use is in food and pet food. In pharmaceutical 

and cosmetic products, carrageenan is used prominently in toothpaste. 

Traditionally, the seaweed carrageen from which this product is derived is found mostly along the coldwater coasts of North America and Europe. Another type of seaweed grows in tropical waters and is used to produce

a product called Philippine natural-grade carrageenan (PNG) or seaweed flour; these product are processed or semirefined using a relatively simple technology.8

 The United States imports significant amounts of raw seaweed of

various types;9

 the sole U.S. manufacturer uses a process employing a more sophisticated technology using an

alcohol process to make a higher-valued product.10 U.S. harvesting of the raw seaweed carrageen has fallen sharply

in recent decades.

II. Probable economic effect advice – Addition

* * * * * *
11 Letter to Committee on Ways and Means, U.S. House of Representatives from David Manning, FMC Corporation,

Food Ingredients Division, Rockland, Maine, Aug. 28, 1992 in the matter of the proposed duty suspension bill on carrageenan;

and letter to the Secretary, USITC, from Collier, Shannon, and Scott, counsel on behalf of FMC Corporation, in the matter of

Probable Effect of Certain Modifications to the NAFTA Rules of Origin Proposal for HS Headings 1302 and 3912, Aug. 27,

2004, USITC inv. No. NAFTA-103-6. 12 Hearing transcript, p. 29; and posthearing submission on behalf of Romeo Borillo, Commercial Counselor, Embassy

of the Philippines, Oct. 6, 2005. 13 Posthearing submission on behalf of Romeo Barillo, Oct. 6, 2005, p. l.

8

III. U.S. market profile

Profile of U.S. industry and market, 2000-04

Item 2000 2001 2002 2003 2004

Producers (number) ................. 11111

Employment (1,000 employees)........ (1

) (1) (1) (1) (1)

Shipments (1,000 dollars)

2 ............ *50,000 *50,000 *50,000 *50,000 *50,000

Exports (1,000 dollars)

3 .............. *23,675 *24,498 *26,022 *24,804 *22,895

Imports (1,000 dollars) . . . . . . . . . . . . . . . 37,748 45,798 50,134 51,006 55,117

Consumption (1,000 dollars) .......... *64,073 *71,300 *74,112 *76,202 *82,222

Import-to-consumption ratio (percent) . . . *59 *65 *68 *67 *67

Capacity utilization (percent).......... (

1

) (1) (1) (1) (1)

1

 Not available.

2

 Estimated by Commission staff.

3

 Export data corresponding to HTS subheading 1302.39.00 include other mucilages and thickeners not covered

in this digest; U.S. exports of carrageenan are estimated to account for 50 percent of the Schedule B subheading. 

Export data reported for the entire product group are provided in the table at the end of this digest.

Comment.–Imported and domestic seaweed are processed domestically into carrageenan. There are two

types of seaweed harvested in the United States: kelp and very small amounts of carrageen. There is only one firm

in the United States manufacturing carrageenan from raw seaweed carrageen, most of which is imported by its plant

in Maine.11 U.S. carrageenan tends to be a high-quality, high-value product derived using alcohol process

technology, whereas the imported product from the Philippines is mainly the pet food or semi-refined carrageenan

that has a much lower unit value and goes into different uses.12 The domestic product is sold at a price of $12 per

kilogram, whereas the typical semi-refined or crude product from Asia sells for $2.50 to $4.50 per kilogram.13

U.S. demand for carrageenan has been rising as a result of its increased use in food products, cosmetics, and

dental products. Popularity of low-fat foods has increased the use of carrageenan. During 2000-04, U.S. production

of carrageenan is estimated to have remained relatively flat at about $50 million annually. U.S. imports of

carrageenan rose to $55 million in 2004. Meanwhile, U.S. exports of carrageenan averaged about $23 million per

year during 2000-04. 
9

IV. GSP import situation, 2004

U.S. imports and share of U.S. consumption, 2004

Item Imports

Percent

 of total

imports

Percent 

of GSP

imports

Percent 

of U.S.

consumption

1,000

dollars

Grand total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,117 100 (1

) *67

Imports from GSP-eligible countries:

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,765 41 100 *28

Philippines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,638 39 95 *26

Indonesia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,127 2 5 *2

1

 Not applicable.

Comment.––The duty rate for U.S. imports covered under this HTS subheading is 3.2 percent. The EU is

the leading U.S. import supplier of carrageenan, followed closely by the Philippines. Canada, Chile, South Korea,

and Indonesia were virtually the only other suppliers. The Philippines and Indonesia are the only GSP-eligible

suppliers. 
14 Posthearing submission on behalf of Romeo Barillo, Oct. 6, 2005, p. 1.

10

V. Competitiveness profile, the Philippines

Ranking as a U.S. import supplier, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . 1 

Aggregate demand elasticity (price elasticity of U.S. demand for the product from all sources, foreign and domestic):

Is the product a finished product for final sale to consumers? . . . . . . . . . . . . . . . Yes No X 

Is the product an intermediate good used as an input in the production of

another good? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes X No 

Is the product an agricultural or food product? . . . . . . . . . . . . . . . . . . . . . . . . . . Yes X No 

What is the aggregate price elasticity of U.S. demand? . . . . . . . . . High Moderate Low X 

Substitution elasticity:

What is the similarity of product characteristics (such as quality, physical specifications, shelf-life, etc.) between

imports from this supplier and:

Imports from other suppliers? . . . . . . . . . . . . . . . . . . . . . . . . High Moderate X Low 

U.S. producers? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . High Moderate Low X 

What is the similarity of conditions of sale and distribution (such as lead times between order and delivery

dates, payment terms, product service, minimum order size, variations in availability, etc.) between imports

from this supplier and:

Imports from other suppliers? . . . . . . . . . . . . . . . . . . . . . . . . . High X Moderate Low 

U.S. producers? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . High Moderate Low X 

What is the substitution elasticity? . . . . . . . . . . . . . . . . . . . . . . . . High Moderate Low X 

Supply elasticity for affected imports:

Can production in the country be easily expanded or contracted in the short

 term? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes X No 

Does the country have significant export markets besides the United States? . . Yes X No 

Could exports from the country be readily redistributed among its foreign

export markets? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes X No 

What is the price elasticity of supply for affected imports? . . . . High X Moderate Low 

Price level compared with--

U.S. products ......................................... Above Equivalent Below X 

Other foreign products ................................. Above Equivalent Below X 

Quality compared with--

U.S. products ......................................... Above Equivalent Below X 

Other foreign products ................................. Above Equivalent Below X 

Comment.–The Philippines is the world’s leading producer of carrageenan; it specializes in low-valued

products and exports to major markets of the world. In recent years, the Philippines accounted for 31 percent of

world carrageenan production.14 The EU was the second-leading supplier with 28 percent, followed by the United

States with 15 percent.
15 Hearing transcript, p. 29.

11

V. Competitiveness profile, all GSP-eligible sources

Ranking as a U.S. import supplier, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . N/A 

Aggregate demand elasticity (price elasticity of U.S. demand for the product from all sources, foreign and domestic):

Is the product a finished product for final sale to consumers? . . . . . . . . . . . . . . . Yes No X 

Is the product an intermediate good used as an input in the production of

another good? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes X No 

Is the product an agricultural or food product? . . . . . . . . . . . . . . . . . . . . . . . . . . Yes X No 

What is the aggregate price elasticity of U.S. demand? . . . . . . . . . High Moderate Low X 

Substitution elasticity:

What is the similarity of product characteristics (such as quality, physical specifications, shelf-life, etc.) between

imports from this supplier and:

Imports from other suppliers? . . . . . . . . . . . . . . . . . . . . . . . . High Moderate X Low 

U.S. producers? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . High Moderate Low X 

What is the similarity of conditions of sale and distribution (such as lead times between order and delivery

dates, payment terms, product service, minimum order size, variations in availability, etc.) between imports

from this supplier and:

Imports from other suppliers? . . . . . . . . . . . . . . . . . . . . . . . . . High X Moderate Low 

U.S. producers? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . High Moderate Low X 

What is the substitution elasticity? . . . . . . . . . . . . . . . . . . . . . . . . High Moderate Low X 

Supply elasticity for affected imports:

Can production in the country be easily expanded or contracted in the short

 term? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes X No 

Does the country have significant export markets besides the United States? . . Yes X No 

Could exports from the country be readily redistributed among its foreign

export markets? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes X No 

What is the price elasticity of supply for affected imports? . . . . High X Moderate Low 

Price level compared with--

U.S. products ......................................... Above Equivalent Below X 

Other foreign products ................................. Above Equivalent Below X 

Quality compared with--

U.S. products ......................................... Above Equivalent Below X 

Other foreign products ................................. Above Equivalent Below X 

Comment.–The Philippines is by far the leading GSP-eligible supplier of carrageenan imports to the U.S.

market. Indonesia is the only other GSP-eligible supplier, most of which is destined for pet food.15 
16 Except as noted, information provided in this section is derived from the petition filed with the USTR as well as

testimony and written submissions of interested parties to the Commission in connection with this investigation. 17 Petitions were filed with the USTR on or before June 15, 2005.

12

VI. Position of interested parties16

Petitioner.

17–The Government of the Philippines and the Seaweed Industry Association of the Philippines,

which represents seaweed farmers, farm organizations, seaweed traders, seaweed processors/exporters and

academics located in the areas of Southern Luzon, the Viasyas, and Mindanao, state that U.S. firms engaged in the

carrageenan business in the Philippines, primarily FMC Marine Colloids and CP Kelco, would benefit from the

addition of this HTS subheading to the list of GSP-eligible articles. Food and non-food users of carrageenan in the

United States would benefit from lower costs associated with importing this product from the Philippines. 

Comment.–The only U.S. producer of carrageenan, FMC Corporation, BioPolymer Division (Maine),

indicated that removal of the import duty on carrageenan from GSP-eligible countries would have a negligible, if

any, impact on the U.S. production of that product. In its letter to the Commission, FMC states that it is not opposed

to the addition of carrageenan to the list of GSP-eligible products. FMC Corporation noted that it has become

involved with carrageenan production in the Philippines and supplements its U.S. production with imports from the

Philippines.
Dig

Table 1.–Carrageenan (HTS subheading 1302.39.0010): U.S. imports for consumption, by principal sources, 2000-2004, 

2004, and January-June 2005Source 2000 2001 2002 2003 2004 January - J

2004 

 - - - - - - - - - - - - - - - - - - - - - - - - - - - In Actual Dollars - - - - - - - - - - - - - - - - - - - 

 Philippines 12,227,311 13,843,124 13,725,784 16,501,509 21,638,347 9,905,6 Denmark 12,391,446 13,990,553 12,589,491 13,361,037 11,622,020 6,435,2 France 5,051,565 4,668,383 6,116,542 4,887,025 8,288,820 3,257,3 Canada 233,720 2,526,075 4,342,601 4,936,368 5,537,345 2,439,5 Chile 3,777,084 5,041,002 5,960,431 5,013,352 2,269,779 1,049,8 South Korea 1,297,737 951,677 1,613,224 1,701,231 1,789,920 910,5 United Kingdom 1,227,866 1,238,042 1,634,536 1,860,667 1,487,189 1,026,7 Indonesia 507,600 471,640 368,300 562,200 1,126,900 422,5 Spain 782,637 1,412,556 1,534,002 1,044,295 934,161 403,2 Belgium 0 11,659 2,084 5,367 129,733 6,1 All other 250,999 1,642,879 2,246,866 1,133,234 293,232 164,5 Total 37,747,965 45,797,590 50,133,861 51,006,285 55,117,446 26,021,2Imports from GSP-eligiblecountries: Philippines 12,227,311 13,843,124 13,725,784 16,501,509 21,638,347 9,905,6 Indonesia 507,600 471,640 368,300 562,200 1,126,900 422,5

All other 0.00 83,658.00 57,559.00 16,960.00 0.00 0.

 Total 12,734,911 14,398,422 14,151,643 17,080,669 22,765,247 10,328,1

Source: Compiled from official statistics of the U.S. Department of Commerce.

13
Table 2.–Carrageenan (including other mucilages and thickeners)1: U.S. exports of domestic merchandise, by market, 200

January-June 2004, and January-June 2005Source 2000 2001 2002 2003 2004 January - J

2004 

 - - - - - - - - - - - - - - - - - - - - - - - - - - - In Actual Dollars - - - - - - - - - - - - - - - - - - - 

 Mexico 5,770,793 5,077,423 7,582,615 6,497,540 10,139,981 5,805,9 China 4,432,224 5,804,428 6,038,064 5,812,365 4,415,097 3,050,3 Canada 3,057,779 4,003,185 3,762,248 5,519,537 4,342,095 2,345,3 India 3,643,850 3,879,037 3,399,569 4,576,061 4,174,359 2,349,4 Thailand 1,993,041 2,503,351 2,590,120 2,715,905 2,872,628 1,617,9 South Korea 4,204,189 6,422,820 9,080,333 2,573,018 2,408,608 900,5 Venezuela 1,791,592 2,000,282 2,118,565 1,835,417 1,878,915 1,261,3 United Kingdom 992,998 1,069,293 972,534 974,831 1,859,111 1,192,3 Brazil 2,958,454 2,837,411 3,246,912 2,658,055 1,826,395 932,4 Norway 1,515,921 2,540,040 1,386,988 2,829,023 1,181,718 412,3

All other 16,673,851 12,858,142 11,865,820 13,616,583 10,691,293 5,526,2

 Total 47,034,692 48,995,412 52,043,768 49,608,335 45,790,200 25,394,5

1 Export data are not separately provided for the Schedule B subheading corresponding to import subheading 1302.39.001

mucilages and thickeners not covered in this digest. U.S. exports of carageenan (See “U.S. Market Profile”) are estimated 

approximately 50 percent of the exports reported in this table. Source: Compiled from official statistics of the U.S. Department of Commerce.

14
15

Ibuprofen

Digest No. 2916.39.15

I. Introduction

 X Restoration: India

HTS subheading(s) Short description

Col. 1 rate of

duty (1/1/05)

Like or directly

competitive article

produced in the United

States on Jan. 1, 1995?

Percent ad

valorem

2916.39.151 Ibuprofen 6.5 Yes

1

 India was removed from GSP eligibility for HTS subheading 2916.39.15 on July 1, 1991, as a result of the

petition process. Presidential Proclamation 6425 (dated April 29, 1992, effective May 14, 1992) removed India from

GSP eligibility for all articles in HTS chapters 28 through 38 (products of the chemical and allied products

industries) due to IPR violations. However, India was graduated before the April 1992 proclamation and therefore is

not part of the overall sanction. India was not restored to GSP eligibility for this HTS subheading when India was

restored to GSP eligibility for articles in HTS chapters 28 through 38 (products of the chemical and allied products

industries) as a result of Presidential Proclamation 7912, effective July 1, 2005.

Description and uses.–Bulk ibuprofen, 2-(4-isobutylphenyl)propionic acid, is a white crystalline solid that is

easily compressed and not very soluble in water. The chemical is produced through a series of chemical reactions

either by batch or continuous production process.

Ibuprofen is a nonsteroidal anti-inflammatory agent (NSAIA) that is also used to control pain and fever.

The bulk form of this product is only used to manufacture dosage forms for human consumption, namely tablets,

caplets, or liquid suspensions. In dosage forms, this product is used in the symptomatic treatment of acute and

chronic rheumatoid arthritis, osteoarthritis, and in the symptomatic treatment of muscular pain and inflammation.

Ibuprofen tablets are sold over-the-counter in 200 milligram dosages under several trade names and private labels. 

Prescription ibuprofen tablets are sold in 300, 400, 600, and 800 milligram dosages.

II. Probable economic effect advice – Restoration: India

* * * * * *
18 Posthearing submission on behalf of Albemarle Corp., Oct. 7, 2005, pp. 4 and 13.

16

III. U.S. market profile

Profile of U.S. industry and market, 2000-04

Item 2000 2001 2002 2003 2004

Producers (number) ................. 2 2 2 2 2

Employment (employees)............. (1

) (1) (1) *** ***

Shipments (1,000 dollars)

2 ............ (1

) (1) *** *** ***

Exports (1,000 dollars)

3 . . . . . . . . . . . . . . *** *** *** *** ***

Imports (1,000 dollars) . . . . . . . . . . . . . . . 7,858 8,342 10,375 13,031 12,337

Consumption (1,000 dollars) .......... (1

) (1) *** *** ***

Import-to-consumption ratio (percent)... (1

) (1) *** *** ***

Capacity utilization (percent).......... *** *** *** *** ***

1

 Not available.

2

 Data are based on industry estimates.

3

 The export data presented in this table are estimated based on industry information. Export data corresponding

to HTS subheading 2916.39.15 includes ibuprofen not covered in this digest. Export data reported for the entire

product group are provided in the table at the end of this digest.

Comment.–Currently, there are two U.S. producers of ibuprofen, Albemarle Corporation and BASF, with

plants in South Carolina and Texas, respectively. These two plants have a total ibuprofen capacity of ***. 

Consumption of bulk ibuprofen ***. The United States is a mature market for ibuprofen. U.S. demand ***.18 
19 Posthearing submission on behalf of Albemarle, Oct. 7, 2005, p. 10. 20 Ibid., p. 11.

17

IV. GSP import situation, 2004

U.S. imports and share of U.S. consumption, 2004

Item Imports

Percent

 of total

imports

Percent 

of GSP

imports

Percent 

of U.S.

consumption

1,000

dollars

Grand total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,337 100 (1

) ***

Imports from GSP-eligible countries:

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,300 97 100 ***

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,300 97 100 ***

1

 Not applicable. 

Comment.–The duty rate for U.S. imports covered under this HTS subheading is 6.5 percent. India is the

only GSP-eligible country that currently produces bulk ibuprofen in exportable quantities. There are two domestic

producers of ibuprofen in India, Shasun Chemicals and Drugs, Ltd. and Cheminor Drugs, Ltd. (a subsidiary of Dr.

Reddy’s Laboratories in India). Until recently, India was the major competitor to the U.S. industry for the bulk

ibuprofen market. However, lower-priced imports from China began entering the U.S. market in 2003. China

operates two FDA-approved bulk ibuprofen plants and ***.19 The increase in U.S. imports of bulk ibuprofen from

China is said to be not included in the official data as it is entering through a foreign trade zone where it is tableted

into dosage-sized ibuprofen.20
21 Posthearing submission on behalf of BASF, Oct. 7, 2005, p. 3. 22 Ibid., p. 4.

18

V. Competitiveness profile, India

Ranking as a U.S. import supplier, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . 1 

Aggregate demand elasticity (price elasticity of U.S. demand for the product from all sources, foreign and domestic):

Is the product a finished product for final sale to consumers? . . . . . . . . . . . . . . . Yes No X 

Is the product an intermediate good used as an input in the production of

another good? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes X No 

Is the product an agricultural or food product? . . . . . . . . . . . . . . . . . . . . . . . . . . Yes No X 

What is the aggregate price elasticity of U.S. demand? . . . . . . . . . High Moderate X Low 

Substitution elasticity:

What is the similarity of product characteristics (such as quality, physical specifications, shelf-life, etc.) between

imports from this supplier and:

Imports from other suppliers? . . . . . . . . . . . . . . . . . . . . . . . . High X Moderate Low 

U.S. producers? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . High X Moderate Low 

What is the similarity of conditions of sale and distribution (such as lead times between order and delivery

dates, payment terms, product service, minimum order size, variations in availability, etc.) between imports

from this supplier and:

Imports from other suppliers? . . . . . . . . . . . . . . . . . . . . . . . . . High X Moderate Low 

U.S. producers? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . High X Moderate Low 

What is the substitution elasticity? . . . . . . . . . . . . . . . . . . . . . . . . High X Moderate Low 

Supply elasticity for affected imports:

Can production in the country be easily expanded or contracted in the short

 term? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes X No 

Does the country have significant export markets besides the United States? . . Yes X No 

Could exports from the country be readily redistributed among its foreign

export markets? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes X No 

What is the price elasticity of supply for affected imports? . . . . High X Moderate Low 

Price level compared with--

U.S. products ......................................... Above Equivalent Below X 

Other foreign products ................................. Above Equivalent X Below 

Quality compared with--

U.S. products ......................................... Above Equivalent X Below 

Other foreign products ................................. Above Equivalent X Below 

Comment.–India is the only major exporter of bulk ibuprofen to the United States; Shasun is the world’s

largest producer of bulk ibuprofen.21 Because both Indian firms are FDA-qualified manufacturing firms, the

imported bulk product is the same high quality as the U.S.- produced ibuprofen. During 2000-04, U.S. imports of

bulk ibuprofen from India increased from $7.6 million to $12.3 million, or by over 38 percent, despite imposition of

the 6.5 percent duty rate, which occurred in 1991. The increase in imports is attributed to declining U.S. shipments

and lower prices for the Indian product, which effectively suppressed U.S. prices during 2000-04.22 
23 Except as noted, information provided in this section is derived from the petition filed with the USTR as well as

testimony and written submissions of interested parties to the Commission in connection with this investigation. 24 Petitions were filed with the USTR on or before June 15, 2005.

19

VI. Position of interested parties23

Petitioner.

24–Shasun Chemicals and Drugs, Ltd. requested the restoration of GSP eligibility for imports of

bulk ibuprofen from India and a waiver of the competitive need limit. Shasun stated that the restoration would not

harm U.S. producers of bulk ibuprofen. The waiver is requested because total imports are below the de minimis level

even though India accounted for nearly all the imports for consumption of bulk ibuprofen.

According to Shasun, restoring GSP eligibility for U.S. imports of Indian bulk ibuprofen will not have a

significant impact on U.S. producers because demand has increased significantly and the U.S. producers are not able

to supply bulk ibuprofen to the tablet makers, especially those producing generic and prescription products. Indian

ibuprofen producers are faced with rising raw materials costs that are hindering their ability to be competitive in the

U.S. market, while U.S. firms are not faced with the same rising costs for their raw materials as the Indian producers. 

According to Shasun, the restoration will permit the Indian firms to expand their sales to the U.S. market as demand

continues to rise. Shasun states that with the increased sales in the United States, they will be able to finance

upgrades to their plants and hire more trained workers, which is the result intended by the GSP program.

Opposition.–Albemarle Corp., a U.S. producer of bulk ibuprofen opposed to the petition, states that U.S.

producers have ample capacity to meet any increase in domestic demand. The domestic ibuprofen market is mature,

growing by *** percent annually. U.S. imports of bulk ibuprofen from India (in metric tons) have increased by over

240 percent since 1998.

According to Albemarle, raw material costs have not made Indian imports less competitive in the United

States because rising raw material costs are affecting all producers, including those in the United States. Despite

rising costs, import prices continue to decline, further suppressing domestic prices. Albemarle states that restoring

GSP eligibility to Indian bulk ibuprofen would result in a 10 percent increase in U.S. imports from Shasun as well as

an increase in exports to the United States by Cheminor, another Indian producer, resulting in additional lost sales

for Albemarle. 

BASF Corp., the other U.S. producer of bulk ibuprofen, is also opposed to the petition. BASF states that

the restoration and possible waiver would result in an adverse impact on the U.S. industry. BASF disputes Shasun’s

statements that granting this request would not adversely affect the U.S. producers because domestic producers are

already operating at near capacity. BASF claims that Shasun’s estimates of U.S. consumption and market growth

are incorrect and U.S. producers have sufficient unused capacity to handle any increase in domestic demand. BASF

also states that the U.S. industry is highly vulnerable to imports from India and the decline in price for bulk

ibuprofen in the domestic market is due, in large part, to the lower-priced imports.

BASF disputes Shasun’s claim that the granting of GSP eligibility to Indian bulk ibuprofen will enable it to

offset higher production costs and that U.S. producers are more protected from increases in raw material costs

because of their large size and structure. BASF states that despite cost increases, it had to lowered its prices in order

to maintain market share in the face of rising imports of low-priced Indian product.
D

Table 1.–Ibuprofen (HTS subheading 2916.39.15): U.S. imports for consumption, by principal sources, 2000-2004, Januaand January-June 2005Source 2000 2001 2002 2003 2004 January - J

2004 

 - - - - - - - - - - - - - - - - - - - - - - - - - - - In Actual Dollars - - - - - - - - - - - - - - - - - - - 

 India 7,582,443 8,012,921 10,187,172 12,261,866 12,300,228 7,378,9 China 0 16,922 81,067 645,842 30,939 30,9 Italy 0 0 0 0 3,000  Germany 6,600 0 0 2,745 2,478 2,4 Canada 232,858 311,780 67,582 101,3200 France 0 0 26,670 15,400 0  Japan 3,808 0 0 0 0  Singapore 0 0 0 4,250 0  Switzerland 0 0 0 0 0  United Kingdom 32,598 0 12,41000 Total 7,858,307 8,341,623 10,374,901 13,031,423 12,336,645 7,412,3Imports from GSP-eligible countries: India 7,582,443 8,012,921 10,187,172 12,261,866 12,300,228 7,378,9 Total 7,582,443 8,012,921 10,187,172 12,261,866 12,300,228 7,378,9

Source: Compiled from official statistics of the U.S. Department of Commerce.

20
D

Table 2.–Ibuprofen (including other than bulk)1: U.S. exports of domestic merchandise, by market, 2000-2004, January-Ju

January-June 2005Source 2000 2001 2002 2003 2004 January - J

2004 

 - - - - - - - - - - - - - - - - - - - - - - - - - - - In Actual Dollars - - - - - - - - - - - - - - - - - - - 

 Germany 470,978 1,055,825 7,533,891 1,273,185 16,089,432 4,703,2 Belgium 193,650 386,660 8,333,472 6,975,530 6,089,017 3,071,5 Argentina 1,021,764 1,106,684 861,115 1,242,641 1,470,825 912,7 Canada 1,487,944 1,522,237 1,406,601 1,292,466 1,217,089 734,0 Japan 370,048 1,015,675 1,853,864 153,245 667,038 169,5 Mexico 832,185 676,044 293,201 611,378 525,042 441,4 Philippines 0 0 33,627 322,239 408,052 164,7 Venezuela 89,853 114,854 62,008 21,711 404,564 325,3 Colombia 265,850 443,609 232,554 401,190 306,861 170,6 Pakistan 170,826 81,000 0 2,690 297,120 

All other 16,508,860 19,022,193 7,618,942 6,306,744 2,902,030 1,099,0

 Total 21,411,958 25,424,781 28,229,275 18,603,019 30,377,070 11,792,4

1 Export data are not separately provided for the Schedule B subheading corresponding to import subheading 2916.39.15 a

other than bulk covered in this digest. See “U.S. Market Profile” for estimated U.S. bulk ibuprofen export data. Source: Compiled from official statistics of the U.S. Department of Commerce.

21
22

Page intentionally blank
25 Loblolly and slash pine, native to the Southeastern United States, are two variety of trees known as “southern yellow

pines.” 26 Craig Adair, Director, Market Research, The Engineered Wood Association (APA), Structural Panel and

Engineered Wood Yearbook, Apr. 2005, p. 4. 27 OSB is made with strands or wafers of wood of various softwood and hardwood tree species and is therefore less

expensive than plywood to produce. Hearing transcript, p. 140. 

OSB has gained share in the U.S. market for structural panels and represented 49 percent of U.S. production of

structural panels in 2004. Since 1990, U.S. production of softwood plywood has declined steadily at an annual compound rate of

approximately 3 percent. During the same period, U.S. production of OSB increased at a compound annual growth rate of

approximately 7 percent. Adair, Structural Panel and Engineered Wood Yearbook, pp. 8-9. 28 Hearing transcript, pp. 102 and 119.

29 Email communication to Commission staff from ***, Sept. 22, 2005. In 2004, approximately 12 percent of U.S.

production of softwood plywood was sanded. Adair, Structural Panel and Engineered Wood Yearbook, p. 27. 30 Hearing transcript, pp. 102 and 119.

23

Softwood Plywood

Digest No. 4412.19.40

I. Introduction

 X Competitive-need-limit waiver: Brazil

HTS subheading(s) Short description

Col. 1 rate of

duty (1/1/05)

Like or directly

competitive article

produced in the United

States on Jan. 1, 1995?

Percent ad

valorem

4412.19.401 Plywood with plies not more than 6 mm thick and

outer plies of coniferous wood of other than Parana

pine or European red pine and not surface covered

or covered with a clear material. 

8 Yes

1

 Brazil has been proclaimed by the President as non-eligible for GSP treatment for articles included under HTS

subheading 4412.09.40, effective July 1, 2005.

Description and uses.–Plywood is a flat panel comprising a number of thin sheets of wood (veneer) that are

glued together under high heat and pressure with the direction of grain of each ply perpendicular to that of adjacent

plies. The wood species of the face ply, which is the highest quality, determines the classification of the particular

panel. The subject plywood has outer plies of coniferous (softwood) tree species other than Parana pine (Araucaria

angustifolia) and European red pine (Pinus silvestris) and is typically manufactured in Brazil using loblolly pine (P.

taeda) or slash pine (P. elliottii).25 The subject product competes with U.S. softwood plywood made with a variety

of native coniferous tree species. It may be prefinished with a clear coat that does not obscure the grain pattern of

the face ply.

Softwood plywood is a structural panel, typically used for structural purposes in residential construction

and remodeling and to a lesser extent in industrial and nonresidential construction.26 Unsanded grades of softwood

plywood are used principally as sheathing in walls, roofs, and floors competing in this application with other

structural panels, particularly oriented strand board (OSB).27 Softwood plywood remains the preferred product in

applications where moisture resistance and/or strength are required28 and in end uses that require sanded plywood

(e.g., furniture, cabinets, fixtures, concrete forming, and home projects such as shelving).29 The long-term shift to

OSB in the U.S. market for structural panels is expected to continue as further technical improvements are made.30

II. Probable economic effect advice – Competitive-need-limit waiver: Brazil

* * * * * *
31 Adair, Structural Panel and Engineered Wood Yearbook, p. 8. 32 Hearing handout of Georgia-Pacific p. 6.

33 During 2000-04, annual U.S. production capacity for OSB increased by 2.1 billion square feet. Adair, Structural

Panel and Engineered Wood Yearbook, p. 8. 34 Hearing transcript, p. 101; posthearing submission on behalf of Guararapes, exhibit 8. 35 Adair, Structural Panel and Engineered Wood Yearbook, p. 5. 36 Hearing transcript, p. 109; and hearing handout of Georgia-Pacific, p. 2. 37 National Association of Home Builders, “Impact of Hurricane Katrina on Building Materials and Prices,” found at

http://www.nahb.org/news_details.aspx and retrieved Sept. 21, 2005. 38 Hearing transcript p. 11; “Estimated Impact of Hurricane Katrina on Structural Wood Panel Demand,” APA, email

*** on Oct. 3, 2005. 39 Posthearing submission on behalf of the APA – The Engineered Wood Association, Oct. 7, 2005, p. 1. 

24

III. U.S. market profile

Profile of U.S. industry and market, 2000-04

Item 2000 2001 2002 2003 2004

Producers (number)

1 . . . . . . . . . . . . . . . . 39 38 36 33 34

Employment (1,000 employees)

2 . . . . . . . 28 26 25 24 24

Shipments (1,000 dollars)

2 . . . . . . . . . . . . 4,682,913 4,146,378 4,017,927 3,944,485 3,755,779

Exports (1,000 dollars)

3 . . . . . . . . . . . . . . 68,056 53,642 51,556 41,191 43,899

Imports (1,000 dollars) . . . . . . . . . . . . . . . 64,273 113,559 164,783 265,447 451,977

Consumption (1,000 dollars) . . . . . . . . . . 4,679,130 4,206,294 4,131,154 4,168,741 4,163,856

Import-to-consumption ratio (percent) . . . 1 3 4 6 11

Capacity utilization (percent)

4 ......... 94 91 92 88 93

1

 APA Economic Reports E68 and E17. Email from ***, September 22, 2005. 2

 2000-02 data are from U.S. Census Bureau report no. EC02-311-321212, Softwood Veneer and Plywood

Manufacturing: 2002. Data for other years are Commission estimates based on long-term trends that do not reflect

seasonal or short-term price fluctuations. 3

 The export data presented in this table are estimated based on industry information. Export data

corresponding to HTS subheading 4412.19.40 includes products not covered in this digest. Export data reported for

the entire product group are provided in the table at the end of this digest 4 Capacity utilization figures are estimated based on APA capacity data. 

Comment.– There are approximately 34 U.S. firms, both large and small, that produce softwood plywood. 

During 2000-04, both U.S. production of softwood plywood and U.S. capacity declined. Production decreased at a

compound annual rate of 4 percent, from 17.5 to 14.7 billion square feet,31 and the U.S. industry closed capacity

totaling 3.4 billion square feet,32 which accounted for approximately 18 percent of annual U.S. production capacity.33

Because softwood plywood structural panels are used primarily for construction, the principal demand

drivers are residential housing construction and residential remodeling. A relatively steady increase in U.S. housing

starts beginning in 1994 and a long-term trend toward larger homes34 helped usher in a period of relatively strong

U.S. demand for structural panels, which increased from 36.5 billion square feet in 2000 to 40.1 billion square feet in

2004, or by 10 percent.35 U.S. demand is expected to increase by about 2 percent per year during the next 5 years.36 

Another factor that may impact demand is damage from hurricanes making landfall in the United States. Demand

rises as a result of home reconstruction in the wake of such storms. However, rebuilding typically takes place

slowly, over a period of years.37 It is estimated that rebuilding efforts resulting from hurricane Katrina will increase

total demand for structural panels by approximately 4.6 billion square feet and annual demand by 2 to 3 percent over

the next 5 years.38 However, not all of this increase in demand will be accounted for by softwood plywood due to

the continuing shift toward OSB for sheathing in residential construction.39
40 Hearing transcript, p. 111; and posthearing submission on behalf of Georgia-Pacific, Oct. 7, 2005, p. 5. 41 Random Lengths, Forest Product Market Prices and Statistics 2004 Yearbook, 2005, p. 276. 42 “Brazil Realizes Its Potential,” Timber & Wood Products International, Vol. 384, No. 6290, June 27, 1998, p. 22. 43 Ibid.

44 On average, small mills in Brazil produce 30 million to 50 million square feet annually, whereas the large mills

produce 200 million to 300 million square feet and are comparable in size to U.S. plywood plants. Hearing transcript, p. 177. 45 Brazil, Solid Wood Products Annual Report-2004, USDA FAS, Gain report BR4631, Dec. 17, 2004, p. 6. 46 Posthearing submission on behalf of Guararapes, Oct. 7, 2005.

47 “Brazil Realizes Its Potential,” pp. 20-21.

48 Hearing transcript, p. 155.

49 Hearing transcript, p. 92; and posthearing submission on behalf of Guararapes, Oct. 7, 2005.

25

Short-term factors such as new capacity, seasonality of construction, inclement weather and hurricanes, and

transportation disruptions can alter the supply/demand balance in the market for structural panels and cause the price

of softwood plywood to vary widely.40 During 2000-04, the annual variation in the U.S. composite price of southern

pine plywood ranged between 10 and 80 percent, and during the entire period, the variation was over 100 percent

from a low of $343 per thousand square feet (MSF) in 2001 to a high of $688 per MSF in 2004.41

IV. GSP import situation, 2004

U.S. imports and share of U.S. consumption, 2004

Item Imports

Percent

 of total

imports

Percent 

of GSP

imports

Percent 

of U.S.

consumption

1,000

dollars

Grand total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 451,977 100 (1

) 11

Imports from GSP-eligible countries:

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251,143 56 100 6

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249,970 55 100 6

 1

 Not applicable.

Comment.–The duty rate for U.S. imports covered under this HTS subheading is 8 percent. During 2000-

04, Brazil accounted for virtually all GSP imports of softwood plywood. The Brazilian forest products industry

originally processed native species such as Parana pine (Araucaria angustifolia), but shifted to plantations as the

native resource dwindled.42 Reportedly, the plywood industry in Brazil has about 300 small, widely scattered

companies, but 40 firms concentrated in the southeast part of Brazil control about 75 percent of production.43 The

output from small mills is approximately 10 times less on an annual basis than that from larger mills.44 The installed

annual production capacity of the plywood industry in Brazil is estimated to be about 2.4 million cubic meters.45

Reportedly, the Brazilian softwood plywood industry enjoys certain advantages versus the U.S. industry, including

wage rates approximately 5 to 10 times less than those paid by the U.S. industry and lower costs for logs.46 While

the principal species of pine used in Brazil are the same as in the United States, growth rates in Brazil may be 2 to 3

times faster and rotations consequently shorter than in the United States.47 In addition, availability of logs is higher

in Brazil than in the United States where softwood plywood producers must compete for available logs with

manufacturers of other products such as laminated veneer lumber or wide-dimension lumber.48 On the other hand,

Brazilian manufacturers have higher transportation and capital costs than do U.S. producers.49
50 “Brazilian Plywood a Growing Force in U.S. Market,” Random Lengths International, Vol. 37, No. 14, July 7, 2004,

p. 1. 51 The selling price is typically an average of the domestic selling price during the transit time minus a percentage. 

Ibid., pp. 1-2.

26

V. Competitiveness profile, Brazil

Ranking as a U.S. import supplier, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 

Aggregate demand elasticity (price elasticity of U.S. demand for the product from all sources, foreign and domestic):

Is the product a finished product for final sale to consumers? . . . . . . . . . . . . . . . Yes X No 

Is the product an intermediate good used as an input in the production of

another good? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes X No 

Is the product an agricultural or food product? . . . . . . . . . . . . . . . . . . . . . . . . . . Yes No X 

What is the aggregate price elasticity of U.S. demand? . . . . . . . . . High Moderate X Low 

Substitution elasticity:

What is the similarity of product characteristics (such as quality, physical specifications, shelf-life, etc.) between

imports from this supplier and:

Imports from other suppliers? . . . . . . . . . . . . . . . . . . . . . . . . High X Moderate Low 

U.S. producers? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . High Moderate X Low 

What is the similarity of conditions of sale and distribution (such as lead times between order and delivery

dates, payment terms, product service, minimum order size, variations in availability, etc.) between imports

from this supplier and:

Imports from other suppliers? . . . . . . . . . . . . . . . . . . . . . . . . . High X Moderate Low 

U.S. producers? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . High Moderate X Low 

What is the substitution elasticity? . . . . . . . . . . . . . . . . . . . . . . . . High Moderate X Low 

Supply elasticity for affected imports:

Can production in the country be easily expanded or contracted in the short

 term? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes No X 

Does the country have significant export markets besides the United States? . . Yes X No 

Could exports from the country be readily redistributed among its foreign

export markets? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes X No 

What is the price elasticity of supply for affected imports? . . . . High Moderate X Low 

Price level compared with--

U.S. products ......................................... Above Equivalent X Below 

Other foreign products ................................. Above Equivalent X Below 

Quality compared with--

U.S. products ......................................... Above Equivalent X Below 

Other foreign products ................................. Above Equivalent X Below 

Comment.– Brazilian softwood plywood is typically made from species of wood native to the southern

United States and is considered by most end users to be interchangeable with U.S. southern pine plywood in most

applications.50 Most of the U.S. imports of Brazilian plywood are certified by U.S. grading agencies, and the prices

are comparable to U.S. prices for plywood from mills in the southeastern states of Georgia, Florida, North Carolina,

South Carolina, and Virginia.51
52 Except as noted, information provided in this section is derived from the petition filed with the USTR as well as

testimony and written submissions of interested parties to the Commission in connection with this investigation. 53 Petitions were filed with the USTR on or before June 15, 2005.

27

VI. Position of interested parties52

Petitioner.

53– Industria de Compensados Gaurarapes Ltda. (Guararapes), a major Brazilian producer of

softwood plywood, states that the sharp increase in U.S. imports of Brazilian softwood plywood in 2004 resulted

from a surge in U.S. residential construction and the inability of U.S. domestic mills to meet the rising U.S. demand. 

Guararapes states that the U.S. manufacturers’ inability to meet demand for softwood plywood stems from the

closure of existing plywood mills and lack of investment in new facilities in favor of investment in OSB mills. 

Gaurarapes maintains that it had been asked by its U.S. customers to increase production and that the large Florida

market had been neglected by U.S. manufacturers. In addition, Guararapes states that Canada, traditionally the

primary foreign supplier to the United States, is producing plywood at or near capacity. Therefore, a competitiveneed-limit waiver poses little risk of injury to the U.S. domestic industry because strong demand is expected to

continue. Guararapes also noted that some U.S. corporations have invested in Brazil’s forests. 

Support.–The National Association of Home Builders, Conex Forest Products, Inc., and TECO Corp. state

that U.S. demand for softwood plywood is not currently being met by domestic production because U.S. firms have

either closed plants or converted them to the production of other products. These companies state that decreased

timber supply from U.S. public lands was the cause of several mill closures in the western United States. Therefore,

to meet domestic demand, increased imports from Brazil are necessary.

Opposition.– GP, the largest U.S. producer, argues that Brazil has become a global competitor, that Brazil

had previously gained market share in Europe at the expense of U.S. exports of softwood plywood, and that the lost

export shipments as well as lost domestic shipments resulting from increased U.S. imports of Brazilian softwood

plywood have been responsible in part for plant closures in the United States. GP notes that some western U.S. mills

were closed due to inadequate timber supplies and that some were changed over to laminated veneer lumber

production. GP maintains that low prices, not the fact that the plants were noncompetitive, caused most of the plant

closures. According to GP, the southern mills were closed in response to market conditions. 

Coastal Plywood Company, which operates a plywood mill in Havana, Florida, states that Brazilian imports

adversely affected its product mix, prices, and sales volumes. Product mix and prices for specific grades,

particularly 19/32-inch Rated Sheathing, are affected by Brazilian plywood imports. When shipments of Brazilian

plywood began arriving at Florida ports, the firm lost local business and was forced to sell in more distant markets. 

Roseburg Forest Products of Oregon and Martco Limited Partnership of Louisiana also request that the

competitive-need-limit waiver not be granted. Roseburg states that it competes against substitute products as well as

imports. 

APA-The Engineered Wood Association, which represents the U.S. plywood industry, states that the recent

decline in U.S. production and capacity is the result of a combination of weakening demand due to competition from

OSB and surging imports of softwood plywood.
D

Table 1.–Softwood plywood (HTS subheading 4412.19.40): U.S. imports for consumption, by principal sources, 2000-20

2004, and January-June 2005Source 2000 2001 2002 2003 2004 January - J

2004 

 - - - - - - - - - - - - - - - - - - - - - - - - - - - In Actual Dollars - - - - - - - - - - - - - - - - - - - 

 Brazil 10,013,153 21,085,877 43,623,802 107,544,359 249,969,702 119,748,0 Canada 39,403,214 67,957,315 83,054,627 105,293,543 131,154,203 70,970,3 Chile 7,336,396 19,226,419 33,915,449 47,184,920 61,223,220 26,986,3 China 0 593,242 441,623 1,326,068 6,558,075 2,537,3 Mexico 4,313,248 1,959,000 1,443,882 1,017,151 1,066,536 540,3 Malaysia 2,142,343 1,931,481 801,988 589,809 445,206 174,1 Paraguay 0 0 0 521,945 443,313 294,8 Argentina 0 38,629 900,727 826,512 383,066 350,8 Colombia 0 0 12,012 177,294 262,200 120,9 Belgium 38,500 0 0 0 96,009 96,0 All other 1,026,256 766,933 588,535 965,124 375,106 219,1 Total 64,273,110 113,558,896 164,782,645 265,446,725 451,976,636 222,038,4Imports from GSP-eligible countries: Brazil 10,013,153 21,085,877 43,623,802 107,544,359 249,969,702 119,748,0 Paraguay 0 0 0 521,945 443,313 294,8 Argentina 0 38,629 900,727 826,512 383,066 350,8 Colombia 0 0 12,012 177,294 262,200 120,9

All other 706,324 471,655 404,035 269,752 84,519 76,7

 Total 10,719,477 21,596,161 44,940,576 109,339,862 251,142,800 120,591,4

Source: Compiled from official statistics of the U.S. Department of Commerce.

28
D

Table 2.–Softwood plywood (including other products)1: U.S. exports of domestic merchandise, by market, 2000-2004, Ja

2004, and January-June 2005Source 2000 2001 2002 2003 2004 January - J

2004 

 - - - - - - - - - - - - - - - - - - - - - - - - - - - In Actual Dollars - - - - - - - - - - - - - - - - - - - 

 Canada 1,172,921 1,352,879 1,771,171 2,108,049 2,202,146 1,100,3 Mexico 631,162 702,799 388,473 532,941 804,143 406,8 Bahamas 346,438 325,346 366,748 556,932 437,417 166,5 United Kingdom 55,798 420,786 131,629 43,814 378,467 310,0 Jamaica 1,289,419 117,944 56,728 131,334 193,899 6,5 Barbados 49,527 21,846 25,675 42,755 67,912 3,1 St. Lucia Island 0 0 0 4,702 62,819 62,8 Bermuda 134,004 84,640 36,095 133,208 50,292 22,9 Taiwan 0 100,357 4,408 8,898 46,566  Panama 12,500 0 7,600 0 44,321 32,4

All other 1,193,556 1,291,619 2,216,477 909,824 353,668 173,3

 Total 4,885,325 4,418,216 5,005,004 4,472,457 4,641,650 2,285,1

1 Export data are not separately provided for the Schedule B subheading corresponding to import subheading 4412.19.40 

not covered in this digest. See “U.S. Market Profile” for estimated U.S. softwood plywood export data. Source: Compiled from official statistics of the U.S. Department of Commerce.

29
30

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31

Certain Travertine Dimension Stone

Digest No. 6802.21.10

I. Introduction

 X Competitive-need-limit waiver: Turkey

HTS subheading(s) Short description

Col. 1 rate of

duty (1/1/05)

Like or directly

competitive article

produced in the United

States on Jan. 1, 1995?

Percent ad

valorem

6802.21.101

6802.91.201

Travertine, simply cut or sawn, with a flat or even

surface

Travertine, simply cut or sawn, with a flat or even

surface, dressed or polished, but not further

worked 

4.2 

4.2

Yes

Yes

1

 Turkey has been proclaimed by the President as non-eligible for GSP treatment for articles included under

HTS subheadings 6802.21.10 and 6802.91.20, effective July 1, 2005.

Description and uses.–Travertine refers to nonmarine carbonate precipitates formed in or near terrestrial

springs, rivers, lakes, and caves. Travertine occurs in areas where limestone is common and groundwater contains

calcium carbonate. Travertine deposits are found typically in caves, where spring waters come to the surface and

either evaporate or undergo certain chemical and/or biochemical processes, leading to the formation of calcite and/or

aragonite rocks. Travertine is a natural rock material quarried to obtain blocks or slabs that meet specifications as to

size (width, length, and thickness) and shape. The process to convert rough travertine into a polished and shaped

form ready for construction applications (called “dimension stone”) is known as “working” or “dressing.” 

The subject travertine stone is one of numerous types of ornamental stone used primarily in high-end

commercial and noncommercial (principally residential) construction applications. Travertine can be found in

building lobbies, wall cladding, flooring, countertops, garden and home decoration, in swimming pools, paving,

tombstones, and ornamental articles. Most travertine used is white, tan, or cream colored. Color, grain texture and

pattern, and the ability of the stone to take a polish are qualities required by customers. Firms that process travertine

into dimension stone typically process other types of limestone such as dolomite, calcareous, and tufa, as well as

marble.

II. Probable economic effect advice – Competitive-need-limit waiver: Turkey (HTS subheadings 6802.21.10 and

6802.91.20)

* * * * * *
32

III. U.S. market profile

Profile of U.S. industry and market, 2000-04

Item 2000 2001 2002 2003 2004

Producers (number) ................. 33333

Employment (employees) . . . . . . . . . . . . . 130 (1

) (1) (1) 58

Shipments (1,000 dollars) ............ (1

) (1) (1) (1) (1)

Exports (1,000 dollars)

2 . . . . . . . . . . . . . . 4,885 4,418 5,005 4,472 4,642

Imports (1,000 dollars) . . . . . . . . . . . . . . . 61,900 66,490 63,456 64,368 88,888

Consumption (1,000 dollars) .......... (1

) (1) (1) (1) (1)

Import-to-consumption ratio (percent)... (1

) (1) (1) (1) (1)

Capacity utilization (percent).......... (

1

) (1) (1) (1) (1)

1

 Not available. 

2

 U.S. exports cannot be separately estimated for travertine stone and include other dimension stone not covered

in this digest and re-exports of imported travertine dimension stone.

Comment.–There are three remaining manufacturers of travertine stone in the United States. One company,

New Mexico Travertine with both quarrying and finishing operations, sells a full line of travertine products to

industry. Another company, Idaho Travertine, Inc., maintains quarrying and finishing operations. In recent years,

the U.S. market has experienced growing demand for travertine dimension stone for upscale residential and

commercial uses, which cannot be completely satisfied by domestic production. As a result, the U.S. industry has

increasingly concentrated on higher-value, speciality construction markets, leaving the other segments of the market

to be supplied by imports.

IV. GSP import situation, 2004

U.S. imports and share of U.S. consumption, 2004

Item Imports

Percent

 of total

imports

Percent 

of GSP

imports

Percent 

of U.S.

consumption

1,000

dollars

Grand total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,888 100 (1

) (2)

Imports from GSP-eligible countries:

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,422 70 100 (2

)

Turkey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,147 59 84 (2

)

1

 Not applicable.

2

 Not available.

Comment.––The duty rate for U.S. imports covered under both HTS subheadings covered in this digest is

4.2 percent. Turkey has emerged as the leading supplier of travertine dimension stone in the U.S. market,

supplanting Italy and Mexico. U.S. imports from Turkey increased 243 percent during 2001-04 to $52.1 million in

2004, due to increased demand for residential and commercial travertine stone in the United States.
33

V. Competitiveness profile, Turkey

Ranking as a U.S. import supplier, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . 1 

Aggregate demand elasticity (price elasticity of U.S. demand for the product from all sources, foreign and domestic):

Is the product a finished product for final sale to consumers? . . . . . . . . . . . . . . . Yes X No 

Is the product an intermediate good used as an input in the production of

another good? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes No X 

Is the product an agricultural or food product? . . . . . . . . . . . . . . . . . . . . . . . . . . Yes No X 

What is the aggregate price elasticity of U.S. demand? . . . . . . . . . High Moderate Low X 

Substitution elasticity:

What is the similarity of product characteristics (such as quality, physical specifications, shelf-life, etc.) between

imports from this supplier and:

Imports from other suppliers? . . . . . . . . . . . . . . . . . . . . . . . . High X Moderate Low 

U.S. producers? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . High Moderate X Low 

What is the similarity of conditions of sale and distribution (such as lead times between order and delivery

dates, payment terms, product service, minimum order size, variations in availability, etc.) between imports

from this supplier and:

Imports from other suppliers? . . . . . . . . . . . . . . . . . . . . . . . . . High Moderate X Low 

U.S. producers? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . High Moderate X Low 

What is the substitution elasticity? . . . . . . . . . . . . . . . . . . . . . . . . High Moderate X Low 

Supply elasticity for affected imports:

Can production in the country be easily expanded or contracted in the short 

 term? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes X No 

Does the country have significant export markets besides the United States? . . Yes X No 

Could exports from the country be readily redistributed among its foreign

export markets? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes No X 

What is the price elasticity of supply for affected imports? . . . . High X Moderate Low 

Price level compared with--

U.S. products ......................................... Above Equivalent Below X 

Other foreign products ................................. Above Equivalent Below X 

Quality compared with--

U.S. products ......................................... Above Equivalent X Below 

Other foreign products ................................. Above Equivalent X Below 

Comment.– An estimated 40 percent of travertine reserves worldwide are located in Turkey. Travertine

quarries in Turkey are largely located in rural areas of the Denizli, Afyon, and Balikesir provinces in the east

Anatolian region. The travertine is quarried in large blocks and carried to factories located generally near the

quarries. In the factories, the travertine blocks are cut or sawed into slabs or into other forms, including tiles and

mosaic cubes. Other small, family-owned workshops often buy slabs from the factories and process them (cut, saw,

polish, and dress, etc.) and sell them either domestically or into the export market.

Total Turkish travertine production in 2004 was estimated at 625,000 metric tons, and nearly 85 percent of

total production was exported, with the United States absorbing an estimated 63 percent of 2004 Turkish exports. 

Total Turkish travertine exports increased from $115 million in 2002 to $267 million in 2004.
54 Except as noted, information provided in this section is derived from the petition filed with the USTR as well as

testimony and written submissions of interested parties to the Commission in connection with this investigation. 55 Petitions were filed with the USTR on or before June 15, 2005.

56 Commission staff verified that 18 percent of total U.S. imports covered under these HTS subheadings were dutiable

in 2004.

34

VI. Position of interested parties54

Petitioner.

55–Istanbul Mineral and Metals Exporters’ Association (IMMIB) is a trade association

representing Turkish-based producers and/or exporters of mineral and metal products, including the subject

travertine stone. According to IMMIB, through the U.S. GSP program, Turkish companies and travertine stone

workers have been able to develop a small but profitable business supplying stones for use in U.S. construction

markets. There are about 180 travertine quarries in Turkey and nearly 200 establishments operating to process the

quarried travertine stone. Total employment in the travertine industry in Turkey has been estimated by the IMMIB

at 12,000. 

According to IMMIB, because of limited U.S. production capacity for this product, a waiver of the

competitive need limit would not adversely affect the industry in the United States. Because of limited domestic

capacity, the United States has become increasingly reliant on imports of travertine stone from developing-country

suppliers to satisfy rising demand for travertine. According to IMMIB, without the waiver of the competitive need

limit for these HTS subheadings, Turkish exports would be at a disadvantage relative to competitive products from

other developing-country suppliers to the U.S. market. The IMMIB estimates that 82 percent of the subject

travertine stones imported into the United States in 2004 from all sources were subject to preferential arrangements

and were shipped duty free.56
D

Table 1.–Certain travertine dimension stone (HTS subheadings 6802.21.10 and 6802.91.20): U.S. imports for consumptiosources, 2000-2004, January-June 2004, and January-June 2005Source 2000 2001 2002 2003 2004 January - J

2004 

 - - - - - - - - - - - - - - - - - - - - - - - - - - - In Actual Dollars - - - - - - - - - - - - - - - - - - - 

6802.21.10: Turkey 4,781,134 5,632,859 8,262,544 6,745,550 16,383,548 5,746,2 Mexico 1,637,970 3,477,621 4,197,934 3,604,967 3,889,251 2,073,8 Italy 8,542,354 8,063,144 6,811,477 6,172,401 3,348,490 1,688,9 Peru 934,760 515,826 1,097,646 966,611 1,767,522 616,5 Colombia 153,639 131,493 364,680 425,630 682,615 127,1 United Arab Emirates 0 35,566 9,576 104,393 451,459 87,6 Israel 20,646 40,724 17,039 65,798 123,555 97,1 Philippines 392,481 248,492 189,986 322,270 82,610 82,6 Brazil 22,845 20,372 47,260 32,317 70,792 30,2 Spain 179,145 269,593 249,415 157,843 62,024  All other 745,676 526,351 601,241 458,173 366,737 80,9 Total 17,410,650 18,962,041 21,848,798 19,055,953 27,228,603 10,631,1Imports from GSP-eligible countries: Turkey 4,781,134 5,632,859 8,262,544 6,745,550 16,383,548 5,746,2 Peru 934,760 515,826 1,097,646 966,611 1,767,522 616,5 Colombia 153,639 131,493 364,680 425,630 682,615 127,1 Philippines 392,481 248,492 189,986 322,270 82,610 82,6

All other 548,028 456,960 555,222 362,098 230,443 56,1

 Total 6,810,042 6,985,630 10,470,078 8,822,159 19,146,738 6,628,6

35
D

Table 1.–Certain travertine dimension stone (HTS subheadings 6802.21.10 and 6802.91.20): U.S. imports for consumptiosources, 2000-2004, January-June 2004, and January-June 2005Source 2000 2001 2002 2003 2004 January - J

2004 

 - - - - - - - - - - - - - - - - - - - - - - - - - - - In Actual Dollars - - - - - - - - - - - - - - - - - - - 

6802.91.20: Turkey 11,879,586 14,139,704 13,723,581 19,358,532 35,763,343 12,649,2 Mexico 10,002,458 9,717,465 8,170,928 7,030,058 8,443,865 4,162,6 Italy 18,971,327 17,580,249 12,922,956 10,754,302 8,062,083 4,191,2 Peru 2,282,104 3,010,456 3,403,103 5,461,554 6,019,554 2,675,5 China 45,351 5,112 48,329 139,760 915,666 216,9 Spain 252,541 473,724 628,354 381,152 462,481 227,8 Argentina 164,953 1,094,737 1,127,803 479,915 458,135 212,8 India 7,800 698,514 206,602 184,739 442,738 145,8 Israel 52,434 56,990 40,367 110,175 218,255 2,3 Greece 403,098 232,760 304,457 528,154 154,715 56,2 All other 427,215 518,657 1,030,905 883,892 718,726 312,7 Total 44,488,867 47,528,368 41,607,385 45,312,233 61,659,561 24,853,6Imports from GSP-eligible countries: Turkey 11,879,586 14,139,704 13,723,581 19,358,532 35,763,343 12,649,2 Peru 2,282,104 3,010,456 3,403,103 5,461,554 6,019,554 2,675,5 Argentina 164,953 1,094,737 1,127,803 479,915 458,135 212,8 India 7,800 698,514 206,602 184,739 442,738 145,8

All other 83,763 370,200 668,694 638,947 591,664 253,7

 Total 14,418,206 19,313,611 19,129,783 26,123,687 43,275,434 15,937,2

36
D

Table 1.–Certain travertine dimension stone (HTS subheadings 6802.21.10 and 6802.91.20): U.S. imports for consumptiosources, 2000-2004, January-June 2004, and January-June 2005Source 2000 2001 2002 2003 2004 January - J

2004 

 - - - - - - - - - - - - - - - - - - - - - - - - - - - In Actual Dollars - - - - - - - - - - - - - - - - - - - 

Total: Turkey 16,660,720 19,772,563 21,986,125 26,104,082 52,146,891 18,395,4 Mexico 11,640,428 13,195,086 12,368,862 10,635,025 12,333,116 6,236,5 Italy 27,513,681 25,643,393 19,734,433 16,926,703 11,410,573 5,880,2 Peru 3,216,864 3,526,282 4,500,749 6,428,165 7,787,076 3,292,0 China 60,561 5,112 48,329 159,555 972,699 228,0 Colombia 194,809 156,170 432,586 472,816 817,459 223,5 Spain 431,686 743,317 877,769 538,995 524,505 227,8 India 164,068 820,218 402,340 262,936 503,201 160,8 United Arab Emirates 8,415 68,386 67,210 143,401 475,037 111,1 Argentina 450,913 1,226,590 1,249,399 508,384 469,785 212,8 All other 1,557,372 1,333,292 1,788,381 2,188,124 1,447,822 516,1 Total 61,899,517 66,490,409 63,456,183 64,368,186 88,888,164 35,484,7Imports from GSP-eligible countries: Turkey 16,660,720 19,772,563 21,986,125 26,104,082 52,146,891 18,395,4 Peru 3,216,864 3,526,282 4,500,749 6,428,165 7,787,076 3,292,0 Colombia 194,809 156,170 432,586 472,816 817,459 223,5 India 164,068 820,218 402,340 262,936 503,201 160,8

All other 1,057,070 2,055,030 2,489,964 1,761,966 1,167,545 493,9

 Total 21,293,531 26,330,563 29,811,764 35,029,965 62,422,172 22,565,9

Source: Compiled from official statistics of the U.S. Department of Commerce.

37
D

Table 2.–Certain travertine dimension stone (including other products)1: U.S. exports of domestic merchandise, by marke

January-June 2004, and January-June 2005Source 2000 2001 2002 2003 2004 January - J

2004 

 - - - - - - - - - - - - - - - - - - - - - - - - - - - In Actual Dollars - - - - - - - - - - - - - - - - - - - 

 Canada 1,172,921 1,352,879 1,771,171 2,108,049 2,202,146 1,100,3 Mexico 631,162 702,799 388,473 532,941 804,143 406,8 Bahamas 346,438 325,346 366,748 556,932 437,417 166,5 United Kingdom 55,798 420,786 131,629 43,814 378,467 310,0 Jamaica 1,289,419 117,944 56,728 131,334 193,899 6,5 Barbados 49,527 21,846 25,675 42,755 67,912 3,1 St. Lusia Island 0 0 0 4,702 62,819 62,8 Bermuda 134,004 84,640 36,095 133,208 50,292 22,9 Taiwan 0 100,357 4,408 8,898 46,566  Panama 12,500 0 7,600 0 44,321 32,4

All Other 1,193,556 1,291,619 2,216,477 909,824 353,668 173,3

 Total 4,885,325 4,418,216 5,005,004 4,472,457 4,641,650 2,285,1

1 Export data are not separately provided for the Schedule B subheadings 6802.21.10 and 6802.91.20, and include produc

digest and re-exports of imported travertine dimension stone. Source: Compiled from official statistics of the U.S. Department of Commerce.

38
APPENDIX A

U.S. Trade Representative’s Request Letter

A-1







APPENDIX B

U.S. International Trade Commission’s Notice of Investigation

B-1



APPENDIX C

List of Witnesses Appearing before the U.S. International Trade Commission

at the hearing on September 29, 2005

C-1

-3-

 CALENDAR OF PUBLIC HEARING

Those listed below appeared as witnesses at the United States International Trade

Commission’s hearing:

Subject: Advice Concerning Possible Modifications to the U.S.

Generalized System of Preferences, 2005 Review 

Inv. No.: 332-470

Date and Time: September 29, 2005 - 9:30 a.m.

Sessions were held in connection with this investigation in the Main Hearing Room (room

101), 500 E Street, S.W., Washington, D.C.

PANEL 1

ORGANIZATION AND WITNESS: PRODUCT:

Carrageenan

Embassy of the Philippines

Washington, D.C.

Romeo G. Borillo, Commercial Counselor

Harris J. Bixler, Vice President, Regulatory

Affairs, Seaweed Industry Association

of the Philippines
-4-

Panel 1 (continued)

ORGANIZATION AND WITNESS: PRODUCT:

Ibuprofen

Williams Mullen

Washington, D.C.

on behalf of 

Shasun Chemicals and Drugs, Ltd.

Shasun, Inc.

Govindarajan Narayanan, Chief Executive

Officer, Shasun Chemicals and Drugs, Ltd.

Jitesh Devendra, Vice President, Business

Development, Americas, Shasun Chemicals

and Drugs, Ltd.

James R. Cannon, Jr. ) – OF COUNSEL

Certain Travertine

Dimension Stones

Hogan & Hartson L.L.P.

Washington, D.C.

on behalf of

Istanbul Minerals & Metals Exporters 

Association (“IMMIB”)

Artemiz Turunc Akyatan, Partner, Tureks-Turunc

Minerals Trade, Inc.

S. Alev Kaymak, Consultant, Hogan &

Hartson L.L.P.

Warren H. Marauyama ) – OF COUNSEL
-5-

Panel 2

ORGANIZATION AND WITNESS: PRODUCT:

Softwood Plywood

Adduci, Mastriani & Schaumberg, L.L.P.

Washington, D.C.

on behalf of

Industria de Compansados Guararapes Ltda. (“Guararapes”)

National Association of Home Builders (“NAHB”)

Conex Forest Products, Inc. (“Conex”)

Carl J. Kurtz, Managing Director, Tropical

Woods International, Ltda.

Jose Carlos Januario, Export Sales Director/Partner,

Guararapes

Steve G. Winistorfer, President, Certification

and Testing Division, TECO Corporation

Michael S. Carliner, Staff Vice President,

Economics, NAHB

Stephen L. Conowall, President, Conex

Thomas F. St. Maxens, President, St. Maxens

& Company

V. James Adduci II )

) – OF COUNSEL

William C. Sjoberg )

Roberts & Dybdahl Inc.

Des Moines, IA

Larry Warner, Vice President, Sales and

Operations, Roberts International, Inc.

Roberts & Dybdahl, Inc.

Panel 2 (continued)
ORGANIZATION AND WITNESS: PRODUCT:

Softwood Plywood (continued)

Georgia-Pacific

Washington, D.C.

David J. Patterson, Executive Vice President,

Building Products

D. Craig Adair, Director, Market Research,

APA The Engineered Wood Association

-END-
APPENDIX D

Model for Evaluating Probable Economic Effects of Changes in GSP Status

D-1

 1

 For derivations, see Paul S. Armington, “A Theory of Demand for Products Distinguished by Place of

Production,” IMF Staff Papers, vol. 16 (1969), pp. 159-176, and J. Francois and K. Hall, “Partial Equilibrium

Modeling,” in J. Francois and K. Reinert, eds., Applied Methods for Trade Policy Analysis, A Handbook

(Cambridge: Cambridge University Press, 1997). 

MODEL FOR EVALUATING THE

PROBABLE ECONOMIC EFFECT OF CHANGES IN GSP STATUS

This appendix presents the method used to analyze the effects of immediate tariff elimination for

selected products on total U.S. imports of affected products, competing U.S. industries, and U.S.

consumers. First, the method is introduced. Then the derivation of the model for estimating changes in

imports, U.S. domestic production, and consumer effects is presented.

Introduction

Commission staff used partial equilibrium modeling to estimate probable economic effects (PE)

of immediate tariff elimination on total U.S. imports, competing U.S. industries, and U.S. consumers. 

The model used in this study is a nonlinear, imperfect substitutes model.1

 Trade data were taken from

official statistics of the U.S. Department of Commerce. U.S. production data were estimated by USITC

industry analysts. Elasticities were estimated by industry analysts in consultation with the assigned

economist based on relevant product and market characteristics. Trade and production data used were for

2004, and tariff rates used were for 2005.

The following model illustrates the case of granting a product GSP duty-free status. The

illustration is for a product for which domestic production, GSP imports, and non-GSP imports are

imperfect substitutes, and shows the basic results of a tariff removal on a portion of imports. 
Sb

S′

b

Db

Q

P

Qb Q′

b

A

B

Sn

Dn

Q

P

Q′

n Qn

Pn

B A

D′

n

Sd

Dd

Q

P

Q′

d Qd

B A

D′

d

Pd P′

b

P′′ b

Pb

Figure D-1

U.S. markets for GSP beneficiary imports (panel a), domestic production (panel b), and nonbeneficiary

imports (panel c)

Consider the market for imports from GSP beneficiary countries illustrated in fig. D-1, panel (a). 

The line labeled is the U.S. demand for imports D from GSP beneficiary countries, the line labeled b

S is the supply of imports from GSP beneficiary countries with the tariff in place, and the line labeled b

S′ is the supply of imports from GSP beneficiary countries without the tariff (i.e., the product is b

receiving duty-free treatment under GSP). Point A is the equilibrium with the tariff in place, and point 

is the equilibrium without the tariff. and are equilibrium quantities at and , respectively. Qb Q′

b

P and are equilibrium prices at and , and is the price received by GSP-beneficiary b P′

b P′′ b

producers when the tariff is in place. The difference between and denotes the tariff, . Pb P′′ b t

In the model, a tariff reduction leads to a decrease in the price of the imported good and an

increase in sales of the good in the United States. The lower price paid for the import in the United States

leads to a reduction in the demand for U.S. production of the good, as well as for imports from 
 2

 The product grouping consists of similar goods from different sources. For example, goods i, j, and k would

indicate three similar goods from three different sources. See Armington (1969) for further discussion of the

concept.

 3

 Armington (1969), p. 167.

 4

 Ibid., p. 168.

q bq p

p

i i

i = ⎛

⎝

⎜ ⎞

⎠

⎟

−

σ

σ

(1)

non-GSP countries. These demand shifts, along with supply responses to the lower demand, determine

the reduction in U.S. output and non-GSP imports. 

The changes that take place in panel (a) lead to the changes seen in panels (b) and (c), where the

demand curves shift from and to and , respectively. Equilibrium quantity in the Dd Dn D′

d D′n

market for domestic production moves from to , and in a similar manner for the market for Qd Q′

d

nonbeneficiary imports, equilibrium quantity falls from to . Qn Q′

n

Derivation of Import, U.S. Production, and Consumer Effects

The basic building blocks of the model are shown below. Armington shows that if consumers

have well-behaved constant elasticity of substitution (CES) utility functions, demand for a good in a

product grouping can be expressed as follows:

where denotes quantity demanded for good in the U.S. market;2

 is the price of good in the U.S.

market; is the elasticity of substitution for the product grouping; is the demand for the aggregate

product (that is, all goods in the product grouping); is a price index for the aggregate product (defined

below); and is a constant.3 As Armington states, the above equation “... can be written in a variety of

useful ways.”4 One of these useful ways can be derived as follows. The aggregate price index is p

defined as
p bp i i

i

= ⎛

⎝

⎜ ⎞

⎠

⎟ − −

∑ σ σ σ 1

1

1

. (2)

q kpA A = η (3)

Kp bk p

p

si i i A si

A

ε σ σ η

σ − =

+

0. (4)

In addition the aggregate quantity index can be defined as q

where is a constant and is the aggregate dema k nd elasticity for the product grouping (natural sign). A η A

Substituting equation (3) into equation (1) yields

q bkp p

p

i iA A i = ⎛

⎝

⎜ ⎞

⎠

⎟

−

σ η

σ

.

Further manipulation and simplification yields

q bk p

p

i iA

i

A

=

+ σ σ η

σ

( )

,

which establishes the demand for in terms of prices, elasticities, and constants. qi

The supply of each good in the product grouping is represented in constant supply elasticity form:

q Kp i si i si = ε ,

where is a constant and is the price elasticity of supply for good . Ksi ε si

Excess supply functions are set up for each good in the product grouping with the following

general form:

The model is calibrated using initial trade and production data and setting all internal prices to unity in the

benchmark calibration. It can be shown that calibration yields for the good so that K bk si i A = σ i

th
p

p

p

i

i

si

A

ε

σ η

σ − =

+

0 . (4N)

equation (4) can be rendered as

If there are goods, the model consists of equations like (4 n n N) plus an equation for the price

aggregator , which are solved simultaneously in prices by an iterative technique. p

For the case of adding a product to the list of products eligible for GSP duty-free treatment, the

equations are as follows:

[ ] p t for imports from GSP beneficiary countries, p

p

b

b

sb

A

( ) 1 0 +− =

+ ε σ η

σ

p for imports from nonbeneficiary countries, p

p n

n

sn

A

ε

σ η

− = σ

+

0

p for U.S. domestic production, and p

p d

d

sd

A

ε

σ η

− = σ

+

0

p bp for the price aggregator. i i

i bnd

= ⎛

⎝

⎜ ⎞

⎠

⎟ −

=

−

∑ σ σ σ 1

1

1

, ,

The prices obtained in the solution to these equations are used to calculate trade and production values,

and resulting percentage changes in total imports and domestic production are computed relative to the

original (benchmark) import and production values. 

Consumer effects

Consumer effects are estimated in terms of the portion of the duty reduction that is passed on to

U.S. consumers on the basis of the import demand and supply elasticity estimates. The formula for

determining the division of the duty savings between U.S. consumers and foreign exporters is

approximated by , where is the percenta SV ge of duty savings retained by exporters ii

ii si

= −

η

( ) η ε
 5

 At any given vector of prices, such as at the benchmark equilibrium, is the own price ηη σ ii i A i = −− S S ( ) 1

elasticity of demand from imports from source , where is the share of total expenditures on the product

grouping spent on good at that vector of prices. See Armington, p. 175. 

from source , is the own price elasticity of demand,5 ηii and is the price elasticity of supply from ε si

source . An “A” code indicates that more than 75 percent of the duty savings are retained by foreign

exporters , and less than 25 percent passed through to U.S. consumers. A “B” code η

η ε

ii

ii si − >

⎛

⎝

⎜ ⎞

⎠ 0 75 . ⎟

covers the range between 75 percent and 25 percent . A “C” code covers the 0 75 0 25 . . > − >

⎛

⎝

⎜ ⎞

⎠

⎟ η

η ε

ii

ii si

case where less than 25 percent of the duty savings are retained by foreign exporters and more than 75

percent of the savings are passed through to U.S. consumers . η

η ε

ii

ii si − <

⎛

⎝

⎜ ⎞

⎠ 0 25 . ⎟

The default assumption for the probable effect on consumers is a “B” code. This assumption

reflects the possibility that short-run supply elasticities may be less than perfectly elastic and the world

supply price may rise in the short run in the face of increased demand when U.S. duties are reduced. In

the long run, unless there are extraordinary market structure circumstances, supply elasticities are likely to

be perfectly elastic for any one product considered in isolation, implying that a “C” code for the consumer

effects is probably more appropriate in the long run in most cases. “A” and “C” codes for consumer

effects are assigned when analysts have information indicating that they are appropriate.