Pakistan-Afghanistan Economic Development Act

To provide duty-free treatment for certain goods from designated Reconstruction Opportunity Zones in Pakistan and Afghanistan, and for other purposes. 1. Short title This Act may be cited as the Pakistan-Afghanistan Economic Development Act 2. Purposes The purposes of this Act are— (1) to stimulate economic activity and development in Afghanistan and the border region of Pakistan, critical fronts in the struggle against violent extremism; (2) to reflect the strong support that the United States has pledged to Pakistan and Afghanistan to build regional stability; and (3) to offer a vital opportunity— (A) to improve livelihoods of indigenous populations of Reconstruction Opportunity Zones; and (B) to promote good governance in the region. 3. Definitions In this Act: (1) Agreement on Textiles and Clothing The term Agreement on Textiles and Clothing 19 U.S.C. 3511(d)(4) (2) Category; textile and apparel category number The terms category textile and apparel category number (3) Core labor standards The term core labor standards (A) freedom of association; (B) the effective recognition of the right to bargain collectively; (C) the elimination of all forms of compulsory or forced labor; (D) the effective abolition of child labor and a prohibition on the worst forms of child labor; and (E) the elimination of discrimination in respect of employment and occupation. (4) Entered The term entered (5) Entity The term entity (A) a natural person, corporation, company, business association, partnership, society, trust, or any other nongovernmental entity, organization, or group, whether or not for-profit; (B) any governmental entity or instrumentality of a government; and (C) any successor, subunit, or subsidiary of any entity described in subparagraph (A) or (B). (6) HTS The term HTS (7) Reconstruction Opportunity Zone (A) In general The term Reconstruction Opportunity Zone (i) has been designated by the competent authorities in Pakistan or Afghanistan, as the case may be, as an area in which merchandise may be introduced without payment of duty or excise tax; and (ii) has been designated by the President as a Reconstruction Opportunity Zone pursuant to section 4(a). (B) Area described An area described in this subparagraph is an area that solely encompasses portions of the territory of the following: (i) Afghanistan. (ii) One or more of the following areas of Pakistan: (I) The 7 tribal agencies formerly known as the Federally Administered Tribal Areas and also known as the newly merged districts (II) Khyber Pakhtunkhwa. (III) Areas of Baluchistan that are within 100 miles of the border between Pakistan and Afghanistan. (8) USMCA The term USMCA (A) attached as an Annex to the Protocol Replacing the North American Free Trade Agreement with the Agreement between the United States of America, the United Mexican States, and Canada, done at Buenos Aires on November 30, 2018, as amended by the Protocol of Amendment to the Agreement Between the United States of America, the United Mexican States, and Canada, done at Mexico City on December 10, 2019; and (B) approved by Congress under section 101(a)(1) of the United States-Mexico-Canada Agreement Implementation Act. 4. Designation of Reconstruction Opportunity Zones (a) Authority To designate The President may designate an area within Pakistan or Afghanistan described in subparagraph (A)(i) of section 3(8) as a Reconstruction Opportunity Zone if— (1) after consideration of the factors set forth in subsection (c) of section 502 of the Trade Act of 1974 ( 19 U.S.C. 2462(c) (2) the President determines that— (A) Pakistan or Afghanistan, as the case may be, meets the eligibility criteria set forth in subsection (b); and (B) designation of the area as a Reconstruction Opportunity Zone is appropriate taking into account the factors listed in subsection (c). (b) Eligibility criteria Pakistan or Afghanistan meets the eligibility criteria set forth in this subsection if Pakistan or Afghanistan, as the case may be— (1) has established, or is making continual progress toward establishing— (A) a market-based economy that— (i) protects private property rights; (ii) incorporates an open rules-based trading system; and (iii) minimizes government interference in the economy through measures such as price controls, subsidies, and government ownership of economic assets; (B) the rule of law, political pluralism, and the right to due process, a fair trial, and equal protection under the law; (C) economic policies— (i) to reduce poverty; (ii) to increase the availability of health care and educational opportunities; (iii) to expand physical infrastructure; (iv) to promote the development of private enterprise; and (v) to encourage the formation of capital markets through microcredit or other programs; (D) a system to combat corruption and bribery, such as a system involving ratification and implementation of the United Nations Convention Against Corruption, done at New York October 31, 2003; and (E) the protection of core labor standards; (2) is eliminating or has eliminated barriers to trade and investment, including— (A) by providing national treatment and measures to create an environment conducive to domestic and foreign investment; (B) by protecting intellectual property; and (C) by resolving bilateral trade and investment disputes; (3) does not engage in activities that undermine the national security or foreign policy interests of the United States; (4) does not engage in gross violations of internationally recognized human rights; (5) does not provide support for acts of international terrorism; and (6) cooperates in international efforts to eliminate human rights violations and terrorist activities. (c) Additional factors In determining whether to designate an area in Pakistan or Afghanistan as a Reconstruction Opportunity Zone, the President shall take into account— (1) an expression by the Government of Pakistan or Afghanistan, as the case may be, of its desire to have a particular area designated as a Reconstruction Opportunity Zone under this Act; (2) whether that Government has provided the United States with a monitoring and enforcement plan outlining specific actions that Government will take to cooperate with the United States— (A) to facilitate legitimate cross-border commerce; (B) to ensure that articles for which duty-free treatment is sought pursuant to this Act satisfy the applicable rules of origin described in sections 5 and 6; and (C) to prevent unlawful transshipment, as described in section 7(b)(4); (3) the potential for such designation to create local employment and to promote local and regional economic development; (4) the physical security of the proposed Reconstruction Opportunity Zone; (5) the economic viability of the proposed Reconstruction Opportunity Zone, including— (A) whether there are commitments to finance economic activity proposed for the Reconstruction Opportunity Zone; and (B) whether there is existing or planned infrastructure for power, water, transportation, and communications in the area; (6) whether such designation would be compatible with and contribute to the foreign policy and national security objectives of the United States, taking into account the information provided under subsection (d); and (7) the comments of interested persons submitted pursuant to subsection (e). (d) Information relating to compatibility with and contribution to foreign policy and national security objectives of the United States (1) In general In determining whether designation of a Reconstruction Opportunity Zone would be compatible with and contribute to the foreign policy and national security objectives of the United States in accordance with subsection (c)(6), the President shall take into account whether the Government of Pakistan or Afghanistan, as the case may be, has provided the United States with a plan outlining specific actions that Government will take to verify the ownership and nature of the activities of entities to be located in the proposed Reconstruction Opportunity Zone. (2) Elements The specific actions outlined in a plan described in paragraph (1) shall include methods— (A) to annually register each entity by a competent authority in Pakistan or Afghanistan, as the case may be; (B) to collect information from each entity operating in, or proposing to operate in, a Reconstruction Opportunity Zone, including— (i) the name and address of the entity; (ii) the name and location of all facilities owned or operated by the entity that are operating in, or proposed to be operating in, a Reconstruction Opportunity Zone; (iii) the name, nationality, date and place of birth, and position title of each person who is an owner, director, or officer of the entity; and (iv) the nature of the activities of each entity; (C) to update the information required under subparagraph (B) as changes occur; and (D) to provide such information promptly to the Secretary of State. (e) Opportunity for public comment Before the President designates an area as a Reconstruction Opportunity Zone pursuant to subsection (a), the President shall provide an opportunity for interested persons to submit comments concerning the designation. (f) Notification to Congress Before the President designates an area as a Reconstruction Opportunity Zone pursuant to subsection (a), the President shall notify Congress of the President’s intention to make the designation and the reasons for making the designation. 5. Duty-free treatment for certain nontextile and nonapparel articles (a) In general The President may proclaim duty-free treatment for— (1) any article from a Reconstruction Opportunity Zone that the President has designated as an eligible article under section 503(a)(1)(A) of the Trade Act of 1974 ( 19 U.S.C. 2463(a)(1)(A) (2) any article from a Reconstruction Opportunity Zone located in Afghanistan that the President has designated as an eligible article under section 503(a)(1)(B) of the Trade Act of 1974 ( 19 U.S.C. 2463(a)(1)(B) (3) any article from a Reconstruction Opportunity Zone that is not a textile or apparel article, regardless of whether the article has been designated as an eligible article under subparagraph (A) or (B) of section 503(a)(1) of the Trade Act of 1974 ( 19 U.S.C. 2463(a)(1) (b) Advice concerning certain eligible articles Before proclaiming duty-free treatment for an article pursuant to subsection (a)(3), the President shall publish in the Federal Register and provide to the United States International Trade Commission a list of articles that may be considered for such treatment. The provisions of sections 131 through 134 of the Trade Act of 1974 ( 19 U.S.C. 2151 19 U.S.C. 2133 (c) General rules of origin (1) In general The duty-free treatment proclaimed with respect to an article described in paragraph (1) or (3) of subsection (a) shall apply to any article subject to such proclamation that is the growth, product, or manufacture of 1 or more Reconstruction Opportunity Zones if— (A) that article is imported directly from a Reconstruction Opportunity Zone into the customs territory of the United States; and (B) (i) with respect to an article that is an article of a Reconstruction Opportunity Zone in Pakistan, the sum of— (I) the cost or value of the materials produced in 1 or more Reconstruction Opportunity Zones in Pakistan or Afghanistan, (II) the direct costs of processing operations performed in 1 or more Reconstruction Opportunity Zones in Pakistan or Afghanistan, and (III) the cost or value of materials produced in the United States, determined in accordance with paragraph (2), is not less than 35 percent of the appraised value of the article at the time it is entered into the United States; or (ii) with respect to an article that is an article of a Reconstruction Opportunity Zone in Afghanistan, the sum of— (I) the cost or value of the materials produced in 1 or more Reconstruction Opportunity Zones in Pakistan or Afghanistan, (II) the cost or value of the materials produced in 1 or more countries that are members of the South Asian Association for Regional Cooperation, (III) the direct costs of processing operations performed in 1 or more Reconstruction Opportunity Zones in Pakistan or Afghanistan, and (IV) the cost or value of materials produced in the United States, determined in accordance with paragraph (2), is not less than 35 percent of the appraised value of the article at the time it is entered into the United States. (2) Determination of 35 percent for articles from Reconstruction Opportunity Zones If the cost or value of materials produced in the customs territory of the United States is included with respect to an article described in paragraph (1), for purposes of determining the 35-percent appraised value requirement under that paragraph, not more than 15 percent of the appraised value of the article at the time the article is entered into the United States may be attributable to the cost or value of such United States materials. (d) Rules of origin for certain articles of Reconstruction Opportunity Zones in afghanistan (1) In general The duty-free treatment proclaimed with respect to an article described in subsection (a)(2) shall apply to any article subject to such proclamation that is the growth, product, or manufacture of 1 or more Reconstruction Opportunity Zones in Afghanistan if— (A) that article is imported directly from a Reconstruction Opportunity Zone in Afghanistan into the customs territory of the United States; and (B) with respect to that article, the sum of— (i) the cost or value of the materials produced in 1 or more Reconstruction Opportunity Zones in Afghanistan, (ii) the cost or value of the materials produced in 1 or more countries that are members of the South Asian Association for Regional Cooperation, (iii) the direct costs of processing operations performed in 1 or more Reconstruction Opportunity Zones in Afghanistan, and (iv) the cost or value of materials produced in the United States, determined in accordance with paragraph (2), is not less than 35 percent of the appraised value of the product at the time it is entered into the United States. (2) Determination of 35 percent for articles from reconstruction opportunity zones If the cost or value of materials produced in the customs territory of the United States is included with respect to an article described in paragraph (1)(B), for purposes of determining the 35-percent appraised value requirement under that paragraph, not more than 15 percent of the appraised value of the article at the time the article is entered into the United States may be attributable to the cost or value of such United States materials. (e) Exclusions An article shall not be treated as the growth, product, or manufacture of 1 or more Reconstruction Opportunity Zones, and no material shall be included for purposes of determining the 35-percent appraised value requirement under subsection (c)(1) or (d)(1), by virtue of having merely undergone— (1) simple combining or packaging operations; or (2) mere dilution with water or with another substance that does not materially alter the characteristics of the article or material. (f) Direct costs of processing operations (1) In general For purposes of subsections (c) and (d), the term direct costs of processing operations (A) all actual labor costs relating to the growth, production, manufacture, or assembly of the article, including— (i) fringe benefits; (ii) on-the-job training; and (iii) costs of engineering, supervisory, quality control, and similar personnel; and (B) costs relating to dyes, molds, tooling, and depreciation on machinery and equipment that are allocable to the article. (2) Excluded costs For purposes of subsections (c) and (d), the term direct costs of processing operations (A) profit; and (B) general expenses of doing business that are either not allocable to the article or are not related to the growth, production, manufacture, or assembly of the article, such as administrative salaries, casualty and liability insurance, advertising, and salesmen’s salaries, commissions, or expenses. (g) Regulations The Secretary of the Treasury, after consultation with the United States Trade Representative, shall prescribe such regulations as may be necessary to carry out this section. The regulations may provide that, in order for an article to be eligible for duty-free treatment under this section, the article shall be— (1) wholly the growth, product, or manufacture of 1 or more Reconstruction Opportunity Zones; or (2) a new or different article of commerce that has been grown, produced, or manufactured in 1 or more Reconstruction Opportunity Zones. 6. Duty-free treatment for certain textile and apparel articles (a) Duty-Free treatment The President may proclaim duty-free treatment for any textile or apparel article described in subsection (b) if the President determines that Pakistan or Afghanistan, as the case may be, has satisfied the requirements set forth in section 7. (b) Textile or apparel articles described A textile or apparel article described in this subsection is an article in 1 of the following categories: (1) Articles of Reconstruction Opportunity Zones An article that— (A) is the product of 1 or more Reconstruction Opportunity Zones; and (B) falls within the scope of 1 of the following textile and apparel category numbers, as set forth in the HTS (as in effect on January 22, 2020): 237 641 751 330 642 752 331 643 758 333 644 759 334 650 831 335 651 832 336 653 833 341 654 834 342 665 835 350 669 836 351 733 838 353 734 839 354 735 840 360 736 842 361 738 843 362 739 844 363 740 845 369 741 846 465 742 850 469 743 851 630 744 852 631 745 858 633 746 859 634 747 863 635 748 899 636 750 (2) Articles of Reconstruction Opportunity Zones in Afghanistan An article that— (A) is the product of 1 or more Reconstruction Opportunity Zones in Afghanistan; and (B) falls within the scope of 1 of the following textile and apparel category numbers, as set forth in the HTS (as in effect on January 22, 2020): 201 439 459 414 440 464 431 442 670 433 444 800 434 445 810 435 446 870 436 448 871 438 (3) Certain other textile and apparel articles An article that— (A) is the product of 1 or more Reconstruction Opportunity Zones; (B) falls within the scope of 1 of the following textile and apparel category numbers as set forth in the HTS (as in effect on January 22, 2020); and (C) is covered by the corresponding description for such category: (i) Category 239 An article in category 239 (relating to cotton and man-made fiber babies’ garments) except for baby socks and baby booties described in subheading 6111.20.6050, 6111.30.5050, or 6111.90.5050 of the HTS. (ii) Category 338 An article in category 338 (relating to men’s and boys’ cotton knit shirts) if the article is a certain knit-to-shape garment that meets the definition included in Statistical Note 6 to Chapter 61 of the HTS, and is provided for in subheading 6110.20.1026, 6110.20.2067 or 6110.90.9067 of the HTS. (iii) Category 339 An article in category 339 (relating to women’s and girls’ cotton knit shirts and blouses) if the article is a knit-to-shape garment that meets the definition included in Statistical Note 6 to Chapter 61 of the HTS, and is provided for in subheading 6110.20.1031, 6110.20.2077, or 6110.90.9071 of the HTS. (iv) Category 359 An article in category 359 (relating to other cotton apparel) except swimwear provided for in subheading 6112.39.0010, 6112.49.0010, 6211.11.8010, 6211.11.8020, 6211.12.8010, or 6211.12.8020 of the HTS. (v) Category 632 An article in category 632 (relating to man-made fiber hosiery) if the article is panty hose provided for in subheading 6115.21.0020 of the HTS. (vi) Category 638 An article in category 638 (relating to men’s and boys’ man-made fiber knit shirts) if the article is a knit-to-shape garment that meets the definition included in Statistical Note 6 to Chapter 61 of the HTS, and is provided for in subheading 6110.30.2051, 6110.30.3051, or 6110.90.9079 of the HTS. (vii) Category 639 An article in category 639 (relating to women’s and girls’ man-made fiber knit shirts and blouses) if the article is a knit-to-shape garment that meets the definition included in Statistical Note 6 to Chapter 61 of the HTS, and is provided for in subheading 6110.30.2061, 6110.30.3057, or 6110.90.9081 of the HTS. (viii) Category 647 An article in category 647 (relating to men’s and boys’ man-made fiber trousers) if the article is ski/snowboard pants that meets the definition included in Statistical Note 4 to Chapter 62 of the HTS, and is provided for in subheading 6203.43.3510, 6210.40.5031, or 6211.20.1525 of the HTS. (ix) Category 648 An article in category 648 (relating to women’s and girls’ man-made fiber trousers) if the article is ski/snowboard pants that meets the definition included in Statistical Note 4 to Chapter 62 of the HTS, and is provided for in subheading 6204.63.3010, 6210.50.5031, or 6211.20.1555 of the HTS. (x) Category 659 An article in category 659 (relating to other man-made fiber apparel) except for swimwear provided for in subheading 6112.31.0010, 6112.31.0020, 6112.41.0010, 6112.41.0020, 6112.41.0030, 6112.41.0040, 6211.11.1010, 6211.11.1020, 6211.12.1010, or 6211.12.1020 of the HTS. (xi) Category 666 An article in category 666 (relating to other man-made fiber furnishings) except for window shades and window blinds provided for in subheading 6303.12.0010 or 6303.92.2030 of the HTS. (4) Certain other articles An article that— (A) is the product of 1 or more Reconstruction Opportunity Zones; and (B) falls within the scope of 1 of the following statistical reporting numbers of the HTS (as in effect on January 22, 2020): 4202.12.8010 6210.20.3000 6304.99.1000 4202.12.8050 6210.20.7000 6304.99.2500 4202.22.4010 6210.30.3000 6304.99.4000 4202.22.7000 6210.30.7000 6304.99.6030 4202.22.8070 6210.40.3000 6306.22.9010 4202.92.3010 6210.40.7000 6306.29.1100 4202.92.6010 6210.50.3000 6306.29.2100 4202.92.9010 6210.50.7000 6306.40.4100 4202.92.9015 6211.20.0810 6306.40.4900 5601.29.0010 6211.20.0820 6306.91.0000 5702.39.2090 6211.32.0003 6306.99.0000 5702.49.2000 6211.33.0003 6307.10.2030 5702.50.5900 6211.42.0003 6307.20.0000 5702.99.2000 6211.43.0003 6307.90.7200 5703.90.0000 6212.10.3000 6307.90.7500 5705.00.2090 6212.10.7000 6307.90.8500 6108.22.1000 6212.90.0050 6307.90.8950 6111.90.7000 6213.90.0500 6307.90.8985 6113.00.1005 6214.10.1000 6310.90.1000 6113.00.1010 6216.00.0800 6406.99.1580 6113.00.1012 6216.00.1300 6501.00.6000 6115.29.4000 6216.00.1900 6502.00.2000 6115.30.1000 6216.00.2600 6502.00.4000 6115.99.4000 6216.00.3100 6502.00.9060 6116.10.0800 6216.00.3500 6504.00.3000 6116.10.1300 6216.00.4600 6504.00.6000 6116.10.4400 6217.10.1010 6504.00.9045 6116.10.6500 6217.10.8500 6504.00.9075 6116.10.9500 6301.90.0020 6505.10.0000 6116.92.0800 6302.29.0010 6505.90.8015 6116.93.0800 6302.39.0020 6505.90.9050 6116.99.3500 6302.59.3010 6505.90.9076 6117.10.4000 6302.99.1000 9404.90.2000 6117.80.3010 6303.99.0030 9404.90.8523 6117.80.8500 6304.19.3030 9404.90.9523 6210.10.2000 6304.91.0060 9404.90.9570 6210.10.7000 (c) Rules of origin for certain covered articles (1) General rules Except with respect to an article listed in paragraph (2) of subsection (b), the President may proclaim duty-free treatment for a textile or apparel article described in that subsection only if the article is imported directly into the customs territory of the United States from a Reconstruction Opportunity Zone and— (A) the article is wholly the growth, product, or manufacture of 1 or more Reconstruction Opportunity Zones; (B) the article is a yarn, thread, twine, cordage, rope, cable, or braiding, and— (i) the constituent staple fibers are spun in, or (ii) the continuous filament fiber is extruded in, 1 or more Reconstruction Opportunity Zones; (C) the article is a fabric, including a fabric classifiable under chapter 59 of the HTS, and the constituent fibers, filaments, or yarns are woven, knitted, needled, tufted, felted, entangled, or transformed by any other fabric-making process in 1 or more Reconstruction Opportunity Zones; or (D) the article is any other textile or apparel article that is cut (or knit-to-shape) and sewn or otherwise assembled in 1 or more Reconstruction Opportunity Zones from its component pieces. (2) Special rules (A) Certain made-up articles, textile articles in the piece, and certain other textiles and textile articles Notwithstanding paragraph (1)(D) and except as provided in subparagraphs (C) and (D) of this paragraph, subparagraph (A), (B), or (C) of paragraph (1), as appropriate, shall determine whether an article that is classifiable under 1 of the following headings or subheadings of the HTS shall be considered to meet the rules of origin of this subsection: 5609, 5807, 5811, 6209.20.50.40, 6213, 6214, 6301, 6302, 6303, 6304, 6305, 6306, 6307.10, 6307.90, 6308, and 9404.90. (B) Certain knit-to-shape textiles and textile articles Notwithstanding paragraph (1)(D) and except as provided in subparagraphs (C) and (D) of this paragraph, a textile or apparel article that is wholly formed on seamless knitting machines or by hand-knitting in 1 or more Reconstruction Opportunity Zones shall be considered to meet the rules of origin of this subsection. (C) Certain dyed and printed textiles and textile articles Notwithstanding paragraph (1)(D), an article classifiable under subheading 6117.10, 6213.00, 6214.00, 6302.22, 6302.29, 6302.52, 6302.53, 6302.59, 6302.92, 6302.93, 6302.99, 6303.92, 6303.99, 6304.19, 6304.93, 6304.99, 9404.90.85, or 9404.90.95 of the HTS, except for an article classifiable under 1 of such subheadings as of cotton or of wool or consisting of fiber blends containing 16 percent or more by weight of cotton, shall be considered to meet the rules of origin of this subsection if the fabric in the article is both dyed and printed in 1 or more Reconstruction Opportunity Zones, and such dyeing and printing is accompanied by 2 or more of the following finishing operations: bleaching, shrinking, fulling, napping, decating, permanent stiffening, weighting, permanent embossing, or moireing. (D) Fabrics of silk, cotton, man-made fiber, or vegetable fiber Notwithstanding paragraph (1)(C), a fabric classifiable under the HTS as of silk, cotton, man-made fiber, or vegetable fiber shall be considered to meet the rules of origin of this subsection if the fabric is both dyed and printed in 1 or more Reconstruction Opportunity Zones, and such dyeing and printing is accompanied by 2 or more of the following finishing operations: bleaching, shrinking, fulling, napping, decating, permanent stiffening, weighting, permanent embossing, or moireing. (d) Rules of origin for covered articles that are products of 1 or more Reconstruction Opportunity Zones in Afghanistan (1) General rules Duty-free treatment may be proclaimed for an article listed in subsection (b)(2) only if the article is imported directly into the customs territory of the United States from a Reconstruction Opportunity Zone in Afghanistan and— (A) the article is wholly the growth, product, or manufacture of 1 or more Reconstruction Opportunity Zones in Afghanistan, (B) the article is a yarn, thread, twine, cordage, rope, cable, or braiding, and— (i) the constituent staple fibers are spun in, or (ii) the continuous filament fiber is extruded in, 1 or more Reconstruction Opportunity Zones in Afghanistan; (C) the article is a fabric, including a fabric classifiable under chapter 59 of the HTS, and the constituent fibers, filaments, or yarns are woven, knitted, needled, tufted, felted, entangled, or transformed by any other fabric-making process in 1 or more Reconstruction Opportunity Zones in Afghanistan; or (D) the article is any other textile or apparel article that is cut (or knit-to-shape) and sewn or otherwise assembled in 1 or more Reconstruction Opportunity Zones in Afghanistan from its component pieces. (2) Special rules (A) Certain made-up articles, textile articles in the piece, and certain other textiles and textile articles Notwithstanding paragraph (1)(D) and except as provided in subparagraphs (C) and (D) of this paragraph, subparagraph (A), (B), or (C) of paragraph (1), as appropriate, shall determine whether an article that is classifiable under 1 of the following headings or subheadings of the HTS shall be considered to meet the rules of origin of this subsection: 5609, 5807, 5811, 6209.20.50.40, 6213, 6214, 6301, 6302, 6303, 6304, 6305, 6306, 6307.10, 6307.90, 6308, and 9404.90. (B) Certain knit-to-shape textiles and textile articles Notwithstanding paragraph (1)(D) and except as provided in subparagraphs (C) and (D) of this paragraph, a textile or apparel article that is wholly formed on seamless knitting machines or by hand-knitting in 1 or more Reconstruction Opportunity Zones in Afghanistan shall be considered to meet the rules of origin of this subsection. (C) Certain dyed and printed textiles and textile articles Notwithstanding paragraph (1)(D), an article classifiable under subheading 6117.10, 6213.00, 6214.00, 6302.22, 6302.29, 6302.52, 6302.53, 6302.59, 6302.92, 6302.93, 6302.99, 6303.92, 6303.99, 6304.19, 6304.93, 6304.99, 9404.90.85, or 9404.90.95 of the HTS, except for an article classifiable under 1 of such subheadings as of cotton or of wool or consisting of fiber blends containing 16 percent or more by weight of cotton, shall be considered to meet the rules of origin of this subsection if the fabric in the article is both dyed and printed in 1 or more Reconstruction Opportunity Zones in Afghanistan, and such dyeing and printing is accompanied by 2 or more of the following finishing operations: bleaching, shrinking, fulling, napping, decating, permanent stiffening, weighting, permanent embossing, or moireing. (D) Fabrics of silk, cotton, man-made fiber or vegetable fiber Notwithstanding paragraph (1)(C), a fabric classifiable under the HTS as of silk, cotton, man-made fiber, or vegetable fiber shall be considered to meet the rules of origin of this subsection if the fabric is both dyed and printed in 1 or more Reconstruction Opportunity Zones in Afghanistan, and such dyeing and printing is accompanied by 2 or more of the following finishing operations: bleaching, shrinking, fulling, napping, decating, permanent stiffening, weighting, permanent embossing, or moireing. (e) Regulations The Secretary of the Treasury, after consultation with the United States Trade Representative, shall prescribe such regulations as may be necessary to carry out this section. 7. Protections against unlawful transshipment (a) Duty-Free treatment conditioned on enforcement measures (1) In general The President may not proclaim duty-free treatment described in section 6 for textile or apparel articles described in subsection (b) of that section that are imported from a Reconstruction Opportunity Zone unless the President determines that the Government of Pakistan or Afghanistan, as the case may be— (A) has adopted an effective visa or electronic certification system, domestic laws, and enforcement procedures applicable to such articles to prevent unlawful transshipment of the articles and the use of false documents relating to the importation of such articles into the United States; (B) has enacted legislation or promulgated regulations that would permit U.S. Customs and Border Protection verification teams to have the access necessary to investigate thoroughly allegations of unlawful transshipment through Pakistan or Afghanistan, as the case may be; (C) agrees to provide U.S. Customs and Border Protection with a monthly report on shipments of such articles from each facility engaged in the production of such articles in a Reconstruction Opportunity Zone; (D) will cooperate fully with the United States to address and take action necessary to prevent circumvention, as described in article 5 of the Agreement on Textiles and Clothing; (E) agrees to require each entity engaged in the production or manufacture of such articles in a Reconstruction Opportunity Zone— (i) to register with the competent government authority; (ii) to provide that authority with— (I) the name and address of the entity, including the location of all textile or apparel facilities owned or operated by that entity in Pakistan or Afghanistan, as the case may be; (II) the telephone number, facsimile number, and electronic mail address of the entity; (III) the names and nationalities of the owners, directors, and corporate officers of the entity, and their positions within the entity; (IV) the number of employees of the entity and their occupations; (V) a general description of the textile and apparel articles described in section 6(b) the entity produces and the production capacity of the entity; (VI) the number and type of machines the entity uses to produce such articles at each facility; (VII) the approximate number of hours the machines operate per week; (VIII) the identity of any supplier to the entity of such articles, or fabrics, yarns, or fibers used in the production of such articles; and (IX) the name of, and contact information for, each of the customers of the entity in the United States; and (iii) to update the information under clause (ii) as changes occur; (F) agrees to provide to U.S. Customs and Border Protection on a timely basis all of the information received by the competent government authority under subparagraph (E) and to provide U.S. Customs and Border Protection with an annual update of that information; (G) agrees to require that all producers and exporters of textile and apparel articles described in section 6(b) in a Reconstruction Opportunity Zone maintain complete records of the production and the export of such articles, including materials used in the production, for at least 5 years after the production or export (as the case may be); and (H) agrees to provide, on a timely basis, at the request of U.S. Customs and Border Protection, documentation establishing the eligibility of such articles for duty-free treatment under section 6. (2) Documentation establishing eligibility of articles for duty-free treatment For purposes of paragraph (1)(H), documentation establishing the eligibility of a textile or apparel article described in section 6(b) for duty-free treatment under section 6 includes documentation such as production records, information relating to the place of production, the number and identification of the types of machinery used in production, the number of workers employed in production, and certification from the manufacturer and the exporter. (b) Customs procedures and enforcement (1) In general (A) Regulations The Secretary of the Treasury, after consultation with the United States Trade Representative, shall prescribe regulations setting forth customs procedures similar in all material respects to the requirements of article 5.4 of the USMCA as implemented pursuant to United States law, which shall apply to any importer that claims duty-free treatment for an article under section 6. (B) Determination In order for articles produced in a Reconstruction Opportunity Zone to qualify for duty-free treatment under section 6, there shall be in effect a determination by the President that Pakistan or Afghanistan, as the case may be— (i) has implemented and follows, or (ii) is making substantial progress toward implementing and following, procedures and requirements similar in all material respects to the relevant procedures and requirements under chapter 5 of the USMCA. (2) Certificate of origin A certificate of origin that otherwise would be required pursuant to the provisions of paragraph (1) shall not be required in the case of an article imported under section 6 if such certificate of origin would not be required under article 5.5 of the USMCA, as implemented pursuant to United States law, if the article were imported from Mexico. (3) Penalties If the President determines, based on sufficient evidence, that an entity has engaged in unlawful transshipment described in paragraph (4), the President shall deny for a period of 5 years beginning on the date of the determination duty-free treatment under section 6 for articles of the entity, any successor of the entity, and any other entity owned, operated, or controlled by the principals of the entity. (4) Unlawful transshipment described For purposes of this section, unlawful transshipment occurs when duty-free treatment for a textile or apparel article described in section 6(b) has been claimed on the basis of material false information concerning the country of origin, manufacture, processing, or assembly of the article or any of its components. For purposes of the preceding sentence, false information is material if disclosure of the true information would mean or would have meant that the article is or was ineligible for duty-free treatment under section 6. (5) Monitoring and reports to Congress The Commissioner of U.S. Customs and Border Protection shall monitor and, not later than March 31 of each year, submit to Congress a report on— (A) the effectiveness of the visa or electronic certification systems and the implementation of legislation and regulations described in subsection (a); and (B) measures taken by the governments of Pakistan and Afghanistan to prevent circumvention as described in article 5 of the Agreement on Textile and Clothing. (c) Additional customs enforcement (1) In general The Commissioner of U.S. Customs and Border Protection shall— (A) make available technical assistance to Pakistan and Afghanistan— (i) in the development and implementation of visa or electronic certification systems, legislation, and regulations described in subparagraphs (A) and (B) of subsection (a)(1); and (ii) to train officials of Pakistan and Afghanistan in anti-transshipment enforcement; (B) send production verification teams to Pakistan and Afghanistan as necessary; and (C) to the extent feasible, include Pakistan and Afghanistan in the Electronic Certification System of U.S. Customs and Border Protection or other relevant electronic certification program. (2) Authorization of appropriations There is authorized to be appropriated to U.S. Customs and Border Protection to carry out this subsection $10,000,000 for each of fiscal years 2021 through 2031. 8. Technical assistance, capacity building, compliance assessment, and remediation program (a) Definitions In this section: (1) Appropriate congressional committees The term appropriate congressional committees (2) Textile or apparel exporting enterprise The term textile or apparel exporting enterprise (b) Eligibility (1) Presidential certification of compliance with requirements Upon the expiration of the 24-month period beginning on the date on which the President notifies Congress of the President’s intention to designate an area within Pakistan or Afghanistan as a Reconstruction Opportunity Zone under section 4, duty-free treatment shall continue to apply under this Act only if the President determines and certifies to Congress that the Government of Pakistan or Afghanistan, as the case may be— (A) has implemented the requirements set forth in subsections (c) and (d); and (B) has agreed to require textile or apparel exporting enterprises to participate in the program described in subsection (d) and has developed a system to ensure participation in such program by such enterprises, including by developing and maintaining the registry described in subsection (c)(2)(A). (2) Extension The President may extend the period for compliance by Pakistan or Afghanistan under paragraph (1) if the President— (A) determines that the Government of Pakistan or Afghanistan, as the case may be, has made a good faith effort toward such compliance and has agreed to take additional actions to come into full compliance that are satisfactory to the President; and (B) not later than 180 days after the last day of the 24-month period specified in paragraph (1), and every 180 days thereafter, submits to the appropriate congressional committees a report identifying— (i) the actions that the Government of Pakistan or Afghanistan, as the case may be, has agreed to take to come into full compliance under paragraph (1); and (ii) the progress made over the preceding 180-day period in implementing such actions. (3) Continuing compliance (A) Termination of eligibility for duty-free treatment If, after making a certification under paragraph (1), the President determines that Pakistan or Afghanistan is no longer meeting the requirements set forth in paragraph (1), the President shall terminate the eligibility of Pakistan or Afghanistan, as the case may be, provided under section 4(b), unless the President determines, after consulting with the appropriate congressional committees, that meeting such requirements is not practicable because of extraordinary circumstances existing in Pakistan or Afghanistan, as the case may be, when the determination is made. (B) Subsequent compliance If, after terminating the eligibility of Pakistan or Afghanistan under subparagraph (A), the President determines that Pakistan or Afghanistan, as the case may be, is meeting the requirements set forth in paragraph (1), the President shall reinstate the eligibility of Pakistan or Afghanistan, as the case may be, under section 4(b). (c) Labor official (1) In general The governments of Pakistan and Afghanistan shall designate a labor official within that Government who— (A) reports directly to the President of Pakistan or Afghanistan, as the case may be; (B) is chosen by the President of Pakistan or Afghanistan, as the case may be, in consultation with labor unions and industry associations; and (C) is vested with the authority to perform the functions described in paragraph (2). (2) Functions The functions of the labor official designated under paragraph (1) shall include— (A) developing and maintaining a registry of textile or apparel exporting enterprises, and developing, in consultation and coordination with any other appropriate officials of the Government of Pakistan or Afghanistan, as the case may be, a system to ensure participation by such enterprises in the program described in subsection (d); (B) overseeing the implementation of the program described in subsection (d); (C) receiving and investigating comments from any interested party regarding the conditions described in subsection (d)(2) in facilities of textile or apparel exporting enterprises listed in the registry described in subparagraph (A) and, as appropriate, referring such comments or the result of such investigations to the appropriate authorities of Pakistan or Afghanistan, as the case may be, or to the entity operating the program described in subsection (d); (D) assisting, in consultation and coordination with any other appropriate authorities of Pakistan or Afghanistan, as the case may be, textile or apparel exporting enterprises listed in the registry described in subparagraph (A) in meeting the conditions described in subsection (d)(2); and (E) coordinating, with the assistance of the entity operating the program described in subsection (d), a committee comprised of appropriate representatives of government agencies, employers, and workers, as well as other relevant interested parties, for the purposes of— (i) evaluating progress in implementing the program described in subsection (d); and (ii) consulting on improving core labor standards and working conditions in the textile and apparel sector in Pakistan or Afghanistan, as the case may be, and on other matters of common concern relating to such core labor standards and working conditions. (d) Technical assistance, capacity building, compliance assessment, and remediation program (1) In general The governments of Pakistan and Afghanistan, in cooperation with the International Labour Organization, shall each establish a program meeting the requirements under paragraph (3)— (A) to assess compliance by textile or apparel exporting enterprises listed in the registry described in subsection (c)(2)(A) with the conditions described in paragraph (2) and to assist such enterprises in meeting such conditions; and (B) to provide assistance to improve the capacity of that government— (i) to inspect facilities of textile or apparel exporting enterprises listed in the registry described in subsection (c)(2)(A); and (ii) to enforce national labor laws and resolve labor disputes, including through measures described in paragraph (5). (2) Conditions described The conditions described in this paragraph are— (A) compliance with core labor standards; and (B) compliance with the labor laws of Pakistan or Afghanistan, as the case may be, that relate directly to core labor standards and to ensuring acceptable conditions of work with respect to minimum wages, hours of work, and occupational health and safety. (3) Requirements The program established under paragraph (1) shall— (A) be operated by the International Labour Organization (or any subdivision, instrumentality, or designee thereof) that publishes annual reports in accordance with paragraph (4); (B) be developed through a participatory process that includes the labor official designated pursuant to subsection (c) and appropriate representatives of government agencies, employers, and workers; (C) assess compliance by each textile or apparel exporting enterprise listed in the registry described in subsection (c)(2)(A) with the conditions described in paragraph (2) and identify any deficiencies by such enterprise with respect to meeting such conditions, including— (i) by conducting site visits to facilities of the enterprise; (ii) by conducting confidential interviews with workers and management of the facilities of the enterprise; and (iii) by providing to management and workers, and as applicable, worker organizations in the enterprise, on a confidential basis— (I) the results of the assessment carried out under this subparagraph; and (II) specific suggestions for remediating any such deficiencies; (D) assist the textile or apparel exporting enterprise in remediating any deficiencies identified under subparagraph (C); (E) conduct prompt follow-up site visits to the facilities of the textile or apparel exporting enterprise to assess progress on remediation of any deficiencies identified under subparagraph (C); and (F) provide training to workers and management of the textile or apparel exporting enterprise, and as appropriate, to other persons or entities, to promote compliance with the conditions described in paragraph (2). (4) Annual report (A) In general Not later than 1 year after the date on which Pakistan or Afghanistan, as the case may be, has implemented the program under this subsection, and annually thereafter, the entity operating the program shall publish a report, covering the preceding 1-year period, that includes the following: (i) The name of each textile or apparel exporting enterprise listed in the registry described in subsection (c)(2)(A) that has been identified as having met the conditions described in paragraph (2). (ii) The name of each textile or apparel exporting enterprise listed in the registry described in subsection (c)(2)(A) that has been identified as having deficiencies with respect to the conditions set forth in paragraph (2), and has failed to remedy such deficiencies. (iii) For each textile or apparel exporting enterprise listed under clause (ii)— (I) a description of the deficiencies found to exist and the specific suggestions for remediating such deficiencies made by the entity operating the program; (II) a description of the efforts by the enterprise to remediate the deficiencies, including a description of assistance provided by any entity to assist in such remediation; and (III) with respect to deficiencies that have not been remediated, the amount of time that has elapsed since the deficiencies were first identified in a report under this subparagraph. (iv) For each textile or apparel exporting enterprise identified as having deficiencies with respect to the conditions described in paragraph (2) in a previous report under this subparagraph— (I) a description of the progress made in remediating such deficiencies since the submission of the previous report; and (II) an assessment of whether any aspect of such deficiencies persists. (B) Availability Each report required by subparagraph (A) shall be made available to the public in a readily accessible manner. (5) Capacity building The assistance to the governments of Pakistan and Afghanistan referred to in paragraph (1)(B) shall include programs— (A) to review the labor laws and regulations of Pakistan and Afghanistan and to develop and implement strategies for improving labor laws and regulations; (B) to develop additional strategies for facilitating protection of core labor standards and providing acceptable conditions of work with respect to minimum wages, hours of work, and occupational safety and health, including through legal, regulatory, and institutional reform; (C) to increase awareness of core labor standards and national labor laws; (D) to promote consultation and cooperation between government representatives, employers, worker representatives, and United States importers on matters relating to core labor standards and national labor laws; (E) to assist the labor official designated pursuant to subsection (c) in establishing and coordinating operation of the committee described in subsection (c)(2)(E); (F) to assist worker representatives in more fully and effectively advocating on behalf of members; and (G) to provide on-the-job training and technical assistance to labor inspectors, judicial officers, and other relevant personnel to build capacity to enforce national labor laws and resolve labor disputes. (e) Compliance with eligibility criteria (1) Country compliance with core labor standards eligibility criteria In making a determination of whether Pakistan or Afghanistan, as the case may be, is meeting the requirement set forth in section 4(b)(1)(E) relating to core labor standards, the President shall consider the reports required by subsection (d)(4). (2) Enterprise eligibility (A) Identification of producers Not later than 2 years after the date on which the President makes the certification under subsection (b)(1), and every 2 years thereafter, the President shall identify whether a textile or apparel exporting enterprise listed in the registry described in subsection (c)(2)(A) has failed to comply with core labor standards and the labor laws of Pakistan or Afghanistan, as the case may be, that directly relate to and are consistent with core labor standards. (B) Assistance to enterprises; withdrawal, suspension, or limitation of duty-free treatment For each textile or apparel exporting enterprise that the President identifies under subparagraph (A), the President shall seek to assist such enterprise in coming into compliance with core labor standards and the labor laws of Pakistan or Afghanistan, as the case may be, that directly relate to and are consistent with core labor standards. If such efforts fail, the President shall withdraw, suspend, or limit the application of duty-free treatment under section 6 to articles of such enterprise. (C) Reinstating duty-free treatment If, after withdrawing, suspending, or limiting the application of duty-free treatment under subparagraph (B) to articles of a textile or apparel exporting enterprise, the President determines that such enterprise is complying with core labor standards and the labor laws of Pakistan or Afghanistan, as the case may be, that directly relate to and are consistent with core labor standards, the President shall reinstate the application of duty-free treatment under section 6 to the articles of the enterprise. (D) Consideration of reports In making the identification under subparagraph (A) and the determination under subparagraph (C), the President shall consider the reports required by subsection (d)(4). (f) Reports by the President (1) In general Not later than 1 year after the date of the enactment of this Act, and annually thereafter, the President shall submit to the appropriate congressional committees a report on the implementation of this section during the preceding 1-year period. (2) Matters to be included Each report required by paragraph (1) shall include the following: (A) An explanation of the efforts of the governments of Pakistan and Afghanistan, the President, and the International Labour Organization to carry out this section. (B) A summary of each report required by (d)(4) during the preceding 1-year period and a summary of the findings contained in such report. (C) Identifications made under subsection (e)(2)(A) and determinations made under subsection (e)(2)(C). (g) Authorization of appropriations There is authorized to be appropriated to carry out this section $20,000,000 for the period beginning on October 1, 2021, and ending on September 30, 2031. 9. Review of eligibility of Pakistan and Afghanistan (a) In general Any interested party may file a request to have the President review the eligibility of Pakistan or Afghanistan under section 4(b) for the designation of Reconstruction Opportunity Zones under this Act. (b) Procedures To carry out subsection (a), the President shall use the same procedures applicable to reviewing the eligibility of countries for designation as beneficiary developing countries under section 502 of the Trade Act of 1974 ( 19 U.S.C. 2462 10. Limitations on providing duty-free treatment (a) In general (1) Proclamation Except as provided in paragraph (2), and subject to subsection (b) and the conditions described in sections 4 through 8, the President shall exercise the President’s authority under this Act and proclaim any duty-free treatment pursuant to that authority. (2) Waiver The President may waive the application of duty-free treatment under this Act with respect to articles imported from Reconstruction Opportunity Zones in Pakistan or Afghanistan or textile or apparel exporting enterprises receiving duty-free treatment under section 5 or 6 if the President determines that providing such treatment is inconsistent with the national interests of the United States. In making such a determination, the President shall consider— (A) obligations of the United States under international agreements; (B) the national economic interests of the United States; and (C) the foreign policy interests of the United States, including the economic development of— (i) the border region of Pakistan; and (ii) Afghanistan. (b) Withdrawal, suspension, or limitation of duty-Free treatment (1) In general The President may withdraw, suspend, or limit the application of duty-free treatment proclaimed under this Act. (2) Reconstruction Opportunity Zones In taking any action to withdraw, suspend, or limit duty-free treatment with respect to articles imported from Reconstruction Opportunity Zones, the President shall consider the factors set forth in— (A) subsections (b) and (c) of section 4 of this Act; and (B) subsections (b) and (c) of section 502 of the Trade Act of 1974 ( 19 U.S.C. 2462 (3) Enterprises In taking any action to withdraw, suspend, or limit duty-free treatment with respect to textile or apparel exporting enterprises receiving duty-free treatment under section 5 or 6, the President shall consider— (A) the factors set forth in— (i) subsections (b) and (c) of section 4 of this Act; and (ii) subsections (b) and (c) of section 502 of the Trade Act of 1974 ( 19 U.S.C. 2462 (B) the information described in section 4(d) relating to verification of the ownership and nature of the activities of such enterprises; and (C) any other relevant information the President determines to be appropriate. (c) Notice to Congress The President shall notify Congress— (1) of any action the President takes to withdraw, suspend, or limit the application of duty-free treatment with respect to Reconstruction Opportunity Zones in Pakistan or Afghanistan or textile or apparel exporting enterprises receiving duty-free treatment under section 5 or 6; and (2) if Pakistan or Afghanistan fails to adequately satisfy the factors set forth in— (A) subsections (b) and (c) of section 4 of this Act; or (B) subsections (b) and (c) of section 502 of the Trade Act of 1974 ( 19 U.S.C. 2462 11. Termination of duty-free treatment Duty-free treatment provided under this Act shall remain in effect through September 30, 2031.

Summary: Pakistan-Afghanistan Economic Development Act This bill allows for duty-free treatment for certain goods from designated Reconstruction Opportunity Zones (ROZs) in Afghanistan and the border regions of Pakistan. Specifically, the bill allows the President to designate ROZs within Afghanistan or parts of Pakistan, provided certain eligibility criteria are met. The countries must, among other conditions (1) establish (or make continual progress toward establishing) a market-based economy, the rule of law, certain economic policies, a system to combat corruption and bribery, and the protection of core labor standards; and (2) eliminate barriers to trade and investment. Additionally, the bill allows the President to provide duty-free treatment for certain textile and apparel products, as well as nontextile and nonapparel products, from a ROZ through September 30, 2031. The bill sets forth requirements to prevent the unlawful transshipment of textile or apparel products. Further, it outlines customs procedures and enforcement. Products from a ROZ in Afghanistan or Pakistan may continue to receive duty-free treatment only if the President certifies to Congress that the countries have complied with certain requirements, including that the countries must designate a labor official. The President may withdraw, suspend, or limit the application of duty-free treatment under the bill.