I
105TH CONGRESS
1ST SESSION
H. R. 2644
To provide to beneficiary countries under the Caribbean Basin Economic
Recovery Act benefits equivalent to those provided under the North
American Free Trade Agreement.
IN THE HOUSE OF REPRESENTATIVES
OCTOBER 9, 1997
Mr. ARCHER (for himself and Mr. CRANE) introduced the following bill; which
was referred to the Committee on Ways and Means
A BILL
To provide to beneficiary countries under the Caribbean
Basin Economic Recovery Act benefits equivalent to
those provided under the North American Free Trade
Agreement.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘United States-Carib-
bean Trade Partnership Act’’.
SEC. 2. FINDINGS AND POLICY.
(a) FINDINGS.—The Congress makes the following
findings:
(1) The Caribbean Basin Economic Recovery
Act represents a permanent commitment by the
United States to encourage the development of
strong democratic governments and revitalized
economies in neighboring countries in the Caribbean
Basin.
(2) The economic security of the countries in
the Caribbean Basin is potentially threatened by the
diversion of investment to Mexico as a result of the
North American Free Trade Agreement.
(3) Offering NAFTA equivalent benefits to
Caribbean Basin beneficiary countries, pending their
eventual accession to the NAFTA or a free trade
agreement comparable to the NAFTA, will promote
the growth of free enterprise and economic oppor-
tunity in the region, and thereby enhance the na-
tional security interests of the United States.
(4) Countries in the Western Hemisphere offer
the greatest opportunities for increased exports of
United States textile and apparel products.
(5) Given the greater propensity of countries lo-
cated in the Western Hemisphere to use United
States components and to purchase United States
products compared to other countries, increased
trade and economic activity between the United
States and countries in the Western Hemisphere will
create new jobs in the United States as a result of
expanding export opportunities.
(b) POLICY.—It is the policy of the United States—
(1) to offer to the products of Caribbean Basin
partnership countries tariffs and quota treatment
equivalent to that accorded to products of NAFTA
countries, and to seek the accession of these partner-
ship countries to the NAFTA or a free trade agree-
ment comparable to the NAFTA at the earliest pos-
sible date, with the goal of achieving full participa-
tion in the NAFTA or in a free trade agreement
comparable to the NAFTA by all partnership coun-
tries by not later than January 1, 2005; and
(2) to assure that the domestic textile and ap-
parel industry remains competitive in the global
marketplace by encouraging the formation and ex-
pansion of ‘‘partnerships’’ between the textile and
apparel industry of the United States and the textile
and apparel industry of various countries located in
the Western Hemisphere.
SEC. 3. DEFINITIONS.
As used in this Act:
(1) PARTNERSHIP COUNTRY.—The term ‘‘part-
nership country’’ means a beneficiary country as de-
‘‘(i) the tariff treatment accorded at
any time to any textile or apparel article
that originates in the territory of a part-
nership country shall be identical to the
tariff treatment that is accorded at such
time under section 2 of the Annex to an
article described in the same 8-digit sub-
heading of the HTS that is a good of Mex-
ico and is imported into the United States;
‘‘(ii) duty-free treatment under this
title shall apply to any textile or apparel
article that is imported into the United
States from a partnership country and
that—
‘‘(I) is assembled in a partner-
ship country, from fabrics wholly
formed and cut in the United States
from yarns formed in the United
States, and is entered—
‘‘(aa) 
under 
subheading
9802.00.80 of the HTS; or
‘‘(bb) under chapter 61, 62,
or 63 of the HTS if, after such
assembly, the article would have
qualified for treatment under
subheading 9802.00.80 of the
HTS, but for the fact the article
was subjected to bleaching, gar-
ments dyeing, stone-washing, en-
zyme-washing, 
acid-washing,
perma-pressing, oven-baking, or
embroidery; or
‘‘(II) is knit-to-shape in a part-
nership country from yarns wholly
formed in the United States;
‘‘(III) is made in a partnership
country from fabric knit in a partner-
ship 
country 
from 
yarns 
wholly
formed in the United States;
‘‘(IV) is cut and assembled in a
partnership 
country 
from 
fabrics
wholly formed in the United States
from yarns wholly formed in the Unit-
ed States; or
‘‘(V) is identified under subpara-
graph (C) as a handloomed, hand-
made, or folklore article of such coun-
try and is certified as such by the
competent authority of such country;
and
‘‘(iii) no quantitative restriction or
consultation level may be applied to the
importation into the United States of any
textile or apparel article that—
‘‘(I) originates in the territory of
a partnership country, or
‘‘(II) qualifies for duty-free treat-
ment under subclause (I), (II), (III),
(IV), or (V) of clause (ii).
‘‘(B) NAFTA TRANSITION PERIOD TREAT-
MENT
OF
OTHER
NONORIGINATING
TEXTILE
AND APPAREL ARTICLES.—
‘‘(i) PREFERENTIAL
TARIFF
TREAT-
MENT.—Subject to clause (ii), the Presi-
dent may place in effect at any time dur-
ing the transition period with respect to
any textile or apparel article that—
‘‘(I) is a product of a partnership
country, but
‘‘(II) does not qualify as a good
that originates in the territory of a
partnership country or is eligible for
benefits under subparagraph (A)(ii),
tariff treatment that is identical to the in-
preference-level tariff treatment accorded
at such time under Appendix 6.B of the
Annex to an article described in the same
8-digit subheading of the HTS that is a
product of Mexico and is imported into the
United States. For purposes of this clause,
the ‘in-preference-level tariff treatment’ ac-
corded to an article that is a product of
Mexico is the rate of duty applied to that
article when imported in quantities less
than or equal to the quantities specified in
Schedule 6.B.1, 6.B.2., or 6.B.3. of the
Annex for imports of that article from
Mexico into the United States.
‘‘(ii) LIMITATIONS
ON
ALL
ARTI-
CLES.—(I) Tariff treatment under clause
(i) may be extended, during any calendar
year, to not more than 45,000,000 square
meter equivalents of cotton or man-made
fiber apparel, to not more than 1,500,000
square meter equivalents of wool apparel,
and to not more than 25,000,000 square
meter equivalents of goods entered under
subheading 9802.00.80 of the HTS.
‘‘(II) Except as provided in subclause
(III), the amounts set forth in subclause
(I) shall be allocated among the 7 partner-
ship countries with the largest volume of
exports to the United States of textile and
apparel goods in calendar year 1996, based
upon a pro rata share of the volume of tex-
tile and apparel goods of each of those 7
countries that entered the United States
under subheading 9802.00.80 of the HTS
during the first 12 months of the 14-
month period ending on the date of the en-
actment of the United States-Caribbean
Trade Partnership Act.
‘‘(III) Five percent of the amounts set
forth in subclause (I) shall be allocated
among the partnership countries, other
than those to which subclause (II) applies,
based upon a pro rata share of the exports
to the United States of textile and apparel
goods of each of those countries during the
first 12 months of the 14-month period
ending on the date of the enactment of the
United States-Caribbean Trade Partner-
ship Act.
‘‘(iii) 
PRIOR
CONSULTATION.—The
President may implement the preferential
‘‘(D) BILATERAL EMERGENCY ACTIONS.—
(i) The President may take—
‘‘(I) bilateral emergency tariff actions
of a kind described in section 4 of the
Annex with respect to any textile or ap-
parel article imported from a partnership
country if the application of tariff treat-
ment under subparagraph (A) to such arti-
cle results in conditions that would be
cause for the taking of such actions under
such section 4 with respect to an article
described in the same 8-digit subheading
of the HTS that is imported from Mexico;
or
‘‘(II) bilateral emergency quantitative
restriction actions of a kind described in
section 5 of the Annex with respect to im-
ports of any textile or apparel article de-
scribed in subparagraphs (B)(i) (I) and
(II) if the importation of such article into
the United States results in conditions that
would be cause for the taking of such ac-
tions under such section 5 with respect to
a like article that is a product of Mexico.
‘‘(ii) The requirement in paragraph (5) of
section 4 of the Annex (relating to providing
compensation) shall not be deemed to apply to
a bilateral emergency action taken under this
subparagraph.
‘‘(iii) For purposes of applying bilateral
emergency action under this subparagraph—
‘‘(I) the term ‘transition period’ in
sections 4 and 5 of the Annex shall be
deemed to be the period defined in para-
graph (5)(E); and
‘‘(II) any requirements to consult
specified in section 4 or 5 of the Annex are
deemed to be satisfied if the President re-
quests consultations with the partnership
country in question and the country does
not agree to consult within the time period
specified under such section 4 or 5, which-
ever is applicable.
‘‘(3) NAFTA TRANSITION PERIOD TREATMENT
OF CERTAIN OTHER ARTICLES ORIGINATING IN BEN-
EFICIARY COUNTRIES.—
‘‘(A) EQUIVALENT TARIFF TREATMENT.—
‘‘(i) IN GENERAL.—Subject to clause
(ii), the tariff treatment accorded at any
time during the transition period to any
article referred to in any of subparagraphs
(B) through (F) of paragraph (1) that
originates in the territory of a partnership
country shall be identical to the tariff
treatment that is accorded at such time
under Annex 302.2 of the NAFTA to an
article described in the same 8-digit sub-
heading of the HTS that is a good of Mex-
ico and is imported into the United States.
‘‘(ii) EXCEPTION.—Clause (i) does not
apply to any article accorded duty-free
treatment under U.S. Note 2(b) to sub-
chapter II of chapter 98 of the HTS.
‘‘(B) RELATIONSHIP TO SUBSECTION (h)
DUTY REDUCTIONS.—If at any time during the
transition period the rate of duty that would
(but for action taken under subparagraph (A)(i)
in regard to such period) apply with respect to
any article under subsection (h) is a rate of
duty that is lower than the rate of duty result-
ing from such action, then such lower rate of
duty shall be applied for the purposes of imple-
menting such action.
‘‘(4) CUSTOMS PROCEDURES.—
‘‘(A) IN GENERAL.—
‘‘(i) 
REGULATIONS.—Any 
importer
that claims preferential tariff treatment
under paragraph (2) or (3) shall comply
with customs procedures similar in all ma-
terial respects to the requirements of Arti-
cle 502(1) of the NAFTA as implemented
pursuant to United States law, in accord-
ance with regulations promulgated by the
Secretary of the Treasury.
‘‘(ii) DETERMINATION.—In order to
qualify for such preferential tariff treat-
ment and for a Certificate of Origin to be
valid with respect to any article for which
such treatment is claimed, there shall be in
effect a determination by the President
that—
‘‘(I) 
the 
partnership 
country
from which the article is exported,
and
‘‘(II) each partnership country in
which materials used in the produc-
tion of the article originate or undergo
production that contributes to a claim
that the article qualifies for such pref-
erential tariff treatment,
has implemented and follows, or is making
substantial progress toward implementing
and following, procedures and require-
ments similar in all material respects to
the relevant procedures and requirements
under chapter 5 of the NAFTA.
‘‘(B) CERTIFICATE OF ORIGIN.—The Cer-
tificate of Origin that otherwise would be re-
quired pursuant to the provisions of subpara-
graph (A) shall not be required in the case of
an article imported under paragraph (2) or (3)
if such Certificate of Origin would not be re-
quired under Article 503 of the NAFTA (as im-
plemented pursuant to United States law), if
the article were imported from Mexico.
‘‘(C) PENALTIES FOR TRANSSHIPMENTS.—
If the President determines, based on sufficient
evidence, that an exporter has engaged in will-
ful illegal transshipment or willful customs
fraud with respect to textile or apparel articles
for which preferential tariff treatment under
subparagraph (A) or (B) of paragraph (2) is
claimed, then the President shall deny all bene-
fits under this title to such exporter, and any
successors of such exporter, for a period of 2
years.
‘‘(D) STUDY BY USTR ON COOPERATION
OF
OTHER
COUNTRIES
CONCERNING
CIR-
CUMVENTION.—The United States Commis-
sioner of Customs shall conduct a study analyz-
ing the extent to which each partnership coun-
try—
‘‘(i) has cooperated fully with the
United States, consistent with its domestic
laws and procedures, in instances of cir-
cumvention or alleged circumvention of ex-
isting quotas on imports of textile and ap-
parel goods, to establish necessary relevant
facts in the places of import, export, and,
where applicable, transshipment, including
investigation of circumvention practices,
exchanges of documents, correspondence,
reports, and other relevant information, to
the extent such information is available;
‘‘(ii) has taken appropriate measures,
consistent with its domestic laws and pro-
cedures, against exporters and importers
involved in instances of false declaration
‘‘(D) The term ‘textile or apparel article’
means any article referred to in paragraph
(1)(A) that is a good listed in Appendix 1.1 of
the Annex.
‘‘(E) The term ‘transition period’ means,
with respect to a partnership country, the pe-
riod that begins on May 15, 1998, and ends on
the earlier of—
‘‘(i) July 15, 1999; or
‘‘(ii) the date on which—
‘‘(I) the United States first ap-
plies the NAFTA to the partnership
country upon its accession to the
NAFTA, or
‘‘(II) there enters into force with
respect to the United States and the
partnership country a free trade
agreement comparable to the NAFTA
that makes substantial progress in
achieving the negotiating objectives
set forth in section 108(b)(5) of the
North American Free Trade Agree-
ment Implementation Act (19 U.S.C.
3317(b)(5)).
‘‘(F) An article shall be deemed as origi-
nating in the territory of a partnership country
if the article meets the rules of origin for a
good set forth in chapter 4 of the NAFTA, and,
in the case of an article described in Appendix
6.A of the Annex, the requirements stated in
such Appendix 6.A for such article to be treated
as if it were an originating good. In applying
such chapter 4 or Appendix 6.A with respect to
a partnership country for purposes of this sub-
section—
‘‘(i) no countries other than the Unit-
ed States and partnership countries may
be treated as being Parties to the NAFTA,
‘‘(ii) references to trade between the
United States and Mexico shall be deemed
to refer to trade between the United States
and partnership countries, and
‘‘(iii) references to a Party shall be
deemed to refer to the United States or a
partnership country, and references to the
Parties shall be deemed to refer to any
combination of partnership countries or
the United States.’’.
(b) DETERMINATION REGARDING RETENTION
OF
DESIGNATION.—Section 212(e)(1) of the Caribbean Basin
Economic Recovery Act (19 U.S.C. 2702(e)) is amended—
(1) by inserting ‘‘(A)’’ after ‘‘(1)’’;
(2) by redesignating subparagraphs (A) and
(B) as clauses (i) and (ii), respectively;
(3) by adding at the end the following:
‘‘(B)(i) Based on the President’s review and
analysis described in subsection (f), the President
may determine if the preferential treatment under
section 213(b)(2) and (3) should be withdrawn, sus-
pended, or limited with respect to any article of a
partnership country. Such determination shall be in-
cluded in the report required by subsection (f).
‘‘(ii) Withdrawal, suspension, or limitation of
the preferential treatment under section 213(b)(2)
and (3) with respect to a partnership country shall
be taken only after the requirements of subsection
(a)(2) and paragraph (2) of this subsection have
been met.’’.
(c) REPORTING REQUIREMENTS.—Section 212(f) of
the Caribbean Basin Economic Recovery Act (19 U.S.C.
2702(f)) is amended to read as follows:
‘‘(f) REPORTING REQUIREMENTS.—Not later than 1
year after the date of the enactment of the United States-
Caribbean Trade Partnership Act and at the close of each
3-year period thereafter, the President shall submit to the
Congress a complete report regarding the operation of this
title, including—
‘‘(1) with respect to subsections (b) and (c) of
this section, the results of a general review of bene-
ficiary countries based on the considerations de-
scribed in such subsections;
‘‘(2) with respect to subsection (c)(4), the de-
gree to which a country follows accepted rules of
international trade provided for under the General
Agreement on Tariffs and Trade and the World
Trade Organization;
‘‘(3) with respect to subsection (c)(9), the ex-
tent to which beneficiary countries are providing or
taking steps to provide protection of intellectual
property rights comparable to the protection pro-
vided to the United States in bilateral intellectual
property rights agreements;
‘‘(4) with respect to subsection (b)(2) and sub-
section (c)(5), the extent that beneficiary countries
are providing or taking steps to provide protection of
investment and investors comparable to the protec-
tion provided to the United States in bilateral in-
vestment treaties;
‘‘(5) with respect to subsection (c)(3), the ex-
tent that beneficiary countries are providing the
United States and other WTO members (as such
term is defined in section 2(10) of the Uruguay
Round Agreements Act (19 U.S.C. 3501(10)) with
equitable and reasonable market access in the prod-
uct sectors for which benefits are provided under
this title;
‘‘(6) with respect to subsection (c)(11), the ex-
tent that beneficiary countries are cooperating with
the United States in administering the provisions of
section 213(b); and
‘‘(7) with respect to subsection (c)(8), the ex-
tent that beneficiary countries are meeting the inter-
nationally recognized worker rights criteria under
such subsection.
In the first report under this subsection, the President
shall include a review of the implementation of section
213(b), and his analysis of whether the benefits under
paragraphs (2) and (3) of such section further the objec-
tives of this title and whether such benefits should be con-
tinued.’’.
(d) CONFORMING AMENDMENT.—Section 213(a)(1)
of the Caribbean Basin Economic Recovery Act is amend-
ed by inserting ‘‘and except as provided in section
213(b)(2) and (3),’’ after ‘‘Tax Reform Act of 1986,’’.
SEC. 5. EFFECT OF NAFTA ON SUGAR IMPORTS FROM BEN-
EFICIARY COUNTRIES.
The President shall monitor the effects, if any, that
the implementation of the NAFTA has on the access of
beneficiary countries under the Caribbean Basin Economic
Recovery Act to the United States market for sugars, syr-
ups, and molasses. If the President considers that the
implementation of the NAFTA is affecting, or will like-
ly affect, in an adverse manner the access of such
countries to the United States market, the President shall
promptly—
(1) take such actions, after consulting with in-
terested parties and with the appropriate committees
of the House of Representatives and the Senate, or
(2) propose to the Congress such legislative ac-
tions,
as may be necessary or appropriate to ameliorate such ad-
verse effect.
SEC. 6. DUTY-FREE TREATMENT FOR CERTAIN BEVERAGES
MADE WITH CARIBBEAN RUM.
Section 213(a) of the Caribbean Basin Economic Re-
covery Act (19 U.S.C. 2703(a)) is amended—
(1) in paragraph (5), by striking ‘‘chapter’’ and
inserting ‘‘title’’; and
(2) by adding at the end the following new
paragraph:
‘‘(6) Notwithstanding paragraph (1), the duty-free
treatment provided under this title shall apply to liqueurs
and spirituous beverages produced in the territory of Can-
ada from rum if—
‘‘(A) such rum is the growth, product, or manu-
facture of a beneficiary country or of the Virgin Is-
lands of the United States;
‘‘(B) such rum is imported directly from a ben-
eficiary country or the Virgin Islands of the United
States into the territory of Canada, and such li-
queurs and spirituous beverages are imported di-
rectly from the territory of Canada into the customs
territory of the United States;
‘‘(C) when imported into the customs territory
of the United States, such liqueurs and spirituous
beverages are classified in subheading 2208.90 or
2208.40 of the HTS; and
‘‘(D) such rum accounts for at least 90 percent
by volume of the alcoholic content of such liqueurs
and spiritous beverages.’’.
SEC. 7. MEETINGS OF TRADE MINISTERS AND USTR.
(a) SCHEDULE OF MEETINGS.—The President shall
take the necessary steps to convene a meeting with the
trade ministers of the partnership countries in order to
establish a schedule of regular meetings, to commence as
soon as is practicable, of the trade ministers and the
Trade Representative, for the purpose set forth in sub-
section (b).
(b) PURPOSE.—The purpose of the meetings sched-
uled under subsection (a) is to reach agreement between
the United States and partnership countries on the likely
timing and procedures for initiating negotiations for part-
nership to accede to the NAFTA, or to enter into mutually
advantageous free trade agreements with the United
States that contain provisions comparable to those in the
NAFTA and would make substantial progress in achieving
the negotiating objectives set forth in section 108(b)(5)
of the North American Free Trade Agreement Implemen-
tation Act (19 U.S.C. 3317(b)(5)).
SEC. 8. REPORT ON ECONOMIC DEVELOPMENT AND MAR-
KET ORIENTED REFORMS IN THE CARIB-
BEAN.
(a) IN GENERAL.—The Trade Representative shall
make an assessment of the economic development efforts
and market oriented reforms in each partnership country
and the ability of each such country, on the basis of such
efforts and reforms, to undertake the obligations of the
NAFTA. The Trade Representative shall, not later than
July 1, 1998, submit to the President and to the Commit-
tee on Finance of the Senate and the Committee on Ways
and Means of the House of Representatives a report on
that assessment.
(b) ACCESSION TO NAFTA.—
(1) ABILITY
OF
COUNTRIES
TO
IMPLEMENT
NAFTA.—The Trade Representative shall include in
the report under subsection (a) a discussion of pos-
sible timetables and procedures pursuant to which
partnership countries can complete the economic re-
forms necessary to enable them to negotiate acces-
sion to the NAFTA. The Trade Representative shall
also include an assessment of the potential phase-in
periods that may be necessary for those partnership
countries with less developed economies to imple-
ment the obligations of the NAFTA.
(2) FACTORS IN ASSESSING ABILITY TO IMPLE-
MENT NAFTA.—In assessing the ability of each part-
nership country to undertake the obligations of the
NAFTA, the Trade Representative should consider,
among other factors—
(A) whether the country has joined the
WTO;
(B) the extent to which the country pro-
vides equitable access to the markets of that
country;
(C) the degree to which the country uses
export subsidies or imposes export performance
requirements or local content requirements;
(D) macroeconomic reforms in the country
such as the abolition of price controls on traded
goods and fiscal discipline;
(E) progress the country has made in the
protection of intellectual property rights;
(F) progress the country has made in the
elimination of barriers to trade in services;
(G) whether the country provides national
treatment to foreign direct investment;
(H) the level of tariffs bound by the coun-
try under the WTO (if the country is a WTO
member);
(I) the extent to which the country has
taken other trade liberalization measures; and
(J) the extent which the country works to
accommodate market access objectives of the
United States.
(c) PARITY REVIEW IN THE EVENT A NEW COUNTRY
ACCEDES TO NAFTA.—If—
(1) a country or group of countries accedes to
the NAFTA, or
(2) the United States negotiates a comparable
free trade agreement with another country or group
of countries,
the Trade Representative shall provide to the committees
referred to in subsection (a) a separate report on the
economic impact of the new trade relationship on partner-
ship countries. The report shall include any measures the
Trade Representative proposes to minimize the po-
tential for the diversion of investment from partnership
countries to the new NAFTA member or free trade agree-
ment partner.
SEC. 9. OVERRULING OF SCHMIDT BAKING COMPANY CASE
WITH RESPECT TO SEVERANCE PAY.
(a) IN GENERAL.—The Internal Revenue Code of
1986 shall be applied with respect to severance pay with-
out regard to the result reached in the case of Schmidt
Baking Company, Inc. v. Commissioner of Internal Reve-
nue, 107 T.C. 271 (1996).
(b) REGULATIONS.—The Secretary of the Treasury
or the Secretary’s delegate shall prescribe regulations to
reflect subsection (a).
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—Subsections (a) and (b) shall
apply to taxable years ending after October 8, 1997.
(2) CHANGE IN METHOD OF ACCOUNTING.—In
the case of any taxpayer required by this section to
change its method of accounting for its first taxable
year ending after October 8, 1997—
(A) such change shall be treated as initi-
ated by the taxpayer,
(B) such change shall be treated as made
with the consent of the Secretary of the Treas-
ury, and
(C) the net amount of the adjustments re-
quired to be taken into account by the taxpayer
under section 481 of the Internal Revenue Code
of 1986 shall be taken into account in such first
taxable year.
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