February 27,2003

Grassley Praises Committee Passage of Trade Bill

WASHINGTON – Sen. Chuck Grassley, chairman of the Committee on Finance, today
praised committee passage of a trade bill that helps to ensure the continued success of key U.S.
manufacturing operations and affirms Senate support for U.S. farmers in international trade talks.

“This bill allows many U.S. companies to produce goods more efficiently,” Grassley said.
“That allows them to be more competitive and function more cost effectively, which helps them to
create jobs for American workers. Greater cost effectiveness for American companies reduces costs for U.S. consumers. The bill also takes a strong stand on behalf of American farmers in
international trade talks. Market access for U.S. agricultural products is very important.”

The Finance Committee passed the Miscellaneous Trade and Technical Corrections Act of
2003, which includes a sense of the Senate resolution, added as a strongly supported bipartisan
amendment from Grassley and others. The resolution calls for significantly increased access to
world markets for U.S. farmers, ranchers and agricultural producers within the context of the World Trade Organization agricultural negotiations.

“These negotiations are so important to America’s farmers that I’d rather see no deal at all
than a bad deal,” Grassley said. “Our trade negotiators need our strong support and guidance now more than ever, especially when critical decisions may soon be made that’ll determine the ultimate outcome of the negotiations. That’s what this resolution is about.”

The bill also includes:

-- A series of provisions to suspend duties on foreign-made products that U.S. manufacturers
use but are unable to obtain domestically;

-- An expansion of Generalized System of Preferences (GSP) benefits to include certain handmade rugs from GSP-beneficiary countries. The primary beneficiary is Pakistan; other
countries that would gain from the bill include Turkey, Nepal, Egypt, and Morocco. The bill
would significantly increase Pakistan’s treatment under GSP and provide a much-needed
advantage to an important ally in the war on terrorism;

-- A restoration of normal trade relations status to Serbia and Montenegro (formerly

-- A series of provisions designed to enhance the international competitiveness of the U.S.
insular possessions, such as the U.S. Virgin Islands, Wake Island, Midway Islands,
American Samoa, and others; and

-- A provision to enhance and strengthen the protection of U.S. intellectual property rights

Grassley said the bipartisan legislation received the benefit of public comment and scrutiny
from the International Trade Commission, the United States Trade Representative, the Department
of Commerce, and the U.S. Customs Service. The bill is similar to legislation that was scheduled
for mark-up last September. The mark-up was delayed.

Grassley said he hopes for full Senate approval of the bill as soon as possible.
“When our manufacturing sector is lagging, and when we’re looking for ways to stimulate
the economy and create jobs, it’s important to pass this bill to allow the benefits of international
trade to accrue to American workers,” Grassley said.

Following are:
(1) a section-by-section bill summary
(2) the text of the sense of the Senate resolution on agricultural negotiations added as an amendment


Title I – Tariff Provisions

Subtitle A - Temporary Duty Suspensions and Reductions

Chapter 1 -- New Duty Suspensions and Reductions

Sec. 1101 through Sec. 1420: These provisions provide for the temporary suspension and/or
reduction of duties on certain imports. The products covered in this chapter are largely products
that are not commercially available in the U.S., are non-competitive, and are non-controversial.

Chapter 2 -- Existing Duty Suspensions and Reductions

Sec. 1501 and Sec. 1502: Extends certain current duty suspensions and/or reductions until
December 31, 2005.

Subtitle B - Other Tariff Provisions

Chapter 1 -- Liquidation or Reliquidation of Certain Entries

This chapter authorizes the U.S. Customs Service to liquidate or reliquidate, at the correct rate of
duty, entries that entered the country under an incorrect duty rate due to administrative error.

Chapter 2 -- Miscellaneous Provisions

Sec. 1704- Vessel Repair Duties: In March 2001, the U.S. Customs Service issued its Final
Rule on ship repair, which misinterpreted Section 1466 of Title 19, U.S. Code, to mean that
repairs made on the high seas by U.S. crews using U.S. parts were considered foreign repairs and
subject to an “ad valorem” duty rate of 50%. This amendment corrects this misinterpretation of
the “ad valorem” ship repair duty rules and returns them to their pre-March 26, 2001, status.

Sec. 1705- Duty-Free Treatment for Hand-Knotted or Hand-Woven Carpets: This
provision enables the President to proclaim these products, under GSP requirements, to be
eligible for duty-free treatment. This provision primarily benefits Pakistan.

Sec. 1706- Duty Drawback for Certain Articles (Insular Possessions): This provision would
allow duty drawback to apply to insular possessions.

Sec. 1707- Modification of Provisions Relating to Drawback Claims: These provisions make
technical changes to the duty drawback laws that simplify the administration of drawback and
ease the regulatory burdens associated with the statute. These changes include:

• establishing a statutory time frame for the liquidation of drawback claims;
• eliminating unnecessary paperwork requirements for drawback claims for substitution
• clarifying the requirements for claiming drawback for defective or nonconforming
imported merchandise that is exported or destroyed under Customs' supervision;
• clarifying the availability of drawback for packaging materials.

Sec. 1708- Unused Merchandise Drawback: This provision clarifies that the Harbor
Maintenance Tax is subject to drawback, in certain circumstances, as consistent with
congressional intent and a ruling by the Court of International Trade (CIT). The U.S. Court
of Appeals for the Federal Circuit invalidated this practice when it incorrectly interpreted the
statute and overturned the CIT ruling.

Sec. 1709- Treatment of Certain Footwear under the Caribbean Basin Economic
Recovery Act: This provision amends the Caribbean Basin Economic Recovery Act to
allow duty-free treatment for footwear from eligible countries. This change will not apply to
17 categories of footwear under the Harmonized Tariff Schedule that are still considered
import sensitive. It will provide similar trade benefits to the Caribbean region, that have
already been provided under prior legislation, to the Andean and Sub-Saharan African

Sec. 1710- Designation of San Antonio International Airport for Customs Processing of
Certain Private Aircraft Arriving in the United States: This provision extends current
law for two years.

Title II – Other Trade Provisions

Sec. 2001- Normal Trade Relations with Serbia and Montenegro: This provision restores
normal trade relation status to Serbia and Montenegro.

Sec. 2002- Articles Eligible for Preferential Treatment Under the Andean Trade
Preference Act (ATPA): This provision corrects a mistake in the Trade Act of 2002 that
inadvertently and temporarily raised duties on Andean originating handbags, luggage, flat
goods, work gloves and leather wearing apparel under the ATPA, by providing for continued
duty-free treatment for eligible products that meet the import sensitivity test, as was the
intent of the ATPA.

Sec. 2003- Amendments to United States Insular Possession Programs: The provision
improves the operation of the insular possession watch and jewelry program. It removes
current restrictions on the use of Production Incentive Certificates by permitting the use of
such certificates for refunds of duties on any articles imported into the United States. The
bill would add a separate 10,000,000-unit cap for jewelry to account for the fact that jewelry
is generally produced at higher volumes than watches. To facilitate the start-up of new
insular possession jewelry production, the bill would provide a transition rule under which
jewelry assembled by a new insular jewelry producer would receive duty-free treatment for
18 months after the producer's commencement of operations. To help assure the long-term
viability of the insular possession program and attract long-term investment in the insular
watch and jewelry industries, the bill would also extend the Production Incentive Certificate
provisions until 2015. The bill also contains a “standby” mechanism to preserve the insular
watch industry and the insular possession program for watches in the event that watch duties
are reduced or eliminated on a worldwide basis.

Sec. 2004- Technical Amendments: The provisions amend the apparel provision for
regional fabrics and yarns in the African Growth and Opportunity Act and the Caribbean
Basin Trade Partnership Act to permit the use of U.S.-formed fabrics or U.S.-formed
components, whether cut to shape or knit to shape, using U.S.-formed yarns, in garments that
are otherwise produced from fabrics formed in the region. Without this additional language,
benefits are currently denied for garments that incorporate U.S.-made fabrics or components,
thereby discouraging the use of such U.S. materials.

The provisions also modify the African Growth and Opportunity Act and the Caribbean
Basin Trade Partnership Act short supply provision to ensure that a garment entered under
short supply is not disqualified because the fabric is made in sub-Saharan Africa.

Sec. 2005- Wool Trust Fund: The provision amends Title V of the Trade and Development
Act of 2000 and establishes a Wool Fabric Trust Fund (the Fund). The general purpose of the
Fund is to provide grants through the office of the Secretary of Commerce to U.S.
manufacturers of worsted wool fabric. Grants are intended to assist U.S. manufacturers in
maximizing U.S. employment and the production of U.S. wool textile products.

Title III – Protection of Intellectual Property Rights

Sec. 3001 through Sec. 3005- Intellectual Property Rights Enforcement: These
provisions enhance and strengthen the protection of U.S. intellectual property rights abroad

• Harmonizing the intellectual property rights criteria for eligibility in the Andean Trade
Preference Act/Andean Trade Promotion and Drug Eradication Act, the Generalized
System of Preferences, the Caribbean Basin Economic Recovery Act/Caribbean Basin
Trade Partnership Act trade preference programs to that found in other U.S. trade laws,
specifically Special 301.

• Establishing a more formalized petition process to "ensure a timely review and
disposition" of such petitions by the USTR. The change would generally conform the
process by which the eligibility of a country can be challenged under our preference
programs to that already applicable for similar trade benefit programs such as the
Generalized System of Preferences.

• Correcting a technical deficiency in the time frame for bringing and concluding
WTO/TRIPS cases against countries subject to trade action under Special 301.

Modified Amendment by Senators Conrad and Grassley, and Others
Sense of the Senate on WTO Agriculture Negotiations

The amendment would add a section expressing the sense of the Senate that –

1) the goals of the United States in the Doha Round of the WTO agriculture negotiations are
to achieve significantly increased market access, harmonize countries’ allowed levels of
trade-distorting domestic support, and achieve a more level playing field for U.S. farmers,
ranchers, and agricultural producers;

2) the proposed “modalities” framework recently released by the Chairman of the WTO
Agriculture Negotiations Committee, Stuart Harbinson, fails to meet these goals because –

a) It accepts the European formulation of equal percentage reductions from unequal
levels of support that locks in place the EU’s current advantage on trade-distorting
domestic support levels,

b) While it recognizes that high tariff levels should be reduced more quickly, it
nevertheless fails to sufficiently open export markets for U.S. products by allowing
countries to maintain prohibitively high tariffs,

c) While it eliminates trade-disrupting export subsidies, it phases out the elimination
of export subsidies too slowly,

d) It contains a potentially unlimited tariff reduction loophole that would
disadvantage United States agricultural products exported to developing countries,
and would also limit trade between developing countries,

e) It preserves the trade distorting “blue box” support payments; and

3) the United States should not agree to this proposal unless and until it is significantly
improved such that the framework will result in significantly greater market access and
harmonization of countries’ allowed levels of trade-distorting domestic support, and achieve
a more level playing field for United States farmers, ranchers, and agricultural producers.