Report by the Secretariat 2012... · 2013. 1. 9. · II.8 Overview of ATPA/ATPDEA 25 . II.9 Overview of trade with freely associated States 25 . II.10 Overview of trade with the West

RESTRICTED WORLD TRADE

ORGANIZATION WT/TPR/S/275 13 November 2012

(12-6166)

Trade Policy Review Body

TRADE POLICY REVIEW

Report by the Secretariat

UNITED STATES

This report, prepared for the eleventh Trade Policy Review of United States, has been drawn up by the WTO Secretariat on its own responsibility. The Secretariat has, as required by the Agreement establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), sought clarification from the United States on its trade policies and practices. Any technical questions arising from this report may be addressed to Messrs. John Finn (tel: 022/739 5081) and Pierre Latrille (tel: 022/739 5266), Mrs. Denby Probst (tel: 022/739 5847), and Messrs. Jesse Kreier (tel: 022/739 5140), Juan Marchetti (tel: 022/739 5871), and Raymundo Valdés (tel: 022/739 5346). Document WT/TPR/G/275 contains the policy statement submitted by the United States.

Note: This report is subject to restricted circulation and press embargo until the end of the first session of the meeting of the Trade Policy Review Body on the United States.

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CONTENTS

Page

SUMMARY ix

I. ECONOMIC ENVIRONMENT 1

(1) RECENT ECONOMIC DEVELOPMENTS 1

(2) MONETARY, FISCAL, AND OTHER POLICIES 4

(3) DEVELOPMENTS IN TRADE AND FOREIGN DIRECT INVESTMENT 6 (i) Merchandise trade 6 (ii) Trade in services 10 (iii) Foreign direct investment 12

II. TRADE POLICY AND INVESTMENT REGIMES 14

(1) TRADE POLICY FORMULATION AND FRAMEWORK 14

(2) PARTICIPATION IN THE WORLD TRADE ORGANIZATION 15

(3) PREFERENTIAL TRADE AGREEMENTS AND ARRANGEMENTS 16 (i) Reciprocal trade agreements 17 (ii) Unilateral preferences 19

(4) INVESTMENT AGREEMENTS AND POLICIES 26 (i) Bilateral investment treaties and framework agreements 26 (ii) Investment promotion 27 (iii) Investment regulations and restrictions 28

(5) AID-FOR-TRADE 29

III. TRADE POLICIES AND PRACTICES BY MEASURE 30

(1) MEASURES DIRECTLY AFFECTING IMPORTS 30 (i) Customs procedures 30 (ii) Customs valuation 32 (iii) Rules of origin 32 (iv) Tariffs 38 (v) Other charges affecting imports 42 (vi) Contingency measures 46 (vii) Quantitative trade measures, restrictions, controls, and licensing 54 (viii) Technical regulations and standards 58 (ix) Sanitary and phytosanitary measures 61

(2) MEASURES DIRECTLY AFFECTING EXPORTS 65 (i) Customs procedures and documentation 65 (ii) Export taxes and fees 65 (iii) Prohibitions, restrictions, and licensing 66 (iv) Official support and related fiscal measures 70

(3) OTHER MEASURES AFFECTING INVESTMENT AND TRADE 72 (i) Business framework and business investment incentives 72 (ii) State trading enterprises, government corporations, and government

enterprises 73 (iii) Government procurement 76 (iv) Subsidies and other government assistance 79

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(v) Competition policy 83 (vi) Trade-related intellectual property rights 84

IV. TRADE POLICIES BY SECTOR 99

(1) AGRICULTURE 99 (i) Agriculture in the United States 99 (ii) Agriculture policies 103 (iii) Levels of support 108

(2) FISHERIES 111 (i) Fisheries in the United States 111 (ii) Trade 113 (iii) Fisheries policy 114

(3) SERVICES 117 (i) Environmental services 117 (ii) Financial services 121

REFERENCES 129

APPENDIX TABLES 135

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CHARTS

Page

I. ECONOMIC ENVIRONMENT

I.1 Contributions to real GDP growth, 2008-12 1 I.2 U.S. current account and net financial flows, 2008-12 3 I.3 Index of trade-weighted exchange rate of dollar, 2008-12 4 I.4 Merchandise trade, by main origin and destination, 2010 and 2011 8 I.5 Merchandise trade, by product, 2010 and 2011 9 I.6 Foreign direct investment into the United States, 2007-11 13

II. TRADE AND INVESTMENT REGIMES

II.1 Formulation of the trade policy 14 II.2 Imports for consumption, by type of import regime, 2011 16 II.3 Unilateral preferences imports, by programme, 2011 20

III. TRADE POLICIES AND PRACTICES BY MEASURE

III.1 Overview of non-preferential rules of origin 33 III.2 MNF tariff distribution, 2012 40 III.3 Federal excise taxes reported and collected, fiscal year 2010 46 III.4 Anti-dumping investigations initiated, by region, 2008-12 47 III.5 Anti-dumping investigations initiated, by product, 2008-12 48 III.6 Countervailing measures initiated, by region, 2008-12 51 III.7 Countervailing measures initiated, by product, 2008-12 52 III.8 Federal Government procurement, by agency, 2010 76 III.9 American Recovery and Reinvestment Act (ARRA) Funds paid out 82 III.10 Royalties and licence fees, 2002-11 86 III.11 Royalties and licence fees, distribution of receipts and payments, 2010 87

IV. TRADE POLICIES BY SECTOR

IV.1 Exports and imports of agriculture products, 2002-11 101 IV.2 Green Box support in the United States, 2001-09 109 IV.3 Amber Box support in the United States, 2001-09 110

TABLES


I.1 Selected macroeconomic indicators, 2008-11 2 I.2 U.S. commercial services exports, by type, 2008-11 11 I.3 U.S. commercial services imports, by type, 2008-11 11 I.4 U.S. commercial services exports (modes 1, 2, and 4), by destination, 2008-10 11 I.5 U.S. commercial services imports (modes 1, 2, and 4), by origin, 2008-10 12


II.1 Economic impact and predictions for the new free-trade agreements 17 II.2 Overview of the new U.S. FTAs, 1 January 2010-30 June 2012 17 II.3 Trade under reciprocal trade agreements, 2011 19

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II.4 Overview of GSP 21 II.5 Overview of the AGOA 22 II.6 Overview of CBERA 23 II.7 Overview of CBTPA 24 II.8 Overview of ATPA/ATPDEA 25 II.9 Overview of trade with freely associated States 25 II.10 Overview of trade with the West Bank, Gaza Strip, and Qualified Industrial Zones 26 II.11 CFIUS covered transaction notices, withdrawals, and decisions, 2009-11 28


III.1 Overview of preferential rules of origin criteria, 2012 34 III.2 Exemptions to the section 304 marking requirement 37 III.3 Changes or developments in U.S. preferential rules of origin, January 2010-June 2012 37 III.4 Structure of the tariff schedule, selected years 39 III.5 MPF exemptions, 2012 43 III.6 Consolidated Omnibus Budget Reconciliation Act fees 44 III.7 Agriculture fees, 2012 45 III.8 Anti-dumping investigations, 2008-12 47 III.9 Anti-dumping measures, by country, 2008-11 49 III.10 Overview of five-year sunset investigations initiated, as of year-end 2011 49 III.11 Countervailing duty investigations initiated, 2008-12 51 III.12 Overview of five-year sunset reviews initiated, as of year-end 2011 52 III.13 U.S. FTA safeguard implementation legislation, as of 2012 53 III.14 Products subject to U.S. import licensing procedures, 2011 54 III.15 Laws, regulations and guidelines on developing technical regulations and conformity assessment procedures 59 III.16 Recalls by the Consumer Product Safety Commission, FY 2007-11 61 III.17 Notifications by the United States, 1 January 2010 to 30 June 2012 63 III.18 Ex-Im Bank authorizations, 2008-11 72 III.19 Government sponsored enterprises 74 III.20 Government corporations, 2011 74 III.21 State-trading enterprises, 2010 75 III.22 Federal subsidy programmes, 2011 (fiscal year 2010) 79 III.23 Federal programmes on biofuels, 2011 81 III.24 DOJ investigations initiated pursuant to antitrust laws, 2008-11 83 III.25 FTC investigations initiated pursuant to antitrust laws, 2008-11 83 III.26 Summary of intellectual property protection in the United States, May 2012 91


IV.1 Value of production, 2007-11 99 IV.2 U.S. and world production and trade of selected commodities, 2006-11 100 IV.3 Exports and imports of selected products, 2005-11 102 IV.4 Deliveries of food aid from the United States, 2006-10 105 IV.5 Total producer support estimate and single commodity transfer values for selected commodities, 2002-10 111 IV.6 Commercial landings of selected species, 2002-10 112 IV.7 Trade in fish and fisheries products, 2004-10 114 IV.8 Market structure of environmental services 117 IV.9 Private-sector involvement in water and waste water management services, 2012 119 IV.10 Summarized trade regimes for environmental services 120

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APPENDIX TABLES

Page


AI.1 Balance of payments, 2008-11 137 AI.2 Merchandise exports and re-exports, by trading partner, 2008-11 138 AI.3 Merchandise exports and re-exports, by group of products, 2008-11 139 AI.4 Merchandise imports, by trading partner, 2008-11 140 AI.5 Merchandise imports, by group of products, 2008-11 141


AII.1 WTO dispute settlement cases, 1 January 2010-30 June 2012 142 AII.2 Selected notifications to the Central Registry of Notifications (CRN), 1 January 2010-30 June 2012 144


AIII.1 Summary analysis of the MFN tariff, 2012 146 AIII.2 Summary analysis of tariffs, according to preferential agreements, interim rates as of 30 June 2012 147 AIII.3 Royalties and licence fees, 2010 148 AIII.4 Main dedicated IP laws and regulations 149

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SUMMARY

1. The United States' economy has been marked by slow but steady recovery and some re-balancing since its last Review. Merchandise and services trade figures have re-bounded significantly since the 2009 financial crisis and have now reached new peak levels, surpassing previous 2008 peak levels. Services trade in particular has shown a growing trade surplus, and services account for approximately 70% of U.S. output. The United States has set in motion policies for domestic and international rebalancing; i.e. moving away from consumption and real estate and encouraging export and investment growth.

2. Since its last Review, United States has moved ahead with the legislative approval of three free-trade agreements and the extension of two lapsed preference programmes (the Generalized System of Preferences and the Andean Trade Preferences Act (ATPA)). The free-trade agreements with Korea and Colombia entered into force in March and May 2012, respectively; while the FTA with Panama has not been implemented at the time of writing. According to the 2012 Trade Policy Agenda, the United States is working toward the conclusion of the Trans-Pacific Partnership regional trade agreement and towards extending permanent normal trade relations with Russia. Preferential trade accounts for an important and growing percentage of U.S. trade; in 2011, 20.1% of U.S. imports were under preferential regimes, reciprocal preferences accounted for 16.4% and unilateral preferences for 3.7%.

3. Foreign direct investment continues to play an important role in the U.S. economy by making important contributions to U.S. employment, R&D, and exports. The United States is the world's largest recipient of foreign direct investment (FDI), which totalled US$228 billion in 2011. As concerns investment policy, after several years of review, the United States completed a new model bilateral investment treaty (BIT) framework containing detailed provisions to foster or facilitate the flow of investment; and in June 2011, new steps were taken to facilitate and attract inward FDI into the United States by creating the first government-initiated centralized investment promotion body through the SelectUSA initiative.

4. The financial services sector accounted for 8.5% of U.S. GDP in 2010, 47% of which was generated by banking activities, 33% by insurance, and 16% by securities trading activities. Over the last decade, the U.S. has run trade surpluses in financial services and trade deficits in insurance. The United States has the largest securities and insurance markets in the world. The main regulatory reform since the last Review is the Dodd-Frank Wall Street Reform and Consumer Protection Act, which entered into force in July 2010. The Act's main objectives include promoting financial stability, ending "too big to fail", ending bailouts, protecting taxpayers, and protecting consumers from abusive financial services practices.

5. Intellectual property (IP) has a central place in the domestic economy and the international trade profile of the United States. The United States is one of the most well established and mature IP jurisdictions, however, the legal, economic, and trade policy context of IP continued to evolve significantly in the review period, notably through major legislative developments, significant judicial decisions, regulatory legislation, strengthened domestic enforcement, an enhanced policy focus on the role of IP, and consolidation of a trend towards development of markets in IP.

6. U.S. import policy has remained relatively static in recent years, with few major legislative or regulatory initiatives. On the export side, the United States has launched the National Export Initiative, aimed at improving trade advocacy and pursuing policies to promote growth; and the Export Control Reform Initiative, to reconcile policies for export controls. In addition, the

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Export-Import Bank has significantly increased its export financing to support the National Export Initiative.

7. Since 2010, growth has averaged 2.2% annually. Recovery slowed somewhat in 2011 and original projections for 2012 have been revised slightly downwards, in large part due to the impact of the European financial crisis and its impact on third country markets. While there are generally positive signs in the U.S. recovery, it will still take more time to reach pre-crisis levels, and certain aspects of the economy still show weaknesses, such as the housing market and unemployment levels.

8. International trade and investment policies play an important role in the U.S. economy, with investment, consumer spending, and exports contributing to the growth in real GDP in recent years. In 2010, the President set a goal of doubling exports in five years, and two major policies have since emerged. Exports, as a share of GDP, have grown by 13% since the end of the recession and reached a historic high of 13.8% of GDP in 2011.

9. Following a significant downturn during the financial crisis, U.S. merchandise trade (imports and exports) rebounded in 2010 and 2011 and surpassed 2008 record levels. While both imports and exports grew, import growth outpaced export growth, thus the worsening of the merchandise trade deficit. Imports grew 16% to reach US$2,236 billion, and exports also grew 16% to reach US$1,497 billion. Services trade, on the other hand, has shown a strong and growing trade surplus in recent years and has had an important impact on the current account balance. U.S. commercial services exports grew 9.2% in 2011, while imports grew 6.9%, thus the trade in services surplus widened to US$186 billion.

10. The United States has one of the largest agriculture sectors in the world with a total value of production of US$372 billion in 2011. It is also the largest agriculture exporting country, with exports of US$144.8 billion, although agriculture represents less than 1% of GDP. Due to its large share in world production, exports, and imports of agricultural products, developments in the United States, including changes to agricultural policies, have an important impact on world markets. There have been no major changes to agriculture policies in the United States since its last Review, and The Food, Conservation, and Energy Act of 2008 remains the basis for most agricultural programmes until it expires.

11. On customs-related issues, the U.S. continues to move forward on a number of trade facilitating initiatives that were passed into legislation several years ago, but have been delayed or not yet been fully implemented, e.g. scanning of maritime containers and air cargo, thus their full impact or effects are not yet clear. Long-standing laws and regulations on rules of origin and marking requirements remain virtually unchanged, albeit their complexity and application remain unnecessarily cumbersome with the possibility of several different rules being applicable across sectors and final outcome being dependent on a number of factors. The United States also imposes a number of fees or charges on imports that vary depending on the source, value, and type of import; these include the merchandise processing fee, COBRA fees, harbour maintenance tax, agriculture fees, and excise taxes. On customs valuation, the situation has remained virtually unchanged with no new legislation or procedures, and the position is similar for import licensing.

12. U.S. tariff protection on imports remained nearly unchanged during the review period and in general remains relatively low. Significant amounts of trade enter the United States duty free under MFN tariffs with zero rates of duty or through the preference programmes. However, significant tariff peaks remain in certain sectors, such as footwear, leather, textiles and clothing, and in agriculture where there is also a considerable number of non-ad valorem tariffs.

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13. The United States continues to use trade remedies as part of its trade policy, as the use of anti-dumping (AD) and countervailing cases continued during the period. The initiation of AD investigations increased from 3 to 15 cases in 2011 after only a few initiations in 2010. There have been no particular trends in the overall number of CVD investigations initiated in recent years, but as with AD investigations, the majority of CVD investigations initiated during the past five years involved imports from Asian countries (92%). During the review period, the United States adopted or proposed several modifications to its methodology for the calculation of dumping margins in the case of non-market economies.

14. The United States continues to be active in the areas of standards and phytosanitary measures, especially in the work of the WTO Committees, with respect to making notifications, and with disputes concerning these subjects. Between 1 January 2010 and 30 June 2012, the United States made 520 notifications to the Committee on TBT of which, 337 were addenda or corrigenda, and 537 to the Committee on SPS. With a few exceptions, such as the Food Safety Modernization Act, the procedures for developing technical regulations and conformity assessment procedures for TBT and SPS matters have not changed over the past few years.

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(1) RECENT ECONOMIC DEVELOPMENTS

1. The United States has emerged quite steadily from the 2007-09 financial crisis, but growth was slower in 2011 than in 2010. Since the recovery began, U.S. growth has averaged 2.2% and the U.S. economy has added private sector jobs for 28 consecutive months, totalling 4.4 million.1 The U.S. economy is moving in a positive direction but it will take more time to emerge from the downturn and to return to growth and confidence levels seen prior to the crisis. Despite a slightly worsening trade deficit for 2011, imports and exports have now surpassed 2008 peak levels.

2. Growth in real GDP was positive in both 2010 and 2011, with increases of 3% and 1.7%, respectively, compared with -3.5% for 2009. Real GDP has grown since third quarter 2009, with consumer spending, gross private domestic investment, and exports as the main contributors in the recovery period (Chart I.1 and Table I.1).2

-10

-8

-6

-4

-2

0

2

4

6

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2008 2009 2010 2011 2012

Chart I.1Contributions to real GDP growth, 2008-12

(Percentage points)

Source: Bureau of Economic Analysis online information. Viewed at: http://www.bea.gov/.

Consumption

Government expenditure

Private investment

Net exports

1 Data as of 1 July 2012, i.e. covers first and second quarter data for 2012 (IMF, 2012a). 2 BEA Press Release, "Gross Domestic Product: Fourth Quarter and Annual 2011 (Third Estimate)

Corporate Profits: Fourth Quarter and Annual 2011", 29 March 2012. Viewed at: http://www.bea.gov/ newsreleases/national/gdp/2012/pdf/gdp4q11_3rd.pdf.

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Table I.1 Selected macroeconomic indicators, 2008-11 (US$ billion and %)

2008 2009 2010 2011a

GDP (current US$ billion) 14,291.5 13,939 14,526.5 15,094 (% change) Real GDP (based on chained 2005 US$ billion) -0.3 -3.5 3.0 1.7 Personal consumption expenditures -0.6 -1.9 2.0 2.2 Gross private domestic investment -10.2 -25 17.9 4.8

Fixed investment -7.1 -18.8 2.6 6.8 Non-residential -0.8 -17.8 4.4 8.8 Residential -23.9 -22.2 -4.3 -1.3

Exports (goods and services) 6.1 -9.4 11.3 6.7 Imports (goods and services) -2.7 -13.6 12.5 4.9 Government consumption expenditures and gross investment 2.6 1.7 0.7 -2.1

Federal 7.2 6 4.5 -1.9 State and local 0 -0.9 -1.8 -2.2

Saving and investment (% of GDP) Gross saving 13.4 11.5 12.5 13.0

Gross private saving 16.0 18.4 19.2 19.0 Gross government saving -2.6 -7.0 -6.6 -5.9

Net saving 0.4 -1.9 -0.4 0.1 Personal saving rate (% of disposable income) 5.4 5.1 5.3 4.7 Gross domestic investment 18.1 14.7 15.8 15.9

Gross private domestic investment 14.6 11.1 12.4 12.7 Gross government investment 3.5 3.6 3.5 3.2

Net domestic investment 5.1 1.3 2.9 3.0 Money and prices M2 (December-December, % change) 9.8 3.7 3.5 9.7 Consumer price index (annual average, % change) 3.8 -0.4 1.6 3.2 Interest rates (%) Federal funds rate, effectiveb 1.92 0.16 0.18 0.1 Treasury note (ten-year) 3.66 3.26 3.22 2.78 Federal public debt Value (US$ billion, fiscal year end) 5,803.1 7,544.7 9,018.9 10,128.2 % of GDPc 40.5 54.1 62.8 67.7 Employment Unemployment rate 5.8 9.3 9.6 9.0

a Preliminary. b The federal funds rate is the cost of borrowing immediately available funds, primarily for one day. The effective rate is a weighted average of rates on brokered trades. c Fiscal year GDP, seasonally adjusted at annual rates.

Source: WTO Secretariat, based on Bureau of Economic Analysis online information. Viewed at: http://www.bea.gov; Board of Governors of the Federal Reserve System online information. Viewed at: http://www.federalreserve.gov/econresdata/default.htm; Budget of the United States Government. Viewed at: http://www.gpo.gov/fdsys/browse/collectionGPO.action?collectionCode=BUDGET; and Bureau of Labor Statistics online information. Viewed at: http://www.bls.gov.

3. The U.S. current account balance continued to worsen slightly between 2010 and 2011, from US$470.9 billion to US$473.4 billion. However, it remained around 3% of GDP, which is lower than the 6% peak in 2005-06.3 In 2011, the biggest influence on the current account deficit was the deficit in trade in goods, which widened to US$738.3 billion. The surplus on trade in services continued to increase, as did the surplus on income, but not to the same extent as the deficit on goods trade; and net unilateral transfers remained nearly static (Chart I.2). Recovery from this recession has been less unbalanced compared with the previous recession, in 2001. In the current recovery, the current

3 It was 3.2% and 3.1% of GDP, respectively, in 2010 and 2011 (BEA Press Release, "U.S. Current Account Deficit Increases in 2011", 14 March 2012. Viewed at: http://www.bea.gov/newsreleases/ international/transactions/trans_highlights.pdf; and Labonte, 2010).

http://www.bea.gov/


account has remained stable, despite worsening conditions in major U.S. export markets, due to the strength in services exports and the income balance (Table AI.1).

-250

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-150

-100

-50

0

50

100

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 a

2008 2009 2010 2011 2012

Balance on current account Balance on goods Balance on services

Balance on income Unilateral current transfers, net

Chart I.2U.S. current account and net financial flows, 2008-12

US$ billion

Source: Bureau of Economic Analysis. Viewed at: http://www.bea.gov.

a Preliminary data.

4. The U.S. current account deficit of 3% of GDP has so far not been a problem for the U.S. economy. U.S. foreign direct investment inflows remain the largest in the world and U.S. assets continue to benefit from the perceived safe-haven status of the U.S. dollar and the U.S. economy.

5. From a peak in 2002, the U.S. dollar4 depreciated gradually by about 25% until 2008, stabilized temporarily in 2008-09, and then resumed its downward trend in 2009 to mid-2011, depreciating by around 16%. More recently, it appreciated by about 5% in the second half of 2011, and then resumed its downward trend in early 2012, falling about 2% before climbing again (Chart I.3). The dollar depreciation has not been uniform against all currencies: since the economic downturn, it has depreciated 13% against the euro, 11% against the yen, 8% against the Mexican peso, and less than 3% against the yuan.5 As the euro zone crisis has intensified, the dollar has strengthened against the euro. The euro-dollar exchange rate movements have an impact on U.S. trade that extends beyond the direct import and export linkages of the United States and the euro zone, as they also affect third-country markets where both compete.

6. The recovery effort was aided by a number of policies or measures that encouraged change, such as reform of the banking and financial sector, budget re-balancing, reduction of household debt, reduction of financial sector debt, and an increase in business investment. While U.S. corporate

4 Inflation-adjusted trade-weighted dollar index. 5 Elwell (2012).


profits and personal income rose during 2010-11, overall U.S. unemployment levels remain high and the housing market remains weak.

90

95

100

105

110

115

12008

3 5 7 9 11 12009

3 5 7 9 11 12010

3 5 7 9 11 12011

3 5 7 9 11 12012

3 5

Chart I.3Index of trade-weighted exchange rate of dollar, 2008-12

Index, 1997=100

Source: Board of Governors of the Federal Reserve System. Viewed at: http://www.federalreserve.gov/econresdata/statisticsdata.htm.

7. According to projections by the IMF, the outlook for the U.S. economy is optimistic for 2012, as it was predicted to grow by approximately 2%. However, this figure was revised downwards by 0.1% at mid-year due to less robust growth than forecast. Weaknesses in the global recovery, including spillover from the euro zone crisis, and possible future fiscal tightening have been cited as important factors in the U.S. outlook.6

(2) MONETARY, FISCAL, AND OTHER POLICIES

8. During the past two years in particular, and since the Obama administration took office, the theme of "rebalancing", both domestically and internationally, has been at the core of U.S. economic policy. It was recognized that the United States, with long-term current account deficits, has relied heavily on domestic consumption and construction of real estate for growth which is unsustainable; and a more balanced pattern of growth is needed, which relies less on consumption and more on exports and investment for growth. Domestically, reforms are also needed in order to increase investment, raise revenues, and cut unnecessary spending.7

9. As a result of the financial crisis, a number of fiscal stimulus measures were enacted to aid the economy. The American Recovery and Reinvestment Act (ARRA), enacted in 2009, continued to support the recovery in 2011, although at declining levels.8 The Troubled Asset Relief Program (TARP) of 2008 targeted financial stability, especially as concerns banking, credit, and support of certain industries. Although funding expired at the end of 2010, approximately one quarter of the

6 IMF (2012b). 7 White House (2012b). 8 For a detailed description of ARRA and analysis, see WTO (2010).


es' surveyed.

funds are outstanding and still supporting certain programmes, including U.S. government investments in the auto industry, American International Group (AIG), and 460 U.S. banks (end 2011).9 However, these investments and support are gradually being reduced and eliminated.

10. Other laws aimed at easing the financial situation and improving the U.S. economy include the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act (TRUIRJCA), enacted at the end of 2010. This law extended the emergency unemployment benefit programs, and reduced the workers' payroll taxes by 2%.10 In late 2011 and again in early 2012, two extensions of the TRUIRJCA provisions for unemployment benefits and payroll tax cuts were approved, thus maintaining them until the end of 2012.11 Furthermore, in late 2011, a new tax credit entered into force for businesses that hire unemployed veterans.12

11. In 2011, the U.S. reported the third highest federal deficit on record since 1945, at US$1.3 trillion. This was nearly the same as in 2010 (US$1.29 trillion) and reflects a slight downward trend from the 2009 peak of US$1.42 trillion. As a percentage of GDP, the 2011 deficit improved slightly to 8.7% compared with 9% in 2010. Government receipts improved for the second consecutive year (fiscal year 2011) to reach US$2.3 trillion, still below the 2007 peak level, while government expenditures grew to US$3.6 trillion.13 The largest increase in expenditures was a 17% increase in net interest on the public debt.14 In 2011, revenues comprised individual income taxes (47%), social insurance and retirement receipts (36%), corporate income taxes (8%), and other (9%).15 While trade remains an important part of the U.S. economy, the impact of tariff revenue for the United States is very small. According to the World Customs Organization, revenues from customs duties in the United States averaged 1.5% to 2% of overall tax revenue in recent years, compared with an overall average of 12.4% for the countri 16

12. The Budget Control Act of 2011, containing a US$1 trillion deficit-reduction package, was enacted in 2011 in order to reign-in the growing government deficit that poses a number of economic risks.17 Current low yields (negative in real terms) on U.S. government debt and the surge of investor demand for U.S. government debt indicate that markets continue to have a high degree of confidence that the U.S. fiscal situation will improve. Further reductions of US$1.2 trillion to US$1.5 trillion are also scheduled to follow. In addition, the 2010 Pay-as-you-go Act contains a rule of budget neutrality, meaning that new laws should not be introduced that would increase budget deficits.18 A number of expiring tax cuts, and lower defence operation spending will also aid the budgetary situation in the near term. Revising U.S. tax policy has also been high on the agenda with a number of proposals from the Administration and from Congress, especially regarding corporate taxes. However, to date, no major reform measures have been enacted.

13. U.S. monetary policy is carried out by the Federal Reserve (hereinafter "the Fed") as a result of powers delegated by the U.S. Congress. However, the Congress maintains oversight on the Fed to ensure that it adheres to its mandated goals of achieving maximum employment, stable prices, and

9 Department of the Treasury, Office of Financial Stability (2011). 10 Public Law 111-312. 11 Middle Class Tax Relief and Job Creation Act of 2012, Public Law 112-96. 12 The VOW to Hire Heroes Act, Public Law 112–56. 13 Monthy Treasury Statement. Viewed at: http://www.fms.treas.gov/mts/mts0612.pdf 14 Congressional Budget Office online information. Viewed at: http://www.cbo.gov. 15 Office of Management and Budget online information, "Historical Tables". Viewed at:

http://www.whitehouse.gov/omb/budget/Historicals. 16 World Customs Organization (2011a). 17 Public Law 112-25. 18 Public Law 111-139.

http://www.cbo.gov/


moderate long-term interest rates. The Fed has been very active in recent times, using a wide range of policies, some unconventional, to aid economic recovery, while it has also been affected by new legislation.19 From late 2010 to mid 2011, the Fed conducted a second round of quantitative easing due to the financial crisis and its aftermath. Actions by the Fed during 2011 have been described as "accommodative", with the Federal Open Market Committee (FOMC)20 maintaining the federal funds rate at exceptionally low target levels, i.e. 0% to 0.25%. Due to the continued weak recovery, the FOMC announced in late 2011 and early 2012 that it would keep the federal funds rate at these low levels until at least end 2014. It also made other moves in 2011 to lower long-term interest rates. It has maintained central bank liquidity swaps, a rarely used mechanism, in part to aid with the European debt crisis. The Fed's swap policy allows foreign central banks to provide liquidity to the foreign banks in U.S. dollars. In January 2012, the Fed announced its policy for a long-run goal of maintaining inflation at 2%.21

14. The U.S. administration was taken two major initiatives in recent years aimed at increasing exports. In 2010, President Obama set a goal of doubling exports in five years through his National Export Initiative. The National Export Initiative aims at improving trade advocacy, increasing access to credit, removing trade barriers, enforcing trade rules, and pursuing policies to promote growth. This programme is currently on track to reach its objective of US$3.16 trillion in exports by 2014.22 The Export Control Reform Initiative was launched to reconcile definitions, regulations, and policies for export controls, while working toward creating a single control list under one agency with unified information and enforcement.23 These initiatives, either alone or in conjunction with other policies and factors, appear to be bearing fruit as exports, as a share of GDP, have grown by 13% since 2009. Exports reached a historic high of 13.8% of GDP in 2011.24

(3) DEVELOPMENTS IN TRADE AND FOREIGN DIRECT INVESTMENT

(i) Merchandise trade

15. U.S. merchandise imports and exports grew in 2010 and 2011, surpassing 2008 record levels, although the merchandise trade deficit expanded. After contracting significantly at the end of the 2007-09 financial crisis, the negative trade balance continued to grow steadily in 2010 and 2011, although not to 2007-08 peak levels. While both imports and exports grew, import growth outpaced export growth, which accounted for the worsening of the trade deficit.

16. Strong growth in merchandise exports continued for the second year in a row, with 16% growth in 2011 and increased in all major export categories. Exports to Latin American25 and Middle East markets grew faster, at 21% each. However, Middle East destinations still account for a very small share of U.S. exports (4%), whereas Latin America is the second largest regional market, accounting for 25% of U.S. merchandise exports. The largest single export market continues to be

19 The Dodd-Frank Act made some changes with respect to audit and oversight. Other proposed

legislation in the 112th Congress that could alter the Feds's mandate, have not become law. 20 The FOMC is the branch of the Federal Reserve Bank that determines the direction of monetary

policy. 21 Federal Reserve Press Release, 25 January 2012. Viewed at: http://www.federalreserve.gov/

newsevents/press/monetary/20120125c.htm. 22 Executive Order 13534, 11 March 2010. Viewed at: http://www.whitehouse.gov/the-press-

office/executive-order-national-export-initiative. 23 White House online information, "Fact Sheet on the President's Export Control Reform Initiative".

Viewed at: http://www.whitehouse.gov/the-press-office/fact-sheet-presidents-export-control-reform-initiative. 24 Department of Commerce online information, "U.S. Export Fact Sheet". Viewed at:

http://www.trade.gov/press/press-releases/2012/export-factsheet-february2012-021012.pdf. 25 Including other western hemisphere countries as well.

http://www.whitehouse.gov/the-press-office/executive-order-national-export-initiative

http://www.whitehouse.gov/the-press-office/executive-order-national-export-initiative


Canada, which accounted for 19% of 2011 U.S. merchandise exports. The Americas remains the most important export region, accounting for 43.5% of merchandise exports, followed by Asia (27.9%) and Europe (21.4%) (Table AI.2 and Chart I.4).

17. U.S. merchandise exports are heavily concentrated in manufactures (65.3% in 2011), followed by mining (12.5%) and agriculture (11.4%). Within manufactures, machinery and transport equipment is the most significant subsector, accounting for about one third of 2011 merchandise exports (Table AI.3 and Chart I.5).

18. The situation of imports is similar to that of exports in that merchandise imports exhibited strong growth for the second year after the recession at 16% in 2011. Imports in all major categories were higher in 2011 than in 2010. Imports from the Middle East grew the most rapidly in 2011, climbing by 40% but again from very low base of 5% of total U.S. merchandise imports. Similar to the growth in exports, U.S. imports from Latin American grew slightly more than the average, at 21% in 2011. China is the dominant supplier of merchandise to the U.S. market, accounting for 18% of total U.S. merchandise imports in 2011, followed by the EU (16.6%) and Canada (14.1%) (Table AI.4 and Chart I.4).

19. U.S. merchandise imports are highly concentrated in manufactures (67.3%) with a much smaller concentration in the mining sector (23.1%). Agricultural imports are very small, accounting for 6.1% of 2011 merchandise imports. As with exports, machinery and transport equipment is the largest subsector (35.8%), followed by fuels (20.5%) (Table AI.5 and Chart I.5).

20. U.S. merchandise trade and the merchandise trade deficit are heavily influenced by trade in petroleum products26, which accounted for a growing share of the total value of merchandise imports during 2009-11, from 16% to 20%. Even more significant is the impact of petroleum trade on the growing trade deficit, accounting for 41% and 44% of the merchandise trade deficit in 2009 and 2011, respectively.

21. This impact on the trade balance was in large part due to the rising price of oil rather than import volumes. Import volumes declined continually in 2010 and 2011, while domestic production increased slightly, somewhat reducing U.S. reliance on imported petroleum. U.S. imports averaged 11.4 million barrels per day in 2011, down 2.7% from 2010, and down 17% from 2005 peak levels. Technological developments and innovation in the U.S. energy sector are credited with improving the trade balance (in volume terms), with falling import volumes.27 The prospects for further increases in domestic production of oil and natural gas are quite high. As domestic production expands, domestic "tight oil" (obtained from shale rock and other previously inaccessible geological formations through hydraulic fracturing and related techniques) could displace some crude oil imports, and there may be scope for substitution between imported oil and domestic natural gas in part of the national transport fleet.

26 Includes crude petroleum and refined petroleum products. 27 Jackson (2012); and Neelesh (2012).


Chart I.4Merchandise trade, by main origin and destination, 2010 and 2011

2010 2011

(a) Exports and re-exports (f.o.b.)

Total: US$1,277 billion

(b) Imports (c.i.f.)

Total: US$1,967 billion Total: US$2,263 billion

Source: UNSD, Comtrade database (SITC Rev.3).

China7.2%


Mexico12.8%

Others6.8%

Canada19.4%

Mexico13.3%

Other America

8.0%

Bolivarian Rep. of Venezuela

1.7%

Other Asia16.6%

America43.5%

Canada19.0%

Brazil2.8%

Other America8.3%

EU(27)18.4%

Other Europe3.0%

Other Asia16.4%

Others7.2%

America43.0%

Canada14.2%

Other America5.2%

EU(27)16.6%Other

Europe1.6%

Japan6.3%

China19.5%

Other Asia13.1%

Others10.0% Canada

14.1%

Bolivarian Rep. of

Venezuela1.9%

Other America5.9%

EU(27)16.6%

Other Europe1.8%

Japan5.9%

China18.4%

Other Asia12.9%

Others10.8%

America32.9% America

33.7%

EU(27)19.0%

Bazil2.9%

China7.0%

Mexico11.8%

Mexico11.7%

Europe21.4%

Europe21.7%

Europe18.2%

Asia38.9%

Asia37.2%

Europe18.4%

Other Europe2.8%

Japan4.7%

Asia28.5%

Asia27.9%Japan

4.5%


Chart I.5Merchandise trade, by product, 2010 and 2011

2010 2011

(a) Exports and re-exports (f.o.b.)


(b) Imports (c.i.f.)

Manufactures69.6%

Total: US$1,967 billion Total: US$2,263 billion



Iron & steel1.3%

Iron & steel1.4%

Other agriculture

2.4%

Other manuf.16.8%

Machinery & transport equip.35.2%

Agri.11.4%

Chemicals14.8%

Food8.9%

Other agriculture

2.5%

Fuels8.7%

Other mining3.8%

Chemicals14.0%

Other manuf.16.1%

Mining12.5%

Agri.11.2%

Mining10.0%

Other agriculture

1.0%

Chemicals9.0%

Other semi-manuf.5.8%

Machinery & transport equip.

37.0%

Other manuf.16.2%

Other mining2.3%

Fuels18.4%

Food5.0%

Chemicals8.9%

Other agriculture

1.0%

Food5.0%

Agri.6.1%

Manufactures67.3%

Mining23.1%

Agri.5.9%

Mining20.7%

Fuels20.5%

Other mining2.6%

Other semi-manuf.

5.6%

Machinery & transport equip.

35.8%

Other manuf.15.1%

Other3.5%

Food8.8%

Manufactures68.1%

Manufactures65.3%

Other mining3.7%

Other3.7%

Fuels6.3%

Iron & steel1.6%

Iron & steel1.8%

Other10.7%

Machinery & transport equip.33.9%

Other10.8%


22. Trade in petroleum products varies significantly depending on the type of product. U.S. imports are dominated by crude petroleum, while exports (at 25% of import volumes), consist nearly exclusively of refined petroleum products (e.g. gasoline, fuel oil, distillates, etc.). This imbalance is in large part attributable to demand, which far exceeds domestic production (the United States is the world's largest oil importer), but also policy issues such as export restrictions on crude petroleum.28 The long-standing trade deficit for refined petroleum products turned to a trade surplus, for the first time, in 2011. Some attribute this to higher world prices and/or higher demand in developing countries relative to developed markets, which have excess refining capacity following lower economic output.29

23. As a result of its importance, U.S. trade in petroleum significantly affects the U.S. economy, including the trade balance/current account balance, the rate of inflation, and consumer spending. Oil provides 94% of the energy needed for the U.S. transport sector and 40% of the energy used in the industrial sector.30 The United States is cognizant of the wider and often negative impact of increased costs and imports of oil, and implemented policies and initiatives in 2011 such as President Obama's initiative to cut oil imports by one-third, and conducting sales from the Strategic Petroleum Reserve in an effort to stabilize prices.31

(ii) Trade in services

24. The services sector continues to be a growing part of the U.S. economy, both in terms of GDP and employment. U.S. GDP is heavily reliant on the services industries, which reportedly account for almost 70% of U.S. output.32 Since 2007, the growing trade surplus in services and the growth in the income balance have had an important impact on the current account balance. Both imports and exports of services rebounded for the second consecutive year in 2011 after retracting in 2009. Imports rose and exports grew more rapidly, thus the positive trade balance in services grew strongly. U.S. commercial services exports rose 9.2% in 2011, while imports grew 6.9%, widening the trade in services surplus to US$186 billion. The United States is the world's leading exporter of services, and set new records in 2011 in terms of services exports and surplus.

25. In 2011, exports increased in all major services categories, led by travel and royalties and licence fees (Table I.2): travel services accounted for approximately 26% of total services exports, and royalties and licence fees for 18%. These services categories are also the most important contributing sectors to the services trade surplus. U.S. exports of commercial services reached a record US$581 billion in 2011.

26. U.S. imports of commercial services reached a new level of US$395 billion, surpassing the previous record level of US$374 in 2008. The growth in commercial services other than travel and transportation services accounted for over half the growth (Table I.3). U.S. services trade (imports and exports) is generally concentrated in relatively few, mainly advanced, developed countries (Tables I.4 and I.5). The EU is by far the most important in terms of both imports and exports.

28 Certain U.S. laws and statutes restrict exports of crude petroleum. Unless exports qualify for a few

pre-defined exceptions, the U.S. Department of Commerce does not grant export licences for crude petroleum exports (Neelesh, 2012).

29 Neelesh (2012). 30 Neelesh (2012). 31 White House Press Release, "Remarks by the President on America's Energy Security",

30 March 2011. Viewed at: http://www.whitehouse.gov/the-press-office/2011/03/30/remarks-president-americas-energy-security; and Andrews and Pirog (2012).

32 White House (2012b).


Table I.2 U.S. commercial services exports, by type, 2008-11 (US$ million)

2008 2009 2010 2011

Total 523,348 491,852 532,142 580,864 Services pursuant to modes 1, 2, and 4 Commercial services 522,231 490,776 532,142 580,864

Transportation 74,671 61,410 70,637 78,929 Travel 139,123 123,855 134,846 149,640 Other commercial services 308,437 305,511 326,659 352,295

Communications services 10,301 10,278 11,324 12,988 Construction 3,885 4,032 2,611 .. Insurance services 13,403 14,427 14,605 15,351 Financial services 63,027 62,444 66,387 72,989 Computer and information services 13,120 13,483 13,766 15,313 Royalties and licence fees 88,895 83,447 92,054 103,797 Other business services 101,829 102,615 111,397 .. Personal, cultural and recreational services 13,977 14,785 14,515 15,906

Government services, n.i.e. 15,644 17,680 18,604 .. Services pursuant to mode 3 1,117 1,076 .. ..

.. Not available.

Source: WTO (2012 forthcoming), International Trade Statistics.

Table I.3 U.S. commercial services imports, by type, 2008-11 (US$ million)

2008 2009 2010 2011

Total 374,592 349,596 369,907 395,268 Services pursuant to modes 1, 2, and 4 Commercial services 373,890 348,927 369,907 395,268

Transportation 87,944 67,274 78,122 85,237 Travel 86,904 80,828 82,696 86,734 Other commercial services 199,042 200,825 209,089 223,297

Communications services 8,353 7,947 8,367 8,174 Construction 3,451 3,579 2,351 .. Insurance services 58,913 63,614 61,767 57,562 Financial services 17,218 13,597 13,803 15,070 Computer and information services 16,895 17,047 19,385 23,977 Royalties and licence fees 27,841 27,924 31,784 34,813 Other business services 64,295 64,699 69,418 .. Personal, cultural and recreational services 2,076 2,418 2,214 ..

Government services, n.i.e. 32,216 34,889 35,012 34,045 Services pursuant to mode 3 702 669 .. ..

.. Not available.


Table I.4 U.S. commercial services exports (modes 1, 2, and 4), by destination, 2008-10 (US$ million)

2008 2009 2010

Total 522,231 490,776 532,142 EU(27) 193,016 170,096 169,098 Canada 45,114 42,644 50,521 Japan 41,524 40,049 44,750 Mexico 25,938 23,080 24,110 China 15,065 15,971 21,135 Switzerland 19,896 18,871 20,313 Brazil 12,120 13,082 16,515

Table I.4 (cont'd) Korea, Republic of 12,885 12,758 15,105


2008 2009 2010

Australia 12,022 12,024 13,168 Bermuda 9,604 10,903 11,061 India 10,189 9,831 10,319 Singapore 7,277 7,055 9,709 Chinese Taipei 6,041 6,459 9,292 All others 111,540 107,953 117,046


Table I.5 U.S. commercial services imports (modes 1, 2, and 4), by origin, 2008-10 (US$ million)

2008 2009 2010

Total 373,890 348,927 369,907 EU(27) 140,688 123,124 125,399 Bermuda 24,740 33,624 31,740 Canada 25,000 22,295 25,579 Japan 24,460 20,990 23,541 Switzerland 18,982 18,583 19,665 Mexico 15,502 13,538 13,730 India 12,465 12,359 13,661 China 9,316 8,161 9,967 Korea, Republic of 7,240 6,384 7,756 Hong Kong, China 7,255 5,820 6,492 Chinese Taipei 6,576 5,125 6,330 Australia 5,713 5,352 5,600 Brazil 4,913 4,987 5,232 All others 71,040 68,585 75,215


27. The United States is aware of the growth potential of its services exports and has enacted laws or initiated actions to increase services exports, especially in the travel and tourism sector. The Travel Promotion Act of 2009, passed in 2010, established the Corporation for Travel Promotion, which does business as Brand USA, a public-private partnership with the mandate to promote travel to the United States.33 In January 2012, President Obama issued an Executive Order to improve visa processing and promote travel and tourism. The Executive Order required the Departments of State and Homeland Security to develop an implementation plan within 60 days to improve visa processing times for non-immigrant visas for foreign visitors, in particular with respect to increasing capacity by 40% in Brazil and China, in order to promote tourism. The Executive Order requires periodic reporting on progress in implementing the goals with respect to non-immigrant visa processing times. In addition, it established a Task Force on Travel and Competitiveness to develop a National Travel and Tourism Strategy, aiming to make the U.S. a top travel and tourism destination.34

(iii) Foreign direct investment

28. The United States is the world's largest recipient of foreign direct investment (FDI), which totalled US$228 billion in 2011, down from US$236 billion in 2010. FDI continues to play an important role in the U.S. economy, with accumulated stock reached US$2.9 trillion in 2010, and making important contributions to U.S. employment, R&D, and exports.35 U.S. foreign direct investment flows tend to track economic growth, being higher when the economy expands, and falling when the economy shrinks. In recent years, U.S. FDI reached a peak in 2008 before falling during the financial crisis. Along with the recovery, U.S. FDI climbed in 2010 and 2011, after falling

33 Travel Promotion Act of 2009, Public Law 111-145. 34 Executive Order No. 13,597, 19 January 2012. 35 Stated at current cost value (White House, 2012b).


significantly in 2009, but has not yet recovered to 2008 peak levels. As the world economy recovers from the economic downturn, global FDI is also predicted to recover, possibly surpassing 2007-08 peak levels in 2013 according to UNCTAD estimates.36

29. FDI in the United States has traditionally been heavily concentrated, both in terms of geographic source and type of investment. The manufacturing sector has generally received the majority of FDI, although levels have varied widely year-to-year (Chart I.6). The vast majority of FDI originates in eight countries, six of which are European.37 In 2010, these top eight accounted for 84% of all U.S. FDI.38 As Europe is a major contributor to U.S. FDI, there is some concern about a prolonged debt crisis in Europe and its consequential negative impact on U.S. FDI. Given the beneficial impact of FDI on the U.S. economy and jobs, the U.S. Administration has recently created SelectUSA, described as a one-stop shop to seek and attract investment in the United States. Established in the Department of Commerce, SelectUSA covers a wide range of investment promotion functions such as coordinating among state, local, and regional economic development organizations and educating investors about relevant U.S. policies and procedures.39

0

50

100

150

200

250

300

350

2007 2008 2009 2010 2011

Chart I.6Foreign direct investment into the United States, 2007-11

(US$ billion)

Source: Bureau of Economic Analysis online information. Viewed at: http://www.bea.gov/.

Manufacturing Wholesale trade Banking & finance All othersManufacturing Wholesale trade Banking & finance All others

36 UNCTAD (2011). 37 Switzerland, United Kingdom, Japan, France, Germany, Luxembourg, the Netherlands, and Canada. 38 Department of Commerce, Economics and Statistics Administration (2011). 39 Established by Executive Order 13577, 15 June 2011 (White House Press Release. Viewed at:

http://www.whitehouse.gov/the-press-office/2011/06/15/executive-order-selectusa-initiative; and SelectUSA online information. Viewed at: http://selectusa.commerce.gov/).

http://www.whitehouse.gov/the-press-office/2011/06/15/executive-order-selectusa-initiative


II. TRADE POLICY AND INVESTMENT REGIMES

(1) TRADE POLICY FORMULATION AND FRAMEWORK

1. The U.S. Constitution grants Congress the power to regulate foreign commerce and authority to establish rates of duty. The Executive branch under the President also has certain roles in trade policy. These may include periodic delegation of authority and negotiation of trade agreements, i.e. under special fast-track procedures, which include intensive consultations, followed by eventual approval and implementation by Congress. Thus, both the Congress and the President have roles in developing U.S. trade policy (Chart II.1).

Lead institutions with trade policy function.

Note: COG: Congresionnal Oversight Group; NSC/NEC: National Security Council/National Economic Council; TPRG: Trade Policy Review Group; TPSC: Trade Policy Staff Committee.

Chart II.1Formulation of the trade policy

Congress

Source: WTO Secretariat, based on information from the U.S. authorities.

House of Representatives

Public Government Agencies

Senate

PresidentTrade policy

Consultation

NSC/NEC

TPRG

TPSC

TradeAdvisory

Committees

U.S. TradeRepresentative

Senate FinanceCommittee

Committee onWays and Means

Other HouseCommittees

Other Senate Committees

Oversight

Ratification

COG

2. On the Congressional side, a number of Congressional bodies or groups have specific trade policy functions. The Trade Act of 2002 established the Congressional Oversight Group (COG), which is authorized to provide advice to the President and USTR on a variety of trade policy matters. For example, it provides direction with respect to negotiating strategies and positions, the development of trade agreements, and compliance and enforcement aspects of trade agreements. Also, the Trade Act of 1974 provides for the House Committee on Ways and Means and the Senate Finance Committee to designate five members each to advise on trade policy and negotiations.1

3. USTR has primary responsibility for coordinating and developing trade policy for the Executive branch. Under the Trade Expansion Act of 1962, Congress established an interagency trade policy mechanism to assist USTR with the implementation of these responsibilities. The mechanism has three tiers: the National Economic Council located in the White House, the Trade Policy Review Group (TPRG), and the Trade Policy Staff Committee (TPSC), the latter two chaired by USTR. The TPSC and TPRG are composed of 21 members from various government Departments, Councils, Offices, or Agencies, and USTR can invite participation of others when appropriate. The NEC, at the highest level, is chaired by the President and has cabinet level representation.2

1 Committee on Ways and Means, U.S. House of Representatives (2010). 2 USTR (2012b).


4. As part of the reporting and consulting process with Congress, the President is mandated through the Trade Act of 1974 to report annually on the operation of the trade agreements program and the national trade policy agenda. The President's annual Trade Policy Agenda, prepared by USTR, typically sets out the Administration's trade policy priorities for the year. On a broader level, U.S. trade policy is informed by U.S. economic and foreign policies and as such its objective is to enhance national economic welfare.

5. Trade legislation is enacted in the same manner as other laws, through passage by both houses of Congress and approval by the President. For example, the United States implemented the Marrakesh Agreement through the Uruguay Round Agreements Act (URAA) under this procedure.3 During certain periods since 1974, Congress has put in place special "fast track" or "trade promotion authority" procedures under which the Congress commits to vote on trade agreement implementing legislation within a fixed period, and without amendment, once the President submits an implementing bill. The most recent set of these procedures covered trade agreements signed between 2002 and mid-2007.

(2) PARTICIPATION IN THE WORLD TRADE ORGANIZATION

6. According to the U.S. Trade Policy Agenda, the United States is "committed to preserving and enhancing the WTO's irreplaceable role as the primary forum for multilateral trade liberalization, for the development and enforcement of global trade rules, and as a key bulwark against protectionism".4 The United States continues to support, participate and pursue trade initiatives and further liberalization through the WTO's multilateral trade framework. Furthermore, the United States is committed to contributing constructively and creatively to the functioning of the WTO, in particular, acknowledging that the WTO Doha Round is at an impasse, it is committed to fresh and credible approaches to new market-opening trade initiatives.5

7. As an original Member of the WTO, the United States adheres to all the multilateral agreements and disciplines, and participates in several plurilateral agreements, i.e. the Agreement on Civil Aircraft, Agreement on Government Procurement, and the Information Technology Agreement. The United States has further liberalized certain goods and services sectors, participating in the pharmaceuticals initiative, Uruguay Round zero-for-zero sectorals, and additional commitments on telecommunications and financial services.

8. The United States is active in all aspects of WTO work, including the on-going negotiations, regular Committee work, reporting and monitoring, development aspects, accessions, and in the dispute settlement arena. During 1 January 2010 to 30 June 2012, the United States submitted 22 proposals or communications to the negotiating groups; the majority of these concerned the Negotiating Group on Market Access. During the same period, the United States was a respondent in eight dispute settlement cases, was a complainant in seven cases, and participated as a third party in seven panel proceedings. The United States was involved in seven appeals processes and involved in three implementation or arbitration matters (Table AII.1).

9. The United States also contributes to improving the transparency of the WTO, its trade rules, and creating a clear and effective system by providing information through the WTO notification process and promoting the use of open and transparent meetings and hearings. Of the 11 panels that have permitted open hearings at the request of the parties to the dispute, the United States was involved as a complainant or respondent in 9. Similarly, the United States was an appellant or

3 Public Law 103-465. 4 USTR (2012b). 5 USTR (2012b).


appellee in 7 of the 8 public hearings that have been held by the Appellate Body. In addition, the United States was a party in both instances where an Arbitrator held open hearings.

10. The United States has made new or updated notifications during the period under review covering a diverse range of WTO disciplines (Table AII.2). However, it appears that some changes or updates to U.S. trade laws or procedures would require updated or amended WTO notifications. In particular, as noted in other parts of this report or in previous Reviews, new notifications are likely necessary in the areas of rectifications and modifications of schedules, preferential rules of origin, quantitative restrictions, and with respect to preference programmes like the GSP.

(3) PREFERENTIAL TRADE AGREEMENTS AND ARRANGEMENTS

11. Since its last Trade Policy Review, the United States has moved ahead with the legislative approval of three free-trade agreements and the extension of two lapsed preference programmes. To date it has put into effect its trade agreements with the Republic of Korea and Colombia, and is working with Panama to put that agreement into effect. The United States has also extended two preference programmes (Generalized System of Preferences and the Andean Trade Preferences Act that had lapsed). Furthermore, as part of the President's 2012 Trade Policy Agenda, important priorities were announced with respect to concluding a bold and ambitious Trans-Pacific Partnership agreement and building better export markets through regional economic integration.6

12. Preferential trade accounts for an important and growing part of U.S. trade. In 2011, 20.1% of U.S. imports were under preferential regimes, reciprocal preferences accounted for 16.4% and unilateral preferences for 3.7% (Chart II.2). While imports under unilateral preference programmes remained flat, at US$80 billion in 2011 compared to 2010, in part due to the lapse of the GSP and ATPA programmes, reciprocal FTA imports increased 15% in 2011. Compared to similar figures for 2008, a peak year for U.S. trade, FTA preferential imports were 15.8% of the overall import share compared to 16.4% in 2011.

Chart II.2Imports for consumption, by type of import regime, 2011

Source: WTO Secretariat, based on U.S. International Trade Commission (USITC), Trade Data Web.

Reciprocal trade agreementsa

16.4%

Unilateral preferences3.7%

MFN dutiable31.1%

MFN duty-freea

48.8%

Note: Non-MFN trade statistically rounds to zero.

a "Reciprocal trade agreements" covers trade benefitting from the RTA, and "MFN duty-free" covers all trade entering at MFN duty-free levels, although the RTA may provide concessions at zero that are alreadyMFN duty-free.

6 USTR (2012b).


(i) Reciprocal trade agreements

(a) New agreements with Colombia, the Republic of Korea, and Panama

13. Legislation approving the free-trade agreements with Colombia, the Republic of Korea, and Panama, negotiated and signed during the previous Administration, was enacted by the U.S. Congress and signed into law by the President in October 2011. The United States-Republic of Korea FTA entered into force on 15 March 2012, and the U.S.-Colombia FTA entered into force on 15 May 2012. As of July 2012, the agreement with Panama is not yet in force. As Congress and the current Administration had a number of concerns regarding the agreements, thus the U.S. Administration did not send the agreements to Congress for approval until it considered that the concerns had been adequately addressed. Thus, certain changes or additions have been agreed in the interim, resulting in amendments or new exchanges of letters.

14. The free-trade agreement with Korea is expected have a substantial impact on trade, and longer term impact on GDP and investment, as Korea is the United States' seventh largest trading partner (Table II.1). The effects of the agreements with Colombia and Panama are expected to be much smaller. Most imports from Colombia and Panama already benefit from unilateral preference programmes or MFN duty-free entry, and they rank 25th and 52nd as trading partners. In terms of trade, the Republic of Korea is expected to quickly become the United States' second largest FTA partner after NAFTA.

Table II.1 Economic impact and predictions for the new free-trade agreements

FTA partner

Impact on U.S. merchandise exports to partner

Impact on U.S. merchandise imports from partner

Impact on U.S. services' exports to partner

Impact on U.S. services' imports from partner

Impact on U.S. GDP

Impact on U.S. investment in partner

Colombia +US$1.1 billion + US$487 million Small increase No measurable effect

+ US$2.5 billion Small positive effect

Korea + US$9.7 billion to US$10.9 billion

+ US$6.4 billion to US$6.9 billion

Increase No substantial impact

+ US$10.1billion to 11.9 billion

Could increase substantially

Panama Small but positive No significant growth

Small increase No significant effect

Small Possible medium and long-term effect

Source: USITC (2006), U.S.-Colombia Trade Promotion Agreement: Potential Economy-wide and Selected Sectoral Effects, Publication 3896, December. Viewed at: http://www.usitc.gov/publications/332/pub3896.pdf; USITC (2007), U.S.-Korea Free Trade Agreement: Potential Economy-wide and Selected Sectoral Effects, Publication 3949, September. Viewed at: http://www.usitc.gov/publications/pub3949.pdf; and USITC (2007), U.S.-Panama Trade Promotion Agreement: Potential Economy-wide and Selected Sectoral Effects, Publication 3948, September. Viewed at: http://www.usitc.gov/publications/pub3949.pdf.

15. Detailed analysis of the three new agreements is beyond the scope of this report, but a few prominent points are summarized in Table II.2.

Table II.2 Overview of the new U.S. FTAs, 1 January 2010-30 June 2012

United States and Colombia Passage of U.S. legislation / entry into force

21.10.2011 / 15.05.12

Transition to full implementation Agriculture product tariffs phased out over 15 years Some agriculture TRQs phased out over 19 years Industrial products phased out over 10 years

Main products excluded from liberalization

TRQ on sugar; exemption from national treatment and exception of the export restriction rules for logs

Other measures Textile safeguard measure; agriculture safeguard measure; sugar compensation mechanism

Table II.2 (cont'd)


U.S. merchandise trade (2011) Imports: US$22,390 million, 1% of total U.S. imports Exports: US$12,830 million, 1% of total U.S. exports

of which preferential imports US$3,059 million or 14% of which MFN duty-free importsa US$9,150 million or 41%

U.S. commercial services trade (2010) .. WTO document series WT/REG314

United States and the Republic of Korea Passage of U.S. legislation / entry into force

21.10.2011 / 15.03.2012

Transition to full implementation Agriculture product tariffs phased out over 23 years TRQ on dairy products phased out over 10 years Industrial products phased out over 10 years


TRQs on most products retained; exemption from national treatment and exception of the export restriction rules for logs

Other measures Motor vehicle safeguard measure; agriculture safeguard measure; exclusion of imports of the other party when invoking a global safeguard measure

U.S. merchandise trade (2011) Imports: US$56,006 million, 2.6% of total U.S. imports Exports: US$41,311 million, 3.2% of total U.S. exports

of which preferential imports 0 of which MFN duty-free importsa US$29,552 million or 53%

U.S. commercial services trade (2011) Imports: US$8,377 million, 2.1% of total U.S. imports Exports: US$16,562 million, 2.8% of total U.S. exports

WTO document series WT/REG311

United States and Panama Passage of U.S. legislation / entry into force

21.10.2011 / not yet entered into force

Transition to full implementation Agriculture product tariffs phased out over 15 years Some agriculture TRQs phased out over 20 years Industrial products phased out over 10 years


TRQ on sugar; exemption from national treatment and exception of the export restriction rules for logs

Other measures Textile safeguard measure; agriculture safeguard measure; sugar compensation mechanism U.S. merchandise trade (2011) Imports: US$388 million, 0.02% of total U.S. imports

Exports: US$7,802 million, 0.6% of total U.S. exports of which preferential imports US$56 million or 14% of which MFN duty-free importsa US$322 million or 83%

U.S. commercial services trade (2010) .. WTO document series Not yet notified

.. Not available.

a MFN duty free and other duty free, including product-specific and unilateral preferences.

Source: USTR online information, "Free Trade Agreements". Viewed at: http://www.ustr.gov/trade-agreements/free-trade-agreements; WTO documents; and USITC Data Web.

(b) Overview of the other free-trade agreements

16. At the end of 2011, the United States had 11 bilateral or regional free-trade agreements in force with 17 countries, which accounted for 16.4% of total U.S. imports. However, this figure may underestimate the trade, as it only provides for trade that would otherwise be dutiable, it does not account for all imports from the partner country, as MFN duty-free trade is not included. As MFN duty-free trade accounts for nearly 50% of U.S. imports (Chart II.2), it may also be important to analyse these two types of imports in tandem (Table II.3). Clearly the majority of imports from FTA partners receive benefits, with 90% or more of trade entering duty free from partner countries, with the exception of the two most recent free-trade agreements, with Oman and Peru, which entered into force in 2009.

17. United States' FTA trade is dominated by NAFTA partners, which accounted for 91% of total imports under FTAs, and 77% of exports to FTA partners in 2011. For the first time, in 2011,


Mexican imports under NAFTA preferences surpassed Canadian imports. Crude petroleum and passenger motor vehicles were the top imported products from NAFTA partners in 2010 and 2011. The United States maintains a positive trade balance for 8 of its 11 free-trade agreements, although it maintains a significant trade deficit with the NAFTA countries (Table II.3). CAFTA-DR partner countries (Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua) and Chile are the next most significant import suppliers, although they account for only 3.3% and 1.6% of preferential imports in 2011 (Table II.3).

Table II.3 Trade under reciprocal trade agreements, 2011 (US$ million, unless otherwise indicated)

FTA partner(s)

Imports under FTA preferences

Other duty-free imports (MFN duty free, etc.)a

% of imports entering duty-free

Total imports from FTA partner(s)

Total exports to FTA partner(s) Trade balance

Australia 3,034 6,668 95 10,173 25,491 15,318 Bahrain 326 180 98 518 1,166 648 Chile 5,706 3,299 98 9,170 14,498 5,328 Israel 2,661 19,810 98 23,018 8,084 -14,934 Jordan 870 181 99 1,060 1,410 350 Morocco 201 694 90 991 2,842 1,851 Oman 1,526 224 80 2,184 1,369 -815 Peru 3,079 2,213 87 6,059 7,412 1,353 Singapore 1,138 16,952 95 18,982 28,224 9,242 NAFTA 326,548 216,285 94 578,891 393,684 -185,207

Canada 162,733 126,742 92 316,257 233,774 -82,483 Mexico 163,815 89,543 96 262,634 159,910 -102,724

DR-CAFTA 11,912 14,651 95 27,932 28,403 471 Costa Rica 1,367 8,501 98 10,111 5,565 -4,546 Dominican Rep. 2,251 1,727 96 4,152 6,963 2,811 El Salvador 1,913 458 96 2,479 3,167 688 Guatemala 1,829 1,842 89 4,129 5,857 1,728 Honduras 3,270 1,046 97 4,457 5,851 1,394 Nicaragua 1,282 1,077 91 2,604 1,000 -1,604

a MFN duty free and other duty free, including product-specific and unilateral preferences.

Note: U.S. exports that benefit from FTA preferences cannot be determined with the data available.


(ii) Unilateral preferences

18. The United States has a long history of providing non-reciprocal preferential trade treatment to developing countries in order to promote economic growth and development. The preference programmes are either global, i.e. the Generalized System of Preferences, or regional, where the five main preference programmes are the Andean Trade Preference Act (ATPA), the Caribbean Basin Economic Recovery Act (CBERA), the Caribbean Trade Partnership Act (CBTPA), the African Growth and Opportunity Act (AGOA), and the Haitian Opportunity through Partnership Encouragement (HOPE) Act. In addition, the United States gives unilateral preferential treatment to imports from: U.S. insular possessions (U.S. Virgin Islands, Guam, American Samoa, Wake Island, Midway Islands, Johnston Atoll, and the Commonwealth of the Northern Mariana Islands); those with Compacts of Free Association (Republic of the Marshall Islands, the Federated States of Micronesia, and the Republic of Palau); and from the West Bank and the Gaza Strip.7 In order to receive benefits under one or more of the preference programmes, countries have to meet eligibility criteria, which vary by programme, but may include meeting international commitments in worker rights and investment practices, as well as foreign policy objectives such as having an extradition treaty or combating trade in illegal drugs, and other technical criteria such as adhering to rules of origin (Chapter III(1)(iii)(b)).

7 Including qualifying industrial zones.


19. The U.S. Congress sets the statutory guidelines for unilateral preference programmes and is responsible for initiating and passing legislation to amend or re-authorize these programmes. During the past two years Congress has held significant policy discussions on prospective reform of some of these programmes, though they have not yet led to any major changes. The legal authority for the GSP and ATPA programmes lapsed on 31 December 2010 and 12 February 2011, respectively. In October 2011, legislation was enacted re-authorizing the two programmes until 31 July 2013.8 Congress may consider changes or reforms in the GSP and ATPA programmes when it next takes up renewal of these two programmes, probably in the first half of 2013. According to the President's Trade Policy Agenda, the growing competitiveness of many emerging-market GSP beneficiaries may prompt review and reform of the GSP programme.9

20. U.S. preference programmes taken together accounted for 3.7% of U.S. imports in 2011 (Chart II.3), with AGOA accounting for the largest part, at 2.4% of total imports or 65.2% of unilateral preferential imports, followed by GSP with 0.9% of total imports or 23.3% of unilateral preferential imports.10 The CBERA/CBTPA and ATPA programmes are very small in terms of trade, accounting for 0.2% of total U.S. imports each (Chart II.3). Imports under the GSP and ATPA declined in 2011 compared to 2010, while those under the AGOA and CBERA increased. The decline in ATPA imports can be attributed to the declining number of participants while the decline in GSP appears to be due primarily to the graduation of Equatorial Guinea from GSP and the shifting of imports from one preference programme to another, i.e. imports from Angola moving from GSP to AGOA preferences. In terms of the products benefiting from unilateral preferences, crude petroleum far outpaced any other product in 2010 and 2011, accounting for over two thirds (68% and 66% by value) of all unilateral preferential imports, respectively. Other main imports under the preference programmes were chemical/fuel products and textiles and clothing.

Chart II.3Unilateral preferences imports, by programme, 2011(Share of imports)


AGOA (65.2%) 2.4%

GSP (23.3%) 0.9%

ATPA / ATPDEA (5.5%)

CBERA / CBTPA

Note: Percentage in parenthesis represents share in unilateral preferences imports. Percentage not in parenthesis represents share in total imports.

Other (1.4%) 0.1%

8 Upon renewal, the benefits for eligible products were applied retroactively from 1 January 2011. 9 USTR (2012b). 10 Only goods benefitting from the preference programmes; does not include MFN duty-free imports.


(a) Generalized System of Preferences

21. In 2011, the Administration worked with Congress to restore authorisation for the GSP programme. In October 2011, the President signed legislation extending GSP until 31 July 2013, with retroactive effect from 1 January 2011 (Table II.4). Due to the lapse of the programme in 2011, the review of petitions seeking waivers of competitive needs limitations (CNLs)11 was suspended and no actions were taken in 2011 to exclude products from GSP eligibility based on CNLs.12 USTR launched the 2011 GSP annual review in November 2011. During such annual reviews, USTR and the TPSC consider petitions from interested parties to modify the status of certain GSP beneficiary countries and modify the list of GSP eligible products.13

Table II.4 Overview of GSP

Entry into force 1 January 1976 Expiry 31 July 2013 Beneficiaries Independent countries: Afghanistan, Albania, Algeria, Angola, Armenia, Azerbaijan, Bangladesh,

Belize, Benin, Bhutan, Plurilateral State of Bolivia, Bosnia and Herzegovina, Botswana, Brazil, Burkina Faso, Burundi, Cambodia, Cameroon, Cape Verde, Central African Republic, Chad, Comoros, Congo (Brazzaville), Congo (Kinshasa), Côte d'Ivoire, Djibouti, Dominica, East Timor, Ecuador, Egypt, Eritrea, Ethiopia, Fiji, Gabon, Gambia, The Georgia, Ghana, Grenada, Guinea, Guinea-Bissau, Guyana, Haiti, India, Indonesia, Iraq, Jamaica, Jordan, Kazakhstan, Kenya, Kiribati, Kosovo, Kyrgyzstan, Lebanon, Lesotho, Liberia, Former Yugoslav Republic of Macedonia, Madagascar, Malawi, Maldives, Mali, Mauritania, Mauritius, Moldova, Mongolia, Montenegro, Mozambique, Namibia, Nepal, Niger, Nigeria, Pakistan, Panama, Papua New Guinea, Paraguay, Philippines, Russia, Rwanda, St. Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Samoa, Sao Tomé and Principe, Senegal, Serbia, Seychelles, Sierra Leone, Solomon Islands, Somalia, South Africa, South Sudan, Sri Lanka, Suriname, Swaziland, Tanzania, Thailand, Togo, Tonga, Tunisia, Turkey, Tuvalu, Uganda, Ukraine, Uruguay, Uzbekistan, Vanuatu, Bolivarian Republic of Venezuela, Yemen, Zambia, Zimbabwe; non-independent countries and territories: Anguilla, British Indian Ocean Territory, Christmas Island (Australia), Cocos (Keeling) Islands, Cook Islands, Falkland Islands (Islas Malvinas), Gibraltar, Heard Island and McDonald Islands, Montserrat, Niue, Norfolk Island, Pitcairn Islands, Saint Helena, Tokelau, Turks and Caicos Islands, British Virgin Islands, Wallis and Futuna, West Bank and Gaza Strip, Western Sahara; least-developed beneficiary developing countries: Afghanistan, Angola, Bangladesh, Benin, Bhutan, Burkina Faso, Burundi, Cambodia, Central African Republic, Chad, Comoros, Congo (Kinshasa), Djibouti, East Timor, Ethiopia, The Gambia, Guinea, Guinea-Bissau, Haiti, Kiribati, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Nepal, Niger, Rwanda, Samoa, Sao Tomé and Principe, Sierra Leone, the Solomon Islands, Somalia, South Sudan, Tanzania, Togo, Tuvalu, Uganda, Vanuatu, Republic of Yemen, Zambia; and certain associations of countries treated as one country for GSP rule-of-origin requirements

Benefits GSP provides duty-free treatment for 3,509 eight-digit tariff lines for GSP beneficiaries. An additional 1,463 tariff lines are eligible for duty-free treatment when imported from least-developed beneficiary developing countries. Thus, GSP-eligible tariff lines are 51.3% of dutiable MFN tariff lines, or 72.7% when including GSP LDC tariff lines

Exclusions Many agricultural, textile and apparel, and other import sensitive products are excluded

Top 3 2010 imports (US$ million) Top 3 2011 imports (US$ million)

By country By country Total 22,554 Total 18,539

Thailand 3,612 India 3,736 Angola 3,544 Thailand 3,720 India 3,482 Brazil 2,059

Table II.4 (cont'd)

11 CNLs are quantitative ceilings on GSP benefits that enter into effect when imports of a GSP-eligible

product from a beneficiary country exceed statutorily defined percentages or dollar values. CNLs do not apply to LDCs or AGOA-eligible sub-Saharan African countries.

12 76 FR 67530. 13 76 FR 67531.


By product By product Total 22,554 Total 18,539

Crude petroleum 5,433 Silver jewellery 695 Silver jewellery 655 Aluminium alloy plate/sheet/strip 493 Rubber automotive tyres 506 Crude petroleum 481

Note: Trade import data used: "imports for consumption", "customs value", and HTSUS six-digit basis. Beneficiaries as at 30 June 2012.

Source: WTO Secretariat, based on data compiled from USITC DataWeb. Viewed at: http://dataweb.usitc.gov; Harmonized Tariff Schedule of the United States (HTSUS) Revision 3, February 2012; USTR (2012) U.S. Generalized System of Preferences: Guidebook, April. Viewed at: http://www.ustr.gov/webfm_send/2880; and USTR online information, "GSP by the Numbers". Viewed at: http://www.ustr.gov/webfm_send/3017.

22. In 2011 and continuing into 2012, USTR and the TPSC were reviewing the GSP eligibility of Bangladesh, Georgia, Niger, the Philippines, Sri Lanka, and Uzbekistan, based on issues related to worker rights. A worker rights petition from 2008 concerning Iraq remains pending. Country practices petitions on Lebanon, Russia, and Uzbekistan for IPR issues also remained under review in early 2012. Pursuant to Presidential Proclamation 8788 of 26 March 2012, Argentina's status as a beneficiary under the GSP was suspended for failure to act in good faith in enforcing arbitral awards in favour of U.S. corporations, and the Republic of South Sudan was added as a least-developed beneficiary developing country.14

23. The United States-Colombia Trade Promotion Agreement entered into force on 15 May 2012. At that time, Colombia ceased to be a GSP beneficiary. Similarly, when the United States-Panama Trade Promotion Agreement enters into force, Panama will cease to be a GSP beneficiary.

(b) African Growth and Opportunity Act (AGOA)

24. By Presidential Proclamation on 28 October 2011, Côte d'Ivoire, Guinea, and Niger were designated as beneficiary sub-Saharan African countries under the AGOA (Table II.5).15 Furthermore, they were deemed to satisfy the criterion of "lesser developed beneficiary sub-Saharan African country", and thus receive additional benefits under section 112 (c) of AGOA. On 1 January 2011, also by Presidential Proclamation, the Democratic Republic of Congo was removed as a beneficiary.16

Table II.5 Overview of the AGOA

Entry into force 1 October 2000 Expiry 30 September 2015 Beneficiaries Republic of Angola, Republic of Benin, Republic of Botswana, Burkina Faso, Republic of Burundi,

Republic of Cape Verde, Republic of Cameroon, Republic of Chad, Union of the Comoros, Republic of Congo, Republic of Côte d'Ivoire, Republic of Djibouti, Ethiopia, Gabonese Republic, Republic of The Gambia, Republic of Ghana, Republic of Guinea, Republic of Guinea-Bissau, Republic of Kenya, Kingdom of Lesotho, Republic of Liberia, Republic of Malawi, Republic of Mali, Islamic Republic of Mauritania, Republic of Mauritius, Republic of Mozambique, Republic of Namibia, Republic of Niger, Federal Republic of Nigeria, Republic of Rwanda, Democratic Republic of Sao Tome and Principe, Republic of Senegal, Republic of Seychelles, Republic of Sierra Leone, Republic of South Africa, Kingdom of Swaziland, United Republic of Tanzania, Republic of Togo, Republic of Uganda, Republic of Zambia

Benefits AGOA provides duty-free treatment for 1,738 eight-digit tariff lines, i.e. 25.4% of MFN dutiable tariff lines (exclusive of GSP lines)

Table II.5 (cont'd)

14 77 FR 18899. 15 76 FR 67035. 16 President Proclamation 8618 of 21 December 2010.

http://dataweb.usitc.gov/

http://www.ustr.gov/webfm_send/3017


Exclusions Import sensitive products subject to TRQs, certain agriculture, flat goods, and iron and steel products



Nigeria 25,154 Nigeria 31,004 Angola 6,294 Angola 11,534 Congo (Republic of) 1,936 Chad 2,991


Crude petroleum 35,360 Crude petroleum 47,434 Certain motor vehicles 1,471 Certain motor vehicles 1,995 Light petroleum oils 519 Light petroleum oils 801

Note: Trade import data used: "imports for consumption", "customs value", and HTSUS six-digit basis.

Source: WTO Secretariat, based on data compiled from USITC DataWeb. Viewed at: http://dataweb.usitc.gov; Harmonized Tariff Schedule of the United States (HTSUS) Revision 3, February 2012; and USTR online information, "Fact Sheet on AGOA". Viewed at: http://www.ustr.gov/sites/default/files/AGOA%20Fact%20 Sheet%202010.pdf.

25. The AGOA third-country fabric provision, seen as successful in promoting the textile and apparel industry in Africa as well as supporting many jobs, is set to expire on 30 September 2012. The U.S. Congress has introduced legislation in this regard, but it has not been enacted into law at this time.

(c) Caribbean Basin Economic Recovery Act (CBERA) and U.S.-Caribbean Basin Trade Partnership Act (CBTPA), including the HOPE and HELP amendments

26. The HOPE amendments to the CBERA agreement, in 2006 and 2008, provided additional duty-free provisions for Haiti, in particular apparel products. A further amendment in January 2010, known as the HELP amendment further extended more flexible and generous tariff preferences to Haiti by allowing third-country inputs to be used as inputs for Haitian exports under the programme.17 Upon entry into force of the free-trade agreement with Panama, Panama will cease to be a CBERA/CBTPA beneficiary (Tables II.6 and II.7).

Table II.6 Overview of CBERA

Entry into force 1 January 1984 Expiry No statutory expiry Beneficiaries Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Haiti, Jamaica,

Montserrat, Panama, St. Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Trinidad and Tobago, British Virgin Islands

Benefits CBERA provides preferential or duty-free treatment for 5,498 eight-digit tariff lines, i.e. 80.4% of MFN dutiable tariff lines

Exclusions Most textiles and apparel, leather, canned tuna, petroleum and derivatives, certain footwear, certain watches, and over-TRQ agricultural goods



Trinidad and Tobago 930 Trinidad and Tobago 1,290 Bahamas 99 Jamaica 179 Jamaica 84 Bahamas 124

Table II.6 (cont'd)

17 Hornbeck (2011).




Methanol 890 Methanol 1,097 Polystyrene 95 Undenatured ethyl alcohol 244 Raw sugar 26 Polystyrene 122

Note: Does not include US$2 million (2010) and US$1million (2011) qualifying CBI imports from Puerto Rico. Trade import data used: "imports for consumption", "customs value", and HTSUS six-digit basis. Beneficiaries as at 30 June 2012.

Source: WTO Secretariat, based on data compiled from USITC DataWeb. Viewed at: http://dataweb.usitc.gov; Harmonized Tariff Schedule of the United States (HTSUS) Revision 3, February 2012; USTR (2011), Ninth Report to Congress on the Operation of the Caribbean Basin Economic Recovery Act, 31 December. Viewed at: http://www.ustr.gov/webfm_send/3214; USITC (2011), Caribbean Basin Economic Recovery Act: Impact on U.S. Industries and Consumers and on Beneficiary Countries: Twentieth Report 2009-10, Investigation 332-227. Viewed at: http://www.usitc.gov/publications/332/pub4271.pdf; and USTR online information, "Caribbean Basin Initiative". Viewed at: http://www.ustr.gov/trade-topics/trade-development/preference-programs/caribbean-basin-initiative-cbi.

Table II.7 Overview of CBTPA

Entry into force 2 October 2000 Expiry 30 September 2020 Beneficiaries Barbados, Belize, Guyana, Haiti, Jamaica, Panama, Saint Lucia, Trinidad and Tobago Benefits Expanded the coverage of CBERA to cover qualifying apparel products, petroleum and petroleum

products, certain tuna, certain footwear, and certain watches and watch parts



Trinidad and Tobago 1,274 Trinidad and Tobago 1,303 Haiti 356 Haiti 461 Belize 38 Belize 110


Crude petroleum 1,249 Crude petroleum 1,274 Cotton T-shirts 204 Cotton sweaters and similar 221 Cotton sweaters and similar 125 Cotton T-shirts 213

Note: Trade import data used: "imports for consumption", "customs value", and HTSUS six-digit basis. Beneficiaries as of 30 June 2012.

Source: WTO Secretariat, based on data compiled from USITC DataWeb. Viewed at: http://dataweb.usitc.gov; Harmonized Tariff Schedule of the United States (HTSUS) Revision 3, February 2012; USTR (2011), Ninth Report to Congress on the Operation of the Caribbean Basin Economic Recovery Act, 31 December. Viewed at: http://www.ustr.gov/webfm_send/3214; USITC (2011), Caribbean Basin Economic Recovery Act: Impact on U.S. Industries and Consumers and on Beneficiary Countries: Twentieth Report 2009-10, Investigation 332-227. Viewed at: http://www.usitc.gov/publications/332/pub4271.pdf; and USTR online information, "Caribbean Basin Initiative". Viewed at: http://www.ustr.gov/trade-topics/trade-development/preference-programs/caribbean-basin-initiative-cbi.

(d) Andean Trade Preference Act as amended by the Andean Trade Promotion and Drug Eradication Act (ATPA/ATPDEA)

27. Due primarily to the negotiation of free-trade agreements with countries of ATPA/ATPDEA, the programme has fewer beneficiaries and therefore less trade coverage than in earlier years: Peru's benefits ceased on 1 January 2011 (Table II.8), and those of Colombia on 15 May 2012 as a result of the entry into force of their FTAs. As the Plurilateral State of Bolivia ceased to be eligible for benefits in December 2008, Ecuador is the only current beneficiary of the ATPA/ATPDEA. Three petitions for removal of Ecuador's ATPA benefits remain under review: two worker-rights petitions dating from 2003, and one from 2004 concerning an investment dispute.



http://www.ustr.gov/trade-topics/trade-development/preference-programs/caribbean-basin-initiative-cbi







Table II.8 Overview of ATPA/ATPDEA

Entry into force December 1991 Expiry 31 July 2013 Beneficiaries Ecuador (Peru ceased to be a beneficiary on 1 January 2011 and Colombia on 15 May 2012) Benefits ATPA/ATPDEA provides duty-free treatment for 5,354 eight-digit tariff lines, i.e. 78.3% of

MFN dutiable tariff lines Exclusions Many textile and apparel articles not otherwise eligible, rum and tafia, tuna in cans, and over

TRQ agricultural products

Top 3 2010 imports (US$ million) Top 3

2011 imports (US$ million)


Colombia 9,473 Colombia 2,675 Ecuador 4,179 Ecuador 1,706 Peru 759 Peru 5


Crude petroleum 11,945 Crude petroleum 3,629 Other distillate and residual fuel oils 331 Other distillate and residual fuel oils 216 Fresh cut roses 314 Fresh cut roses 140

Note: Trade import data used: "imports for consumption", "customs value", and HTSUS six-digit basis. Beneficiaries as at 30 June 2012.

Source: WTO Secretariat, based on data compiled from USITC DataWeb. Viewed at: http://Dataweb.usitc.gov; Harmonized Tariff Schedule of the United States (HTSUS) Revision 3 February 2012; USTR (2010), Fifth Report to the Congress on the Operation of the Andean Trade Preference Act as Amended, 30 June. Viewed at: http://www.ustr.gov/sites/default/files/USTR%202010%20ATPA%20Report.pdf; and Congressional Research Service (14 April).

(e) Other unilateral preferences

28. The United States provides duty-free treatment to eligible imports from U.S. insular possessions, freely associated States (Table II.9), and the West Bank and Gaza Strip (including Qualified Industrial Zones) (Table II.10). Trade data are not available for U.S. trade with U.S. insular possessions (U.S. Virgin Islands, Guam, American Samoa, Wake Island, Midway Islands, Johnston Atoll, and the Commonwealth of the Northern Mariana Islands).

Table II.9 Overview of trade with freely associated States

Entry into force 1985 Expiry n.a. Beneficiaries Republic of the Marshall Islands, the Federated States of Micronesia, and the Republic of Palau Benefits Duty-free treatment to all qualifying products


By state By state Total 4 Total 7

Marshall Islands 3.2 Marshall Islands 6.7 Fed. States of Micronesia 0.8 Fed. States of Micronesia 0.4 Palau - Palau -

By product By product Total 4 Total 7

Tunas, skipjack, and bonito 3 Tunas, skipjack, and bonito 7 Other fish fillets and fish meat 0.5 Other fish fillets and fish meat 0.2 Basketwork, wickerwork 0.1 Basketwork, wickerwork 0.2

n.a. Not applicable. - Negligible.

Source: WTO Secretariat, based on data from USITC DataWeb.


http://www.ustr.gov/sites/default/files/USTR%202010%20ATPA%20Report.pdf


Table II.10 Overview of trade with the West Bank, Gaza Strip, and Qualified Industrial Zones

Entry into force 1985 Expiry n.a. Beneficiaries West Bank, Gaza Strip, and Qualified Industrial Zones (located between Israel and Jordan, or

Israel and Egypt) Benefits Duty-free treatment to all qualifying products

Top 3 2010 imports (US$ million) Top 3

2011 imports (US$ million)

By area By area Total 1,160 Total 1,108

Egypt 956 Egypt 1,009 Jordan 200 Jordan 95 Gaza Strip 3 Gaza Strip 3


Women's or girls' trousers of cotton 198 Men's or boys' trousers of cotton 209 Men's or boys' trousers of cotton 180 Women's or girls' trousers of cotton 172 Sweaters, pullovers of cotton 106 Sweaters, pullovers of manmade fibers 73

n.a. Not applicable.

Source: WTO Secretariat, based on data compiled from USITC DataWeb.

(4) INVESTMENT AGREEMENTS AND POLICIES

(i) Bilateral investment treaties and framework agreements

29. The United States negotiates bilateral investment treaties (BITs) to provide a framework and detailed provisions to foster or facilitate the flow of investment. In addition to BITs, the United States has significant investment provisions in many of its free-trade agreements, thus extensive coverage in an FTA may replace the need for a BIT. For example, the United States does not have BITs with Canada or Mexico, but the NAFTA (chapter 11) contains investment provisions similar to those in U.S. BITs; this is also the case for a number of other FTA partners. At end-June 2012, the United States had 41 BITs in force.18 The United States does not have BITs with many of the emerging economies, which have been growing in importance with respect to world investment flows in recent years. Moreover, it is in the process of negotiating with several countries although some negotiations have been on-going for many years, i.e. China and India. A few BITs that have been negotiated, have not entered into force, i.e. Belarus, El Salvador, Haiti, Nicaragua, Russia, and Uzbekistan.

30. The BITs have been traditionally negotiated on the basis of a model that is then applied to the new partners entering into negotiations. The use of BITs and its goals are to:

protect investment abroad in countries where investors' rights are not already protected through existing agreements (such as modern treaties of friendship, commerce, and navigation, or FTAs);

open markets to investment, i.e. pre-establishment

encourage the adoption of market-oriented domestic policies that treat private investment in an open, transparent, and non-discriminatory way; and

18 Department of State online information, "United States Bilateral Investment Treaties". Viewed at:

http://www.state.gov/e/eb/ifd/bit/117402.htm.

http://www.state.gov/e/eb/ifd/bit/


support the development of international law standards consistent with these objectives.19

31. In 2009, the Administration launched a review of the 2004 model BIT to update it in order to ensure that it was consistent with the public interest and the Administration's overall economic agenda. The Administration completed the review in April 2012, and announced a new model BIT. The 2012 model has 42 pages (including annexes) and is reported to build upon the previous model by enhancing transparency and public participation; sharpening disciplines that address preferential treatment to state-owned enterprises, including the distortions created by certain indigenous innovation policies; and strengthening protection relating to labour and the environment.20

32. The United States also uses Trade and Investment Framework Agreements (TIFAs) for dialogue on trade and investment issues. Currently, 47 agreements are in force with individual countries or country groups. TIFAs have often been used as the first level of engagement before moving towards a closer trade and investment relationship. According to the 2012 Trade Policy Agenda, the United States intends to pursue more TIFAs in 2012, especially with African and Middle East countries. Furthermore, the United States plans to strengthen engagement on labour rights thorough the TIFAs in 2012.21

(ii) Investment promotion

33. In June 2011, the U.S. Government took steps to facilitate and attract inward FDI into the United States by creating the first government-initiated centralized investment promotion body. The SelectUSA initiative was established22, by Presidential Executive Order, to attract and retain investment in the American economy, with the specific mission to facilitate business investment in the United States in order to create jobs, spur economic growth, and promote American competitiveness. The SelectUSA initiative involves the creation of the Federal Interagency Investment Working Group, to coordinate activities to promote business investment and to respond to specific issues that affect business investment decisions. According to the Executive Order:

"The Initiative shall coordinate outreach and engagement by the Federal Government to promote the United States as the premier location to operate a business.

The Initiative shall serve as an ombudsman that facilitates the resolution of issues involving federal programs or activities related to pending investments.

The Initiative shall provide information to domestic and foreign firms on: the investment climate in the United States; federal programs and incentives available to investors; and State and local economic development organizations.

The Initiative shall report quarterly to the President through the National Economic Council, the Domestic Policy Council, and the National Security Staff, describing its outreach activities, requests for information received, and efforts to resolve issues."23

19 Department of State online information, "Bilateral Investment Treaties and Related Agreements".

Viewed at: http://www.state.gov/e/eb/ifd/bit/index.htm. 20 Department of State (2012). 21 USTR (2012b). 22 White House Press Release, "Executive Order 13577: SelectUSA Initiative", 15 June 2011. Viewed

at: http://www.whitehouse.gov/the-press-office/2011/06/15/executive-order-selectusa-initiative. SelectUSA activities are performed by the U.S. Department of Commerce under its existing appropriations.

23 White House Press Release, "Executive Order 13577: SelectUSA Initiative", 15 June 2011. Viewed at: http://www.whitehouse.gov/the-press-office/2011/06/15/executive-order-selectusa-initiative.

http://www.state.gov/e/eb/ifd/bit/




(iii) Investment regulations and restrictions

34. The United States' investment regime has been described as open and transparent with few formal encumbrances. For example, there is free movement of capital and profits, and no minimum investment thresholds. However, there remain a number of restrictions to foreign investment in certain areas, and certain information-gathering, monitoring, reporting, and disclosure procedures can also have an impact on foreign investment.

35. According to a 2009 Congressional Research Service report, a number of federal laws or regulations act as barriers or otherwise restrict foreign investment in several areas, i.e. maritime, aircraft, mining, energy, lands, radio communications, banking, and investment company regulations. In addition, in terms of reporting and disclosure, four major federal statutes have an impact on foreign investment. For example, a provision in the Agricultural Foreign Investment Disclosure Act requires foreign persons or an interest by a foreign person in agricultural land to submit a report to the Secretary of Agriculture within a specified timeframe. 24

36. The Committee on Foreign Investment in the United States (CFIUS) is an interagency committee authorized to review transactions that could result in control of a U.S. business by a foreign person, in order to determine the national security effects of such transactions. Where CFIUS identifies national security concerns with a transaction that are not adequately and appropriately addressed by other law, CFIUS is authorized to negotiate or impose mitigation measures or, if the risks cannot be mitigated, recommend to the President that he suspend or prohibit the transaction. CFIUS operates essentially on a voluntary basis, but has the authority to initiate a review of any transaction that may raise national security concerns. Between 2009 and 2011, the number of notices received and investigations undertaken by CFIUS have increased steadily (Table II.11), although notices remain below the 2008 pre-recession level.

Table II.11 CFIUS covered transaction notices, withdrawals, and decisions, 2009-11

No. of notices

Notices withdrawn during review No. of investigations

Notices withdrawn during investigation

Presidential Decisions

2009 65 5 25 2 0 2010 93 6 35 6 0 2011 111 1 40 5 0

Source: Department of Treasury online information. Viewed at: http://www.treasury.gov/resource-center/ international/foreign-investment/Documents/CFIUS%20Stats%202009-2011.pdf.

37. A separate, but parallel mechanism established through Executive Order is the National Industrial Security Program (NISP) for the protection and safeguarding of classified information that may be released to industry.25 The Department of Defense serves as the Executive Agent and has the lead to issue and update an NISP Operating Manual (NISPOM), to implement standards for industry that are consistent with those established for U.S. government agencies for the protection of classified information. The NISPOM requires evaluation of any foreign ownership, control or influence factors at a U.S. company as part of the determination of eligibility for access to classified information. U.S. companies cleared through the NISP must agree to comply with the NISPOM and be subject to compliance inspections.26

24 Seitzinger (2009). 25 Executive Order 12829. 26 Jackson (2010).


(5) AID-FOR-TRADE

38. The United States is one of the world's largest bilateral contributors to trade capacity building initiatives, and is an active partner in the Aid-for-Trade discussions and initiatives. In late 2010, President Obama released his strategy for development, which was the first initiative of its kind to provide a coherent framework for U.S. development policy, i.e. the Presidential Policy Directive on Global Development.27 In particular, this policy sets out the new strategic context through three pillars:

a focus on sustainable development outcomes that places a premium on broad-based economic growth, democratic governance, game-changing innovations, and sustainable systems for meeting basic human needs;

a new operational model that positions the United States to be a more effective partner and to leverage leadership; and

a modern architecture that elevates development and harnesses development capabilities spread across government in support of common objectives – including a deliberate effort to leverage the engagement of and collaboration with other donors, foundations, the private sector, and NGOs – not just at the project level, but systemically.28

39. In 2010, the U.S. Department of State issued its first Quadrennial Diplomacy and Development Review (QDDR) which, among other things, made an assessment of how the U.S. Agency for International Development (USAID) could become more accountable, efficient, and effective. As a result, there have been a number of changes and a move towards more accountability and delivery of results. An evaluation of USAID's trade capacity building programmes was completed in late 2010. One of the findings of the report showed a statistically significant relationship between USAID trade capacity building (TCB) obligations and developing country exports, indicating that, on a predictive basis, an additional US$1 of USAID TCB assistance is associated with a US$42 increase in the value of developing country exports two years later.29

40. One of the developments resulting from the 2010 Directive on Global Development is the establishment of the Partnership for Growth (PFG) initiative. This programme, established in 2011, begins with an analysis of the constraints to growth, followed by the development of joint action plans to address these constraints, and mutual accountability for implementation. To date, PFG programmes have been initiated with El Salvador, Ghana, the Philippines, and Tanzania.30

41. U.S. aid for trade gives countries, including those with low volumes of trade, the training and technical assistance needed to make decisions about the benefits of trade reforms, to implement their obligations to bring certainty to their trade regimes, and to enhance their ability to compete in a global economy.31

27 White House Press Release, "Fact Sheet: U.S. Global Development Policy", 22 September 2010.

Viewed at: http://www.whitehouse.gov/the-press-office/2010/09/22/fact-sheet-us-global-development-policy. 28 USTR (2012b). 29 USAID (2010). 30 Department of State Press Release, "Partnership for Growth", 29 November 2011. Viewed at:

http://www.state.gov/r/pa/prs/ps/2011/11/177887.htm. 31 USTR online information, "Aid for Trade". Viewed at: http://www.ustr.gov/trade-topics/trade-

development/trade-capacity-building/aid-trade.

http://www.state.gov/r/pa/prs/ps/2011/



(1) MEASURES DIRECTLY AFFECTING IMPORTS

(i) Customs procedures

1. U.S. Customs and Border Protection (CBP), an agency of the Department of Homeland Security is responsible for matters relating to customs and importation, and enforcement of U.S. trade laws. Since 1993, with the implementation of the Customs Modernization Act, there has been an increased sharing of responsibility for compliance with customs rules between CBP and the importing community.1 Pursuant to this "informed compliance" approach, i.e. the shared responsibility between CBP and the import community, importers are expected to apply "reasonable care" in their importing operations. They are expected to exercise reasonable care to classify, value, and determine origin of goods so that CBP can apply the necessary import rules, assess duty rates, and collect statistics. CBP also makes available a significant amount of information to importers, through its informed compliance publications and through various rulings.

2. Beyond the basic importing topics of classification, valuation, and origin and marking, CBP is responsible for a number of initiatives to facilitate trade, better secure U.S. borders, and enforce U.S. laws and regulations. These include:

C-TPAT, is a voluntary public-private partnership operated in conjunction with over 10,000 partners in order to develop and adopt measures to improve security while at the same time not hindering trade. In addition to importers, the programme covers carriers, brokers, consolidators, and certain manufacturers who agree to work to help protect the supply chain and implement security measures and best practices. C-TPAT is working towards signing mutual recognition arrangements with a number of foreign governments in order to link international industry partnerships together globally.2 Through the C-TPAT partnership more than 50% of U.S. imports are covered by C-TPAT partnership trade.3

Automated Commercial Environment (ACE), the electronic commercial trade processing system being developed to facilitate trade while strengthening border security. ACE will provide a single centralized portal and access point for the trade community to interact with CBP. Currently, ACE is being implemented in phases and already includes provisions for individual account management, periodic payment capabilities, e-manifests, entry summary filing, and trade data sharing. More than 17,000 ACE accounts were in operation in 2011.4

Container Security Initiative (CSI), launched in the aftermath of the 9/11 terrorist attacks in order to address the threat to border security posed by the use of maritime container shipments. As more than 11 million cargo containers arrive at U.S. ports every year, CBP has developed a pre-screening process to assess risk and, if necessary, containers are inspected abroad before being shipped to the

1 Public Law 103-182. 2 Mutual recognition arrangements (non-binding) have been completed with New Zealand, Canada,

Republic of Korea, Japan, Jordan, and the European Union. 3 CBP online information, "C-TPAT: Program Overview". Viewed at: http://www.cbp.gov/

linkhandler/cgov/trade/cargo_security/ctpat/ctpat_program_information/what_is_ctpat/ctpat_overview.ctt/ctpat_overview.pdf.

4 CBP online information, "ACE at a Glance Fact Sheet". Viewed at http://www.cbp.gov/xp/ cgov/newsroom/fact_sheets/trade/ace_factsheets/ace_glance_sheet.xml.


United States. CSI is now in operation in 58 ports world-wide and pre-screens over 80% of maritime container cargo destined for the United States.5

Secure Freight Initiative (SFI), initiated in response to the Security and Accountability for Every (SAFE) Port Act to evaluate the feasibility of requiring 100% scanning of maritime cargo containers. 6 The SAFE Port Act, as amended, requires 100% scanning of all maritime containers shipped to the United States by 1 July 2012. On 2 May 2012, in accordance with the statute, DHS Secretary submitted to Congress her intent to extend the deadline by two years. New proposed legislation to extend or eliminate the statutory deadline has not been passed into law.7 Complimentary rules and procedures for ensuring security of air cargo on passenger aircraft were enacted (Implementing Recommendations of the 9/11 Commission Act) and the law is under the purview of the Transportation Security Administration (TSA), another agency of the Department of Homeland Security. The law required 100% cargo scanning on international U.S. inbound flights, originally by 31 December 2011. However, the TSA postponed this deadline and instituted a new deadline of 3 December 2012 for implementation.8

3. CBP is also responsible for supervision or oversight of certain import processes or provisions. For example, CBP regulations allow for the "in-bond process", which provides that imported goods may be transported in-bond to another port of entry and entered there under the same conditions as at the port of arrival. CBP recently proposed new rules or procedures for the in-bond process, but final rules have not yet been issued.9 CBP also oversees "Foreign Trade Zones" (FTZs) which are located at or near CBP ports of entry and allow merchandise to enter and be further processed before entering the customs territory of the United States or being re-exported. Although CBP oversees the FTZs, the establishment of FTZs, and their rules and regulations are under the purview of the Foreign-Trade Zones Board. The FTZ Board recently revised the regulations pursuant to the Foreign-Trade Zones Act in order to improve flexibility and enhance clarity for U.S.-based operations, address compliance for uniform treatment in a zone, and simplify the procedures to gain authority to undertake an activity in a FTZ.10

4. In addition, CBP is responsible for the rules pertaining to customs brokers, through its regulations.11 While there are no specific rules or restrictions on importing by an owner or purchaser of imported goods, U.S. laws only allow licensed customs brokers to transact customs business on behalf of others (i.e. importers, purchasers).12 There are approximately 11,000 licensed customs brokers in the United States. CBP regulations prescribe eligibility requirements (age, citizenship, etc.) and qualifications (licence exam, fees, and approval by CBP) to become a licensed customs broker. In 2010, CBP adopted new eligibility requirements, which slightly modified the rules for taking the licence exam.13 CBP is also working on another important initiative with respect to customs brokers. The Role of the Broker Initiative will examine with a view to redesigning and modernizing broker

5 CBP online information, "CSI In Brief", viewed at: http://www.cbp.gov/xp/cgov/trade/cargo_

security/csi/csi_in_brief.xml. 6 Public Law 109-347. 7 S.832. 8 TSA Press Release, "TSA Sets Cargo Screening Deadline for International Inbound Passenger

Aircraft", 16 May 2012. Viewed at: http://www.tsa.gov/press/releases/2012/0516.shtm. 9 77 FR 10622. 10 77 FR 12112. 11 19 CFR part 111. 12 19 U.S.C. 1641. 13 9 CFR part 111.


regulations and clarifying brokers' responsibilities, as well as encouraging brokers to be force multipliers for CBP trade facilitation efforts.14

(ii) Customs valuation

5. Since 1980 when the United States implemented the Tokyo Round Customs Valuation Agreement, the primary method of determining the value of imported merchandise has been the "transaction value".15 There have been no legislative changes to the basic valuation method, as prescribed by the GATT/WTO Customs Valuation Agreement, since its establishment by title II of the Trade Agreements Act of 1979.16 In 1996, the United States notified that its legislation previously notified remained valid, and no further notifications have been made since that time.17 The United States assesses customs duties on an f.o.b. basis.

6. In 2008, the U.S. Department of Homeland Security, Bureau of Customs and Border Protection, proposed a new interpretation of the phrase "sold for exportation to the United States" for the purposes of applying the transaction value method in a series-of-sales importation scenario. This proposal reflected the conclusions of the WCO Technical Committee on Customs Valuation, as set out in Commentary 22.1, in which the majority of WTO Members already used the price paid in the last sale occurring prior to import.18 Thereafter, Congress enacted the Food, Conservation, and Energy Act, in 2008, and Section 15422 created a one-year importer-declaration requirement to collect data and information on the valuation of certain goods in a multiple sale scenario situation. This provision was included in order to help Congress better understand the impact of the proposed new interpretation, which would have reversed a long-standing judicial and administrative interpretation of the expression "sold for exportation to the United States".19 The legislation also indicated that Customs and Border Protection should not implement a change of interpretation of the expression before 1 January 2011.20 On 29 September 2010, Customs and Border Protection officially withdrew its proposal, thus retaining its long-standing position of using the "first (or earlier) sale" interpretation.21

(iii) Rules of origin

(a) Non-preferential rules of origin

7. In July 2008, the CBP proposed new uniform rules of origin, based on the NAFTA tariff-shift methodology, that would apply to all imports (non-preferential trade). Based on the experience with the NAFTA origin rules, the CBP stated that the proposed rules "have proven to be more objective and transparent and provide greater predictability in determining the country of origin of imported merchandise than the system of case-by-case adjudication they would replace. The proposed change also will aid an importer's exercise of reasonable care."22 However, after receiving comments, many of which opposed the new rules, the CBP officially withdrew the proposal on 2 September 2011.23

14 Customs and Border Protection online information, "CBP Begins Public Outreach to Update Broker

Regulations". Viewed at: http://www.cbp.gov/xp/cgov/trade/trade_transformation/brokerregs.xml. 15 19 U.S.C. 1401a. 16 43 FR 45135. 17 WTO document G/VAL/N/1/USA/1, 1 April 1996. 18 73 FR 4254. 19 Committee on Ways and Means, U.S. House of Representatives (2010), p. 71. 20 Committee on Ways and Means, U.S. House of Representatives (2010), p. 71. 21 75 FR 60134. 22 73 FR 43385. 23 76 FR 54691.

http://www.cbp.gov/xp/cgov/trade/trade_transformation/brokerregs.xml

https://www.federalregister.gov/citation/73-FR-43385


Thus, the non-preferential rules of origin remain unchanged (Chart III.1). CBP continues to determine origin on a case-by-case basis, often relying on a number of court decisions, regulations, and agency interpretations to confer origin.24 For example, according to the CBP's Customs Rulings Online Search System (CROSS), there were approximately 100 country of origin and/or marking rulings in 2011 (nearly 200 in 2010).25

Chart III.1Overview of non-preferential rules of origin

"Wholly obtained" criteria

Source: U.S. CBP (2004), What Every Member of the Trade Community Should Know About: U.S. Rules of Origin, Preferential and Non-Preferential Rules of Origin, An Informed Compliance Publication, May. Viewed at: http://www.cbp.gov/linkhandler/cgov/trade/legal/informed_compliance_pubs/icp026.ctt/icp026.pdf.

textiles and clothingproducts

wholly the growth, product, or manufacture

of one particular country

all other products

"Substantial transformation" criteria

Non-preferential rules of origin

case-by-case basis, which is based on a

change in name, character, or use

method

tariff-shift method

(b) Preferential rules of origin

8. The increasing number of FTAs the United States has entered into with trading partners has had an impact on the growth of U.S. preferential origin regimes. Each agreement has unique rules of origin, specifically negotiated between the trading partners, and results in more pages of differing rules. The preferential rules used for non-reciprocal trade preference programmes rely largely on the "wholly obtained" criteria, or undergo a substantial transformation, determined by using a required minimum local value content of an appraised value. In contrast, U.S. FTA rules of origin have been modelled after the NAFTA rules, which principally utilize product-specific rules, largely based on a tariff-shift methodology and/or regional value content formula. Product-specific rules are based on the HS nomenclature and can be extensive since there are specific rules for each HS Chapter, heading, or subheading. NAFTA, CAFTA-DR, Australia, Chile, Peru, and Singapore FTAs mostly use changes in tariff classification to determine the origin of a good with components from more than once country (Table III.1). Furthermore, within the same FTA there are often significant differences in the origin rules applied across HS chapters or across industries. The case of textiles and clothing is one important example, with its "yarn forward" rule for many products, which essentially requires three levels or steps of origin-confirming processes for the yarn, fabric, and clothing in order to confer origin or allow for regional value content calculation. Other industry sectors often require a simple one-step change in tariff heading or subheading to confer origin. The role of U.S. industry has been

24 Jones and Martin (2012). 25 CBP CROSS database. Viewed at: http://rulings.cbp.gov/index.asp.

http://rulings.cbp.gov/index.asp


noted as having a very influential impact on the varying product-by-product outcome of preferential rules of origin negotiations. This proliferation of differing rules of origin, their complexity, and lack of transparency continues to be of concern for some.26

Table III.1 Overview of preferential rules of origin criteria, 2012

Preferential programme Citationa Brief overview of origin rulesb

AGOA GN 16; 19 U.S.C. 3701; 19 CFR 10.178a, 10.211

Imported directly from a beneficiary country and the sum of the cost or value of the materials produced in one or more designated beneficiary countries, plus the direct costs of processing operations is at least 35% of the appraised value of the article. Up to 15% of the 35% local value content requirement may be attributable to the cost or value of materials produced in the United States

ATPA/ ATPDEA

GN 11; 19 U.S.C. 3201; 19 CFR 10.201, 10.241, 251

Imported directly from a beneficiary country and the sum of the cost or value of the materials produced in one or more Andean beneficiary countries or one or more Caribbean Basin beneficiary countries, plus the direct costs of processing operations is at least 35% of the appraised value of the article. Up to 15% of the 35% local value content requirement may be attributable to the cost or value of materials produced in the United States

CBERA GN; 19 CFR 10.191; 19 U.S.C. 2701

Imported directly from a beneficiary country and the sum of the cost or value of the materials produced in one or more designated beneficiary countries, plus the direct costs of processing operations is at least 35% of the appraised value of the article. Up to 15% of the 35% local value content requirement may be attributable to the cost or value of materials produced in the United States

CBTPA GN 17; 19 U.S.C. 2701; 19 CFR 10.221, 10.231

Imported directly from a beneficiary country and meets the NAFTA rules of origin

GSP GN 4; 19 CFR 10.171; 19 U.S.C. 2461

Imported directly from a beneficiary country and the sum of the cost or value of the materials produced in a designated beneficiary country or in one or more members treated as an association of countries, plus the direct costs of processing operations is at least 35% of the appraised value of the article

NAFTA Article 401 of NAFTA; GN 12; 19 CFR Part 181; 19 U.S.C. 3332

The rules of origin for goods that are not wholly obtained from the NAFTA region are based on a tariff shift method and/or regional value content method

Chile GN 26; 19 U.S.C. 3805 The rules of origin for goods that are not wholly obtained from the United States or Chile are based on a tariff shift method and/or regional value content method

Israel GNs 3(a)(v) and 8; 19 U.S.C. 2112

Imported directly from Israel, West Bank, Gaza Strip, or a Qualifying Industrial Zone and the sum of the cost or value of materials produced in Israel, West Bank, Gaza Strip, or a Qualifying Industrial Zone, plus the direct costs of processing operations, is at least 35% of the appraised value of the article. Up to 15% of the 35% local value content requirement may be attributable to the cost or value of materials produced in the United States

Jordan GN 18; 19 U.S.C. 2112 Imported directly from Jordan and that is wholly the growth, product or manufacture of Jordan or a new or different article of commerce that has been grown, produced or manufactured in Jordan and the sum of the cost or value of the materials produced in Jordan, plus the direct costs of processing operations is not less than 35% of the appraised value of such article. Up to 15% of the 35% local value content requirement may be attributable to the cost or value of materials produced in the United States

Singapore GN 25; 19 U.S.C. 3805 The rules of origin for goods that are not wholly obtained from the United States or Singapore are based on a tariff-shift method and/or regional value-content method

Australia GN 28, P.L 108-286 The rules of origin for goods that are not wholly obtained from the United States or Australia are based on a tariff-shift method and/or regional value-content method

Morocco GN 27, P.L 108-302 The rules of origin for goods that are not wholly obtained from the United States or Morocco are based on a tariff-shift method or the sum of the value of each material produced in the territory of Morocco or of the United States, or both, and the direct costs of processing operations performed in the territory of Morocco or of the United States, or both, is not less than 35% of the appraised value of the good

CAFTA-DR GN 29, P.L 109-53 The rules of origin for goods that are not wholly obtained from the United States or the CAFTA-DR region are based on a tariff-shift method and/or regional value-content method

Bahrain GN 30, P.L 109-169 The rules of origin for goods that are not wholly obtained from the United States or Bahrain are based on a tariff-shift method or the sum of the value of each material produced in the territory of Bahrain or of the United States, or both, and the direct costs of processing operations performed in the territory of Bahrain or of the United States, or both, is not less than 35% of the appraised value of the good

Table III.1 (cont'd)

26 Jones and Martin (2012).


Preferential programme Citationa Brief overview of origin rulesb

Oman GN 31, P.L 109-283 The rules of origin for goods that are not wholly obtained from the United States or Oman are based on a tariff-shift method or the sum of the value of each material produced in the territory of Oman or of the United States, or both, and the direct costs of processing operations performed in the territory of Oman or of the United States, or both, is not less than 35% of the appraised value of the good

Peru GN 32, P.L 110-138 The rules of origin for goods that are not wholly obtained from the United States or Peru are based on a tariff-shift method and/or regional value content method

Korea, Rep. of

GN 32, P.L 110-138 The rules of origin for goods that are not wholly obtained from the United States or Korea, Rep. of, are based on a tariff-shift method and/or regional value content method

Colombia GN 34, P.L. 112-42 The rules of origin for goods that are not wholly obtained from the United States or Colombia are based on a tariff-shift method and/or regional value content method

a "GN" refers to General Note of the HTSUS. b For non-textile items. For textile items, different rules apply.

Source: U.S. Customs and Border Protection (2004), What Every Member of the Trade Community Should Know About: U.S. Rules of Origin: Preferential and Non-Preferential Rules of Origin, May. Viewed at: http://www.cbp.gov/ linkhandler/cgov/trade/legal/informed_compliance_pubs/icp026.ctt/icp026.pdf; and Committee on Ways and Means, U.S. House of Representatives (2010), Overview and Compilation of U.S. Trade Statutes, December. Viewed at: http://www.gpo.gov/fdsys/pkg/CPRT-111WPRT63130/pdf/CPRT-111WPRT63130.pdf.

9. The U.S. preferential rules of origin have not been notified to the WTO Committee on Rules of Origin since 1997.27 The preferential rules are contained in the HTSUS, mainly in the General Notes, accounting for approximately 670 pages of text.28 Additional preferential origin criteria, outside the General Notes, are in Chapter 98 and 99 provisions. An importer would need to determine which preferential rules might apply to the product concerned, and then find the appropriate section of the HTSUS to determine the applicable origin criteria. Furthermore, the nomenclature-specific tariff shift information has not been updated to reflect HS2012 changes introduced in the tariff, which would have to be negotiated between trading partners for FTAs.

(c) Country-of-origin marking

10. U.S. legislation dating back to 1890 requires that articles of foreign manufacture contain a mark or label indicating the country where the good originated.29 The law has been amended numerous times but, as originally enacted, covered "all articles of foreign manufacture".30 Different rules apply for domestic products, for example in order to be labelled as "Made in the U.S.A.". The principle legislation for imported products is in section 304 of the Tariff Act of 1930 and is administered by CBP at the border. Pursuant to marking legislation and its judicial interpretation over many years, goods are considered to originate from the country in which they were grown, produced or manufactured. The rules of "substantial transformation" may be applied to determine the last country in which the article was transformed by having a new name, character, or use.31

27 At the last TPR of the United States, certain Members requested information on preferential rules of

origin, and the United States indicated that it intended to submit an updated notification within months (WTO document, WT/TPR/M/235/Add.1, 1 November 2010, p. 194). To date, no notification has been received by the Secretariat. The last notification concerning preferential rules of origin was in WTO document G/RO/N/18, 3 November 1997, concerning the Israel FTA.

28 The HTSUS 2012 (Supplement 1) contains approximately 3,400 pages and includes the General Notes in addition to the sections outlining the specific tariff rates.

29 Tariff Act of 1890 and Tariff Act of 1930, 19 U.S.C. 1304. 30 USITC (1996). 31 Legislation and implementing regulations governing rules of origin in U.S. non-preferential schemes

may be found as follows: Government Procurement (19 U.S.C. § 2511 et seq. (Specifically § 2518(4)(B)) and 19 CFR §177.21); Marking Rules of Origin (19 U.S.C. §1304 for marking requirement, 19 CFR Part 134, and


11. Other product-specific marking/labelling requirements, at the federal or state level, follow other rules or regulations. Specific labelling requirements, outside of section 304, include the American Automobile Labeling Act, the Fur Products Labelling Act, the Omnibus Trade and Competitiveness Act for Native American style jewellery, and various other Acts or Codes relating to agricultural products such as meat, eggs, mushrooms, etc.32 In addition to product-specific marking requirements, different marking requirements exist, outside section 304, for products subject to FTAs such as NAFTA.33

12. Section 304 of the Tariff Act of 1930, as amended, provides that all imported articles, unless exempted (Table III.2), must be marked at the time of importation so that the "ultimate purchaser" knows where the imported article was manufactured. If imported articles are not marked or if they are inadequately marked, penalties or fines may be applied, and the products may be retained by Customs.34 Provisions of certain FTAs allow exemptions from the fines and penalties for beneficiary countries under certain conditions.

13. The U.S. marking rules regime may be considered as one of the more detailed, compared with other countries. Specific rules for U.S. imported products, differ from those applied to domestic products, which differ from FTA preferential origin rules, and these are likely to differ for U.S. products exported (subject to foreign countries marking or origin requirements).35 For example, under some preference programmes, such as GSP, an imported article must be substantially transformed in the beneficiary country and must include at least 35% local value content. Failure to meet the 35% local value content makes the article ineligible for GSP treatment even if it is substantially transformed. However, for marking and other purposes, the article would be "originating" in that beneficiary country because of the substantial transformation. Furthermore, as U.S. domestic product marking rules follow a different set of rules and jurisprudence of the Federal Trade Commission, the product would have to be made solely of domestic content and of U.S. labour in order to be marked as "Made in the U.S.A."; the concept of substantial transformation does not apply. Thus, the same or similar products could have different origin determinations depending on which rules were being applied for which purpose.

19 CFR §102.0); Most-Favored-Nation or Normal-Trade-Relations Duty Assessment(General Note 3 to the HTSUS (19 U.S.C. §1202)); Textile and Textile Products (7 U.S.C. §1854, 19 U.S.C. § 3592, and 19 CFR §§ 12.130, 102.21); Other Marking Statutes (15 U.S.C. 69, 49 U.S.C. 32304).

32 Legislation and implementing regulations governing rules of origin in U.S. non-preferential schemes may be found as follows: Government Procurement (19 U.S.C. § 2511 et seq. (Specifically § 2518(4)(B)) and 19 CFR §177.21); Marking Rules of Origin (19 U.S.C. §1304 for marking requirement, 19 CFR Part 134, and 19 CFR §102.0); Most-Favored-Nation or Normal-Trade-Relations Duty Assessment(General Note 3 to the HTSUS (19 U.S.C. §1202)); Textile and Textile Products (7 U.S.C. §1854, 19 U.S.C. § 3592, and 19 CFR §§ 12.130, 102.21); Other Marking Statutes (15 U.S.C. 69, 49 U.S.C. 32304).

33 Paragraph 1 of Annex 311 of the NAFTA provides that the NAFTA parties shall establish "Marking Rules" to determine when a good is a good of a NAFTA country. The Marking Rules established by the United States are set out in 19 CFR Part 102, and are used to determine the country of origin. The Marking Rules are distinct from the rules of origin that are used to determine whether a good is originating under Article 401 of the Agreement.

34 Imported goods that are not properly marked may be subject to a 10% ad valorem marking duty penalty, and persons involved in intentional alternation or removal of country-of-origin markings may also be subject to fines of US$100,000 or one-year prison term for the first offence and US$250,000 for subsequent offences (Committee on Ways and Means, U.S. House of Representatives, 2010).

35 USITC (1996).


Table III.2 Exemptions to the section 304 marking requirement

Article is incapable of being marked Article cannot be marked without injury to the item Article cannot be marked prior to shipment to the United States, except at an expense economically prohibitive of its importation Marking of the container of the article will reasonably indicate the origin of the article The article is a crude substance Such article is imported for use by the importer and not intended for sale in its imported or any other form Such article is to be processed in the United States by the importer or for his account otherwise than for the purpose of concealing the origin of such article and in such a manner that any mark contemplated by this section would necessarily be obliterated, destroyed, or permanently concealed An ultimate purchaser, by reason of the character of such article or by reasons of the circumstances of its importation, must necessarily know the country of origin of such article even though it is not marked Such article was produced more than 20 years prior to its importation U.S. Treasury J-List of exempted products Such article cannot be marked after importation except at an expense which is economically prohibitive, and the failure to mark the article before importation was not due to any purpose of the importer, producer, seller, or shipper to avoid compliance with marking Products of American fisheries Products of U.S. possessions Products of U.S. origin that have been exported and returned Articles entered for immediate transhipment and exportation Articles entering duty-free valued at US$1 or less

Bona fide gifts valued at less than US$10 Certain teas, coffees, and spices

Source: USITC (1996), Country-of-Origin Marking: Review of Laws, Regulations, and Practices, Investigation No. 332-366, Publication 2975, July. Viewed at: http://www.usitc.gov/publications/332/pub2975.pdf; and Committee on Ways and Means, U.S. House of Representatives (2010), Overview and Compilation of U.S. Trade Statutes, December. Viewed at: http://www.gpo.gov/fdsys/pkg/CPRT-111WPRT63130/pdf/CPRT-111WPRT 63130.pdf.

(d) Changes to U.S. origin and marking rules

14. The United States continues to make changes to its rules of origin regimes (Table III.3). It appears that the majority of the changes were a result of aligning the origin rules to the intent of the agreements, a result of legal jurisprudence, and to harmonize certain provisions among the various FTAs.

Table III.3 Changes or developments in U.S. preferential rules of origin, January 2010-June 2012

ROO Effective datea Citation Issue/subject

NAFTA FTA 3 October 2009 Presidential proclamation 8536

Technical corrections for certain chemicals and brake linings

Singapore FTA 8 February 2009 Presidential proclamation 8536

Technical corrections for certain machinery

Chile FTA 8 February 2009 Presidential proclamation 8536

Technical corrections for certain machinery

Truth in Fur Labeling Act

18 March 2011 P.L. 111-113 Made changes to the Fur Products Labelling Act to require labelling of all fur products regardless of value

ROO for textiles and apparel products

17 March 2011 76 FR 14575 Final rule to revise, update, and consolidate the CBP regulations relating to the country of origin of textile and apparel products. The primary regulatory change consists of the elimination of the requirement that a textile declaration be submitted for all importations of textile and apparel products. In addition, to improve the quality of reporting of the identity of the manufacturer of imported textile and apparel products, it adopts as a final rule an amendment requiring importers to identify the manufacturer of such products through a manufacturer identification code ("MID'')

NAFTA FTA 3 October 2011 76 FR 54691 Pipe fittings and flanges, greeting cards, glass optical fiber, rice preparations, and certain textile and apparel products

Chile FTA 1 November 2011 Presidential proclamation 8742

Chemicals, certain dried vegetables, coffee, spices, cocoa, rubber products, certain machines of ch. 84, lamps, and certain instruments and apparatus


http://www.gpo.gov/fdsys/pkg/CPRT-111WPRT63130/pdf/CPRT-111WPRT%0B63130.pdf

http://www.gpo.gov/fdsys/pkg/CPRT-111WPRT63130/pdf/CPRT-111WPRT%0B63130.pdf


ROO Effective datea Citation Issue/subject

Singapore FTA 7 February 2008 / 24 May 2011

Presidential proclamation 8682

Certain instruments and apparatus, and certain clothing and apparel items

Peru FTA 1 January 2011 Presidential proclamation 8682

Certain amendments to chapter 99

NAFTA FTA 2 October 2009 Presidential proclamation 8682

Chemicals

a Changes were sometimes issued with retroactive effect, thus the effective date may precede the date of the legislation or proclamation.

Source: WTO Secretariat.

(iv) Tariffs

15. The Harmonized Tariff Schedule of the United States (HTSUS) provides tariff levels, classification, general rules for importation, and rules of origin information for imported products entering the United States. While it is cited in the Code of Federal Regulations, it remains a publication of the USITC so that it can be kept current and updated regularly. The USITC maintains a custodial role over the HTSUS as key elements are legislated by Congress, proclaimed by the President through limited authority and oversight, and/or directly through the provisions of the international nomenclature. The HTSUS may be updated frequently to reflect new provisions in rates, nomenclature or other trade rules. For example, the HTSUS has been updated four times in 2012 to incorporate changes to implement WCO changes, the FTAs with Korea and Colombia, and changes related to the U.S. Generalized System of Preferences.

(a) Tariff nomenclature

16. The United States' tariff nomenclature is published as the Harmonized Tariff Schedule of the United States, which is based upon the internationally adopted Harmonized System. 36 In addition to adopting the international nomenclature to the six-digit level, the United States further delineates the nomenclature to the eight-digit tariff-rate legal level, and to the ten-digit statistical reporting level. Thus, for importers reporting purposes, the ten-digit level is recorded for entries. The United States also expands the nomenclature with the use of chapters 98 and 99 of the tariff, which are unique national provisions. Chapter 98 pertains to special classification provisions, and chapter 99 to temporary legislation, temporary modifications, and additional import restrictions. The use of chapter 99 has increased significantly in recent years as it is typically used to implement certain temporary provisions, especially as pertains to FTA tariff reductions.

17. By presidential proclamation, the United States implemented the HS2012 nomenclature changes to its tariff schedule in early 2012.37 The changes implemented comprise 219 of the 220 sets of changes as prescribed by the WCO Harmonised System Convention in order to keep the HS updated and current to reflect changes in technology and patterns in international trade. The United States did not implement one set of changes affecting three six-digit tariff codes of certain photographic films of chapter 37.38 The United States has been included in the WTO waiver decision of 30 November 2011, "Introduction of Harmonized System Changes into WTO Schedules of Tariff Concessions", to waive certain WTO obligations in order to implement the nomenclature changes.39

36 The Harmonised Commodity Description and Coding System. 37 Proclamation 8771, 29 December 2011, 77 FR 413. 38 The change concerns the deletion of subheadings 3702.91 to 3702.95, and the insertion of new

subheadings 3702.96, 3702.97, and 3702.98 (World Customs Organization, 2011b). 39 WTO document WT/L/834, 8 November 2007.


To date (noting the deadline of 30 September 2012), the United States had not yet submitted its documentation to the WTO in order to make the necessary changes to its WTO tariff schedule.40

18. During the period under review, the United States implemented other nomenclature changes to its tariff schedule (HTSUS) by presidential proclamation. There were 11 sets of changes involving the footwear sector (i.e. footwear with textile outersoles). 41 The United States has not notified these changes as a rectification or modification to its tariff schedule, thus the nomenclature of the HTSUS and the U.S. WTO schedule differ for these 11 sets of footwear changes.

(b) MFN applied tariffs

19. The HTSUS contains seven columns of information and two of these pertain to rates of duty. Column 1, subdivided into "General" and "Special", is for those countries having normal trade relations (NTR), i.e. MFN status; and column 2 for those countries that do not have NTR. Currently only two countries are designated as column 2 countries, Cuba and North Korea. Column 1 "General" is the normal duty rate applied, while "Special" is used to designate special duty provisions or programmes such as FTA rates, preferential rates, and special programmes that cover trade in civil aircraft or pharmaceuticals for example. Thus, even if a WTO commitment is recorded on an MFN basis, the United States may apply this through the "General" or "Special" columns. The United States generally uses ad valorem, specific, or compound duty rates.

20. The 2012 HTSUS contains 10,711 tariff lines at the eight-digit tariff level. According to the HTSUS, the United States maintains TRQs on 200 tariff lines of agricultural products, which correspond to 199 out-of-quota tariff lines. These include beef, dairy, sugar, cotton, tobacco, and peanuts (see also Chapter IV(1)(iii)(a)). The following analysis excludes the in-quota lines, and is based on 10,511 tariff lines (Table III.4).

Table III.4 Structure of the tariff schedule, selected yearsa

(%) 2002 2004 2007 2009 2012

1. Total number of tariff lines 10,297 10,304 10,253 10,253 10,511 2. Bound tariff lines (% of all tariff lines)b 100.0 100.0 100.0 100.0 100.0 3. Duty free tariff lines (% of all tariff lines) 31.2 37.7 36.5 36.3 37.0 4. Simple average tariff (%) 5.1 4.9 4.8 4.8 4.7 5. WTO agriculture 9.8 9.7 8.9 8.9 8.5 6. WTO non-agriculture (including petroleum) 4.2 4.0 4.0 4.0 4.0 7. Agriculture, hunting, forestry, and fishing (ISIC 1) 5.6 5.7 5.5 5.7 5.6 8. Mining and quarrying (ISIC 2) 0.4 0.4 0.3 0.4 0.4 9. Manufacturing (ISIC 3) 5.1 4.9 4.8 4.8 4.7 10. First stage of processing 3.8 3.7 3.7 3.7 3.7 11. Semi-processed products 4.7 4.3 4.2 4.2 4.2 12. Fully processed products 5.5 5.4 5.3 5.3 5.2 13. Dutiable lines tariff average rate (%) 7.4 7.8 7.6 7.6 7.5 14. Non-ad valorem tariffs (% of all tariff lines) 12.2 10.6 10.7 10.7 10.9 15. Non-ad valorem with no AVEs (% of all tariff lines) 0.0 0.0 0.0 0.0 0.0 16. Lines subject to tariff quotas (% of all tariff lines) 1.9 1.9 1.9 1.9 1.9 17. Domestic tariff "peaks" (% of all tariff lines)c 5.6 7.1 6.9 6.7 6.7 18. International tariff "peaks" (% of all tariff lines)d 6.6 5.5 5.2 5.3 5.0 19. Overall standard deviation 12.3 12.6 11.9 11.8 11.9

a The tariff is provided at the eight-digit level. Averages exclude in-quota rates and lines. Calculations include ad valorem equivalents (AVEs) for non-ad valorem duties that were calculated by the U.S. authorities using import price data.

b Two lines applying to crude petroleum are not bound. c Domestic tariff peaks are defined as those exceeding three times the overall average applied rate. d International tariff peaks are defined as those exceeding 15%.

Source: WTO Secretariat calculations, based on data provided by the U.S. authorities and notifications.

40 Presidential Proclamation 8771. 41 Presidential Proclamation 8742.


21. U.S. tariff rates have remained relatively unchanged for several years. The United States assesses duties on an f.o.b. basis (not c.i.f. like most other countries) which may have a bearing on tariff rates. The 2012 simple average tariff level remains relatively low, at 4.7%, however the tariff structure is quite dispersed. A significant proportion (37%) of tariff lines are duty free, while approximately 7% of tariff lines are considered to have peaks, some as high as 350% (tobacco) (Chart III.2) The vast majority of peaks (around 50%) are in the textile and apparel sector, followed by agricultural products (35%), and footwear (7%). Commodities that are subject to TRQs generally have peak tariffs in the out-of-quota tariff line and many tariffs that are non-ad valorem are also peak tariffs. Duty-free tariffs are highly concentrated in the machinery and electronics sector, mainly due to the products covered by the ITA, and in the chemicals, steel, and paper subsectors, due to the U.S. participation in the Uruguay Round zero-for-zero sectoral initiatives (Table AIII.1).

Chart III.2MFN tariff distribution, 2012(Share of total tariff lines)

Source: WTO Secretariat calculations, based on the HTSUS (2012).

Tariff rate 0.1 to 5%:31.2%

Duty free:37.0%

Tariff rate 5.1 to 14.1%:25.1%

Domestic peak:(tariffs above 14.1%)

6.7%

Note: Non-ad valorem duties are included in calculations, based on corresponding AVEs provided by the U.S. authorities.

22. The United States made a few changes to its MFN applied rates during the period under review. The U.S. Manufacturing Enhancement Act of 2010 was passed by Congress and signed into law by the President in August 2010.42 This legislation grouped several hundreds of tariff duty suspensions and reductions into one law, thereby providing new or extended temporary duty relief for certain products until 31 December 2012. According to a statement released by the Office of the President, the legislation would reduce or eliminate some tariffs, which in turn would significantly lower costs for American manufacturing companies, including cars, chemicals, medical devices, and sporting goods.43 These specific duty reductions are not accounted for in the analysis above as they are implemented through special Chapter 99 temporary tariff reductions.

23. On 1 January 2011, the United States implemented additional duty-free concessions on pharmaceutical products pursuant to its participation in the WTO initiative on pharmaceutical

42 H.R. 4380 (111th Congress), enacted after signature by the President on 11 August 2010. 43 The White House Blog online information, "Another Step for American Manufacturing". Viewed at

http://www.whitehouse.gov/blog/2010/08/11/another-step-american-manufacturing.


products.44 A total of 718 new pharmaceutical products were added in the 4th review cycle in order to receive duty-free treatment.45 To date, the United States were notified these changes to its WTO schedule of concessions; the notification of the third review of pharmaceutical products also remains outstanding.

(c) WTO bindings

24. The United States' WTO tariff schedule (Schedule XX) contains concessions mainly from the Uruguay Round, although subsequent rectifications or modifications reflect the HS nomenclature changes from 1996 and 2002, and certain other trade liberalizing initiatives such as the ITA, distilled spirits, certain pharmaceutical products, etc. The WTO tariff bindings do not yet reflect HS changes from 2007 and 2012, as is the case with most Members, or some other changes that the United States has made domestically but has not yet notified.46 Moreover, while the HS96 and HS02 nomenclature changes have been implemented for the tariff lines concerned, the Chapter notes have not been updated, and they remain as implemented at the time of the Uruguay Round. One Uruguay Round concession remains conditional, i.e. subject to obtaining adequate coverage in the area of Government Procurement, and therefore remains outstanding.47 Furthermore, the legal change to amend certain tobacco tariffs, pursuant to Article XXVIII renegotiations, has not been implemented at the WTO, while it appears the United States proceeded domestically with these changes long ago.48

25. U.S. Schedule XX statistically results in 100% binding coverage, however two lines remain unbound, those pertaining to crude petroleum.49 A comparison of the bound and applied rates was performed using the bound tariff schedule that currently exists in the HS2002 nomenclature and no discrepancies were found.

26. The United States bound most "other duties and charges" at zero during the Uruguay Round. However, seven tariff lines have "other duties and charges" bound at higher levels, i.e. US¢ 5.99 or US¢ 14.27 per litre for fuel mixtures containing ethyl alcohol and for ETBE.

(d) Preferential tariffs and duty-free initiatives

27. Tariff commitments under the FTA with Korea entered into force on 15 March 2012 (Table AIII.2). As of 30 June 2012, the simple average tariff for Korean products entering the United States is 1.7%, compared with 4.7% for MFN countries. Tariffs were reduced to zero for petroleum, minerals, and pulp and paper immediately upon implementation. Significant tariff reductions, i.e. greater than a 2% reduction, occurred in the fruit and vegetable, textiles, leather and footwear, chemicals and photographic supplies, and electric machinery.

28. Upon implementation of the Colombia FTA on 15 May 2012, tariff reductions went into effect giving a simple average tariff of 0.8% for all products (Table AIII.2). Over half of all imports from Colombia already benefited from duty-free access due to preferences or MFN-duty free rates (Chapter II(3)(i)(a)). Most sectors were liberalized immediately upon implementation; the HS sections in which tariffs remain and are being staged more gradually are in agriculture and footwear.

44 Presidential Proclamation 8618. 45 WTO document G/MA/W/102, 2 August 2010. 46 These have been noted above or in other parts of this Report. 47 Additional Note 12 to Chapter 85, pertaining to ex 8518.90.10. 48 G/SECRET/2, 8 March 1995 has not been approved or certified. Tobacco changes implemented by

Presidential Proclamation 6821. 49 HTSUS 2709.00.10 and 2709.00.20.


29. Pursuant to preferential trade relations under FTAs, the United States maintains tariff-rate quotas on some imports from certain FTA partners. A number of products across sectors are involved, but in particular to textiles and apparel, where Tariff Preference Levels (TPLs) are created in which duty-free treatment is provided to non-originating goods up to agreed quantity restrictions.50 This allows products to enter under the preferential rates when the item does not meet the preferential rule of origin. For textiles and apparel, the item is converted to "square meter equivalents", and thereafter measured against the quota category to determine the available quota or quota fill rate.

30. Certain watches, watch movements, and jewellery enter the United States duty free from U.S. insular possessions through special annual import allocations. Watch producers in the U.S. insular possessions may ship watches and watch movements, up to their exemption limits, free of duty into the customs territory of the United States. In addition, producers of watches and jewellery in the U.S. insular possessions receive a duty refund certificate, based on the amount of wages and fringe benefits (health insurance, life insurance, and pension benefits) they paid their workers during the previous calendar year, entitling them to refunds of duties paid on goods imported into the United States.51

31. The United States applied certain other special programmes that provide duty-free or preferential rates for certain products. Under the Florence Agreement programme, certain scientific instruments apparatus qualify for duty-free entry if the Department of Commerce determines that an equivalent instrument is not being manufactured in the United States. The United States also adheres to the Nairobi Protocol, which allows for duty-free treatment of articles for physically handicapped persons.

(v) Other charges affecting imports

(a) Customs user fees

Merchandise Processing Fee

32. Since 1985 the United States has imposed fees for the processing of commercial merchandise. Several revisions to the law or new laws that have modified the fees, changed how they are assessed, and created exemptions. The Merchandise Processing Fee (MPF) was created in 1986, and since 1990 has been applied differently depending on whether the import is an informal or formal entry. For informal entries, the MPFs are: US$2 for automated entries, US$6 for manual entries not prepared by CBP, and US$9 for manual entries prepared by CBP. For formal entries there is an ad valorem fee with caps for minimum (US$25) and maximum (US$485) rates. Currently, the informal entry limit for merchandise is US$2,000, but there is a proposed rule by the Department of Homeland Security and the Department of Treasury to raise the limit to US$2,500.52 The final rule is expected to be issued in the second half of 2012.53

33. Following the enactment of the NAFTA, the merchandise processing fee has not been applied to imports from Canada since 1 January 1994 and from Mexico since 30 June 1999. Successive FTAs

50 Customs and Border Protection (2012). 51 Import Administration online information, "The Insular Possessions Watch and Jewellery Program".

Viewed at: http://ia.ita.doc.gov/sips/sipswap.html. 52 76 FR 66875. 53 The proposed rule would also remove the requirement for certain products, i.e. textiles and apparel,

to be imported as a formal entry. The CBP notes that requirement of formal entry is no longer necessary as these products are no longer subject to quota under the ATC, which has expired (see 76 FR 66875).

http://ia.ita.doc.gov/sips/sipswap.html


have exempted most from this fee, with the exception of Morocco and Jordan. Certain other preference programme recipients are also exempt (Table III.5).

Table III.5 MPF exemptions, 2012

MPF exemption Citation Notes

Australia Article 2.12 of the AFTA TPL goodsa are not exempt Bahrain 19 CFR 24.23(c)(8) TPL goods are not exempt Chile 19 CFR 24.23(c)(7) TPL goods are not exempt CAFTA-DR 19 CFR 24.23(c) TPL goods are not exempt Colombia 19 USC 58c(b)(20) Israel 19 CFR 24.23(c)(5) Products of Israel are exempt irrespective of whether ILFTA is claimed Korea, Rep. of Sec. 203

NAFTA 19 CFR 24.23(c)(3) TPL goods are not exempt. E criterion goods (Annex 308.1) are not exempt unless eligible to be marked as products of Canada or Mexico

Oman 19 CFR 24.23(c) Panama Sec. 204 Peru 19 CFR 24.23(c) Singapore 19 CFR 24.23(c)(6) Integrated Sourcing Initiative (ISI) goods also originate, so also exempt. TPL

goods are not exempt AGOA 19 CFR 24.23(c)(1)(iv)

19 CFR 24.23(c)(1)(i) Exempt only when products of an LDBDC or when entered under HTS 9819

ATPDEA 19 CFR 24.23(c)(1)(i) Exempt only when HTS 9821 is claimed CBERA 19 CFR 24.23(c)(1)(iii) Exempt irrespective of whether CBERA is claimed CBTPA 19 CFR 24.23(c)(1)(iii) Exempt irrespective of whether CBTPA is claimed because they are a subset of

CBERA DCMAO (DCASR)b 19 CFR 24.23(c)(1)(i) GSP 19 CFR 24.23(c)(1)(iv) Although products of a GSP country are not exempt, products of an LDBDC (a

subset) are exempt, irrespective of whether GSP is claimed Insular possessionsc 19 CFR 24.23(c)(1)(ii) Products of insular possessions are exempt irrespective of whether preference is

claimed

a TPL = Tariff Preference Level goods. These goods are restricted by quantity and are administered like a quota by CBP. They concern textile and apparel products. See section (vii)(a) for more details on TPL.

b Defense Contract Management Area Office (Defense Contract Administration Service Representative. c U.S. Virgin Islands, Guam, American Samoa, and Northern Mariana Islands.

Source: U.S. Customs and Border Protection online information, "Trade: Trade Programs: Trade Agreements: MPF and Duty Preference Programs". Viewed at: http://www.cbp.gov/xp/cgov/trade/trade_programs/international_ agreements/merchandise_fee/; and United States-Korea Free Trade Agreement Implementation Act, Public Law 112–41, 21 October 2011.

34. New legislation raised the MPF ad valorem rate for formal entries from 0.21% to 0.3464% as of 1 October 2011; however the minimum and maximum rates remained unchanged at US$25 and US$485, respectively.54 The rates for informal entries remain unchanged.

COBRA fees

35. The United States charges fees to recover processing costs in ensuring carriers, passengers, and their personal effects entering the U.S. are compliant with customs laws. The law, established in 1985 as the Consolidated Omnibus Budget Reconciliation Act (COBRA), has been modified over the years and is essentially a flat-rate fee system for inspection services on a per arrival basis for commercial vessels, trucks, railroad cars, private aircraft and boats, and certain passengers arriving on commercial vessels or aircraft (Table III.6).

54 19 USC 58c note, Public Law 112-40.


Table III.6 Consolidated Omnibus Budget Reconciliation Act fees

Fee Citation Fee rate/annual decal/cap/user fee Notes

Commercial vessel 19 CFR 24.22(b)(1) US$437/ US$5,955 (cap) Commercial vehicle 19 CFR 24.22(c) US$5.50/US$100 (annual

cap)

Rail cars 19 CFR 24.22(d) US$8.25/ US$100 (prepay) Private aircraft/vessel 19 CFR 24.22(e) US$27.50 (annual decal) Air/sea passenger 19 CFR 24.22(g) US$5.50 Exemption for Canada,

Mexico, and U.S. territories, possessions or adjacent islands

Cruise vessel and ferry passenger travel from Canada, Mexico, and U.S. territories, possessions or adjacent islands

19 CFR 24.22(g)(ii) US$1.93

Dutiable mail 19 CFR 24.22(f) US$5.50 Customs broker 19 CFR 24.22(c) US$138 (annual fee) Barge/bulk carriers from Canada and Mexico 19 CFR 24.22(b)(2)(i) US$110/US$1,500 (cap)

Source: CBP (undated), User Fees FAQs. Viewed at: http://www.cbp.gov/linkhandler/cgov/travel/inspections_carriers_ facilities/advisory_committee/user_fees_faqs.ctt/user_fees_faqs.doc.

(b) Harbor Maintenance Tax

36. Since 1986, the United States has charged a fee on certain merchandise arriving by vessel in order to maintain the navigation channels.55 The ad valorem fee of 0.125% is assessed on the declared value for commercial cargo entering the United States.56 The fee is remitted by CBP to the Harbor Maintenance Trust Fund, and the U.S. Congress makes appropriations for harbour dredging or other purposes. The fund has maintained a significant surplus for many years. Data from 2005 suggests that most of the expenditures from the fund in recent years have been concentrated in Louisiana, while the highest revenue ports are located elsewhere. In essence, the tax generates a pool of funds and is distributed without regard to which ports collected the tax.57 A number of changes to the Harbor Maintenance Tax, including the tax rate and how to spend the revenues, have been proposed in recent year in Congress, however none has been passed into law.58

(c) Agriculture fees

37. Fees charged by Customs at the border for the inspection and/or quarantine of agricultural goods, often known as "AQI", are jointly administered by APHIS and the Department of Homeland Security's Customs and Border Protection. The fees vary by type of carrier (Table III.7). The Food, Agriculture, Conservation and Trade (FACT) Act of 1990 authorised these fees, which have been adjusted and amended by subsequent legislation.59 For fiscal year 2011, AQI fees collected amounted to US$534.7 million.60

55 Water Resources Development Act of 1986, P.L. 99-662. A Supreme Court case in 1998 challenged

its assessment on exports, and the fee has been applied only to imports since then. 56 The fee is also assessed on passengers based on the price of their ticket (Government Accountability

Office, 2008). 57 "While the top ten ports account for nearly 70% of the total value of foreign goods shipped through

U.S. ports, these ports have received about 16% of total HMTF expenditures over the last decade" (Frittelli, 2011).

58 Frittelli (2011). 59 21 U.S.C. 136a/Pub. L. No. 101-624, as amended by Pub. L. No. 101-508, Pub. L. No. 102-237, Pub.

L. No. 104-127, and Pub. L. No. 107-171. 60 Department of Agriculture online information, "Agricultural Quarantine and Inspection: User Fees".

Viewed at: http://www.aphis.usda.gov/userfees/aqi_rates.shtml.

http://www.aphis.usda.gov/userfees/aqi_rates.shtml


Table III.7 Agriculture fees, 2012

Fee Citation Fee rate/annual decal/cap/prepay

Air passenger 7 CFR 354.3(f) US$5 Commercial aircraft clearance 7 CFR 354.3(e) US$70.75 Commercial truck 7 CFR 354.3(c) US$5.25/US$105 (annual decal) Commercial vessel 7 CFR 354.3(b) US$496/7,410 (cap) Commercial railroad car 7 CFR 354.3(d) US$7.75/155 (prepay)

Source: CBP (undated), User Fees FAQs. Viewed at: http://www.cbp.gov/linkhandler/cgov/travel/inspections_carriers_ facilities/advisory_committee/user_fees_faqs.ctt/user_fees_faqs.doc; and U.S. Department of Agriculture online information, "Agricultural Quarantine and Inspection: User Fees". Viewed at: http://www.aphis.usda.gov/ userfees/aqi_rates.shtml.

(d) Excise taxes

38. The United States maintains over 100 excise taxes at the federal level on various products and services.61 A number of these have been discussed in previous TPRs of the United States.62 The Internal Revenue Code establishes the excise taxes, which are assessed and collected on different bases and exist in two basic forms: general fund and trust fund excise taxes. The trust funds have been established by the federal government, often for many social reasons, and are financed with dedicated excise receipts; other, general fund, excise taxes are used for general purpose expenditures.

39. For fiscal year 2010, the United States collected US$74.7 billion in federal excise taxes. Over one third (US$25.1 billion) was on gasoline motor fuels, followed by tobacco products (US$15.5 billion), diesel motor fuel (US$8.6 billion), beverage alcohol (US$7.6 billion), and transportation of persons by air (US$7.6 billion) (Chart III.3).63

40. Federal excise taxes are collected and reported by: the Internal Revenue Service for retail, manufacturers, service, environmental, transportation, and insurance activities; or by the CBP (for imports), and the Alcohol and Tobacco Tax and Trade Bureau (TTB) (for domestic products), for spirits, wine, beer, tobacco products; and by the Bureau of Alcohol, Tobacco, Firearms and Explosives for firearms. As reported in previous TPRs, there are differences regarding the collection of excise taxes for some categories of beer and wine.

41. In addition to federal excise taxes, the 50 states and local governments charge excise taxes. Products affected by state and local excise taxes include fuels, tobacco products, cigarettes, spirits, wine, and beer.

61 For a full detailed description of the taxes and their details, see Joint Committee on Taxation (2011). 62 See WTO documents WT/TPR/M/200/Add.1, 9 September 2008; and WT/TPR/S/235/Rev.1,

29 October 2010. 63 Internal Revenue Service online information, "IRS online information, "SOI Bulletin Historical

Table 20: Federal Excise Taxes Reported to or Collected By the Internal Revenue Service, Alcohol and Tobacco Tax and Trade Bureau, and Customs Service, By Type of Excise Tax, Fiscal Years 1999–2010". Viewed at: http://www.irs.gov/taxstats/article/0,,id=175900,00.html.


Chart III.3Federal excise taxes reported and collected, fiscal year 2010

Source: U.S. Department of the Treasury; Alcohol and Tobacco Tax and Trade Bureau; Internal Revenue Service; and Office of Finance.

Other1.6%

Alcohol, tobacco & firearms34.6%

Manufacturers (e.g. fuels, sport equipment)

45.7%

Retail (e.g. trucks)2.4%

Facilities & services (e.g. telephone &

transport)14.5%

Environmental0.7%

Policies issued by foreign insurers

0.6%

(vi) Contingency measures

(a) Anti-dumping and countervailing measures

42. Anti-dumping (AD) and countervailing duty (CVD) legislation is contained in title 19 of the U.S. Code (sections 1671-77). Regulations are included in title 19 of the Code of Federal Regulations. The U.S. Department of Commerce and the U.S. International Trade Commission (USITC) are responsible for the administration of AD and CVD legislation.

43. The initiation of anti-dumping investigations increased in 2011 after only a few initiations in 2010. In 2008-10, over 90% of the AD investigations initiated resulted in final AD measures being imposed, but this percentage dropped in 2011, with half of the initiated investigations resulting in the imposition of final AD measures through June 2012 (Table III.8). From 2008 to June 2012, AD investigations were initiated on 0.15% of total imports.

44. The majority of AD investigations in recent years were on imports from Asia, and in particular, China. Over the past five years, Asia has accounted for 83% of the AD investigations initiated, with the Americas accounting for 10%, and the Middle East for 5% (Chart III.4).


Table III.8 Anti-dumping investigations, 2008-12

2008 2009 2010 2011 2012a

Investigation initiations 16 20 3 15 9 Of the investigations initiated, the following determinations have been madeb

Preliminary injury determinations, negative n.a. 2 n.a. .. .. Final injury determinations, affirmative 15 17 3 4 .. Final injury determinations, negative 1 1 n.a. 5 .. Final dumping determinations, affirmative 15 18 3 9 .. Final dumping determinations, negative n.a. n.a. n.a. .. .. Termination, suspension or withdrawal 1 n.a. 1 .. ..

By per cent Final dumping determinations, affirmative 94 90 100 .. .. Final dumping determinations, negative n.a. n.a. n.a. .. ..

Imports subject to investigation initiations (US$ million)c 984 5,614 753 5,659 1,555 As a % of total imports 0.05 0.27 0.05 0.30 0.07

n.a. Not applicable. .. Not available.

a Up to June 2012. b Data based on calendar year when relevant investigation was initiated, regardless of when a given action actually occurred. c Import value data based on calendar year prior to initiation date.

Note: All figures refer to calendar year.

Source: WTO Secretariat, based on Import Administration online information, "Antidumping and Countervailing Duty Investigations Initiated After January 01, 2000". Viewed at: http://ia.ita.doc.gov/stats/inv-initiations-2000-current.html; USITC (2010), Import Injury Investigations Case Statistics (FY 1980-2008), February. Viewed at: http://www.usitc.gov/trade_remedy/documents/historical_case_stats.pdf; and USITC online information, " Trade Remedy Investigations: Completed Investigations". Viewed at: http://www.usitc.gov/trade_remedy/731_ad_ 701_cvd/investigations/completed/index.htm.

14

18

310

7

1

1

1

2

2

1

3

0

5

10

15

20

25

2008 2009 2010 2011 2012

Asia Middle EastEurope Africa Americas

Chart III.4Anti-dumping investigations initiated, by region, 2008-12a

Number of measures

Source: WTO Secretariat, based on Import Administration online information. Viewed at: http://ia.ita.doc.gov/stats/inv-initiations-2000-current.html; USITC (2010), Import Injury Investigations Case Statistics (FY 1980-2008), February; and USITC online information. Viewed at: http://www.usitc.gov/trade_remedy/731_ad_701_cvd/investigations/completed/index.htm.

a Data until 30 June 2012.


45. In terms of sectors affected by AD investigations, the metals industry accounted for 41% of all investigations, followed by chemicals and plastics with 21%, and machinery and electrical equipment with 13% (Chart III.5).

4

8

2

9

3

5

4 2

2

3

2

2

1

2

4

2

5

1

2

0

5

10

15

20

25

2008 2009 2010 2011 2012

Chart III.5Anti-dumping investigations initiated, by product, 2008-12 a

Number of measures



Metals

Misc. manufactures

Chemicals & plastics Textiles Stones, ceramic, etc.

Wood & paper Machinery & electrical equipt.

46. At the end of 2011, the United States had 237 AD measures in force; the number remained relatively stable during 2008-11 with an average of 241 measures. In 2011, China was the subject of the most AD orders with 38%, followed by the EU countries with 10%, and Chinese Taipei, 7%. The number of AD orders relating to imports from China has increased steadily, in line with increased imports from China; while the number relating to imports from EU member States has fallen. The other six countries/customs territories (Chinese Taipei, India, Japan, the Republic of Korea, Brazil, and Mexico) accounting for the next highest numbers of AD orders imposed have generally seen their number of orders remain stable over the past four years (Table III.9). Many of these developing countries are also generally the ones that have become larger users of AD measures themselves in recent years.

47. Pursuant to commitments undertaken in the Uruguay Round, the United States began reviewing outstanding AD orders in force starting in July 1998. The two agencies involved – the Department of Commerce and the USITC – had conducted 738 reviews at end 2011 under the "sunset" review procedure. The sunset review process has resulted in about 58% of orders being maintained (i.e. not revoked), and 37% of orders being revoked (Table III.10).

48. The United States abandoned the use of zeroing when calculating margins in original investigations based on weighted average to weighted average comparisons in 2006. However, in February 2012, after publishing a proposed modification, receiving public comments, and consulting with Congress, the U.S. Department of Commerce modified its methodology to address the issue of


zeroing in administrative, new shipper, expedited, and sunset reviews.64 In administrative reviews, "except where the Department determines that application of a different comparison method is more appropriate, the Department will compare monthly weighted average export prices with monthly weighted average normal values, and will grant an offset" where the export price exceeds the normal value.65 Further, in sunset reviews "it will not rely on weighted average dumping margins that were calculated using the methodology determined by the Appellate Body to be WTO-inconsistent."66 The new rules apply to all reviews pending before the Department for which preliminary results were issued after 16 April 2012.

Table III.9 Anti-dumping measures, by country, 2008-11

2008 2009 2010 2011

Trading partner/region China 72 82 88 91 EU countries (27) 32 32 31 23 Chinese Taipei 16 16 16 16 India 14 16 16 15 Japan 20 20 16 14 Korea, Rep. of 14 15 13 11 Brazil 11 11 11 10 Mexico 7 6 8 6 Other America 6 6 6 6 Other Asia (including Australia) 22 22 25 25 Other Europe 17 17 17 17 Africa 3 3 3 3

Total 234 246 250 237

Source: WTO Secretariat, based on USITC (2011), Antidumping and Countervailing Duty Orders in place as of 11 October 2011; USITC (2010), Import Injury Investigations Case Statistics (FY 1980-2008), February. Viewed at: http://www.usitc.gov/trade_remedy/documents/historical_case_stats.pdf; and Department of Commerce, Import Administration online information.

Table III.10 Overview of five-year sunset investigations initiated, as of year-end 2011

Number of cases Distribution of cases (%)

Cases instituted 738 Final disposition – order revoked 271 36.7 Final disposition – order not revoked 427 57.9 Terminated 2 0.3 Suspended 3 0.4 Pending 35 4.7

Source: WTO Secretariat, based on USITC (2010), Import Injury Investigations Case Statistics (FY 1980-2008), February. Viewed at: http://www.usitc.gov/trade_remedy/documents/historical_case_stats.pdf; USITC Sunset Review online database. Viewed at: http://pubapps2.usitc.gov/sunset/caseProf/list?sort=caseTitle&order=asc; and USITC online information, "Trade Remedy Investigations: Active Investigations". Viewed at http://www.usitc.gov/ trade_remedy/731_ad_701_cvd/investigations/active/index.htm#reviews.

64 Federal Register, "Antidumping Proceedings: Calculation of the Weighted Average Dumping

Margin and Assessment Rate in Certain Anti-Dumping Proceedings: Final Modification", Vol. 77, No. 30, p. 8101, 14 February 2012. Viewed at: http://www.gpo.gov/fdsys/pkg/FR-2012-02-14/html/2012-3290.htm.

65 Federal Register, "Antidumping Proceedings: Calculation of the Weighted Average Dumping Margin and Assessment Rate in Certain Anti-Dumping Proceedings: Final Modification", Vol. 77, No. 30, p. 8102, 14 February 2012. Viewed at: http://www.gpo.gov/fdsys/pkg/FR-2012-02-14/html/2012-3290.htm.

66 Federal Register, "Antidumping Proceedings: Calculation of the Weighted Average Dumping Margin and Assessment Rate in Certain Anti-Dumping Proceedings: Final Modification", Vol. 77, No. 30, p. 8103, 14 February 2012. Viewed at: http://www.gpo.gov/fdsys/pkg/FR-2012-02-14/html/2012-3290.htm.

http://www.gpo.gov/fdsys/pkg/FR-2012-02-14/html/2012-3290.htm




49. As of August 2011, the Department of Commerce implemented changes in its regulations governing the submission of information in AD and CVD proceedings. These amendments incorporated changes resulting from the first phase of the Department’s implementation of an electronic filing system, known as IA ACCESS (Import Administration Antidumping and Countervailing Duty Centralized Electronic Service System). When the remaining two phases are fully implemented (2012-13), all public documents will be available in IA ACCESS.67

50. During the review period, the United States has adopted or proposed several modifications to its methodology for the calculation of dumping margins for non-market economies. In June 2012, after receiving public comments, the U.S. Department of Commerce announced a methodological change under which it will now reduce the export price or constructed export price by the amount of any export tax, duty or other charge in proceedings involving China and Viet Nam. Although this reduction is standard in transactions involving market economies, the U.S. Department of Commerce previously considered that such reductions were not appropriate in the case of non-market economies.

51. More recently, the U.S. Department of Commerce proposed to modify its regulations concerning the use of market economy input prices in non-market economy proceedings. Under the proposed modification, where a non-market economy producer purchases an input from a market economy supplier, the U.S. Department of Commerce would treat the price paid to the market economy supplier as the price for all of the input used only if "substantially all" of the input (greater than 85%) was purchased from the market economy supplier. In other cases, it would use a surrogate price for the portion of the input not purchased from a market economy supplier. Currently, it presumptively uses the price paid to the market economy supplier as the price for all of the input used where the share of the input purchased from market economy suppliers exceeds 33% of the total volume of the input purchased. This proposed modification was opened for public comments, to be received by 30 July 2012.

52. From 2008 to 2010, 91% of CVD investigations resulted in final affirmative CVD determinations. From 2008 to June 2012, CVD investigations were initiated on 0.10% of total imports (Table III.11).

53. The majority of CVD investigations initiated during the past five years involved imports from Asian countries (92%) (Chart III.6), in particular China. This reflects a decision of the Department of Commerce, noted in the Secretariat's previous review Report68, to apply CVD measures to non-market economy countries (NMEs). This decision, and consequent decisions regarding the simultaneous application of CVD measures alongside AD measures based upon dumping margins calculated using an NME methodology, have resulted in litigation both at the WTO69, and in domestic courts. While the U.S. Court of Appeals for the Federal Circuit held in December 2011 that under U.S. law CVD measures cannot be applied to NMEs70, Congress in March 2012 enacted legislation effectively reversing that ruling retroactively.71 The new legislation, which also contains provisions intended to address WTO rulings by preventing "double counting", is currently facing challenges on Constitutional grounds.72

67 International Trade Administration online information. Viewed at: http://iaaccess.trade.gov. 68 WTO document WT/TPR/S/235/Rev.1/, 29 October 2010, p. 32. 69 WTO document WT/DS379/AB/R, United States - Definitive Anti-Dumping and Countervailing

Duties on Certain Products from China. 70 GPX International Tire Corp. v. United States, 666 F3d 732 (Fed. Cir. 2011). 71 Application of Countervailing Duty Provisions to Nonmarket Economy Countries, Pub. L.

No. 112-99, 126 Stat. 265 (2012)(to be codified at 19 U.S.C. Secs. 1671, 1677f-1). 72 GPX International Tire Corp. v. United States, 2011-1107, -1108, -1109, 9 May 2012 (Fed. Cir.

2012).

http://iaaccess.trade.gov/


Table III.11 Countervailing duty investigations initiated, 2008-12

2008 2009 2010 2011 2012a

Investigation initiations 6 14 3 9 4 Of the investigations initiated, the following determinations have been madeb

Preliminary determinations, negative n.a. 1 n.a. Final injury determinations, affirmative 6 10 3 1 .. Final injury determinations, negative n.a. 3 n.a. .. .. Final CVD determinations, affirmative 6 12 3 .. .. Final CVD determinations, negative n.a. 1 n.a. .. .. Termination, suspension or withdrawal ..

By per cent Final CVD determinations, affirmative 100 86 100 .. .. Final CVD determinations, negative n.a. 7 n.a. .. ..

Imports subject to investigation initiations (US$ million)c 511 4,475 752 2,713 941 As a of total imports 0.03 0.21 0.05 0.14 0.04

n.a. Not applicable. .. Not available.

a Data as of June 2012. b Data based on calendar year when relevant investigation was initiated, regardless of when a given action actually occurred. c Import value data based on calendar year prior to initiation date.

Note: All figures refer to calendar year.

Source: WTO Secretariat, based on Import Administration online information, "Antidumping and Countervailing Duty Investigations Initiated After January 01, 2000". Viewed at: http://ia.ita.doc.gov/stats/inv-initiations-2000-current.html; USITC (2010), Import Injury Investigations Case Statistics (FY 1980-2008), February. Viewed at: http://www.usitc.gov/trade_remedy/documents/historical_case_stats.pdf; and USITC online information, " Trade Remedy Investigations: Completed Investigations". Viewed at: http://www.usitc.gov/trade_remedy/731_ad_ 701_cvd/investigations/completed/index.htm.

6

13

3

7

4

1

2

0

5

10

15

20

2008 2009 2010 2011 2012

Asia Middle EastEurope Africa Americas

Chart III.6Countervailing measures initiated, by region, 2008-12a

Number of measures




54. CVD measures have been concentrated in the metals sector since 2008 with 20 cases (Chart III.7).

2

5

2

7

2

2

2

11

2

1

2

2

1

2

1

1

0

5

10

15

20

2008 2009 2010 2011 2012

Chart III.7Countervailing measures initiated, by product, 2008-12a

Number of measures



Metals

Misc. manufactures

Chemicals & plastics Textiles Stones, ceramic, etc.

Wood & paper Machinery & electrical equipt.

55. Under the "Sunset" review procedures initiated to date, approximately half (48%) of the 125 cases have resulted in the final CVD duty being lifted (revoked) and the other half (49%) being maintained (not revoked) (Table III.12).

Table III.12 Overview of five-year sunset reviews initiated, as of year-end 2011

Number of cases Distribution of cases (%)

Cases instituted 125 100.0 Final disposition – order revoked 60 48.0 Final disposition – order not revoked 61 48.8 Terminated 0 0.0 Suspended 0 0.0 Pending 4 3.2

Source: WTO Secretariat, based on USITC (2010), Import Injury Investigations Case Statistics (FY 1980-2008), February. Viewed at: http://www.usitc.gov/trade_remedy/documents/historical_case_stats.pdf; USITC Sunset Review online database. Viewed at: http://pubapps2.usitc.gov/sunset/caseProf/list?sort=caseTitle&order=asc; and USITC online information, "Trade Remedy Investigations: Active Investigations". Viewed at http://www.usitc.gov/ trade_remedy/731_ad_701_cvd/investigations/active/index.htm#reviews.

(b) Safeguards

56. The U.S. has several statutes in place relating to safeguards. The global safeguard provisions, 19 U.S.C. 2251-2254, are generally referred to as Sections 201-204 of the Trade Act of 1974, as amended. There is also safeguard legislation specific to communist countries under 19 U.S.C. 2436


(Section 406), and to China under 19 U.S.C. 2451-2451b (Sections 421-423), as well as safeguard provisions in many of the U.S. FTAs (Table III.13).

Table III.13 U.S. FTA safeguard implementation legislation, as of 2012

Agreement Section of the Act U.S.C. reference

United States-Australia Free Trade Agreement Implementation Act 311(b) 19 U.S.C. 3805 note United States-Bahrain Free Trade Agreement Implementation Act 311(b) 19 U.S.C. 3805 note United States-Chile Free Trade Agreement Implementation Act 311(b) 19 U.S.C. 3805 note United States-Colombia Trade Promotion Agreement Implementation Act 311(b) 19 U.S.C. 3805 note Dominican Republic-Central America-United States Free Trade Agreement Implementation Act

311(b) 19 U.S.C. 4061(b)

United States-Jordan Free Trade Area Implementation Act 211(b) 19 U.S.C. 2112 note United States-Korea Free Trade Agreement Implementation Act 311(b) 19 U.S.C. 3805 note United States-Morocco Free Trade Agreement Implementation Act 311(b) 19 U.S.C. 3805 note NAFTA Implementation Act 302(b) 19 U.S.C. 3352(b) United States-Oman Free Trade Agreement Implementation Act 311(b) 19 U.S.C. 3805 note United States-Panama Trade Promotion Agreement Implementation Act 311(b) 19 U.S.C. 3805 note United States-Peru Trade Promotion Agreement Implementation Act 311(b) 19 U.S.C. 3805 note United States-Singapore Free Trade Agreement Implementation Act 311(b) 19 U.S.C. 3805 note

Source: 77 FR 3922.

57. There were no changes to U.S. safeguard laws during the period under review. However, there were two changes with respect to practice and procedure. The first involved a rule of general application regarding procedural changes at the USITC with respect to the electronic filing of documents, which became effective on 7 November 2011.73 On 26 January 2012, the USITC published notice of an interim rule as part of its Rules of Practice and Procedure to amend its rules relating to the conduct of investigations under legislation implementing safeguard provisions in free trade agreements. In essence, these rules expand upon the current rules for bilateral safeguard investigations under the NAFTA and make them applicable to other FTAs with similar procedures.74 On 25 June 2012, the interim rule was adopted as a final rule.75

58. The U.S. last applied a safeguard measure in 2009, with respect to China, under the provisions of Section 421. This measure, "Certain Passenger Vehicle and Light Truck Tires From China," was challenged by China under the DSU. China brought a complaint and subsequently requested establishment of a panel to review the matter; it appealed the Panel's findings to the Appellate Body.76 The findings upheld the safeguard measure. The other U.S. safeguard laws have been little utilized in recent times. A case under Sections 201-202 was last initiated in 2001 with a review of that case (Sections 203-204) in 2005, and Section 406 was last utilized in 1993.77

Special safeguard provisions under Article 5 of the Agreement on Agriculture

59. The United States has certain scheduled rights in its WTO tariff schedule relating to the possible invocation of the agriculture special safeguard (SSG) (see Chapter IV(1)).

73 76 FR 39750 and 76 FR 61937. 74 77 FR 3922. 75 77 FR 37804. 76 For details, see WTO documents WT/DS/399/R, 13 December 2010, and WT/DS/399/AB/R,

5 September 2011. 77 USITC (2010); and USITC online information, "Trade Remedy Investigations: Completed

Investigations". Viewed at: http://www.usitc.gov/trade_remedy/731_ad_701_cvd/investigations/completed/ index.htm.


(vii) Quantitative trade measures, restrictions, controls, and licensing

(a) Quantitative restrictions, including prohibitions

60. The United States has various laws or provisions that allow for quantitative restrictions or prohibitions on imported products. These are often maintained to protect the security or economy of the United States, or safeguard the health or well-being of plant or animal life. For example, the Marine Mammal Protection Act, Endangered Species Act, the Fishermen's Protective Act, the Lacey Act, and the Tariff Act of 1930 Section 305 for obscene materials, and Section 308 pertaining to dog and cat fur products all have provisions to prohibit imports of certain products. CBP has enforcement authority and may restrict goods (on behalf of other agencies) that do not conform to U.S. laws or regulations such as standards or consumer protection regulations.

61. The United States also maintains quotas or quantitative restrictions on products outside of the agriculture TRQs. For industrial products, there are TRQs on certain tariff lines of tuna fish and for broomcorn brooms.78 Quotas on textile and apparel products were eliminated in line with the expiry of the ATC in 2005.

62. The United States last notified quantitative restrictions in 1999, and cross-referenced three notifications in the areas of safeguards, import licensing, and textiles.79 According to the authorities, a new notification is under preparation.

(b) Import licensing

63. The United States requires an import licence, either automatic or non-automatic for 15 categories of products (Table III.14).80 The licensing requirements are required by six different U.S. executive Departments, under various statutes, and for various purposes. Generally, it is necessary to contact the focal point at the Department or Agency concerned in order to obtain the necessary licence, which is subsequently enforced at the border by CBP.81 In general, all persons, firms, and institutions are eligible to apply for licences. For certain products additional criteria may apply, i.e. being a resident in the United States, a registered user, a manufacturer or refiner, etc.

Table III.14 Products subject to U.S. import licensing procedures, 2011

Product / Legal reference Stated purpose Procedure

Animals and animal products Title 9 C.F.R., Parts 92, 94.7, 94.16, 95.4, 95.18, 95.19, 95.20 through 98, 104 and 122; and in the following laws as codified: 21 U.S.C–102 to 105, 111, 134, 135, 151-159 and 19 U.S.C–1306

Not used to restrict the quantity or value of imports, but only to protect domestic agriculture from the introduction or entry of animal diseases or disease vectors

The amount of time in advance of importation within which a permit must be applied for is not specified in the regulations. A permit cannot be granted immediately upon request. Prior review of the application is required. There are no limitations as to the period of the year during which permit applications may be made. Permit applications are processed and effected by one office


78 Quantity for certain tuna is limited to 4.8% of apparent U.S. consumption for a lower duty rate of

6%. Quantity limit for whiskbrooms of 61,655 dozen per year, and other brooms of 121,478 dozen per year for brooms valued at less than US$0.96 may enter at duty rate of 8% (HTSUS 2012).

79 WTO document G/MA/NTM/QR/1/Add.6, 20 September 1999. 80 WTO document G/LIC/N/3/USA/8, 10 October 2011. 81 Customs and Border Protection (2006).



Certain dairy products The licensing system is not a statutory requirement. The authority to make such allocations was delegated to the Secretary of Agriculture by Presidential Proclamation 3019 of 8 June 1953

Administrative tool that governs the importation of certain dairy products subject to TRQs resulting from entry into force of the Uruguay Round Agreement. Dairy articles subject to licensing cannot enter at the in-quota rate unless accompanied by a licence

The procedures for submitting licence applications, eligibility criteria, licence use requirements, and other provisions of the regulation are codified in 7 CFR 6.20-6.37

Controlled substances and listed chemicals

Title 21, Code of Federal Regulations, Section 1312.13 poses additional limitations on the imports of narcotic raw materials

To restrict the quantity of imports of controlled substances and listed chemicals and maintain a monitoring system

Annual notice of publication of aggregate production quotas for total U.S. needs (through domestic manufacture or importation) for all Schedule I and II controlled substances and the listed chemicals ephedrine, pseudoephedrine, and phenylpropanolamine, are published in the Federal Register on or about 1 July of the year prior to that to which the quota applies. Additional notice of regulations is published in Title 21, Code of Federal Regulations, Part 1300 to End

Defence articles Arms Export Control Act of 1976; 22 U.S.C. 2778; 27 CFR Part 447; and Executive Order 11958 (42 FR 4311), as amended by Executive Order 13284 (68 FR 4075)

In part, to regulate the permanent importation of certain defence articles under the Arms Export Control Act

Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) administers the permanent importation provisions of the Arms Export Control Act with respect to defence articles. ATF is guided by the Department of State on matters affecting world peace and the external security and foreign policy of the United States

Distilled spirits or alcohol for industrial use (incl. alcohol for fuel use)

26 U.S.C. 5171 and 27 CFR Part 19

To prevent tax fraud An importer of distilled spirits or alcohol for industrial use (including alcohol for fuel use) secures a permit from the Alcohol and Tobacco Tax and Trade Bureau

Distilled spirits (beverages); wine, and malt beverages

Federal Alcohol Administration Act (FAA Act), 27 U.S.C. 201 et seq.

To provide an enforcement mechanism to ensure that importers comply with all requirements of Federal law relating to alcohol

An importer of alcohol beverages secures a permit from the Alcohol and Tobacco Tax and Trade Bureau

Explosives 18 U.S.C. Chapter 40 and 27 CFR Part 555

To protect commerce against interference and interruption by reducing the hazard to persons and property arising from misuse and unsafe or insecure storage of explosive materials

Consideration of licence applications is effected by a single administrative organ (ATF)

Firearms and ammunition 18 U.S.C., Chapter 44 and 27 CFR Part 478 26 U.S.C., Chapter 53 and 27 CFR Part 479

To provide support to Federal, State, and local law enforcement officials in their fight against crime and violence without placing any undue or unnecessary Federal restrictions or burdens on law-abiding citizens with respect to the acquisition, possession, or use of firearms appropriate to the purpose of hunting, trapshooting, target shooting, personal protection, or any other lawful activity . In part, generally to prevent statutorily prohibited persons in the United States from shipping, transporting, possessing, or receiving any firearm or ammunition. Certain firearms, including non-sporting firearms, machine guns, and destructive devices, are generally not importable into the United States except as provided in the statutes. Firearms under the National Firearms Act are generally subject to registration and taxation

Only a licensed importer may import firearms or ammunition. A Federal Firearms Licence is issued within 60 days after receipt of a properly completed application. Any person who wishes to permanently import a firearm, firearm barrel, or ammunition into the United States must first file with the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and obtain an approved ATF Form 6 – Application and Permit for Importation of Firearms, Ammunition and Implements of War




Fish and wildlife (incl. endangered species)

50 CFR 14.91 93. Exceptions to the licence requirement are found at 50 CFR 14.92

To identify commercial importers and exporters of wildlife, require records which fully and correctly disclose each importation or exportation of wildlife and the subsequent disposition of the wildlife by the importer or exporter. To allow the Service to inspect records required to be kept and inventories of imported wildlife or wildlife to be exported. To remove repeat wildlife law violators from commercial wildlife trade. To improve communications between the Service and commercial wildlife importers and exporters. To assist the Service in its effort to conserve endangered and threatened species and identify species which may be threatened or endangered

No time limit is set for receiving an application in advance of importation, however the Service has 60 days to process a licence application, which must be issued prior to an importation or exportation. Applications are submitted to and processed by Service law enforcement regional offices. The Special Agent in Charge, Office of Law Enforcement, of each office has been delegated authority to issue licences

Natural gas Section 3 of the Natural Gas Act (NGA) (15 U.S.C. 717b)

Not intended to restrict the quantity or value of natural gas imports

DOE regulations (10 C.F.R. Part 590) specify that an applicant for a natural gas import authorization should apply 90 days prior to the anticipated date for start up of the import. Licensing applications are considered by a single administrative organ, the Office of Fossil Energy, U.S. Department of Energy

Nuclear facilities and materials 10 CFR Part 110 pursuant to the Atomic Energy Act of 1954, as amended, and the Energy Reorganization Act of 1974, as amended

Not to restrict quantities or values of items imported; it is to protect public health and safety and the environment, and maintain the common defence and security of the United States, by exercising prudent controls over the possession, use, distribution, and transport of such items

For imports under NRC’s import authority that are not authorized by the general licence in 10 CFR 110.27, an application must be submitted for review and a licence must be issued before the importation occurs

Plants and plant products Section 412 of the Plant Protection Act, 7 U.S.C. 7712

To protect against the entry of plant pests and diseases, and to protect endangered plant species

Permit applications are effected by one office, U.S. Department of Agriculture, Permit Section. Most applications are not passed on to other offices for visas, note or approval. The exceptions to this are permit applications for soil and for plants required to be grown in post-entry quarantine

Steel The final rule extending the system until 21 March 2013 was published on 18 March 2009, in the Federal Register (74 FR 11474); it is possible to renew and extend the program pending Administrative review and approval

Not intended to restrict the quantity or value of imports. It is designed to provide fast and reliable statistical information on steel imports to both the government and the public

Steel import licences may be applied for up to 60 days prior to the expected date of importation and until the date of filing of the entry summary documents, or in the case of FTZ entries, the filing of Customs and Border Protection (CBP) Form 214. The licence is valid for 75 days

Sugar 15 CFR 2011, Sub part A. Certificates for specialty sugar are issued pursuant to 15 CFR 2011, Sub part B. The regulations governing licenses for the importation of sugar exempt from quota are under 7 CFR 1530. Authority exists to suspend each of these systems whenever it is determined that such action is appropriate. Notice of such suspension shall be published in the Federal Register

To provide exporters access to the U.S. domestic market at the low tier tariff. The purpose of the certificate for specialty sugar is to allow entry of certain refined sugars not widely available in the United States. These refined sugars fulfil demand in niche markets, such as the ethnic, organic and gourmet markets. Licenses for quota exempt sugar are intended to increase the utilization of excess domestic refining capacity and improve employment in refining and related industries

The U.S. Department of Agriculture administers the licensing and certificate systems

Tobacco products 26 U.S.C. 5713 and 26 U.S.C. 5702

Does not restrict the quantity or value of imported tobacco products. To provide an enforcement mechanism to ensure that importers comply with all requirements of the Internal Revenue Code relating to tobacco

The Alcohol and Tobacco Tax and Trade Bureau has sole authority to issue the permit required under 26 U.S.C. 5713

Source: WTO document G/LIC/N/3/USA/8, 10 October 2011; and information provided by the U.S. authorities.


(c) Sanctions, controls, or special procedures

64. The United States imposes sanctions against a number of countries, some of which restrict imports and/or exports to/from the United States. In addition to restraints on trade in goods, many of the sanctions involve controls on financial services, restrictions on monetary flows or remittances, and transfer of property. Full or partial trade sanctions are in place with respect to two WTO Members, Cuba and Myanmar, and a number of non-WTO Members, i.e. Syria, Iran, North Korea, and Sudan.82

65. The Clean Diamond Trade Act of 2003 implements the Kimberley Process Certification Scheme, an international initiative aimed at curbing the trade in conflict diamonds.83 The importation and exportation of rough diamonds into and out of the United States requires a Kimberley Process Certificate and a tamper-resistant container. The United States is currently covered under a WTO waiver for the Kimberley process.84

66. Under the Currency and Foreign Transactions Reporting Act persons transporting monetary instruments (e.g. coins, currency, checks, money orders, securities or stocks in bearer form, etc.) in excess of US$10,000 across U.S. borders are required to file and report this movement of monetary instruments to the CBP.85 According to the authorities, this reporting requirement has no impact on legitimate trade.

(d) New legislation or rules enacted during the review period

67. The Asian Carp Prevention and Control Act of 2010 amends the Lacey Act to add the bighead carp of the species Hypophthalmichthys nobilis to the list of injurious species that are prohibited from being shipped or imported to the United States.86

68. A new law pertaining to conflict minerals was contained in the Dodd–Frank Wall Street Reform and Consumer Protection Act87, which entered into effect on 21 July 2010. The law foresees reporting and disclosing the source of four minerals, some of which are mainly used in the electronic industry. Reporting would be required by companies listed in the U.S. stock exchanges or those that raise capital in the United States. Draft rules and regulations implementing the law were issued by the SEC in 2010 for comment, and final rules were expected in 2011, but have so far not been issued (1 July 2012).88 Thus, the actual reporting requirements and their impact are not known at this time. The State of California has adopted a similar law pertaining to conflict minerals, which will be implemented when the Dodd-Frank rules are finalized.89 Maryland has also enacted a law on conflict minerals.

69. A new rule by the Agricultural Department amends the historical licence-reduction provisions of the Dairy TRQ licensing programme, by suspending the provisions on the reduction of historical licences based on surrenders of unused quantities until 2016.90

82 Department of Treasury, "Sanctions Programs and Country Information". Viewed at:

http://www.treasury.gov/resource-center/sanctions/Programs/Pages/Programs.aspx. 83 Public Law 108-19. 84 WTO document WT/L/676, 19 December 2006. 85 31 U.S.C. 5311. 86 Public Law 111-307 87 Public Law 111-203. 88 75 FR 80948. 89 Bill SB 861 was approved by both California assembly and senate and subsequently approved by the

Governor in October 2011. 90 75 FR 762530.

http://www.treasury.gov/resource-center/sanctions/Programs/Pages/Programs.aspx


(viii) Technical regulations and standards

70. Title IV of the Trade Agreements Act of 1979, as amended, is the legal basis for implementing the TBT Agreement in the United States.91 The Trade Agreements Act designates the Office of the USTR as the lead agency within the federal Government for coordinating and developing international trade policy on standards-related activities and in discussions and negotiations with foreign countries on standards-related matters. The Trade Agreements Act requires the USTR to inform and consult with federal agencies with expertise in the matters under discussion and negotiation.92 The United States submitted a notification on the implementation and administration of the TBT Agreement in February 1996.93 The enquiry point and notification authority under the Agreement is the National Institute of Standards and Technology (NIST) of the Department of Commerce.

71. Between 1 January 2010 and 30 June 2012, the United States made 520 notifications to the WTO Committee on Technical Barriers to Trade of which, 337 were addenda or corrigenda. The notifications were made on behalf of a number of government agencies for a variety of reasons, including: the Environmental Protection Agency for environmental protection; the Consumer Product Safety Commission on product safety; and the Food and Drug Administration for human health and food safety standards. Over the period, the U.S. authorities recognized the need to make improvements in their internal procedures for sub-federal notifications, and initiated a temporary hiatus in notifications in order to make corrections. Therefore, in contrast with the last review period, when 83 sub-federal measures were notified, 16 notifications on sub-federal measures have been made since 1 January 2010, 15 of which have been notified since August 2012.

72. WTO Members have used the TBT Committee to raise a number of concerns about TBT measures taken by the United States, and three dispute settlement proceedings in the WTO were taken against the United States under the TBT Agreement during the period under review.94 The United States has also used the TBT Committee to raise concerns on TBT measures taken or proposed by other Members95 and, since 2010, has published an annual report on measures considered to represent barriers to trade in other countries in the form of standards, conformity assessment, and technical regulations.96

73. The United States is a member of the International Organization for Standardization (ISO) and the International Electrotechnical Commission, where it is represented by the American National Standards Institute (ANSI), a private sector body. It is also a member of the International Telecommunication Union (where it is represented by the Department of State, the Department of Commerce, and the Federal Communications Commission), and the Codex Alimentarius Commission (where it is represented by the U.S. Codex Office, the Food and Drug Administration, and the Department of Agriculture). In addition, the United States is a member of the International Maritime Organization (IMO), and the International Civil Aviation Organization (ICAO), participating in the respective standards-development activities of these organizations.

91 19 USC, Section 2531 et seq. 92 WTO document G/TBT/2/Add.2, 19 February 1996. 93 WTO document G/TBT/2/Add.2, 19 February 1996. 94 US-Clove Cigarettes (DS406), US-Country of Origin Labelling (COOL) (DS386 and DS384), and

US-Tuna II (DS381). 95 WTO TBT Information Management System. Viewed at: http://tbtims.wto.org/Default.aspx?

Lang=0 [May 2012]. 96 USTR (2012c).


74. The United States is also a member of several regional organizations, such as the Pacific Area Standards Congress (PASC), the Pan American Standards Commission (COPANT), and the Council for Harmonization of Electrotechnical Standards of the Nations in the Americas (CANENA). PASC and COPANT coordinate regional input for international standardization organizations while CANENA is a forum for regional harmonization of standards in North America.

75. With a few exceptions, such as Executive Order 13563 of 18 January 2011 on improving regulation and regulatory review and Executive Order 13609 of 1 May 2011 on promoting international regulatory cooperation (see below), the procedures for developing technical regulations and conformity assessment procedures have not changed over the past few years97 and they are set out in a number of laws, regulations, and guidelines (Table III.15).

Table III.15 Laws, regulations and guidelines on developing technical regulations and conformity assessment procedures

Law/Regulation/Guideline Description

Administrative Procedures Act of 1946 Covers the notice and comment process for rule making, including the development of technical regulations, and generally requires that members of the public be given the opportunity to comment on regulatory proposals before new rules can be issued or existing ones changed. Proposed and final technical regulations or conformity assessment procedures must be published in the Federal Register

Regulatory Flexibility Act Requires Government agencies to publish biennial agenda, which included proposed new rules that are likely to have significant economic impact

Consumer Product Safety Act as amended (including the Consumer Products Safety Improvement Act (CPSIA) in 2008) and associated regulations,

Established the Consumer Product Safety Commission with the power to develop safety standards and pursue product recalls (see below). The CPSIA was again amended in 2011, with provisions intended to reduce the cost of third-party testing requirements with a proposed rule published in November of that yeara

National Technology Transfer and Advancement Act

Requires government agencies to use voluntary consensus standards developed by private-sector standards development organizations except where inconsistent with law or otherwise impractical

Executive Order 12866 on Regulatory Planning and Review

States that government agencies should only promulgate regulations as required by law, necessary to interpret the law, or as required by compelling public need. Agencies proposing regulations, including technical regulations or sanitary or phytosanitary measures at the federal level, must identify the nature and significance of the problem to be addressed through regulation, identify and assess the costs and benefits of alternatives, and ensure that the benefits of regulations justify their costs

Circular OMB A-119 of 10 February 1998 on Federal participation in the development and use of voluntary consensus standards and in conformity assessment activities

Requires federal agencies to use "voluntary consensus standards"b in procurement and regulatory activities, and for federal employees to participate in the standard development activities

Circular OMB A-4 of 17 September 2003 on regulatory analysis

Encourages the use of voluntary standards over technical regulations for goods and services; and a focus on performance rather than design standards (that is the outcome rather than the means to achieve it)

Executive Order 13563 on Improving Regulation and Regulatory Review which reaffirmed Executive Order 12866,

Stresses the importance of public participation in the rulemaking process, and seeks to improve rulemaking by requiring the use of the Internet and a period of 60 days to enable public comment on regulatory proposals

Executive Order 13609 on Promoting International Regulatory Co-operation

Provides a framework for promoting efforts to eliminate unnecessary regulatory differences and related costs, burdens and delays associated with U.S. regulatory approaches. The Order also requires agencies to provide the public with a summary, in advance, of their international regulatory cooperation activities that are reasonably anticipated to lead to significant regulations

a Federal Register, "Application of Third Party Testing Requirements; Reducing Third Party Testing Burdens", 11 August 2011. Viewed at: https://www.federalregister.gov/articles/2011/11/08/2011-27676/application-of-third-party-testing-requirements-reducing-third-party-testing-burdens [May 2012].

b "Voluntary consensus standards" are defined as standards developed or adopted by "voluntary consensus standards bodies" which are defined as domestic or international organizations which plan, develop, establish, or coordinate voluntary consensus standards using agreed-upon procedures.


97 WTO document WT/TPR/S/235/Rev.1, 29 October 2010, pp. 34-40.


nt or review.

ies among federal government agencies with private sector standards-development organizations.

s. About 200 products are currently subject to technical regulations developed by the CPSC.

ineers (ASME)) develop approximately 80% of the standards produced by ANSI-accredited SDOs.

76. Institutional responsibility for implementing technical regulations has not changed over the past few years. The Office of Management and Budget (OMB) in the Executive Office of the President is responsible for overseeing and coordinating regulatory policy in the federal government. New regulations, including those that incorporate technical regulations and conformity assessment procedures, must be published in the Federal Register in both proposed and final form and must be cleared by the OMB before publication if they have a significant effect.98 The Regulatory Information Service Center, a component of the U.S. General Services Administration, compiles the semi-annual Unified Agenda of Federal Regulatory and Deregulatory Actions with the Office of Management and Budget's Office of Information and Regulatory Affairs and the 60 Cabinet, Executive, and independent agencies, government wide. Each edition of the Unified Agenda includes regulatory agendas from all federal entities that currently have regulations under developme

99

77. The agency or agencies responsible for developing technical regulations depend on the product in question and include: the National Highway Traffic Safety Administration for on-road vehicles and tyres; the U.S. Coast Guard for boats; the Alcohol and Tobacco, Tax and Trade Bureau for alcohol and tobacco; the Food and Drug Administration for food, drugs, cosmetics, and medical devices; the Food Safety Inspection Service (FSIS) of the Department of Agriculture for meat, poultry, and egg products; the Environmental Protection Agency (EPA); and the Consumer Product Safety Commission (CPSC) for consumer products not under other agencies' jurisdictions. The National Institute for Standards and Technology (NIST) is the federal agency that coordinates standards activit

78. The CPSC is an independent agency set up in 1972 under the Consumer Product Safety Act with general responsibility for ensuring consumer product safety by encouraging the development of effective standards, developing technical regulations where needed, and enforcing compliance with product safety laws and regulations, including the overarching requirement that no product may present an unreasonable risk of injury or death. Although the official preference is to rely on industry's use of voluntary standards, the CPSC and other agencies with responsibility for product and service regulations may develop technical regulations when voluntary standards are not considered adequate or when compliance with voluntary standards is considered unlikely. The government agencies may also be required by law to develop or adopt technical regulations, for example, the Consumer Products Safety Improvement Act required the CPSC to develop technical regulations for toys and all-terrain vehicle

100

79. The American National Standards Institute (ANSI) coordinates and administers the private sector voluntary standards system in the United States. There are about 225 ANSI accredited standards developing organizations (SDOs) in the United States, 20 of which (e.g. Underwriters Laboratories Inc. (UL), ASTM International, and the American Society of Mechanical Eng

80. Although compliance with voluntary consumer product safety standards is not a legal obligation, non-compliance may indicate the existence of a hazard. The CSPC and other agencies may take corrective action if their analysis shows that the product could pose a substantial hazard, in

98 Economically significant regulations are those that have an effect on the economy of US$100 million

or more in any one year. 99 For the Annual Unified Agenda and Regulatory Plan, see the Office of Information and Regulatory

Affairs online information. Viewed at: http://www.reginfo.gov/public/do/eAgendaMain. 100 Government Accountability Office (2012a), p. 4.

http://www.reginfo.gov/public/reginfo/leaveregs.jsp?toURL=http://www.gsa.gov/risc

http://www.reginfo.gov/public/reginfo/leaveregs.jsp?toURL=http://www.gsa.gov/risc


and compliance work on imported products which represented about 80% of recalls for 2008-11.

Recalls by the Consumer -11

Number of recall lated products Number of recall nregulated products

which case it will take action to withdraw the product from the market. The number of product recalls has fallen over the past few years, from over 628 in 2008 to 413 in 2011 (Table III.16). According to the GAO, the CPSC focused much of its surveillance

101

Table III.16 Product Safety Commission, FY 2007

Year s of regu s of u

2007 92 385 2008 169 449 2009 46 452 2010 60 416 2011 30 383

Note:

voluntary standards; on some occasions the recall could be associated with issues in manufacturing or assembly of

Source: pment Should Be Considered, GAO-12-582, p. 22, May. Viewed at: http://gao.gov/assets/

600/590990.pdf.

(ix) Sanitary and phytosanitary measures

ming from at least 30 laws related to food safety that are collectively administered by 15 agencies."

ex, and the Animal and Plant Health Inspection Services of the USDA for both the OIE and the IPPC.

These recalls were tabulated from CPSC data for regulated and unregulated products. Unregulated products may include those covered by voluntary standards. According to CPSC officials, recalls of unregulated products are not necessarily associated with violations of the product.

CPSC as quoted by GAO (2012), Consumer Product Safety Commission, A More Active Role in Voluntary Standards Develo

81. At the federal level, institutional responsibility for SPS matters continues to be shared among several government agencies depending on the product and type of risk, while at the state level the authorities may develop their own measures, subject to federal laws and regulations.102 At the federal level, numerous statues, along with their implementing regulations, impose SPS requirements in the U.S. market. These statutes include: the Federal Food, Drug, and Cosmetic Act103, the Federal Meat Inspection Act104; the Plant Protection Act105; and the Federal Insecticide, Fungicide, and Rodenticide Act.106 In addition, the Food and Drug Administration (FDA) Food Safety Modernization Act (which amended the Federal Food, Drug, and Cosmetic Act) became law on 4 January 2010 (Box III.1). In general, many SPS measures are subject to the same administrative rulemaking procedures as technical regulations (see above). However, according to the GAO, "[t]he safety and quality of the U.S. food supply is governed by a highly complex system stem

107

82. The United States is a member of the Codex Alimentarius Commission and the World Organization for Animal Health (OIE), and a contracting party to the International Plant Protection Convention (IPPC). The contact points are in the Food Safety and Inspection Service of USDA for Cod

101 Government Accountability Office (2012a), p. 22. 102 WTO document WT/TPR/S/235/Rev.1, 29 October 2010, pp. 40-46. 103 21 USC, Section 301 et seq. 104 21 USC Chapter 12, Section 601-624, 641-645, 661, 671-680, 691-695. 105 7 USC Section 7701 et seq. 106 7 USC Section 136 et seq. 107 Government Accountability Office (2011), p. 3.


Box III.1: The FDA Food Safety Modernization Act (FSMA)

The FDA Food Safety Modernization Act, became law in January 2011. It is a major reform of legislation on food safety under the responsibility of the FDA, and applies to all FDA-regulated food (i.e. it does not apply to meat poultry, and processed egg products to the extent that they are under the jurisdiction of the FSIS in the Department of Agriculture).

Registration: Under Section 102 of the FSMA, food facilities are required to renew their registration with the FDA (required under Section 415 of the Federal Food, Drug, and Cosmetic Act (FD&C Act)) every two years. "Food facilities" include places that manufacture, process, pack, or hold food for consumption in the United States, including foreign facilities. This biennial registration renewal requirement which must be submitted between 1 October and 31 December, begins in 2012. The FDA may suspend registration if there is reasonable probability that food manufactured, processed, packed, received, or held by the facility could have serious adverse effect on human or animal health. Food from a facility that must register, but that does not have a valid registration must not be brought into the United States.

Preventive Controls: Under Section 418 of the FD&C Act, a registered facility is required to evaluate the hazards that could affect the food it manufactures, processes, packs or holds. The facility is required to prepare a written plan that includes: the identification of potential hazards; and the preventive controls to minimize or prevent these hazards (which could include a recall plan and/or verification of supplier activities related to food safety). The effectiveness of these controls must be monitored and procedures established for corrective actions for circumstances where they are not properly implemented or are ineffective. Each facility is required to keep records, for at least two years, documenting the monitoring of the preventive controls, instances of non-conformance, test results, verification, and corrective actions taken. The food safety plan must be re-analysed at least once every three years.

Some food facilities are exempt in whole or in part from the requirements of Section 418, including:

facilities that comply with the FDA's existing seafood or juice hazard analysis and critical control point (HACCP) regulations;

facilities that comply with the FDA's existing low-acid canned food regulations (only for microbiological hazards, addressed by those regulations; for other hazards facilities must comply with the FSMA);

qualified facilities (defined as very small business or a small business with total annual food sales of less than US$500,000, at least half of which was sold directly to the final consumers, to restaurants, or to retail food establishments in the same State or within 275 miles). These qualified facilities must provide documentation including: showing potential hazards have been identified, and preventive controls are being implemented and monitored; or showing the facility is complying with all State, local, or other applicable non-federal food safety laws. (Proposed rules not yet issued.)

Produce Safety Standards: Under Section 419 of the FD&C Act, the FDA is required to establish science-based minimum standards for the safe production and harvesting of fruits and vegetables that are raw agricultural commodities for which the FDA determines that such standards minimize the risk of serious adverse health consequences or death. The FDA has the discretion to decide whether to include small and very small businesses that produce low-risk raw agricultural commodities in this rulemaking and, when included, smaller businesses have extended compliance dates. (Proposed rule not yet issued.)

Safety of imported food: Section 301 of the FD&C Act now provides that U.S. importers are to be required to verify that imported food is produced in compliance with processes and procedures that provide the same level of public health protection as Section 418 (preventive controls) or Section 419 (produce safety standards) and to verify that the food is not adulterated and is not misbranded with regard to food allergen labelling requirements. (Proposed rules not yet issued.) The Voluntary Qualified Importer Program is intended to expedite the review and imports by importers that meet certain requirements, including that the facility must have been certified by an accredited third-party auditor. (Programme not yet established.)

Intentional Adulteration: Section 420 of the FD&C Act requires the FDA, in coordination with the DHS and in consultation with USDA, to issue regulations to protect against the intentional adulteration of food. The regulations will be limited to food for which there is a high risk of intentional contamination and are to specify how a person is to assess whether mitigation measures are required and to specify appropriate science-based mitigation measures or strategies. In addition, In consultation with DHS and USDA, the FDA is directed to issue guidance documents on protection against intentional adulteration. (Proposed rule and guidance to industry not yet issued.)

Box III.1 (cont'd)


Fees: The FSMA provides the FDA with the authority to collect certain fees related to food safety. Section 743 of the FD&C Act now provides for the collection of fees from domestic facilities and the U.S. agents of foreign facilities to cover costs related to reinspections (i.e., costs incurred for inspections conducted after an earlier inspection uncovered instances of non-compliance related to a food safety requirement of the FD&C Act), for non-compliance with recall orders, from each importer subject to a reinspection, to cover reinspection-related costs, and from importers participating in the voluntary qualified importer program (see below). A Fee Notice was issued in August 2011 and a Guidance to Industry was issued in September 2011. In addition, Section 808 of the FD&C Act provides FDA with the authority to collect fees to cover the costs of establishing and administering the third party accreditation system (see below).

Inspections: The FSMA sets out inspection frequencies for high risk food facilities of once in the first five years after the FSMA was enacted and every three years thereafter. For non-high-risk facilities, FSMA mandates a minimum inspection frequency of once in the first seven years following enactment and once every five years thereafter. Under the statute, at least 600 foreign facilities are to be inspected in the first year of enactment and FDA is directed to double the number of foreign facilities inspected each year thereafter for five years. Under section 807 of the FD&C Act, if a foreign factory, warehouse, or other establishment refuses an inspection (defined as not permitting an inspection within 24 hours of a request or such other time period as agreed upon) food from the establishment is subject to refusal of admission into the United States.

Laboratory and Third-Party Accreditation: Section 422 of the FD&C Act requires the FDA to implement a programme for the accreditation of laboratories (including foreign laboratories) and to work with accreditation bodies to increase the number of accredited laboratories. Under Section 307 of the FD&C Act, the FDA is also required to establish a programme for the recognition of accreditation bodies that, in turn, may accredit third-party auditors to certify eligible foreign facilities and food shipments as meeting FDA requirements. (Proposed rules not yet issued.)

Traceability, records: Section 204 of the FSMA directs the Secretary of Health and Human Services to develop a product tracing system to improve the ability of FDA to track and trace food in the United States or offered for import into the United States. Section 204 also requires the FDA to develop regulations for records that must be kept by facilities involved with high-risk foods. The FSMA updates requirements for responsible parties for food facilities to report additional consumer-orientated information to the FDA in instances where food it has dealt with has a reasonable probability of causing adverse health consequences to humans or animals (a "reportable food") for subsequent notification to grocery and retail stores. (A traceability pilot project is in progress, record-keeping requirements for high-risk foods proposed rule not yet issued, reportable food Registry improvements not yet issued.)

Mandatory recall authority: Under Section 206 of the FSMA, if the FDA determines that there is a reasonable probability that an article of food is adulterated or misbranded and that it will cause serious adverse health consequences or death for humans or animals, the FDA may order a party to cease distribution and recall the food, after first giving the party an opportunity to do so voluntarily. (Authority in effect.)

Source: The FDA Food Modernization Act, 21 USC 2201 note. Viewed at: http://www.fda.gov/food/foodsafety/fsma/default.htm [May 2012].

83. The U.S. enquiry point and national notification authority under the SPS Agreement is the International Regulations and Standards Division in the Foreign Agricultural Service of the USDA.108 The United States has continued to make notifications of SPS measures it proposes to take or has taken to the WTO Committee on Sanitary and Phytosanitary Measures (Table III.17) and to use the Committee to raise concerns about measures other Members have taken.

Table III.17 Notifications by the United States, 1 January 2010 to 30 June 2012

Objective/rationale Total Addenda/corrigenda Emergency Regular

Food safety 398 31 0 367 Zoonoses 6 2 1 3 Plant protection 114 51 11 52 Animal health 29 15 2 12 Territory protection 16 2 13 1 Total 537 92 13 432

Note: A notification may have more than one rationale.

Source: WTO documents in the series G/SPS/N/USA/.

108 WTO documents G/SPS/ENQ/21/Add.1, 22 June 2007, and G/SPS/NNA/11/Add.1, 22 June 2007.


84. In the WTO Committee on Sanitary and Phytosanitary Measures, since 1 January 2010 the United States has raised concerns on measures taken by several Members, including the EU, Turkey, Viet Nam, the Philippines, Indonesia, and India, and it has supported others in their statements about measures taken by Chinese Taipei, Albania, Croatia, China, Malaysia, and the EU. Other Members have also used the SPS Committee to raise concerns with measures taken or proposed by the United States, including: Costa Rica on measures affecting imports of flowers and plants; Argentina on foot-and-mouth disease and imports of queen bees; and India on maximum residue limits on basmati rice imports. A particular concern of several Members has been the FDA Food Safety Modernization Act and its implementing regulations. This issue was raised by India, China, Mexico, Costa Rica, Pakistan, and the Philippines, and the United States responded that the law had not been implemented yet and that trading partners would be able to participate in the process of developing implementing regulations for the Act through the WTO notification process.109

85. The SPS Agreement was also cited in a dispute settlement cases taken against the United States on poultry.110,111

86. As stated above, a number of different agencies are involved in developing, implementing, and enforcing SPS measures. Among the main agencies are:

the Animal and Plant Health Inspection Service (APHIS) in the Department of Agriculture, whose responsibilities include the regulation of imports of live plants, grain, oilseed and horticultural products, animals, including those embryos, semen, ova, and live animals intended for research and development;

the Food Safety and Inspection Service (FSIS) in the Department of Agriculture, which is responsible for the safety of meat, poultry, and processed egg products, including imports, and the recognition of establishments in other countries that meet U.S. regulatory standards for these commodities and may export to the United States;

the Food and Drug Administration (FDA), whose responsibilities include the regulation of: human and veterinary drugs; food (except meat, poultry, and processed eggs), including food additives; cosmetics; and dietary supplements; and

the Environmental Protection Agency (EPA), whose responsibilities include registering pesticides (including herbicides and fungicides) for use in the United States, and establishing maximum residue limits (MRLs) for pesticides on food.112

87. Other agencies involved in SPS issues, include the Agricultural Marketing Service, the Agricultural Research Service, and the National Institute of Food and Agriculture in USDA, the Centers for Disease Control and Prevention in the Department of Health and Human Services, the National Marine Fisheries Service in the Department of Commerce, Customs and Border Protection in

109 WTO SPS Information Management System database. Viewed at: http://www.wto.org/

english/tratop_e/sps_e/sps_e.htm [May 2012]; and WTO documents G/SPS/R/66, 23 May 2012; G/SPS/R/64, 17 January 2012; G/SPS/R/63, 12 September 2011; and G/SPS/R/62, 27 May 2011.

110 DS392 United States – Certain Measures Affecting Imports of Poultry from China. 111 The SPS Agreement was also cited in the request for consultations in another case on clove

cigarettes (DS406 United States-Measures Affecting the Production and Sale of Clove Cigarettes), but the Panel noted that "no analysis or request for findings was made in respect to [the] conditional SPS claims"(WT/DS406/R para. 7.9) and they were not examined.

112 WTO document WT/TPR/S/235/Rev.1, 29 October 2010, pp. 44-45.


the Department of Homeland Security, and the Alcohol and Tobacco Tax and Trade Bureau in the Department of the Treasury.

88. The Food Safety Working Group, an interagency group set up in March 2009 by the President to advise him on how to strengthen the food safety system has continued to work to improve coordination throughout the Government.113 The Working Group has been credited with improving cooperation between agencies and, as a result, improving food safety. However, it has also been noted that it has not developed a government-wide performance plan for food safety. Although the FDA Food Safety Modernization Act was recognized as strengthening a major part of the food safety system, "it does not apply to the federal food safety system as a whole or create a new risk-based food safety structure" (Box III.1).114

(2) MEASURES DIRECTLY AFFECTING EXPORTS

(i) Customs procedures and documentation

89. Since the elimination of the Shipper's Export Declaration in 2008, information on exports must be filed electronically through the Automated Export System (AES), which is used to collect data for statistical purposes as well as to support export controls. The information must be filed by the U.S. principal party in interest (USPPI) or an authorized agent. An Internal Transaction Number (ITN), which is generated by the AES, is assigned to a shipment confirming that the export information was accepted and is on file in the AES. The ITN is sent electronically to the filer of the information as proof of filing citation. This citation, or the applicable Electronic Export Information (EEI) filing exemption, must be submitted to the exporting carrier on the bill of lading, air waybill, export shipping instructions, or other commercial loading documents. The carrier is responsible for collecting the ITN or EEI filing exemption before loading the merchandise for export. Other documents may be required depending on the product and its destination. Enforcement of export controls and other export-related measures requires certification and notification requirements that depend on the product, the destination, and the use the product will be put to.

90. According to the World Bank, on average four documents are needed for exports (a customs export declaration, a bill of lading, a certificate of origin, and a commercial invoice), and exporting a container costs about US$1,050 and takes six days, including two days to prepare documents and one day for customs clearance and technical control.115 However, the authorities pointed out that that they do not require a commercial invoice or certificate of origin to be submitted for export, and export data are filed electronically only with no document involved.

(ii) Export taxes and fees

91. The U.S. Constitution's Export Clause bars Congress from imposing taxes on exports.116 Thus, taxes contingent on exports, such as the Harbour Maintenance Tax, which do not represent compensation for services rendered, may not be applied. However, fees may be applied for government supplied services, facilities, or benefits117, such as user fees for providing certification for

113 For more details, see WTO document WT/TPR/S/235/Rev.1, 29 October 2010, pp. 41-45. 114 Government Accountability Office (2011). 115 World Bank (2011). 116 Constitution of the United States, Article I, Section 9: "No Tax or Duty shall be laid on Articles

exported from any State". 117 Onecle online information, "Duties on Exports from States". Viewed at: http://law.onecle.com/

constitution/article-1/54-duties-on-exports-from-states.html [May 2012].


the exportation of plant and plant products under the Plant Protection Act118, and fees for export certificates for human and animal drugs and devices under the Federal Food Drug and Cosmetic Act.119 In these cases, the fees relate to certificates or other documents required by the importing country rather than for export from the United States.

(iii) Prohibitions, restrictions, and licensing

92. The United States maintains export restrictions and controls for national security and foreign policy reasons, including addressing shortages of scarce materials. Export controls may be based on domestic legislation, policy decisions, UN Security Council Resolutions or international agreements (such as the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), and the Chemical Weapons Convention) as well as U.S. participation in non-binding arrangements such as:

Wassenaar Arrangement on transfers of conventional arms and dual-use goods and technologies120;

Missile Technology Control Regime (MTCR), which seeks to coordinate national export licensing efforts on the non-proliferation of unmanned delivery systems capable of delivering weapons of mass destruction121;

Treaty on the Non-Proliferation of Nuclear Weapons (NPT), and the Exporters Committee (Zangger Committee), which seeks to harmonize implementation of the Treaty's requirements to apply International Atomic Energy Agency safeguards to nuclear exports122;

Nuclear Suppliers Group (NSG) on the non-proliferation of nuclear weapons through the implementation of guidelines for nuclear exports and nuclear-related exports123; and

Australia Group (AG), an informal forum of countries which, through the harmonization of export controls, seeks to ensure that exports do not contribute to the development of chemical or biological weapons.124

93. Trade sanctions may be applied by the Department of the Treasury under the authority of, inter alia, the International Emergency Economic Powers Act (IEEPA)125, the Trading with the Enemy Act126, and the United Nations Participation Act.127 The Department of the Treasury's Office of Foreign Assets Control (OFAC) administers economic and trade sanctions under these laws, and

118 7 USC, Chapter 104, Subchapter III, Section 7759(f)(2). 119 21 USC, Chapter VIII Section, 381(e)(4)(B). 120 Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and

Technologies online information. Viewed at: http://www.wassenaar.org/introduction/index.html [May 2012]. 121 Missile Technology Control Regime online information. Viewed at: http://www.mtcr.info/english/

index.html [May 2012]. 122 Zangger Committee online information. Viewed at: http://www.zanggercommittee.org/

Seiten/default.aspx [May 2012]. 123 Nuclear Suppliers Group online information. Viewed at: http://www.nuclearsuppliersgroup.org/

Leng/default.htm [May 2012]. 124 The Australia Group online information. Viewed at: http://www.australiagroup.net/en/index.html

[May 2012]. 125 50 USC Chapter 35. 126 50 USC Appendix, Chapter 106, 40 Stat.411. 127 22 USC Chapter 7, Subchapter XVI.


may, in this capacity, restrict exports to foreign countries and regimes and persons (entities and individuals) that are subject to such sanctions.

94. Export licences are actually required for only a small percentage of total exports. However, it is up to the exporter to determine whether a product and/or its destination require a licence and to research the end-use of the product. The law on export controls is contained in several different pieces of legislation and responsibility for implementation is divided among different government agencies.128

(a) Arms Export Control Act

95. Under the Arms Export Control Act (AECA)129 and the International Traffic in Arms Regulations (ITAR), all manufacturers, exporters, and brokers of items on the U.S. Munitions List (USML)130 must register with the Directorate of Defense Trade Controls (DDTC) in the Department of State, and often must obtain an export licence or other authorization for the export of any item on the USML. An exporter may make a self-determination, based on the USML, as to whether the item is controlled on the USML. However, should the exporter prefer a formal government opinion, it may request a Commodity Jurisdiction (CJ) determination. An appeal of a CJ determination may be made to the Managing Director of the DDTC for a final determination.

96. An exporter may also ask for a review of a decision by the DDTC concerning refusal, revocation or amendment of an export licence, in which case the Under Secretary for Arms Control and International Security has the authority to make a final decision.131 However, out of a total of over 82,000 applications for export licences or authorization in 2011, less than 1% were refused and there were no appeals of these decisions.

97. U.S. Immigration and Customs Enforcement, Homeland Security Investigations (HSI), in the Department of Homeland Security is responsible for investigating violations and attempted violations of the AECA and ITAR, as well as other potential violations involving exports, such as smuggling, pursuant to 18 U.S.C. Section 554. HSI works with the U.S. Department of Justice to prosecute criminal cases.

98. Civil penalties that may be imposed on an enterprise for violations of the AECA include a fine and a Consent Agreement that outlines the measures required to improve compliance within the enterprise. In 2010 and 2011, four Consent Agreements were imposed.132

99. For commodities controlled by the International Traffic in Arms Regulations (ITAR), a destination control statement appears on the commercial invoice, and bill of lading, which indicates to the carrier and all foreign parties that the item may be exported only to certain destinations.

(b) Export Administration Regulations

100. Exports and re-exports of certain goods, technology, and software that have commercial and military or proliferation applications ("dual-use" items) are controlled through the Export

128 WTO document WT/TPR/S/235/Rev.1, 29 October 2010, pp. 48-50. 129 22 USC Chapter 39. 130 22 CFR Sections 120-130. 131 22 CFR Section 128.13. 132 Department of State online information, "Consent Agreements". Viewed at:

http://www.pmddtc.state.gov/compliance/consent_agreements.html [May 2012].


Administration Act (EAA)133 and the Export Administration Regulations (EAR)134, which is administered by the Bureau of Industry and Security (BIS) in the Department of Commerce. The EAR includes a list of products, the Commerce Control List (CCL)135, which may require a licence from the BIS before they may be exported or re-exported. The rules are frequently updated and changes posted on the BIS website.136 The need for a licence depends on the item, the country of destination, its end-use, and the end-user and it is up to the exporter to find out if a licence is needed (unless informed directly by the BIS).

101. The Bureau of Industry and Security is also responsible for licensing products that are determined to be in short supply under the EAA.

102. In 2010, U.S. companies exported US$3.7 billion in licensed items (of which 5% were exported under a special comprehensive licence), and US$16.1 billion under a licence exception, representing 0.3% and 1.3%, respectively, of overall U.S. goods exported.

103. The Export Administration (EA) in the Bureau of Industry and Security is responsible for analysing applications for export licences, classification of items, and development of proposals for the control or decontrol of items covered by the Wassenaar Arrangement, the Nuclear Suppliers Group, the Australia Group, and the Missile Technology Control Regime. All applications for export licences are reviewed under the timeframes set out in Executive Order 12981.137 Applicants denied an export licence application may appeal to the Under Secretary for Industry and Security. In the past two years, the BIS has received between 10 and 15 appeals. In FY 2011, the BIS processed 25,093 export licence applications valued at approximately US$89.6 billion up from 21,660 applications processed in FY 2010.

104. The Office of Export Enforcement (OEE) in the Bureau of Industry and Security and U.S. Immigration and Customs Enforcement, Homeland Security Investigations (HSI) are responsible for investigating potential criminal violations of the dual-use export control laws. HIS and the OEE work with the Department of Justice to prosecute criminal cases, and the Office of Chief Counsel for Industry and Security to impose civil fines and deny export privileges.

105. A licence is required for exports or re-exports to Cuba of all commodities, technology, and software subject to the EAR, with a few exceptions. The Bureau generally denies such applications, although applications for certain products are reviewed on a case-by-case basis. Similarly, the EAR imposes varying degrees of strict controls on exports or re-exports to the Islamic Republic of Iran, the Democratic Peoples' Republic of Korea, the Republic of Sudan, and the Syrian Arab Republic.

(c) Atomic Energy Act

106. The Nuclear Regulatory Commission (NRC), established as an independent government agency under the Energy Reorganization Act, is responsible for administering export controls on

133 Since August 21, 2001, the EAA has been in lapse but under Executive Order 13222 of

17 August 2001 (3 CFR, 2001 Comp. 783 (2002)) and Presidential Notices (the most recent being that of 15 August 2012 (77 FR 49699 of 16 August 2012)), the EAR has continued in effect under the International Emergency Economic Powers Act (50 USC Sections 1701 et seq.).

134 15 CFR Chapter VII, subchapter C. 135 15 CFR Chapter VII, subchapter C, Section 774. 136 BIS online information. Viewed at: http://www.bis.doc.gov/index.htm. 137 60 FR 62981 (8 December 1995).


source, special nuclear, and by-product material, and nuclear facilities and equipment.138 The Department of Energy is responsible for the re-export of such nuclear material and equipment and the export of nuclear technology. An exporter must submit an application to the NRC and decisions may be appealed to the federal courts of appeal.

(d) Export Control Reform Initiative

107. In August 2009, the President directed that an inter-agency process to review the export control system139 be launched. This review found that the current system was overly complicated, contained too many redundancies, and reduced the focus on the most critical national security priorities. As a result, the Administration launched the Export Control Reform Initiative (ECR Initiative), which is being implemented in three phases: the first two phases are focused on establishing harmonized control lists and processes among the Departments of Commerce, State, and the Treasury; and the third phase is the establishment of a single control list, a single licensing agency, an information technology system, and a single enforcement coordination agency. A November 2010 GAO report noted that some progress had been made in addressing weaknesses in the export control system and that the export control initiatives have the potential to address others, if fully implemented.140

108. A number of proposed and final rules have been published under the ECR Initiative, with a focus on rebuilding the U.S. export control lists. These rulemakings are being made in a two-step process of publishing proposed and final rules to ensure that public input is included before issuing final rules. All proposed and final rules, as well as all other measures taken as part of the Initiative, are made available to the public in a single location.141 As examples of rules that have been proposed and then published in final, in May 2011, the Department of State amended ITAR by simplifying licence procedures for approved end-users to allow access to items on the USML by dual and third-country nationals employed by the end-user.142 In June 2011, the Bureau of Industry and Security published a final rule on the Strategic Trade Authorization Licence Exception which amends the EAR. Under the rule, export licences will no longer be required for exports, re-exports, and transfers in the country of destination of some items on the CCL for destinations that "pose relatively low risk that those items will be used for a purpose that licence requirements are designed to prevent." Eligibility for the exception depends on the parties to a transaction providing notifications giving assurances against diversion of imports to other destinations.143

109. The Export Enforcement Coordination Center (E2C2) was opened in March 2012. The Center is administered by the Department of Homeland Security (DHS) and coordinates with the Department of Commerce, the Department of State, the Department of Defense, the Department of Energy, the Department of Justice, the Department of Treasury, and the Office of the Director of National Intelligence. The aim of the E2C2 is to coordinate and improve criminal, administrative, and related export enforcement activities, and to protect national security through greater export

138 The commodities under the NRC's export licensing authority are set out in 10 CFR Sections 110.8

and 110.9. 139 White House Press Release, "Statement of the Press Secretary", 13 August 2009. Viewed at:

http://www.whitehouse.gov/the_press_office/Statement-of-the-Press-Secretary/ [April 2010]. 140 Government Accountability Office (2010). 141 See Export.gov online information, "President's Export Control Reform Initiative". Viewed at:

http://www.export.gov/ecr. 142 22 CFR Parts 120, 124, and 126. See Federal Register, Vol. 76, No. 94, 16 May 2011. Viewed at:

http://export.gov/static/2011-05-16%20Dual%20Nationals%20Final_Latest_eg_main_030527.pdf. 143 15 CFR Parts 732, 738, 740, 743, and 774. See Federal Register, Vol. 76, No. 116, 16 June 2011.

Viewed at: http://www.gpo.gov/fdsys/pkg/FR-2011-06-16/pdf/2011-14705.pdf [May 2012].

http://www.export.gov/ecr


enforcement and intelligence exchange. On the same day, the multi-agency Information Triage Unit (ITU) was also opened in the Department of Commerce. The ITU is responsible for gathering information on exports that require licences and disseminating this information among the agencies responsible for making decisions on export licences.144

(iv) Official support and related fiscal measures

(a) Export subsidies and drawbacks

110. Under the Agreement on Agriculture, the United States has the right to provide export subsidies for 14 agricultural products, subject to limits on the quantities that may be exported with subsidies in any year, and limits to the budgetary outlay for exports of each of these products. The notifications to the Committee show that, since 2007, export subsidies have been used for exports of some dairy products (Chapter IV(1)(iii)(a)).

111. A number of different types of drawback of duties, taxes, and fees paid on imported products remain in operation.145 The drawback schemes cover a variety of imported goods, including import duties, taxes, and fees on: goods imported into the United States that are re-exported; goods used in the manufacture of products (including packaging) that are exported; imports of goods that are "commercially interchangeable" with domestically produced products that are exported; imports of salt used to cure fish or meat; imported material used to construct and equip vessels built for foreign account and ownership; and imported material used to repair jet aircraft engines that are exported.146

(b) National Export Initiative

112. Under Executive Order 13534 of 11 March 2010, the President set out the National Export Initiative (NEI) with the goal of doubling exports over five years by "helping firms – especially small businesses – overcome the hurdles to entering new export markets, by assisting with financing, and in general by pursuing a Government-wide approach to export advocacy abroad, among other steps".147 The NEI addresses several issues intended to increase exports, including: developing programmes that improve information and other technical assistance to first-time exporters, and assist current exporters in identifying new export opportunities in international markets; promoting existing federal resources for export assistance; increasing the availability of export credits to SMEs; promoting exports of goods and services through trade missions and commercial advocacy; improving market access by actively opening new markets; reducing significant barriers to trade, and enforcing trade agreements; and promoting balanced growth in the global economy.

(c) Finance, insurance, and guarantees

113. The Export-Import Bank of the United States (Ex-Im Bank) is the official export credit agency of the United States with the mission of assisting in financing exports to international markets by "assuming credit and country risks that the private sector is unable or unwilling to accept" and

144 White House Press Release, "Fact Sheet: Latest Steps to Implement the President's Export Control

Reform Initiative", 7 March 2012. Viewed at: http://www.whitehouse.gov/the-press-office/2012/03/07/fact-sheet-latest-steps-implement-presidents-export-control-reform-initi.

145 WTO document WT/TPR/S/235/Rev.1, 29 October 2010, p. 51. 146 19 USC 1313. 147 Executive Order 13534 – National Export Initiative, 11 March 2010. Viewed at:

http://www.whitehouse.gov/the-press-office/executive-order-national-export-initiative [May 2012].

http://www.whitehouse.gov/the-press-office/2012/03/07/fact-sheet-latest-steps-implement-presidents-export-control-reform-initi

http://www.whitehouse.gov/the-press-office/2012/03/07/fact-sheet-latest-steps-implement-presidents-export-control-reform-initi


"matching the financing that other governments provide to their exporters."148 The Ex-Im Bank has been an independent executive agency since 1934 and funds both programme and administrative costs from receipts, which are also used to fund reserves to cover future claims. Since 9 September 2001, the Bank has operated under the Federal Credit Reform Act, which is subject to periodic extensions granted by Congress, most recently in May 2012, with the next reauthorization scheduled for September 2014. In addition, Ex-Im Bank's overall exposure limit was raised to US$140 billion by 2014.

114. Ex-Im Bank provides export financing through various programmes including:

direct loans to foreign buyers of exports from the United States, normally for capital-intensive goods such as commercial aircraft, heavy equipment, and project finance;

medium and long-term guarantees for financial institutions lending to foreign buyers of U.S. exports;

working capital guarantees for lenders (normally commercial banks) on secured, short-term working capital loans to finance the production of goods for export by U.S. companies, particularly small businesses;

short and medium-term export credit insurance to exporters and lenders against the risk of default on debt obligations used to finance export contracts; and

special financing programmes such as aircraft finance, project finance, and supply chain finance.

115. Ex-Im Bank operates in 186 countries around the world and has identified nine key markets (Brazil, Colombia, India, Indonesia, Mexico, Nigeria, South Africa, Turkey, and Viet Nam).

116. To the extent necessary, Ex-Im borrows from the U.S. Treasury to finance medium- and long-term loans. However, in the past five years, Ex-Im Bank has generated US$1.9billion in excess revenues over its costs of operations.149 According to the authorities, the Ex-Im Bank's fees are set in accordance with the OECD Arrangement on Officially Supported Export Credits. The Bank typically covers up to 85% of the value of eligible goods and services in a U.S. supply contract or all of the U.S. content of eligible goods and services in that contract. Certain ocean-borne cargoes financed by Ex-Im Bank direct loans and long-term guarantees exceeding US$20 million or with a repayment period of more than seven years must be transported on U.S. flag vessels, unless a waiver is obtained from the U.S. Maritime Administration.150 According to MARAD, 10 waivers were granted in 2010 and 16 in 2011.

117. The "efforts at Ex-Im Bank are focused on supporting President Obama's National Export Initiative (NEI) and the goal of doubling U.S. exports by 2015."151 Since 2008, the Bank has greatly increased its export financing through loans, guarantees, and export credit insurance (Table III.18) with the increased activity primarily attributed to greater demand driven by a lack of private-sector

148 Ex-Im Bank online information, "Mission". Viewed at: http://www.exim.gov/about/mission.cfm

[May 2012]. 149 Ex-Im Bank Press Release, "U.S. Exports in April Hit $182.9 Billion", 8 June 2012. Viewed at:

http://www.exim.gov/pressrelease.cfm/09F38661-098E-3C86-337C6EF4D8E519CB/ [June 2012]. 150 Public Resolution No. 17 of the 73rd Congress. This Public Resolution is implemented by the Ex-Im

Bank under regulations contained in 12 CFR 402.3. 151 Ex-Im Bank (2011), p. 5.


liquidity.152 Under the NEI, the Bank has increased its efforts to provide export financing for small businesses, through the Small Business (Global Access) initiative, launched in 2011, and the development of new products, such as express insurance and an online application process.

Table III.18 Ex-Im Bank authorizations, 2008-11

2008 2009 2010 2011

Number US$ million Number US$ million Number US$ million Number US$ million

Loans 2 356.0 16 3,033.3 15 4,260.6 18 6,322.9 Long-term 2 356.0 16 3,025.5 14 4,255.5 17 6,315.0 Medium-term/ tied aid

0 0 0 7.8 1 5.1 1 7.9

Guarantees 673 10,179.4 619 11,474.7 719 13,105.9 784 19,400.4 Long-term 79 8,101.5 57 9,628.4 67 10,224.9 97 15,479.4 Medium-term 135 697.0 89 315.3 95 702.5 81 693.0

Working capital 459 1,380.9 473 1,531.0 557 2,178.5 606 3,228.0 Credit Insurance 2,029 3,863.5 2,256 6,513.1 2,798 7,101.3 2.949 7,003.8

Short-term 1,879 3,635.5 2,153 6,275.8 2648 6,788.4 2,836 6,765.0 Medium-term 150 228.0 103 237.3 150 312.9 113 238.8

Source: Ex-Im Bank (several issues), Annual Reports.

118. At the end of FY 2011 (30 September 2011), the Bank had over US$60 billion in outstanding guarantees, loans, insurance, and claims with an additional US$29 billion undisbursed, giving a total exposure of US$89 billion, up from US$68 billion in FY 2009. The largest exposure is in the air transportation sector, which accounted for nearly half of total exposure in FY 2011. Geographically, the Bank's greatest exposure is to Mexico (US$8.3 billion), India (US$7.0 billion), Ireland (US$4.3 billion), Turkey (US$3.8 billion), and Colombia (US$3.8 billion).

(3) OTHER MEASURES AFFECTING INVESTMENT AND TRADE

(i) Business framework and business investment incentives

119. The U.S. business climate is one of encouraging private enterprise and fostering competition based on free-market economic principles. The United States also uses a number of tools and policies to encourage private-sector growth, investment, job creation, and small business development.

120. Following the economic downturn the U.S. Government has turned to a number of fiscal incentives to help spur the economic recovery. In particular a number of tax incentives to businesses have been adopted in the last few years:

the American Recovery and Reinvestment Act (ARRA) extended the temporary bonus depreciation incentive originally contained in the Economic Stimulus Act153;

the Hiring Incentives to Restore Employment (HIRE) Act of 2010 included an employment tax credit154; and

the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act (TRUIRJCA) of 2010, reduced the workers' payroll taxes by 2%. It also included a provision

152 Ex-Im Bank (2011), p. 37. 153 Public Law 110-185 and Public Law 111-5. 154 Public Law 111-147.


9).

to encourage investment through the 100% business expensing provision, which allows for bonus depreciation in the first year, allowing for 100% deductions.155

121. More recently, the President proposed a new framework for business tax reform in February 2012. The proposed reforms include provisions to: (a) eliminate dozens of tax loopholes and subsides, broaden the base and cut the corporate tax rate to spur growth in America; (b) strengthen American manufacturing and innovation; (c) strengthen the international tax system, including establishing a new minimum tax on foreign earnings, to encourage domestic investment; (d) simplify and cut taxes for America's small businesses; and (e) restore fiscal responsibility and "not add a dime to the deficit".156 To date, these reforms are only a proposal from the Administration, however, the U.S. Congress is also holding hearings on possible business tax reform.

122. The United States also has a significant number of state, local, and regional economic development organizations that aim to facilitate business investment attraction. The newly created SelectUSA initiative further coordinates and builds upon this by partnering with economic development organizations, providing a single entry point for information, and serving as a national advocate for business investment in the United States. The U.S. Economic Development Administration is also involved in promoting collaborative regional innovation, public/private partnerships, and global competitiveness.

123. The growth of small businesses has been a priority for economic growth in the United States as small businesses account for approximately half of private-sector non-farm employment.157 Through the Small Business Administration (SBA), loans, loan guarantees, procurement opportunities, contracts, counselling sessions, and other forms of assistance are offered to small businesses. The SBA is involved in a number of initiatives, alone or in conjunction with other agencies to help promote businesses, trade, and investment. For example, the SBA is part of the Advanced Manufacturing Jobs and Innovation Accelerator Challenge, which aims to foster innovation-fueled job creation through public-private partnerships. It aims to promote regional-driven economic development that supports cluster-based development and advanced manufacturing.158 SBA was appropriated USD$30 million a year for two years (2010 and 2011 fiscal years), under the Small Business Jobs Act of 2010, to provide grants to states to promote small business exports. The grants are made on a competitive basis to states that have submitted proposals for their own custom-designed programmes.

(ii) State trading enterprises, government corporations, and government enterprises

124. The United States has a number of entities that contain elements of governmental and corporate organization. These entities vary considerably in structure, finance, and management.

125. One type, known as Government Sponsored Enterprises (GSEs), exists and operates by virtue of federal law. Some GSEs have private equity shareholders. The GSEs are characterized by private-sector ownership, limited competition, activities limited by Congressional charter, and chartered privileges that create an inferred federal guarantee of obligations.159 There are currently five GSEs in operation (Table III.1

155 Public Law 111-312. 156 White House and Department of the Treasury (2012). 157 White House (2012b). 158 SBA Press Release, "Obama Administration Launches $26 Million Multi-Agency Competition to

Strengthen Advanced Manufacturing Clusters Across the Nation", 29 May 2012. Viewed at: http://www.sba.gov/about-sba-services/7367/148601.

159 Kosar (2007).


Table III.19 Government sponsored enterprises

GSE Area of operation

Federal National Mortgage Association (Fannie Mae)a Residential and multi-family mortgages Federal Home Loan Mortgage Corporation (Freddie Mac)a Residential and multi-family mortgages Federal Agricultural Mortgage Corporation (Farmer Mac) Creates a secondary market for agricultural, rural housing, and rural

utility loans Federal Home Loan Bank System Provides funding to member banks so the banks can provide community

development credit Farm Credit Systemb Guarantees payments as to principal and interest on securities issues by

member banks

a Currently in conservatorship. b The Farm Credit System now encompasses the roles of the Federal Intermediate Credit Banks, Federal Land Banks, and the

Regional Banks for Cooperatives.

Source: Kosar, K. (2007), Government-Sponsored Enterprises (GSEs): An Institutional Overview, CRS Publication RS21663, 23 April. Viewed at: http://www.fas.org/sgp/crs/misc/RS21663.pdf; and information provided by U.S. authorities.

126. A second category comprises government agencies established by Congress as corporations. There is no single definition of a government corporation, therefore they are often enumerated differently depending on their purpose. The use of a corporate structure for a government agency may arise for several reasons. These agencies for the most part do not operate commercially but serve governmental or public policy functions. Some have special privileges and receive budgetary allocations. In most cases, a corporate structure also allows these agencies to be self-sustaining. A corporate structure also allows Congress, as the agency authorizer, to clearly define its role. Many government agencies structured as corporations have limited mandates as defined by their legal charters. This prevents the agencies from taking on roles outside of their defined mandates. A corporate structure may provide (usually also includes) a clearly defined management structure through the use of a board of directors or similar governing body (Table III.20).

Table III.20 Government corporations, 2011

Government corporation Legal reference Area of operation

Commodity Credit Corporation 15 U.S.C. 714 Commodity credit financing Export-Import Bank 12 U.S.C. 635 Export financing Federal Crop Insurance Corporation 7 U.S.C. 1501 Agricultural insurance Federal Deposit Insurance Corporation 12 U.S.C. 1811 Bank resolution and deposit insurance Federal Financing Bank 12 U.S.C. 2281 Financing Federal Prison Industries (UNICOR) 18 U.S.C. 4121 Prison services Financing Corporationa 12 U.S.C. 1441 Financing

Government National Mortgage Corporation 12 U.S.C. 1717 Mortgagees National Railroad Passenger Corporation (AMTRAK)

49 U.S.C. 241 Passenger rail services

Overseas Private Investment Corporation 22 U.S.C. 2191 International investment and financing Pension Benefit Guaranty Corporation 29 U.S.C. 1301 Pensions Presidio Trust of San Francisco 16 U.S.C. 460bb Park and recreation Resolution Funding Corporation 12 U.S.C. 1441(b) Financing and bonds for debt created by the former

Resolution Trust Corporation St. Lawrence Seaway Development Corporation 33 U.S.C. 981 Marine transport Tennessee Valley Authority 16 U.S.C. 831 Navigation, flood control, electricity, certain

manufacturing and economic development U.S. Postal Serviceb 39 U.S.C. 101 Mail services Valles Caldera Trust 16 U.S.C. 698-v4 Historical preservation Federal Home Loan Banks 12 U.S.C. Ch. 11 Banking


http://www.fas.org/sgp/crs/misc/RS21663.pdf


Government corporation Legal reference Area of operation

National Credit Union Administration Central Liquidity Facility

12 U.S.C. 1795b Credit Unions

Community Development Financial Institutions Fund

12 U.S.C. 4701 Banking

Corporation for National and Community Service 42 U.S.C. 12651 National and communities services Government National Mortgage Association 12 U.S.C. 1717 Mortgages Millennium Challenge Corporation 22 U.S.C. 7703 Foreign assistance International Clean Energy Foundation 42 U.S.C. Part B Foreign assistance for green house gas reduction

a No longer writing new business; current outstanding obligations expire by 2019. b Only partially a government corporation.

Source: Kosar, K. (2011), Federal Government Corporations: An Overview, CRS Publication RL30365, 8 June. Viewed at: http://www.fas.org/sgp/crs/misc/RL30365.pdf; Government Corporation Control Act, 31 U.S.C. 9101; and information provided by U.S. authorities.

127. The United States has also identified certain government entities as state-trading enterprises pursuant to the provisions of GATT Article XVII. According to a 2010 notification to the WTO, the United States maintains four state-trading enterprises (Table III.21).160

Table III.21 State-trading enterprises, 2010

Enterprise Products affected Purpose

Commodity Credit Corporation

Non-fat dry milk (0402), butter (0405), cheese (0406), honey (0409), dry beans (0713), wheat (1001), rye (1002), barley (1003), oats (1004), corn (1005), rice (1006), sorghum (1007), soybeans (1201), peanuts (1202), flaxseed (1204), Sunflower seeds (1206), sugar (1212), cotton (5201), mohair (5102), wool (4102), and pulses (0708)

The Commodity Credit Corporation (CCC) is a government-owned and operated entity within the U.S. Department of Agriculture (USDA). CCC was created to stabilize, support, and protect farm income and prices. CCC also helps maintain balanced and adequate supplies of agricultural commodities, and aids in their orderly distribution

Isotopes Production and Distribution Fund

Isotopes under Harmonized Tariff System headings 2844 and 2845

The Department of Energy provides radioactive and stable isotope products and associated services. The IP&D produces and sells radioactive and stable isotopes, byproducts, surplus materials, and related isotope services. These products and services are sold worldwide and are used for a variety of research, development, biomedical, and industrial applications. The programme's objectives are to produce and distribute isotopes for research and development, medical diagnostics and therapy, and other applications that are in the national interest

Power Administrations

Electrical energy, Harmonized Tariff System Number 2716

The Power Marketing Administrations (PMAs) market wholesale electricity generated at hydroelectric dams owned and managed by the United States Army Corps of Engineers (Corps) and the United States Bureau of Reclamation (Reclamation). Bonneville also markets electricity generated by a nuclear plant owned and operated by Energy Northwest, and by a non-federally owned and operated hydro project. Western also markets about 400 MW of capacity generated by the Navajo coal-fired plant in Arizona. The Federal Government began to market electricity after Congress authorized the construction of the dams and established major water projects by the Corps and Reclamation, primarily in the 1930s through the 1960s. The Corps and Reclamation operate these projects to provide or manage water for such multiple purposes as irrigation, flood control, navigation, recreation, water supply, and environmental enhancement. These agencies also generate electricity at hydropower plants located at federal water projects. The PMAs sell the power that is not used for project purposes to cooperatives and public bodies, such as municipal utilities, irrigation districts, military installations, and to other utilities, and any power surplus to those needs to other power purchasing entities

Strategic Petroleum Reserve

Crude petroleum, Harmonized Tariff System Number 2709

The Strategic Petroleum Reserve (SPR) is a crude oil stockpile, managed by the Department of Energy (DOE). The SPR mission is to reduce vulnerability to economic, national security, and foreign policy consequences of supply interruptions

Source: WTO document G/STR/N/13/USA, 22 July 2010.

160 WTO document G/STR/N/13/USA, 22 July 2010.


(iii) Government procurement

(a) Overview of U.S. Federal Procurement

128. For fiscal year 2010, U.S. spending on federal procurement contracts amounted to US$517 billion, approximately 16% of 2010 federal government expenditures. The Department of Defense accounted for the most significant share with 64%, and all non-defense agencies with the remaining 36%. The Departments of Energy and of Veterans Affairs accounted for 5% and 4.5%, respectively (Chart III.8). In terms of distribution of federal procurement among the states, California and Virginia each accounted for approximately 11% of all federal procurement.161

Chart III.8Federal government procurement, by agency, 2010

Source: Census Bureau (2011), Consolidated Federal Funds Report for Fiscal Year 2010, September.

Defense64.1%

Energy5.0%

All other (Commerce, Agriculture, State, Homeland Security,

Transportation)13.5%

Total procurement: US$516.7 billion.

Veterans Affairs4.5%

Health & Human Services3.5%

GSA3.3%

NASA3.1%

U.S. Postal Service3.0%

(b) U.S. procurement legislation

129. The first major U.S. government procurement legislation enacted, and still operating after 80 years, is the Buy American Act, which requires the U.S. Federal Government to purchase domestic goods.162 Title III of the Trade Agreements Act of 1979 allows the President to waive the discriminatory purchasing requirements with respect to purchases covered by the GPA and FTAs, for the signatories of those agreements, as well as for least developed countries. However, the Buy American Act applies to purchases below the GPA and FTAs thresholds and to non-covered entities. Exceptions under the Buy American Act apply when: (i) it is deemed inconsistent with the public

161 Census Bureau (2011). 162 41 U.S.C. Chapter 83.


interest; (ii) the cost is considered unreasonable; (iii) the products are for use outside of the United States; (iv) the products are not produced or manufactured in the United States in sufficient quantities or of satisfactory quality; and (v) the procurement is for less than US$2,500.

130. An agency is allowed to use a foreign supplier if the price of the domestic product is "unreasonable". The threshold for determining "unreasonable" is generally 6%. However, if the contract involves a small business or labour surplus area, a differential of 12% is applied, and for the Department of Defense, a threshold of 50% is applied.163

131. U.S. procurement legislation also has specific rules on what qualifies as an American good, i.e. specific origin rules that differ from rules of origin and marking for importation purposes. Non-manufactures are considered U.S. products if mined or produced in the United States. Manufactures are considered U.S. products if manufactured in the United States and the cost of U.S. components is more than 50% of the overall cost of all components. In addition, special rules apply for construction contracts: origin is not based on the nationality of the contractor or similar, but on the origin of the articles, materials, and supplies used by the contractor in constructing or repairing the building or work.164

132. The second major procurement law is the Office of Federal Procurement Policy Act of 1974 (OFPP Act). This legislation provided overall direction for government-wide procurement policies, regulations, and procedures. In order to promote standard processes, the OFPP Act provided for the creation of the Federal Acquisition Regulation (FAR). The FAR establishes the rules and regulations for federal procurement of goods and services through the acquisition process. It is codified in Title 48 of the Code of Federal Regulations. Nearly all federal agencies are required to comply with the FAR, but certain agencies are exempt.165 The Competition in Contracting Act (CICA) was enacted in 1984 and its implementation required revisions to the FAR. The CICA introduced more competition through full and open competition in the awarding of government contracts, with the goal of reducing the costs of procurement.

133. In January 2011, the U.S. Congress passed new legislation relating to the reorganization of public contracts as Title 41 of the United States Code, "Public Contracts".166 This legislation revises and restates certain laws relating to public contracts and re-enacts them as Title 41, U.S.C. The new law consolidates various provisions that had been enacted separately over many years, reorganizing them, conforming style and terminology, modernizing obsolete language, and correcting drafting errors. The changes were to restate existing law without substantive effect.

134. Under U.S. laws and rules, agencies may reserve contracts exclusively for certain designated groups. These provisions are known as set-asides. There are five set-aside categories: (i) small business; (ii) woman-owned small business; (iii) disabled veteran-owned small business; (iv) historically under-utilized small business zones (HUBZones); and (v) a minority small business development programme that utilizes set-asides. The Small Business Act sets a government-wide small business contracting goal of 23% of all federal procurement dollars to be awarded to small business. The Small Business Administration (SBA) negotiates individual small business goals with each federal agency. Included in the 23% goal are individual goals for woman-owned small business (5%), small disadvantaged business (5%), disabled veteran-owned small business (3%), and HUBZone small business (3%). The Department of Veterans Administration (DVA) is responsible for two DVA contract award specific set-asides, one for veteran-owned small business and one for

163 Luckey (2009). 164 Luckey (2009). 165 For example, U.S. Postal Service and CIA are exempt. 166 Public Law 111-350.


service-disabled veteran-owned business. In addition, the Department of Commerce administers a contracting and grants programme for minority business enterprise.167

135. In August 2010, the United States notified the final Regulation implementing the "buy American" provision in the American Recovery and Reinvestment Act of 2009 (ARRA) pursuant to Article XXIV:5(b).168 The rule applied only with respect to contracts funded with ARRA funds to ensure compliance with U.S. obligations under international agreements when undertaking construction covered by such agreements.

(c) New WTO government procurement commitments

136. WTO GPA Members recently reached consensus on a revision of the GPA and re-negotiation of the specific commitments contained in the annexes pertaining to each Member. The U.S. commitments, undertaken in the 1994 GPA, remain virtually the same.169 While the thresholds for procurement did not change, the number of central government covered entities has increased by 12. Commitments for sub-central government entities (i.e. states) and other entities (i.e. government corporations) remain unchanged, except for the increased transparency with the listing for several states of the executive branch entities that they cover. In addition, the United States covered telecommunications projects funded by the U.S. Rural Utilities Service under Annex 3.170

(d) Special provisions, exceptions, etc.

137. The United States passed new legislation in late 2010 to create a federal excise tax on foreign entities receiving payments for goods and services.171 When the law goes into effect, an amount of 2% is applied to foreign entities not party to an international procurement agreement. This is understood to apply to countries that are not members of the GPA or do not have a free-trade agreement with the United States. The regulatory changes to implement the law have not been finalized; the changes will follow the FAR rulemaking procedures before entering into effect.

138. Procurement at the sub-central (i.e. state) level is a matter of state law. Various state procurement rules may have similar "buy American" provisions that can be seen as restrictive or discriminate on the basis of origin or similar requirements. For example, several states have restrictions on the public procurement of American flags, requiring them to be manufactured in the United States. In Minnesota, law officials' uniforms are required to be of U.S. origin.

139. The United States also has special provisions regarding procurement under legislation relating to sanctions on certain countries. This not only results in direct restrictions on the country concerned, but also indirectly on firms that do certain types of business with that country. The Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA), prohibits U.S. executive agencies from entering into or renewing a contract, for goods or services, with an entity that exports sensitive technology, as defined in section 6 of CISADA, to Iran.172 Regulations requiring government contractors to self-certify regarding this issue became effective on 2 November 2011.

167 Set-asides for small business are in respect of all federal government contracts, but may vary on the

size of the contract. For small contracts (less than US$150,000), set-asides are automatic, and for large contracts (US$500,000), a sub-contracting plan is often necessary (SBA online information, "Goaling Program". Viewed at: http://www.sba.gov/about-sba-services/2636).

168 WTO document GPA/98/Add.2, 6 September 2010. 169 WTO document WT/Let/844, 9 January 2012. 170 WTO document GPA/113, 2 April 2012. 171 Public Law 111-347. 172 Public Law 111-195.

http://www.sba.gov/about-sba-services/2636


(iv) Subsidies and other government assistance

140. Subsidies, as defined and notified under GATT Article XVI:1 and Article 25 of the Agreement on Subsides and Countervailing Duties are reported to the WTO by Members including the United States. According to the latest notification in October 2011, the United States reported 50 federal programmes, and over 500 sub-federal programs (Table III.22).

Table III.22 Federal subsidy programmes, 2011 (fiscal year 2010) (US$ million)

Federal programmes Amount reported (US$ million)

Agriculture 14,424 Dairy Export Incentive Program (DEIP) 2a Agriculture Income Support and Marketing Assistance for Covered Commodities 13,532b Expensing of Multi-period Livestock and Crop Production Costs 140c Treatment of Loans Forgiven Solvent Farmers as if Insolvent 20c Capital Gains Treatment of Certain Agricultural Income 490c Exemption from Excise Tax for Tobacco Products Supplied to Their Employees by Tobacco Product Producers

Per unit amount only

Five-year Recovery Period for Certain Farming Business Machinery or Equipment 240c

Energy and fuels 18,099 Energy Supply – Renewable Energy Resources 815d Energy Conservation Programs – Transportation Sector 304d Energy Conservation Programs – Building Technologies 219d Energy Conservation – Industry Sector 94d Fossil Energy Research and Development 477d Expensing of Exploration and Development (E&D) Costs for Oil, Gas and other Fuels 400c Excess of Percentage over Cost Depletion for Oil, Gas and Other Fuels 980c Alternative Fuel Production Credit 170c Capital Gains Treatment of Royalties on Coal 50c Energy Efficient Appliance Credit 150c Alcohol Fuel Credit 8,570c Biodiesel and Renewable Diesel Credit 510c Alternative Fuels Credit 3,960c Tax Credit for Refined Coal and Indian Coal Less than 50c Credits for Investment in Advanced Coal Facilities and Advanced Gasification Facilities 240c Advanced Energy Property Credit 180c Credit for Production of Low-Sulfur Diesel and Deduction for Investment in Low-Sulfur Diesel Refineries

Under 10c

Deduction for Investment in Increased Refinery Capacity 760c Amortization of Geological and Geophysical Expenditures 150c Deduction for Tertiary Injectants Less than 10c

Fisheries 112 Fisheries Finance Program (FFP) 69e Saltonstall-Kennedy Grant Program: Fisheries Research and Development 8 Sea Grant 9d Columbia River Hatcheries 26d

Lumber and timber 380 Capital Gains Treatment of Certain Timber Income 50c Expensing of Multi-period Timber Growing Costs 230c Expensing and Seven-Year Amortization for Reforestation Expenditures 50c Reduced Corporate Capital Gains Tax Rate for Qualified Timber Gain 50c

Medical 489 Orphan Drug Tax Credit 470c The Office of Isotopes for Medicine and Science 19a

Metals, minerals, and extraction (non-fuel) 900 Excess of Percentage over Cost Depletion for Non-fuel Minerals 770c Expensing of Exploration and Development Costs for Non-fuel Minerals 110c



Federal programmes Amount reported (US$ million)

Capital Gains Treatment of Iron Ore Less than 10c Special Rules for Mining Reclamation Reserves Less than 10c

Shipyards 15 Assistance to Small Shipyards Grant Program 15d

Textiles 1 Textile/Clothing Technology Corporation Program (TC2) 1d

Timepieces and jewellery 3 Insular Possessions Watch and Jewellery Programs 3

Other 2,030 Empowerment Zones and Renewal Communities 730c New Markets Tax Credit 720c New York Liberty Zone 20c Gulf Opportunity Zone 360c Kansas Disaster Area 100c, f Midwestern Disaster Area 100c

a Budgetary outlay basis. b Includes some fiscal year 2009 data. c Revenue loss basis. d Appropriations basis. e Loan basis. f 2009 fiscal year.

Note: Subtotals are approximate. Sub-federal entities are not included as they are too numerous (see WTO document G/SCM/N/220/USA, 19 October 2011 for details).

Source: WTO document G/SCM/N/220/USA, 19 October 2011.

141. As illustrated through the WTO notification, the agriculture and energy and fuel sectors are the largest recipients of government assistance and have grown in recent years. One of the major contributors to the growth in this sector is interest in biofuels, or using incentives to find alternatives to fossil fuels. This has gained further momentum in recent years due to the high energy prices and the negative contribution to the current account caused by substantial petroleum imports (Chapter I). Biofuel incentives are also important as they could have a direct or indirect impact on certain aspects of global trade, due to diversion of food products to fuel, commodity price fluctuations, and with respect to agricultural policies. There are a number of programmes, grants, tax credits, and other incentives related to energy biofuels (Table III.23).

142. As examined during the last Review, the United States implemented a number of fiscal stimulus measures or government assistance to mitigate the impact of the financial crisis. While some of these programmes are winding down, some still play an important role in the ongoing recovery and have an impact on the current economic and business climate, including the Authoritative Resources on the American Recovery and Reinvestment Act of 2009 (ARRA) and the Troubled Asset Relief Program (TARP, as contained in the Emergency Economic Stabilization Act (EESA). The recently re-authorized Trade Adjustment Assistance (TAA) also provides support for workers and firms, and is an important aspect of U.S. trade policy.

143. The TARP provided government support to AIG, the automotive industry, banks, and financial institutions. On 31 May 2012, the lifetime cost of TARP was estimated at US$63 billion. While many of the TARP programmes are winding down, significant assets remain under government control or ownership and a number of programmes remain active, especially in the housing market. The United States has articulated broad principles for exiting TARP, including exiting TARP programmes as soon as practicable and seeking to maximize taxpayer returns. As concerns the Automotive Industry Financing Program, TARP has received US$40 billion of its approximately US$80 billion investment. Chrysler exited the programme in July 2011, but GM and Ally Financial (former GMAC financing) remain included, as US$37.2 billion of reimbursement remains


outstanding. Likewise, AIG is still covered under TARP and is expected to have a lifetime cost of US$18.7 billion.173

Table III.23 Federal programmes on biofuels, 2011

Federal programmes Legal citation Description

Renewable Fuel Standard P.L. 109-58 §1501 Mandated use of renewable fuel in gasoline: 4 billion gallons in 2006, increasing to 36 billion gallons in 2022

Volumetric Ethanol Excise Tax Credita

P.L. 108-357 §301 Gasoline suppliers who blend ethanol with gasoline are eligible for a tax credit of US$0.45 per gallon of ethanol

Small Ethanol Producer Credita

P.L. 101-508 An ethanol producer with less than 60 million gallons per year in production capacity may claim a credit of US$0.10 per gallon on the first 15 million gallons produced in a year

Biodiesel Tax Credita P.L. 108-357 Producers of biodiesel or diesel/biodiesel blends may claim a tax credit of US$1.00 per gallon of biodiesel

Small Agri-Biodiesel Producer Credita

P.L. 109-58 An agri-biodiesel (produced from virgin agricultural products) producer with less than 60 million gallons per year in production capacity may claim a credit of US$0.10 per gallon on the first 15 million gallons produced in a year

Renewable Diesel Tax Credita

P.L. 109-58 Producers of renewable diesel (similar to biodiesel, but produced through a different process) may claim a tax credit of US$1.00 per gallon of renewable diesel

Credit for Production of Cellulosic Biofuel

P.L. 110-246 Producers of cellulosic biofuel may claim a tax credit of US$1.01 per gallon. For cellulosic ethanol producers, the value of the production tax credit is reduced by the value of the volumetric ethanol excise tax credit and the small ethanol producer credit – the credit is currently valued at US$0.46 per gallon. The credit applies to fuel produced after 31 December 2008

Special Depreciation Allowance for Cellulosic Biofuel Plant Property

P.L. 109-432 Plants producing cellulosic biofuels may take a 50% depreciation allowance in the first year of operation, subject to certain restrictions

Alternative Fueling Station Credita

P.L. 109-58 §1342 A credit of up to $30,000 is available for the installation of alternative fuel infrastructure, including E85 (85% ethanol and 15% gasoline) pumps

Biorefinery Assistance P.L. 110-246 §9001 Loan guarantees and grants for the construction and retrofitting of biorefineries to produce advanced biofuels

Repowering Assistance P.L. 110-246 §9001 Grants to biorefineries that use renewable biomass to reduce or eliminate fossil fuel use Bioenergy Program for Advanced Biofuels

P.L. 110-246 §9001 Provides payments to producers to support and expand production of advanced biofuels

Feedstock Flexibility Program for Producers of Biofuels (Sugar)

P.L. 110-246 §9001 Authorizes the use of CCC funds to purchase surplus sugar, to be resold as a biomass feedstock to produce bioenergy

Biomass Crop Assistance Program (BCAP)

P.L. 110-246 §9001 For biomass crop establishment costs and annual payments for biomass production; also provides payments to assist with costs for biomass collection, harvest, storage, and transportation

Rural Energy for America Program (REAP)

P.L. 110-246 §9001 Loan guarantees and grants for a wide range of rural energy projects, including biofuels

Biomass Research and Development

P.L. 106-224 Grants for biomass research, development, and demonstration projects

Biorefinery Project Grants Various statutes Funds cooperative R&D on biomass for fuels, power, chemicals, and other products Loan Guarantees for Ethanol and Commercial Byproducts from Various Feedstocks

P.L. 109-58 §§1510, 1511, and 1516

Several programs of loan guarantees to construct facilities that produce ethanol and other commercial products from cellulosic material, municipal solid waste, and/or sugarcane

DOE Loan Guarantee Program

P.L. 109-58 Title XVII

Loan guarantees for energy projects that reduce air pollutant and greenhouse gas emissions, including biofuels projects

Cellulosic Ethanol Reserve Auction

P.L. 109-58 §942 Authorizes DOE to provide per-gallon payments to cellulosic biofuel producers

Import Duty for Fuel Ethanola

P.L. 96-499 All imported ethanol is subject to a 2.5% ad valorem tariff; fuel ethanol is also subject to a most-favored nation added duty of US$0.54 per gallon (with some exceptions)

Flexible Fuel Vehicle Production Incentive

P.L. 94-163 Automakers subject to Corporate Average Fuel Economy (CAFE) standards may accrue credits under that program for the production and sale of alternative fuel vehicles, including ethanol/gasoline flexible fuel vehicles (FFVs)

a Expired at the end of 2011.

Source: Yacobucci, B.D. (2011), Biofuels Incentives: A Summary of Federal Programs", CRS Publication R40110, 1 July. Viewed at: http://fpc.state.gov/documents/organization/168094.pdf.

173 Department of Treasury (2012).


144. ARRA has current expected outlays of US$840 billion, up from US$787 billion, since its inception in 2009.174 It continues to provide money for three main categories aimed at economic recovery: tax cuts, entitlement programmes, and federal contracts, grants, and loans (Chart III.9). In the category of federal contracts, grants, and loans, the majority of funding is for education, followed by transportation, infrastructure, and energy/environment. Most of the funding for tax cuts goes to individual tax credits, and most of the entitlement funding is for Medicaid/Medicare and unemployment insurance. There is no legislative expiry for ARRA, although many of the individual provisions are limited in time and have deadlines associated with the appropriations (budget).

Chart III.9American Recovery and Reinvestment Act (ARRA) Funds paid out

Source: WTO Secretariat, based on Recovery online information. Viewed at: http://www.recovery.gov/Transparency/fundingoverview/Pages/fundingbreakdown.aspx.

Tax benefits (tax credits, tax incentives, energy incentives)

39.3%

Contracts, grants and loans (education, transportation,

infractructure, energy/envireonment)30.9%

Entitlements (Medicaid/Medicare, unemployment insurance,

economic recovery payments)29.8%

Total funds paid out: US$758 billion.

145. TAA has been an important aspect of U.S. trade policy for over half a century, helping firms and workers adjust to trade liberalization. In particular, it helps with worker retraining, financial assistance, and benefits; and for firms it provides loans, guarantees, and tax benefits. As a result of proceeding with three new FTAs in October 2011, the President pushed for re-authorization of the TAA in order to improve or modify a number of its provisions. Among the other important changes, the re-authorization extended the worker, firm, and farmer programmes until 31 December 2013; discontinued TAA for communities; restored and enhanced funding levels for many of the programmes; discontinued eligibility for public-sector workers; and made provisions retroactive to the expiry of the previous enhancements.175

174 Recovery online information. Viewed at: www.recovery.gov. 175 Hornbeck and Rover (2011).


(v) Competition policy

146. U.S. federal legislation on competition policy, or antitrust, has been in existence for 112 years and is constituted by three core laws or pillars. The Sherman Act, passed in 1890, is a comprehensive law aimed at preserving free and unfettered competition.176 It outlaws restraint of trade and monopolization. The Federal Trade Commission Act of 1914 prohibits unfair methods of competition and unfair or deceptive acts or practices. The Clayton Act prohibits mergers and acquisitions where the result would lessen competition.177 The Robinson-Patman Act and the Hart-Scott-Rodino Antitrust Improvement Act amended the Clayton Act to ban certain discriminatory prices and to require advance notification of mergers and acquisitions. The U.S. antitrust laws often have severe penalties or fines for violations, including imprisonment. The Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ) enforce the federal antitrust laws. In addition to the main federal laws, most states have antitrust laws, often modelled after the federal laws.

147. There have been no major changes to the core antitrust laws for many years. Contrary to most aspects of U.S. trade policy that occur through new laws or actions by Congress and the Executive branch, U.S. competition policy is generally developed through interpretation by the Judicial branch, and through administrative proceedings at the FTC. The DOJ or the FTC initiate many cases each year pursuant to the relevant antitrust laws (Tables III.24 and III.25).

Table III.24 DOJ investigations initiated pursuant to antitrust laws, 2008-11

Total investigations initiated, by primary type of conduct 2008 2009 2010 2011

Sherman §1 – Restraint of trade 66 70 46 47 Sherman §2 – Monopoly 0 4 2 2 Clayton §7 – Mergers 84 68 64 90 Others 22 22 7 3

Source: Department of Justice, statistics.

Table III.25 FTC investigations initiated pursuant to antitrust laws, 2008-11

2008 2009 2010 2011

Merger investigations opened 224 135 186 222 Non-merger investigations opened 39 31 32 23 Abuse of dominance (monopolization) investigations openeda 11 8 18 7

a The number of "abuse of dominance investigations opened" is as reported in the Global Competition Review survey, and is a subset of non-merger investigations opened.

Source: Federal Trade Commission, statistics.

148. While the three pillars of antitrust legislation provide the basic structure, there are other U.S. laws or regulations that could facilitate anticompetitive practices. In the area of international trade: the Agricultural Marketing Agreement Act of 1937 allows the Secretary of Agriculture to enter into marketing agreements with producers and processors of agricultural commodities, and these are specifically exempt from the antitrust laws178; the Export Trading Company Act of 1982 provides certain antitrust immunity for export trade and export trade activities179; and the Webb-Pomerene Act

176 15 U.S.C. 1-7. 177 15 U.S.C. 12-27. 178 7 U.S.C. 601-627. 179 15 U.S.C. 4001-4003.


provides immunity for associations of otherwise competing businesses to engage in collective export sales.180

149. In 2011, the Federal Trade Commission amended the Hart-Scott-Rodino Pre-merger notification rules and the form for reporting the proposed merger. The new rules, effective 18 August 2011, include significant changes. Additionally in 2010, the Department of Justice and the FTC amended the Horizontal Merger Guidelines. The amendments retained the core elements of the previous guidelines but contain a number of important clarifications concerning market definition, and expand the discussion on assessing unilateral effects.181

(vi) Trade-related intellectual property rights

(a) Introduction

150. Intellectual property (IP) has a central place in the domestic economy and the international trade profile of the United States. The United States is one of the most well established and mature IP jurisdictions, however, the legal, economic, and trade policy context of IP continued to evolve significantly during the review period, notably through:

major legislative developments (e.g., the Leahy-Smith America Invents Act) and continuing reform of IP administration (such as improvement in patent quality and pendency reduction in the patent examination process);

significant judicial decisions on central issues of patentability particularly as regards patent-eligible subject matter;

regulatory legislation with significance for IP protection, for instance an abbreviated process for approving "biosimilar" generic versions of innovative biological medicines;

strengthened domestic enforcement, including through the work of the Office of the U.S. Intellectual Property Enforcement Coordinator, and efforts to build stronger enforcement in foreign markets;

a policy focus on the role of IP in promoting domestic economic growth and creation of high-value jobs, and in strengthening the U.S. position in international trade. IP protection has been stressed in the implementation of the National Export Initiative (NEI)182, which aims at doubling U.S. exports within five years; and

consolidation of a trend towards development of markets in IP as such, ranging from the rapid expansion of markets in digital products to major transactions in patent portfolios in the IT sector.

(b) Economic policy context

151. Policymakers continued to emphasize the central importance of IP for the trade, economic and employment position of the United States, and – in line with international developments – sought to base IP policy on a firm empirical foundation. A 2012 report, jointly prepared by the Economics and Statistics Administration and the U.S. Patent and Trademark Office, assessed that U.S. industries

180 15 U.S.C. 61-66. 181 Varney (2011). 182 Executive Order 13534, 11 March 2010.


that protect their works through patents, trademarks or copyrights supported 27.1 million jobs, or close to 19% of all employment in the United States in 2010183, and indirectly supported a further 12.9 million jobs. A substantial share of this IP-intensive employment was in trademark-intensive industries, which sustained 22.6 million jobs, while patent-intensive industries accounted for 3.9 million jobs, and copyright-intensive industries for 5.1 million jobs.184 IP-intensive industries contributed just over US$5 trillion in value added, or almost 35% of U.S. GDP in 2010.

152. IP was integral to trade policy concerns to boost high-value exports of goods and services. The same report estimated that merchandise exports of IP-intensive industries accounted for close to 61% of total U.S. merchandise exports in 2010, and merchandise imports of IP-intensive industries for almost 70% of total U.S. merchandise imports. That same year, manufacturing industries were responsible for 99% and 79% of IP-intensive merchandise exports and imports, respectively. The report estimated that exports of IP-intensive service-providing industries accounted for about 19% of total U.S. private services exports. Exports of software publishers were the largest group of IP-intensive service-providing industries in 2007, followed by the motion picture and video industry, financial investment activities, and scientific research and development.

153. The IP component of trade in technology, know-how, creative expressions, brands, and other types of IP is difficult to measure precisely since these often take the form of intangibles embedded in services and physical goods. However, trade in IP is also undertaken as specific IP licences, and the value of this trade may be estimated from balance-of-payments statistics, distinctly from figures for trade in goods that incorporate IP or for IP-related services. In the case of the United States, a comprehensive assessment of IP licence trade is made possible by the detailed statistics available on international payments and receipts of royalties and licence fees.185 This shows that the United States has traditionally posted a large balance-of-payments surplus in IP licence trade. The surplus declined in 2009 but recovered to reach an all-time record of US$84 billion in 2011 (Chart III.10).

154. The IP licence surplus was the result of U.S. residents having collected almost US$121 billion in royalties and licence fees in 2011, while paying nearly US$37 billion to foreign residents (preliminary data). Both receipts (exports) and payments (imports) increased considerably between 2009 and 2011 (by 24.1% and 22.6% in nominal terms), to reach historical peaks, which is in line with the overall expansion of U.S. exports and imports of goods and services. In monetary terms, IP licence exports are as significant as U.S. exports of agricultural food products, and larger than those of mining or automotive products (see Chapter I(3)). IP licence exports and imports contributed 5.7% and 1.4% to total exports and imports of goods and services in 2011.

155. The United States is by far the world's single largest IP licence exporter, collecting about half of world royalties and licence fees in 2010 (last year available).186 The United States paid approximately 15% of world royalties and licence fees in the same year, which made it the second

183 Economics and Statistics Administration and U.S. Patent and Trademark Office (2012). 184 Total IP-intensive industry employment is less than the sum of patent, trademark, and

copyright-intensive industry employment because several industries intensively use both patents and trademarks or copyrights and trademarks.

185 Royalties and licence fees cover transactions with non–residents that involve intangible assets – including patents, trade secrets, and other proprietary rights – that are used in connection with the production of goods; copyrights; trademarks; franchises; rights to reproduce or distribute motion pictures and television recordings; rights to broadcast live events; software licensing fees; and other IPRs. The term royalties generally refers to payments for the utilization of copyrights or trademarks, and the term licence fees to payments for the use of patents or industrial processes.

186 WTO Secretariat estimates, based on World Bank online information, "Indicators: Science and Technology: Royalties and License Fees". Viewed at: http://data.worldbank.org/indicator?display=default [May 2012].

http://data.worldbank.org/indicator?display=default


single largest IP importer. As noted by the U.S. authorities, IP-related imports provide benefits for U.S. consumers and producers by increasing market competition and thus lowering prices, and by supplying intermediate inputs for U.S. industries that make these industries' finished products more competitive.187

0

20

40

60

80

100

120

140

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Chart III.10Royalties and licence fees, 2002-11(US$ billion)

Source: Bureau of Economic Analysis online information, "U.S. International Transactions, 1960-present. Viewed at: http://www.bea.gov/international/index.htm#services [May 2012].

Receipts (exports) BalancePayments (imports)

Note: Data for 2011 are provisional.

156. The large two-way trade in IP licences between the United States and its partners reflects the fact that U.S. residents control a significant proportion of IP rights (IPRs) worldwide, while foreign residents account for a considerable share of IPRs in the United States. For example, U.S. residents own some 8%-9% of the patents in force worldwide (excluding the United States), while foreign residents account for about 48% of the patents in force in the United States.188 This suggests that the United States' large market and well developed IP regime offer an attractive environment for both U.S. and foreign IP right holders.

157. The combined value of IP licence receipts and payments was US$139 billion in 2010 (the most recent year available) (Chart III.11. See also Table AIII.3). This trade is geographically concentrated, with only three U.S. trading partners – Canada, the European Union, and Japan – accounting for 61% in 2010. However, trade with developing countries has been more dynamic, and the highest rates of growth in U.S. IP licence trade between 2006 and 2010 was with Argentina,

187 Economics and Statistics Administration and U.S. Patent and Trademark Office (2012). 188 WTO Secretariat estimates, based on WIPO online information, "Statistics on Patents". Viewed at:

http://www.wipo.int/ipstats/en/statistics/patents/ [May 2012].

http://www.wipo.int/ipstats/en/statistics/patents/


Brazil, Chile, China, Chinese Taipei, and India. In these markets, except for Chinese Taipei, receipts and payments associated with film and television tape distribution expanded particularly strongly.

Chart III.11Royalties and licence fees, distribution of receipts and payments, 2010Combined value of receipts to, and payments by U.S. residents: US$ 139 billion.

By trading partner/region

Source: Bureau of Economic Analysis online information, "Royalties and licence fees". Viewed at: http://www.bea.gov/international/international_services.htm#detailedstatisticsfor [May 2012].

Canada6.7%

Industrial processes

39.9%

Others2.3%

By type of intangible asset

Books, records, & tapes1.8%

Film & television tape

distribution10.9%

Trademarks13.6%

Franchise fees

3.4%

General use computer software28.8%

Broadcasting, recording of live events, & others

1.6%Other Americas

9.9%

Japan13.3%

Other Asia15.6%

European Union41.1%

Other Europe11.1%

158. Industrial processes generated 40% of U.S. IP licence trade, followed by computer software, with almost 30%, and trademarks with close to 14% (Chart III.11). The fastest growing IP types were computer software and trademarks, which expanded 56% and 53% between 2006 and 2010.189 Ireland and, far behind, Japan made the largest contribution to computer software expansion, and Japan and Switzerland to trademark growth. Payments for rights related to industrial processes have been less dynamic, possibly reflecting the subdued performance of the manufacturing sector, although improving over the past two years.

159. Most U.S. IP licence trade takes place within multinational companies that serve foreign markets through affiliates located in those markets. The value of receipts and payments within U.S. multinational companies (affiliated transactions) represented about 65% of the total value of IP licence transactions in 2010 (Table AIII.3). This was slightly lower than the share in 2006 (67%), as affiliated transactions have tended to expand at a slower pace than those involving unaffiliated firms. On the other hand, affiliated transactions have shown greater stability during the recent years of economic turmoil. This resilience has been attributed to the nature of long-term contracts, the reliance on inputs from affiliated parties in the integrated operations of multinational companies, and cost-sharing arrangements within these companies.190

189 WTO Secretariat estimates, based on Bureau of Economic Analysis online information, "Royalties

and license fees". Viewed at: http://www.bea.gov/international/international_services.htm#detailedstatisticsfor [May 2012].

190 Koncz-Bruner and Flatness (2011).


160. Some of the most dynamic recent developments in domestic and international trade in IP licences has been at the consumer level, with the rapid growth in markets for content in the form of digital downloads, notably software applications for mobile platforms, e-books, and audio and audiovisual works. A publishing industry report recorded a 332.6% increase in export revenues from e-books in 2011191, lifting the share of e-books in publishing exports from 1.5% in 2010 to over 6%. Digital downloads of music reportedly rose 17% in 2011 to reach US$2.6 billion192, offsetting a decline in shipments of physical media in a year when digital shipments exceeded conventional music media for the first time. One online music store, operated by U.S. corporation Apple Inc., confirmed its status in the review period as the world's largest music retailer193, exporting to over 120 countries194; it also reported over 30 billion downloads of software applications in under four years, with payments of over US$5 billion to software developers.

161. The significance for the United States of trade in IP licences and in IP-intensive goods and services is mirrored by the high level of expenditures on R&D, which OECD data set at 2.9% of GDP, by far the largest such outlay within the OECD.195 Some 30% of R&D expenditures are estimated to be government-financed.196 The 2012 U.S. Budget provided US$148 billion for R&D overall, a slight nominal increase (0.5%) over actual 2010 expenditures.197 Government assistance to R&D activities takes different forms including, in addition to IPR protection, direct grants and "tax expenditures" (see section (iv)). Against a background of policy focus on the continuing competitiveness of the U.S. economy and the need for high value jobs, the impact of such assistance would be assessed to the extent that it is commensurate with the positive externalities generated198, and to the extent that the balance between assistance and externalities avoids distortions to the incentives framework for R&D activities, not just domestically but also internationally.

(c) Institutional framework

162. Several agencies are responsible for various administrative and enforcement aspects involving intellectual property in the United States. The United States Patent and Trademark Office (USPTO) plays a key role in strengthening and facilitating IP protection. Beyond its administrative and statutory functions, USPTO provides advice on IP policy issues, gives assistance to foreign governments and

191 Association of American Publishers online information, "US Publishers See Rapid Sales Growth

Worldwide". Viewed at: http://www.publishers.org/press/68/. 192 Recording Industry Association of America (2012). 193 Apple Press Release, "Apple's App Store Downloads Top 25 Billion", 5 March 2012. Viewed at:

http://www.apple.com/pr/library/2012/03/05Apples-App-Store-Downloads-Top-25-Billion.html; and International Federation of the Phonographic Industry (2012).

194 Apple online information, "iTunes Support". Viewed at: http://www.apple.com/support/ itunes/ww/.

195 OECD online information, "OECD.Stat Extracts: Indicator on Gross Domestic Expenditure on R&D". Viewed at: http://stats.oecd.org/BrandedView.aspx?oecd_bv_id=strd-data-en&doi=data-00182-en [May 2012].

196 WTO Secretariat estimates, based on OECD online information, "Gross domestic expenditure on R-D by sector of performance and source of funds". Viewed at: http://www.oecd-ilibrary.org/science-and-technology/data/oecd-science-technology-and-r-d-statistics/gross-domestic-expenditure-on-r-d-by-sector-of-performance-and-source-of-funds_data-00189-en?isPartOf=/content/datacollection/strd-data-en [May 2012].

197 White House, Office of Science and Technology Policy (2011). 198 For example, a recent report from the Office of Tax Policy, U.S. Department of the Treasury,

estimated that the Research and Experimentation Tax Credit produces approximately a dollar-for-dollar increase in current research spending, while supporting a large number of well paid, highly skilled jobs as some 70% of research costs that qualify for the credit are labour costs. On the cost side, the same report estimated that close to US$9 billion in research credits were claimed in FY2008 (Department of the Treasury, 2011).

http://www.publishers.org/press/68/


international organizations, and conducts programmes and studies to strengthen the effectiveness of IP protection domestically and throughout the world.199

163. The USPTO established the Office of Chief Economist in March 2010 to provide advice on the economic implications of policies affecting the U.S. IP system. USPTO's Economic Research Agenda covers matters such as the relationship between IP and economic growth, the economic impact of trademark examination on relative grounds, managing IP in the context of technology standards, and facilitating more efficient markets for technology and knowledge.200 The USPTO also conducts training and education programmes, including through the Global Intellectual Property Academy, which offers courses designed for foreign government officials and other stakeholders. Moreover, it has developed the Intellectual Property Awareness Assessment Tool, a web-based system designed to assess IP knowledge and provide training resources for small and medium-sized enterprises and inventors.201

164. The United States Copyright Office (USCO) is charged by Congress with administering the Copyright Act; it is an office of public record, where claims to copyright are registered and where documents relating to copyright may be recorded when the requirements of the copyright law are met. The USCO also provides advice to Congress on the development of national and international copyright policy, drafts legislation, and prepares technical studies on copyright-related matters. Like the USPTO, the Copyright Office works with other U.S. government agencies and international organizations to promote adequate and effective protection of U.S. copyright works internationally.202

165. A number of other agencies work to promote effective intellectual property protection both in the United States and aboard; these include the Department of State, the Department of Commerce, and USTR.

166. The mission of the USTR includes "to support and implement the Administration’s commitment to aggressively protect American IP overseas"203, in view of the impact of IPR infringements in foreign markets on U.S. businesses and on key U.S. comparative advantages in innovation and creativity. USTR's Office of Intellectual Property and Innovation uses a range of tools to promote strong IP laws and effective enforcement worldwide (see below).

(d) Participation in WTO and international initiatives

167. The United States aims to use Trade Policy Reviews of its trading partners to seek constructive engagement on TRIPS implementation.204 The reviews of its own trade policies regularly cover IP issues, with the most recent covering patents, copyright, broadcast signals, circumvention of technological measures, trademarks and geographical indications205, as well as enforcement activities, including annual and out-of-cycle Special 301 Reports and Section 337 investigations. The United States also responded to questions on its implementation of DSB recommendations concerning two of the four IP-related cases in which the United States had taken

199 American Inventors Protection Act of 1999 (Public Law 106-113). 200 For details, see USPTO online information, "Office of Chief Economist". Viewed at:

http://www.uspto.gov/ip/officechiefecon/index.jsp [May 2012]. 201 USPTO online information, "IP Awareness Assessment". Viewed at: http://www.uspto.gov/

inventors/assessment [May 2012]. 202 17 U.S.C. section 701; see also USCO Circular 1a. Viewed at http://www.copyright.gov/

circs/circ1a. 203 USTR (2012a). 204 USTR (2012a). 205 WTO document WT/TPR/M/235/Add.1, 1 November 2010.


part as respondent206, i.e. Section 110(5) of U.S. Copyright Act, and Section 211 Omnibus Appropriations Act of 1998.207 Acknowledging that in those two cases its implementation had not been completed, the United States noted that it had been working actively towards compliance in furtherance of the purpose of the dispute settlement system, and engaged to continue to work to implement the relevant DSB recommendations and rulings.208

168. With respect to the 110(5) matter, the U.S. Administration continues to work closely with the U.S. Congress, and will continue to confer with the European Union, in order to reach a mutually satisfactory resolution of this matter. With respect to the Section 211, the U.S. Administration will continue to work on a solution that would resolve this matter.

169. The United States was not active in any TRIPS-related dispute settlement cases during the review period (see Chapter II(2)). However, in the course of one case covering also a wide range of non-IP measures, Measures Affecting Trade in Large Civil Aircraft209, the panel considered measures on the allocation of IP rights under government contracts, and did not determine them to be covered by the SCM Agreement.

170. The United States continued its active role in the TRIPS Council during period under review, in particular introducing material concerning IP enforcement, and communicating (with several other Members) the text of the Anti-Counterfeiting Trade Agreement (ACTA; see section below).210 USTR views the TRIPS Council as an opportunity for sharing experiences to ensure effective implementation of IP enforcement obligations.211

171. During the review period, several updates were made on IP laws notified to the TRIPS Council.212 Table III.26 lists the United States' main IP laws currently in force, and summarizes the protection they provide; Table AIII.4 lists all laws notified under the TRIPS Agreement. The United States updated the Council on its implementation of Article 66.2 of the TRIPS Agreement213, its programmes on TRIPS-related technical assistance and capacity building214, and notified the Deputy Assistant USTR for IP and Innovation as its contact point both for TRIPS-related technical cooperation and for cooperation on enforcement under Article 69 of the TRIPS Agreement.215

206 As respondent, the United States has taken part in the following IPR-related cases: DS160, DS176,

DS186, and DS224. For details, see WTO (2010), Table III.12. 207 WTO documents WT/DS160/R, 15 June 2000; and WT/DS176/R, 6 August 2001. 208 WTO document WT/TPR/M/235/Add.1, 1 November 2010. 209 WTO document WT/DS353/R, 31 March 2011. 210 WTO document IP/C/W/563, 7 October 2011. 211 USTR (2012a). 212 Article 63.2 requires Members to notify their IPR-related laws and regulations. Since 2010, the

United States has notified the following statutes (WTO document between parentheses): Trademark Technical and Conforming Amendment Act of 2010 (IP/N/1/USA/2, 8 June 2010); Leahy-Smith America Invents Act (IP/N/1/USA/3, 21 October 2011); and Appendix R – Consolidated Patent Rules – Title 37 – Code of Federal Regulations Patents, Trademarks, and Copyrights; U.S. Trademark Law – Rules of Practice and Federal Statutes; and U.S. Trademark Technical and Conforming Amendments ( IP/N/1/USA/4, 22 February 2012).

213 Article 66.2 requires developed country Members to provide incentives to promote technology transfer to LDCs. See WTO documents IP/C/W/551/Add.5, 25 October 2010, and IP/C/W/558/Add.6, 20 October 2011.

214 WTO documents IP/C/W/550/Add.5, 25 October 2010, and IP/C/W/560/Add.6, 21 October 2011. 215 WTO documents IP/N/7/Rev.3, 17 February 2010, and IP/N/3/Rev.11, 4 February 2010. Article 69

requires Members to establish and notify contact points to exchange information on trade in counterfeit and pirated goods.


Table III.26 Summary of intellectual property protection in the United States, May 2012

Form Main legislation Coverage Duration

Copyright and related rights

Copyright Law of the United States, Title 17 of the U.S. Code

Authors' rights in the artistic, literary and scientific domains; to enjoy copyright protection a work must be an original creation

Life of author plus 70 years for works created on or after 1 January 1978. Anonymous works, pseudonymous works, and works made for hire protected for 95 years after publication or 120 years after creation, whichever is the shorter

Patents Patent Law of the United States, as incorporated in Title 35 of the U.S. Code

Any inventions that are new, useful, and non-obvious. Apply to process, machine, manufacture or composition of matter, or improvements thereof

20 years from filing date

Industrial designs

Patent Law of the United States, as incorporated in Title 35 of the US Code

The ornamental design of a product is entitled to the protection afforded to designs, provided it is new

14 years from date of grant

Trademarks The Lanham Act of 1946, as amended (15 U.S.C. 1051 et seq.)

Any sign used to identify and distinguish goods or services from one enterprise from those of another enterprise

10 years from registration date; renewable indefinitely as long as the trademark is in use in commerce that is lawfully regulated by Congress

Geographical indications

The Lanham Act of 1946, as amended (15 U.S.C. 1051 et seq.), and Federal Alcohol Administration Act of 1935

Protection against misuse of geographic signs and names of viticultural significance

Unlimited

New plant varieties

Plant Variety Protection Act Amendments of 1994 (7 U.S.C. 2321 et seq.)

New plant varieties: not previously sold for purposes of exploitation of the variety, in the United States, more than 1 year prior to the date of filing; or in any area outside of the United States more than 4 years prior to the date of filing, or, in the case of a tree or vine, more than 6 years prior to the date of filing

20 years from the date of issue of the certificate in the United States

Layout designs of integrated circuits

Semiconductor Chip Protection Act of 1984

Topography of microelectronic semiconductor products provided it is original (the result of its creator's own intellectual effort) and is not staple, commonplace or familiar in the industry at the time of its creation

10 years from filing date (or, if earlier, from first use)

Undisclosed Information

Economic Espionage Act of 1996 and state laws

Any information, including a formula, pattern, compilation, program device, method, technique, or process, not generally known to the relevant portion of the public, that provides an economic benefit to its holder, and is the subject of reasonable efforts to maintain its secrecy

Indefinite

Note: In some cases common law may control aspects of IPR protection.

Source: WTO document WT/TPR/S/235/Rev.1, 29 October 2010 – updated by the WTO Secretariat.

172. Multilateral, bilateral, and regional institutions all play a part in U.S. trade policy efforts to enhance IP protection and enforcement. WTO accession negotiations are viewed as an opportunity to improve IP standards, in view of concerns about infringement in several accession countries.216 Thus, with the exception of LDCs, the United States requires full implementation of TRIPS obligations as a condition of entry into the WTO.

173. All but one of the 14 RTAs entered into by the United States and included in the WTO's RTA Information System contain substantive IP provisions (see also Chapter II(3)).217 These provisions

216 USPTO online information, "Office of the Administrator for Policy and External Affairs: WTO

Accessions". Viewed at: http://www.uspto.gov/ip/global/trade/ir_trade_wtoaccessions.jsp [May 2012]. 217 The exception is the US-Israel FTA, which is the earliest U.S. RTA included in the WTO RTA

Information System online information. Viewed at: http://rtais.wto.org/UI/PublicMaintainRTAHome.aspx [May 2012].

http://www.uspto.gov/ip/global/trade/ir_trade_wtoaccessions.jsp

http://rtais.wto.org/UI/PublicMaintainRTAHome.aspx


vary somewhat across RTAs, but generally cover enforcement procedures, including border measures, and substantive standards across the full category of IP, broadly requiring a level of protection similar to that in the United States, although flexibilities were introduced by the "New Trade Policy for America".218 WTO non-discrimination principles mean that these additional IP standards have a systematic reach and impact beyond the original parties to bilateral agreements.219

174. Bilateral talks under Trade and Investment Framework Agreements (TIFAs) also cover IP protection and enforcement220; the United States has signed 22 bilateral agreements or memoranda of understanding specifically covering IP, which are considered important for furthering the protection and enforcement of IPRs.221 The United States has also sought to enhance IPR protection in foreign countries by conducting regular reviews of their enforcement efforts (see below).

(e) Patent law

175. The Leahy-Smith America Invents Act222 entered into effect in 2011, representing the most significant reform of U.S. patent law in the past 50 years. Key features of this complex legislation include:

changing the rule of entitlement to an invention as between competing inventors from "first-to-invent" to "first-to-file", which brings U.S. law in this regard into alignment with the practice in other national and regional patent systems. The Act continues existing U.S. practice in providing a one-year, pre-filing "grace period" whereby disclosures of the invention by the applicant within the one year window do not affect patentability;

replacement of "first-to-invent"-based interference proceedings for resolving conflicting claims of entitlement to a patent for the same invention with "first-to-file"-based derivation proceedings that can be used to determine whether an inventor named in an earlier application derived the claimed invention from the inventor named in a later application;

measures to provide cost-effective alternatives to litigation, measures that are expected to improve patent quality and reduce litigation by expanding third-party review of patents through pre-issuance submissions, inter partes review, and post grant review; and

establishment of a prior user rights regime consistent with similar regimes provided for in the laws of major trading partners.

218 USPTO online information, "Office of the Administrator for Policy and External Affairs: Trade:

Free Trade Agreements (FTAs)". Viewed at: http://www.uspto.gov/ip/global/trade/ir_trade_fta.jsp [May 2012]. The Trade Promotion Authority Act of 2002, as a negotiating objective, to promote IP rules that "… reflect a standard of protection similar to that found in United States law". Viewed at: http://www.bilaterals.org/ IMG/pdf/TPAA_2002.pdf.

219 Unlike in the case of goods and services, no general derogation from the MFN principle is available for IP under multilateral rules. For a detailed discussion of the costs and benefits of harmonizing national policies across jurisdictions in the context of RTAs, see WTO (2011).

220 The United States has signed TIFAs with 45 countries or trading groups. Viewed at: http://www.ustr.gov/trade-agreements/trade-investment-framework-agreements.

221 With the Bahamas, Bulgaria, Cambodia, China, Chinese Taipei, Ecuador, Hungary, Jamaica, Japan, Korea (Rep. of), Latvia, Nicaragua, Paraguay, Peru, the Philippines, Sri Lanka, Trinidad and Tobago, and Viet Nam (Trade Compliance Center online information. Viewed at: http://tcc.export.gov/Trade_Agreements/ All_Trade_Agreements/ [May 2012]).

222 H.R. 1249, An Act to amend title 35, United States Code, to provide for patent reform. Viewed at: http://www.gpo.gov/fdsys/pkg/BILLS-112hr1249eh/pdf/BILLS-112hr1249eh.pdf.

http://www.uspto.gov/ip/global/trade/ir_trade_fta.jsp

http://www.bilaterals.org/%0BIMG/pdf/TPAA_2002.pdf

http://www.bilaterals.org/%0BIMG/pdf/TPAA_2002.pdf

http://www.ustr.gov/trade-agreements/trade-investment-framework-agreements

http://www.gpo.gov/fdsys/pkg/BILLS-112hr1249eh/pdf/BILLS-112hr1249eh.pdf


176. The Act also provides that while disclosure of best mode continues to be a requirement for obtaining a patent in the first instance, failure to disclose the best mode cannot be raised as a ground for invalidating, cancelling, or otherwise holding unenforceable any claim in a granted patent. The Act further codifies long-standing USPTO policy that claims directed to or encompassing human organisms are not patent-eligible subject matter.

177. The Act established several mechanisms aimed at boosting competitiveness of U.S. markets and at supporting innovative firms, particularly small businesses. For example, it establishes a new category of applicant known as a "micro entity", in recognition of the substantial contributions made by small businesses and independent inventors that are resource-challenged to economic growth and innovation, and accordingly, grants them a 75% discount of certain fees.

178. The Act also includes provisions for the establishment of a prioritized examination process, whereby examination of an application may be expedited upon payment of a fee. In addition, Congress required the USPTO to produce a study on how USPTO can best help small businesses with patent protection overseas, such as whether a loan or grant programme should be established to help small businesses cover the costs of application, maintenance, and enforcement fees or related technical assistance.

179. During the review period, a number of landmark judicial decisions were made on patent law, shedding light on how the core principles of patentability are applied in current U.S. law. In Bilski v. Kappos (2010), the Supreme Court provided guidance for determining when a claimed process is directed to patent-eligible subject matter or to an ineligible abstract idea. In Mayo v. Prometheus (2012), the Court addressed the difference between claims directed to patent-eligible applications of natural laws and claims directed to the natural laws themselves.

180. Timeliness and quality of patent examination continued to be a key focus for the USPTO. Timeliness of patent procedures was measured by total pendency, i.e. the average number of months from filing date to final disposition of an application (issued as a patent or abandoned). Against a goal of reducing this period to 20 months by 2015, pendency in the review period varied between 33.5 and 33.9 months. The USPTO also undertook a range of initiatives during the review period to further improve quality and timeliness, including through international cooperation. Among those activities were:

worksharing initiatives with other patent offices on patent examination, notably the Patent Prosecution Highway, which speeds up patent examination and reduces costs by allowing examiners to reuse search and examination results for corresponding applications filed in other participating countries. There was a significant increase in the number of international partners during the review period, and the petition fee for use of this pathway was eliminated;

the Green Technology Pilot Program, which ran from December 2009 to December 2011, enabling applicants to request accelerated examination for patents on green technologies. Of 5,550 petitions under the programme, 3,533 were granted, leading (as at April 2012) to 1,062 issued patents;

the Cooperative Patent Classification (CPC) Project, a partnership with the European Patent Office aimed at harmonizing the existing classification systems (ECLA and USPC, respectively) and migrating towards a common classification scheme;

a second pilot programme under the Peer to Patent project, enabling public participation in the patent examination process;


patent examination quality initiatives, including the development of new metrics for patent quality; and

Patents for Humanity, a voluntary pilot programme to recognize patent owners who apply their patented technology to address humanitarian needs.

(f) Data protection

181. The Patient Protection and Affordable Care Act (Affordable Care Act), signed into law on 23 March 2010, amended the Public Health Service Act (PHS Act) to create an abbreviated pathway, through the Biologics Price Competition and Innovation Act (BPCI Act), for approval of biological products that are shown to be "biosimilar" to or "interchangeable" with a biological product already licensed by the FDA. The Affordable Care Act provided for a 12 year period of data exclusivity from the time of FDA approval of the original product, after which follow-on biologics would be able to rely on data provided for the original approval, together with data demonstrating the similarity of the generic product.

(g) Trademarks and geographical indications

182. The Trademark Technical and Conforming Amendments took effect on 8 November 2011, and amended the Rules of Practice in Trademark Cases to implement the Trademark Technical and Conforming Amendment Act of 2010. The Act became law on 17 March 2010, and made small technical and conforming corrections to the Lanham Act, as well as more significant changes regarding filing Affidavits or Declarations of Use or Excusable Nonuse to maintain a registration. Specifically, the legislation gave Madrid Protocol registrants the benefit of six-month grace periods immediately following the statutory time periods for filing their trademark registration maintenance documents under Section 71, 15 U.S.C. 1141k.

183. "Changes in Requirements for Specimens and for Affidavits or Declarations of Continued Use or Excusable Nonuse in Trademark Cases" took effect on 21 June 2012. The rule was promulgated to help access and to ensure the accuracy of the trademark register, by allowing the USPTO to require any additional specimens, information, exhibits, and affidavits or declarations deemed reasonably necessary to examine a post-registration affidavit or declaration of continued use or excusable nonuse in trademark cases; to conduct a two-year pilot programme to assess the accuracy and integrity of the register; and, upon request, to require more than one specimen in connection with a use-based trademark application, an allegation of use, or an amendment to a registered mark.

(h) Copyright

184. The increasing availability of digitized material online sparked litigation with significant implications for the publishing industry, including foreign holders of copyright. Associations of publishers and artists had brought separate lawsuits against Google, Inc. for copyright infringement in relation to the Google Book Search project, an initiative to digitize books in libraries and make them searchable on the Internet. A proposed settlement sparked international debate over how to facilitate access to orphan works, as well as on the compatibility of the settlement with international copyright law, as the terms of the settlement would have affected the rights of rights owners from around the world. In March 2011, the Southern District Court of New York rejected the proposed settlement agreement, citing, inter alia, concerns over copyright law, antitrust law, and international law, as well as the adequacy of class representation.223 A particular concern was that the settlement would have released Google from future acts that were not covered by the claims of the law suits, which the court

223 Authors Guild v. Google, Inc., 770 F. Supp. 2d 666 (S.D.N.Y. 2011).


felt should be left to the legislature, and forced right holders to opt out of the settlement agreement if they did not want to be covered.

185. Following the Court's settlement rejection, the Authors Guild filed their fourth amended class action complaint in October 2011, and in November 2011 the American Society of Media Photographers, et al., filed their first amended class action complaint against Google, Inc. The members of the Authors Guild then filed a motion to be declared a class, for the purposes of suing Google, Inc. as a class, and to be a plaintiff alongside the Authors Guild as co-plaintiffs. Google, Inc. filed a motion to have the plaintiff associations in both cases dismissed and to require the individual members join the case individually. In May 2012, the Judge issued a single opinion on both motions.224 The order granted class action status to the individual members of the Authors Guild and denied Google's motion to remove the plaintiff associations as named plaintiffs from the renewed case brought by the Authors Guild and the case brought by several associations including the American Society of Media Photographers, the Graphic Artists Guild, the Picture Archive Council of America, the North American Nature Photography Association, and Professional Photographers of America.

186. On 18 January 2012, in the case of Golan v. Holder225, the Supreme Court upheld the constitutionality (under the Copyright Clause) of the restoration of copyright protection to foreign works that had previously fallen into the public domain, through the operation of the Uruguay Round Agreements Act (which included provisions to implement U.S. obligations under the TRIPS Agreement).

187. Congress has asked the Copyright Office to undertake various studies, three of particular note. First, with a view to reviewing the scope of federal protection for recordings, as directed by Congress, the Copyright Office undertook a study on "the desirability and means of bringing sound recordings fixed before 15 February 1972, under Federal jurisdiction"; these recordings are currently "protected under a patchwork of State statutory and common laws from their date of creation until 2067".226 Its report recommended that the term of protection for sound recordings fixed prior to 15 February 1972 be 95 years from publication or, if the work was not published prior to the effective date of legislation federalizing protection, 120 years from fixation. Such protection would not continue past 2067, and for such recordings where these terms expired before 2067, protection could be extended if the recording had been available to the public at a reasonable price. At the time of writing, this recommendation had not been developed into legislation.

188. Second, a study entitled "The Satellite Television Extension and Localism Act (STELA)," was prepared by the Copyright Office and delivered to Congress on 29 August 2012.227 As directed by Congress under Section 302 of the Satellite Television Extension and Localism Act of 2010228, the Report considers the repeal of statutory licensing provisions in Sections 111, 119, and 122 of the Copyright Act, which currently govern the retransmission of distant and local television broadcast

224 Authors Guild, et al, v. Google, Inc. American Society of Media Photographers, et al, v. Google,

Inc., no. 05 Civ. 9136, 10 Civ. 2977 (S.D.N.Y. May 31, 2012). 225 565 U. S. ____, 132 S. Ct. 873 (2012). 226 Federal Register, "Protection of Sound Recordings Fixed Before February 15, 1972", Vol. 75,

No. 212, 3 November 2010. For the docket of this study, including public comments, related documents and the final report issued on 28 December 2011, a U.S Copyright Office Study on the Desirability and Means for Bringing Sound Recordings Fixed Before February 15 1972 (U.S. Copyright Office online information, "A Study on the Desirability of and Means for Bringing Sound Recordings Fixed Before February 15, 1972, Under Federal Jurisdiction", see: http://www.copyright.gov/docs/sound/).

227 The text of the Copyright Office report on STELA (also sometimes referred to as the "Section 302 Report") is viewed at U.S. Copyright Office (2011a).

228 See Public Law No. III-175, 124 Stat. 1218 (2010).

ttp://www.copyright.gov/docs/sound/


signals by cable operators and satellite carriers. The Report provides recommendations for commencing and carrying out such repeal responsibly and on a reasonable schedule, and addresses possible methods and mechanisms for the possible phase-out of these licenses. Third, on 31 October 2011, the Office published "Legal Issues in Mass Digitization: A Preliminary Analysis and Discussion Document", which addressed issues raised by the intersection between copyright law and the mass digitization of books.229 The purpose of this discussion document is to facilitate further discussions among the affected parties and the public (such as voluntary initiatives, legislative options, or both) and to identify questions to consider in determining an appropriate policy for the mass digitization of books.

(i) Enforcement

189. Several initiatives to improve the coordination and effectiveness of domestic mechanisms to enforce IP rights matured during the review period. In recognition of the need for more effective coordination and a stronger information base for enforcement of IP rights, the Prioritizing Resources and Organization for Intellectual Property (PRO-IP) Act of 2008 created a new position of Intellectual Property Enforcement Coordinator (IPEC). This position was filled following Senate confirmation in 2009. The PRO-IP Act required the IPEC to coordinate the development of a joint strategic plan against counterfeiting and infringement. The plan was issued in 2010, containing 33 enforcement strategy action items within six categories: (i) leading by example; (ii) increasing transparency; (iii) ensuring efficiency and coordination; (iv) enforcing rights internationally; (v) securing the supply chain; and (vi) building a data-driven government.

190. In June 2012, on the second anniversary of the Joint Strategic Plan on Intellectual Property Enforcement, the IPEC reported on progress under the plan230, highlighting growth in enforcement activities between 2009 and 2011, customs seizures in that period rising 67% to 24,792, including increases of 183% in counterfeit consumer-safety and critical-technology merchandise, and nearly 600% in counterfeit pharmaceuticals. The report stressed the significant impact of voluntary approaches to combating online infringement, such as voluntary agreements to quarantine sites engaged in counterfeiting and piracy through cooperation with credit card companies, domain name registrars, and online advertisers. Among legislative recommendations made in the 2011 White Paper on Intellectual Property Enforcement, two entered law as part of the National Defense Authorization Act of 2012, concerning penalties for counterfeit goods or services sold to or for use by the military or national security applications, and granting explicit authority to U.S. Customs and Border Protection to share information to help determine whether suspected counterfeit semiconductors, electronics, or other products are genuine. The report also emphasized greater efficiency and inter-agency coordination; for instance, in FY 2010 a 5% increase in funding for IP enforcement, reportedly yielded a 33% rise in seizures of counterfeit and pirated goods.

191. Section 337 investigations conducted by the U.S. International Trade Commission, may result in exclusion orders directing U.S. Customs to prevent IP-infringing imports from entering the United States. During the review period, the Commission conducted a survey on the effectiveness of exclusion orders. Its results reflected the continuing challenges of enforcement: 39% of survey responders believed that infringing goods covered by an exclusion order had not been imported since issuance of the order compared with 35% in a similar survey in 2005; those believing that infringing goods had since been imported rose from 48% to 51%.

229 For the text of the Copyright Office report on Mass Digitization, see U.S. Copyright Office online

information, "Legal Issues in Mass Digitization: A Preliminary Analysis and Discussion Document". Viewed at: http://www.copyright.gov/docs/massdigitization/; and for the full report see U.S. Copyright Office (2011b).

230 White House (2012a).


192. Effective IP enforcement in foreign markets remains a strong priority for U.S. authorities. The Joint Strategy included the goal of working collectively to strengthen enforcement of IP rights internationally, including through: (i) combating foreign-based and foreign-controlled websites that infringe American IP rights, as a "growing problem that undermines … national security, particularly … national economic security"; (ii) enhancing foreign law enforcement cooperation to combat piracy and counterfeiting; and (iii) promoting enforcement of U.S. IP rights through trade policy tools, including bilateral trade dialogues and problem-solving, communicating U.S. concerns clearly through reports such as the Special 301 Report, committing trading partners to protect American IP through trade agreements such as the ACTA and the Trans-Pacific Partnership (TPP), and, when necessary, asserting rights through WTO dispute settlement processes. The policy is adopted of conducting these efforts in a manner consistent with the balance found in U.S. law and the legal traditions of its trading partners.231

193. The IPEC Second Anniversary report noted that administration officials at the most senior levels had repeatedly pressed foreign trading partners to improve IP enforcement, and had adopted, in the Statement by G-8 Leaders on the Global Economy in May 2012232, a statement affirming "the significance of high standards for IPR protection and enforcement, including through international legal instruments and mutual assistance agreements, as well as through government procurement processes, private-sector voluntary codes of best practices, and enhanced customs cooperation, while promoting the free flow of information". The statement also committed, in the interests of public health and consumer safety, to exchange information on rogue internet pharmacy sites in accordance with national law, and to share best practices on combating counterfeit medical products.

194. The United States and seven other WTO Members signed the ACTA on 1 October 2011.233 The ACTA aims to strengthen the international legal framework for combating commercial-scale counterfeiting and piracy. It calls for stronger legal frameworks, deeper international cooperation, and better enforcement practices. The U.S. authorities consider that the ACTA will help defend U.S. jobs in innovative and creative industries against IP theft.234 The U.S. authorities have noted that the ACTA is consistent with existing U.S. law and does not require the enactment of implementing legislation.235 The TRIPS Council discussed the ACTA at some of its recent meetings, when questions, answers, and divergent views were presented by Members236: the United States commented that "the effective enforcement of IPRs was critical to sustaining economic growth across all industries and globally."

195. The annual Special 301 Reports237 issued by the USTR in 2011 and 2012 continued to monitor developments concerning IP protection in U.S. trading partners, and cited the significance of IP protection for U.S. jobs and export performance. In both years, 77 trading partners were reviewed, and 42 (in 2011) and 40 (in 2012) were placed on one of the Special 301 lists (Priority Watch List, Watch List, or Section 306 monitoring list). Areas of particular concern included online copyright piracy, internet trading in physical counterfeit goods, test data protection, infringing goods sent by

231 White House (2010). 232 White House Press Release, "Statement by G-8 Leaders on the Global Economy", 19 May 2012.

Viewed at: http://www.whitehouse.gov/the-press-office/2012/05/19/statement-g-8-leaders-global-economy. 233 The ACTA was signed in Tokyo by Australia, Canada, Korea (Rep. of), Japan, New Zealand,

Morocco, Singapore, and the United States. 234 USTR online information, "Anti-Counterfeiting Trade Agreement (ACTA)". Viewed at:

http://www.ustr.gov/acta [May 2012]. 235 USTR online information, "ACTA: Meeting U.S. Objectives". Viewed at: http://www.ustr.gov/

about-us/press-office/fact-sheets/2011/september/acta-meeting-us-objectives [May 2012]. 236 WTO documents series IP/C/M/. 237 For details of the process, see USTR (2012a), Annex 1: Statutory Background on Special 301.

http://www.whitehouse.gov/the-press-office/2012/05/19/statement-g-8-leaders-global-economy

http://www.ustr.gov/acta


regular courier services, separate shipping of labels for counterfeit products, collection of royalties for performance of musical works, trade secret protection and "enforced technology transfer", government use of illegitimate software, and unauthorized registration of trademarks under country code top level domain name (ccTLD) extensions. The Special 301 process also focused on specific websites and physical markets concerns, which are considered particularly relevant for enforcement action. While USTR had identified such "notorious markets" in Special 301 Reports since 2006, in 2010 it announced that the Notorious Markets List would be published separately from the Special 301 Report, in order to increase public awareness and guide related trade enforcement actions. Such lists of notorious markets were published in February and December 2011.238 Special 301 Reports also described positive trends in a number of countries, outlined international cooperation and capacity building on enforcement, and identified international best practices among trading partners.

238 USTR (2011).



(1) AGRICULTURE

(i) Agriculture in the United States

1. The United States has one of the largest agriculture sectors in the world with a total value of production of US$372 billion in 2011. It is also the largest agriculture exporting country with exports of US$144.8 billion (WTO definition). Although agriculture represents less than 1% of GDP it is important to the economy generally as it represents 11% of total exports of goods (and 6% of imports) and in some States it is one of the main economic activities with net value added from agriculture equivalent to over 6% of GDP in Iowa, Nebraska, North Dakota, and South Dakota.

2. Over 2010-11, the value of agricultural production continued to increase, mainly due to higher prices, reaching US$272 billion in 2011. Although a wide variety of products are produced, a relatively small number make up over half of production, with maize and soybeans being the principal crops and milk, cattle, and poultry and eggs the main animal products (Table IV.1).

Table IV.1 Value of production, 2007-11 (US$ billion and %)

2007 2008 2009 2010 2011 % of total for most recent year data available

Total 311.3 318.3 284.5 334.9 372.3 100 Maize for grain 54.7 49.2 46.7 64.6 76.5 21 Soybeans for beans 27.0 29.5 32.1 37.5 35.8 10 Hay 16.8 18.6 14.7 14.7 17.7 5 Wheat 13.3 16.6 10.7 12.8 14.4 4 Cotton 5.7 3.0 3.9 7.3 7.3 2 Milk 35.7 35.1 24.5 31.5 39.7 11 Cattle and calves 36.0 35.6 32.0 37.0 45.2 12 Poultry and eggs 32.2 34.0 31.6 34.7 35.6 10

Source: USDA National Agricultural Statistics Service online information, "National Agricultural Statistics Service: Crop Values Annual Summaries". Viewed at: http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1050; USDA National Agricultural Statistics Service online information, "Quick Stats". Viewed at: http://quickstats.nass.usda.gov/, for cotton and milk; USDA National Agricultural Statistics Service (2011), 2011 Agricultural Statistics Annual. Viewed at: http://www.nass.usda.gov/Publications/Ag_Statistics/2011/index.asp, for cattle and calves; and USDA National Agricultural Statistics Service online information, "Poultry Production and Value 2012-2009". Viewed at http://usda.mannlib.cornell.edu/ MannUsda/viewDocumentInfo.do?documentID=1130 for poultry and eggs (includes broilers, eggs, turkeys, and other chickens).

3. The United States is one of the world's main producers of a number of agricultural products; it is the biggest producer of soybeans, maize, beef, chicken, and turkey, the second biggest producer of pig meat, and the third biggest producer of cotton and wheat.1 For many products, the United States exports a large portion of production (Table IV.2). At the same time, total world production and consumption of agricultural products are increasing faster than in the United States with the result that U.S. market share for many products is declining. For the main commodities, the principal exception for the decline in market share is beef, which has more than doubled its share of exports on the world market since 2006. This increase reflects the re-opening of major beef export markets that had been closed due to the discovery of BSE in December 2003, and the decline in per capita consumption of beef in the United States.

4. Due to its large share in world production, exports, and imports of agricultural products, developments in the United States, including changes to agricultural policies, have an impact on world markets and on agriculture in other countries. As the U.S. agriculture sector is highly

1 FAOStat database. Viewed at: http://faostat.fao.org/site/291/default.aspx [March 2012].

http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1050

http://quickstats.nass.usda.gov/

http://www.nass.usda.gov/Publications/Ag_Statistics/2011/index.asp


integrated into world markets, other countries' agricultural trade and production policies also affect U.S. agriculture.

Table IV.2 U.S. and world production and trade of selected commodities, 2006-11 ('000 tonnes, unless otherwise indicated)

Marketing year 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12

Maize Production United States 267,503 331,177 307,142 332,549 316,165 313,918 % of World 37.5 41.7 38.4 40.6 38.1 36.3 Exports United States 53,987 61,913 46,965 50,295 46,599 43,182

% of World 57.4 62.8 55.6 51.9 51.1 44.7 Wheat

Production United States 49,217 55,821 68,016 60,366 60,062 54,413 % of World 8.3 9.1 10.0 8.8 9.2 7.8 Exports United States 24,725 34,363 27,635 23,930 35,076 27,216

% of World 22.1 29.3 19.3 17.6 26.5 18.9 Cotton (480 lb bales)


% of World 34.5 34.9 43.6 33.8 39.9 27.7 Soybean, oilseed


% of World 42.7 40.2 45.3 43.9 44.1 39.4

Calendar year 2006 2007 2008 2009 2010 2011

Beef and veal Production United States 11,980 12,097 12,163 11,891 12,047 11,997 % of World 20.8 20.7 20.8 20.8 21.1 21.1 Exports United States 519 650 905 878 1,043 1,265

% of World 6.8 8.5 11.8 11.7 13.3 15.5 Poultry meat


% of World 35.9 36.3 37.5 37.4 34.7 33.9

Source: USDA Foreign Agricultural Service, Production, Supply and Distribution database. Viewed at: http://www.fas.usda.gov/psdonline/psdQuery.aspx [April 2012].

5. The total number of farms in the United States, having fallen for several decades, up to the late 1990s, have been increasing over the past ten years and there are now about 2.2 million. However, this increase is due to more small farms (less than 50 acres or 20 hectares), while consolidation of land and production has continued among larger farms. In 2007, 8% of farms were over 1,000 acres but represented 68% of all land in farms, while 2.5% of farms had sales of over US$1,000,000 but these farms represented 59% of total sales.2

6. The vast majority of farms in the United States are family farms and even among corporate farms the vast majority are family-held corporations. As in other developed countries, off-farm income is, in many cases, more important than earnings from farming activities but the opposite is true on the larger farms, where most production takes place. The agriculture sector varies considerably from one State to another with average farm size ranging from over 2,000 acres in Montana, New Mexico, and Wyoming to less than 100 acres in Connecticut, Massachusetts, New Jersey, and Rhode Island.3

2 USDA (2009). 3 U.S. Census Bureau (2012), Section 17, Agriculture.


7. The United States remains the biggest agriculture exporting country in the world and it has a large and growing agriculture trade surplus: between 2005 and 2011 exports of agriculture products (WTO definition) more than doubled while imports increased by about 60% (Chart IV.1). The increase in the value of exports over the past few years is a result of both increasing quantities exported and rising prices.

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Chart IV.1Exports and imports of agricultural products, 2002-11

Source: UNSD Comtrade database.

Exports

Imports

(US$ million)

8. Both exports and imports are broadly based with the top 10 products (HS 2002 four-digit4) representing just over half of total exports and one third of imports. As noted above, the structure of exports has changed somewhat over the past few years, as beef exports have increased considerably, although soybeans, maize, wheat, and cotton remain the main exports. There has been some change to the structure of imports, as imports of coffee and sugar have increased more rapidly than other imports (Table IV.3).

9. The main destinations for exports from the United States depend on the product: China is still the main market for U.S. exports of soybeans as it takes over three quarters of the US$17.6 billion soybean exports; exports of other agriculture goods are more widely dispersed, with Japan, Mexico, the Republic of Korea, and China being the main destinations for maize, and Japan, Nigeria, Mexico, and Egypt for wheat.

10. The main sources of imports also vary depending on the product: Brazil and Colombia are the main sources for imports of coffee; France, the United Kingdom, and Mexico for imports of distilled beverages (although the EU as a whole accounts for over 80% of imports); Italy, France, and Australia for wine (the EU accounts for nearly 70%); Mexico and the Netherlands for beer; and Canada, New Zealand, and Australia for meat of bovine animals.

4 Under the Harmonized System, at the four-digit level, beef is divided between fresh and chilled

(0201) and frozen (0202) while other meats are under single headings, such as meat of swine (0203), meat and edible offal of poultry (0207). For the purpose of showing the main imports and exports for the United States both fresh and chilled, and frozen exports have been shown as s single heading in Table IV.3.


Table IV.3 Exports and imports of selected products, 2005-11a

2005 2006 2007 2008 2009 2010 2011

Total exports US$ million 66,727 75,132 94,521 120,322 102,727 121,177 144,814

US$ million 6,324 6,923 10,016 15,537 16,476 18,586 17,564 1201 Soybeans '000 tonnes 25,658 28,120 29,840 51,278 40,506 42,351 34,311 US$ million 5,039 7,300 10,100 13,884 9,086 10,110 13,982 1005 Maize '000 tonnes 45,369 57,886 57,014 71,415 47,813 50,906 45,888 US$ million 4,382 4,230 8,345 11,306 5,380 6,751 11,135 1001 Wheat and meslin '000 tonnes 27,179 23,395 32,947 48,613 21,942 27,629 32,790 US$ million 3,924 4,503 4,580 4,832 3,387 5,748 8,425 5201 Cotton '000 tonnes 3,400 3,508 3,259 3,798 2,553 2,962 2,774 US$ million 2,507 2,625 2,776 3,121 3,467 4,164 5,002 0802 Other nuts, fresh or

dried '000 tonnes 562 589 637 608 920 933 1,043 US$ million 2,063 2,222 2,488 3,789 3,181 3,531 4,687 0203b Meat of swine '000 tonnes 820 907 966 1,530 1,255 1,241 1,548 US$ million 2,469 2,238 3,260 4,158 3,851 3,825 4,504 0207b Meat and edible offal

poultry '000 tonnes 2,727 2,814 3,264 3,047 3,738 3,544 3,747 US$ million 2,592 3,007 2,974 3,367 3,345 3,686 4,286 2106 Food preparations not

elsewhere specified '000 tonnes 532 576 610 806 663 725 806 US$ million 141 109 396 413 282 915 3,316 2207 Undenatured ethyl

alcohol 80% or higher; other denatured spirits

'000 tonnes 167 155 628 - 245 894 3,023

US$ million 1,131 1,289 1,685 2,598 3,003 3,103 2,702 2304 Oil-cake and solid residues, from extraction of soybean oil

'000 tonnes 5,068 5,976 6,408 11,496 7,678 8,355 6,701

US$ million 848 1,429 1,897 2,697 2,485 3,397 4,571 0201 + 0202b

Meat of bovine animals fresh and frozen

'000 tonnes 206 353 440 271 587 727 884

Total imports US$ million 65,839 73,547 80,352 88,246 79,603 88,821 105,520 US$ million 2,895 3,220 3,648 4,257 3,872 4,696 7,844 0901 Coffee '000 tonnes 1,261 1,321 1,356 1,586 1,306 1,344 166 US$ million 4,487 5,042 5,677 5,615 5,145 5,742 6,399 2208 Spirits, liqueurs and

other spirituous beverages

'000 tonnes 1,300 512 543 - 707 1,288 210

US$ million 3,945 4,370 4,856 4,841 4,190 4,462 5,047 2204 Wine of fresh grapes '000 tonnes 1,527 782 845 - 927 938 421 US$ million 3,343 3,880 3,928 3,942 3,564 3,748 3,796 2203 Beer made from malt '000 tonnes 3,941 3,438 3,485 4,372 3,037 3,185 363 US$ million 1,945 2,188 2,369 2,544 2,525 2,828 3,157 1905 Bread, pastry, cakes,

biscuits and other bakers' wares

'000 tonnes 759 803 829 824 817 900 531

US$ million 3,436 2,915 2,949 2,750 2,471 2,705 2,927 0201 + 0202b

Meat of bovine animals fresh and frozen

'000 tonnes 1,077 903 892 636 796 735 656

US$ million 926 1,452 917 1,224 1,275 2,084 2,912 1701 Sugar and chemically pure sucrose, in solid form

'000 tonnes 2,088 2,919 1,948 2,466 2,511 2,917 353

US$ million 1,372 1,471 1,525 1,685 1,899 2,126 2,327 0803 Bananas '000 tonnes 4,089 4,088 4,261 2,532 3,853 4,382 516 US$ million 1,126 1,301 1,283 1,501 1,471 1,880 2,220 0702 Tomatoes, fresh or

chilled '000 tonnes 952 992 1,071 903 1,190 1,532 208 US$ million 1,529 1,680 1,760 1,796 1,721 2,188 2,209 0709 Other vegetables,

fresh or chilled '000 tonnes 1,176 1,254 1,326 778 1,422 1,651 511

a Trade volumes in this table are derived from the UNSD Comtrade database and differ from those in Table IV.2, which are taken from USDA Foreign Agriculture Service, Production, Supply, and Distribution database.

b HS headings 0201 (meat of bovine animals, fresh and chilled) and 0202 (meat of bovine animals, frozen) have been added together so that trade in meat of bovine animals is comparable to HS headings 0203 (meat of swine) and 0207 (meat and edible offal of poultry), which both include fresh, chilled, and frozen meat under the same HS heading.

Source: UNSD Comtrade database.


(ii) Agriculture policies

11. There have been no major changes to agriculture policies in the United States since the last Trade Policy Review.5 The Food, Conservation, and Energy Act of 2008 remains the basis for most agricultural programmes and will remain so until it expires. Some of the provisions of the 2008 Act expire on 30 September 2012, others on 31 December 2012, and others in 2013 at the end of the 2012 crop year. Should the 2008 Act expire without enactment of successor legislation or a temporary extension, farm programmes will revert to the permanent legislation, most of which is in the Agricultural Adjustment Act of 1938, the Agriculture Act of 1949, and the Commodity Credit Corporation Charter Act of 1948.

(a) Trade6

Imports

12. The average tariff on imports of agricultural products (WTO definition) into the United States in 2012 was 8.5%, slightly down on the level of two years previously due to increasing commodity prices, which led to lower ad valorem equivalents for tariff lines with specific or compound duties. This average is low compared with some other WTO Members and, furthermore, is somewhat over-stated because the United States charges tariffs on the f.o.b. value rather than the c.i.f. value. Tariff rates vary considerably from one tariff line to another and range from zero, for 620 tariff lines, up to 350%, for some tobacco products. The highest tariffs are on tobacco, sugar, peanuts, and dairy products, followed by beef, cotton, and certain horticultural products (such as mushrooms).

13. As reported in its last Review, the United States notifies the Committee on Agriculture of 44 tariff quotas covering 171 tariff lines, mostly for dairy products, sugar products, products containing sugar and/or dairy ingredients and cotton.7 The most recent notification is for 2010 and 2011.8 Fill-rates vary significantly from one quota to another and have been particularly low for cotton and high for some dairy and sugar products.

14. The United States has reserved the right to use the Special Agricultural Safeguard (SSG) on 189 tariff lines, mostly dairy products, sugar products, products containing sugar and/or dairy ingredients, and cotton. The volume-based SSG was last used in 2003. However, the price-based safeguard has been applied more frequently. It was used on 48 tariff lines in 2010, and 59 lines in 2009.9 Whenever an importer declares a price for out-of-quota imports that is below the level where the SSG is applicable, the additional duty is automatically applied. Hence, in many cases the SSG is applied to small quantities such as 4 kg of fresh cheddar cheese or 3 kg of chocolate bars.

Exports

15. The Commodity Credit Corporation (CCC) provides funding for a number of programmes that support exports of agricultural goods from the United States.

16. The Export Credit Guarantee Program (GSM-102) is administered by the Foreign Agricultural Service in conjunction with the Farm Services Agency of USDA. Under the Program, the CCC may provide guarantees for credits from private U.S. banks to approved foreign banks for

5 WTO document WT/TPR/S/235/Rev.1, 29 October 2010. 6 SPS measures are discussed in Chapter III(1)(ix). 7 WTO document WT/TPR/S/235/Rev.1, 29 October 2010. 8 WTO document G/AG/N/USA/85, 27 June 2012. 9 WTO documents G/AG/N/USA/74, 16 August 2010; and G/AG/N/USA/81, 29 August 2011.


the purchase of agricultural products by foreign buyers. Currently, no funding is provided to GSM-102 as fees and recoveries on default claim payments exceed losses. For the year ending 30 September 2011, the Export Credit Guarantee Program registered guarantees stood at US$4.1 billion, mostly for exports of wheat, maize, soybeans and soybean products, and cotton.10

17. The CCC also has authority to make funding available under the Facility Guarantee Program, for storage, handling, and processing facilities in importing countries on the grounds that these guarantees improve sales of U.S. agricultural products. However, this programme is not currently active.

18. The FAS also administers a number of programmes to promote exports, such as: the Quality Samples Program (through which the CCC funds the provision of product samples to foreign importers); the Market Access Program (the CCC provides funding for some of the costs of marketing and promotional exercises abroad); the Emerging Markets Program (for technical assistance activities that promote exports, such as feasibility studies and specialized training); the Foreign Market Development (Cooperator) Program; and the Technical Assistance for Speciality Crops Program. Total funding available for these programmes for FY 2012 was US$255 million.11

19. Under the Dairy Export Incentive Program (DEIP) the CCC may provide subsidies (bonuses) for exports of some dairy products. According to the most recent notification to the WTO Committee on Agriculture, the budgetary outlay for export subsidies under the DEIP in the year ending 30 June 2010 was US$2.1 million for 15,607 tonnes of butter and butteroil and US$0.2 million for 1,691 tonnes of cheese.12 In July 2010, the USDA announced that, due to prevailing market conditions, it would not be making invitations for offers available but it would continue to monitor market conditions.13

(b) Food aid

20. The United States is the world's biggest donor of food aid, delivering over half of total food aid in most years (3.2 million tonnes grain equivalent, nearly 56% of total aid in 2010). About two thirds of aid is for emergencies, a bit less than one third for project aid, and a relatively small amount for programme aid. Since 2006, the structure of aid has changed noticeably as direct transfers have declined while local purchases and triangular purchases have increased (Table IV.4).14 Furthermore, since 2006, new funding has not been provided for concessional sales as demand has declined and the grant programmes have been considered more appropriate ways to provide aid.15

21. Most food aid is provided under Title II of the Food for Peace Act of 2008 (commonly referred to as P.L. 480) with outlays of about US$1.5 billion in 2011. The McGovern-Dole International Food for Education and Child Nutrition Program, and the Food for Progress Act of 1985 also remain in force, with outlays of about US$205 million and US$162 million, respectively,

10 USDA FAS online information, "Export Credit Guarantee Programs". Viewed at:

http://www.fas.usda.gov/excredits/ecgp.asp [May 2012]. 11 USDA (2012), pp. 35-36. 12 WTO document G/AG/N/USA/82, 13 September 2011. 13 USDA FAS Press Release 0161-10, "USDA Announces DEIP Allocations for 2010/11",

14 July 2010. Viewed at: http://www.fas.usda.gov/excredits/deip/deip.asp [May 2012]. 14 WFP Food Aid Information System database. Viewed at: http://www.wfp.org/fais/ [May 2012]. 15 House Committee on Agriculture online information, "Submission to House of Representatives

Agricultural Program Audit: Examination of Foreign Agriculture and Food Aid Programs". Viewed at: http://agriculture.house.gov/hearings/hearingDetails.aspx?NewsID=1415 [May 2012].


in 2011. The Bill Emerson Humanitarian Trust is a reserve available to meet unanticipated food aid needs. It currently holds about US$311 million in cash reserves and no physical reserves.16

Table IV.4 Deliveries of food aid from the United States, 2006-10 (Tonnes)

2006 2007 2008 2009 2010

Direct transfer 3,496,411 2,574,291 3,162,721 2,665,609 1,575,620 Local purchase 48,393 36,108 100,627 111,175 343,625 Triangular purchase 12,961 10,408 68,655 460,349 1,258,961

Source: WFP Food Aid Information System database. Viewed at: http://www.wfp.org/fais/ [May 2012].

(c) Domestic support

Domestic food aid

22. For many years, the largest budgetary outlays for programmes operated by the USDA have been under the Supplemental Nutrition Assistance Program (SNAP, formerly called the Food Stamp Program). Outlays for SNAP and other domestic food-aid programmes have been increasing steadily over the past few years, rising from US$45.9 billion in FY 2004 to US$94.9 billion in FY 2010. Most of these funds go towards providing vouchers for purchases of food in retail outlets (including imported as well as domestic products) by people and families with low incomes. About US$0.9 billion is expended for purchase of commodities through the Food and Consumer Services' food programmes for distribution to low-income or other needy people.17

Direct payments

23. Over the past few years, most support to producers has been provided through direct payments that are linked to historic planting and yields. Producers with eligible historical production of wheat, maize, sorghum, barley, oats, rice, soybeans and other oilseeds, upland cotton, and peanuts during the base period are eligible for direct payments. Payments are not linked to production or prices, except for some limits to planting fruits, vegetables, and wild rice, although a pilot project has been developed to allow planting of selected vegetables for processing in seven States for the 2009-12 crop years.18 Since they were introduced in the 2002 Farm Bill, support to producers provided through direct payments has been relatively constant, averaging about US$5 billion per year.19

Counter-cyclical payments

24. The counter-cyclical payments programme remains in place and provides for payments to producers with historical production of the same products as direct payments plus some pulses. Payments are linked to current prices but not to current production, and the target prices used to calculate when payments start are set out in the 2008 Farm Bill.20 In recent years, prices for most of

16 USDA (2012), pp. 34-38. 17 WTO document G/AG/N/USA/80, 20 August 2011; and U.S. authorities. 18 7 USC 8701, Sec 1107, PL 110-246; and USDA ERS online information, "Farm and Commodity

Policy: Program Provisions; Direct Payments". Viewed at: http://www.ers.usda.gov/briefing/farmpolicy/ directpayments.htm [April 2012].

19 USDA ERS (2011), p. 17. 20 7 USC 8701, Sec 1104, PL 110-246; and USDA ERS online information, "Farm and Commodity

Policy: Program Provisions: Counter-Cyclical Payments". Viewed at: http://www.ers.usda.gov/briefing/ farmpolicy/countercyclicalpay.htm [May 2012].


the covered commodities have been above target prices and counter-cyclical payments have fallen from a peak of nearly US$4.8 billion in crop year 2005 to US$17 million (peanuts only) in CY 2010 and no payments anticipated for CY 2011.21 Farmers with base acres for peanuts and upland cotton have been the most consistent recipients of counter-cyclical payments, while those with base acres for wheat and soybeans have never received any payments since they were introduced in the 2002 Farm Bill.

Marketing assistance loans and loan deficiency payments

25. Marketing assistance loans and loan deficiency payments also remain in place with no changes to the provisions that compensate producers of the commodities covered22 whenever local prices (or, for cotton and rice, adjusted world prices) fall below the loan rates set out in the 2008 Farm Bill.23 Under the marketing assistance loans and loan deficiency payments programme, the support may be provided:

by way of a post-harvest loan to the producer at the loan rate for the particular commodity, which may be repaid either at the loan rate plus interest, by transferring ownership of the product to the Commodity Credit Corporation, or by receiving a benefit equal to the difference between the loan and the market price (a marketing loan gain);

through a loan deficiency payment equal to the difference between the loan rate and the local market price (except for cotton and rice for which adjusted world prices are used instead of local prices) for each unit of production; or

up until the 2008 crop year, a producer also had the option of buying a commodity certificate from the USDA, which essentially fixed the marketing loan gain at the difference between the market price (or adjusted world price) and the loan rate for each unit of production. Certificate exchange gains were realized at the end of the loan period.24, 25

26. Like counter-cyclical payments, budgetary outlays for loan deficiency payments, marketing loan gains, and certificate exchange gains have fallen as prices have increased, and were about US$1 million (wool only) for crop year 2011.

ACRE programme

27. The ACRE programme remains in operation as an alternative to counter-cyclical payments for producers of cereals, oilseeds, upland cotton, peanuts, and some pulse crops. Under the programme, producers may opt to forgo counter-cyclical payments and accept a 20% reduction in direct payments and a 30% reduction in loan rates in return for payments based on the difference

21 USDA FSA (2012). 22 Wheat, maize, grain sorghum, barley, oats, upland cotton, extra-long staple cotton, rice, peanuts,

soybeans, other oilseeds, dry peas, lentils, chickpeas, wool, mohair, and honey. 23 For most commodities, local prices are used for the loan repayment rates, except for cotton and rice

where adjusted world prices are used. 24 Loan periods may start at any time between harvest and: 31 January for mohair, peanuts, and wool;

31 March for barley, canola, crambe, flaxseed, honey, oats, rapeseed, sesame, and wheat; and 31 May for maize, dry peas, extra-long staple cotton, grain sorghum, lentils, mustard seed, rice, safflower, small chickpeas, soybeans, sunflower seeds, and upland cotton. The loan period is up to nine months starting at the beginning of the month after the loan is made.

25 7 USC 8701, Sec 1201-1210, 1301-1308, and 1401, PL 110-246; and USDA ERS online information, "Farm and Commodity Policy: Program Provisions; Marketing Assistance Loans and Loan Deficiency Payments". Viewed at: http://www.ers.usda.gov/briefing/farmpolicy/malp.htm [May 2012].


between annual State and farm-level revenues for the commodities covered, and State and farm-level benchmark revenues, both calculated using national prices and State and farm-level yields. The benchmark revenues are calculated using a two-year rolling average of national market prices and a five-year "Olympic" average for State and farm-level yield. Enrolment in ACRE has not increased significantly over the past few years: in 2011, 8.2% of farms were enrolled covering 13.8% of base acres compared to 7.8% of farms and 13.0% of base acres in 2009.26

Insurance programmes

28. Insurance coverage is available for over 100 different crops under a wide variety of insurance policies covering production, price and/or revenue risks, under the Federal Crop Insurance Program. Insurance coverage is provided by the private sector at subsidized rates under terms set by the Federal Crop Insurance Corporation and administered by the USDA Risk Management Agency (RMA). Most of the policies available from the RMA are for crops, although livestock policies are available for cattle, pigs, lambs, and milk to insure against declining prices or differences between sale price and feed costs, and policies are available for forage, grazing, and rangelands. The subsidies provided by USDA are on producer premiums paid to private insurance companies for providing the insurance policies, as well as on a portion of the companies' operating costs and underwriting losses. The premium subsidy to producers was US$4.7 billion in CY 2010 and is expected to be about US$7.2 billion for CY 2011.27 The value of crops protected by insurance also increased, from US$67 billion in 2007 to $114 billion in 2011, representing about 80% of area planted to principal crops.28

29. The Supplemental Revenue Assurance Program (SURE) is the largest of five disaster assistance measures financed by the Agricultural Disaster Relief Trust Fund, although it does not cover losses incurred after 30 September 2011. SURE provided assistance to crop producers in counties designated by the Secretary of Agriculture as suffering from a disaster, as well as other counties bordering those directly affected by the event and other counties where losses caused by the weather exceed 50% of revenue. The other four disaster assistance measures cover producers of livestock, livestock forage, trees and nurseries, and honey bees and farm-raised fish. These programmes also do not cover losses incurred after 30 September 2011. Payments under SURE and the other disaster programmes were US$1.9 billion in fiscal year 2010 and are estimated at US$2.2 billion for FY 2011.29

Sugar

30. Sugar processors qualify for marketing loans (without provisions for marketing loan gains or loan deficiency payments), and production is supported by other schemes. The sugar programme "uses price supports, domestic marketing allotments, and tariff-rate quotas (TRQs) to influence the amount of sugar available to the U.S. market. The program supports U.S. sugar prices above comparable levels in the world market."30 Under the marketing loan programme, sugar processors rather than producers may take out loans and they agree to pay the producers at a rate proportional to the loan. To prevent sugar being transferred to the CCC to settle a marketing assistance loan, an

26 USDA FSA online information, "Direct and Counter-Cyclical Program/ACRE". Viewed at:

http://www.fsa.usda.gov/FSA/webapp?area=home&subject=dccp&topic=09cy [May 2012]. 27 USDA Risk Management Agency online information "Costs and Outlays". Viewed at:

http://www.rma.usda.gov/aboutrma/budget/cycost2002-11.pdf [July 2012]. 28 USDA (2012), pp. 30-31. 29 USDA (2012), p. 26. 30 USDA ERS online information, "Sugar and Sweeteners: Policy". Viewed at:

http://www.ers.usda.gov/Briefing/Sugar/Policy.htm [May 2012].


overall allotment quantity is applied, to limit marketing, along with other provisions designed to manage domestic supply commensurate with domestic demand.

Dairy

31. Federal milk marketing orders (FMMOs) set minimum prices that processors or manufacturers are required to pay for fluid milk in the ten regions covered by the system; five other States operate similar systems. The two main elements to the FMMO system are classified pricing, and revenue pooling. Under the federal and some State milk marketing orders, regulated processors must pay a minimum price for Grade A milk according to the class in which it is used. There are four classes (uses): Class I is milk used in all beverage milks; Class II is milk used in fluid cream products, yogurts, or perishable manufactured products (ice cream, cottage cheese, and others); Class III is milk used to produce cheeses; and Class IV for milk used to produce butter and dried milk.

32. Producers participating in the revenue pool receive identical uniform blend prices, with adjustments for butterfat content and location of the plant to which the milk is delivered. Producers are paid a weighted average, or "blend" price for all uses of milk in a particular order or market. Processors pay into or draw out of the pool on the basis of their milk used relative to market average use.

33. Dairy producers also receive direct payments under the Milk Income Loss Contract (MILC) programme which partially compensates producers when the Class I price in the Boston MMO for fluid milk falls below US$16.94 per hundredweight (US$372.53 per tonne), with adjustments for feed costs. Due to the counter-cyclical nature of the programme, spending depends on the FMMO price and feed costs; it reached a high of US$757 million in MY 2007/0831, and is expected to be less than US$1 million in MY2010/11. In addition to marketing orders and the MILC programme, dairy producers benefit from the Dairy Product Price Support Program (DPPSP), which offers to purchase cheddar cheese, butter, and non-fat dried milk at a guaranteed price. Significant purchases under the DPPSP were last made in 2009.

Other programmes

34. Other domestic support programmes remain in place, including energy programmes (such as the Biomass Crop Assistance Program), credit programmes for loans to farmers, and marketing orders for some horticultural products.32

(iii) Levels of support

(a) WTO notifications

35. The most recent notification of domestic support from the United States is for marketing year 2009.33 This showed that support notified under the Green Box has continued to increase compared with earlier years as domestic food aid, general services, and environmental programmes increased. Domestic food aid is by far the biggest item, taking over three quarters of support notified as Green Box (Chart IV.2).

31 WTO document G/AG/N/USA/77/Rev.1, 29 August 2011. 32 WTO document WT/TPR/S/235/Rev.1, 29 October 2010, pp. 87-89. 33 WTO document G/AG/N/USA/80, 29 August 2011.


0

20,000

40,000

60,000

80,000

100,000

120,000

2001 2002 2003 2004 2005 2006 2007 2008 2009

Chart IV.2Green Box support in the United States, 2001-09

Source: WTO notifications.

(US$ million)

General services

Domestic food aid

Decoupled income support

Payments for relief from natural disasters

Structural adjustment

Environmental programs

36. The Current Total AMS in the U.S. notifications has continued to decline, falling below US$5 billion for the first time in 2009. However, total support notified under the Amber Box (i.e. including de minimis levels) has increased since 2007, rising from US$8.5 billion to US$11.5 billion in 2009. This is due to an increase in support notified as non-product-specific and that has been less than the de minimis limit of 5% of the value of production, and, therefore, is not included in the Current Total AMS figure.

37. High prices have reduced budgetary outlays under marketing assistance loans and loan deficiency payments, and counter-cyclical payments. Spending on these programmes is directly related to market prices and relatively high market prices have greatly reduced spending. On the other hand, support under crop insurance has remained high because premiums (and, therefore, premium subsidies) are tied to prices, which have been high. Support for sugar has remained constant at about US$1.2 billion while support for dairy declined to about US$3 billion (Chart IV.3).34 The high level of support for these two commodities reflects the market-price support programmes in place and the methodology used to calculate the value of support compared with that used for other commodities.35

34 WTO documents G/AG/N/USA/80 and G/AG/N/USA, 29 August 2011; G/AG/N/USA/77/Rev.1,

29 August 2011; G/AG/N/USA/66, 19 January 2009; and G/AG/N/USA/60/Rev.1 and G/AG/N/USA/51/Rev.1, 28 January 2009.

35 WTO document WT/TPR/S/235/Rev.1, 29 October 2010, p. 91.


0

5,000

10,000

15,000

20,000

25,000

30,000

2001 2002 2003 2004 2005 2006 2007 2008 2009

Chart IV.3Amber Box support in the United States, 2001-09

Source: WTO notifications.

(US$ million)

Non product-specific

Dairy

Sugar

Wheat

Soybeans

Livestock and livestock products

Cotton

Maize

Rice

Other

(b) Producer support estimates

38. The OECD has been publishing reviews of agriculture policies in the United States, other OECD countries, and some emerging economies for several years.36 In these publications, the value of transfers to agricultural producers is measured using the Producer Support Estimate (PSE) and associated indicators. The methodology for calculating these indicators is different from that used to calculate the AMS, and the two sets of data are not compatible or comparable. The methodology used by the OECD is evolving and was revised for the 2007 Monitoring and Evaluation report, resulting in several changes, including the method used to estimate support for specific commodities.37 The total PSE is "the annual monetary value of gross transfers from consumers and taxpayers to agricultural producers, measured at the farm gate level, arising from policy measures that support agriculture, regardless of their nature, objectives or impacts on farm production or income. It includes market price support, budgetary payments and budget revenue foregone, i.e. gross transfers from consumers and taxpayers to agricultural producers arising from policy measures based on: current output, input use, area planted/animal numbers/receipts/incomes (current, non-current), and non-commodity criteria." Thus, the PSE includes estimates for the value of transfers provided by market access measures, such as tariffs and tariff quotas, as well as input subsides, direct payments to producers that are coupled to prices or production, and direct payments decoupled from prices and production.38

39. The trend for the PSE for the United States has been declining, in both absolute terms and relative to gross receipts since 1999, when it was 26% of gross receipts (US$55.7 billion), to 7% of

36 OECD (2011) and (2009a). 37 OECD (2007). 38 OECD (2011).


gross receipts (US$25.6 billion) in 2010 (Table IV.5). A large part of the decline can be attributed to rising prices for agricultural commodities, which have reduced budgetary outlays for some commodities (mostly cereals), and the value of market price support measures for others (mainly sugar and dairy products). At 7% of total receipts from farming, the PSE in the United States is low compared with the OECD as a whole for which it is 18%. However, given the large size of the agriculture sector the absolute amount represents 11% of the total PSE for the OECD as a whole.

Table IV.5 Total producer support estimate and single commodity transfer values for selected commodities, 2002-10 (US$ million or % of gross farm receipts for respective products)

2002 2003 2004 2005 2006 2007 2008 2009 2010

Producer support estimate US$ million 40,332 36,167 43,254 40,626 30,496 33,174 30,477 31,423 25,551 PSE as % gross farm receipts 18 15 16 15 11 10 9 10 7 Single commodity transfers Wheat

US$ million 708 273 353 124 544 493 940 1,521 809 SCT as % gross farm receipts 11 3 5 2 7 4 5 12 6

Maize US$ million 1,464 908 316 2,952 4,443 138 -246 2,147 2,168 SCT as % gross farm receipts 7 4 1 11 17 0 0 4 4

Soybeans US$ million 302 567 517 -87 -77 152 1,483 1,198 1,074 SCT as % gross farm receipts 2 3 3 -1 0 1 5 4 3

Cotton US$ million 1,709 848 2,381 1,741 1,772 207 1,313 252 343 SCT as % gross farm receipts 34 14 35 25 26 4 30 6 5

Milk US$ million 8,229 7,226 7,619 5,122 3,257 8,881 8 3,353 568 SCT as % gross farm receipts 40 31 28 19 14 25 0 13 2

Beef and veal US$ million 131 0 0 0 0 0 0 0 0 SCT as % gross farm receipts 0 0 0 0 0 0 0 0 0

Refined sugar US$ million 1,185 1,327 1,053 896 519 775 562 481 746 SCT as % gross farm receipts 53 60 54 44 21 35 26 19 28

Source: OECD.

40. Although the trend in support for agricultural producers in the United States has been downwards for several years this is not due to a change in agricultural policies but to rising prices, which have reduced price- and revenue-linked payments. These policies continue to offer producers of some commodities guaranteed minimum prices and/or partial compensation should prices or revenues fall below mandated triggers. In addition, there has been an increase in support for insurance, which is notified as non-product-specific support in the notifications to the Committee on Agriculture.

(2) FISHERIES

(i) Fisheries in the United States

41. In 2009, the seafood industry (harvesting, processing, wholesale, and retail) accounted for 0.3% of GDP in the United States. Nevertheless, the United States has one of the biggest fisheries sectors in the world: according to the FAO, in 2010 the capture industry took 4.4 million tonnes or nearly 5% of total world catch, putting the United States fourth after China, Peru, and Indonesia.39

39 FAO Fisheries and Aquaculture Information and Statistics Service database. Viewed at:

http://www.fao.org/fishery/statistics/en [March 2012].


42. National data differs from FAO data, although both show similar trends. According to the National Oceanic and Atmospheric Administration (NOAA), total commercial landings in 2010 were 3.7 million tonnes valued at US$4,511 million. Although total commercial landings have been declining in terms of weight, their value has increased as a result of higher prices (Table IV.6).

43. Commercial landings cover a wide range of fish and other products. In value terms, the most important are sea scallops, followed by American lobster, walleye pollock, and sockeye salmon, but together they make up only about one third of the total value of commercial landings (Table IV.6).

Table IV.6 Commercial landings of selected species, 2002-10

2002 2003 2004 2005 2006 2007 2008 2009 2010

'0000 tonnes 4,280 4,312 4,395 4,406 4,302 4,223 3,791 3,656 3,742 Total commercial landings US$ million 3,164 3,346 3,770 3,953 4,041 4,204 4,394 3,927 4,511

'000 tonnes 24 25 29 26 27 27 24 26 26 Scallop, sea US$ million 202 229 320 433 385 386 370 376 456

'000 tonnes 38 33 41 40 42 37 40 46 53 Lobster, American US$ million 294 284 374 415 395 368 327 310 399

'000 tonnes 1,516 1,525 1,521 1,547 1,543 1,391 1,032 846 883 Pollock, Walleye US$ million 204 203 272 307 330 297 323 271 282

'000 tonnes 116 152 135 224 101 208 118 133 169 Salmon, Pink US$ million 18 25 31 49 28 70 74 66 127

'000 tonnes 62 84 115 120 108 125 102 116 115 Salmon, Sockeye US$ million 77 110 157 187 159 205 176 204 279

'000 tonnes 37 36 36 35 33 32 30 27 26 Halibut, Pacific US$ million 137 173 177 177 202 227 217 140 207

'000 tonnes 77 75 77 70 74 70 73 79 89 Crab, Blue US$ million 129 133 129 124 114 142 155 157 199

'000 tonnes 44 48 57 50 67 52 50 57 48 Shrimp, White US$ million 182 163 203 193 216 204 228 178 201

Source: NOAA Fisheries Service database. Viewed at: http://www.st.nmfs.noaa.gov/st1/commercial/index.html [March 2012].

44. The importance of fishing varies considerably from one State to another and is particularly important in Alaska, which accounted for over one third of the value of commercial landings in 2010. However, the only States in which landings are the equivalent of more than 0.5% of that State's GDP, are Maine (0.7%) and Alaska (3.3%).40

45. In 2008, the United States had 20,231 commercial fishing and processing vessels in service with valid certificates of documentation from the United States Coast Guard (USCG), and a total of 77,816 commercial fishing vessels.41 Reflecting the great variety of species caught, the fishing fleet is diverse in terms of both the size of vessels and the equipment used.

46. The Exclusive Economic Zone (EEZ) of the United States is the largest in the world and covers an area 1.7 times the U.S. landmass. The EEZ covers the area between 3 and 200 nautical miles seaward for nearly all coastal States and other territories under U.S. jurisdiction, except for Texas and the Gulf Coast of Florida where the EEZ extends from 9 to 200 nautical miles off-shore, and Puerto Rico where it is from 12 to 200 nautical miles off-shore.42 The EEZ covers about eight

40 WTO Secretariat calculations, based on the value of landings by State (NOAA Fisheries, Office of

Science and Technology online information, "Fisheries Statistics". Viewed at: http://www.st.nmfs.noaa.gov/ st1/commercial/index.html), and GDP by State (Bureau of Economic Analysis online information, "U.S. Economic Accounts: Regional". Viewed at: http://www.bea.gov/index.htm) [July 2012].

41 National Transportation Safety Board (2010). 42 NMFS (2009), p. 4.


large ecosystems, including those around U.S. overseas territories in the Caribbean and the Pacific. These fishing regions cover several climatic zones and many types of fish and other sea products.

47. Inland fisheries are much smaller than marine fishing and mostly comprise landings from the Great Lakes and Mississippi River basin. Total commercial landings for the Great Lakes were 8,725 tonnes in 2009, valued at US$18 million.43 However, most of the landings and economic benefits in the Great Lakes are from recreational rather than commercial fishing.44 The aquaculture subsector is small compared with the capture industry, with production valued at US$1,167 million in 2009. Catfish and crawfish are the main products.45

48. Recreational fishing is popular in the United States. In 2009, there were about 11 million recreational anglers who spent US$4.5 billion on fishing trips and US$15 billion on durable fishing-related equipment. The most commonly caught species were seatrout, Atlantic croaker and spot, summer flounder, and striped bass.46 The total harvest for recreational fishing has been falling for several years from a peak in 2003 when 210 million fish were taken compared with 128 million in 2011.47

49. Fish processing (of both domestic catch and imported products) was valued at over US$9,021 million in 2010, nearly all of which was edible fish, with only 6% going for industrial use (including bait and animal food). In 2009, processing and wholesale plants employed a total of 59,389 people.48

(ii) Trade

50. The United States has a trade deficit in fish and fish products as, in 2010, it exported US$4,753 million and imported US$15,502 million.49 Imports have grown strongly over the past few years, apart from a decline in 2009 compared with 2008. Shrimps and fish fillets make up over half of all imports with import growth particularly strong for frozen fish fillets, tuna, and Pacific salmon. The main sources of imports are: Thailand, Indonesia, Ecuador, and Viet Nam for shrimps; Chile, Norway, and Canada for fresh fillets; and China, Indonesia, and Viet Nam for frozen fillets.

51. Exports have increased steadily over the past few years and are much more diverse than imports; the top nine products (at HS 2002 six-digit level) make up just over half of total fish exports. The main exports are frozen fish fillets but export growth has been particularly strong for Pacific and sockeye salmon (Table IV.7). The main destinations for the principal exports are the European Union and Canada with considerable quantities sent to China for processing.

43 NOAA Fisheries Service database. Viewed at: http://www.st.nmfs.noaa.gov/st1/commercial/

index.html [March 2012]. 44 FAO (2005). 45 NMFS (2011b). 46 NMFS (2011a), p. 8. 47 NOAA Fisheries Service online information, "Recreational Fisheries Statistics Queries". Viewed at:

http://www.st.nmfs.noaa.gov/st1/recreational/queries/index.html [March 2012]. 48 NMFS (2011b). 49 For the purposes of this section of the Review, fish products are defined as HS Headings 020840, 03,

051191, 1504, 1603, 1604, 1605, and 230120.


Table IV.7 Trade in fish and fisheries products, 2004-10

HS 2002 Description 2004 2005 2006 2007 2008 2009 2010

Exports US$ million 293 270 347 424 466 466 445 030420 Fish fillets, frozen '000 tonnes 125 105 111 133 115 132 126 US$ million 375 468 428 345 306 258 350 030490 Fish meat other

than fillets, frozen '000 tonnes 233 224 207 165 110 101 126 US$ million 300 322 333 329 321 290 345 030622 Lobsters, other

than frozen '000 tonnes 25 24 27 25 16 22 30 US$ million 115 173 199 247 224 218 296 030319 Pacific salmon,

frozen '000 tonnes 50 74 72 90 69 80 97 US$ million 411 463 464 450 370 269 256 030380 Fish livers and

roes, frozen '000 tonnes 46 50 51 57 58 30 27 US$ million 315 344 354 240 206 223 229 030379 Fish, n.e.s., frozen '000 tonnes 141 127 130 90 130 83 93

Total exports US$ million 3,894 4,277 4,448 4,482 4,510 4,204 4,753

Imports US$ million 2,953 2,920 3,124 3,104 3,289 2,896 3,379 030613 Shrimps and

prawns, frozen '000 tonnes 396 396 418 415 429 407 415 US$ million 1,588 1,777 2,093 2,308 2,391 2,441 2,787 030420 Fish fillets, frozen '000 tonnes 391 422 461 482 451 498 540 US$ million 950 1,054 1,139 1,281 1,312 1,166 1,176 030410 Fish fillets, fresh '000 tonnes 145 149 131 150 151 123 111 US$ million 864 892 1,165 963 981 1,027 1,074 160520 Shrimps and

prawns, prepared '000 tonnes 122 136 173 143 144 144 144 US$ million 655 710 734 703 877 798 951 160414 Tunas, skipjack,

bonito, prepared '000 tonnes 248 254 241 218 261 231 267 US$ million 303 365 490 536 529 590 668 030212 Pacific salmon '000 tonnes 62 72 86 87 88 93 99

Total imports US$ million 11,972 12,776 14,070 14,451 14,968 13,869 15,502

Source: UNSD Comtrade.

(iii) Fisheries policy

52. The National Oceanic and Atmospheric Administration (NOAA) of the Department of Commerce is responsible for fisheries policy for the EEZ and represents the United States in international fora such as the International Commission for the Conservation of Atlantic Tunas (ICCAT), and the Inter-American Tropical Tuna Commission (IATTC). Individual States are responsible for fisheries managements in State waters (in general, the first three miles off their coasts50), and for inland fisheries management for inland waters within their jurisdiction. Fisheries in the Great Lakes are managed by the U.S. States with shorelines on the Great Lakes and by the Canadian province of Ontario through the Great Lakes Fishery Commission.

53. Within NOAA, the National Marine Fisheries Service (NMFS) is responsible for the management, conservation, and protection of living marine resources within the EEZ. The NMFS works with eight Regional Fishery Management Councils51 to prepare Fishery Management Plans for management of fishery stocks. Members of the Fishery Management Councils are nominated by the State governors in each region and appointed by the Secretary of Commerce.52 The Magnuson-Stevens Fishery Management and Conservation Act (MSA) sets out the requirements for

50 Except for Texas and Florida, which have jurisdiction for the first 9 miles off-shore, and Puerto Rico

which has jurisdiction for the first 12 miles off-shore. 51 Each Regional Fishery Management Council corresponds to one of the eight fishery regions:

North Pacific, Western Pacific, Gulf of Mexico, Mid-Atlantic, New England, Pacific, South Atlantic, and Caribbean.

52 NMFS (2009), p. 4.


the ten Fishery Management Plans. In addition, the National Standards for Fishery Conservation and Management guide the development of each management plan to address various issues, such as preventing overfishing, using best available scientific information, equitable distribution of fishing privileges among States and fishermen, bycatch, and safety.

54. The NMFS is also the host for the International Monitoring, Control and Surveillance Network, which seeks to link fisheries enforcement agencies from different countries to reduce illegal, unreported and unregulated (IUU) fishing.

55. Several other federal government agencies are also involved in developing and implementing fisheries policies, including:

the United States Coast Guard (USCG), which is responsible for protecting the EEZ and enforcing domestic fisheries laws at sea, as well as the requirements of applicable international fisheries agreements;53

the Fish and Wildlife Service (FWS), which through the Fisheries and Habitat Conservation Program and the Fisheries Aquatic Resource Program, provides advice and assistance to federal and sub-federal agencies and programmes on conservation, and supports the federal hatchery system. Along with NOAA, the FWS chairs the Aquatic Nuisance Species Task Force, which develops strategies to identify and reduce the risk of introduction of invasive species and minimize the harmful effects of ones already introduced into U.S. waters;54 and

the Marine Mammal Commission, which supports and conducts research and reviews of the conservation and status of marine mammal stocks, and provides advice to the Secretaries of Commerce, Interior, and State on policies and programmes for conservation and protection at both the domestic and international levels.55

56. The MSA is the principal legislation on fisheries.56 It was first passed in 1976 and was amended in the Magnuson-Stevens Reauthorization Act of 2006. The MSA provides the legal basis for the management and conservation of fisheries stocks, including the prohibition of overfishing, the rebuilding of overfished stocks, and the conservation of fish habitats. Other laws that regulate fisheries include: the High Seas Driftnet Fishing Moratorium Protection Act; the Endangered Species Act; the Marine Mammal Protection Act; the National Environmental Policy Act; and the Lacey Act, which prohibits fish and wildlife trafficking and other transactions that violate federal, Native American, tribal or foreign laws.

57. The main focus of fisheries policy is to end overfishing and rebuild stocks based on scientific assessments of stocks and market-based management approaches to conservation. The eight Fishery Management Councils, responsible for fishery management in each region, work with the NMFS to prepare Fishery Management Plans (see above).

58. Under the MSA, the Department of Commerce is required to report annually to Congress on the status of U.S. fisheries. According to the report for 2011, of the 537 stocks and stock complexes subject to fishery management plans, 258 had a known overfishing status and 36 were subject to

53 United States Coast Guard online information. Viewed at: http://www.uscg.mil/ [April 2012]. 54 Aquatic Nuisance Species Task Force online information. Viewed at: http://www.anstaskforce.gov/

default.php [April 2012]. 55 Marine Mammal Commission online information. Viewed at: http://mmc.gov/index.shtml

[April 2012]. 56 16 U.S.C. 1801.


overfishing (i.e. current harvesting above maximum sustainable yield). Furthermore, 219 had a known overfished status and 45 were overfished (i.e. current population below its potential biomass level). Overall, progress has been made to improve sustainable fishing as 27 stocks have been rebuilt since 2000, and the NMFS's Fish Stock Sustainability Index shows a steady improvement since 2000.57

59. The MSA requires that the fisheries management plans establish annual catch limits for all fisheries stocks and all fisheries are to be managed under annual catch limits in 2012. According to one report, a growing number of federally managed fisheries are being managed through exclusive quota programmes and cooperatives, limited-access privilege programmes, and individual fishing quotas.58 However, the NMFS's focus on ecosystem-based management means that such programmes are unlikely to be the only methods used, and fisheries management tools will depend on many factors.59

60. The United States is party to nine regional fishery management organizations for the conservation and management of specific species, control of bycatch, and addressing IUU fishing.60 The United States has also concluded a number of bilateral and regional agreements on shared stocks with other countries, particularly Canada. Under the South Pacific Tuna Treaty, U.S.-flagged tuna purse seine vessels have access to fisheries in the waters of the 16 other treaty countries (mostly small island nations) in return for which the U.S. tuna industry provides US$3 million each year to the Forum Fisheries Agency and, in association with the Treaty, under an Economic Assistance Agreement between the U.S. Department of State and the Forum, the U.S. Government provides US$18 million into an economic development fund administered by the Forum.61

61. Support to the fisheries sector in the United States is provided through a number of programmes at federal and sub-federal levels. Under the National Standards for Fishery Conservation and Management, the measures taken to manage fisheries are required to minimize the adverse economic impacts on fishing communities.62 In addition, disaster assistance may be provided under the Interjurisdictional Fisheries Act and the MSA in response to a disaster63, with US$170.4 million in total government financial transfers provided for disaster relief in 2007. The MSA also gives the NMFS the authority to implement a capacity-reduction programme, such as a vessel buyback scheme.64 However, vessel buyback schemes in 2005-07 did not involve government transfers, with any official loans being repaid at market rates from landing fees.65

62. The most recent figures for Government support to the fisheries sector are from the OECD for 2008. Total Government financial transfers to the marine capture sector, at US$2,084 million, are quite high compared with other OECD countries as they are equivalent to 47% of the total landed value, while in the OECD as a whole they are equivalent to 20% of landed value. In the United States, most of the total Government financial transfer is for General Services (mostly

57 NMFS (2012). 58 OECD (2009b), p. 371. 59 NMFS (2009), p. 7-8. 60 International Commission for the Conservation of Atlantic Tunas (ICCAT); North Atlantic Salmon

Conservation Organization (NASCO); Northwest Atlantic Fisheries Organization (NAFO); Inter-American Tropical Tuna Commission (IATTC); International Pacific Halibut Commission (IPHC), North Pacific Anadromous Fish Commission (NPAFC); Pacific Salmon Commission (PSC), Western and Central Pacific Fisheries Convention (WCPFC); and Commission for the Conservation of Antarctic Marine Living Resource.

61 NMFS (2011c). 62 16 USC 1851 Sec 301(8).PL 94-265 as amended by PL 104-297, 109-479. 63 16 USC 1851 Sec 312(a).PL 94-265 as amended by PL 104-297, 109-479. 64 16 USC 1851 Sec 312(b).PL 94-265 as amended by PL 104-297, 109-479. 65 OECD (2009b), p. 370.


enforcement and surveillance and research/management services). Direct payments and cost-reducing transfers are equivalent to 6% of the total landed value, which is the same as for the OECD as a whole.66 Imports of most fishery products are duty free (Table AIII.1) but tariffs are charged on some (essentially a small number of processed products such as canned tuna, sardines and oysters, smoked salmon, and frozen crabmeat). These tariffs resulted in a transfer from consumers to the fishery sector of about US$68 million in 2007.67

63. Fishers are entitled to an income tax credit for most of the federal fuel tax they pay on the grounds that most of the tax is for the Highway Trust Fund (HTF) and fuel for fishing does not use the highways, just as other non-highway uses are also exempt from paying into the HTF. The current federal fuel tax is US$0.244 per gallon for diesel and US$0.184 per gallon for petrol. The tax credit is US$0.243 per gallon for diesel and US$0.183 per gallon for petrol, which represents the part of the tax that is for the highway use. The remaining US$0.001 goes to the Leaking Underground Storage Tank Trust Fund. Fishers may also be entitled to concessions from State and local fuel taxes which range from US$0.08 to US$0.32 per gallon in coastal States.68

(3) SERVICES

(i) Environmental services

(a) Market structure

64. The U.S. market for environmental services is mature; its growth has been heavily influenced by the development of environmental regulations during the 1960s to 1990s, both at federal and sub-federal level. It is also the largest single market for environmental services (Table IV.8).

Table IV.8 Market structure of environmental services

Water utilities and waste water treatment services U.S. share of the global market (2008) 40% of a US$212.6 billion market Number of firms and employees (2010) 87,990 firms and 366,600 employees Share of revenues of publicly owned water utilities companies (2010)

88%

Exports and imports (cross-border trade + affiliates sales) (2009)

US$0.32 billion and US$2.7 billion

Main private companies American Water Works Inc. and E Town Waters (subsidiaries of Germany’s RWE); American States Water Company; Aqua America; California Water Services Group; Connecticut Water Inc.; United Waters (subsidiary of France's Suez); U.S. Filter (subsidiary of France's Veolia); Severn Trent Services (subsidiary of UK's Severn Trent Plc.); etc.

Level of regulation Federal (Environmental Protection Agency) and subfederal (state public utility commissions)

Main regulations Clean Water Act(1972); Water Quality Act (1987); Clean Water State Revolving Fund (1987); Drinking Water State Revolving Fund (1997)

Main objectives of the regulations Quality and performance standards, environmental protection, investment funding, security, pricing (for investor-owned utilities and for all utilities in 12 states) and universal service

Solid and hazardous waste management services U.S. share of the global market (2008) 39% Share of the private sector in the revenues

Solid waste management industry (2010) 74% Hazardous waste management industry (2010) 96%

Market size, number of firms, and employment (2010)

Solid waste: US$53.4 billion, 9,950 firms, and 278,000 employees; hazardous waste: US$9 billion, 480 firms, and 43,600 employees

Table IV.8 (cont'd)

66 OECD (2012), p. 67. 67 OECD (2012), p. 503. 68 Martini (2012).


Volume produced (2009 and 2010) Municipal solid waste: 249.86 million tonnes (2010); hazardous waste: 35.3 million tonnes (2009)

Public sector customer / private sector customer ratio (2010)

Solid waste 59%-41%; hazardous waste: 45%-55%

Concentration (2010) Municipal solid waste sector: publicly traded investor-owned firms account for about 60% of municipal solid waste revenues. Two firms (Waste Management and Republic Services) generated over 60% of such revenues. Solid and hazardous waste sector: four companies (Waste Management Inc., Republic Services Inc., Covanta Holding Corporation, and Clean Harbors Inc.) account for about 65%, two firms (Waste Management Inc. and Republic Services Inc.) account for about 48%

Assets and annual sales of the top U.S.-based waste management firms, and remediation affiliates of foreign-owned firms (2008)

US$8.3 billion and US$5.9 billion

Sales of affiliates associated with direct investment, waste management, and remediation services (2010)

FDI in the United States: ..a; U.S. direct investment abroad: US$1.3 billion

Exports and imports (2009) Solid waste management services: exports: US$0.15 billion; imports: US$0.7 billion; hazardous waste management services: exports: US$0.09 billion; imports: US$0.1 billion

Main private companies Municipal solid waste segment: Waste Management Inc.; Allied Waste Industries; Republic Services; Onyx (subsidiary of France's Veolia). Incineration segment: Ogden Projects; Wheelabrator Technologies and American Ref-fuel. Hazardous waste segment: Clean Harbors Inc.; Onyx; Philip Services; Medical Waste Stericycle

Level of regulation Federal (Environmental Protection Agency) and sub-federal (state and local government environmental agencies)

Main regulations Solid Waste Disposal Act (1965); Pollution Prevention Act (1990); Resources Conservation and Recovery Act (1976); Hazardous and Solid Waste amendments (1984); Comprehensive Environmental Response, Compensation and Liability Act/"Superfund" (1980)

Main objectives of the regulations Quality and performance standards, environmental protection, liabilities pricing, and universal service

Air and noise pollution abattement services Revenues (2010) Engineering and consulting segment: US$1.7 billion;

Analytical services segment US$0.06 billion (air pollution-related revenues only) Main private companies Babcok and Wilcox; Babcock Power; General Electric; Thermo Electron; Wheelabrator;

ABB Environmental Systems (Switzerland); Alstom (France); Hamon Research Cottrell (Belgium); Hitz America (Japan); KWH (Germany); Marsulex Environmental Services (Canada); Mitsubishi Power Systems (Japan)

Level of regulation Federal (Environmental Protection Agency) and sub-federal (state and local government environmental agencies)

Main regulations Clean Air Act (1963) and its 1990 amendments; Air Quality Act (1967); Toxic Release Inventory (1986); Lead Phasedown Program (1982); Acid Rain Cap and Trade Program (1990); Noise control Act (1972); Occupational Safety and Health Act (1970); Aircraft Noise And Capacity Act (1990)

Main objectives of the regulations Quality and performance standards, and environmental protection Remediation and nature and landscape protection (NLP) services U.S. share of the global remediation and industrial services market (2010)

28.6% of a US$44.8 billion market

Revenues, number of firms and employment in remediation and industrial services (2010)

US$12.8 billion revenues, 2,060 firms, and 108,400 workers

Exportations and importations of remediation and industrial services (2009)

US$ 0.79 billion and US$ 0.5 billion

Main private companies Shaw Environmental and Infrastructure Inc.; Bechtel Group Inc.; Parsons, Fluor Daniel Inc.; C2HM hill; URS Corp.; Washington Group International

Level of regulation Federal (Environmental Protection Agency, U.S. army Corps of Engineers, U.S. Coast Guard, Departments of Agriculture, Commerce, Defense, Energy, Homeland Security, Housing and Urban Development and Interior); and sub-federal (state and local government environmental agencies)

Main regulations Resources Conservation and Recovery Act (1976); Comprehensive Environmental Response; Compensation and Liability Act/CERCLA-"Superfund" (1980)

Main objectives of the regulations Quality and performance standards, and environmental protection

.. Not available.

a Data on FDI in U.S. waste management and remediation services affiliates were supressed for the years 2007 through 2010 to avoid disclosure of information on individual firms.

Source: WTO Secretariat, based on information provided by the U.S. authorities.


65. The degree of private-sector involvement in the collective, network-based environmental services (water and waste-water management services, refuse disposal services) in the U.S. market remains relatively marginal as most consumers are served by publicly owned or cooperative utilities (Table IV.9).

Table IV.9 Private-sector involvement in water and waste water treatment services, 2012

Private ownership BOO/BOT Concession Lease

Operation/ management contract Outsourcing

Main characteristics Duration Indefinite 20-30 years 20-30 years 5-15 years 3-7 years 1-2 years

Ownership of assets Private Public Public Public Public Public

Source of capital investment Private Private Private Public Public Public

Scope of private-sector responsibilities

Entire system Entire system (BOO); parts of the system (BOT)

Entire system

Entire system

Entire system Parts of the system

50% of the total, (16% "for profit" utilities) serving 11% of the population 1.7 trillion gallons per year

.. .. .. .. .. Water utilities (number, population served, production, revenues)

Private drinking-water business US$4.3 billion revenues

.. .. .. ..

Waste water utilities (number, population served, production, revenues)

4,200, i.e. 20% of the total, serving 3% of the population

2,000 facilities operate under a public-private partnership; they generate revenue of US$1.5 billion annually

Water and waste water utilities combined

Population receiving water services from a privately owned water utility or a municipal utility operating under a public private partnership: 73 million

Solid waste management utilities ..

.. Not available.

Source: National Association of Water Companies online information, "Private Water Service Providers Quick Facts". Viewed at: http://www.nawc.org/uploads/documents-and-publications/documents/document_ecf5b3ac-c222-4b6c-b99f-a0128ae1e9aa.pdf [3 May 2012].

(b) Trade regime

66. The U.S. trade regimes for environmental services appear very open. The United States has full GATS commitments on environmental services, as defined by the classic GATS classifications (which do not include the distribution of fresh/drinking water).69 However for two subsectors, sewage services and refuse disposal services, those commitments are limited to services contracted by private industry (Table IV.10). U.S. free-trade agreements contain no reservations for national treatment with respect to environmental services. With respect to the market access obligation, the same modifications apply as in the GATS, for sewage and refuse disposal services contracted by

69 Distribution of fresh water is often considered as an environmental service and is delivered in bundle

with waste water treatment, by the same utility, and with a single bill. However there are various views as to where water supply services should be classified. The environmental services category of the CPC provisions refers only to sewage services and adds that "collection, purification and distribution services of water are classified in subclass 18000 (Natural water)", the latter belonging to the goods section of the CPC. The latest version of the CPC (CPC 2) has included "water distribution services" under Section 8 ("Business and production services"). In classification discussions which took place in the Committee on Specific Commitments, a proposal to list water collection, purification and distribution under environmental services was opposed by several Members. On the other hand, relevant publications on environmental services tend to address both water supply and wastewater services, and references to water supply as an environmental service are found in several non-U.S. preferential trade agreements.


private industry. Commitments by the United States in 1994 and 2012 under the WTO Government Procurement Agreement (GPA) are negatively listed and based on the MTN.GNS/W/120 list. They therefore include environmental services, subject to the reservations listed in annex 4 of the U.S. commitments. While environmental services are not mentioned explicitly in these reservations, the reservation on "public utilities services" cover some environmental services. The government procurement commitments under the various U.S. free-trade agreements echo this exclusion, though in most instances with slightly different wording.70 The applied regime is very open, including for publicly contracted services, with numerous foreign firms present and treated according to the national treatment principle.

Table IV.10 Summarized trade regimes for environmental services

Subsectorsa GATSb FTAsc Applied regime

6A Sewage services contracted by private industry

No restrictions

6B Refuse disposal services contracted by private industry

1) 2) 3) none for MA and MT 4) unbound, except as indicated in the horizontal section for MA and none for MT

No restrictions on national treatment. Replicates GATS treatment for the market access obligation (whereby the scope of covered services is defined)d

"There are no known measures that are imposed specifically on foreign providers of waste services industry"

6.C Sanitation and similar services

No restrictions

6.D Other environmental services (cleaning of exhaust gases, noise abatement services, nature and landscape services, other environmental services not elsewhere classified)

1) 2) 3) none for MA and MT 4) unbound, except as indicated in the horizontal section for MA and none for MT

No restrictions on national treatment. Replicates GATS treatment for the market access obligation (whereby the scope of covered services is defined)

"The U.S. market for air pollution abatement services is open to imports as well as foreign investors. Numerous European, Canadian, and Japanese firms have acquired U.S. firms or established affiliates in the United States and some maintain manufacturing and engineering operations in the U.S. market" "The United States maintains no known trade restrictions specifically relating to foreign providers of remediation and nature and landscape protection services or relating to foreign investment in these industry segments"

a The order and structure of the subsectors follow the U.S. GATS commitments not the CPC. b All U.S. environmental services commitments under the GATS are qualified by two footnotes: footnote 19 "In each of the

following subsectors, U.S. commitments are limited to the following activities: implementation and installation of new or existing systems for environmental cleanup, remediation, prevention and monitoring; implementation of environmental quality control and pollution reduction services; maintenance and repair of environment-related systems and facilities not already covered by the US commitments on maintenance and repair of equipment; on-site environmental investigation, evaluation, monitoring; sample collection services; training on site or at the facility; consulting related to these areas"; footnote 20: Nothing in this offer related to transportation should be construed to supersede the existing U.S. commitments on transportation or related MFN exemptions (WTO document GATS/SC/90, 15 April 1994, p. 50).

c U.S. FTAs except the one with Jordan are negative listing agreements that are not immediately comparable to the GATS, which follows a positive approach for listing commitments. However, commitments subscribed in FTAs and in GATS are broadly similar and very liberal. For the purpose of the present table "FTAs" means: NAFTA, U.S.-Jordan, U.S.-Chile, U.S.-Singapore, U.S.-Australia, U.S.-Morocco, CAFTA-DR, U.S.-Bahrain, U.S.-Oman, U.S.-Peru, U.S.-Korea, and U.S.-Colombia.

d The precise text of the reservation by which U.S. GATS commitments with respect to the market access obligation are incorporated in the FTA, reads: "The United States reserves the right to adopt or maintain any measure that is not inconsistent with the United States' obligations under article XVI of the GATS". In addition, the scope of the national treatment commitment for sewage and refuse disposal is not limited to privately contracted services.

Source: WTO Secretariat; USITC (2004), Solid and Hazardous Waste Services: An Examination of U.S. and Foreign Markets, pp. 3-11 and 3-12, April. Viewed at: http://www.usitc.gov/publications/332/pub3679.pdf; USITC (2005), Air and Noise Pollution Abatement Services: An Examination of U.S. and Foreign Markets, p. 4-12, April. Viewed at: http://www.usitc.gov/publications/docs/pubs/332/pub3761.pdf; and USITC (2004), Remediation and Nature and Landscape Protection Services: An Examination of U.S. and Foreign Markets, p. 3-17, October. Viewed at: http://www.usitc.gov/publications/332/pub3727.pdf.

70 Identical to GATS "public utilities services for the agreement with Singapore, "utilities: all" in the

FTAs with Australia, Bahrain, Chile, Morocco, Oman, Peru, the CAFTA-DR, and Colombia.

http://www.usitc.gov/publications/332/pub3727.pdf


(ii) Financial services

(a) Overview of the sector

67. The financial services sector accounted for 8.5% of U.S. GDP in 2010, 47% of which was generated by banking activities, 33% by insurance, 16% by securities trading activities, and the rest by funds, trusts, and other financial vehicles.71 Over the last decade, the U.S. has run trade surpluses in financial services and trade deficits in insurance. In 2010, exports of financial services, excluding insurance, amounted to US$66.4 billion, while imports amounted to US$13.8 billion. Also in 2010, exports of insurance services reached US$14.6 billion, while imports amounted to US$61.8 billion. The U.S. sells more financial services through companies' foreign affiliates than it buys from foreign companies' affiliates established in the United States. In 2009, sales of financial services, including insurance, to foreign persons by U.S. multinational corporations amounted to US$226 billion, while sales of financial services to U.S. persons by foreign multinational corporations were US$147 billion.72

68. There were 1,711 "large" commercial banks in the United States at end-March 2011, each with consolidated assets of US$300 million or more. Their total consolidated assets amounted to US$12 trillion, of which 87% were domestic assets.73

69. At end-March 2012, foreign banks from 57 countries and territories had offices in the United States.74 The assets held by these offices totalled US$3.2 trillion (21.8% of total assets of the U.S. commercial banking system), while their deposits amounted to US$1.7 trillion (16.9% of total deposits in the U.S. commercial banking system). U.S. banking offices of foreign banks contributed 15.3% of total commercial bank lending at end March 2012.75

70. The U.S. insurance market is the world's largest, with gross insurance premiums of US$1.20 trillion in 2011, or 26.2% of the world market; of which US$537 billion were in life and health insurance, and US$667 billion in property and casualty insurance.76 The United States is 14th in the world in terms of insurance premiums per capita, with US$3,846 per head in 2011. Insurance penetration (premiums as a percentage of GDP) was 8.1% in 2011.

71. The United States has the largest securities market in the world.77 At end 2011, market capitalization was US$15.6 trillion, representing about 103% of U.S. GDP, while the value of shares traded in U.S. stock markets totalled US$30.8 trillion, about 204% of U.S. GDP.78

71 BEA online information, "Industry Economic Accounts". Viewed at: http://www.bea.gov/industry. 72 BEA online information. Viewed at: http://www.bea.gov/; and Koncz-Bruner and Flatness (2011). 73 Federal Reserve online information, "Statistical Release: Large Commercial Banks as of

31 March 2011". Viewed at: http://www.federalreserve.gov/releases/lbr/current/default.htm. 74 See Federal Reserve online information, "U.S. Offices of Foreign Banking Organizations by

Country, 31 March 2012". Viewed at: http://www.federalreserve.gov/releases/iba/201203/bycntry.htm. 75 U.S. banking offices of foreign banks include foreign-owned banks and U.S. branches and agencies

of foreign banks. See Federal Reserve online information, "Share Data for U.S. Offices of Foreign Banking Organizations". Viewed at: http://www.federalreserve.gov/releases/iba/fboshr.htm.

76 Swiss Re (2012). 77 McKinsey Global Institute (2011), Exhibit E2. 78 See World Bank online information, "World Development Indicators". Viewed at:

data.worldbank.org. Market capitalization is the market value of all domestic listed companies, and the value of shares traded is the annual total turnover of listed company shares. According to data provided by the U.S. Census Bureau, at the end of 2010, market capitalization in the United States represented about 32% of market capitalization in all stock markets around the world. See U.S. Census Bureau online information,


(b) Legislative and regulatory developments

72. The main regulatory reform since the last TPR of the United States, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub.L. 111-203, H.R. 4173) (the Dodd-Frank Act), entered into force on 21 July 2010.79 As stated in its introductory paragraph, the Act's objectives include promoting financial stability, ending "too big to fail", ending bailouts, protecting taxpayers, and protecting consumers from abusive financial services practices.80 The Act does not introduce market access or national treatment limitations, but establishes a new and comprehensive regulatory framework and extends regulation over new markets, entities, and activities.

73. In total, the Dodd-Frank Act mandates 398 rulemaking requirements by 20 regulatory agencies, a process that is still on-going. As of 1 June 2012, 110 of the rulemaking requirements (27.6%) have resulted in finalized rules; rules have been proposed, but not yet finalized for another 144 (36.2%); and rules have not yet been proposed for the remaining 144 (36.2%).81

74. Section 173 of the Dodd-Frank Act (Access to United States financial market by foreign institutions) introduces modifications to sections 7(d)(3) and 7(e)(1) of the International Banking Act of 1978 and to section 15 of the Securities Exchange Act of 1934. The amended International Banking Act now explicitly requires the Board of Governors of the Federal Reserve System, when considering an application for establishment of a U.S. office of a foreign bank that presents a risk to the stability of the United States financial system, to consider whether the home country of the foreign bank has adopted, or is making demonstrable progress toward adopting, an appropriate system of financial regulation for the financial system of such home country to mitigate such risk.82 The new amendments also allow the Board to order the termination of the activities of U.S. offices of such foreign banks in the absence of these criteria. Similarly, the SEC is now required, when considering an application for establishment of a foreign broker or dealer that presents a risk to consider the same criteria regarding home country regulation. The SEC is also explicitly authorized to rescind the authorization of such foreign brokers or dealers if the home country authority has not taken the steps required.

75. Section 604(d) of the Dodd-Frank Act amends section 3(c) of the Bank Holding Company Act of 1956 (12 U.S.C. 1842(c)), making it mandatory for the Federal Reserve Board, when considering a proposed acquisition, merger or consolidation, to "take into consideration the extent to which a proposed acquisition, merger, or consolidation would result in greater or more concentrated risks to the stability of the United States banking or financial system".83

76. The Dodd-Frank Act introduces important changes in the U.S. financial services regulatory structure. It eliminates the Office of Thrift Supervision, whose functions have been transferred to the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the Office of the

"Statistical Abstract of the United States 2012, Table 1397: U.S. and Foreign Stock Markets-Market Capitalization and Value of Shares Traded: 2002 to 2010". Viewed at: http://www.census.gov/ compendia/statab/).

79 Library of Congress online information, "THOMAS Home: Bills, Resolutions: Bill Summary & Status : 111th Congress (2009-2010): H.R.4173: All Information". Viewed at http://thomas.loc.gov/cgi-bin/bdquery/z?d111:HR04173:@@@L&summ2=m&#major%20actions.

80 Senate Committee on Banking, Housing, and Urban Affairs (undated). 81 Davis Polk Dodd-Frank (2012). 82 To see the other criteria applied to approve applications, see "International Banking Act of 1978",

available at the FDIC website (http://www.fdic.gov/regulations/laws/rules/8000-4800.html) and the Securities Exchange Act of 1934, available at the SEC website (http://www.sec.gov/about/laws.shtml#secexact1934).

83 For an example of the application of this provision, see FRB Order No. 2012-4 (9 May 2012).


Comptroller of the Currency (OCC).84 The Act also establishes a Financial Stability Oversight Council (FSOC), which is aimed primarily at comprehensive macro-prudential oversight of the U.S. financial system, and which has therefore been mandated with monitoring, identifying, and addressing systemic risks posed by financial firms, products, and activities.85 The FSOC, a type of "umbrella" regulatory agency, may make recommendations within its remit, but has no immediate enforcement powers.

77. The Act establishes several offices, committees, and bureaus within existing regulatory agencies: the Consumer Financial Protection Bureau (CFPB) (an independent bureau of the Federal Reserve System that includes an Office of Financial Education, Office of Fair Lending and Equal Opportunity, and Office of Financial Protection of Older Americans); the Office of the Investor Advocate (OIA); Office of Credit Ratings (OCR); and Investor Advisory Committee (IAC) (all within the Securities and Exchange Commission), and the Federal Insurance Office (FIO) and Office of Financial Research (OFR), both within the Treasury Department.

78. The Consumer Financial Protection Bureau is mandated to regulate the offering and provision of consumer financial products and services under federal consumer financial protection laws. In so doing, the Bureau will, inter alia, supervise covered entities (i.e. insured depository institutions and credit unions with assets greater than US$10 billion) for compliance with federal consumer financial protection laws and regulations, and take appropriate enforcement action to address violations, and issue new rules, orders, and guidance implementing federal consumer financial protection laws.86

79. The new Federal Insurance Office has been mandated to monitor much of the insurance industry, to recommend insurance regulation, and to coordinate federal efforts with regard to international prudential insurance matters. All lines of insurance will be under the purview of the new Office, except health insurance, certain long-term care insurance, and crop insurance.

80. In the case of derivatives reform, the Dodd-Frank Act gives the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) authority to regulate over-the-counter (OTC) derivatives, including the clearing, reporting, and trading of certain products and the entities that buy and sell them. Certain OTC derivatives will be required to be traded on regulated exchanges or trading platforms, and the trades will have to be submitted to regulated clearinghouses. Clearinghouses must submit proposals to regulators before accepting swaps or security-based swaps for clearing, and regulators will be required to evaluate which swaps and security-based swaps will be cleared centrally. In addition, regulators will have the authority to impose capital, margin, reporting, record-keeping, and conduct requirements on swap dealers, security-based swap dealers, major swap participants, and major security-based swap participants, to ensure, among other things, that they have adequate financial resources to meet their responsibilities. Banks that are insured depositary institutions will be required to spin-off their riskiest derivatives trading operations into affiliates if the banks wish to remain eligible for federal assistance, although they will be allowed to keep operations for interest rate swaps, foreign-exchange swaps, and gold and silver swaps.

84 The thrift charter is preserved, though. 85 The FSOC, made up of ten voting members (nine federal financial regulatory agencies and an

independent member with insurance expertise) and five non-voting members, is chaired by the Treasury Secretary. For further details, see U.S. Department of the Treasury online information, "Financial Stability Oversight Council". Viewed at: http://www.treasury.gov/initiatives/fsoc/Documents/2012%20Financial%20 Stability%20Oversight%20Council.pdf.

86 The Bureau will be led by a Director who will be appointed by the President and confirmed by the Senate for a five-year term. Although the Bureau will be housed within the Federal Reserve, it is independent and the Federal Reserve Board may not interfere with its functions or personnel.


81. As per Title IX, Subtitle C of the Dodd-Frank Act (Improvements to the regulation of credit rating agencies), credit rating agencies will be subject to additional regulatory oversight by the SEC. Nationally recognized statistical ratings organizations (NRSROs) will be required to disclose their methodologies, their use of third parties for due diligence efforts, and their ratings track record. The SEC may de-register a credit rating agency if regulatory requirements are not met over time.87

(c) The "Volcker rule"

82. The Volcker rule, as embodied in Section 619 of the Dodd-Frank Act (Prohibitions on proprietary trading and certain relationships with hedge funds and private equity funds), generally contains two prohibitions.88 It prohibits "banking entities" (insured depository institutions, bank holding companies, and their subsidiaries or affiliates) from engaging in short-term proprietary trading of any security, derivative, and certain other financial instruments for a banking entity's own account, subject to certain exemptions. In addition, it prohibits "banking entities" from acquiring or retaining any equity, partnership, or other ownership interest in or from sponsoring a hedge fund or private equity fund, subject to certain exemptions. The term "banking entities" includes foreign banks that maintain branches or agencies in the United States or that own U.S. banks or commercial lending companies in the United States. These banks, as well as their parent holding companies, are referred to in U.S. regulations as "foreign banking organizations".

Ban on "proprietary trading"

83. According to Section 619 of the Dodd-Frank Act, investments made "for the trading account" of a covered banking entity would be deemed proprietary trading and therefore prohibited.89 However, there are exemptions. Section 619 specifically permits trading transactions (i) in government securities (e.g. securities issued by the U.S. government or a U.S. government agency, government-sponsored enterprises, and state and local governments); (ii) in connection with underwriting or market-making, on behalf of customers; and (iii) by an insurance company solely for the general account of the company. In addition, the Act permits certain risk-mitigating hedging, as well as proprietary trading occurring "solely outside of the United States" and conducted by a banking entity that is not directly or indirectly controlled by a banking entity that is organized under the laws of the United States or of one or more States. However, the Act prohibits covered banking entities from engaging in any of these exempted transactions or activities if it would involve a material

87 See also "Proposed Rules for Nationally Recognized Statistical Rating Organizations", SEC, 17 CFR

Parts 232, 240, and 249, and 249b Release No. 34-64514; File No. S7-18-11 RIN 3235-AL15. 88 The implementing regulation has not been finalized at the time of writing. See Notice of Proposed

Rulemaking on "Prohibitions and Restrictions on Proprietary Trading and Certain Interests In, and Relationships With, Hedge Funds and Private Equity Funds", Board of Governors of the Federal Reserve System Press Release, 11 October 2011. Viewed at: http://www.federalreserve.gov/newsevents/press/bcreg/20111011a.htm.

89 According to the Dodd-Frank Act, the term "proprietary trading" means engaging as a principal for the trading account of the banking entity or nonbank financial company supervised by the Board in any transaction to purchase or sell, or otherwise acquire or dispose of, any security, any derivative, any contract of sale of a commodity for future delivery, any option on any such security, derivative, or contract, or any other security or financial instrument that the appropriate Federal banking agencies, the Securities and Exchange Commission, and the Commodity Futures Trading Commission may determine in the implementing regulation. The term "trading account" is defined by the Act as any account used for acquiring or taking positions in the securities and instruments described in the definition of "proprietary trading", principally for the purpose of selling in the near term (or otherwise with the intent to resell in order to profit from short-term price movements), and any such other accounts as the Federal banking agencies, the Securities and Exchange Commission, and the Commodity Futures Trading Commission may determine in the implementing regulation (Dodd-Frank Wall Street Reform and Consumer Protection Act. Viewed at: http://www.gpo.gov/fdsys/pkg/ BILLS-111hr4173enr/pdf/BILLS-111hr4173enr.pdf).


conflict of interest between the entity and its clients, or result in a material exposure to high-risk assets or trading strategies, or pose a threat to the safety and soundness of the banking entity or to the financial stability of the United States.

Ban on investment in or sponsorship of a fund

84. As noted, the Dodd-Frank Act prohibits banking entities from acquiring or retaining any ownership interest in or from sponsoring hedge funds or private equity funds. The Act defines a "hedge fund" and a "private equity fund" to include any issuer that would be considered an investment company under the Investment Company Act of 1940, except those under sections 3(c)(1) or 3(c)(7) of that Act.90

85. However, the Dodd-Frank Act allows a banking entity to organize and offer a hedge fund or private equity fund if: (i) it provides bona fide trust, fiduciary, or investment advisery services; (ii) the fund is organized and offered only in connection with such services and only to customers of such services of the banking entity; (iii) it does not have an ownership interest in the fund except for a de minimis investment; (iv) it does not guarantee, assume, or otherwise insure obligations or performance of the fund; (v) it does not share the same or similar name as the fund; (vi) no director or employee of the banking entity has an ownership interest in the fund; and (vii) it discloses, in writing, to investors in the fund that any losses in the fund are borne solely by the investors and not by the banking entity.

86. Despite the general prohibition, a banking entity may make a "de minimis" investment in a fund it advises, for the purpose of providing the fund sufficient initial equity to attract unaffiliated investors. This investment may not exceed 3% of total ownership interest of the fund within one year after the date of its establishment (the Board of Governors of the Federal Reserve may extend the period for two years), and must be "immaterial" to the banking entity, and in no case may the aggregate of all of the interests of the banking entity in all such funds exceed 3% of its Tier 1 capital.

(d) New regime for private fund advisers

87. Section 403 of the Dodd-Frank Act eliminated the "private adviser exemption" contained in section 203(b)(3) of the Advisers Act of 1940. The exemption allowed advisers with fewer than 15 clients to avoid registration with the SEC, and allowed those advisers to count each fund as a client, as opposed to each investor in a fund. In eliminating this exemption, the law generally extends registration requirements under the Advisers Act to almost all advisers to private funds (hedge funds and private equity funds). The final rules implementing this provision were released by the SEC on 22 June 2011, and advisers subject to the rules were required to register with the SEC by 30 March 2012.91 Registration entails significant regulatory and compliance obligations.

88. The SEC's rules define three new exemptions from the Advisers Act registration requirements for (i) advisers solely to venture capital funds; (ii) advisers solely to private funds with less than US$150 million in assets under management in the United States; and (iii) certain foreign advisers without a place of business in the United States. To qualify for the latter, the final rules require that an adviser must comply with the following requirements: (a) have no place of business in the United States; (b) have, in total, less than 15 clients in the United States and investors in the United States in private funds advised by the adviser; (c) have less than US$25 million in aggregate assets under management attributable to clients in the United States and investors in the United States in private funds advised by the adviser; and (d) not hold itself out generally to the public in the

90 See Investment Company Act of 1940. Viewed at: http://www.sec.gov/about/laws/ica40.pdf. 91 Securities and Exchange Commission (2011).


United States as an investment adviser. Non-U.S. advisers may rely on the other two exemptions as well.

89. All advisers must provide information regarding their advisory business, including the types of clients, their employees, and their advisory activities, any business practices that may present significant conflicts of interest, their non-advisory activities, and their financial industry affiliations. Private fund advisers must provide additional information about each fund they advise.

(e) Systemically Important Financial Institutions (SIFIs)

90. Under Section 113 of the Dodd-Frank Act, the FSOC may determine that a U.S. or a foreign non-bank financial company should be subject to supervision by the Board of Governors of the Federal Reserve System and to prudential standards with respect to financial activities if the company's material financial distress or the nature or mix of its activities could pose a threat to the financial stability of the United States. Section 115 of the Act also subjects bank holding companies (U.S. and foreign) with more than US$50 billion in assets to enhanced supervision and prudential standards. The FSOC shall (a) give due regard to the principle of national treatment and equality of competitive opportunity; and (b) take into account the extent to which the foreign or foreign-based company is subject on a consolidated basis to home country standards that are comparable to those applied in the United States.

91. The FSOC issued a final rule and interpretative guidance regarding the application of Section 113 requirements on 3 April 2012.92

92. The FSOC must consider 11 factors in evaluating whether a non-bank financial company should be subject to enhanced supervision (Section 113(a)(2)). It translated those factors into six categories: size, interconnectedness, substitutability, leverage, liquidity risk and maturity mismatch, and existing regulatory scrutiny. The first three relate to the potential impact of a company's financial distress on the broader economy; and the others relate to the vulnerability of a company to financial distress.

93. Its determination process consists of three stages: (i) narrowing the companies subject to review by applying thresholds related to size, interconnectedness, leverage, and liquidity risk and maturity mismatch93; (ii) analysing the threat that each identified company could pose to U.S. financial stability based on information available through existing public and regulatory sources, using the six-category framework described above; and (iii) identifying the companies that merit further review in the third stage. Companies will receive notice that they are being considered for a proposed determination and an opportunity to submit materials and further discuss with the FSOC. The FSOC will reconsider its designations annually.

92 "Final Rule and Interpretive Guidance on the Authority to Require Supervision and Regulation of

Certain Nonbank Financial Companies". Viewed at: http://www.treasury.gov/initiatives/fsoc/Documents/ Nonbank%20Designations%20-%20Final%20Rule%20and%20Guidance.pdf.

93 Thus, a company will be subject to additional review if it meets both the size threshold (US$50 billion in total consolidated assets) and any one of the other thresholds (US$30 billion in gross notional credit default swaps outstanding for which a company is the reference entity; US$3.5 billion of derivative liabilities; US$20 billion in total debt outstanding; 15 to 1 leverage ratio of total consolidated assets to total equity; and 10% short-term debt ratio of total debt outstanding with a maturity of less than 12 months to total consolidated assets.


(f) Swap market reforms

94. Title VII of the Dodd-Frank Act establishes a comprehensive regulatory framework for swaps and securities-based swaps. It requires, inter alia, swap dealers to register with the CFTC and securities-based swap dealers to register with the SEC, and swaps and security-based swaps to be traded on an exchange and cleared through a central counterparty to reduce systemic risk. In addition, companies that use swaps will face new regulatory, business, and operational requirements as dealers, counterparties, and other swap market participants become subject to new clearing, margin and collateral requirements, record-keeping and reporting duties, and new trade execution alternatives.

95. Sections 722 and 772 under Title VII of the Dodd-Frank Act establish the territorial scope of CFTC and SEC jurisdiction over the swaps and security-based swaps market. Section 722(d) provides that the CFTC's jurisdiction will apply to activities outside the United States if those activities have "a direct and significant connection with activities in, or effect on, commerce of the United States". Section 772 provides that the SEC's regulations do not apply to any person insofar as such person transacts a business in security-based swaps outside the jurisdiction of the United States. Thus far, there has been little guidance from the CFTC and SEC on the cross-border application of swap market reforms, but the CFTC has indicated that it expects to provide a proposed rule and some interpretative guidance on the provision contained in Section 722(d) of Act soon.94

94 U.S. Commodity Futures Trading Commission online information, "Remarks by CFTC's Chairman

Gary Gensler on Derivatives and the Cross-Border Application of Dodd-Frank Swap Market Reforms", Institute of International Bankers' Membership Luncheon, 14 June 2012. Viewed at: http://www.cftc.gov/ PressRoom/SpeechesTestimony/opagensler-116.


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APPENDIX TABLES


Table AI.1 Balance of payments, 2008-11 (US$ billion)

2008 2009 2010 2011a

Current account balance -677.1 -376.6 -470.9 -473.4 Exports of goods and services 1,842.7 1,575.0 1,837.6 2,105.0

Goods 1,307.5 1,069.5 1,288.7 1,497.4 Services 535.2 505.5 548.9 607.7

Imports of goods and services -2,541.0 -1,956.3 -2,337.6 -2,665.0 Goods -2,137.6 -1,575.4 -1,934.6 -2,235.7 Services -403.4 -380.9 -403.0 -429.3

Income, net 147.1 128.0 165.2 221.1 Unilateral current transfers, net -125.9 -123.3 -136.1 -134.6 Capital account transactions, net 6.0 -0.1 -0.2 -1.2 Financial account U.S.-owned assets abroadb 332.1 -139.3 -1,005.2 -396.4 Foreign-owned assets in the United Statesc 431.4 335.8 1,245.7 783.7 Financial derivatives, net -32.9 49.5 13.7 6.8d Statistical discrepancy -59.4 130.8 216.8 80.5 Memoranda Balance on goods -830.1 -505.9 -645.9 -738.3 Balance on services 131.8 124.6 145.8 178.3 Balance on goods and services -698.3 -381.3 -500.0 -560.0 Balance on current account (as % of GDP) -4.7 -2.7 -3.2 -3.1

a Preliminary. b Exclude financial derivatives (increase/financial outflow (-)). c Exclude financial derivatives (increase/financial outflow (+)). d Sum of financial derivatives for the first three quarters of 2011.

Source: WTO Secretariat, based on Bureau of Economic Analysis online information. Viewed at: http://www.bea.gov/ international/index.htm#bop.


Table AI.2 Merchandise exports and re-exports, by trading partner, 2008-11 (US$ million and %)

Description 2008 2009 2010 2011

Total (US$ million) 1,299,899 1,056,712 1,277,109 1,479,730

(% of total) America 42.3 41.9 43.0 43.5

Canada 20.1 19.4 19.4 19.0 Mexico 11.7 12.2 12.8 13.3 Brazil 2.5 2.5 2.8 2.9 Chile 0.9 0.9 0.9 1.1 Colombia 0.9 0.9 0.9 1.0 Bolivarian Republic of Venezuela 1.0 0.9 0.8 0.8 Argentina 0.6 0.5 0.6 0.7 Peru 0.5 0.5 0.5 0.6 Panama 0.4 0.4 0.5 0.6 Dominican Rep. 0.5 0.5 0.5 0.5

Europe 24.2 23.7 21.7 21.4

EU(27) 21.4 21.1 19.0 18.4 United Kingdom 4.1 4.3 3.8 3.8 Germany 4.2 4.1 3.8 3.3 Netherlands 3.1 3.1 2.7 2.9 Belgium 2.2 2.0 2.0 2.0 France 2.3 2.6 2.2 1.9

EFTA 2.0 1.9 1.9 1.9 Switzerland 1.7 1.7 1.6 1.7

Other Europe 0.9 0.7 0.9 1.0 Turkey 0.8 0.7 0.8 1.0

Commonwealth of Independent States (CIS) 1.1 0.8 0.7 0.9

Russian Federation 0.7 0.5 0.5 0.6 Africa 2.2 2.3 2.2 2.2

South Africa 0.5 0.4 0.4 0.5 Egypt 0.5 0.5 0.5 0.4

Middle East 4.4 4.2 3.8 3.9

United Arab Emirates 1.2 1.1 0.9 1.1 Israel 1.1 0.9 0.9 0.9 Kingdom of Saudi Arabia 1.0 1.0 0.9 0.9

Asia 25.8 27.0 28.5 27.9

China 5.5 6.6 7.2 7.0 Japan 5.1 4.8 4.7 4.5 Six East Asian traders 10.2 10.2 11.2 11.0

Korea, Rep. of 2.7 2.7 3.0 2.9 Hong Kong, China 1.7 2.0 2.1 2.5 Singapore 2.2 2.1 2.3 2.1 Chinese Taipei 1.9 1.7 2.0 1.8 Malaysia 1.0 1.0 1.1 1.0 Thailand 0.7 0.7 0.7 0.7

Other Asia 5.0 5.4 5.3 5.4 Australia 1.7 1.9 1.7 1.9 India 1.4 1.6 1.5 1.5

Other 0.0 0.0 0.0 0.2

Note: Detailed data are available only on a "Census basis" and may differ slightly from data reported for economic reasons on a "balance of payments" basis.



Table AI.3 Merchandise exports and re-exports, by group of products, 2008-11 (US$ million and %)

Description 2008 2009 2010 2011

Total (US$ million) 1,299,899 1,056,712 1,277,109 1,479,730

(% of total) Total primary products 20.5 19.7 21.2 23.9

Agriculture 10.8 11.3 11.2 11.4 Food 8.7 9.2 8.8 8.9

2222 Soya beans 1.2 1.6 1.5 1.2 0449 Other maize, unmilled 1.0 0.8 0.8 0.9 0412 Other wheat (including spelt) and meslin, unmilled 0.8 0.5 0.5 0.7

Agricultural raw material 2.1 2.1 2.4 2.5 2631 Cotton (other than linters), not carded or combed 0.4 0.3 0.5 0.6

Mining 9.7 8.3 10.0 12.5 Ores and other minerals 2.5 2.1 2.4 2.5

2823 Other ferrous waste and scrap 0.6 0.5 0.5 0.6 2882 Other non-ferrous base metal waste and scrap, n.e.s. 0.5 0.4 0.5 0.6 2892 Waste and scrap of precious metals (excl. gold) 0.4 0.5 0.6 0.3

Non-ferrous metals 1.3 1.1 1.2 1.3 Fuels 5.9 5.2 6.3 8.7

334 Petroleum oils and oils obtained from bituminous minerals 4.0 3.5 4.2 6.2 3212 Other coal, whether or pulverized, not agglomerated 0.6 0.6 0.8 1.1 3354 Petroleum bitumen/coke/mixtures, n.e.s. 0.3 0.2 0.3 0.4 3432 Natural gas, in the gaseous state 0.3 0.3 0.3 0.4

Manufactures 74.9 68.6 68.1 65.3 Iron and steel 1.5 1.3 1.3 1.4 Chemicals 13.8 15.1 14.8 14.0

5429 Medicaments, n.e.s. 1.3 1.9 1.6 1.5 5416 Glycosides; glands, etc. and extracts; antisera/vaccines, etc. 0.9 1.4 1.1 0.8

Other semi-manufactures 5.8 5.7 5.8 5.8 6672 Diamonds (excl. industrial, sorted) not mounted/set 1.1 0.9 1.1 1.2 6996 Articles iron or steel, n.e.s. 0.3 0.3 0.3 0.3

Machinery and transport equipment 42.8 34.7 35.2 33.9 Power generating machines 3.2 1.9 1.6 1.5

7149 Parts of engines and motors of 714.41 and 714.8 1.5 0.6 0.5 0.4 7148 Gas turbines, n.e.s. 0.4 0.3 0.3 0.2 7165 Generating sets 0.3 0.3 0.3 0.2

Other non-electrical machinery 9.3 8.9 8.9 8.8 7284 Machinery and appliances for particular industries, n.e.s. 0.8 0.7 1.1 0.8 7239 Parts n.e.s., of machinery of 723 and 744.3 1.1 1.0 0.8 0.8 Agricultural machinery and tractors 0.7 0.6 0.6 0.6

Office machines and telecommunication equipment 10.6 10.7 10.5 9.5 7764 Electronic integrated circuits and microassemblies 3.1 2.8 2.8 2.3 7599 Parts and accessories of 751.1, 751.2, 751.9 and 752 1.2 1.2 1.1 1.0

Other electrical machines 4.1 4.3 4.3 4.0 7731 Insulated wire, cable etc.; optical fibre cables 0.5 0.5 0.6 0.6 7725 Switches, relays, fuses etc. for a voltage not exceeding 1000 V 0.6 0.6 0.6 0.6

Automotive products 8.6 6.9 7.8 8.1 7812 Motor vehicles for the transport of persons, n.e.s. 3.9 2.6 3.0 3.2 7843 Other motor vehicle parts and accessories of 722, 781 to 783 2.4 2.2 2.6 2.5 7821 Goods vehicles 1.0 0.9 1.0 1.1

Other transport equipment 7.1 2.1 2.0 1.9 Textiles 1.0 0.9 1.0 0.9 Clothing 0.3 0.4 0.4 0.4 Other consumer goods 9.6 10.5 9.7 9.0

8722 Instruments used in medical, surgical or veterinary sciences 1.1 1.4 1.3 1.2 Other 4.6 11.7 10.7 10.8

Gold 1.5 1.3 1.4 2.2




Table AI.4 Merchandise imports, by trading partner, 2008-11 (US$ million and %)

Description 2008 2009 2010 2011

Total (US$ million) 2,164,834 1,601,896 1,966,497 2,262,586

(% of total) America 33.5 32.4 32.9 33.7

Canada 15.7 14.2 14.2 14.1 Mexico 10.1 11.1 11.8 11.7 Bolivarian Republic of Venezuela 2.4 1.8 1.7 1.9 Brazil 1.5 1.3 1.3 1.4 Colombia 0.6 0.7 0.8 1.0 Costa Rica 0.2 0.4 0.5 0.5 Ecuador 0.4 0.4 0.4 0.4 Chile 0.4 0.4 0.4 0.4 Trinidad and Tobago 0.4 0.4 0.4 0.4

Europe 18.9 19.6 18.2 18.4

EU(27) 17.4 17.9 16.6 16.6 Germany 4.6 4.5 4.3 4.4 United Kingdom 2.8 3.0 2.6 2.3 France 2.1 2.2 2.0 1.8 Ireland 1.5 1.8 1.7 1.7 Italy 1.7 1.7 1.5 1.6

EFTA 1.2 1.4 1.4 1.5 Switzerland 0.8 1.0 1.0 1.1

Other Europe 0.3 0.3 0.3 0.3 Turkey 0.2 0.2 0.2 0.2

Commonwealth of Independent States (CIS) 1.8 1.5 1.6 1.9

Russian Federation 1.3 1.2 1.3 1.6 Africa 5.4 4.0 4.4 4.2

Nigeria 1.8 1.2 1.6 1.5 Algeria 0.9 0.7 0.8 0.7

Middle East 5.3 3.8 3.9 4.7

Kingdom of Saudi Arabia 2.6 1.5 1.7 2.2 Israel 1.0 1.2 1.1 1.0

Asia 35.2 38.7 38.9 37.2

China 16.5 19.3 19.5 18.4 Japan 6.6 6.1 6.3 5.9 Six East Asian traders 7.7 8.3 8.1 7.8

Korea, Rep. of 2.3 2.5 2.6 2.6 Chinese Taipei 1.7 1.8 1.9 1.9 Malaysia 1.5 1.5 1.4 1.2 Thailand 1.1 1.2 1.2 1.1 Singapore 0.7 1.0 0.9 0.9 Hong Kong, China 0.3 0.2 0.2 0.2

Other Asia 4.4 4.9 5.0 5.0 India 1.2 1.4 1.6 1.7 Indonesia 0.8 0.9 0.9 0.9

Other 0.0 0.0 0.0 0.1 Memorandum

EC(25) 17.3 17.8 16.5 16.5




Table AI.5 Merchandise imports, by group of products, 2008-11 (US$ million and %)

Description 2008 2009 2010 2011

Total (US$ million) 2,164,834 1,601,896 1,966,497 2,262,586

(% of total) Total primary products 31.1 25.7 26.7 29.2

Agriculture 5.4 6.3 5.9 6.1 Food 4.4 5.4 5.0 5.0

0711 Coffee, not roasted 0.2 0.2 0.2 0.3 1124 Spirits 0.3 0.3 0.3 0.3 0361 Crustaceans, frozen 0.2 0.3 0.2 0.2 1121 Wine of fresh grapes (including fortified wine) 0.2 0.3 0.2 0.2

Agricultural raw material 1.0 0.9 1.0 1.0 Mining 25.8 19.4 20.7 23.1

Ores and other minerals 0.6 0.5 0.5 0.6 Non-ferrous metals 2.0 1.5 1.8 2.0

6811 Silver 0.1 0.1 0.2 0.4 6841 Aluminium and aluminium alloys, unwrought 0.4 0.3 0.3 0.3

Fuels 23.2 17.4 18.4 20.5 3330 Crude oils of petroleum and bituminous minerals 16.8 12.5 13.6 15.2 334 Petroleum oils and oils obtained from bituminous minerals 4.2 3.4 3.5 4.2

Manufactures 65.4 70.0 69.6 67.3 Iron and steel 2.3 1.4 1.6 1.8 Chemicals 8.4 9.6 9.0 8.9

5429 Medicaments, n.e.s. 1.7 2.3 2.0 1.7 5157 Other heterocyclic compounds; nucleic acids 1.0 1.3 1.0 1.0

Other semi-manufactures 5.8 5.8 5.8 5.6 6672 Diamonds (excl. industrial, sorted) not mounted/set 0.9 0.8 0.9 1.0

Machinery and transport equipment 34.0 36.2 37.0 35.8 Power generating machines 1.6 1.8 1.4 1.5

7149 Parts of engines and motors of 714.41 and 714.8 0.5 0.7 0.5 0.5 Other non-electrical machinery 5.3 5.1 5.1 5.6

7284 Machinery and appliances for particular industries, n.e.s. 0.3 0.3 0.4 0.5 Agricultural machinery and tractors 0.3 0.3 0.3 0.3

Office machines and telecommunication equipment 12.0 14.7 14.5 13.1 7643 Radio or television transmission apparatus 1.6 2.3 2.1 2.1 7522 Data processing machines, with at least processing, input and output units

1.4 1.8 1.8 2.0

7764 Electronic integrated circuits and microassemblies 0.9 1.0 1.1 1.2 Other electrical machines 3.9 4.2 4.4 4.2 Automotive products 9.2 8.3 9.6 9.4

7812 Motor vehicles for the transport of persons, n.e.s. 5.9 5.1 5.9 5.5 7843 Other motor vehicle parts and accessories of 722, 781 to 783 1.9 1.9 2.2 2.2

Other transport equipment 2.1 2.1 2.0 2.0 Textiles 1.1 1.2 1.2 1.1 Clothing 3.8 4.5 4.2 3.9 Other consumer goods 10.0 11.3 10.9 10.1

Other 3.4 4.3 3.7 3.5 Gold 0.3 0.5 0.6 0.7




Table AII.1 WTO dispute settlement cases, 1 January 2010-30 June 2012

Subject Respondent/ complainant/appellant

Request for consultation received Status (as at 30 June 2012)

WTO document series

Panels United States as respondent Anti-dumping measures on certain shrimp from Viet Nam

United States/ Viet Nam

1-Feb-10 Report(s) adopted, with recommendation to bring measure(s) into conformity on 2 September 2011

WT/DS404

Measures affecting the production and sale of clove cigarettes

United States/ Indonesia

7-Apr-10 Report(s) adopted, with recommendation to bring measure(s) into conformity on 24 April 2012

WT/DS406

Anti-dumping measures on corrosion-resistant carbon steel flat products from Korea

United States/ Rep. of Korea

31-Jan-11 Panel established, but not yet composed on 22 February 2012

WT/DS420

Anti-dumping measures on shrimp and diamond sawblades from China

United States/ China

28-Feb-11 Panel composed on 21 December 2011

WT/DS422

Anti-dumping measures on imports of stainless steel sheet and strip in coils from Italy

United States/ EU

1-Apr-11 In consultations on 1 April 2011 WT/DS424

Anti-dumping measures on certain frozen warmwater shrimp from Viet Nam

United States/ Viet Nam

20-Feb-12 In consultations on 20 February 2012

WT/DS429

Countervailing measures on certain hot-rolled carbon steel flat products from India

United States/ India

12-Apr-12 In consultations on 12 April 2012 WT/DS436

Countervailing duty measures on certain products from China


25-May-12 In consultations on 25 May 2012 WT/DS437

United States as complainant Taxes on distilled spirits Philippines/

United States 14-Jan-10 Report(s) adopted, with

recommendation to bring measure(s) into conformity on 20 January 2012

WT/DS403

Certain measures affecting electronic payment services

China/ United States

15-Sep-10 Panel composed on 4 July 2011 WT/DS413

Countervailing and anti-dumping duties on grain oriented flat-rolled electrical steel from the United States


15-Sep-10 Panel composed on 13 May 2011 WT/DS414

Measures concerning wind power equipment


22-Dec-10 In consultations on 22 December 2010

WT/DS419

Anti-dumping and countervailing duty measures on broiler products from the United States


20-Sep-11 Panel established, but not yet composed on 20 January 2012

WT/DS427

Measures concerning the import of certain agricultural products from the United States

India/ United States

6-Mar-12 In consultations on 6 March 2012 WT/DS430

Measures related to the export of rare earths, tungsten, and molybdenum


13-Mar-12 In consultations on 13 March 2012 WT/DS431

Table AII.1 (cont'd)


Subject Respondent/ complainant/appellant

Request for consultation received Status (as at 30 June 2012)

WTO document series

United States as a third party Anti-dumping measures on certain footwear from China

EU/ China

4-Feb-10 Report(s) adopted, with recommendation to bring measure(s) into conformity on 22 February 2012

WT/DS405

Certain measures affecting the renewable energy generation sector

Canada/ Japan

13-Sept-10 Panel composed on 6 October 2011 WT/DS412

Dominican Republic/ Costa Rica

15-Oct-10 WT/DS415

Dominican Republic/ Guatemala

15-Oct-10 WT/DS416

Dominican Republic/ Honduras

18-Oct-10 WT/DS417

Safeguard measures on imports of polypropylene bags and tubular fabric

Dominican Republic/ El Salvador

19-Oct-10

Report(s) adopted, with recommendation to bring measure(s) into conformity on 22 February 2012

WT/DS418

Measures affecting the import and internal sale of goods (environmental charge)

Moldova/ Ukraine

17-Feb-11 Panel established, but not yet composed on 17 June 2011

WT/DS421

Taxes on distilled spirits Ukraine/ Moldova

3-Mar-11 Panel established, but not yet composed on 20 July 2011

WT/DS423

Definitive anti-dumping duties on X-ray security inspection equipment from the EU

China/ EU

25-Jul-11 Panel composed on 15 March 2012 WT/DS425

Measures relating to the feed-in tariff programme

Canada/ EU

11-Aug-11 Panel composed on 23 January 2012 WT/DS426

Appeals to the Appellate body involving the U.S. as a complainant or respondent to the dispute, and/or as an appellant Definitive anti-dumping and countervailing duties on certain products from China


Appellate Body Report adopted on 25 March 2011

WT/DS379/AB/R

Taxes on distilled spirits Philippines/ United States

Appellate Body Report adopted on 20 January 2012

WT/DS403/AB/R

Measures affecting imports of certain passenger vehicle and light truck tyres from China


Appellate Body Report adopted on 5 October 2011

WT/DS399/AB/R

Measures related to the export of various raw materials


Appellate Body Report adopted on 22 February 2012

WT/DS394/AB/R

Measures affecting trade in large civil aircraft

United States/ EU

Appellate Body Report adopted on 23 March 2012

WT/DS353/AB/R

Measures affecting the production and sale of clove cigarettes

United States/ Indonesia

Appellate Body Report adopted on 24 April 2012

WT/DS406/AB/R

Measures concerning the importation, marketing, and sale of tuna and tuna products

United States/ Mexico

Appellate Body Report adopted on 13 June 2012

WT/DS381/AB/R

Implementation (Articles 21.5 and 22.6) Laws, regulations and methodology for calculating dumping margins (zeroing)

United States/ EU

Referred to arbitration on 18 February 2010

WT/DS294

Measures affecting trade in large civil aircraft

EU/ United States

Suspension of arbitration on 19 January 2012 (Article 21.5). Constituted panel on 17 April 2012 (Article 22.6)

WT/DS316

Measures relating to zeroing and sunset reviews

United States/ Japan

Suspension of arbitration on 15 December 2010, with further suspension thereafter

WT/DS322



Table AII.2 Selected notifications to the Central Registry of Notifications (CRN), 1 January 2010–30 June 2012

WTO Agreement Description Document symbola Date

Agreement on Agriculture Articles 10 and 18.2 (ES:1 and ES:2)

Export subsidies commitments: budgetary outlays and quantity reduction commitments; and notification of total exports

G/AG/N/USA/82 13/09/2011

Article 16.2 NF:1 (1)-(4)

Net-food importing decision: food and other assistance; and other specific actions

G/AG/N/USA/83 26/10/2011

Article 18.2 (DS:1) Domestic support G/AG/N/USA/80 29/08/2011 Article 18.2 (MA:1) Administration of tariff and other quota

commitments G/AG/N/USA/79/Add.2 13/06/2011

Article 18.3 (DS:2) New or modified exempt domestic support measures

G/AG/N/USA/73 29/04/2010

Articles 5.7 and 18.2 (MA:5)

Special safeguard provisions G/AG/N/USA/81 29/08/2011

Article 18.2 (MA:2) Tariff quotas G/AG/N/USA/85 27/06/2012 General Agreement on Trade in Services Article III:3 Laws / regulations S/C/N/569 29/09/2010 Article VII:4 Recognition agreements / arrangements;

autonomous recognition measures S/C/N/539 18/03/2010

Economic integration agreements: United States-Korea (Rep. of) regional trade agreement

S/C/N/621 WT/REG311/N/1

16/03/2012 Article V:7(a)

Economic integration agreements: United States-Colombia trade promotion agreement

S/C/N/643 WT/REG314/N/1

10/05/2012

GATT 1994 Article XXVIII:5 Modification of schedules (reserve the right to

modify schedules for a three-year period) G/MA/279 09/01/2012

Free-trade areas: United States-Korea (Rep. of) regional trade agreement

S/C/N/621 WT/REG311/N/1

16/03/2012 Article XXIV:7(a)

Free-trade areas: United States-Colombia trade promotion agreement

S/C/N/643 WT/REG314/N/1

10/05/2012

Article XVII:4(a) State trading activities G/STR/N/13/USA 22/07/2010 Paragraph 3(c) Annual reports concerning vessels WT/L/849 11/01/2012 Agreement on the Implementation of Article VI of the GATT 1994 (Anti-Dumping Agreement) Article 16.4 – ad hoc Anti-dumping actions (preliminary and final) Many notifications received, please see http://www.wto.org/

english/tratop_e/adp_e/adp_e.htm G/ADP/N/223/USA 03/04/2012 G/ADP/N/216/USA 30/09/2011 G/ADP/N/209/USA and Corr.1 07/04/2011 and 20/04/2011 G/ADP/N/202/USA 22/09/2010

Article 16.4 – semi annual

Anti-dumping actions (taken within the preceding six months)

G/ADP/N/195/USA 18/03/2010 Article 16.5 Competent authorities G/ADP/N/14/Add.33

G/SCM/N/18/Add.33 17/04/2012

Article 18.5 Laws and regulations, and changes thereto, including changes in the administration of such laws

G/ADP/N/1/USA/1/Suppl.11 G/SCM/N/1/USA/1/Suppl.11

06/06/2012

Agreement on Government Procurement Appendix I Procurement thresholds GPA/W/314/Add.2 20/12/2011 Article XXIV:5 Statistics GPA/102/Add.3 15/07/2010

GPA/98/Add.2 06/09/2010 Article XXIV:5(b) Laws / regulations (changes thereto or changes in the administration thereof) GPA/98/Add.1 01/04/2010

Agreement on Import Licensing Article 1.4(a) Licensing procedures G/LIC/N/1/USA/6/ and Add.1 06/10/2010 and 04/10/2011 Articles 7.3 Replies to questionnaire G/LIC/N/3/USA/8 10/10/2011 Article 8.2(b) Changes in law / regulations and administrative

arrangements G/LIC/N/1/USA/6 and Add.1 06/10/2010 and 04/10/2011

Agreement on Subsidies and Countervailing Article 25.1 and GATT 1994 Article XVI:1

Subsidies G/SCM/N/220/USA 19/11/2011

Article 25.11 – ad hoc Countervailing duty actions (preliminary and final)

Many notifications received, please see http://www.wto.org/ english/tratop_e/scm_e/scm_e.htm

Table AII.2 (cont'd)


WTO Agreement Description Document symbola Date

G/SCM/N/235/USA 04/04/2012 G/SCM/N/228/USA 28/09/2011 G/SCM/N/219/USA 28/03/2011 G/SCM/N/212/USA 16/09/2010

Article 25.11 – semi Countervailing duty actions (taken within the preceding six months)

G/SCM/N/203/USA 18/03/2010 Article 25.12 Competent authorities G/ADP/N/14/Add.33

G/SCM/N/18/Add.33 17/04/2012

Article 32.6 Laws / regulations and changes thereto, including changes in administration of such laws

G/ADP/N/1/USA/1/Suppl.11 G/SCM/N/1/USA/1/Suppl.11

06/06/2012

Agreement on Sanitary and Phytosanitary Measures Article 7 Annex B Sanitary and phytosanitary regulations Many notifications received, please see http://www.wto.org/

english/tratop_e/sps_e/work_and_doc_e.htm Agreement on Technical Barriers to Trade Article 2.9 Technical regulations Many notifications received, please see http://tbtims.wto.org/

G/TBT/N/USA/601 03/12/2010 G/TBT/N/USA/572 and Add.1 20/09/2010 and 17/12/2010 G/TBT/N/USA/567 27/08/2010

Articles 2.9 and 5.6 Technical regulations and conformity assessment procedures

G/TBT/N/USA/568, Corr.1 and Rev.1

27/08/2010, 20/09/2010, and 13/12/2010

G/TBT/N/USA/663 and Corr.1 08/12/2011 and 22/12/2011 Article 3.2 Technical regulations (local government) G/TBT/N/USA/579 and Corr.1 26/10/2010 and 01/11/2011 G/TBT/N/USA/638 and Corr.1, Corr.2, and Corr.3

06/07/2011 and 22/08/2011, 31/08/2011, and 14/09/2011

G/TBT/N/USA/637 and Corr.1, Corr.2, and Corr.3

06/07/2011 and 22/08/2011, 14/09/2011, and 23/09/2011

G/TBT/N/USA/630 16/06/2011 G/TBT/N/USA/625 28/04/2011 G/TBT/N/USA/601/Corr.1 25/01/2011 G/TBT/N/USA/572/Corr.1 25/01/2011 G/TBT/N/USA/570/Corr.1 25/01/2011 G/TBT/N/USA/568/Corr.2 26/01/2011 G/TBT/N/USA/567/Corr.1 25/01/2011 G/TBT/N/USA/553/Corr.1 25/01/2011 G/TBT/N/USA/540/Corr.1 25/01/2011 G/TBT/N/USA/563/Corr.1 25/01/2011 G/TBT/N/USA/562/Corr.1 25/01/2011 G/TBT/N/USA/595 18/11/2010 G/TBT/N/USA/576 24/09/2010 G/TBT/N/USA/570 31/08/2010

Article unspecified Technical regulations

G/TBT/N/USA/565 and Add.1 and Add.2

18/08/2010 and 27/10/2010 and 08/11/2010

Agreement on Trade-Related Aspects of Intellectual Property Rights IP/N/1/USA/D/2 IP/N/1/USA/P/6

27/02/2012

IP/N/1/USA/T/4 27/02/2012 IP/N/1/USA/T/5 27/02/2012 IP/N/1/USA/4 22/02/2012 IP/N/1/USA/3 21/10/2011 IP/N/1/USA/P/5 21/10/2011 IP/N/1/USA/2 08/06/2010

Article 63.2 Laws / regulations; amendment of a law / regulation

IP/N/1/USA/T/3 08/06/2010

a In case of recurring notifications, only the most recent document is listed.

Source: WTO Central Registry of Notifications.


Table AIII.1 Summary analysis of the MFN tariff, 2012

MFN

Description No. of lines Average (%) Range (%) Coefficient of variation (CV)

Total 10,511 4.7 0 - 350 2.5 HS 01-24 1,873 7.8 0 - 350 3.3 HS 25-97 8,638 4.1 0 - 57.7 1.3 By WTO category WTO Agriculture 1,690 8.5 0 - 350 3.1

Animals and products thereof 161 3.0 0 - 26.4 1.8 Dairy products 167 22.6 0 - 190.11 1.1 Fruit, vegetables, and plants 527 5.4 0 - 131.8 2.1 Coffee and tea 82 9.9 0 - 34.82 0.9 Cereals and preparations 182 8.3 0 - 97.88 1.6 Oil seeds, fats and oils, and their products 107 6.7 0 - 163.8 3.5 Sugars and confectionary 53 10.7 0 - 50.29 1.0 Beverages, spirits and tobacco 149 21.7 0 - 350 3.4 Cotton 16 4.8 0 - 20.18 1.2 Other agricultural products n.e.s. 246 1.5 0 - 54.33 2.7

WTO Non-agriculture (incl. petroleum) 8,821 4.0 0 - 57.7 1.4 WTO Non-agriculture (excl. petroleum) 8,789 4.0 0 - 57.7 1.4

Fish and fishery products 331 1.5 0 - 35 2.4 Minerals and metals 1,547 2.4 0 - 38 1.6 Chemicals and photographic supplies 1,847 3.7 0 - 6.5 0.7 Wood, pulp, paper, and furniture 525 0.7 0 - 14 2.8 Textiles 1,082 7.8 0 - 42.31 0.7 Clothing 571 11.6 0 - 32 0.7 Leather, rubber, footwear, and travel goods 422 7.4 0 - 57.7 1.5 Non-electric machinery 799 1.4 0 - 9.9 1.4 Electric machinery 526 2.3 0 - 15 1.0 Transport equipment 241 2.5 0 - 25 1.9 Non-agriculture articles n.e.s. 898 3.0 0 - 39.91 1.3

Petroleum 32 1.9 0.02 - 7.89 1.4 By ISIC sectora Agriculture and fisheries 580 5.6 0 - 350 5.6 Mining 115 0.4 0 - 10.5 3.6 Manufacturing 9,815 4.7 0 - 350 2.0 By HS section 01 Live animals and prod. 569 7.7 0 - 190.11 2.2 02 Vegetable products 558 3.9 0 - 163.8 3.0 03 Fats & oils 69 3.4 0 - 19.1 1.3 04 Prepared food etc. 677 11.5 0 - 350 3.3 05 Minerals 204 0.6 0 - 12.58 2.9 06 Chemical and prod. 1,714 3.5 0 - 6.5 0.8 07 Plastics and rubber 375 3.7 0 - 14 0.7 08 Hides and skins 220 4.3 0 - 20 1.1 09 Wood and articles 240 2.4 0 - 18 1.4 10 Pulp, paper etc. 275 0.0 0 - 0 n.a. 11 Textile and articles 1,592 9.0 0 - 32 0.8 12 Footwear, headgear 195 13.4 0 - 57.7 1.1 13 Articles of stone 298 5.2 0 - 38 1.2 14 Precious stones, etc. 105 3.0 0 - 13.5 1.1 15 Base metals and prod. 988 1.9 0 - 21.03 1.4 16 Machinery 1,346 1.7 0 - 15 1.2 17 Transport equipment 252 2.4 0 - 25 1.9 18 Precision equipment 512 2.5 0 - 35 1.3 19 Arms and ammunition 33 1.9 0 - 11.69 1.3 20 Miscellaneous manuf. 282 3.6 0 - 39.91 1.3 21 Works of art, etc. 7 0.0 0 - 0 n.a. By stage of processing First stage of processing 1,101 3.7 0 - 350 6.3 Semi-processed products 3,444 4.2 0 - 50.29 1.1 Fully-processed products 5,966 5.2 0 - 350 2.2


a ISIC (Rev.2) classification, excluding electricity (1 line).

Source: WTO Secretariat estimates, based on data provided by the U.S. authorities.


Table AIII.2 Summary analysis of tariffs, according to preferential agreements, interim rates as of 30 June 2012

(Simple averages, %)

Description No. of linesa MFN Rep. of Koreab Colombiac

Total 10,511 4.7 1.8 0.8 HS 01-24 1,873 7.8 6.1 4.2 HS 25-97 8,638 4.1 0.8 0.1 By WTO category WTO agriculture 1,690 8.5 6.5 4.7

Animals and products thereof 161 3.0 1.8 1.0 Dairy products 167 22.6 20.2 16.0 Fruit, vegetables, and plants 527 5.4 3.4 0.7 Coffee and tea 82 9.9 8.1 7.7 Cereals and preparations 182 8.3 6.4 4.5 Oil seeds, fats, and oils and their products 107 6.7 4.9 3.8 Sugars and confectionary 53 10.7 7.4 7.2 Beverages, spirits, and tobacco 149 21.7 18.0 16.0 Cotton 16 4.8 3.4 0.0 Other agricultural products n.e.s. 246 1.5 0.5 0.4

WTO non-agriculture (incl. petroleum) 8,821 4.0 0.8 0.1 WTO non-agriculture (excl. petroleum) 8,789 4.0 0.8 0.1

Fish and fishery products 331 1.5 1.2 0.1 Minerals and metals 1,547 2.4 0.7 0.0 Chemicals and photographic supplies 1,847 3.7 1.0 0.0 Wood, pulp, paper, and furniture 525 0.7 0.6 0.0 Textiles 1,082 7.8 1.5 0.0 Clothing 571 11.6 0.7 0.0 Leather, rubber, footwear, and travel goods 422 7.4 1.9 1.5 Non-electric machinery 799 1.4 0.3 0.0 Electric machinery 526 2.3 0.2 0.0 Transport equipment 241 2.5 0.9 0.0 Non-agriculture articles n.e.s. 898 3.0 0.5 0.0

Petroleum 32 1.9 0.0 0.0 By ISIC sectord Agriculture and fisheries 580 5.6 4.2 3.1 Mining 115 0.4 0.1 0.0 Manufacturing 9,815 4.7 1.6 0.7 By HS section 01 Live animals and prod. 569 7.7 6.7 5.0 02 Vegetable products 558 3.9 2.4 0.7 03 Fats and oils 69 3.4 1.8 0.1 04 Prepared food, etc. 677 11.5 9.0 7.0 05 Minerals 204 0.6 0.0 0.0 06 Chemical and prod. 1,714 3.5 0.7 0.0 07 Plastics and rubber 375 3.7 1.8 0.0 08 Hides and skins 220 4.3 0.5 0.0 09 Wood and articles 240 2.4 1.5 0.0 10 Pulp, paper, etc. 275 0.0 0.0 0.0 11 Textile and articles 1,592 9.0 1.3 0.0 12 Footwear, headgear 195 13.4 3.7 3.2 13 Articles of stone 298 5.2 2.1 0.0 14 Precious stones, etc. 105 3.0 0.3 0.0 15 Base metals and prod. 988 1.9 0.3 0.0 16 Machinery 1,346 1.7 0.3 0.0 17 Transport equipment 252 2.4 0.9 0.0 18 Precision equipment 512 2.5 0.4 0.0 19 Arms and ammunition 33 1.9 0.0 0.0 20 Miscellaneous manuf. 282 3.6 0.6 0.0 21 Works of art, etc. 7 0.0 0.0 0.0 By stage of processing First stage of processing 1,101 3.7 2.6 1.7 Semi-processed products 3,444 4.2 1.1 0.1 Fully-processed products 5,966 5.2 2.0 1.1

a Tariff averages do not include HS lines and duty rates for in-quota tariffs. b Applicable duties upon implementation, 15 March 2012. c Applicable duties upon implementation, 15 May 2012. d ISIC (Rev.2) classification, excluding electricity (1 line).

Source: WTO Secretariat estimates, based on data provided by the U.S. authorities.


Table AIII.3 Royalties and licence fees, 2010

Receipts Payments Receipts plus payments

US$ million % of total US$ million % of total US$ million % of total

By affiliation Unaffiliated 39,188 37.1 10,080 30.1 49,268 35.4 Affiliated 6,395 62.9 23,370 69.9 89,765 64.6 By type of asset Industrial processes 35,818 33.9 19,672 58.8 55,490 39.9 Books, records, and tapes 1,639 1.6 868 2.6 2,507 1.8 Film and television tape distribution 13,529 12.8 1,666 5.0 15,195 10.9 Broadcasting, recording of live events 600 0.6 1,222 3.7 1,822 1.3 Franchise fees 4,583 4.3 153 0.5 4,736 3.4 Trademarks 14,062 13.3 4,808 14.4 18,870 13.6 General use computer software 35,040 33.2 4,942 14.8 39,982 28.8 Other intangibles 313 0.3 119 0.4 432 0.3 By trading partner Africa 1,030 1.0 44 0.1 1,074 0.8 Americas 20,144 19.1 2,906 8.7 23,050 16.6

Brazil 3,123 3.0 708 2.1 3,831 2.8 Canada 8,287 7.8 1,036 3.1 9,323 6.7 Mexico 2,526 2.4 379 1.1 2,905 2.1

Asia and Pacific 31,317 29.7 8,916 26.7 40,233 28.9 Australia 2,691 2.5 494 1.5 3,185 2.3 China 3,333 3.2 176 0.5 3,509 2.5 Japan 10,721 10.2 7,817 23.4 18,538 13.3 Korea (Rep. of) 3,968 3.8 80 0.2 4,048 2.9 Singapore 3,479 3.3 16 0.0 3,495 2.5 Chinese Taipei 4,356 4.1 22 0.1 4,378 3.1

Europe 52,211 49.4 20,382 60.9 72,593 52.2 European Union 42,194 40.0 14,886 44.5 57,080 41.1

Belgium-Luxembourg 1,897 1.8 684 2.0 2,581 1.9 France 3,441 3.3 4,016 12.0 7,457 5.4 Germany 6,181 5.9 3,187 9.5 9,368 6.7 Ireland 12,850 12.2 1,239 3.7 14,089 10.1 Italy 1,800 1.7 124 0.4 1,924 1.4 Netherlands 3,249 3.1 756 2.3 4,005 2.9 Spain 1,518 1.4 243 0.7 1,761 1.3 Sweden 1,010 1.0 786 2.3 1,796 1.3 United Kingdom 6,864 6.5 3,031 9.1 9,895 7.1 Switzerland 8,281 7.8 5,272 15.8 13,553 9.7

Middle East 880 0.8 200 0.6 1,080 0.8 Int'l organizations and unallocated 1 0.0 1,002 3.0 1,003 0.7 Total 105,584 100.0 33,450 100.0 139,034 100.0

Source: Bureau of Economic Analysis online information, "Royalties and license fees". Viewed at: http://www.bea.gov/international/international_services.htm#detailedstatisticsfor [May 2012].


Table AIII.4 Main dedicated IP laws and regulations

Description WTO document WTO base reference document Date

Summary of State and Federal laws and regulations governing trade secret protection in the United States

IP/N/1/USA/U/1 IP/N/1/USA/1 20/01/1996

Title 17 - Copyrights, United States Code IP/N/1/USA/C/1 IP/N/1/USA/1 25/03/1996

Chapter II - Copyright Office, Library of Congress, of Title 37, Code of Federal Regulations

IP/N/1/USA/C/2 IP/N/1/USA/1 25/03/1996

Title 15, United States Code, §§45(a), 1052(a) and 1125(a). Title 27, United States Code, §§205(e)-(f). The United States has, furthermore, referred to trademark laws and regulations as being relevant generally in respect of the protection of geographical indications and will provide correlation charts (so-called "roadmaps") for all US main dedicated laws and regulations and "other laws and regulations" as a complement to their notification under Article 63.2 (to be distributed in document IP/N/1/USA/1)

IP/N/1/USA/G/1 IP/N/1/USA/1 06/06/1996

Title 35, United States Code, §§171-173 and §289, as notified by the United States under Article 63.2 of the Agreement. The United States has also notified Title 37, Chapter II, §§151-155 of the Code of Federal Regulations as being relevant to the protection of industrial designs; the text of these provisions can be found in document IP/N/1/USA/P/2. The United States has, furthermore, referred to patent laws and regulations as being relevant generally in respect of industrial design protection and will provide correlation charts (so-called "roadmaps") for all US main dedicated laws and regulations and "other laws and regulations" as a complement to their notification under Article 63.2 (to be distributed in document IP/N/1/USA/1)

IP/N/1/USA/D/1 n.a. 07/06/1996

Title 15, United States Code, §§1051-1127. Also, information is reproduced, as notified by the United States concerning some other Sections of the United States Code and the Code of Federal Regulations protecting specific names, terms and marks, as well as some Sections of the United States Code which relate to trademarks. Reference has also been made by the United States to State laws governing deceptive business practices and laying down some measure of trademark-style protection. The United States will provide a summary of these laws along with correlation charts (so-called "roadmaps") for all US main dedicated laws and regulations and "other laws and regulations" as a complement of their notification under Article 63.2 (to be distributed in document IP/N/1/USA/1)

IP/N/1/USA/T/1 n.a. 07/06/1996

Title 35, United States Code, Parts I to IV. The United States will provide correlation charts (so-called "roadmaps") for all US main dedicated laws and regulations and "other laws and regulations" as a complement to their notification under Article 63.2 (to be distributed in document IP/N/1/USA/1)

IP/N/1/USA/P/1 IP/N/1/USA/1 12/06/1996

Title 37, Chapter I, Subchapter A, Parts 2 and 6 of the Code of Federal Regulations. The United States has also referred to Chapter I, Subchapter A, Parts 1 and 3 of the Code of Federal Regulations as being relevant to trademarks. The text of these Parts can be found in document IP/N/1/USA/P/2

IP/N/1/USA/T/2 n.a. 12/06/1996

The present document reproduces Title 37, Code of Federal Regulations, Chapter I, Subchapter A, Parts 1, 3, 5, 7, 10, 15 and 15a and Subchapter B as well as Chapters IV and V. The United States will provide correlation charts (so-called "roadmaps") for all US main dedicated laws and regulations and "other laws and regulations" as a complement to their notification under Article 63.2 (to be distributed in document IP/N/1/USA/1)

IP/N/1/USA/P/2 IP/N/1/USA/1 15/07/1996

Title 17, United States Code, §§901-914 IP/N/1/USA/L/1 n.a. 20/01/1997

Title 37, Code of Federal Regulations, Chapter I, Subchapter C and Chapter II, Subchapter A, Part 211

IP/N/1/USA/L/2 n.a. 20/01/1997

Title 7, United States Code, Chapter 57, §2321 et seq. The United States has also notified Title 35, United States Code, Part II, Chapter 15, §§161-164 as being relevant to the protection of plant varieties. The text of the provisions in question can be found in document IP/N/1/USA/P/1

IP/N/1/USA/P/3 IP/N/1/USA/1 20/01/1997

Title 7, Code of Federal Regulations, Subtitle B, Subchapter E, Part 97 – Plant Variety and Protection Scope

IP/N/1/USA/P/4 IP/N/1/USA/1 20/01/1997

Base Document IP/N/1/USA/1 21/01/1997

Economic Espionage Act, Title 18, Part I, Chapter 90 IP/N/1/USA/U/2 IP/N/1/USA/1 06/10/1998

Consolidated version of Title 17 of the United States Code, Copyright Law, as amended through 13 December 2003

IP/N/1/USA/C/3 IP/N/1/USA/I/1

n.a. 09/02/2004

Table AIII.4 (cont'd)


Description WTO document WTO base reference document Date

Consolidated version of Title 35 of the United States Code, Patent Law, as amended through 13 December 2003.

IP/N/1/USA/I/2 n.a. 09/02/2004

Consolidated version of Title 15 of the United States Code, Trademark Law, as amended through 13 December 2003.

IP/N/1/USA/I/3 n.a. 20/02/2004

Text of the legislation enacted by the US Congress that relates to Intellectual Property, entitled "Prioritizing Resources and Organization for Intellectual Property Act 2008

IP/N/1/USA/E/1 n.a. 18/06/2009

Trademark Technical and Conforming Amendment Act of 2010 An Act to make certain technical and conforming amendments to the Lanham Act (otherwise known as the "Trademark Act of 1946")

IP/N/1/USA/T/3 IP/N/1/USA/2 08/06/2010


Act to amend title 35, United States Code, to provide for patent reform IP/N/1/USA/P/5 IP/N/1/USA/3 21/10/2011



Appendix R – Consolidated Patent Rules – Title 37 – Code of Federal Regulations Patents, Trademarks, and Copyrights

IP/N/1/USA/D/2 IP/N/1/USA/P/6

IP/N/1/USA/4 27/02/2012

U.S. Trademark Law – Rules of Practice and Federal Statutes IP/N/1/USA/T4 IP/N/1/USA/4 27/02/2012

U.S. Trademark Technical and Conforming Amendments IP/N/1/USA/T5 IP/N/1/USA/4 27/02/2012

Texts notified as "other laws and regulations"

Title 15, United States Code, Chapters 1, 2 and 88 IP/N/1/USA/1 21/01/1997

Civil and Administrative procedures and Remedies (TRIPS, Part III, Section 2, Articles 42-49)

IP/N/1/USA/1 21/01/1997

Title 28, United States Code, Part IV, Chapter 83 (§§1291, 1292, 1294, 1295); Chapter 85 (§1338); Chapter 87 (§§1391, 1400); Chapter 91 (§1498); Chapter 113 (§1694); Chapter 123 (§1928). Appendix to Title 28, United States Code, Federal Rules of Civil Procedure and Forms 16 and 17. Note: Title 28, United States Code generally addresses matters of judicial procedure in the United States, and should be referred to for further information. Provisions regarding enforcement of intellectual property rights and remedies are also found in US national laws and regulations regarding each of the forms of intellectual property specified in Part II of the TRIPS Agreement

IP/N/1/USA/1 21/01/1997

Title 15, United States Code, Chapter 22, Subchapter III, §§1124-1125. Title 17, United States Code, Chapter 6, §§601-603 and Chapter 9, §§905, 910. Title 18, United States Code, Chapter 113, §§2318 2320. Title 19, United States Code, Chapter 4, Subtitle II, Part II, §1337; Subtitle III, §§1499, 1526; Part V, §§1595a, 1623. Title 19, Code of Federal Regulations, Parts 133, 177 and 210

IP/N/1/USA/1 21/01/1997

See relevant provisions in laws and regulations mentioned under "Copyright Laws and Regulations" and "Trademark Laws and Regulations"

IP/N/1/USA/1 21/01/1997



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