House Ways and Means Committee
Committee on Ways and Means
For Immediate Release Contact: Press Office
September 21, 2006 202-225-8933
Chairman Thomas Introduces Trade Preferences BillWASHINGTON – Today, Rep. Bill Thomas (R-CA), Chairman of the Ways and Means Committee, introduced H.R. 6142, a bill to provide trade preferences for developing countries.This legislation has three major components:
- African Investment Incentive Act to provide investment incentives for U.S. companies in Africa and to extend modified third country fabric benefits.
- Generalized System of Preferences extension for two years with modifications to assure preferences benefit countries in the most need.
- Haitian Hemispheric Opportunity through Partnership Encouragement Act (HOPE)to provide certain apparel benefits to Haiti.
“This legislation is aimed at continuing and targeting our bipartisan humanitarian efforts through trade,” said Ways and Means Chairman Bill Thomas (R-CA). “It will enhance opportunities for the world’s poorest countries, while assuring no adverse impact to U.S. industries or workers.”A summary of the legislation follows:
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Committee on Ways and Means
Extension of Generalized System of Preferences,
Africa Investment Incentive Act, and
Haitian Hemispheric Opportunity through
Partnership Encouragement (“HOPE”) Act
H.R. 6142, SummaryGeneralized System of Preferences (GSP)
- Extends GSP for two years, consistent with the President’s budget request.
2. Tightens rules on competitive need limit waivers to tailor the program for use by lesser developed countries that need help exporting to the United States:· Eliminates the opportunity for waivers on any product category when a country exports more than $1.5 billion of that product in the prior year.1 Eliminates the opportunity for waivers for countries with per capita income more than $3400..African Investment Incentive Act1. Provides a tax credit for new U.S. labor and capital investments in AGOA-eligible countries:
- An elective credit is available to offset U.S. tax on income from active trade or business operations (other than mining, oil and gas) in AGOA-eligible countries. The credit is available to U.S. corporations that invest in AGOA-eligible countries directly (through “branch” operations) and indirectly (through controlled foreign corporations and partnerships).
- The credit is equal to 60 percent of additional wages and fringe benefits and an amount (15 percent – 65 percent) of depreciation on new investments in tangible property (other than vessels, aircraft and related containers). Credit can be carried forward for 10 years. Credit (as well as any carryforward) expires for taxable years beginning after December 31, 2015.
- Extends current provision allowing benefits for apparel made with fabric from third countries until September 2008, with a full 3.5 percent cap.
3. Starting in October 2008, replaces current third country fabric benefit with a new rule of origin for lesser developed countries for apparel products based upon the percentage of African content. The new rule would allow duty free access for apparel containing 50 percent or more African content (or U.S., U.S. free trade agreement, or Caribbean content). This 50 percent in the rule would grow to 60 percent in increments through year 2015 and be subject to a 3.5 percent cap.4. Provides an exception to the third country fabric benefit and to the benefit under the newly created rule of origin for apparel goods made from components that are in “abundant supply” in Africa. The purpose is to remove current disincentives for the investment in fabric production in Africa.
Specifically, the bill requires the International Trade Commission (ITC) to determine which products are being produced commercially in Africa and in what amount. After the ITC-determined level of African supply is used, then apparel companies in Africa may use the third country rule for additional demand. In particular, denim is deemed to be in abundant supply because of known production in Lesotho.
- Allows duty free treatment for lesser developed countries for certain textiles (non-apparel) of wholly made African fabric.
Haitian Hemispheric Opportunity through Partnership Encouragement (“HOPE”) Act
- Applies the same political, economic, and labor criteria as the African Growth and Opportunity Act (AGOA).
2. Applies same textile and apparel transshipment requirements as AGOA.3. In addition to current CBI benefits, provides a new rule of origin for apparel:
- 50% of the value of the finished product must be of U.S., Haitian, NAFTA, AGOA, CBI, Andean, or FTA origin in years 1-3; in year 4, the percentage grows to 55% and in year 5, to 60%
- Allows the new test to be applied on an annual, aggregated basis
- Caps the amount of trade under the new test at 1% of U.S. apparel imports in year 1, growing by 0.25 percentage points per year through year 5
4. Allows a “single transformation” rule of origin for bras, so that components can be sourced from anywhere as long as they are assembled in Haiti.5. Provides a small tariff preference level (TPL) for woven apparel, of 50 million square meter equivalents (SMEs) in years 1 and 2 and 33.5 million SMEs in year 3.6. Requires a study by the International Trade Commission to determine the effect of the textile and apparel benefits on the trade markets and industries in Haiti, the Caribbean Basin countries, and the United States.7. Assures that short supply determinations can be revoked in the case of fraud.8. Liberalizes the rule of origin for wire harnesses, providing benefits if 50% of the value added is of U.S., Haitian, NAFTA, AGOA, CBI, Andean, or FTA origin.
