Chapter 5 & 6

Binding Commitments

Under GATT, when countries agree to open their markets for goods or services, they "bind" their commitments. For goods, these bindings amount to ceilings on customs tariff rates.

Agreement on Preshipment Inspection-

pertains to an importing country's right to pre-shipment inspection. This right to pre-inspect goods for quality, quantity, and value is afforded only to developing countries. Because of the limited resources of developing countries, GATT recognizes their right to hire private companies to inspect the goods in the country of export.

Principle of Transparency

requires countries to provide clear and accessible customs regulations so that they are not used as disguised barriers to trade.

Impairment and Nullification

Damage to a country's benefits and expectations from its WTO membership through another country's change in its trade regime or failure to carry out its WTO obligations.

Rule of Specificity

It requires the use of a heading and subheading that provides a more specific description of the good over one that gives a more general description.

Substantial Transformation Test

(where a good or material is further processed), which usually results in a tariff classification change for the goods.

Ad Valorem Duties

Duties are generally based on the value of the goods some other factors include weight or quantity (specific duties), or a combination (compound duties). Ad valorem literally means "according to value" and refers to any charge, duty, or tax that is applied as a percentage of value

Specific Duties

Duties based on weight or quantity

Dumping

If a company exports a product at a price lower than the price it normally charges on its own home market; it is said to be "dumping" the product.

Technical Committee on Rules of Origin

In conjunction with the Origin Agreement, the Technical Committee on Rules of Origin and the Committee on Rules of Origin has been established to interpret the rules.

Tariff Act of 1974

Section 301 of the Trade Act of 1974 provides the United States with the authority to enforce trade agreements, resolve trade disputes, and open foreign markets to U.S. goods and services. It is the principal statutory authority under which the United States may impose trade sanctions on foreign countries that either violate trade agreements or engage in other unfair trade practices.

Bureau of Export Administration (BXA)

The BXA is organized into two branches: Export Administration and Export Enforcement. Export Administration implements and administers the export controls as detailed in the EAR. It consists of five offices: Office of Nuclear and Missile Technology Controls, Office of Chemical and Biological Controls and Treaty Compliance, Office of Strategic Trade and Foreign Policy Controls, Office of Strategic Industries and Economic Security, and Office of Export Services. The last office provides assistance to exporters and reexporters, conducts educational seminars, and maintains the EAR. The Export Enforcement branch has three offices: Office of Export Enforcement, Office of Environmental Support, and Office of Antiboycott Compliance. The last office enforces the Restrictive Trade Practices and Boycotts restrictions enacted under U.S. law.

Export Administration Regulations (EAR)

The Export Administration Regulations (EAR) provide a general overview of U.S. export restrictions as published by the Bureau of Export Administration (BXA).

Safeguards

WTO member may take a "safeguard" action (i.e., restrict imports of a product temporarily) to protect a specific domestic industry from an increase in imports of any product which is causing, or which is threatening to cause, serious injury to the industry

Subsidies

a financial contribution (ii) by a government or any public body within the territory of a Member (iii) which confers a benefit. Examples of subsidies include— loans at preferential rates, grants, tax incentives, or the providing of goods or services by a government at prices below market levels.

Generalized System of Preferences (GSP)

a framework under which developed countries give preferential tariff treatment to manufactured goods imported from developing countries. It states that reduced tariff rates are to be removed if a "country has not taken steps to afford internationally recognized worker rights to workers in the country.". It is targeted to helping less developed countries

General Agreement on Tariffs and Trade (GATT)

a legal agreement between many countries, whose overall purpose was to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas

General Agreement on Trade in Services (GATS)

a treaty of the World Trade Organization which entered into force in January 1995 as a result of the Uruguay Round negotiations and are targeted to reducing obstacles to trade in services

Ecolabel

a voluntary mark in the EU that means a manufactures products are less harmful to the environment than other similar products.

Origin Agreement

adopts the change in tariff classification as the primary method to determine origin. The Origin Agreement also emphasizes the importance of transparency. It requires all WTO countries to publish their nation's origin rules and applications of their rules. It also requires members to give a binding assessment to anyone who requests an advanced determination of origin.

North American Free Trade Agreement (NAFTA)

agreement signed by Canada, Mexico, and the United States, creating a trilateral trade bloc in North America

Agreement on Technical Barriers to Trade (TBT)

aims to ensure that technical regulations, standards, testing, and certification procedures are non-discriminatory and do not create unnecessary obstacles to trade

Destination Control Statement

alert foreign buyers of goods and documents that diversion contrary to U.S. law is prohibited. Requires that the following language be placed upon all export documents including the bill of lading and commercial invoice: "These commodities, technology, or software were exported from the United States in accordance with the Export Administration Regulations. Diversion contrary to U.S. law is prohibited.".

Code on Subsidies and Countervailing Duties

allows an importing country to impose duties when it can prove that a foreign subsidy would cause injury to a domestic industry.

Countervailing Subsidy

also known as anti-subsidy duties, are trade import duties imposed under World Trade Organization rules to neutralize the negative effects of subsidies

National Treatment Principle

applies once goods have been imported into a country. Once foreign goods pass through customs, they are to be treated the same as goods produced in the country of import.

WTO Panels

are like tribunals, usually consisting of three, sometimes five, experts that consult on countries disputes

Free Trade Zone (FTZ)

are specially designated areas within a country that are "outside" the country for purposes of assessing and collecting tariffs and import fees.

Export Processing Zones (EPZ)

areas within developing countries that offer incentives and a barrier-free environment to promote economic growth by attracting foreign investment for export-oriented production. These including free trade zones, special economic zones, bonded warehouses, free ports, and customs zones

Dispute Settlement Body (DSB)

as the sole authority for appointing the panel of experts to decide cases

European Union (EU)

at regional trade integration consisting of 28 countries with a combined population of 508 million. Geographically, it covers Western Europe, including the United Kingdom and Ireland; Central Europe, including Germany and Poland; and Eastern Europe, including the Baltic States, Hungary, Romania, and Bulgaria, and the Scandinavian countries of Denmark, Finland, and Sweden

Customs Valuation Code

attempts to standardize country challenges to the valuations placed on goods being imported

U.S. Trade Representative (USTR)

authorized by statute (Tariff Act of 1974) to retaliate against activities of other countries that are deemed to violate U.S. rights under international trade agreements. The USTR coordinates the development of U.S. trade policy, negotiates international trade regulations on behalf of the U.S., and seeks to expand U.S. exports by promoting the removal of foreign trade barriers and the opening of foreign markets.

General License

authorizing exports, without application by the exporter and requires only the submission of the Shipper's Export Declaration

Immigration and Customs Enforcement

charged with enforcing immigration law

Essential Character

chosen HTS classification must have the essential character of the complete or finished article. The classification should state that the article is complete or finished, or alternatively as unassembled or disassembled. The classification of goods consisting of a mixture or combination of materials shall be taken to include a reference to goods consisting wholly or partly of such material.

Harmonized Tariff Schedule (HTS)

classification of goods in which a ten-digit number is assigned to the product. It is published by the World Customs Organization and provides the product descriptions and accompanying tariff rates that are used by most trading countries.

Country Group List

consists of countries that are being boycotted by the U.S. government

Theory of Comparative Advantage

economic growth can be obtained by allowing people to do the things they are best at doing and then trading or buying goods and services that are provided by other specialists. If national industries are not protected through government subsidies or the assessment of excessive tariffs on imported goods, then nations will restructure to produce what they are best at producing. This allows them to export their surpluses and be able to more cheaply purchase imports of goods they are not efficient at producing

Special 301

enable U.S. government agencies to unilaterally retaliate against foreign countries that do not allow open access to American goods. Enacted in 1988 and gives greater power to the USTR to open foreign markets. It allows the USTR to create "priority watch lists" to designate countries that should be monitored for unfair trade practices.

Specified Processes Test

expressly lists the types of processes or operations that are considered to confer country of origin status

Countervailing Duties

extra duties or charges countries place on imported goods to offset the subsidies granted to the exporters by their home governments

Computed Value

fabricated by adding the manufacturer's actual labor and material costs, along with an estimate of its general expenses and profits

Bali Package

focuses on reducing import tariffs and agricultural subsidies, with the goal of making it easier for developing countries to trade in global markets. The developed countries agreed to eliminate or abolish import quotas on agricultural products from the developing world. Another important target of the Bali agreement is reforming customs bureaucracies and formalities to facilitate trade

Transaction Value

goods must be priced at a value that would be the result of a sale between two unrelated parties in the ordinary course of business.

Embargoes

government order that restricts commerce with a specified country or the exchange of specific goods

Illegal Subsidies

government payments or other financially quantifiable benefits provided to domestic producers or exporters contingent on the export of their goods and services.

Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS)

grants the licensor or intellectual property owner the rights to prevent imports of licensed goods into its domestic market.

CE Mark (Conformité Europiénne mark)

harmonizes quality standards throughout the EU and was created under EU Directives 94/25/EC and 2003/44/EC. If the product has been CE mark certified, then the issue of quality is satisfied.

Agreement on Import Licensing Procedures

import licensing should be simple, transparent and predictable so as not to become an obstacle to trade

Bonded Warehouse

is a building or other secured area in which dutiable goods may be stored or undergo manufacturing operations, without payment of duty

Drawback

is a form of tax relief in which a lawfully collected customs duty is refunded or remitted wholly or in part because of the particular use made of the commodity on which the duty was collected.

Commodity Control List

is a list of sensitive products whose export is restricted or regulated.

Maquiladora

is a manufacturing operation in a free trade zone (FTZ), where companies import material and equipment on a duty-and tariff-free basis for assembly, processing, or manufacturing.

Statement by Ultimate Consignee and Purchaser

is an assurance from the purchaser that the goods will not be resold or disposed of contrary to the requirements of the export license. The former is issued by the government of importation and certifies that the goods will be disposed of in the designated country.

Value Added Test-

is based upon the use of percentages, either of the value-added or percentage of component parts coming from imported materials, to determine the country of origin.

Country of Origin

is the last country in which a good or product was substantially transformed.

Ultimate Purchaser

is the last person in the country of import who receives the article in the form in which it was imported.

World Trade Organization (WTO)

is the only international body dealing with the rules of trade between nations. The primary purpose of the WTO is to remove barriers to international trade. The most important factor has been the success of the World Trade Organization (WTO), and its predecessor the General Agreement on Tariffs and Trade (GATT), in lowering tariffs and nontariff barriers to trade; the almost complete removal of the threat of expropriation as countries have moved to privatize their industries due to inefficiency; and the proliferation of free trade agreements (FTAs) that have further opened foreign markets.

Deductive Value

is the price that the goods being imported are ultimately sold at in the U.S. The importer is allowed to deduct a number of costs from that price, including international freight, duties, and certain commissions.

Transfer Pricing

is the setting of the price for goods and services sold between controlled or related legal entities within an enterprise. Transfer pricing is a major illegal tool for corporate tax avoidance.

Automated Export System (AES)

is the system used by U.S. exporters to electronically declare their international exports, known as Electronic Export Information (EEI), to the Census Bureau to help compile U.S. export and trade statistics.

Agreement on Customs Valuation

it establishes fair valuation as an internationally recognizable principle. It further makes transaction value the internationally preferred means of calculating dutiable value.

World Customs Organization (WCO)

makes changes and publishes the HTS. WCO member countries are responsible for 98 percent of all international trade

Suspension

means the temporary cessation of the operation of all or of a part of a treaty the suspending parties are released from the obligation to perform the treaty in their mutual relations during the period of the suspension

Uruguay Round

multilateral trade negotiations conducted within the framework of the General Agreement on Tariffs and Trade. It covered almost all trade, from toothbrushes to pleasure boats, from banking to telecommunications, from the genes of wild rice to AIDS treatments. It was quite simply the largest trade negotiation ever, and most probably the largest negotiation of any kind in history. Led to the creation of the World Trade Organization.

Sunset Reviews

procedures carried out every five years to establish if an anti-dumping duty is still justified

Cease and Desist Order

prohibiting future imports by the accused importer or distributor. The minimum daily penalty for violating an exclusion or a cease and desist order is $100,000 or twice the domestic value of the imported goods.

Tariff Act of 1930

provides a broad definition of subsidy. Prohibits the importation of goods produced with prison or indentured labor. Section 337 of the Tariff Act of 1930 provides for relief to be given by the ITC for "unfair methods of competition" in the importation or sale of imported goods

TARIC

provides rules for determining whether an import license is required for a particular good.

Marking Requirement

qualification for trade preferences under a free trade agreement, application of anti-dumping duties and quota restrictions, and granting of a special duty status for tariff reductions

Most Favored-Nation Principle-

requires WTO members to offer its lowest tariff rates to members of the WTO

Trade and Tariff Act of 1984

revised and expanded drawbacks. Under existing regulations several types of drawbacks have been authorized, but only three are of interest to most manufacturers. First, if articles manufactured in the U.S. using imported merchandise are exported, then the duties paid on the imported merchandise may be refunded as a drawback. Second, if both imported merchandise and domestic merchandise of the same kind and quality are used to manufacture articles, some of which are exported, then duties paid on the imported merchandise are refundable as a drawback, regardless of whether that merchandise was used in the exported articles. Finally, if articles of foreign origin imported for consumption are exported from the United States or are destroyed under the supervision of the CBP within three years of the date of importation, in the same condition as when imported and without being "used" in the United States, then duties paid on the imported merchandise are refundable as a drawback.

Agreement on the Application of Sanitary and Phytosanitary Measures (SPS)

sets out the basic rules for food safety and animal and plant health standards. It allows countries to set their own standards. But it also says regulations must be based on science. They should be applied only to the extent necessary to protect human, animal or plant life or health.

Foreign Affairs Doctrine

states that it is the exclusive domain of the federal government to enact laws regulating international trade. A state law that prohibits the procurement of goods from a particular country is an unconstitutional intrusion of federal government powers.

Dispute Settlement System (DSS)

the cornerstone of the international trading system provides for the prompt handling of international trade disputes. Which includes a three-tier system: Dispute Resolution Panels > AB > DSB (issues measure of retaliation in cases of noncompliance).

Customs Modernization Act

the legal responsibility for classifying and valuing imported products was transferred from the CBP to the importer of the goods. The importer is under a duty of reasonable care to correctly classify and value the goods being imported. This duty cannot legally be delegated to a customs broker. The importer remains liable for any misclassification or undervaluation.

Zeroing

the practice of assigning a value of zero anytime a foreign producer's export price to the U.S. is above that producer's "normal value." In practice, this methodology tends to increase exporters' dumping margins, resulting in the imposition of higher anti-dumping duties.

Country of Origin Rules

used to conform to import laws pertaining to the labeling of products manufactured, produced, assembled, or made from materials from different countries. Country-specific or industry-specific restrictions like anti-dumping duties, quotas, and voluntary restraint agreements are dependent upon the determination of the country of origin

Validated License

validated license, authorizing a specific export; (2) validated license authorizing multiple exports including the distribution license, project license, service supply license, and the comprehensive operations license;

Shipper's Export Declaration (SED)

was a standard United States government form required for all U.S. exports with commodities valued at US$2,500 or higher. It has been replaced with the Electronic Export Information form. The SED is used to control exports and compile trade statistics.

Free Trade Agreements (FTAs)

which allow two or more countries to form a free trade area, such as NAFTA or a customs union, such as the EU, that allows the area or union to be treated as a single country for purposes of complying with the most-favored-nation principle.