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3.5 Preferences under Free Trade Agreements

A. US-Israel FTA

The US-Israel FTA took effect on 1 September 1985.

Pursuant to HTSUS General Note 3(v), duty free treatment is allowed for products of the West Bank, Gaza Strip or a QIZ, provided certain requirements are met. A QIZ is defined as any area that (1) encompasses portions of the territory of Israel and Jordan or Israel and Egypt; (2) has been designated by local authorities as an enclave where merchandise may enter without payment of duty or excise taxes; and (3) has been designated by the USTR in an notice published in the Federal Register as a QIZ.

a) Eligible Items

The FTA covers most tariff items listed in the HTSUS, but it does allow the US and Israel to protect sensitive agricultural sub-sectors with non-tariff barriers including import bans, quotas and fees.
A good is eligible for reduced duty or duty-free treatment if it (a) is the growth, product or manufacture of Israel; (b) is imported directly from Israel, the West Bank, the Gaza Strip or a QIZ into the US customs territory; and (c) meets a value-added requirement.

b) Designation in the “Special” Column of the HTSUS

“IL”

c) Additional Information

•    HTSUS General Note 8:
www.usitc.gov/tata/hts/bychapter/index.htm.
•    CBP Web site:
http://www.cbp.gov/xp/cgov/trade/trade_programs/international_agreements/free_trade/free_trade_area/.
•    USTR Web site:
http://www.ustr.gov/trade-agreements/free-trade-agreements/israel-fta.

B. NAFTA

NAFTA was signed in 1992 by the US, Canada and Mexico and entered into force on 1 January 1994.
NAFTA eliminates tariffs on most goods originating in the member countries over a maximum transition period of 15 years. Under the duty elimination schedule previously established in the US-Canada FTA, goods originating in Canada have been duty-free in the US since 1998. For most Mexico US and Canada Mexico trade, NAFTA either eliminated existing duties immediately or phased them out over five to 10 years.

a) Designation in the “Special” Column of the HTSUS

“CA” for items from Canada
“MX” for items from Mexico

b) Additional Information

•    HTSUS General Note 12:
www.usitc.gov/tata/hts/bychapter/index.htm.
•    Customs Publication No. 571, The North American Free Trade Agreement: A Guide to Customs Procedures. This guide may be purchased from the Government Printing Office or downloaded on-line at http://www.cbp.gov/xp/cgov/trade/trade_programs/international_agreements/free_trade/nafta/customs_procedures/.  
•    CBP Web site:
http://www.cbp.gov/xp/cgov/trade/trade_programs/international_agreements/free_trade/nafta/.
•    USTR Web site:
http://www.ustr.gov/trade-agreements/free-trade-agreements/north-american-free-trade-agreement-nafta.

C. US-Jordan FTA

The US Jordan FTA entered into force on 17 December 2001.

a) Eligible Items

The FTA eliminates tariffs on most goods originating in Jordan and the US over a transition period of 10 years. A good is eligible for duty-free treatment if it (a) is the growth, product or manufacture of Jordan or a new or different article of commerce that has been grown, produced or manufactured in Jordan; (b) is imported directly from Jordan into the US customs territory; and (c) meets a value-added requirement.
The FTA does not affect merchandise entered from a QIZ.

b) Designation in the “Special” Column of the HTSUS

“JO”

c) Additional Information

•    HTSUS General Note 18:
www.usitc.gov/tata/hts/bychapter/index.htm.
•    CBP Web site:
http://www.cbp.gov/xp/cgov/trade/trade_programs/international_agreements/free_trade/jordan/.
•    USTR Web site:
http://www.ustr.gov/trade-agreements/free-trade-agreements/jordan-fta.

D. US-Chile FTA

The US-Chile FTA entered into force on 1 January 2004.

a) Eligible Items

Under the agreement, all tariffs and quotas on all goods are eliminated immediately or after a four-year transition period. 

A good is eligible for duty-free treatment if (a) it is produced entirely in the territory of Chile, the US, or both, exclusively from originating materials; or (b) materials used to produce the good that are not themselves originating goods are transformed in such a way as to cause their tariff classification to change or meet other requirements.

b) Eligible Textile and Apparel Articles

Textiles and apparel are duty-free if they meet a tariff shift rule that implicitly imposes a “yarn-forward” requirement. A limited yearly amount of textiles and apparel containing non-US or non-Chilean yarns, fibres or fabrics may also qualify for duty-free treatment. The FTA provides for special safeguard measures to stem potential surges of textile and apparel imports in bi-lateral trade.

c) Designation in the “Special” Column of the HTSUS

“CL”

d) Additional Information

•    HTSUS General Note 26:
www.usitc.gov/tata/hts/bychapter/index.htm.
•    CBP Web site:
http://www.cbp.gov/xp/cgov/trade/trade_programs/international_agreements/free_trade/us_cfta/.
•    USTR Web site:
http://www.ustr.gov/trade-agreements/free-trade-agreements/chile-fta.

E. US-Singapore FTA

The US-Singapore FTA took effect on 1 January 2004.

a) Eligible Items

The FTA eliminated immediately most US tariffs on Singaporean goods, with remaining tariffs phased out over three to 10 years.

A good is eligible for preferential tariff treatment if (a) it is wholly obtained or produced entirely in the territory of Singapore, the US, or both; (b) materials used to produce the good that are not themselves originating goods are transformed in such a way as to cause their tariff classification to change or meet other requirements; or (c) the good itself, as imported, is listed in Annex 3B of the agreement and is imported into the territory of the US from the territory of Singapore. 

b) Eligible Textile and Apparel Articles

Textiles and apparel are duty-free if they meet a tariff shift rule that implicitly imposes a “yarn-forward” requirement. A limited yearly amount of textiles and apparel containing non-US or non-Singaporean yarns, fibres or fabrics may also qualify for duty-free treatment. The FTA provides for special safeguard measures to stem potential surges of textile and apparel imports in bi-lateral trade.

c) Designation in the “Special” Column of the HTSUS

“SG”

d) Additional Information

•    HTSUS General Note 25:
www.usitc.gov/tata/hts/bychapter/index.htm.
•    CBP Web site:
http://www.cbp.gov/xp/cgov/trade/trade_programs/international_agreements/free_trade/us_sgfta/.
•    USTR Web site:
http://www.ustr.gov/trade-agreements/free-trade-agreements/singapore-fta.

F. US-Australia FTA

The US-Australia FTA entered into force on 1 January 2005.

a) Eligible Items

The FTA immediately removed duties on 97% of Australian exports of manufactured goods to the US. By 2015, tariffs on all manufactured goods trade between the US and Australia will be eliminated. US tariffs on approximately 20% of agricultural imports from Australia were eliminated immediately. Most tariffs and quotas on dairy products, peanuts, tobacco, cotton, avocados and wine will be phased out.
Under the FTA, a good qualifies for preferential tariff treatment if it is (a) wholly obtained or produced in either Australia or the US; (b) produced in either country from materials originating from either country; or (c) produced partially from materials that have originated from a non-FTA country but pass a rules of origin test.

b) Eligible Textile and Apparel Articles

The agreement applies the “yarn-forward” principle; i.e., fabrics produced for export must be formed entirely from yarns formed in either the US or Australia and apparel for export must be produced entirely from fabrics produced in either Australia or the US from yarns entirely formed in either of the two countries. In addition, the apparel must be cut or knitted to shape or assembled in either Australia or the US. The FTA provides for special safeguard measures to stem potential surges of textile and apparel imports in bi-lateral trade.

c) Designation in the “Special” Column of the HTSUS

“AU”

d) Additional Information

•    HTSUS General Note 28:
www.usitc.gov/tata/hts/bychapter/index.htm.
•    CBP Web site:
http://www.cbp.gov/xp/cgov/trade/trade_programs/international_agreements/free_trade/australia/.
•    USTR Web site:
http://www.ustr.gov/trade-agreements/free-trade-agreements/australian-fta.

G. US-Morocco FTA

The US-Morocco FTA entered into force on 1 January 2006, effectively terminating Morocco’s GSP eligibility.

a) Eligible Items

The FTA will eliminate tariffs on virtually all trade between the two countries within 10 years. The FTA provides immediate bi-lateral tariff reduction on many agricultural products.
Under the agreement, a good qualifies for preferential tariff treatment if it is (a) wholly the growth, product or manufacture of Morocco, the US, or both; or (b) a new or different good that has been grown, produced or manufactured in Morocco, the US, or both. A value-added requirement must also be met.

b) Eligible Textile and Apparel Articles

The FTA contains a yarn-forward rule of origin. Thus, to qualify as an originating good under the agreement, an apparel product must have been cut (or knitted to shape) and sewn or otherwise assembled in Morocco from yarn or fabric made from yarn that originates in Morocco, the US, or both. Tariffs on textiles and apparel meeting the rule of origin will also be phased out over the course of 10 years. The FTA provides for special safeguard measures to stem potential surges of textile and apparel imports in bi-lateral trade.

c) Designation in the “Special” Column of the HTSUS

“MA”

d) Additional Information

•    HTSUS General Note 27:
www.usitc.gov/tata/hts/bychapter/index.htm.
•    CBP Web site:
http://www.cbp.gov/xp/cgov/trade/trade_programs/international_agreements/free_trade/morocco/.
•    USTR Web site:
http://www.ustr.gov/trade-agreements/free-trade-agreements/morocco-fta.

H. DR-CAFTA

President Bush signed into law the implementing legislation for the DR-CAFTA on 2 August 2005. Parties to the agreement include Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, the Dominican Republic and the US. All countries have ratified the agreement. The agreement entered into force in 2006 with respect to the US, El Salvador, Honduras, Guatemala and Nicaragua. The agreement entered into force with respect to the Dominican Republic in 2007 and with respect to Costa Rica in 2009.
The DR-CAFTA replaced US uni-lateral preferential trade treatment extended to these countries under CBI and GSP.

a) Eligible Items

The DR-CAFTA liberalises trade in goods, services, government procurement, intellectual property and investment. All agricultural trade eventually becomes duty-free, with certain exceptions. Tariffs on remaining trade will be phased out incrementally over five to 20 years.

b) Eligible Textile and Apparel Articles

The DR-CAFTA removes all duties on textile and apparel imports that qualify under the agreement’s rules of origin. This duty-free treatment may be retroactive to 1 January 2004, depending on each country. Special safeguard measures are also permitted during the duty phase-out period.
The DR-CAFTA parties implemented several significant changes to the agreement’s textile provisions on 15 August 2008, including changing the rules of origin to ensure that pocket fabric in apparel is sourced from the US or another DR-CAFTA party. The parties also implemented a reciprocal textile input sourcing rule with Mexico.

c) Designation in the “Special” Column of the HTSUS

“P” or “P+”

d) Additional Information

•    HTSUS General Note 29:
www.usitc.gov/tata/hts/bychapter/index.htm.
•    CBP Web site:
http://www.cbp.gov/xp/cgov/trade/trade_programs/international_agreements/free_trade/dominican_republic/.
•    USTR Web site:
http://www.ustr.gov/trade-agreements/free-trade-agreements/cafta-dr-dominican-republic-central-america-fta.

I. US-Bahrain FTA

President Bush signed into law the implementing legislation for the US-Bahrain FTA on 11 January 2006 and the agreement entered into force on 1 August 2006.

a) Eligible Items

100 percent of bi-lateral trade in consumer and industrial products became duty-free immediately upon entry into force of the agreement. In addition, Bahrain and the US provided immediate duty-free access to virtually all products in their tariff schedules and will phase out tariffs on the remaining handful of products within ten years.

b) Designation in the “Special” Column of the HTSUS

“BH”

c) Additional Information

•    HTSUS General Note 30:
www.usitc.gov/tata/hts/bychapter/index.htm.
•    CBP Web site:
http://www.cbp.gov/xp/cgov/trade/trade_programs/international_agreements/free_trade/bahrain/.
•    USTR Web site:
http://www.ustr.gov/trade-agreements/free-trade-agreements/bahrain-fta.

J. US-Oman FTA

The US-Oman FTA entered into force on 1 January 2009.

a) Eligible Items

Oman and the US provided immediate duty-free access to almost all consumer and industrial products and 87 percent of all agricultural tariff lines. Both countries will phase out all tariffs on the remaining eligible goods within ten years.

b) Designation in the “Special” Column of the HTSUS

“OM”

c) Additional Information

•    HTSUS General Note 31:
www.usitc.gov/tata/hts/bychapter/index.htm.
•    CBP Web site:
http://www.cbp.gov/xp/cgov/trade/trade_programs/international_agreements/free_trade/oman/.
•    USTR Web site:
http://www.ustr.gov/trade-agreements/free-trade-agreements/oman-fta.

K. US-Peru TPA

The US-Peru TPA entered into force on 1 February 2009.

a) Eligible Items

Peru and the US provided immediate duty-free access to a broad range of goods and will phase out the duties on all other goods within 17 years. Tariffs on textiles and apparel meeting the rule of origin (generally yarn-forward) were eliminated upon entry into force of the agreement.

b) Designation in the “Special” Column of the HTSUS

“PE”

c) Additional Information

•    HTSUS General Note 32:
www.usitc.gov/tata/hts/bychapter/index.htm.
•    CBP Web site:
http://www.cbp.gov/xp/cgov/trade/trade_programs/international_agreements/free_trade/peru/.
•    USTR Web site:
http://www.ustr.gov/trade-agreements/free-trade-agreements/peru-tpa.

L. Potential Additional FTAs

The US has completed negotiations on FTAs with Panama, Colombia and South Korea. The US-South Korea FTA is expected to be considered by the US Congress during the first half of 2011 and is likely to enter into force during the second half of the year. The outlook for the US-Colombia TPA and the US-Panama TPA is more uncertain, although there is a chance that these agreements could be considered by the US Congress in 2011.

Content provided by Hong Kong Trade Development Council
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