United States WT/TPR/S/56 
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III. TRADE POLICIES AND PRACTICES BY MEASURE 
(1) OVERVIEW  
1. The United States maintains liberal trading and in vestment regimes.  Furthermore, policies, 
practices and measures relating to trade and investment ar e, by and large, transparent.  In this regard, 
not only does the United States make information read ily available on the objectives and nature of its 
policy measures, but various independent bodies, such as the U.S. Intern ational Trade Commission 
and the General Accounting Office, evaluate the ec onomic effectiveness and welfare effects of such 
measures; reports of these bodies are made public. 
2. Most imports either enter the United States duty -free or are subject to very low tariffs, all 
except two of which are bound.  Zero tariffs apply to  nearly one-third of national tariff lines and the 
simple average applied MFN tariff rate has declined  from 6.4% in 1996 to 5.7% in 1999; the average 
can be expected to fall to 4.6% once the Ur uguay Round (UR) and ITA tariff cuts are fully 
implemented.  As a result of the NAFTA, even lower preferential tariff rates apply to two of its main 
trading partners, namely Canada and Mexico , and developing countries have the GSP scheme 
available for most of their exports to the United States.  Notwithstanding, the low overall level of 
tariff protection, 5% of MFN tariffs involve rat es exceeding three times the overall average; such 
tariff "peaks" affect some agricultural and food prod ucts as well as textiles, clothing and footwear.  
One in seven duties are specific (non ad valorem );  in the interests of  transparency, the U.S. 
authorities publish reliable estimates of their ad valorem  equivalents, which show  that specific duties 
account for 86 of the top 100 MFN tariffs. 
3. The non-tariff border measures (NTMs) currently applied by the United States involve some 
import prohibitions, import licensing and quantitative r estrictions.  The importation of certain goods 
may be prohibited or subject to licensing in orde r to ensure the security of the United States, 
safeguard consumer health and well-being, or to  preserve domestic plant and animal life and the 
environment.  In addition, some commodities, notably textiles and clothing, are subject to import quotas or restraints under bilateral tr ade agreements and arrangements. 
4. The United States, like other WTO Members, has several types of contingency measures at its 
disposal, namely countervailing and anti-dumping duties as well as safeguards.  These measures are 
designed to counteract trade practices, such as expor t subsidies and the dumping of products onto the 
U.S. market.  Although still important, the use of such measures by the United States has declined in 
recent years. 
5. Export controls and licensing apply mainly to dual-use and encryption products.  As in the 
case of import controls, export controls are intended, inter alia , to preserve national security, support 
foreign policy, ensure non-proliferation, and in some  cases, to fulfil international obligations of the 
United States.  Export subsidies are aimed at certain agricultural products;  export finance, insurance, 
guarantee and duty drawback schemes are available;  the United States also has Foreign Trade Zones.  
U.S. legislation (sections 301-306 of the Trade Act of 1974) provides for the review of foreign 
country practices that may impede U.S. exports of goods and services or impair U.S. rights under international trade agreements; action may be ta ken provided that it is consistent with WTO 
provisions. 
6. Not only is the United States open to internationa l trade and foreign investment;  its markets 
are relatively free from regulations and other inte rnal government measures that can unduly distort 
competition in domestic goods, services and factor mark ets.  Moreover, taxes are low by international 
standards and the tax system is relatively neutral in so far as different economic activities are WT/TPR/S/56 Trade Policy Review 
Page 46 
 
 
concerned.  Nevertheless, potentia l distortions to competition may arise as a consequence of various 
forms of assistance provided by federal and state Go vernments to some sectors (notably agriculture) 
or to certain types of investment, including tho se related to R&D and environmental protection.  
Assistance is provided through the tax system in the form of tax expenditures; however, in recognition 
of the fact that these measures are alternatives to  other policy instruments, such as spending or 
regulatory programmes, and Congress's insistence on tran sparency in this regard, detailed estimates of 
tax expenditures are published annually in the U.S. G overnment's Budget.  Internal policies, practices 
and measures, including those pertaining to investme nt, usually entail national treatment for foreign 
firms and investors.  Preferences for domestic supplies are available for government procurement 
under the "Buy-American" provisions. 
7. Competition in U.S. domestic markets is further fostered by the Govern ment's inclination to 
take strong action against anti-competitive private practices that are found to be detrimental to domestic consumers.  In addition to measures aimed at counteracting trade practices, such as 
dumping, the United States rigorously enforces its  own anti-trust laws, as witnessed by the large 
number of ongoing investigations into and actions ta ken to combat price-fixing, predatory pricing and 
exclusionary pacts involving major U.S. companies.   The United States also enforces laws protecting 
intellectual property rights (IPRs) so as to ensure ad equate returns for invest ment in innovation; these 
laws are designed to achieve the appropriate ba lance between IPR protection and competition policy.
1  
Accordingly, the United States grants exclusive rights that confer a limited, temporary monopoly 
power while, at the same time, seeking to prom ote competition. IPR and competition policies thus 
have the common goal of enhancing econom ic performance and consumer welfare. 
(2) BORDER MEASURES  
(i) Tariffs 
8. The United States levies its ad valorem  duties on the basis of the "f.o.b." ("free on board") 
price, thereby excluding the costs of insurance a nd freight.  By contrast, most other WTO Members 
levy ad valorem  import duties on the "c.i.f." price, which includes these costs. 2  As the c.i.f. price 
exceeds the f.o.b. price by the amount of insurance and freight costs, a tariff levied on the f.o.b. price 
affords less protection than one levied at the same rate on the c.i.f. price. 
9. The 1999 U.S. tariff schedule consists of 10,173 tariff lines (at the HS 8-digit level), with 
different tariff rates applicable to the same tariff  lines depending on whether MFN or preferential rates 
are involved.  The main features of the schedul e concerning most-favoured-nation (MFN) tariffs are 
captured by the 11 summary indicators reported in  Table III.1 for 1996, 1998 and 1999, and under the 
full implementation of the Uruguay Round (UR) an d Information Technology Agreements (ITA). 3  
The following broad conclusions can be drawn from these indicators. 
                                                      
1See Council of Economic Advisers, Economic Report of the President , February 1999, pp. 181-185. 
2 Hence, the f.o.b. price corresponds to the valuati on of the traded commodity on-board ship at the port 
of embarkation abroad, whereas the c.i. f. price corresponds to the cost of the commodity at the point of entry 
into the United States. 
3The ITA will be fully implemented in 2000 while the Uruguay Round tariff cuts are to be fully 
implemented in 2004. United States WT/TPR/S/56 
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Table III.1 
Structure of applied MFN tariffs in the United States 
(Per cent) 
Indicators 1996a 1998 1999 U.R.b U.R. + ITAb 
1. Bound tariff lines 100.0c 100.0c 100.0c 100.0c 100.0c 
2. Duty-free tariff lines 21.4 13.8 29.7 36.4 37.8 
3. Specific and compound tariffs/all tariffs 24.4 14.3 12.9 11.2 11.1 
4. Tariff quotas/all tariffs 1.9 1.9 1.9 1.9 1.9 
5. Tariffs with no ad valorem  equivalent 3.1 0.2 0.2 0.3 0.3 
6. Simple average bound tariff rate .. 5.9 5.7 4.7 4.6 
7. Simple average applied tariff rate 6.4 5.9 5.7 4.7 4.6 
Agricultural products 10.0 10.3 10.7 8.2 8.2 
Industrial products 5.7 5.0 4.7 4.0 4.0 
8. Domestic tariff "peaks"d 4.0 4.9 5.0 6.9 7.3 
9. International tariff "peaks"e 8.9 7.7 7.4 5.2 5.2 
10. Overall standard deviation (SD) 13.4 12.9 13.3 8.6 8.6 
11. Coefficient of variation (CV) 2.10 2.19 2.34 1.83 1.85 
.. Not available. 
a Calculated on the basis of the data provi ded by the U.S. authorities for the 1996 TPR. 
b U.R. and U.R. + ITA AVEs are estimated proportionally by the WTO Secretariat using 1998 nomenclature and the 1997 AVEs 
 provided by the U.S. authorities.  Use of 1999 nomenclature and 1998 AVEs would have  little impact on the magnitudes of these 
 indicators;  indicator 2, for exam ple, would be 36.8 instead of 36.4,  if 1999 nomenclature were used. 
c Two lines, applying to crude petroleum, are not bound. 
d Domestic tariff "peaks" are defined as those exceed ing three times the overall simple average MFN rate. 
e International tariff "peaks" are defined as those exceeding 15%. 
Note Indicators 1, 3 and 4 are calculated taking into account all tariff lines (i .e. in- and out-of-quota lines).  All other in dicators 
 exclude in-quota lines.  Inclusion of in-quota tariff lines would have little effect  on the magnitudes of the tariff indicator s.  For 
 example, if in-quota tariff rates were included in the calcul ations for 1999, the simple average bound and applied MFN tariff 
 rates (indicators 5 and 6) would both be 4.7% instead of 4.8%, domestic "peaks" (indicator 8) would be 5.1% rather than 5%, an d 
 the CV (indicator 11) would be 2.30 instead of  2.34. 
Source : WTO Secretariat estimates based on da ta provided by the U.S. authorities. 
(a) MFN tariff bindings 
10. Following the Uruguay Round, all U.S. tariff lines except two (covering crude petroleum) 4 
are bound and all applied MFN rates coincide with the bound rates, thereby guaranteeing a high degree of tariff predictability. 
(b) Duty-free items 
11. In 1999, 29.7% of tariff lines (excluding those involving "in-quota" tariffs) are duty free, 
considerably more than in 1998 and 1996.  This proportion is expected to rise to 36.4% once the 
Uruguay Round is fully implemented.
5  Full implementation of the ITA will remove duties on an 
additional 1.4% of tariff lines. 
(c) Specific duties 
12. Specific (and compound) duties are a feature of the U.S. tariff.  In 1999, they account for 
12.9% of all tariffs and apply mainly to agricu ltural products, prepared food etc., footwear and 
headgear, and precision instruments, namely watch es (Chart III.1);  a number of specific duties are 
                                                      
4The actual tariff lines are 2709.0010 and 2709.0020. 
5This figure is derived using the 1998 U.S. tariff nomenclature;  it rises to 36.8% under the 1999 
nomenclature. WT/TPR/S/56 Trade Policy Review 
Page 48 
 
 
also applied to chemicals and chemical products 6, textiles and base metals.  While such duties are 
intrinsically more opaque than ad valorem  duties and can be used to conceal high ad valorem  
equivalents (AVEs), the United States ensures the tr ansparency of most of these duties by providing 
reliable estimates of their ad valorem  equivalents (AVEs).7  These estimates show that although 
specific duties account for less than one seventh of all tariffs in 1999, all but 16 of the top 100 tariffs 
(in AVE terms)8 entailed specific duties ranging 40.6% to 232. 2%.  Other aspects of specific duties 
are summarized in Box III.1. 
13. As a consequence of the recent decline in the prices of U.S. imports9, particularly 
commodities, effective tariff protecti on increased substantially for some products despite cuts in their 
applied specific duty rates.  For example, from 1996 to 1997, the AVEs of specific duties applied to 
cocoa powder (HTS8 tariff line number 1806.1038) and cotton (5201.0018) rose from 5.9% and 12.3%, to 11.9% and 22.3%, respectively, notwithstanding cuts in specific duty rates. 
Box III.1:  Specific duties 
The use of specific (and mixed) duties may be disadvantageous for several reasons in addition to the fact that 
they tend to be less easy to understand than ad valorem  tariffs and may conceal high ad valorem  equivalents 
(AVEs).  Specific duties also tend to distort domestic production patterns more than ad valorem  tariffs 
because they provide disparate levels of assistance for similar tariff line goods by taxing imports of cheaper 
products more heavily, thereby encouraging domestic firms to produce less expensive goods for which the 
level of protection against imports is proportionately greater.  Moreover, specific duties may be more 
regressive than ad valorem  duties because they impose a heavier burden on cheaper products within the 
same tariff line.  At the same time, specific duties encourage quality upgrading by exporters, which may 
entail efficiency losses in addition to the conventional dead weight losses associated with tariffs.  
Furthermore, as AVEs are inversely related to import prices, specific duties progressively cushion domestic 
producers against competition from lower-priced imports, thereby counteracting cuts in specific duty rates.  
Consequently, they counteract the relative price effects of exchange rate changes on countries' trade 
balances.  It follows that the use of specific duties can lead to an increase in effective tariff protection insofar 
as events such as the Asian crisis and the associated currency depreciations by several countries result in 
declining prices for traded goods.  To the extent deve loping countries are exporter s of relatively low-priced 
products, specific duties also tend to have a greater impact on their exports than on those of industrialized 
countries. 
On the other hand, specific duties are relatively simple to administer in instances where the value-for-duty 
cannot be easily observed.  They may also reduce pres sure to resort to anti-dumping or countervailing 
(AD/CV) measures for protection because the amounts of duty collected are unaffected by drops in prices for 
whatever reason.  Thus, as prices fall, the ad valorem  equivalents of specific duties rise, and vice versa, 
thereby contributing to domestic price stability in the face of "excessive" fluctuations in world prices. In 
addition, unlike with AD/CV duties, any increases in r eal tariff protection associated with specific duties are 
on an MFN basis. 
Source:  WTO Secretariat.  
 
                                                      
6Specific duties on certain chemicals will be converted to ad valorem  duties once the Uruguay Round 
is fully implemented. 
7The most recent estimates of AVEs available were for 1998.  These estimates by the USITC involve 
the computation of MFN duties actually collected in 1998 as a percentage of MFN import values in the same 
year. 
8Estimates of AVEs can vary widely, depending on the world prices of the products involved. 
9 U.S. import prices fell by 4.2% in 1997 and, according to estimates by the OECD (1998a), dropped 
by a further 5.3% in 1998. United States WT/TPR/S/56 
 Page 49 
 
 
05101520253035404550
Live animal & prod.
Vegetable products
Fats and oils
Prepared food, etc.
Mineral products
Chemicals and prod.
Plastic and rubber
Hides and skins
Wood and articles
Pulp, paper, etc.
Textiles and articles
Footwear, headgear
Articles of stone
Precious stones, etc.
Base metals and prod.
Machinery
Transport equipment
Precision instruments
Arms and ammunition
Miscellaneous manuf.
Works of art, etc.
Total
Note:
Source :Chart III.1
Share of specific duties, by HS section, 1999
Per cent
(185)(222)(31)
(307)
(24)
(142)
(3)
(1)(2)(6)(138)(24)
(7)
(0)(53)
(6)
(0)(137)
(4)
(23)
(0)(1,315)
Each bar in the chart depicts the percentage of tariff lines out of the total within each HS section that 
are specific or compound duties.  The figure in paren theses above each bar shows the number of tariff 
lines in each HS section involving specific rates.
WTO Secretariat estimates based on data provided by U S authorities
 
(d) Tariff quotas 
14. As a result of the "tariffication" of import restrictions on agricultural products, under the 
Uruguay Round commitments, the United States now u ses tariff quotas for beef, dairy products, sugar 
and some sugar products, peanuts, tobacco and cotton;   such measures cover 1.9% (some 198) of all 
tariff lines.  Over 90.8% of the out-of-quota tariffs are non ad valorem,  compared to 28.3% of the in-
quota rates.  The simple average in-quota MFN ta riff rate is estimated at 9.5%;  while the 
corresponding average out-of-quota MFN tariff is 55.8% (Annex III.2 Agriculture). 
15. In accordance with Article 5 of the WTO Agr eement on Agriculture, products subject to tariff 
quotas may also be subject to special safeguard provisions.10  Under these provisions, a safeguard 
based upon value may be applied to imports enteri ng the United States.  A charge based upon quantity 
                                                      
10Exceptions involve green olives (HTS 0711.2028 and 2005.70.08) and tobacco (HTS 2401.10.65, 
2401.20.35, 2401.20.87, 2401.30.70, 2403.10.90, 2403.91.47 and 2403.99.90). WT/TPR/S/56 Trade Policy Review 
Page 50 
 
 
may also be levied on the same  products, but not simultaneously.11  Such charges are cumulative (i.e. 
they apply in addition to the out-of-quota rate);  most of them are specific or combined duties 
(Annex III.2).12 
(e) MFN tariffs 
16. Using the simple average of U.S. applied MFN tariff for all lines, the level of overall tariff 
protection in the United States is now among the lowest in the world and the trend has been 
downward.13  The simple applied MFN tariff average, for example, fell from 6.4% in 1996 to 5.7% 
in 1999.  However, tariff protection for some broa d categories of agricultural products, including live 
animals and meat products, prepared food, bevera ges and tobacco, increased between 1996 and 1999.  
The outcome is that the applied MFN tariff average for agricultural products is 10.7% in 1999, more 
than double the average for industrial products (4.7%) .  This level of tariff protection for agricultural 
products is to some extent due to "tariffica tion" under the Uruguay Round, which eliminated 
agricultural NTMs.  The overall simple applied MFN average is scheduled to fall to 4.7% once the 
Uruguay Round tariff cuts for both agricultural and industrial products are fully implemented, and 
to 4.6% if the full effect of the ITA is taken into account.14 
(f) MFN tariff dispersion 
17. The efficiency losses associated with the tariff de pend not just on average applied tariff rates, 
but also on the dispersion of those rates across pr oducts.  In the United States, live animal and meat 
products, prepared food, beverages and tobacco, textiles, clothing and footwear are the broad 
categories of products most protected by MFN ta riffs and will remain so even once the Uruguay 
Round is fully implemented (Chart III.2);  by contrast, mineral products , pulp and paper, and 
machinery receive little tariff protection.  The higher th e dispersion in tariff rates, particularly within 
groups of similar and, thus, highl y substitutable products, the greater  the likelihood that consumers' 
and producers' decisions are distorted by the tariff structure.15  The dispersion also provides an 
indication of the complexity of the tariff schedule.16 
                                                      
11A safeguard based upon quantity could also be levied upon sheep meat (HTS 0204.21.00, 0204.22.40, 
0204.23.40, 0204.41.00, 0204.42.40 and 0204.43.40) even though these products are not subject to a 
tariff-quota. 
12For example the equivalent ad valorem  rate for the special safeguard based upon value for dried milk 
(HTS 0402.21.50 or 0403.90.55) varies from 4% to 237%;  this charge is in addition to the ad valorem  
out-of-quota tariff rate of 38% (for HTS 0402.21.50) or 59.40% (for HTS 0403.90.55). 
13Import weighted averages were not used because they assign small weight s to highly protected 
products, thus tending to underestimate the degree of tariff protection – no weight at all would be attached to a 
prohibitive tariff, for example. 
14Tariff indicators reflecting full implementation of the Uruguay Round and ITA are based solely on 
bound rates because one cannot be certa in about future applied rates (except to assume that they should not 
exceed bound rates).  As all applied ta riffs in the United States coincide w ith bound tariffs, it probably makes no 
difference whether these indicators are based on applied or bound rates. 
15Strictly speaking, a uniform nominal tariff (or a uniformly restrictive NTM) minimizes the net 
welfare cost of such protection only if import demand elasticities are uniform across commodities and 
cross-price effects are negligible.  Tariff uniformity ma y be desirable on administrative simplicity and political 
grounds, however.  For a discussion of these and related matters, see Panagariya and Rodrik (1993). 
16Moreover, the larger the dispersion in tariff rates applicable to various products, the greater the 
incentive for exporters and importers to reclassify products so that they are subject to lower tariffs. United States WT/TPR/S/56 
 Page 51 
 
 
18. Judging by the overall coefficient of variation (CV)17, the dispersion in U.S. tariffs has risen 
from 2.10 in 1996 to 2.34 in 1999.  However, it is expected to drop to 1.85 once the Uruguay Round and ITA are fully implemented.  The overall standard  deviation (SD) shows a broadly similar trend.  
By contrast, the proportion of tariffs involving domes tic tariff "peaks" (that is, tariff rates over three 
times the overall simple average applied MFN rate)
18;  which rose from 4% in 1996 to 5% in 1999, 
can be expected to rise to 7.3% once the Uruguay Round and ITA are fully implemented; a complete 
distribution of MFN tariff rates is depicted in Char t III.3.  Tariff peaks affect mainly the same broad 
product categories whose average tariffs are the hi ghest; clearly, their elimination would further 
reduce the dispersion in tariff rates.  The lower th e dispersion in tariff rates, the less the potential 
distortion in the allocation of domestic resources caused by tariffs. 
0246810121416
Live animal & prod.
Vegetable products
Fats and oils
Prepared food, etc.
Mineral products
Chemicals and prod.
Plastic and rubber
Hides and skins
Wood and articles
Pulp, paper, etc.
Textiles and articles
Footwear, headgear
Articles of stone
Precious stones, etc.
Base metals and prod.
Machinery
Transport equipment
Precision instrument
Arms and ammunition
Miscellaneous manuf.
Works of art, etc.
Total
Uruguay Round rates are based on 1998 nomenclature and 1997 AVEs. 
WTO Secretariat estimates based on data provided b y U.S. authorities.Chart III.2
Simple average applied MFN tariff rates, by HS section
Per cent
Note:
Source:Uruguay
Round1996 1999
 
(g) MFN tariff escalation 
19. The magnitudes of the simple aver ages of applied MFN tariffs (Tab le III.2) suggest that tariff 
protection in 1999 was slightly higher for finished goods than for semi-finished goods, which was, in turn, considerably higher than fo r raw materials (including agricultural products).  It would appear 
                                                     
 
17The CV is the standard deviation (SD) (indicator 12 in Table III.1) divided by the simple average 
applied tariff rate (indicator 7).  Whereas the SD is an indicator of absolute tariff dispersion, the CV measures 
relative tariff dispersion. 
18This definition of tariff "peaks" correspon ds to the one used by the OECD (1997). WT/TPR/S/56 Trade Policy Review 
Page 52 
 
 
that full implementation of the Uruguay Round w ill exacerbate such tari ff escalation.  Tariff 
escalation means that the level of effective tari ff protection increases as goods undergo further 
processing.  It thus tends to promote primary a nd semi-finished goods, thereby possibly slowing the 
move to higher-value-added production in other countries. 
0510152025303540
Duty-
free0-5 5-10 10-15 15-20 20-25 25-30 30-35 35-40 40-45 45-50 >50Chart III.3
MFN tariff distribution, 1999
Per cent
Source : WTO Secretariat estimates based on data provided by the U.S. authorities.
 
Table III.2 
MFN tariff escalation, based on simple applied MFN tariff averages, in the United States 
(Per cent) 
Indicators 1996 1999 U.R. 
0. Raw materials 4.8 4.2 2.5 
1. Agriculture, forestry, fishing 7.1 6.4 3.4 
2. Mining and quarrying 0.9 0.5 0.5 
3A. Manufacturing 2.8 2.2 1.9 
3B. Semi-finished manufactured goods 6.6 5.7 4.3 
3C. Finished manufactured goods 6.5 5.9 5.2 
Total All products 6.4 5.7 4.7 
Source : WTO Secretariat estimates based on da ta provided by the U.S. authorities. 
(h) Tariff preferences 
20. The United States grants unilateral preferential tariff treatment to countries benefiting from 
the GSP, CBERA and ATPA schemes (Chapter II(4)(iv )).  Reciprocal tariff preferences are granted 
under the NAFTA and the United States-Israel Free Trade Agreement.  While the simple average United States WT/TPR/S/56 
 Page 53 
 
 
MFN tariff rate is currently 5.7% (Table III.3), th e collected duty rate (total duties collected as a 
percentage of the overall import value) was only 2.1% in 1997.19 
Table III.3 
U.S. tariff preferences by agr eement, and import volumes, 1999 
Trading partner Share of 
total imports 
(%) Simple 
Average 
tariff rate Industrial 
products Agricultural 
productsa First stage 
of 
processing Semi-
processed Fully 
processed 
MFN trading partners 57.5 5.7 4.7 10.7 4.2 5.7 5.9 
Canada 19.2 0.8 0.0 5.0 0.6 0.2 1.2 
Mexicob 7.3 1.1 0.5 4.5 0.7 0.6 1.5 
Israel 0.8 0.8 0.0 5.2 0.6 0.2 1.2 
GSP 12.5 4.1 3.1 9.2 3.4 3.8 4.4 
CBERA 1.9 2.7 1.9 6.8 2.3 2.3 3.0 
ATPA 0.9 2.8 2.1 6.8 2.3 2.3 3.2 
a HS 01 to 24. 
b Rates for Mexico calculated using AVEs from USITC when  available or estimated AVEs proportionally from MFN AVEs. 
Note: Tariff figures exclude in-quota tariff lines. 
Source : WTO calculations, based on informati on provided by the U.S. authorities. 
21. Pursuant to Article 302 of the NAFTA, the Unite d States, Canada and Mexico agreed in 1997 
to review a list of approximately 1,500 8-digit tariff subheadings for accelerated tariff reduction.  For 
trade between the United States and Canada, all duti es subject to tariff reductions were eliminated 
on 1 January 1998 within the time-frame estab lished in the former U.S.-Canada FTA.  The 
acceleration round resulted in other agreements to accelerate reductions, between the United States 
and Mexico and between Mexico a nd Canada.  Ultimately, accelerated reductions with Mexico were 
agreed on some 600 products and we re implemented on 1 August 1998.  The bulk of the reductions 
involved products classified in HS Chapters 29, 38, 51, 52, 54, 55, 56, 58, 59, 63, 65, 72, 85, 91.20  
This was the second NAFTA tariff acceleration round (previously three rounds had been conducted 
under the provisions of the U.S.-Canada FTA).  Further tariff acceleration activity is expected to 
encourage consultations and communication am ong the private sectors of the NAFTA countries.21 
22. The average tariff applied to imports from Mexi co in 1999 is 1.1%, compared to 0.8% for 
both Canada and Israel (Table III.3).  Imports of industrial goods  from Canada and Israel are 
duty free, while those from Mexico are subj ect to an average tariff rate of 0.5%22, while imports of 
agricultural goods are subject to tariffs around 5% .  Imports (including those entering at non-zero 
rates, which is the normal treatment under the U. S GSP scheme) from GSP beneficiary countries were 
subject to an average tariff of 4%, roughly one third less than the MFN tariff rate.  Imports from CBERA countries faced an average tariff of 2.7%  in 1999, while those from ATPA countries were 
subject to an average tariff of 2.8%.  In the th ree cases tariffs on agricultural goods are higher than 
tariffs on industrial goods.  Tariffs on fully pro cessed goods were some 20% higher than those on 
goods in the first stage of processing in the case of GSP imports, and some 25% higher for imports 
from CBERA countries. 
                                                     
 
19Down from 2.3% of imports (US$18 billion) in 1996, and 2.5% of imports (US$18.6 billion) in 
1995).  See U.S. Census Bureau (1998), p. 806. 
20The average tariff rates on imports from Mexico cl assified under these chapters were 0.8%;  0.7%;  
1%;  1.5%;  2.5%;  3.1%;  2.6%;  1.6% ; 1.6%;  0.8%;  2.2%;  0%;  and 0.6%. 
21Federal Register , 11 June 1998, Vol. 63, N° 112. 
22The highest tariffs on imports from Mexico are applied on imports classified under HS Chapter 64 
(footwear, gaiters and the like). WT/TPR/S/56 Trade Policy Review 
Page 54 
 
 
(ii) Rules of origin, marking and labelling 
23. Few changes have taken place regarding rules of  origin since the previous Review of the 
United States in 1996.  Rules of origin regarding textiles were modified on 1 July 1996 (Annex III.1).  
Rules of origin for preferential arrangements rema ined unchanged.  An eventual granting of NAFTA-
parity to CBERA countries was considered (but not  passed) in Congress in 1998, and is likely to be 
reconsidered in 1999.  CBERA enhancement (but not NAFTA parity) is under consideration in the 
current Congress. 
24. The main principle used to determine origin fo r imports into the United States is "substantial 
transformation".  For NAFTA goods, origin is confe rred on the basis of product-specific rules, which 
may be determined by change in tariff classifica tion, value-content requirement, or some specific 
requirements spelled out in Annex 401 of the NAFTA.  In those cases where valu e-content criteria are 
used, origin is conferred when the value content of the good is not less than 60% if the transaction 
method is used, or 50% if the net cost method is used.23  For automotive products, the 
regional-content requirement is 56% (since 1998), to  be increased to 62.5% in 2002 (55% and 60% 
for some vehicles).24  In the case of GSP, ATPA and CBERA beneficiaries, and the free-trade 
agreement with Israel, 35% of the value must orig inate in a beneficiary country;  for ATPA and 
CBERA countries, materials produced in the United States may count for up to 15% of the 35%. 
25. Country-of-origin marking is required on all im ported goods or containers.  Marking must be 
in English and conspicuous.  If an imported produc t is subject to further, significant manufacturing in 
the United States, the resulting product does not require a country-of-origin mark.  Regulations 
covering markings are contained in sections 134.21 through 134.26 of the U.S. Customs Regulations.  
Special markings are required by the Internal  Revenue Service on alcoholic-beverage bottles 
(section (4)(i)).  As of 5 August 1996, the term "assembled in" may be used for marking imported 
goods when the country of origin is determined by where the final product was assembled.  Goods 
may no longer be labelled with either the phrase  'made in' or 'product of' along with the phrase 
"assembled in". 
26. Special country-of-origin marking requirements ar e applied on certain articles, such as clocks 
and watches, and iron and steel pipes.  Imported wi nes in bottles and other containers are required to 
be packaged, marked, branded and labelled in accordan ce with the regulations in  27 Code of Federal 
Regulation (CFR) Part 4.  Imported malt beverages are also required to be labelled in conformity with 
the regulations in 27 CFR Part 7. 
27. Country-of-origin marking requirements genera lly do not apply to products made in the 
United States (with the exception of cars and light trucks, textiles a nd apparel, and furs).25  For a 
product to be marked or labelled as "Made in USA" , "substantially all" do mestic parts and labour 
                                                      
23The transaction value method calculates the regional value content (RVC) of a good as RVC=(TV-
VNM)x100/TV;  where TV is the transaction value (pri ce actually paid or payable for a good or material) 
adjusted to a f.o.b basis, and VNM is the value of the non-originating materials used by the producer in the 
production of the good.  The net cost method calculates the RVC as:  RVC=(NC-VNM)x100/NC, where NC is 
the net cost of a good, defined as the "total cost minus sales promotion, marketing and after-sales service costs, royalties, shipping and packing costs, and non allowable interests costs included in the total cost".  (NAFTA, 
Articles 402 and 415). 
24NAFTA, Article 403. 
25In the case of motor vehicles, manufacturers are requ ired to label the percentage of U.S./Canadian 
content, the name and percentage of content of any two countries if contributing each 15% or more of the 
equipment content, the country of final assembly, and the country of origin of the engine and of the transmission. United States WT/TPR/S/56 
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must be used, in accordance with federal consumer protection laws administered by the Federal Trade 
Commission.  Any imported article with a marking l eading the consumer to believe that it was made 
in a country other than its country of origin may be barred from entry into the United States, in accordance with Section 43 of the Trade-Mark Act of 1946.  Imported articles bearing a name or mark 
prohibited by Section 42 of the Trade-Mark Ac t may be subject to seizure and forfeiture. 
28. All textile products must be labelled or marked  in accordance with the Textile Fibre Products 
Identification Act, unless exempted from marking under section 12 of the Act.  The name of the 
manufacturer and of the country where the textile  product was processed or manufactured must be 
indicated.  New textile rules of origin became effe ctive 1 July 1996:  for products requiring a certain 
degree of assembly, origin is conferred by the country  where the final garment was assembled.  In the 
case of products that require minimal cutting and assembly (towels, sheets, scarves) origin is 
conferred by the country where the fabric was wove n.  An agreement with the European Union  was 
reached in 1997 to prevent the new rules from aff ecting imports of silk products.  However, this 
agreement has been the object of a request for cons ultations by the EU, which claims that the United 
States has failed to  implement its commitment (Annex III.1). 
29. In accordance with the Wool Products Labe lling Act of 1939, labe lling requirements are 
imposed on imported (and U.S.) products containing woollen fibre, with the exception of carpets, 
rugs, mats, and upholstery.  Under the Fur Products  Labeling Act, any imported or U.S.-produced 
clothing made in whole or in part of fur (except products with a cost or selling price not exceeding 
US$7), must be labelled or marked.  The country of  origin of any imported furs contained in a fur 
product must also be indicated. 
(iii) Non-tariff measures 
30. The non-tariff border measures (NTMs) currently  applied by the United States are import 
prohibitions, import licensing and quantitative restrict ions.  The importation of certain goods may be 
prohibited or subject to licensing in order to ensu re the security of the United States, safeguard 
consumer health and well-being, or to preserve dom estic plant and animal life and the environment.  
In addition, some commodities, notably textiles and clothing, are subject to import quotas or restraints 
under bilateral trade agreem ents and arrangements. 
(a) Prohibitions 
31. Imports of goods and services that originate in Cuba, the Islamic Republic of Iran, Iraq, the 
Democratic People's Republic of Korea, Liby a, and Sudan are prohibited unless specifically 
authorized by the Department of the Treasury.
26  Diamonds originating in Angola are not allowed to 
enter the United States unless they are controlled thr ough the Certificate of Origin regime of the 
Angolan Government of Unity and National Reconciliation.27 
32. Under a 1968 gun control law, foreign firearms may be imported only if they are for sporting 
purposes.28  Since 1989, the importation of 43 types of semi-automatic assault rifles has been 
permanently banned.  On 6 April 1998, an Executiv e Order permanently banned imports of 58 types 
of high-powered military-style assault weapons. 
33. Other import prohibitions include:  any wild animal  or bird if captured or  exported contrary to 
the law of the foreign country;  feathers or skins of any wild bird, except for scientific and educational 
                                                      
26IMF (1998b). 
27Office of Foreign Assets Control (1999). 
28Dun & Bradstreet Information Service (1998).  WT/TPR/S/56 Trade Policy Review 
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purposes;  immoral articles29;  cattle, sheep, swine, and meats from any country for which the 
Secretary of Agriculture has determined the existence of rinderpest or foot-and-mouth disease.30  In 
order to implement the International Convention on the Conservation of Atlantic Tunas (ICCAT), 
imports of Atlantic Bluefin T una and its products in any form harvested by vessels of Panama, 
Honduras and Belize are prohibited.31  In addition, merchandise that can be proved to have been 
mined, produced or manufactured wholly or in part in any foreign country by bonded, industrialized, 
slave or forced labour may not enter the United States.32 
(b) Import licensing33 
34. Products subject to import licensing in the United States include:  plants and plant products;  
animals and animal products;  products  subject to tariff quotas (e.g. suga r and dairy products);  natural 
gas;  fish and wildlife (including endangered sp ecies);  controlled substances;  distilled spirits 
(beverages);  wine and malt beverages;  distilled spir its for industrial use (including alcohol for fuel);  
firearms, ammunitions, and implements of war;  expl osives;  nuclear facilities;  and materials.  The 
primary reasons for licensing of imports are, inter alia,  enforcement of sanitary regulations, protection 
of wildlife, administration of tariff quotas, consum er protection, safety, and the security and defence 
of the United States. 
35. Import permits are required for most plants a nd some plant products to protect against the 
introduction of pests and diseases, and to protect enda ngered plant species.  Permits are only issued to 
a firm or individual resident in the United States and apply to products from all countries with certain 
exceptions.34  The only reason for refusal of a permit is failure to meet standard criteria.35 To protect 
U.S. livestock and poultry against the introduction of  diseases that do not exist in the United States, 
certain animals and animal products, organisms and vectors, and veterinary biological products are 
also subject to import permits granted by the U. S. Department of Agriculture (USDA), Permit 
Section.  Imports originating in all countries (e xcept Canada and Mexico) are subject to this 
requirement with some variation resulting from the species, and the disease status of the country of 
origin.  In general, only failure to meet ordinary criteria would result in refusal of a permit.36  In the 
                                                      
2919 U.S.Code. §1305. 
30This prohibition will be in place until the Secretary of  Agriculture ensures that such disease no longer 
exists (19 U.S.C. Section 1306). 
31Imports from Honduras and Belize had been prohibited since 4 August 1997;  while imports from 
Panama have been prohibited since 1 January 1998 ( Federal Register , Vol. 62, N° 137, 17 July 1996). 
3219 U.S.C. §1307.  A general provision in the Fiscal Year 1998 Treasury Appropriation Act made 
explicit that merchandise manufacture with "forced or indentures child la bour" falls within this prohibition. 
(Federal Register , 5 June 1998, Vol. 63, N° 108). 
33This section is based on WTO document G/LIC/N/3/USA/2, 16 October 1998. 
34Exemption of countries differs according to the product.  APHIS extends no permit exemptions to 
products from any country;  it focuses on the status of animal diseases in each country.  Even with Canada, the 
potential exists for import of certain animal diseases , however, APHIS does not require import permits for 
Canadian produce.  Four reasons substantiate this approach:  same pest and disease complexes in both countries; 
same pest and disease risk in both countries; no tropical fruit is shipped from Canada;  and the contiguous 
border.  APHIS does not extend this policy to Me xico (information provided by the U.S. authorities). 
35Standard criteria involves APHIS' ex amination of the status of an an imal disease or plant pest in a 
particular country.  If the co untry is free of the disease or pest in question, APHIS will issue the import permit.  
If an item is new to import into the United States, APHIS must assess the risk of a disease or pest entering 
through commercial imports, before approving and issuing permits for the product (information provided by the U.S. authorities). 
36Ordinary criteria involves low risk of introducing an animal or plant disease or pest.  APHIS 
identifies these risks by thorough risk assessment.  If the disease or pest is isolated to certain regions, APHIS 
will adapt certain measures accordingly (inf ormation provided by the U.S. authorities). United States WT/TPR/S/56 
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case of live animals or animal products, poultry, or birds, a permit could be refused if there is no 
space available at a Quarantine Station.  A permit could be revoked by Animal and Plant Health 
Inspection Service (APHIS) following an outbreak of a particular disease in the exporting country.  APHIS may use an emergency regulation to stop issuing import permits.
37  As in the case of plants, 
reasons for refusal are provided to the applicant;  the legislation does not provide for an appeal 
procedure.  Importers and exporte rs of fish or wildlife (including endangered species) generally 
require an import/export licence.  Imports or e xports of certain wildlife as well as certain 
importers/exporters are excepted from the requirement. 
36. Sugar described in Harmonized Tariff Schedul e (HTS) subheading 1701.11.10 is subject to 
the raw cane sugar tariff rate quota (TRQ).  To be el igible for in-quota tariff treatment, countries must 
obtain and execute a Certificate of Quota Eligibility (CQE).38  The CQE authorizes the entry into the 
United States of raw cane sugar that is produced in the exporting country.  Sugars, syrups, and molasses described in HTS subheadings 1701.12.10, 1701.91.10, 1701.99.10, 1702.90.10, and 2106.90.44 are subject to the refined sugar TRQ;  except for Mexico, a CQE is not needed by the exporting country to enter sugar at the in-quota rate.
39  The refined sugar TRQ includes an allocation 
for specialty sugars, which is available on a global fi rst come, first served basis.  To enter sugar under 
this allocation, a U.S. importer must obtain a speci alty sugar certificate from the U.S. Department of 
Agriculture (USDA).  U.S. refiners of raw cane  sugar may obtain a licence to import quota-exempt 
sugar described in HTS 1701.11.20.  In accordance with the regulations governing these imports, the 
sugar must be:  (a) used for the production, other th an by distillation, of polyhydric alcohol except that 
used as a substitute for sugar in human food,  (b ) re-exported in refined form in sugar-containing 
products, or (c) re-exported in refined form.  These licences are intended to increase the utilization of 
excess domestic refining capacity and improve em ployment in refining and related industries. 
37. A licensing system is also in place for imports of certain dairy products that are subject to 
tariff quotas under the WTO Agreement on Agriculture.40  This applies to dairy products coming from 
all supplying countries.41 
38. Importation of natural gas or liquefied natural gas is  authorized only if it is consistent with the 
public interest;  a finding of public interest is requi red except for imports originating in a country with 
which the United States has a free-trade agreement.42  Currently, virtually all natural gas imports 
originate in FTA partners.43  All persons, firms and institutions ar e eligible to apply for authorization 
to import natural gas. 
                                                      
37APHIS' interim rule on BSE represents an example of revocation of import permits for animals and 
animal product due to heightened concern with BSE risk from certain countries.  Another APHIS interim rule, dealing with solid wood packing material from China, emerged from an emergency regulation to protect U.S. 
agriculture from a significant insect pest (information provided by the U.S. authorities). 
38Regulations governing the Certificate of Quota Eligibility programme are contained in 15 CFR Part 
2011. 
39The Secretary of Agriculture establishes the quantity of raw cane sugar that can enter under the tariff 
quota, while USTR allocates this quantity.  Currently, the TRQ is allocated to 40 countries.  A portion of the 
refined sugar is allocated to Canada and Mexico, while the balance is available on a first come, first served 
basis.  The quantities allocated to Canada and Mexico, along with beneficiary countries under the GSP, the 
Caribbean Basin Initiative (CBI) and the Andean  Trade Initiative receive  duty-free treatment. 
40Other quotas are available on a first come, first served basis as notified to the WTO Committee on 
Agriculture in G/AG/N/USA/2 and USA/2/Add.1 and 2. 
41Licences are issued for 1 January through 31 December;  they canno t be extended into the following 
quota year, and are not transferable between importers. 
42Energy Policy Act of 1992 (ENACT), 24 October 1992 
43WTO document G/LIC/N/3/USA/2, 16 October 1998. WT/TPR/S/56 Trade Policy Review 
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39. Controlled substances are subject to a system of import permits, declarations, and quotas, 
designed to restrict importation to the quantity n ecessary to meet the medical, scientific or other 
legitimate needs of the United States, and to  monitor the handlers of such substances.44  An importer 
of any controlled substance must apply to the Drug Enforcement Administration (DEA) for 
registration.  The registration application must be  approved by the DEA and registrations are issued 
annually.  In general, import restrictions apply to  all controlled substances, regardless of the country 
of origin.  However, additional limitations appl y to the importation of narcotic raw materials.45  I n 
effect, the importation of approve d narcotic raw materials (opium , poppy straw and concentrate of 
poppy straw) into the United States must have as its source:  Australia, France, Hungary, India, 
Poland, Turkey, and Yugoslavia;  at least 80% mu st originate in Turkey and India.  Quotas for 
legitimate needs are determined on an annual basi s, but determinations regarding importation are 
made at the time of individual application.  Import permits are issued only to registered importers who 
have demonstrated the legitimate need for the impor ted substance.  Declarations are submitted as an 
advanced notice of import only for DEA monitoring pu rposes.  If legitimate need is not demonstrated, 
a registered importer may be refused an im portation, in line with the above criteria. 
40. Producers, bottlers, wholesalers and importers of  distilled spirits, wine, and malt beverages 
are required to hold permits, issued under the Fede ral Alcohol Administration Act.  The primary 
purposes of this requirement are to protect the cons umer by oversight of la belling, advertising and 
other practices.  The permit system applies to goo ds originating in and coming from all countries.  
Under the Internal Revenue Code, producers, distri butors and users of distilled spirits for industrial 
purposes must have permits.  Industrial alcohol is ex empt from taxation if used as authorized by law.  
The permit system is a means of controlling these authorized uses. 
41. The United States also maintains a system of li cences and permits to control the manufacture, 
importation and dealing in firearms and ammunition.   The Bureau of Alcohol, Tobacco and Firearms 
(ATF) administers these import controls, along with controls established by the Arms Export Control 
Act of 1976, through a system of import permits.  Ge nerally, the purpose of the licensing system is to 
prevent the granting of licences to persons falling with in statutorily determined prohibited categories.  
It is also to ensure that se mi-automatic assault rifles, machin e guns, destructive devices, surplus 
military firearms, and other like firearms are not  imported except for the use of governmental 
agencies.  The importation of arms, ammunition and implements of war is also subject to a system of registration and permits.
46  The primary purpose is to suppress international arms trafficking.  The law 
and regulations of these imports are administered by ATF in accordance with the Gun Control Act 
of 1968.  The Department of State maintains a similar system of controls relative to exports. 
42. The Nuclear Regulatory Commission (NRC) regulations, which govern the importation of 
nuclear materials apply to all persons in the United States;  the U.S. Department of Energy, and in 
large part, the Department of Defense are not s ubject to the NRC's import licensing requirements.  
The NRC import licensing authority covers produc tion and utilisation facilities, special nuclear 
material, source material, and by-product material .  In this case, the primary reasons for import 
licensing relate to health and safety, control over possession, use, distribution and transport, and the 
defense and security of the United States. 
                                                      
44The system is mandated by United States law and is based upon two international treaties (The Single 
Convention on Narcotic Drugs, 1961, and the Convention on Psychotropic Substances, 1971). 
45Title 21, Code of Federal Regulations, Section 1312.13. 
46Goods from certain countries (primarily centrally planned economies), as determined by the State 
Department are denied entry into the United States. United States WT/TPR/S/56 
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(c) Quantitative restrictions 
43. Under Section 22 of the Agricultural Adjustment  Act of 1933 the President may impose either 
an ad valorem  import fee of up to 50% or a quantitative rest riction reducing imports by up to 50% of 
the amount imported in a representative period.  M easures under this section, which were previously 
covered by a waiver under GATT Article XXV, can no longer be imposed on articles produced by 
WTO member countries47;  any such measures were terminated by virtue of their "tariffication" on the 
date of entry into force of the WTO Agreement.48  However, measures may still be applied to 
countries that are non-Members. 
44. The remaining quantitative restrictions on te xtiles and clothing are being phased out in 
accordance with the Agreement on Te xtiles and Clothing (Annex III.1). 
(iv) Contingency measures 
(a) Overview 
45. In 1996-98, the total number of anti-dumping i nvestigations initiated declined to 72, from 102 
in 1993-95, while the number of duty orders issued fell from 82 to 25.  Countervailing duty 
investigations initiated during the period under review totalled 18, up from 14 in 1993-95;  
nevertheless, the number of duty orders issued d eclined substantially.  The number of safeguard 
investigation initiations increased in 1996-98, but their number and scope remains limited. 
(b) Safeguards 
46. Between 1996 and 1998, three new safeguard inve stigations were initiated, notified to the 
WTO, and terminated by the United States under Sections 201-204 of the Trade Act of 1974 (also 
known as the "escape clause").49  The U.S. International Trade Commission (USITC) found no injury 
in one case, related to fresh tomatoes and bell peppe rs, while it did find injury in the broom corn 
broom case, which was filed in  parallel under Section 302 of the NAFTA Implementation Act,50 and 
in a case involving wheat gluten.  One of the me asures, regarding broom corn brooms from Mexico, 
was terminated one year ahead of schedule.  A f ourth case, regarding lamb imports, was initiated in 
October 1998.  A fifth safeguard investigation re garding certain steel wire rods (HTSUS 7213.91, 
7213.99, 7227.20, and 7227.90.60) was initiated on 12 January 1999, following a petition by a group 
of U.S. steel companies and trade unions51, and notified to the WTO on 17 February 1999.52 
                                                      
47USITC (1996a);  and U.S.C. Section 624 (htt p://uscode.house.gov/usc.htm, 11 January 1999). 
48GATT(1994);  and WTO document WT/L/153, 17 June 1996. 
49In the United States the application of safeguard measures requires Presidential approval. The USITC 
is required under Section 311 of the NAFTA Implementa tion Act to investigate affirmative cases determined 
under  Sections 201-204 of the Trade Act of 1974, to assess whether imports of the investigated good from a 
NAFTA country account for a substantial share of total imports and whether su ch imports contributed to serious 
injury or threat thereof. 
50Under Section 311 of the NAFTA Implementation Act, the USITC is required to investigate 
affirmative cases determined under  S ections 201-204 of the Trade Act of 1974, to assess whether imports of the 
investigated good from a NAFTA coun try account for a substantial share of  total imports and whether such 
imports contributed to serious injury or threat thereof. 
51No specific country is named. The petitioners are Atlantic Steel Industries Inc.; Birmingham Steel 
Corp.; Connecticut Steel Corp., Co-Steel  Raritan; GS Industries, Inc.; Keystone Steel and Wire Company; North 
Star Steel Co.; North Star Texas, Inc.;  Northwestern Steel and Wire Co.; the Independent Steel Workers 
Alliance; and the United Steel Workers of America.  
52WTO document G/SG/N/USA/6, 18 February 1999. WT/TPR/S/56 Trade Policy Review 
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47. Under U.S. law, the President generally has 60 days from receipt of a USITC report 
containing an affirmative determina tion of serious injury to determine what safeguard action, if any, 
he will take.  Among the types of safeguard ac tion the President may impose are a quantitative 
restriction, increased tariffs, or a tariff-rate quota.  Of the two cases where an affirmative 
determination of injury was made in the 1996-98 pe riod, quantitative restrictions were used in one 
case and tariff-based measures in the other.  Under section 311(a) of the NAFTA Implementation Act, NAFTA countries are excluded from the application of safeguard measures, unless they are among the 
top five suppliers and it is shown that they ma ke an important contribution to serious injury. 
Fresh tomatoes and bell peppers 
48. The first safeguard investigation notified to the WTO during the period under review, 
involved fresh tomatoes and bell peppers 
53 (subheadings 0702.00.20, 0702.00.40, 0702.00.60 and 
0709.60.40 of the Harmonized Tariff Schedule of the United States).  The investigation was terminated on 12 August 1996 with no safegua rd measure imposed, following a negative 
determination of injury.
 54  The USITC ruled that the products subject to the investigation were not 
being imported in such increased quantities as to be a substantial cause of serious injury, or threat 
thereof, to the domestic industries.55 
Broom corn brooms 
49. Following an affirmative dete rmination of injury by the USITC, on 2 July 1996, the 
United States notified the Committee on Safeguards 56 that it had introduced a safeguard measure on 
the importation of broom corn brooms, (subheadin gs 9603.10.50 and 9603.10.60 of the HTSUS), as 
of 28 November 1996.  The measure consisted of a temporary (three-year), decreasing-with-time 
increase in tariffs.  This resulted in an incr ease of the specific duty from zero to 33 cents for 
subheading 9603.10.5057, and an increase in the ad valorem  rate of duty for above-quota imports 
under subheading 9603.10.60.  The measure was sc heduled to be in place until 27 November 1999, 
but did not apply to imports from Canada, Israel, or from developing countries described in the 
notification under Article 9, footnote 2 of the Agreement on Safeguards (Table III.4). 
Table III.4  
Duties applied on imports of broom corn brooms, 1996-99 
Year 1 Year 2 Year 3 
HTSUS 
subheading Bound rate/ Applied rate 
before the increase 28 Nov. 1996-27 Nov. 1997 28 Nov. 1997-27 Nov. 1998 28 Nov. 1998-27 Nov. 
1999 
9603.10.50a 32¢ each/zero 33¢ each 32.5¢ each 32.1¢ each 
9603.10.60b 32% ad valorem /22.4% 
ad valorem  for above tariff-rate 
quota imports. 33% ad valorem  32.5% ad valorem  32.1% ad valorem  
a Broom corn imports valued at below 96 cents. 
b Broom corn imports valued at above 96 cents.  Impor ts subject to a tariff-rate quota of 1.2 million units. 
Source :  WTO documents G/SG/N/10/USA/1and G/SG/N/11/USA/1, 6 December 1996. 
                                                      
53WTO document G/SG/N/6/USA/3, 2 April 1996. 
54Federal Register , 16 August 1996, Vol. 61, p. 42 652. 
55USITC (1996b). 
56WTO documents G/SG/N/10/USA/1 and G/SG/N/11/USA/1, 6 December 1996. 
57Most U.S. imports of broom corn broom are valued at less than 96 cents, since no duties apply to 
them. United States WT/TPR/S/56 
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50. An annual quantity of 192,000 dozens of broom corn brooms provided for in 
subheading 9603.10.60 was allowed to enter free of the above-described increase in duties until 
November 1999;  99% of these imports are from Mexico, Panama, Honduras, and Colombia, with 
Mexico alone accounting for over 50% of the duty-free quota (Table III.5). 
Table III.5  
Duty-free imports of broom corn brooms, 1996-99  
Year 1 Year 2 Year 3 Country from which 
product originates 28 Nov. 1996-27 Nov. 1997 28 Nov. 1997-27 Nov. 1998 28 Nov. 1998-27 Nov. 1999 
Mexico 100,000 dozen 100,000 dozen 100,000 dozen 
Panama 41,000 dozen 41,000 dozen 41,000 dozen 
Honduras 37,000 dozen 37,000 dozen 37,000 dozen 
Colombia 12,000 dozen 12,000 dozen 12,000 dozen 
All Others 2,000 dozen 2,000 dozen 2,000 dozen 
Source : WTO documents G/SG/N/10/USA/1and G/SG/N/11/USA/1, 6 December 1996.  
51. The tariff increase was removed ahead of sch edule, following an announcement by the 
President on 3 December 1998.  As a result, the tariff for imports under heading HTSUS 9603.10.50 reverted back to zero;  for imports under head ing 9603.10.60, the above-quota tariff returned to 
22.4%.  Under NAFTA, this rate is scheduled to drop gradually to zero by year 12 of the agreement.  
It will drop to 16% in 2000.  At the same time, Mexico was expected to drop a series of tariff 
increases applied in retaliation of the U.S. increase. 
Wheat gluten 
52. The United States notified the Committee on Safeguards in early 1998 of a finding made by 
the USITC of serious injury caused by  increased imports of wheat gluten.
58  The USITC investigation 
found that between 1993 and 1997, imports of wheat  gluten had increased from 128 million pounds to 
177 million pounds;  the ratio of imports to produc tion and domestic consump tion had also increased; 
and there was a direct correlation between the incre ase in imports and the decline in the performance 
of the domestic industry in 1996 and 1997.  As a resu lt of the investigation, the United States notified 
the WTO that it had taken a decision to apply a safeguard measure setting quantitative limits on imports of wheat gluten (HTSUS 1109.00.10 and 1109.00.90), for a period of three years starting on 1 
June 1998 and ending on 1 June 2001.
59  The quota was fixed at 57.5 million kg. for the first year60, 
subject to a growth factor of 6% per year, a nd was allocated based on relative import shares 
(Table III.6).  More than 90% of the quota was a llocated to Australia and the European Union.  
Imports from Canada, Mexico61, Israel, and beneficiary countries under the CBERA or the ATPA are 
not subject to the measure.  GSP beneficiaries acc ounting individually for less than 2% of U.S. wheat 
gluten imports or collectively for less than 3% are also excluded from the scope of the measure.62 
                                                      
58WTO documents G/SG/N/8/USA/2, 12 February 1998 and G/SG/N/8/USA/2/Rev.1, 27 March 1998. 
59WTO documents  G/SG/N/10/USA/2 and G/SG/N/11/USA/2, 8 June 1998. 
60Equivalent to the 126 million pound import quota recommended by the USITC. 
61As a result of a finding by USITC that imports fr om Canada and Mexico either do not account for a 
substantial share of total imports or do not contribute importantly to serious injury. 
62Notification under Article 9, footnote 2 of the Safe guards Agreement (non-app lication of a safeguard 
measure to developing countries under Article 9.1 of the Agreement). WT/TPR/S/56 Trade Policy Review 
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Table III.6 
Distribution of U.S. wheat gluten import quantitative limits 
(Kg.) 
Country Year 1: 
1 June 1998 to 31 May 1999 Year 2: 
1 June 1999 to 31 May 2000 Year 3: 
1 June 2000 to 1 June 
2001 
Australia 28,315,000 30,014,000 31,814,000 
European Union 24,513,000 25,983,000 27,543,000 
Other countries 4,693,000 4,975,000 5,273,000 
Total 57,521,000 60,972,000 64,630,000 
Source : WTO document G/SG/N/10/USA/2, 8 June 1998. 
Lamb meat 
53. The United States notified the Committee on Safeguards on 30 October 199863, that a 
safeguards proceeding had been initiated by the USIT C on the basis of a petition filed on behalf of the 
domestic industry on 7 October 1998 with respect to  lamb meat (HTSUS subheadings 0204.10.00, 
0204.22.20, 0204.23.20, 0204.30.00, 0204.42.20 and 0204.43.20).64  The subheadings subject to the 
proceeding are not covered by a special safegua rd under the Agreement on Agriculture.  The bound 
tariff rate on these products is a specific duty of  0.7 cents per kg.  The hearings began on 
12 January 1999 and an affirmative injury determin ation was reached on 9 February 1999 and notified 
to the WTO65;  hearings on the question of remedy began on 25 February 1999. 
(c) Anti-dumping and countervailing measures 
Anti-dumping and countervailing duty legislation 
54. Anti-dumping legislation was introduced in the United States with the Anti-dumping Act 
of 1921, which gave the Department of the Treas ury the task of investigating alleged dumping 
practices and imposing anti-dumping duties.  Legisla tion referring to unfair pricing, the Unfair 
Competition Act of 1916, sometimes referred to as  the Anti-dumping Act of 1916, was already in 
place.  The 1916 Act allows companies to sue, in fe deral courts, importers that sell goods priced lower 
than in the country of production or in other fo reign countries to which the goods are exported, and 
recover up to three times the damages suffered.66 
55. In 1954, the administration of the Anti-dumpi ng Act of 1921 was split, and the function of 
determining injury in anti-dumping investigati ons was transferred from the Department of the 
Treasury to the United States Tariff Commission  (now the United States International Trade 
Commission).  The Department of the Treasury retained responsibility for determining anti-dumping (and countervailing duty) margins until Congress adopted the GATT Anti-Dumping Agreement 
through passage of the Trade Agreements Act of 1979.
67  The 1979 Act repealed the Anti-Dumping 
Act of 1921 and amended the Tariff Act of 1930 by  adding a new Title VII to implement the 
provisions of the Anti-Dumping Agreement.  The Department of the Treasury's responsibilities for 
anti-dumping and countervailing duty in vestigations were transferred to the Department of Commerce 
                                                      
63WTO document G/SG/N/6/USA/5, 5 November 1998. 
64As a response to a petition by the American Shee p Industry Association (ASI), which filed for 
Section 201 protection on  30 September 1998, and requested a remedy of increased tariffs and a tariff rate quota to limit all types of lamb meat for four years. 
65WTO document G/SG/N/8/USA/3, 18 February 1999. 
66USITC (1998d), p.IV-3. 
67USITC (1998d), p.IV-3. United States WT/TPR/S/56 
 Page 63 
 
 
in 1980;  since then the Depart ment's International Trade Administration (ITA)  determines the 
margin of dumping, and the USITC determines whether there is material injury or threat of material 
injury by reason of the dumped imports. 
56. Further modifications to anti-dumping law we re introduced by the Trade and Tariff Act 
of 1984, which amended the provisions relating to cumu lation of imports and thr eat of material injury, 
and by the Omnibus Trade and Competitiveness Act of 1988, which modified Title VII provisions 
relating to critical circumstances, material injury, and threat of material injury.  The Uruguay Round 
Agreements Act (URAA, 1994) amended Title VII to comply with the WTO Anti-Dumping 
Agreement.  One of the most important amendments  was the introduction of sunset review, after five 
years of application of an anti-dumping or countervailing duty order (see below). 
57. In May 1997, the Department of Commerce issu ed a final rule consolidating Anti-dumping 
and Countervailing Duty  Regulations.68  The new regulations, among ot her things, integrate general 
definitions applicable to anti-dumping/countervailin g duty proceedings, define de minimis standards 
for countervailable subsidies and dumping margins, and the rates to be applied in the case of 
non-producing exporters, and anti- dumping proceedings involving non-market economy countries.  
They also establish procedures for anti-dumpi ng and countervailing duty actions, specifying 
differences where they apply.  Methodologies for identifying and measuri ng dumping were included 
in the regulations.  Methodologies for identifying  and measuring the margin of subsidy were not 
included;  however, they were instead the object of new regulations issued in November 1998 (see 
below). 
58. Countervailing duty legislation, introduced in  1897, remained unchanged until 1974, when 
the application of countervailing duties was exte nded to duty-free imports and an injury test 
requirement was introduced.69  The Trade Agreements Act of 1979 introduced the requirement of an 
injury test in all countervailing duty cases involving imports from countries that were signatories to the GATT Agreement on Subsidies and Countervaili ng Measures, or which had assumed obligations 
substantially equivalent to those of the Agreemen t.  Previously, under section 303 of the Tariff Act 
of 1930, imports from countries that were not signa tories to the Agreement were entitled to an injury 
test only when imports were duty free.  Further m odifications to countervailing duty legislation were 
introduced in the Trade and Tariff Act of 1984 and the Omnibus Trade and Competitiveness Act 
of 1988.  The URAA repealed section 303 of the Tariff Act of 1930 and implemented the WTO Agreement on Subsidies and Countervailing Measures. 
59. Final countervailing duty regula tions were issued by the Department of Commerce in 
November 1998.
70  The 1998 rules established administra tive practices regarding countervailing 
measures in conformity with the amendments introduced by the URAA.  They also fill a void 
regarding regulations for countervailing measure investigations.  Although the Department of 
Commerce had up to then used the "1989 Proposed Regulations'', these were not binding since final 
rules had never been issued.  The Department of Commerce also issued, in 1998, interim final rules 
setting forth certain procedures for establishing the non- countervailable status of alleged subsidies or 
subsidy programmes pursuant to section 771(5B) of the Tariff Act of 1930. 
                                                      
68Substantive and procedural anti-dumping and procedural countervailing duty rules were consolidated 
into a new part 351 of Title 19 of the Code of Federal Regulations (19 CFR);  parts 353 and 355 were removed.  
Federal Register , 19 May 1997, Vol. 62, N° 96)[Rules and Regulations], pp. 27295-27345.  Available at 
Federal Register Online via GPO Access [www.gpo.gov]. 
69Before 1974, countervailing duties were applied only on dutiable goods and did not require an injury 
test.  USITC (1998d), p. IV-5. 
70Effective 28 December 1998, with  the exception of one subsectio n, which became effective on 
25 November 1998.  Federal Register , 25 November 1998, Vol. 63, No. 227. WT/TPR/S/56 Trade Policy Review 
Page 64 
 
 
60. Administrative reviews of existing anti-dumping or countervailing duty orders may be 
requested of the Department of Commerce by an interested party each year during the anniversary 
month of the publication of the order (19 CFR 351.213) .  The list of orders eligible for review is 
published in the Federal Register .  An interested party must specify the individual producers or 
exporters covered by the order or suspension agre ement for which they are requesting a review and 
the reason for this (Department of Commerce Regulations, 19 CFR 351.213(b)).71  The results of the 
reviews are normally issued within 12 months from the date of initiation. 
61. The Unfair Competition Act of 1916 enacted as Title VII (Unfair Competition) of the 
Revenue Act of 1916, is the subject of complain ts by the European Comm unities and Japan to the 
WTO.  The complaint by the EC, dated 9 June 1998, is  in respect of the United States's alleged failure 
to repeal this Act.72  The EC claims that the 1916 Act is still in force and is applicable to the import 
and internal sale of any foreign product irrespectiv e of its origin, including products originating in 
countries that are WTO Members.  The EC also alle ges that the 1916 Act exists in the U.S. statute 
books in parallel with the Tariff Act of 1930, as amended, which includes the U.S. implementing 
legislation for multilateral anti-dumping provisions.  The claim states that a court action brought 
under the 1916 Act is at present pending before U.S. courts 73;  that further court actions could be 
brought in the near future;  and that U.S. producer s of any product could decide to resort to the 1916 
Act.  The EC alleges violations of Articles III:4,  VI:1, and VI:2 of GATT 1994, Article XVI:4 of the 
WTO Agreement, and Articles 1, 2, 3, 4 and 5 of  the Anti-Dumping Agreement.  On 11 November 
1998, the EC requested the establishment of a panel;  which was created on 1 February 1999.  Japan 
requested consultations with the United States on 10 February 1999 regard ing the WTO consistency 
of the 1916 Act, which, under certain circumstan ces, makes the importation, or sales of imported 
goods within the United States unlawful and subject to  civil lawsuits.  Japan claims that judicial 
decisions under the 1916 Act are made without th e procedural safeguards provided for in the 
Anti-Dumping Agreement.  The cl aim states that a court action wa s brought under the 1916 Act and is 
presently under way against the affiliates of Japanese companies.74 
62. Certain aspects of the Department of Co mmerce's procedures regarding Title VII 
investigations were challenged when the Republic  of Korea presented a complaint to the WTO 
regarding a decision of the Department of Co mmerce not to revoke an anti-dumping duty order on 
dynamic random access memory semi-conductors (D RAMS) of one megabyte or above originating 
from Korea following a third review of the case.75  Korea claimed that the decision was made despite 
the finding that the Korean DRAM producers had not dumped their products for more than three and a 
half consecutive years, and despite the existence of evidence indicating that Korean producers would 
not engage in dumping DRAMS in the future.  Ac cordingly, on 6 November 1997, Korea requested 
the DSB to establish a panel, which was created  on 16 January 1998.  The Panel found that 
section 353.25(a)(2)(ii) of the Department of Commer ce regulations, together with the results of the 
review based on that provision, were inconsistent  with U.S. obligations under Article 11.2 of the 
Anti-Dumping Agreement.76  While recommending that the United States bring 
                                                      
71Federal Register, 19 May 1997, Vol. 62, pp. 27295-27424. 
72WTO document WT/DS136/1, 24 June 1998. 
73Complaint filed by Wheeling-Pittsburgh Steel Corp. in an Ohio federal district court in 
November 1998 seeking relief from allegedly dumped imports of Russian and Japanese steel under the 1916 Act. 
74WTO document WT/DS162/1, G/L/293, and G/ADP/D16/1,16 February 1999. 
75WTO document WT/DS99/1, 14 August 1997. According to section 353.25(a)(2)(ii) of the 
Department of Commerce regulations, an anti-dumping or countervailing duty order may be revoked during a 
review, if producers from the exporting country are no longer engaging in dumping and are not likely to engage 
in it in the future. 
76WTO document WT/DS99/R, 29 January 1999. United States WT/TPR/S/56 
 Page 65 
 
 
"section 353.25(a)(2)(ii) of the Department of Commerce regulations, and the Final Results Third 
Review , into conformity with its obligations" under th e Agreement, the Panel report did not suggest 
that the United States revoke the anti-dumpi ng order and amend section 353.25(a)(2)(ii).77 
63. The European Communities requested consulta tions with the United States on 12 June 1998 
under Article 4 of the DSU, Article XXII:1 of GATT 1994, and Article 30 of the SCM Agreement, 
with respect to the imposition of countervailing duties on certain hot-rolled lead and bismuth carbon 
steel (leaded bars) originating in the United Kingdom, in the context of three successive administrative reviews.
78  The EC claimed that the United St ates was breaching Articles 1.1(b), 10, 14 
and 19.4 of the SCM Agreement by applying co untervailing duties on British Steel plc/British Steel 
Engineering Steels Ltd (BSES) and United Engineer ing Steels Ltd (UES) based on subsidies received 
by British Steel Corporation (BSC) before its privatization in 1988.79  On 14 January 1999, the EC 
requested the establishment of a panel, which was created on 17 February 1999. 
Anti-dumping and countervailing duty investigation procedures 
64. Anti-dumping and countervailing duty  investigations are generally initiated at the request of 
petitioners.  Although the Department of Commerce is entitled to self-initiate investigations, it has 
seldom done so.  In the case of a petition filed on beha lf of an affected domestic industry, petitioners 
may be manufacturers, producers or wholesalers of the like product;  a recognized union representative of the affected party;  a trade association;  a coalition of  the three former;  or a coalition 
of processors, or processors and growers (for agricultural products).
80  Petitions must be filed 
simultaneously with the USITC and the ITA.  An inv estigation is initiated within 20 days of the date 
on which the petition was made after the ITA dete rmines whether the petition alleges the elements 
necessary for the imposition of a duty and contains information reasonably available to the petitioner 
supporting the allegations.81  The USITC then has 25 days to make a preliminary determination of 
injury. 
65. After a determination of injury has been made , the ITA has 115 days to issue a preliminary 
anti-dumping determination, or 85 days to  issue a preliminary CVD determination.82  If material 
injury has been found by the USITC, and the ITA makes an affirmative prel iminary determination, 
preliminary anti-dumping or countervailing duty me asures, generally the posting of a cash deposit or 
bond in an amount equivalent to the estimated marg in of dumping, may be applied for a period of six 
months.  If the ITA makes a preliminary determination of critical circumstances, the preliminary measures apply retroactively to subject imports en tered up to 90 days before  the determination was 
published in the Federal Register .
83  Whatever the determination, even if no margin of dumping or 
                                                      
77An amendment would involve, i.e., eliminating the "not likely" criterion. 
78WTO document WT/DS138/1 and G/SCM/D26/1,  6 July 1998. 
79BSC was privatized in December 1988 and changed its name to British Steel plc. UES is an 
independent joint-venture company, formed partly with BSC stock.  Countervailing duties were applied in 1993 
and in each of the subsequent reviews.  The EC claims that, as a result of privatization, British Steel plc. did not 
benefit from subsidies conferred upon BSC, and that the U.S. Department of Commerce had relied on the 
presumption that benefits from prior subsidies continue , without fulfilling the requirement to show this, as 
mandated by the SCM Agreement.  
80Petitioners may also be the governments of other WTO Members, in the case of third-country 
dumping. 
81The ITA has the authority to postpone the initiation of an investigation by up to 20 days to "poll the 
industry", or otherwise determine support for the petitio n, if the petition provides insufficient information 
establishing industry support.  USITC (1998d), p. II.3. 
82In some cases, the determination can be postponed, in accordance with CFR 351.205. 
83A determination of critical circumstances results from a history of dumping and material injury, 
knowledge of dumping (presumed to exist when there is margin of dumping of 25% or more for export price WT/TPR/S/56 Trade Policy Review 
Page 66 
 
 
subsidization is found, or the margin found is below the de minimis threshold 84, the investigation 
proceeds, and the ITA has an additional 75 days to  determine the final margin of dumping.  If the 
ITA's final determination finds a margin of dumping (o r subsidy) higher than the de minimis, then the 
investigation goes back to the USITC, which has 45 da ys to make a final determination of injury.  The 
final decision is then taken, within 280 (205 for C VD) days from the filing of the petition, or 260 days 
after the beginning of the investigation.  The im position of an order in the case of an affirmative 
determination, or of termination of the applicati on of provisional measures and return of the bond, in 
case of a negative determination, takes place within the 287th day (212th for CVD) and is published in 
the Federal Register .  An affirmative determination of injury  requires that at least half of the six 
USITC commissioners find injury;  if there is a tie in the vote, the determination is considered 
affirmative, and no final duties are imposed.  Affirm ative determinations are subject to administrative 
reviews at the request of an interested part y, and to sunset reviews after five years. 
66. Suspension agreements are sometimes negotia ted with the country under investigation.85 
These agreements are generally voluntary limits on  exports or price undertakings or involve the 
elimination of subsidies by the investigated countries. 86 There are several examples in the steel 
industry (see below). 
Anti-dumping and countervailing duty cases 
Anti-dumping investigations 
67. The number of annual anti-dumping investiga tion initiations has declined since the 
establishment of the WTO in 1995.  Initiations peak ed in 1992 with 84 cases.  Subsequently, the 
number declined, to 14 in 1995, 21 in 1996 and 15 in  1997.  In 1998, pressure from some domestic 
industries facing intense foreign competition, particul arly in steel, led to an increase in the number of 
initiations to 36 cases (Chart III.4).  The investiga tions initiated in 1996 and 1997 covered a value of 
imports of some US$2.18 billion.  Between 1996 and 1998, 25 anti-dumping duty orders were issued 
(nine each in 1996 and 1998 , and seven in 1997), considerably belo w the number of orders issued in 
previous years.  Imports affected by an affirm ative determination by the USITC were some US$920 
million in the same period.87 
                                                                                                                                                                     
(EP) sales, and a margin of 15% or more for constr ucted export price (CEP) sale s), together with massive 
imports over a short period of time (normally, when imports increase by 15% or more in the three months 
following the petition as compared to the three-month period prior to the petition). 
84The de minimis threshold is 2% for anti-dumping investigations (0.5% in the case of reviews) and, in 
the case of countervailable subsidies, 1% for developed countries, 2% for developing countries and, until 2003, 
3% for developing countries that have eliminated thei r export subsidies in accordance with Art.27.10 of the 
SCM Agreement.  
85Agreements with WTO Members involving price undertakings in suspended anti-dumping 
investigations are allowed under Article 8 of the An ti-Dumping Agreement;  those involving undertakings to 
eliminate a subsidy or adopt other measures to counter its effects ar e covered by Article 18 of the SCM 
Agreement. 
86If a suspension agreement is interrupted, the inve stigation resumes where it was left.  In general 
terms, suspension agreements may allow the exporter to appropriate at least some of the rent that would accrue 
to the importer in the case of imposition of an anti-dumping or countervailing duty, and hence, are sometimes 
more attractive to the exporter than continuing an anti-dumping  investigation.  
87This information refers to fiscal years.  USITC (1998d), p. E-7. United States WT/TPR/S/56 
 Page 67 
 
 
16143546
386983
1642
24356684
3751
1421
1536
020406080100
1980 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 1998
5451320
122653
1224
1419
1642
1624
979
0102030405060
1980 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 1998Chart III.4
Anti-dumping case activity, 1980-98
(a)  Initiations
(b) Duty orders issued
Source: http://www.ita.doc.gov/import_admin/ records/stats/ad8090.htm
 WT/TPR/S/56 Trade Policy Review 
Page 68 
 
 
68. Between 1980 and 1998, 742 anti-du mping investigations were initiated;  of these cases some 
44% (330 cases) resulted in final affirmative determin ations by both the ITA and the USITC and led 
to the imposition of final anti-dumping duties (Table III.7).88  However, provisional anti-dumping 
duties were applied in some three quarters of the investigations.89  There was a final negative 
determination in around 36% of the cases 90;  and some 22% of the inv estigations were terminated, 
due to withdrawal of the case because a settleme nt was reached, or becau se the case was dismissed 
due to a lack of sufficient evidence by the petitioner.91  In around one third of the cases, the negative 
determination of injury took place at the preliminar y stage;  in the remaining two thirds, there was a 
final negative determination of injury. 
Table III.7 
Anti-dumping investigations, 1980-98 
1980 Year 1980
-85 86 87 88 89 90 91 92 93 94 95 96 97 98 
1998
Initiations 218 83 16 42 24 35 66 84 37 51 14 21 15 36 742 
Prelim. 156 52 45 35 23 25 43 47 67 46 23 16 16 28 629 
Final Det. 107 43 58 17 40 18 28 28 80 31 38 12 15 17 533 
Duty 59 26 53 12 24 14 19 16 42 16 24 9 7 9 310 
Revocation 37 8 9 0 5 10 7 1 3 28 12 6 4 25 145 
Source : U.S. Department of Commerce, International Trade Administration. 
69. Of the 72 anti-dumping investigations initia ted between 1996 and 1998, 39 cases (54% of the 
total) involved steel products92;  ten investigations (14% of the total) involved agricultural and food 
products;  the remaining investigations involved a wide range of products in cluding supercomputers, 
semiconductors, rubber products, some textile products;  and chemicals.  The large share of the steel 
industry in the number of anti-dumping investigations follows the pattern observed in the past twenty 
years;  however, the share of investigations invo lving agricultural goods h as increased (see below).  
The countries subject to the largest number of an ti-dumping investigations in the period were China 
(8);  Chinese Taipei (8);  Japan (7);   Korea (6);  Canada (5);  Mexico (4);  and Italy (3).  EU countries 
were subject to 14 investigations (Table III.8).  In the 1980-98 period, the main respondents were 
Japan, China, Germany, Republic of  Korea, Chinese Taipei, Brazil, Italy, Canada, France and the 
United Kingdom.93 
                                                      
88This covers the whole period during which anti-dumping and countervailing duty investigations have 
been under the responsibility of the Department of Commerce and the USITC. 
89The application of provisional measures is allo wed by Article 7 of the Anti-Dumping Agreement. 
90USITC (1998d), and Mastel (1998).  The figures cover the period 1980-1997.  
91By value of imports, affirmative determinations affected 45% of subject merchandise and negative 
determinations 33%;  investigations covering 22% of imports were terminated.  USITC (1998). 
92Several preliminary determinations of dumping were made in early 1999 in cases involving steel 
products.  On 4 January 1999, the ITA issued a preliminary determination for stainless steel sheet and strip in 
coils from Japan (margins of dumping between 24.94% and 57.87%);  the United Kingdom (13.45%);  France (11.73%);  Germany (21.34%);  Italy (6.25%);  Korea (0, 12.35% and 58.79%);  Mexico (23.27%);  and Chinese 
Taipei (0.07%, 0.57%, and 2.94%) ( Federal Register , 4 January 1999, Vol. 64, No. 1, p. 108).  On 19 February 
1999, the ITA made a preliminary determination of dumping with respect to hot-rolled steel imports from Brazil and Japan;  the margins of dumping found were betwee n 25.14% and  71.02% (the USITC determination of 
threat of material injury had also included Russia).  Th e ITA also made preliminary affirmative determinations 
of critical circumstances for hot-rolled steel impor ts from Japan and Russia, but not from Brazil. 
93USITC (1998d). United States WT/TPR/S/56 
 Page 69 
 
 
Table III.8  
Anti-dumping and countervailing duty invest igations initiated between 1 January 1996 and 31 December 1998, by product and 
country 
Date filed Product Country 
12/11/98 Live cattle  Canada (A), (C);  Mexico (A) 
22/10/98 Dynamic Random Access Memory Semiconductors Chinese Taipei (A) 
30/09/98 Hot-rolled flat-rolled carbon-quality steel products Ja pan (A);  Russian Federation (A);  Brazil (A), (C) 
18/08/98 Elastic rubber tape India (A), (C) 
10/06/98 Stainless steel sheet and strip in coils France(A), (C); Italy (A), (C); Korea (A), (C); Japan (A);  Germany (A); 
Mexico (A);  Chinese Taipei (A);  United Kingdom (A) 
01/04/98 Emulsion styrene-butadiene rubber Ko rea (A);  Mexico (A);  Brazil (A) 
31/03/98 Stainless steel plate in coils Belgium(A), (C);  Canada (A) 
31/03/98 Extruded rubber thread Indonesia (A), (C) 
 31/03/98 Stainless steel plate in coils Italy (A), (C);  Korea (A), (C); South Africa (A),  (C); Chinese Taipei 
(A) 
27/03/98 Stainless steel round wire Cana da (A);  India (A);  Japan (A);  Korea (A);  Spain (A);  Chinese 
Taipei (A) 
06/02/98 Butter cookies in tins Denmark (A), (C) 
 06/01/98 Preserved mushrooms Chile (A);  China (A);  India (A); Indonesia (A) 
30/07/97 Stainless steel wire rod Sweden (A);  Germany (A);  Spain  (A);  Italy (A), (C);  Korea (A);  
Chinese Taipei (A);  Japan (A) 
 12/06/97 Fresh Atlantic Salmon Chile (A), (C) 
26/02/97 Steel wire rod  Canada (A), (C);  Trinid ad and Tobago (A), (C);  Venezuela (A), (C);  
Germany (A), (C) 
25/02/97 Static random access memory Korea (A);  Chinese Taipei (A) 
26/11/96 Collated roofing nails China (A);  Korea (A);  Chinese Taipei (A) 
06/11/96  Certain cut-to-length carbon steel plate China (A);  South Africa (A);  Russian Federation (A);  Ukraine (A) 
20/09/96 Crawfish tail meat China (A) 
20/08/96 Open-end spun rayon singles yarn Austria (A) 
29/07/96  Vector supercomputers Japan (A) 
11/07/96 Persulfates China (A) 
08/05/96 Engineered process gas turbo-compressor systems Japan (A) 
29/03/96 Fresh tomatoes Mexico (A) 
14/03/96  Beryllium metal & alloys Kazakhstan (A) 
08/03/96 Rebar Steel Turkey (A) 
07/03/96 Brake drums China (A) 
07/03/96 Brake rotors China (A) 
07/03/96  Certain laminated ha rdwood flooring Canada (A) 
06/02/96  Melamine dinnerware Indonesia (A);  China (A);  Chinese Taipei (A) 
16/01/96 Sodium azide Japan (A) 
(A) = Anti-dumping duty investigation. 
(C) = Countervailing measure investiga tion.  Each country is the object of an individual investigation. 
Source : U.S. Department of Commerce, International Trade Administration.  WT/TPR/S/56 Trade Policy Review 
Page 70 
 
 
70. The number of anti-dumping duty orders in effect on 1 January 1999 was 297 94, compared 
to 292 on 1 January 1996.  Of  these, 41% were on iron and steel pr oducts, and 8% on other metals;  
some 7% involved agricultural products and foods tuffs (Chart III.5).  The anti-dumping duty orders 
applied to the member countries of the European Union represented 21% of the total (63 orders);  
orders applied to Japan accounted for 16% (49 orders );  followed by China with 12%;  Chinese Taipei 
with 7%;  Korea with 6%;  Brazil with 5%  and Canada with 4%.  Anti-dumping duties were applied 
to imports from 56 countries and customs territories (Table AIII.1). 
 
Chart III.5
Anti-dumping duty orders in effect on 1 January 1999
Japan
16.2Other
2.4Other Europe
12.1
Other Asia
7.0  EU15 
21.2
Korea, Rep. of 
5.7Brazil   
5.4Other America
6.7Prepared foodstuff 
& beverages   4.4
Electrical
equipment
3.7Vegetable products 
3.0
Machinery
 & mechanical 
appliances
9.8Iron & steel and 
products thereof
41.1Plastic & rubber and 
products thereof
8.1
    Other  base 
metals and 
their products  
7.7
Source : WTO Secretariat, based on information provided by the International Trade Administration.Total:  297 cases(a)  By countr y                                                                          (b)  By product cate goryPer cent
Chinese Taipei  
 6.7Canada   
4.4
Other
3.0Mineral products  2.4
Products of  the chemical
 or allied industries
14.1
Textiles & 
clothing
2.7Base metals
48.8
China
12.1Asia
47.7America
16.5Europe
33.3
 
Countervailing duty investigations 
71. There were 18 countervailing duty investigations  initiated between 1996 and 1998;  13 of 
these investigations involved steel products.  Thr ee countervailing duty orders were issued during the 
period.  All countervailing duty investigati ons were initiated with a parallel anti-dumping 
investigation (Chart III.6).  The investigations in itiated in 1996 and 1997 covered a value of imports 
of some US$640 million.  Only US$2 million of imports were affected by an affirmative 
determination in 1997.95 
 
                                                      
94Of these, 24 orders were revoked as a result of sunset reviews held between July and November 1998, 
but will remain in effect until 1 January 2000. 
95This information refers to fiscal years.  USITC (1998d), p. E-8. United States WT/TPR/S/56 
 Page 71 
 
 
91160
1937 37
28
817
771122
57
2 1611
020406080
1980 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 1998
6
31115
1218
1314
7
6
22416
122
01
048121620
1980 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 1998Chart III.6
Countervailing duty case activity, 1980-98
(a)  Initiations
(b) Duty orders issued
Source: http://www.ita.doc.gov/import_admin/ records/stats/ad8090.htm
 WT/TPR/S/56 Trade Policy Review 
Page 72 
 
 
72. Between 1980 and 1998, 305 countervailing duty investig ations were initiated;  44% 
(135 cases) led to the imposition of countervailing duties (Table III.9).96 
Table III.9 
Countervailing duty in vestigations, 1980-98 
1980
- Year 1980-
85 86 87 88 89 90 91 92 93 94 95 96 97 98 
1998 
Initiations 173 28 8 17 7 7 11 22 5 7 2 1 6 11 305 
Prelim. 144 28 10 18 6 4 9 26 1 7 3 0 3 7 266 
Final Det. 104 22 20 14 12 4 5 7 20 2 6 2 0 2 220 
Duty 65 13 14 7 6 2 2 4 16 1 2 2 0 1 135 
Revocation 68 4 2 1 5 4 6 0 1 5 35 1 1 4 137 
Source : ITA, Department of Commerce. 
73. The countries subject to countervailing duty investigations in the period 1996-98 were 
Italy (3);  the Republic of Korea (2);  Brazil;  Fran ce;  India;  Belgium;  South Africa;  Indonesia;  
Denmark;  Germany;  Chile;  Trinidad  and Tobago;  Venezuela;  and Canada. 
74. There were 51 countervailing duty orders in effe ct on 1 January 1999, 11 less than at the time 
of the last Review;  over one third involved a me mber country of the European Union.  Brazil, 
Argentina and Canada accounted for around a quarter of the number of orders in effect (Table AIII.2).  
Some 58% of the countervailing orders a pplied to steel products (Chart III.7). 
 
Chart III.7
Countervailing duty orders in effect on  1 January 1999
East Asia 
7.8Other 
Europe
5.9
Argentina
7.9EU15 
37.2
Brazil
11.7Other America
9.8 Vegetable & 
animal products
9.8Iron & steel and 
products thereof
58.8
Other  base metals 
and their products  
7.9 Total:  51 cases(a)  By countr y                                                                          (b)  By product cate goryPer cent
Middle East  
 7.9Canada  
5.9Chemical products
3.9
Prepared foodstuff
11.7Textiles & leather and 
products thereof
7.9
South Asia 
5.9Asia
21.6America
35.3Europe
43.1Base metals
66.7
Source : WTO Secretariat, based on information provided by the International Trade Administration.
 
                                                      
96This covers the whole period during which anti-dumping and countervailing duty investigations have 
been under the responsibility of the Department of Commerce and the USITC. United States WT/TPR/S/56 
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Suspension Agreements 
75. The United States reached seven suspension agreements in the 1996-98 period:  five were 
related to steel (with China, the Russian Federa tion, Ukraine, Venezuela and South Africa), one 
sodium azide (with Japan) and one involved tomatoes (w ith Mexico).  Six of the agreements led to the 
suspension of anti-dumping investigations, and on e (with Venezuela) to the suspension of a 
countervailing duty investigation.  The Venezuelan  suspension agreement was terminated based on a 
USITC finding of no injury, which was published on 23 February 1998.  The agreements regarding 
anti-dumping investigations reached with other WTO Members (Japan, Mexico and South Africa) 
resulted in price undertakings;  those with non-member countries contained provisions to limit 
exports.  As of 1 January 1999, 24 suspension agre ements were in place.  Although the agreements 
cover different sectors and products, the highest recu rrence is found in steel products, textiles, and 
uranium.  Suspension agreements currently in place cover 18 countries;  the highest number per single country is three, for Japan (Table III.10). 
Table III.10 
Suspension agreements in ef fect on 1 January 1999 
Country Products Date of order 
Argentina  Carbon steel wire rod (C) 27-09-82 
Brazil  Frozen concentrated orange juice (C) 02-03-83 
Canada  Potassium chloride 19-01-88 
China  Honey 16-08-95 
China  Cut to length carbon steel plate 19-11-97 
Colombia  Textiles & textile products (C)   13-08-90; reinstated 22-10 -93 
Japan Small electric motors 06-11-80 
Japan Color negative photo pape r & chemical components 12-08-94 
Japan  Sodium azide 07-01-97 
Kazakhstan  Uranium 30-10-92; amended 30-10 -92  and 14-03-95 
Kyrgyzstan Uranium 30-10-92; amended 30-10-92 and 14-03-95 
Mexico  Tomatoes 01-11-96 
Netherlands  Colour negative photo paper & chemical components 12-08-94 
Peru  Cotton shop towels (C) 12-09-84 
Russian Federation Uranium 30-10-92; amended 30-10-92 
Russian Federation Cut to length carbon steel plate 9-11-97 
Singapore Refrigeration compressors (C) 07-11-83 
South Africa Cut to length carbon steel plate 19-11-97 
Thailand Textiles & textile products 03-03-85; reinstated   on 22-10-93 for yarn . 
Ukraine Siliconmanganese 29-11-94 
Ukraine Cut to length carbon steel plate 19-11-97 
Uzbekistan Uranium 30-10-92;  amended 30-10-92 
Venezuela Gray Portland cement and cement clinker 27-02-92 
Venezuela Gray Portland cement and cement clinker (C) 17-03-92  
(C) = countervailing measure investigation. 
Source : U.S. Department of Commerce, International Trade Administration. 
Administrative reviews 
76. The number of administrative reviews comple ted in 1996-98 reached 341 in the case of 
anti-dumping duties, and 60 in the case of countervaili ng.  This is a substantial increase in both cases WT/TPR/S/56 Trade Policy Review 
Page 74 
 
 
with respect to the1993-95 period.97  There were 1,056 anti-dumpi ng duty and 473 countervailing 
duty administrative reviews completed between 1980 and 1998. 
U.S. Products subject to foreign anti-dumping and countervailing duties 77. As reported by the ITA
98, partly based on notifications provided to the WTO, 65 
anti-dumping duty orders were applied on U.S. produc ts by 12 trading partners as at 1 January 1999.  
These were Australia (3);  Brazil (5);  Canada ( 15);  Colombia (4);  the European Union (5);  
India (4);  Israel (1);  Korea (3);  Mexico (19);  New Zealand (1);  South Africa (4);  and Venezuela (1).  The products affected by an ti-dumping duties included paper, chemicals, 
pharmaceutical products, steel products, copper an d brass fittings, certain agricultural products, 
microdisks, acrylic fibres, gasoline additives, and oil filters.  Suspension agreements with Canada 
regarding plastic bags, and with Me xico regarding apples were in effect.  Additionally, China applied 
provisional anti-dumping duties on newsprint.  No  countervailing duties were applied on U.S. 
products as at 1 January 1999. 
Five-Year Sunset Reviews 
78. U.S. legislation regarding anti-dumping a nd countervailing measures as embodied in 
Section 751 (c) of the Tariff Act of 1930 was amende d by the URAA to require reviews of those 
anti-dumping and countervailing duties in place.
99  These "sunset" provisions require the ITA and the 
USITC to conduct reviews no later than five year s after an anti-dumping or countervailing duty order 
is issued, to determine whether the revocation of th e order would be likely to lead to continuation or 
recurrence of dumping or subsidies (ITA) and of mate rial injury to the U.S. industry (USITC).  New 
regulations for the implementation of sunset reviews were published in the Federal Register  on 
5 June 1998, notified to the WTO on 15 June  1998, and became effective on 6 July 1998.100  Sunset 
reviews are order-specific (country and product-specifi c).  Suspension agreements are also subject to 
review.  The concept of duty absorption, allowed by  Article 9.3.3 of the Anti-Dumping Agreement, is 
to be considered by the ITA in determining the ma gnitude of the dumping margin likely to prevail if 
an order is revoked. 
79. A calendar for the review, over a three-year  "transition period", of all outstanding 
anti-dumping and countervailing duty or ders in existence as of 1 Ja nuary 1995 ("transition orders") 
was initially established.  The transition period, whic h  started in July 1998, when 12 reviews were 
initiated by the ITA (Table AIII.3), ends on 1 Janua ry 2000.  All investigations during this period 
must begin before 31 December 1999.  Reviews in itiated in December 1999, must be completed by 
June 2001.  In total, 321 reviews are to be held during the transition period.101 
80. Five-year reviews of all anti-dumping and countervailing duty orders issued since 
1 January 1995, will be initia ted no later than 30 days prior to their five-year anniversary.  A system 
to review the 49 anti-dumping and 5 countervailing duty orders issued between 1 January 1995 and 
31 December 1998, running between January 2000 and December 2003, has already been put in 
place.  More reviews will take place during the tran sition period than after the year 2000, because the 
321 orders under review ha ve accumulated since 1966. 
                                                      
97Between 1993 and 1995, 214 anti-dumping duty  and 48 countervailing duty administrative reviews 
were completed.  See:  http://www.ita .doc.gov/import_admin/records/stats.htm. 
98http://www.ita.doc.gov/import_ad min/records/foracdcvd.htm. 
99To comply with the requirements of Article 11 of  the Agreement on Anti-Dumping and Article 21 of 
the SCM Agreement. 
10019 CFR Part 351. 
101Federal Register, 29 May 1998, Vol. 63, N° 103. United States WT/TPR/S/56 
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81. Reviews are initiated by the ITA not later than 30 days before the fifth anniversary of the date 
of publication of an anti-dumping or countervailing dut y order;  a notice of initiation is published in 
the Federal Register requesting interested parties to provide a note of intent to participate in the 
investigation and provide information to the Depart ment of Commerce and the USITC.  At the same 
time, the USITC publishes a notice of institution in the Federal Register .  A notice of intent to 
participate in a sunset review must be submitted by  interested domestic parties to the ITA within 
15 days of initiation of a sunset review.  Comple te responses to a notice of initiation must be 
submitted by all interested parties within 30 days of initiation of a review.  Interested parties must also 
file an entry of appearance with the USITC within  21 days of the publication of the notice of 
institution, and submit complete information re garding the investigation within 50 days. 
82. Respondent interested parties, including fo reign governments, are allowed to waive 
participation in a sunset review conducted by the ITA102;  a statement of waiver must be filed within 
30 days of initiation of the sunset review.  Failure to file a complete substantive response to a notice 
of initiation is treated as a waiver of participation.  If a foreign government waives participation in a 
countervailing duty sunset review, e ither by filing a statement of waiver or by failing to file a 
complete substantive response to a notice of initiati on, an expedited sunset review will be conducted 
which will normally conclude that revocation of  the order or termination of the suspended 
investigation would be likely to lead to conti nuation or recurrence of a countervailable subsidy. 
83. Responses by domestic and respondent interested  parties are evaluated by the ITA on an 
individual and an aggregate basis;  they are asked  to provide, if available, information regarding 
historical margins of dumping or subsidy, export volume and value data and the U.S. share of total 
exports of  the merchandise investigated.  Domestic interested parties are considered to have provided 
adequate response where at least one domestic in terested party files a complete substantive 
response.103  Respondent interested parties are considered  to have provided adequate response where  
responses account for more than 50%, by volume, of the total exports to the United States of the 
product investigated.  The ITA notifies the USITC of its adequacy determinati on within 50 days of 
initiation of the sunset review. 
84. A sunset  review must normally be completed by the ITA and the USITC within 360 days of  
the date of initiation (Box III.2).  The regulations  implemented by the ITA in July 1998 introduced the 
concepts of expedited and full sunset reviews.  Expedited reviews by the ITA are made  when 
respondent interested parties provide inad equate responses to a notice of initiation.104  Expedited 
reviews by the USITC take place in case of inadequa te response to its notice of institution.  Full 
sunset reviews are conducted when domestic inter ested parties and respondent interested parties 
provide adequate responses  both to the ITA and the USITC.  Wher e there is no domestic party interest 
in a particular case, the ITA automatically revokes the order or terminates the suspended 
investigation, as applicable, within 90 da ys of initiation of the sunset review.105  In expedited reviews, 
the ITA can make a final determin ation (regarding the margin of dumping) within 120 days of the 
date of initiation, and the USITC within 150 days.106  For transition reviews, and in cases started after 
                                                      
10219 CFR 351.218 (d). 
10319 CFR 351.218 (e)(1)(i)(A).  A complete substantive response is one that contains all the 
information requested. 
10419 CFR 351.218 (e)(1)(ii)(C). 
105Tariff Act of 1930, as amended, section 751(c)(3)(A). 
106In some cases, the USITC may decide to conduct a full review even when the ITA has opted for an 
expedited one.  In these cases, the ITA makes a final de termination within 120 days, but the USITC still has 360 
days from the initiation of the review to  conclude it.  An example of this is the sunset review of an anti-dumping 
order on stainless steel plate from Sweden, for which the ITA i ssued a notice of final results on WT/TPR/S/56 Trade Policy Review 
Page 76 
 
 
1 January 2000 that may prove to present complic ations, the ITA and the USITC may extend these 
deadlines by up to 90 days.  A review of a transition order must be completed not later than 18 months 
after the date such review is initia ted.  No transition order may be revoked before 1 January 2000, five 
years after the date the WTO Agreement entered into force for the United States.  In this respect, one 
determination of non-recurrence of material inju ry has already been made in 1998 and 1999, but 
duties will remain in place until 1 January 2000 (Table  AIII.3).  There have also been a number of "no 
domestic interest" determinations. 
85. In the case of a full review, the ITA issues its preliminary determination normally not later 
than 110 days after initiation.  If the preliminary determination is negative and the margin of dumping 
or subsidy used was not based on countervailing duty rates or du mping margins from the original 
investigation or subsequent reviews,  the ITA must conduct a verification.107  The ITA must make a 
final determination of dumping within 240 days of  the date of initiation, and the USITC has an 
additional 120 days to issue a final determination of injury.  The ITA normally will issue its determination to continue , revoke, or terminate an order or suspended investigation, as applicable, 
within seven days after the date of publication of the USITC's final determination concluding the 
sunset review, and subsequently publish notice of the ITA's determination in the Federal Register . 
86. While the ITA conducts administrative revi ews upon request and has procedures for 
revocation of orders based on cessation of dumping, the USITC determines whether revocation of an 
order, or termination of a suspension agreement, would be likely to lead to the continuation or 
recurrence of material injury within a reasonabl y foreseeable time.  The margin of dumping or 
subsidy considered by the ITA and provided to th e USITC ("margin of dumping that is likely to 
prevail if the order is revoked") is generally the margin determined in the original investigation.
108  
Factors taken into account in the USITC reviews ar e the likely volume, price effect, and impact of 
imports of the subject merchandise on the indust ry if the order is revoked or the suspended 
investigation is terminated;  prior injury determinations, whether the industry is vulnerable to material 
injury if the order is revoked or the suspension agre ement is terminated;  and considerations of duty 
absorption (section 751(a)(4)). 
87. The determination of the likelihood of continuati on or recurrence of a countervailable subsidy 
if duties are revoked takes into account the level of  the net countervailable subsidy from the original 
investigation;  elimination or addition of progra mmes;  and, as appropriate, the possible use of new 
subsidies programmes identified in other investigati ons or reviews.  In anti-dumping investigations, 
the determination must take into account the wei ghted average dumping margins and the volume of 
imports before and after the issuance of the anti- dumping duty order or acceptance of the suspension 
agreement.  The fact that a subsidy or an dumping ma rgin is found to be zero or de minimis, leaves 
unresolved the issue of whether revocation of a countervailing duty order or termination of a 
suspended investigation would lead to continua tion or recurrence of a countervailable subsidy. 
                                                                                                                                                                     
8 December 1998 ( Federal Register , Vol. 63, p. 67658), while the USITC issued a notice of institution of a full 
review on 16 November 1998, Federal Register , Vol. 63, p. 63478).  
10719 CFR 351.218 (f)(2)(i). 
10819 CFR 351.218 (e)(2)(i) provides that only unde r the most extraordinary circumstances will the 
Department of Commerce rely on a countervailing duty rate or dumping margin other than those it calculated 
and published in its prior determinations.  If the marg ins determined in the original investigation are not 
available (for investigations held before 1980), the De partment of Commerce normally will select the margin of 
dumping from the first administrative review.  However,  a more recently calculated margin may be used for a 
particular investigated company, wher e there are indications of duty absorp tion, or when ther e is evidence that 
the margin of dumping or subsidization may have decreased.  (ITA, "Sunset Policy Bulletin", Federal Register , 
16 April 1998, Vol. 63, No. 73, p. 18873). United States WT/TPR/S/56 
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Box III.2:  Schedule of sunset reviews 
A.  Schedule for 90-day sunset reviews (no response by domestic interested parties) 
Day 0 Initiation. Publication of the Notice of Initiation in the Federal Register by the ITA and the USITC. 
Day 15 Filing of Notice of Intent to Partic ipate by domestic interested parties. 
Day 20 Notification to the USITC that no domestic interested party has responded to the Notice of Initiation. 
Day 30 Filing of substantive response to the Notice of Initiation by all interested parties and industrial users 
 and consumers. Day 35 Filing of rebuttal to substantive response to the Notice of Initiation.  
Day 40 Notification by the ITA to the USITC that no domestic interested party has responded to the Notice 
 of Initiation. 
Day 50 Responses to notice of institution by the USITC. 
Day 90 ITA issues a final determination revoking an or der or terminating a suspended investigation where no 
 domestic interested party responds to the Notice of Initiation. 
B.  Schedule for expedited sunset reviews (inc omplete answers by domes tic interested parties) 
Day 0 Initiation. Publication of the Notice of Initiation in the Federal Register by the ITA and the USITC. 
Day 15 Filing of Notice of Intent to Partic ipate by domestic interested parties. 
Day 30 Filing of Statement of Waiver by respondent interested parties. 
Day 30 Filing of substantive response to the Notice of Initiation by all interested parties and industrial users 
 and consumers. 
Day 35 Filing of rebuttal to substantive response to the Notice of Initiation. 
Day 50 Notification by the ITA to the USITC that resp ondent interested parties provided inadequate 
 response to the Notice of Initiation. 
Day 50 Responses to notice of institution by the USITC. 
Day 70 Comments on adequacy of response and appropriateness of expedited sunset review. 
Day 95 Notice of expedited review. 
Day 120 Expedited final determination by the ITA (if issued). 
Day 150 Expedited final determination by the USITC.  Views transmitted to the  ITA. 
C.  Schedule for full sunset reviews 
Day 0 Initiation. Publication of the Notice of Initiation in the Federal Register by the ITA and the USITC. 
Day 15 Filing of Notice of Intent to Partic ipate by domestic interested parties. 
Day 30 Filing of Statement of Waiver by respondent interested parties. 
Day 30 Filing of substantive response to the Notice of Initiation by all interested parties and industrial users 
 and consumers. 
Day 35 Filing of rebuttal substantive response to the Notice of Initiation. 
Day 50 Responses to notice of institution by the USITC. Day 95 Notice of full review. 
Day 110 Preliminary results of full sunset review by the ITA. 
Day 120 Verification in a full sunset review, where needed. Day 160 Filing of case brief in full sunset review. 
Day 165 Filing of rebuttal brief in full sunset review. 
Day 167 Hearing in full sunset review if requested. Day 240 Final determination by the ITA. 
Day 285 Prehearing report to the USITC and parties. 
Day 305 Hearing  (USITC). Day 330 Final determination by the ITA if full review is fully extended. (when the review is extraordinarily 
 complicated, the period for issuing final results may be extended by not more than 90 days). 
Day 348 Vote by the USITC. Day 360 Final determination by the USITC.  Views transmitted to the ITA.  Termination of the review. 
Day 450 Final determination by the USITC if full review is fully extended.  Termination of the review. 
Source :  U.S. Department of Commerce, International Trade Administration (ITA);  and U.S. International 
 Trade Commission (USITC). 
 WT/TPR/S/56 Trade Policy Review 
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88. Some 82 sunset reviews were initiated between July 1998 and end-January 1999.  Of these, 
27 reviews had been terminated and duties revoked by the end of January.  Most reviews initiated in 
the second half of 1998 were completed by the ITA in 90 or 120 days (expe dited reviews), and will 
result in the revocation of orders due to failure of response or inadequate response by domestic 
interested parties.  In general te rms, full-length reviews involve sens itive products, such as steel, sugar 
and some synthetic products (Table AIII.3). 
(3) MEASURES AFFECTING EXPORTS  
(i) Export prohibitions and licensing 
89. The U.S. Department of Commerce, which is responsible for administering and enforcing 
export controls109, currently acts under the authority conferred by Executive Order No. 12924 issued 
on 19 August 1994.  This has been renewed on a yearly basis since Congress failed to renew the 
Export Administration Act (EAA) of 1979, which lapsed in 1994110;  the EAA is in the process of 
being revised.111  The Export Administration Regulation (EAR) was simplified in 1996.112 
90. The EAR's export control provisions are intended not only to fight proliferation, but also to 
pursue other goals, such as national security, preven tion of supply shortages in the United States, and 
foreign policy.  Many of these controls are mainta ined as part of multilateral control arrangements, 
such as the Wassenaar Arrangement, Nuclear Supp lier Group, and the Missile Technology Control 
Regime.113  Some controls are designed to restrict  access to dual-use items by countries or persons 
that might employ them for purposes contrary to the interests of the United States.  These include 
controls to stem the proliferation of weapons of  mass destruction, and to limit the military and 
terrorist support capability of certain countries. 
91. U.S. exports are regulated for national security and foreign policy reasons by several U.S. 
government departments:  the Department of Stat e regulates items on the U.S. Munitions List;  the 
Department of Energy and the Nuclear Regulati on Commission regulate special nuclear equipment 
and technology use in nuclear reactors and special fissile material, natural gas, and electric power;  the Department of Justice regulates narcotics and dange rous drugs;  the Maritime Agency regulates all 
boats and ships of five net tonnes or more;  the De partment of the Treasury regulates all exports to (or 
imports from) countries or individuals subject to foreign assets sanctions (see below);  and the Bureau of Export Administration (BXA) regulates all dual-u se items other than those regulated by other 
agencies. 
92. The BXA regulates U.S. exports of commercia l commodities, software and technology. 
Exports require a licence, based upon the item classi fication, the destination, the end-user, and the 
end-use.  The Commerce Control List (CCL) clas sifies items subject to BXA jurisdiction and,  
together with the Export Administration Regulation, identifies which export restriction applies, 
                                                     
 
109This power was conferred by the Export Control Act of 1949.  Upon expiry of the Export Control 
Act, the Export Administration Act (EAA) of 1969 took effect on 1 January 1970.  The EAA was re-established 
in 1979. 
110On 19 August 1994, consistent with the authority provided under the International Emergency 
Economic Powers Act (50 U.S.C. 1701 et seq.), Executiv e Order 12924 was issued by the President to declare a 
national emergency with respect to the threat to nationa l security, foreign policy, and the economy of the United 
States, in light of the expiry of the Export Administration Act of 1979 (Notice of the President, 13 August 1998, 
Federal Register , 17 August 1998, Vol, 63, No. 158.  Available at:  http:frwebgate…/waisgate.cgi [26 January 
1999]. 
111http://bax.fedworld.gov/mission.html, 6 October 1998. 
112Federal Register (Rules and Regulations), 25 March 1996. 
113http://bax.fedworld.gov/ear.html, 6 October 1998. United States WT/TPR/S/56 
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reasons for the control, prohibited destinations  and applicable licence exceptions.  The specific 
reasons for the BXA's export controls include na tional security, nuclear non-proliferation, regional 
stability, anti-terrorism, United Nations sanctions, s hort supply, and crime control.  In addition, 
specific products such as missile technology pr oducts, chemical and biological weapons, high 
performance computers, and encryption information products are subject to export controls.  Many 
items on the CCL are subject to more than one type of control (e.g. national security, missile technology, etc.).  A licence is issued only if an application can be approved under all applicable licensing policies.  In addition to specific control list license requirements, BXA has adopted an end-user control commonly referre d to as "catch-all" controls.
114 
93. In general, goods that are controlled for pr oliferation reasons require a licence to all 
destinations.  Licence exceptions apply to speci fic groups of items and specific destinations.  
Examples of such exceptions include shipments of limited value (LVS), temporary imports, exports, 
and re-exports (TMP), gift parcels and huma nitarian donations (GFT), and baggage (BAG).  
However, exporters are not permitted to use licence exceptions if the transaction is captured by the 
catch-all-control.115 
94. The U.S. maintains embargoes on specific c ountry destinations.  In general, goods, 
technology, or services may not be exported to Cuba, Iran, Iraq, Liby a, North Korea, and Sudan.  
Some specific restrictions exist on exports to Syria.  Exceptions may apply for information or 
information materials, and donated articles intended to  relieve human suffering, such as food, clothing 
and medicine.  Exports of other goods to North Ko rea may be possible if licensed by the Bureau of 
Export Administration (BXA).116  On 18 June 1998, the Administration announced details of 
sanctions that the United States imposed on India and Pakistan, which included a ban on exports of 
items controlled for nuclear proliferat ion (NP) and missile technology (MT)117, thus the BXA has 
been denying licence applications for the export of NP and MT controlled dual-use items. 
95. Furthermore, U.S. persons cannot export mini ng materials, arms a nd related materials, 
petroleum and petroleum products, aircraft or aircra ft components, motorized vehicles or watercraft, 
and their spare parts, to the territory of Angola other than through points of entry designated by the 
U.S. Treasury Department.  Nor can U.S. vessels or  aircraft be used to transport such exports.118 
96. In accordance with an international arms em bargo mandated by the United Nations Security 
Council, the United States has banned  the sale and suppl y of arms and related material of all types to 
the Federal Republic of Yugoslavia (Serbia and Montenegro).119 
97. A major function of economic sanctions is to  alter the conduct of a foreign government.  
However, firms and workers of the country imposing th e sanction are also hurt.  It has been estimated 
that economic sanctions cost the United States US$15 billion to US$19 billion annually in potential 
exports.  This, in turn, translates into an estimat ed 200,000 or more jobs lost in the export sector.120  
According to a USITC study, the sectors most affected  by such sanctions are agriculture and energy. 
                                                      
114U.S. authorities. 
115Information provided by the U.S. authorities. 
116OFAC (1998a). 
117 Sanctions have been implemented under the authority of the Glenn Amendment (paragraph 102 of 
the Arms Export Control Act) and have been codified in Section 742.16(b)(i) of the EAR. 
118OFAC (1998b). 
119Federal Register , 14 July 1998, Vol. 63, No. 134. 
120Elliot (1997). WT/TPR/S/56 Trade Policy Review 
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98. In addition, exports of unprocessed timber or iginating from non-federal public lands in the 
western continental United States remain prohibited.121  In 1990, Congress passed and the President 
signed the Forest Conservation and Shortage Relief Act (the Act).  This legislation was passed to 
provide the executive branch with the authority to manage the impact on timber supply of broad 
conservation measures (e.g. timberlands set-aside s pursuant to the Endangered Species Act and the 
National Forest Management Act).  These conser vation measures had the effect of reducing the 
volume of timber harvested from federal and other public  lands, thereby contributing to a shortfall in 
the supply of timber in the western United States.  The Act, among other things, prohibits the export 
of unprocessed timber originating from non-fede ral public land in 17 western states.122 
(ii) Export subsidies 
99. The Export Enhancement Program (EEP), which affects agricultural goods, has been in place 
since May 1985, was re-authorized until the year  2001 in the Uruguay Round Agreements Act of 
1994.123  The purpose of the programme is to enable exporters to offer prices that are competitive with 
those being offered by other countri es' exporters in selected forei gn markets.  Under the EEP, cash 
bonuses are made available by the CC C to enable exporters to meet pr evailing world prices for targeted 
commodities in targeted destinations.124 
100. EEP initiatives are evaluated on five criteria:  (i) the contribution of the initiative in furthering 
the U.S. trade policy objective of countering compet itors' subsidies and other unfair trade practices by 
displacing such countries' subs idized exports in targeted  countries;  (ii) the poten tial to develop, expand, 
or maintain markets for U.S. agri cultural commodities;  (iii) the adverse effects on non-subsidized 
exporters of agricultural products;  (iv) the expected benefits compared with expe cted costs of the 
initiative;  and (v) market development.125 
101. The commodities that have been affected by this programme are wheat, wheat flour, feedgrains, 
rice, vegetable oil, frozen poultr y, barley malt, pork and eggs.126  However, most of these products have 
not been subject to EEP in recent years.  In  FY 1996 the CCC spent US$339.5 million under the EEP.127  
The CCC did not operate the EEP in fiscal year 1997.128  In FY 1998, EEP awards were available for 
barley and frozen poultry and amounted to US$2.06 million.129 
102. The Dairy Export Incentive Program (DEIP) is ba sed on the same criteria as the EEP.  Under 
this programme payments are made in cash on a bid basis to entities that sell U.S. dairy products for 
export.  Export sales under the programme must be in  addition to and, to the extent practi cable, not 
displace commercial export sales of U.S. dairy produc ts.  Eligible dairy produc ts are butter, butter-oil, 
                                                      
121GATT (1994);  and Federal Register , 10 April 1998, Vol. 63, No. 69.  Available at:  
http://frwebga…/waisgate.cgi?WAISdoc. 
122Information provided by the U.S. authorities. 
123The Federal Agricultural Improvement and Reform Act of 1996, enacted on 4 April 1996, further 
extends funding through 2002. 
124Export Enhancement Programme Criteria [online]. Available at:  
http://ffas.usda.gov/excredits/reg2a3b.html [19 October 1998]. 
125WTO documents G/SCM/N/3/USA, 15 March 1996, and G/SCM/N/3/USA/suppl.1, 
19 November 1998. 
126Since 1 July 1995, the terms of the Uruguay Round Agreement on Agriculture established annual 
ceilings, by commodity, with respect to maximum quant ity and budgetary expenditu res permitted for export 
subsidies (WTO documents G/SCM/N/3/USA, 15 March 1996, and G/SCM/N/3/USA/Suppl.1, 19 November 1998). 
127WTO document G/SCM/N/25/USA, 11 May 1998. 
128WTO document G/SCM/N/3/USA/Suppl.1, 19 November 1998. 
129Data provided by the U.S. authorities. United States WT/TPR/S/56 
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anhydrous milk fat, non-fat dry milk, whol e milk powder, and a variety of cheeses.130  In FY 1997 
government expenditure on DEIP amounted to US$12 1.5 million and in FY 1998 the awards totalled 
US$110.2 million.131 
103. As in the case of the EEP, effective 1 July 1995, the terms of the Uruguay Round Agreement on 
Agriculture established annual ceilings for the DEIP by commodity, with respect to maximum quantity 
and budgetary expenditures pe rmitted for export subsidies.  This programme was re-authorized by the 
Uruguay Round Agreements Acts of 1994 until 2001, and extended to 2002 by the Farm Bill. 
(iii) Duty and tax concessions affecting exports  
104. A drawback system is used in order to enc ourage American commerce and/or manufacturing;  
it allows for the refund or remission, in whole or in  part, of customs duties, internal taxes, or fees.132  
The drawback is authorized under a number of circumstances133, for instance, when articles 
manufactured in the United States using imported merchandise are exported (or destroyed), 99% of 
the duties paid on the used imported merchandise ma y be refunded as a drawback, except in the case 
of flour or by-products produced from imported whea t.  If two or more products result from the use of 
imported merchandise, the drawback is distributed  among products in accordance with their relative 
values at the time of separation.  Also, if both im ported merchandise and domest ic merchandise of the 
same kind and quality are used to manufacture article s, some of which are exported (or destroyed), a 
drawback (not exceeding 99%) of the duty paid on the imported merchandise is refundable on the 
exports.  It is immaterial whether the actua l imported merchandise or the similar domestic 
merchandise was used in the exported articles.134  The drawback is processed by the Customs 
Drawback offices, which are located at ports. 
(a) Foreign-trade zones 
105. Foreign-trade zones are designated sites licen sed by the Foreign-Trade Zones (FTZ) Board 
(the Secretary of Commerce is Chairman);  they ar e legally outside the U.S. customs territory.  The 
purpose of the zones, inter alia,  is to expedite and encourage foreign commerce, attract offshore 
activity and encourage retention of domestic activ ity;  to assist state/local economic development 
efforts;  and to promote employment .  During FY 1997 there were 141 fully active FTz. 
106. Foreign and domestic merchandise may be pu t in a FTZ for purposes such as storage, 
exhibition, assembly, manufacture, and processing, without formal customs entry procedures and payment of duties, unless and until the foreign mercha ndise enters U.S. customs territory for domestic 
consumption.  At that time, the importer may choose to  pay duties either at the rate applicable to the 
foreign material upon its entry into a zone or, if  used in manufacturing or processing, the emerging 
product.  Quota restrictions do not apply to foreig n goods put in the zones.  Merchandise moved into 
FTZs for export may be considered exported for purposes such as federal excise tax rebates and 
drawback.  In addition, foreign goods and domestic goods held for exportation  are exempt from state/local inventory taxes.
135 
                                                      
130Cheddar cheese, mozzarella cheese, cream cheese, feta cheese and gouda cheese. 
131Data provided by the U.S. authorities. 
132Drawback payments were initially authorized by th e first Tariff Act of the United States in 1789.  
Since then they have been part of the law, although the conditions under which they are payable have changed. 
13319 U.S.C. 1313. 
134"Drawback:  a Duty Refund on Certain Exports".  Available at:  
http://www.customs.ustreas .gov/imp-exp2/export/dback.h tm [14 December 1998]. 
135http//www.ita.gov;  21 January 1999. WT/TPR/S/56 Trade Policy Review 
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107. In 1997 (FY) the value of merchandise handled  in FTZs was US$178 billion;  exports from 
the zones amounted to US$17 billion, and of the im ports into the zone, some 68% was of U.S. 
origin.136 Foreign trade zones are important for oil refining, the production of pharmaceuticals, office 
equipment, high-technology mercha ndise, and particularly important for the automobile sector.137 
108. Under special income tax provisions, a portion of the export income of  an eligible foreign 
sales corporation (FSC) is exempt from U.S. income tax (section (4)(i)(b)). 
(iv) Export finance, insurance and guarantees 
109. Several federal government agencies, as well as  a number of state and local ones, offer 
programmes to assist exporters with their financ ing needs.  Some are guarantee programmes that 
require the participation of an approved lender, othe rs provide loans or grants to the exporter or a 
foreign government.  To be eligible for these pr ogrammes, an export sale must generally be made 
under a letter of credit or with credit insurance cove rage.  A certain percentage of state or local 
content may also be required.  However, some programmes may require only that certain facilities, 
such as a state or local port, be used.138  Other agencies fill various ma rket niches;  for instance the 
USDA offers a variety of programmes to foster agricultural exports, while the Small Business 
Administration offers programmes to a ddress the needs of smaller exporters. 
110. Eximbank is responsible for assisting the export financing of U.S. goods and services through 
a variety of loan, guarantee, and insurance programmes.139  It guarantees both working capital loans 
for U.S. exporters and the repayment of loans by foreign purchasers of U.S. goods and services.  In 
addition, the Federal Credit Insurance Agency (FCI A) an affiliate of the Eximbank, the Federal 
Government's general trade finance agency, prov ides credit insurance to cover the risk of 
non-payment by foreign buyers for political or commercial reasons.  The bank does not compete with commercial lenders but rather supplements conve ntional lending, assuming risks that commercial 
banks cannot take on.  Eximbank programmes have minimum acceptan ce levels and varying coverage 
for foreign content included in U.S. manufactured and produced items.  The Eximbank is required to 
'set aside' up to 10% of its opera tions for small businesses.  It must also review the environmental 
impact of transactions requesting financing.  More over, Eximbank is required to provide financing for 
U.S. goods and services shipped on U.S. vessels.
140  Table III.11 shows the levels of spending and the 
subsidy rates of Eximbank's direct loan s, guarantees and insurance programmes. 
111. The Commodity Credit Corporation (CCC), administers export credit guarantee programmes 
for commercial financing of U.S. agricultural exports.  The programmes encourage exports to 
countries where credit is necessary to maintain or in crease U.S. sales, but where financing may not be 
available without CCC guarantees.141  Two programmes underwrite credit extended by the private 
banking sector in the United States:  the Expor t Credit Guarantee Progr ammes (GSM-102), which 
cover credit terms up to three years;  and the Intermediate Export Credit Guarantee Programme (GSM-103), which covers longer credit terms up to  ten years.  Under these programmes, the CCC 
does not provide financing but guarantees payments  due from foreign banks:  typically, 98% of 
principal and a portion of interest at  an adjustable rate is covered. 
                                                     
 
136"The 58th Annual Report of the Foreign-Trade Zones Bo ard to the Congress of the United States" for 
the fiscal year ended on 30 September 1996.  Ava ilable at:  http://www.ita.g ov [8 February 1999]. 
137WTO (1996a). 
138gopher://gopher.umsl.edus/00/library/govdocs/ exprguide/eg_ch14 [21 January 1999]. 
139As notified to the WTO (WTO document G/SCM/N/38/USA, 19 November 1998). 
140http://www.exim.gov/mover.ht ml [4 August 1998]. 
141http:www.fas.usda.gov/ agesport/finance.html [22 January 1999]. United States WT/TPR/S/56 
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Table III.11 
Eximbank activities  
(US$ million) 
Fiscal Year Levels Cost Budget Authority Subsidy rate (%) 
Direct Loan Budget Authority    
Direct Loan    
1996 1,236.3 98.3 8.0 
1997 1,548.9 43.7 2.8 
1998 102.5 16.5 16.1 
Loan Guarantees and Insurance Budget Authority     
Guarantee and Insurance    
1996 10,281.4 771.7 7.5 
1997 10,609.9 767.1 7.2 
1998 10,433.0 700.3 6.7 
Source : WTO document G/SCM/N/38/USA, 19 November 1998. 
112. The commodities eligible for coverage under th e two programmes are selected by the CCC 
according to market potential.  The list may be am ended as additional commodities become eligible.  
Eligible commodities are divided in two groups : standard products (GSM-102) and high-value 
agricultural products (GSM-103).142  Standard products must be entirely produced in the United 
States, while for high-value agricultural products, 90% or more of the agricultural components by 
weight, excluding packaging and added water, must be entirely produced in the United States.  In 
FY 1998, total expenditure in GSM-102 and GSM-103 amounted to US$3.9 million and 
US$56 million, respectively.  The amount spent on GSM-102 increased since FY 1996 when it stood 
at US$3.07 million;  while total expenditure in GSM-103 declined substantially since FY 1996 when 
it amounted to US$150.7 million.143 
113. Products eligible for GSM-102 and GSM-103, ar e also eligible for the Supplier Credit 
Guarantee Programme (SCGP), under which the CCC guarantees a portion of payments due from importers under short-term financi ng (up to 180 days), extended directly by U.S. exporters to the 
importers for the purchase of U.S. agricultural commodities and products.  Under the SCGP, the 
exporter must be in possession of a promisory note from the importer.  In FY 1998, US$18.18 million 
were spent in this programme.
144 
114. In addition, the CCC's Facility Guarantee Program (FGP), a subpart of GSM-102 and 
GSM-103, provides payment guarantees to facilitate  the financing of manufactured goods and 
services exported from the United States to impr ove or establish agriculture-related facilities in 
emerging markets.  The aim is to  improve inade quate storage, processing, or handling capabilities for 
agricultural products, and thus enhance sales of these products.145  Only projects where the combined 
value of the foreign components in U.S. goods and services represents less than 50% of the eligible 
sales transaction, are considered.146  The FGP has been operational since 3 December 1997.  Although 
                                                      
142The determination of products designated as "high- value" is at the discretion of CCC.  Although, 
technically, any agricultural product could be made eligible for GSM-103, this programme has been 
traditionally used to support the export  financing of livestock and animal genetics.  On occasion, the GSM-103 
programme has been used to support the export financing of bulk grain to countries where longer repayment 
terms were needed (U.S. authorities). 
143Data provided by the U.S. authorities. 
144Information provided by the U.S. authorities. 
1457 CFR Part 1493. 
146FAS Online , "Facility Guarantee Programme".  Av ailable at:  http://www.fas.usda.gov 
[20 November 1998]. WT/TPR/S/56 Trade Policy Review 
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considerable interest has been shown in the pr ogramme, as of 18 March, no projects have been 
approved for a facility guarantee.  The progra mme adheres to the OECD Arrangement on Export 
Credits. 
115. The United States is a signatory to the OECD Agreement on Export Credits. 
(v) Section 301 and related measures 
116. U.S. legislation provides for the review of practices by foreign countries that may affect 
U.S. exports of goods and services or impair U.S.  rights under international trade agreements.  
Provisions in this respect are contained in th e Trade Act of 1974 (sections 301-306) and in the 
Omnibus Trade and Competitiveness Act of 1988.  The USTR is in charge of conducting the 
investigations mandated under these laws and of de vising and applying retaliatory measures, if it is 
determined that they are warranted.  Prior to ta king any action, the USTR must hold consultations 
with the foreign government involved and must follow the dispute settlement provisions of the 
relevant agreement.  In the case of the WTO, the USTR is not required to take any action if the DSB 
has adopted a report regarding the dispute concerned wh ich finds no violation or denial of U.S. rights. 
(a) Section 301 of the Trade Act of 1974 Section 301 procedures 
117. Under section 301 of the Trade Act of 1974, as amended (19 U.S.C. section 2411) the 
United States may impose trade measures on foreign countries that maintain an act, policy or practice that violates, or denies U.S. rights or benefits  under trade agreements;  or is unjustifiable, 
unreasonable
147, or discriminatory, and burdens or restricts U.S. commerce.  A section 301 
investigation may be initiated following a petition by an interested party to the USTR, or be 
self-initiated by the USTR.  In the case of a petition,  the USTR determines within 45 days whether to 
initiate an investigation, based on considerations  of the effectiveness of an action under section 301 
in addressing the act, policy or practice involved.  The USTR must then publish a determination to 
initiate an investigation (or r easons for not initiating one in  the case of a petition) in the 
Federal Register .  This process is open to comment from the public, and may include a public hearing 
if requested by the petitioner or an interested person. 
118. Once an investigation is initiated, the USTR  requests consultations with the foreign 
government or governments involved.  If the inv estigation involves an alleged violation of a 
multilateral trade agreement (such as any of th e WTO Agreements), or of a regional economic 
agreement with dispute settlements provisions, (NAF TA), the USTR must follow the consultation and 
dispute settlement provisions set out in that agreement. 
119. The USTR must terminate investigations involv ing a trade agreement with dispute settlement 
provisions within 18 months after initiation, or 30 days after the conclusion of dispute settlement 
procedures, whichever comes first.  The determination must be published in the Federal Register .  In 
cases where the dispute does not involve a trade agr eement with a dispute settlement mechanism, the 
investigation must be concluded 12 months after its  initiation.  Investigations not involving a trade 
agreement and concerning intellectual property rights must lead to a determination within six months 
of initiation of the investigation;  this period can be extended to nine months if the investigation 
involves complicated issues, or the foreign co untry is making substantial progress in taking 
appropriate measures to protect  intellectual property rights. 
                                                      
147These practices are those which deny MFN or nationa l treatment to U.S. exports, curtail the right of 
establishment of U.S. enterprises, an d violate intellectual property rights. United States WT/TPR/S/56 
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Section 301 determinations 
120. The USTR is required to take action of it determines under section 301(a) that a foreign 
government is violating or denying U.S. rights or benefits under a trad e agreement, or its acts, policies 
or practices are unjustifiable and burden or restrict U.S. trade.  The USTR is not required to take 
action if the WTO DSB has adopted a report regardi ng the dispute concerned which finds no violation 
or denial of U.S. rights, or if a NAFTA panel finds  no violation to the agreement or that U.S. rights 
under the agreement are not being denied.  Nor is the USTR required to take action if it is found that 
the foreign country is taking satisfactory measures to  grant U.S. rights under a trade agreement;  or the 
foreign country has agreed to eliminate or phase out the act, policy or practice or to provide any other 
satisfactory solution for the United States or, if this is not possible, to provide the United States with 
compensatory trade benefits.  Finally, the USTR is not required to take action if it finds, in 
"extraordinary cases", that the adverse effects of retaliation on the U.S. ec onomy would substantially 
outweigh the benefits of such action, or that th e retaliation would cause serious harm to the national 
security of the United States. 
121. The USTR has the discretion to take action if it determines under section 301(b) that a foreign 
country maintains an act, policy or practice that is "unreasonable or discriminatory and burdens or 
restricts U.S. trade", even if it does not violate th e international legal rights of the United States, and 
that action is appropriate.  These practices in clude the denial of fair opportunities for the 
establishment of enterprises;  the denial of adequa te and effective protecti on of intellectual property 
rights, even if the foreign country is in compliance with the TRIPS Agreement;  the denial of fair and 
equitable market access opportunities for U.S. person s that rely on intellectual property protection;  
the denial of fair and equitable market opportuniti es, including a foreign government's toleration of 
anti-competitive activities that restri ct access of U.S. goods or services to a foreign market;  export 
targeting;  and the denial of worker rights. 
122. After making an affirmative determination under section 301(a) or 301(b), the USTR may 
reach a binding agreement with a foreign country to eliminate or phase out the act, policy or practice, 
eliminate any restriction on U.S. trade resulting from it,  or to provide compensatory trade benefits.  If 
an agreement is not reached, the USTR may decide to  suspend, withdraw or prevent the application of 
trade agreement concessions;  impose duties or other im port restrictions on goods (preference must be 
given to duties);  impose fees or restrict the terms a nd conditions or deny issuance of authorizations to 
provide services (prior consultation w ith the relevant federal agency or state);  and withdraw, limit or 
suspend duty-free treatment under the GSP, the CBERA or the ATPA, where the act, policy or 
practice subject to the 301 determination also fails to meet the criteria for receiving such duty-free 
treatment. 
123. The action taken may be directed at any economi c sector without regard to whether the good 
or sector was involved in the act, policy or practice s ubject to the determination. Similarly, the action 
may be taken on either a non-discriminatory basis or  solely against the foreign country involved, but 
must be limited to a value equivalent to the burd en or restriction imposed on U.S. commerce by the 
foreign country.  Unless it considers that expeditious  action is required, the USTR must provide an 
opportunity for public comment, including a hearing if requested, on any proposed action. Actions generally must be implemented with in 30 days of a determination.  An action may be delayed, by not 
more than 180 days, at the petitioner's request;  if  the USTR determines that substantial progress is 
being made in negotiations with the foreign country; or if a delay  is deemed necessary or convenient 
to obtain a satisfactory solution. 
124. Under Section 306 of the Trade Act of 1974, the USTR must monitor the implementation of 
each measure undertaken and agreement entered to r esolve a section 301 investigation or as a result of WT/TPR/S/56 Trade Policy Review 
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a dispute settlement proceeding under a trade agreem ent, including those under the umbrella of the 
WTO.  If, as result of this monitoring, and prior consultations with the petitioner in the original 
investigation or with the affected domestic industr y or other interested persons, the USTR considers 
that the foreign country is not satisfactorily impl ementing a measure or agreement, it must make a 
determination for further action.148 
125. In the context of the WTO, and under section 306, the United States is currently monitoring 
the implementation of DSB recommendations in di sputes with Argentina regarding textiles and 
apparel; with Canada concerning ma gazines; with the European Uni on with respect to bananas, and 
meat treated with hormones; and with Indonesia rega rding autos. In the bananas dispute, the United 
States used section 306 to seek recourse to Article 22 of the DSU.  On 9 April 1 999, the United States, 
pursuant to Article 22.7 of the DSU,  requested that the DSB authorize suspension of concessions to the 
European Union equivalent to the level of nul lification and impairment -US$191.4 million.  On 
19 April 1999, the DSB authorized  the United States to suspe nd concessions as requested. 
Section 301 cases 1996-98 
126. Table III.12 shows a complete list of the inves tigations under section 301 initiated between 
1996 and the end of 1998.  The majority of the case s were brought to the WTO.  Those which were 
not were generally settled at a bila teral level and resulted in a modifi cation of the legislation by the 
foreign country.  No sanctions were applied duri ng the period as a result of investigations initiated 
since 1996.  An increasing number of cases seem to be linked to intellectual property rights and thus 
would be a result of the application of  Special 301 (see below). 
127. The number of investigation initiations under sec tion 301 of the Trade Act of 1974 has been 
decreasing through the 1996-98 period.  In the whole period, 17 investigations  were initiated.  Of 
these, nine were initiated in 1996, six in 1997, an d only three in 1998.  Fifteen trading partner were 
affected by these investigations (Table III.12), name ly: Argentina;  Australia;  Brazil;  Canada;  the 
European Union (counted as a single trading partner) Honduras;  India;  Indonesia;  Japan;  the Republic of Korea;  Mexico;  Pakistan;  Para guay;  Portugal;  and Turkey.  Five of these 
investigations concerned intellectual property right s (Special 301 investigations);  six cases involved 
agricultural issues;  three the auto industry 
149;  two cases dealt with textiles;  one case with 
distribution;  and one case with taxation policy. 
128. Of the nine cases initiated in 1996, seven were te rminated by the end of 1998;  all were taken 
to the WTO.  Of the six cases initiated in 1997, four were taken to the WTO;  the two cases not 
brought to the WTO were terminated in 1998, one, with Korea, through a bilateral memorandum of 
understanding, the other, with Honduras, through an  agreement to strengthen intellectual property 
protection. 
                                                      
148An example of this requirement may be found in the dispute with the EC regarding bananas.  The 
monitoring of WTO panel recommendations may in some cas es act as a deterrent to the initiation of section 301 
investigations, such as in a dispute with Argentina regarding specific duties on textiles and apparel and the 
application of a statistical tax on imports, where the USTR decided not to take action under section 301 and 
terminate the investigation following the Panel's report.  Instead, the USTR opted to monitor Argentina's steps to 
implement the panel report and to take action under section 301 only  if Argentina failed to implement the 
rulings and recommendations of the WTO panel within a reasonable period of time to be determined in 
accordance with WTO rules.  Federal Register , 8 May 1998, Vol. 63, No 89. 
149One of these cases concerns import barriers (Korea), and was conducted as a Super 301 
investigation.  The other two cases, (Brazil and Indonesia)  dealt with trade practices in the auto industry.  The 
three cases were terminated in 1998 (Table III.12).  The Indonesian auto industry practices were brought as a dispute to the WTO. United States WT/TPR/S/56 
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Table III.12 
Section 301 initiated cases 1996-98 
Country, product, 
and investigation 
number  Statute, source of complaint, and actions taken 
Canada        
Practices Affecting 
Periodicals        
(301-102)a,b,c Section 301 investigation self-initiated by the USTR on 11 March 1996, with respect to certain acts, policies 
and practices restricting or prohibitin g imports of certain periodicals into Canada and applying discriminatory 
treatment to certain imported periodicals.  The Un ited States requested WTO consultations and the 
establishment of a Panel (WT/DS31/2, 24 May 1996).  On  30 July 1997, the DSB adopted the Appellate Body 
report (WT/DS31/AB/R) and the Panel report as modified  by the Appellate Body report (WT/DS31/R).  The 
implementation period was agreed by the parties to be 15 months and expired on 30 October 1998. 
Portugal       
Practices Regarding 
Term of Patent 
Protection          
(301-103) a,b,c Section 301 investigati on, self-initiated by USTR on 30 April 1996 with respect to certain acts, policies and 
practices of the Government of Portugal relating to the term of existing patents.  Consultations with Portugal 
were requested under Article XXII of GATT 1994, and Article 4 of the DSU and held formally on 30 May 
1996. On 23 August 1996, Portugal issued Decree-Law 141/ 96, which changed the terms of existing patents to 
conform with the TRIPS agreement.  The USTR terminat ed the investigation on 21 October 1996, which led to 
a termination of the investigation by the USTR  on the same date (61 FR 55352, 26 October 1997). 
Pakistan       
Practices Regarding 
Patent Protection for 
Pharmaceuticals and Agricultural Chemicals         
(301-104)
a,b,c On 30 April 1996 the USTR self-in itiated an investigation regarding ce rtain policies and practices of the 
Government of Pakistan which were considered as de nying patents and exclusive marketing rights to U.S. 
individuals and firms involved in th e development of pharmaceutical and agricultural chemicals products.  The 
USTR requested WTO consultations with the Governme nt of Pakistan (61 FR 19971 of 5/3/97), which were 
held on 30 May 1996.  On 4 July 1996 the United States re quested the establishment of a Panel.  However, 
following Pakistan's issue of Ordi nance No. XXVI of 1997, which dealt with U.S. concerns, on 28 February 
1997, the United States and Pakistan jointly notified the DSB of the resolution of the dispute.  The 
investigation was terminated on 8 J une 1997 (62 FR 33695,  20 June 1997). 
Turkey            
Practices Regarding 
the Imposition of a 
Discriminatory Tax 
on Box Office Revenues           
(301-105)
a,b,c USTR self-initiated investigation (12 June 1996) with respect to practices resulting in the discriminatory 
treatment of U.S. films in Turkey. The USTR requested  WTO consultations with the Government of Turkey 
(61 FR 32883, 6/25/96).  A Panel was subsequently formed, but did not pr oceed because Turk ey agreed to 
address U.S. concerns.  This settlement was notified to  the DSB on 17 July 1997.  The USTR terminated the 
investigation on 3 December 1997 (62 FR 64907 of 9 December 1997). 
India                
Practices Regarding 
Patent Protection for Pharmaceuticals and 
Agricultural 
Chemicals         (301-106)
a,b,c USTR self-initiated investigation on 2 July 1996 regardi ng certain policies and practi ces of the Government of 
India considered as denying patents and exclusive mark eting rights to U.S. indivi duals and firms involved in 
the development of pharmaceutical and agricultural chem icals products.  The USTR requested consultations 
with India pursuant to Article XXII of GATT 1994, a nd Article 4 of the WTO DSU and Article 64 of the 
TRIPS Agreement (61 FR 35857, 7 August 1996).  Subseque ntly, a  Panel was formed and a report circulated 
on 5 September 1997.  India appealed the decision to  the WTO's Appellate Body  on 15 October 1997.  On 
19 December 1997, the Appellate Body confirmed mo st of the Panel's findings.  India stated (on 
13 February 1998) its intention to comply with its WTO obligations and (on 22 April 1998) that it would 
amend its patent law no later than 19 April 1999.  Alt hough the USTR made a determination finding that the 
investigated practices by India were violating, or ot herwise denying benefits to which the United States was 
entitled under the TRIPS Agreement, no action under s ection 301(a) of the Trad e Act was taken and the 
investigation was terminated, in the light of India's commitment to implement its WTO obligations.  The USTR 
stated it would monitor India's implementation of the WT O reports and take action under section 301(a) of the 
Trade Act if India did not come into compliance.  (63 FR 29053 of 27 May 1998). 
Australia         
Subsides Affecting 
Leather              
(301-107) b,c A petition under section 302(a) of the Trade Act  wa s filed on 19 August 1996 by the Coalition Against 
Australian Leather Subsidies.  The petitioners claimed th at certain subsidy programmes of the Government of 
Australia were inconsistent with and otherwise denied  benefits to the United States under GATT 1994 and the 
Subsidies and Countervailing Measures  (SCM) Agreement.  Following this petition, the USTR initiated an 
investigation to determine whether subsidies availa ble to leather under Australia's Textile, Clothing and 
Footwear Import Credit Scheme and other subsidies to leather granted or maintained in Australia were 
actionable under section 301.  The USTR WTO requested c onsultations with Australia pursuant to Articles 1 
and 4 of the DSU, Article 4.1 of the SCM Agreement, and Article XXIII:1 of GATT  994 as incorporated in 
Article 30 of the SCM Agreement (61 FR 55063, 23 October 1996).  Consultations were held on 
31 October 1996, and a settlement was reached on 25 November 1996.  New consultations were, however, 
required on 10 November 1997.  A new Panel was esta blished on 22 January 1998, but the United States 
withdrew the request for a Panel on 11 June 1998. 
 Table III.12 (cont'd) 
  
  
  
  
  
  
  
  
  
  WT/TPR/S/56 Trade Policy Review 
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Country, product, 
and investigation 
number  Statute, source of complaint, and actions taken 
Argentina        
Specific Duties and 
Non-Tariff Barriers 
Affecting Apparel, Textiles, Footwear 
(301-108)
a,b,c Investigation self-initiated by the USTR on 4 Oc tober 1996 concerning the imposition by Argentina of: 
(a) specific duties on apparel, textiles, and footwear ; (b) a labelling requirement on apparel, textiles and 
footwear;  and (c) a discriminatory statistical tax.  The USTR requested consultations with Argentina pursuant 
to Article 4 of the DSU, Article XXII:1 of GATT 1994, Article 14 of the Agreement on Technical Barriers to 
Trade, Article 19 of the Agreement on Customs Valua tion, and Article 7 of th e Agreement on Textiles and 
Clothing (61 FR 53776, 15 October 1996).  The consultations  failed to resolve this dispute, and a WTO dispute 
settlement Panel was established on 25 February 1997 which found that the minimum specific duties imposed 
by Argentina on textiles and apparel are inconsistent with the requirements of Article II of GATT 1994 and 
that the statistical tax imposed by Argentina on imports was inconsistent with the requirements of Article VIII 
of GATT 1994.  The report of the Panel was circulated  on 25 November 1997.  On 21 January 1998, Argentina 
notified its intention to appeal certa in issues of law and legal interpre tations developed by the Panel.  The 
Appellate Body upheld, with some modification, the Pa nel's findings and conclusions.  The Appellate Body 
report and the Panel report, as modified by the Appe llate Body, were adopted by the DSB on 22 April 1998.  
Argentina announced on 22 June 1998 that it had reache d an agreement on implementation with the United 
States, by which the specific duties on textiles and a pparel were capped at 35% effective 19 October 1998 and 
the statistical tax lowered to 0.5%. 
Indonesia        
Practices Regarding 
the Promotion of the 
Motor Vehicle 
Sector (301-109)a Investigation self-initiated by the USTR on 8 Oct ober 1996 concerning the grant by the Government of 
Indonesia of conditional tax and tariff benefits intended to develop a motor vehicle sector in Indonesia.  The 
USTR requested consultations with Indonesia pursuant to  Article 1 and 4 of the DSU, Article XXII:1 of GATT 
1994, Article 8 of the TRIMs Agreement, Articles 7 and 30 of the SCM Agreement, and Article 64 of the 
TRIPS Agreement (61 FR 54247, 17 Oct ober 1996).  Consultations failed to reach a settlement, and the United 
States joined Japan and the EC in the request of a WT O dispute Panel, which was established on 12 June 1997.  
The Panel found that Indonesia was in violation of Ar ticles I and II:2 of GATT 1994, Article 2 of the TRIMS 
Agreement, Article 5(c) of the SCM Agreement, but was not in violation of Article 28.2 of the SCM 
Agreement. The Panel however, found that the complain ants had not demonstrated that Indonesia was in 
violation of Articles 3 and 65.5 of the TRIPS Agreemen t.  The report of the Panel was adopted on 23 July 
1998.  Indonesia indicated its intention to comply with  the recommendations of the DSB within the time 
permissible under Article 21 of the DSU.  This period was determined by binding arbitration as 12 months 
from the date of adoption of the Panel. The report of the Arbitrator was circulated to Members on 7 December 
1998. 
Brazil              
Practices Regarding 
Trade and 
Investment in the Auto Sector       
(301-110)
a,b,c USTR self-initiated investigation (11 October 1996) c oncerning the grant by the Government of Brazil of 
tariff-reduction benefits continge nt on satisfying certain export performance and domestic content 
requirements. The USTR requested consultations with  Brazil in August 1996 to discuss the removal of the 
discriminatory impact of the Brazilian measures on U.S. exports.  Pursuant to sec tion 303(b)(1)(A) of the Trade 
Act of 1974, the USTR decided to delay for up to 90  days requesting WTO dispute settlement procedures 
(required under section 303(a) of the Trade Act).  On 10 January  1997 the United States requested formal 
consultations pursuant to Articles 1 and 4 of the DSU,  Article XXIII:1 of GATT 1994, Article 8 of the TRIMS 
Agreement, and Articles 4.1, 7.1 and 30 of the SCM Ag reement.  On 16 March  1998, the United States and 
Brazil reached an agreement in which Brazil committed not to extend the measures beyond 31 December 1999.  
The USTR terminated the investigation on 16 March 1998, and will monitor Brazil's implementation of the 
agreement. 
European Union  
Certain Subsidies 
Affecting Access to 
the European 
Communities' Market for Modified Starch (301-111) On 22 January  1997 the U.S. Wheat Gluten Industry C ouncil filed a petition under section 302(a) of the Trade 
Act of 1974 alleging that certain subsidy schemes of the EC violate, or are inconsistent with and otherwise 
deny benefits to the United States under GATT 1994 a nd the SCM Agreement. On 8 March 1997 the USTR 
initiated an investigation with respect to the provision by the EC of subsidies that affect access to the EC 
modified starch market.  A request for WTO consulta tions was postponed for a period up to 90 days (62 FR 
12264, 14 March 1997).  Bilateral consultations with the EC were announced on 6 June 1997, pending the 
outcome of which, the USTR declared that cons ultations under the WTO would not be pursued.  The 
investigation was terminated on 6 J une 1997 (62 FR 32398,  13 June 1997). 
Japan  
Market Access 
Barriers to 
Agricultural Products            
(301-112)
a,b Investigation self-initiated by the USTR on 7 Oct ober 1997 concerning Japan's prohibition on imports of 
certain agricultural products.  The USTR requested WTO c onsultations with Japan pursuant to Article 4 of the 
DSU, Article 11 of the Agreement on the Application of  Sanitary and Phytosanitary Measures (SPS), Article 
XXIII of GATT 1994, and Article 19 of the Agreement on Agriculture, and invited written comments from the 
public on these matters (62 FR 53853, 16 October 1997) .  At the request of the United States, the DSB 
established a panel on 18 November 1997, which found that  Japan acted inconsistently with Articles 2.2 and 
5.6, Annex B and Article 7 of the SPS Agreement.  The report of the Panel was circulated to Members on 27 
October 1998.  On 24 November 1998, Ja pan notified its intention to appeal  certain issues of law and legal 
interpretations developed by the Panel.  The report of the Appellate Body, ci rculated on 22 January 1999, 
upheld the Panel report's basic findings. 
Canada              
Export Subsidies and 
Market Access for Dairy Products  
(301-113)
 b A petition pursuant to section 302(a) of the Trade Act of  1974 was filed to the US TR by the National Milk 
Producers Federation, the U.S. Dairy Export Council, and the International Dairy Foods Association on 
5 September 1997, alleging that certain Canadian export subsidies as well as  Canada's failure to implement a 
tariff rate quota for fluid milk were in consistent with and otherwise denied  benefits to the United States under 
the Uruguay Round Agreement on Agriculture and GATT 1994.   
 Table III.12 (cont'd) 
  
  United States WT/TPR/S/56 
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Country, product, 
and investigation 
number  Statute, source of complaint, and actions taken 
 The USTR initiated on 8 October 1997an investigation ( 62 FR 53851 of 16 October 1997).  In addition, the 
USTR requested WTO consultations with Canada pursu ant to Article 4 of the DSU, Article XXII of GATT 
1994, and Article 30 of the SCM Agreement. On 25 March 1998, the DSB established a Panel at the request of 
the United States. 
European Union  
Circumvention of 
Export Subsidy 
Commitments on 
Dairy Products  (301-114)
a,b An investigation was self-initiated by the USTR on 8 October 1997 with respect to certain acts, policies and 
practices of the European Union concerning export subs idies on processed cheese.  The USTR requested WTO 
consultations with the EU pursuant to Article 4 of the DSU, Article 19, of  the Agreement on Ag riculture to the 
extent it incorporates Article XXII of GATT 1994, and Article 30 of the Agreement on Subsidies and 
Countervailing Measurers to the extent it incorporates Article XXII of GATT 1994. 
Korea               
Barriers to Auto 
Imports              
(301-115)a,c On 1 October 1997, the USTR identified Korea as a ``priority foreign country practice'' (62 FR 52604, 
8 October 1997), listing some Korean practices of con cern including cumulative tariff and tax disincentives 
affecting imports, costly auto standa rds and certification procedures, auto financing restrictions, and a bias 
against imported vehicles.  Some of these barriers were  addressed in a 1995 bilateral agreement between the 
United States and Korea, but the USTR was not satisfied  with its implementation and considered that Korea 
was not prepared to undertake the necessary reforms to open its automobile market. On 20 October 1997, the 
USTR initiated a Super 301 investig ation (62 FR 55843 of 28 October 1997).  An end of the Super 301 
investigation was announced on 20 October 1998. Korea agreed to broaden the coverage of the previous 
agreement, and to address the issue of standards and certification proced ures, adopting self-certification since 
2002, reducing taxes on autos, and binding tariff s on vehicles at 8%, among other measures.  
Honduras     
Protection of 
Intellectual Property 
Rights (301-116)a Subsequent to a determination by the Trade Polic y Staff Committee (TPSC), the USTR initiated the 
investigation on 31 October 1997 (62 FR 60299 of 7 November 1997) and made a determination on 16 March 
1998, sanctioning that certain acts, policies, and prac tices of Honduras with respect to the protection of 
intellectual property rights burdened or restricted U.S.  commerce. Pursuant to sections 304(a)(1)(B), 301(b) 
and 301(c) of the Trade Act, the US TR suspended effective 20 April 1998 , the preferential treatment accorded 
under the GSP and the CBI programmes to certain fr uit and vegetable products of Honduras, including 
cucumbers, watermelons, and cigars. (63 FR 16607, 3 April 1998). In the light that, following the 
determinations, Honduras  took a number of steps to st op broadcast piracy, the USTR terminated the action on 
30 June 1998 and restored the suspended GSP and CBI benefits. (63 FR 35633, 30 June 1998). 
Paraguay    
Intellectual Property 
Laws and Practices 
(301-117)a,c Investigation self-initiated by the USTR on 17 Februa ry 1998, with respect to certain acts, policies and 
practices of the Government of Para guay that deny adequate and effectiv e protection of intellectual property 
rights. The USTR requested consultations with  Para guay. (63 FR 9292 of 24 Februa ry 1998) The investigation 
was extended by three months on 10 August 1998. It wa s terminated on 17 November 1998 with the signature 
of a Memorandum of Understanding and Enforcement Ac tion Plan, containing specific short and long-term 
obligations to strengthen Paraguayan intellectual property la w and enforcement procedures. These include 
strengthening enforcement at borders, am endments to copyright legislation to  facilitate effective prosecution of 
piracy, immediate action against known centers of pir acy and counterfeiting, and c oordinating the anti-piracy 
efforts of its customs, police, prosecutorial and tax aut horities. In addition, Paraguay agreed to pursue reform 
of its patent law, and to ensure that its  Ministries use only authorized software. 
Mexico         
Practices Affecting 
High Fructose Corn 
Syrup (301-118) A petition under Section 301 of the Trade Act was filed on 2 April 1998, by the Corn Refiners Association, 
Inc. alleging denial by Mexico of fa ir and equitable market opportunities fo r U.S. exporters of High Fructose 
Corn Syrup (HFCS) by enc ouraging and supporti ng an agreement between Mexican  sugar growers and bottlers 
to limit use of HFCS. The USTR initiated on 15 May 1998 a Section 301 investigation and invited written 
comments from the public on the matters being investigated. (63 FR 28544 of 26 May 1998).  
European Communities     
Banana Regime     
(301-100)
a,b Investigation initiated by the USTR on 10 October 1998 with respect to alleged  non-compliance by the EC 
with WTO's Appellate Body ruling concerning the EC's regime for the importation, sale and distribution of 
bananas. The USTR requested written comments in  the context of a public hearing on its proposed 
determination that the im position of prohibitive (100 % ad valorem ) duties on selected products from the 
European Communities was an action a ppropriate under section 306( b) and 301(a) of the Trade Act of 1974, as 
amended, should the EC fail to implement the reco mmendations of the WTO's DSB concerning the EC’s 
regime for the importation, sale, and distribution of ba nanas within the prescribed reasonable period of time, 
which expired on 1 January 1999. The products to be  affected by the proposed duty increase would be 
published on 15 December 1998. On 14 January 1999, the United States, pursuant to Article 22.2 of the DSU, requested authorisation from the DSB for suspension of concessions to the EC. The EC pursuant to Article 22.6 
of the DSU, requested , on 29 January 1999, arbitrati on on the level of suspension of concessions. The DSB 
referred the issue of the level of suspension to the origin al panel for arbitration within 30 days and the request 
for the suspension of concessions by the United States was deferred by the DSB until the determination, 
through the arbitration, of the appropriate level for the suspension of concessions.  The arbitrators determined 
the level of nullification suffered by the United States at US$191.4 million on a report circulated on 
9 April 1999.  The United States requested that the DSB au thorize the suspension of concessions to the EC by 
this amount.  On 19 April 1999, the DSB granted this authorization. 
a USTR Self-Initiated Investigations unde r section 302(b)(1) of the Trade Act. 
b Case taken to the WTO. 
c Investigation terminated. 
Source : USTR. WT/TPR/S/56 Trade Policy Review 
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129. Some procedural aspects of section 301 investiga tions are the subject of a complaint to the 
WTO by the European Communities and other Members.150  On 25 November 1998, the European 
Union requested consultations with the United States with regard to sections 301-310 of the Trade Act 
of 1974, as amended (19 U.S. C., paragraphs 2411-2420).151  On 26 January 1999, the European 
Communities requested the establishment of a panel.   The EC claimed that, "by imposing specific, 
strict time limits within which unilateral determinations must be made and trade sanctions must be 
taken, sections 306 and 305 of the Trade Act of 197 4 do not allow the United States to comply with 
the rules of the DSU in situati ons where a prior multilateral ruling under the DSU on the conformity 
of implementing measures has not yet been adopted by the DSB".  The EC considered 
sections 301-310 of the Trade Act of 1974, as amended, to be inconsistent with  Articles 3, 21, 22 and 
23 of the DSU;  Article XVI:4 of the Marra kesh Agreement Establishing the World Trade 
Organization;  and Articles I, II, III, VIII and XI of GATT 1994, and that this  had impaired benefits 
accruing, directly or indirectly, to the European  Communities under GATT 1994.  At its meeting on 2 
March 1999, the DSB established a panel. 
"Special 301" 
130. Under "Special 301" provisions (section 182 of  the Trade Act of 1974, as amended by the 
Omnibus Trade and Competitiveness Act of 1988)152 the USTR must identify, each year, foreign 
countries that deny adequate and effective protectio n of intellectual property rights or deny fair and 
equitable market access to United States persons th at rely upon intellectual property protection.153  
The first Special 301 investigations were initiated in April 1989.  Sin ce then, the USTR must make its 
Special 301 determinations by 30 April every year, within 30 days of the publication of the National 
Trade Estimates Report (NTE).  The USTR is require d, under the Uruguay Round Agreements Act, to 
present to Congress an annual Special 301 report on acti ons taken during the previous twelve months 
and the progress achieved in improving intellectua l property rights protecti on and market access for 
persons relying on intellectual property rights. 
131. Under the Special 301 Annual Review, countri es may be identified as "priority foreign 
countries" (PFC) if their acts, policies or practices have the greatest adverse impact on the relevant 
U.S. products and they are not "entering into good faith negotiations or making significant progress in 
bilateral or multilateral negotiations."  The PFC is a statutory category which is used by the USTR to 
initiate investigations (see below).  Countries may be  also be placed on a "priority watch list", and a 
"watch list".  The priority watch list includes all coun tries that satisfy some, but not all the criteria for 
designation as a priority foreign country.  The wa tch list is comprised of those countries with which 
the United States has significant intellectual propert y rights concerns.  A country may be found to 
deny adequate and effective protection of intell ectual property rights even if it complies with its 
obligations under the TRIPS Agreement.154 
132. In cases where a country has been identified as a "priority foreign country", the USTR is 
required to self-initiate an investigation by 30 Ma y of the year the country was placed on this list, 
unless the USTR determines that the initiation of such an investigation would be  detrimental to U.S. 
economic interests.155  If the case involves the TRIPS Agreement or another trade agreement, a 
determination must be made within 18 months of  initiating the investigation.  In cases not involving 
                                                      
150Consultations were also requested by Colombia, the Dominican Republic, Ecuador, Honduras, 
Jamaica, Japan, and Mexico. 
151WTO document WT/DS152/1, 30 November 1998. 
15219 U.S.C.  section 2242. 
 153Section 1303 of the Omnibus Trade and Competitiv eness Act of 1988 (19 U.S.C. section 2242). 
154Section 313 of the Uruguay Round Agreements Act. 
155 Trade Act of 1974, section 302(b). United States WT/TPR/S/56 
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the TRIPS Agreement or another trade agreement, th e USTR must make a dete rmination of unfairness 
and decide what action to take, if any, within six months of the initiation of the investigation.  This 
period may be extended to nine months if the issu es are complex;  the foreign country is making 
substantial progress in drafting or implementing le gislation or administrative measures that will 
provide adequate and effective protection of in tellectual property rights;  or it is undertaking 
enforcement measures to this end.  An affirmativ e determination under "Special 301" is treated as a 
section 301 determination and the section 30 1 provisions for retaliation apply. 
133. Section 182 of the Trade Act of 1974 contains a special provision that applies solely to 
Canadian acts, practices, or policies that affect U.S. cultural industries, which may fall under the 
umbrella of Special 301.  This pr ovision requires the USTR to identify any such policy, act or practice 
by Canada with the same status as a priority forei gn country designation, and thus to subject it to the 
same rules of a Special 301 investigation, provi ded the policy was adopted after 17 December 1992, 
and is actionable but no action has b een taken under article 2106 of the NAFTA. 
134. In its 1997 report, released on  30 April 1997, the USTR place d on its priority watch list 
Argentina, Ecuador, Egypt, the European Union, Greece, India, Indonesia, Paraguay, Russia, and 
Turkey;  another 36 countries were placed on the watch list.  As a result of the report, WTO dispute 
settlement procedures with respect to practices in Denmark, Sweden, and Ireland were initiated. 
135. In its 1998 report, released on 30 April 1998, the USTR identified 47 countries as failing to 
provide adequate and effective in tellectual property protection and fa ir and equitable market access to 
persons that rely on such protection.156  No country was identified as a priority foreign country as a 
result of the review;  however, Paraguay was identified as a priority foreign country on 
16 January 1998, and a sec tion 301 investigation was initiated on  17 February 1998 (Table III.12).157  
Sixteen countries were placed on the priority watch list;  these were Argentina, Bulgaria, China, the 
Dominican Republic, Ecuador, Egypt, the European Un ion, Greece, India, Indonesia, Israel, Italy, 
Kuwait, Macao, Russia and Turkey.  Of these, Bulgar ia was designated to be subject to review during 
the course of 1998, and was eventually removed from the priority watch list and placed in the watch 
list.158  Additionally, it was decided that China's implementation of the 1995 and 1996 Bilateral 
Intellectual Property Rights Agreements would rema in subject to monitoring under section 306 of the 
Trade Act (19 U.S.C. 2416).  Thirty-one other countries were placed on the Special 301 watch list, 
namely Australia, Bahrain, Canada, Chile, Co lombia, Costa Rica, Czech Republic, Denmark, 
Guatemala, Honduras, Ireland, Jamaica, Japan, Jordan , Korea, Oman, Pakistan, Peru, the Philippines, 
Poland, Qatar, Saudi Arabia, Singapore, South A frica, Sweden, Thailand, Ukraine, United Arab 
Emirates, Venezuela, Viet-Nam and Hong Kong, Ch ina.  Of these, it was announced that at least 
Colombia, Jordan, Viet-Nam and Hong Kong, Chin a would be subject to interim reviews during 
1999.  The report mentioned areas of concern in 17 additional countries and announced the initiation 
of a WTO dispute settlement case ag ainst Greece and the European Communities for violations of the 
enforcement obligations of the TRIPS Agreement. 
136. The USTR announced on 19 February 1999 the r esults of the interim out-of-cycle reviews of 
Hong Kong, Ecuador, Colombia, and Viet-Nam.  As a result of th e review, Hong Kong was removed 
from the Special 301 watch list, while it was decide d that Colombia and Viet-Nam would remain on 
the watch list.  Ecuador was kept on the priority watch list.159 
                                                      
156Federal Register , 8 May 1998, Vol. 63, No. 89. 
157The investigation was terminated on 17 November 1998 and Paraguay's identification as a priority 
foreign country was revoked.  USTR Press Release 98-100, 17 November 1998. 
158USTR Press Release 98-98, 4 November 1998. 
159USTR Press Release 99-14, 19 February 1999. WT/TPR/S/56 Trade Policy Review 
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137. The results of the 1999 "Special 301" annual review were announced on 30 April 1999: 57 
countries were identified as denying adequate and effective protection of intellectual property or 
denying fair and equitable market access to Unit ed States artists and industries that rely upon 
intellectual property protection.160  The 1999 review focused on the implementation of the WTO 
TRIPS Agreement, cracking down on pirated pr oduction of optical media, and ensuring that 
government ministries only use authorized software.161 
138. The USTR announced that, as a result of the review, WTO consultations with Argentina, 
Canada and the European Union would be initiate d, bringing to 13 the number of intellectual 
property-related WTO complaints filed by the United States since 1996.162  Paraguay and China were 
designated for "Section 306 monitoring" to ensu re compliance with the commitments made under 
bilateral intellectual property agreements. A total of 16 U.S. trading partners were placed on the 
priority watch list:  Argentina, Dominican Republic, Egypt, the European Union, Greece, Guatemala, 
India, Indonesia, Israel, Italy, Kuwait, Macau, Pe ru, Russia, Turkey, and Ukraine.  A total of 37 
countries were placed on the watch list:  Australia, Belarus, Bolivia, Brazil, Canada, Chile, Chinese 
Taipei, Colombia, Costa Rica, Czech Republic, Denm ark, Ecuador, Hungary, Ireland, Jamaica, Japan, 
Jordan, Korea, Lebanon, Mexico, New Zealand, Om an, Pakistan, the Philippines, Poland, Qatar, 
Romania, Saudi Arabia, Singapore, South Africa, Spain, Sweden, Thailand, the United Arab 
Emirates, Uruguay, Venezuela, and Viet-Nam.  It was also announced that out-of-cycle reviews of 
Colombia, the Czech Republic, Hong Kong, Israel , Korea, Kuwait, Malaysia, Poland, and South 
Africa would be conducted. In the case of Malaysia , the review will be c onducted in September 1999 
to assess Malaysia’s progress in the reduction of pirated optical media production and export. In the case of Hong Kong, the out-of-cycle review, which will also take place in September 1999, will 
address efforts to fight copyright piracy. 
139. The USTR also announced the scheduling of a sp ecial out-of-cycle review of all developing 
countries’ TRIPS Agreement implementation in Dece mber 1999.  Actions to address situations where 
WTO Members have failed to implement their oblig ations on 1 January 2000, including the possible 
initiation of additional dispute settlement cases,  will be announced in early January 2000. 
Consultations will be held with developing countries, and technical assistance provided, to assist 
Members in meeting their obligations. 
"Super 301" 
140. Super 301 was enacted in 1989, for 1989 and 1990. Its application was reinstated twice by 
Executive Order, for the periods 1994-95 and 1996-97.  In March 1999, President Clinton issued a 
third Executive Order reinstating Super 301 for 1999, 2000, and 2001. 
                                                     
 
160USTR Press Release 99-41, 30 April 1999. 
161A new Executive Order, announced in October 1998, directed U.S. government agencies to maintain 
effective procedures to ensure legitimate use of softwa re. The President also directed USTR to undertake an 
initiative over the following 12 months to work with governments in need of modernizing their software 
management systems, or about which concerns have been expressed regarding inappropriate government use. 
162The announced WTO consultations with Argentina refer to the exclusive marketing rights to 
pharmaceutical products as a transitio nal form of protection under Article  70.9 of the TRIPS Agreement;  a 
recent court decision in Argentina alle gedly limits those rights. The cons ultations with Canada regard the 
application of Articles 33 and 70.2 of the TRIPS Agreement, namely the length of protection for patents filed on 
or after 1 October 1989. In the case of the European Un ion, the consultations will deal with an EU regulation 
governing the protection of geographical indications for agricultural products and foodstuffs. The USTR also 
announced concerns regarding Egypt and Uruguay’s comp liance with Article 70.9 of the TRIPS Agreement, and 
the intention to initiate dispute settle ment proceedings if necessary (USTR Press Release 99-41, 30 April 1999). 
 United States WT/TPR/S/56 
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141. Under Super 301, the USTR is responsible for the identification, on 30 April of each year, 
following submission to Congress of the National Trade Estimates (NTE) report, of priority foreign country practices that restrict market access to U.S.  products and services.  Priority foreign country 
practices are understood to be those whose eliminati on is likely to have the most significant potential 
to increase U.S. exports.  In identifying priority pr actices, the USTR must consider the major barriers 
and trade distorting practices set out in the NTE re port;  the trade agreements to which a foreign 
country is a party and its compliance with th at agreement;  the medium-term and long-term 
implications of foreign governme nt procurement plans;  and the international competitive position and 
export potential of U.S. products and services.  The USTR may also cite foreign country practices that 
may warrant identification in the future or that were not identified because they are already being 
addressed and progress is being made toward their elimination.  During the 90 days that follow identification, the USTR will seek a satisfactory r esolution of the priority foreign country's trade 
practices.  A section 301 investigation will be initia ted for each practice for which a satisfactory 
resolution is not achieved during that period.  The investigation period will be 18 months for practices 
involving a WTO Agreement and 12 months for othe r practices.  If no agreement is reached, the 
USTR must determine whether the practice under inv estigation is actionable under section 301;  if this 
is the case, the USTR must also determine what retaliatory action should be taken. 
142. No priority foreign countries were identif ied in the 1996 annual review.  Nonetheless, 
section 301 investigations and WTO dispute set tlement procedures were initiated regarding 
Indonesia's national auto policy, regarding Argent ina's maintenance of specific import duties on 
textiles, apparel and footwear exceeding the 35% ad valorem  tariff rate bound in the WTO greements, 
and regarding Brazil's auto programme;  a section 301 investigation into Australian export subsidies 
on leather for automobile upholstery was also initiated. 
143. As a result of the 1997 Super 301 review, the USTR identified one priority foreign country 
practice and decided to use WTO dispute settlement procedures in four cases.
163  The priority foreign 
country practices identified were Korea's barriers to auto imports, including cumulative tariff and tax 
disincentives affecting imports;  auto standards a nd certification procedures;  and auto financing 
restrictions.  The USTR initiated a section 301 inv estigation regarding Korea's practices, which was 
terminated on 20 October 1998 with the broadeni ng of the coverage of a United States/Korea 
Memorandum of Understanding rega rding the automobile sector. 
144. WTO dispute settlement procedures were initiate d in parallel with section 301 investigations 
with respect to market access barriers to fruit impor ts in Japan and requirements of separate efficacy 
testing of certain quarantine treatment for each variety of imported fruit164;  with respect to practices 
that subsidize exports of dairy products in Cana da, and Canadian implemen tation of its import quotas 
on milk165;  and with respect to subsidized exports of processed cheese by the EC.  A section 301 
                                                      
163USTR, Report on Trade Expansion Priorities Pursuant to Executive Order 12901, Federal Register , 
8 October 1997, Vol. 62, No. 195. 
164The request was made on 7 April 1997 (WT/DS/76/1);  a panel was established on 
18 November 1997.  The report of the Panel was circulated to Members on 27 October 1998.  On 24 November 1998, Japan notified its intention to appeal certain issues of law and legal interpretations developed by the Panel.  
The Appellate Body upheld the basic finding that Japan's varietal testing of apples, cherries, nectarines and 
walnuts is without scientific basis.  The report of  the Appellate Body was circulated to Members on 
22 February 1999.  The DSB adopted the Appellate Body Report and the Panel Report, as modified by the 
Appellate Body Report, on 19 March 1999. 
165The request was made on 8 October 1997 (WT/DS/103/1).  A panel was established on 
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investigation regarding Australia's export subsid es on automotive leather was renewed, and action 
taken in the WTO.166 
(b) Telecommunications equipment procurement (S ection 1371-1382 of the Omnibus Trade and 
 Competitiveness Act of 1988) 
145. The USTR reviews annually (by 31 March) the effectiveness of telecommunications trade 
agreements to which the United States is party,  following Section 1377 of the Omnibus Trade and 
Competitiveness Act of 1988.  Section 1377, has the main  goal of ensuring that U.S. trading partners 
are fulfilling commitments under tr ade agreements, such as the GATS or NAFTA, to open their 
telecommunications markets.  In these reviews, the USTR must determine whether the foreign 
country is complying with the relevant agreem ent or denying market access opportunities for U.S. 
telecommunications products and services.  An af firmative 1377 determination is considered as a 
violation of a trade agreement under section 301 of the Trade Act of 1974 and authorizes the USTR to 
take action.  Under Section 1374 of the Omnibus  Trade and Competitiveness Act of 1988, the USTR 
identifies priority foreign countries that have viol ated telecommunications agreements.  Section 1375 
of the 1988 Act gives the President authority to negotiate with priority foreign countries.  If no 
agreement is reached, the President has author ity under section 1376 to ta ke a range of actions, 
including retaliation, which must be targeted at  telecommunications produc ts and services of the 
foreign country, unless it is considered that acti ons against other economic sectors would be more 
effective in achieving compliance with  the agreement.  This normally takes the form of withdrawal of 
trade benefits from the violating country if no prior understanding is reached. 
146. In its 1996, 1997 and 1998 secti on 1377 reviews, the USTR did not identify any violation of 
an existing telecommunications agreement.  Howe ver, Korea was identified as a priority foreign 
country (PFC) in July 1996, due to U.S. concerns over the implementation of the 1992 
telecommunications agreement and some issues not covered by the agreement, such as services and 
non-interference by the government in private sector procurement.167  Negotiations between the 
United States and Korea continued in order to avoid the imposition of trade sanctions.  Korea's 
designation as a PFC was maintained during the 1997 review and bilateral ne gotiations to enhance 
access to the Korean telecommunications equipment and services market continued.  Negotiations between the United States and Korea, which lasted over a year, were concluded in July 1997 with 
commitments by Korea to ensure that U.S. equipment suppliers would be treated fairly with regard to 
procurement, equipment certification and type a pproval, protection of intellectual property, and 
technology transfer.  Korea's identification as a pr iority foreign country was revoked as a result of 
these commitments and of Korea’s agreement un der the Information Technology Agreement to 
eliminate tariffs on information technology products, and the commitment, under the WTO Negotiations on Telecommunications to reform its  regulatory regime, introducing rules favouring 
competition. 
147. Mexico was cited in the 1996 review for not fulfilling its NAFTA obligation to accept other 
parties' laboratory or test facility test data rela ting to product safety in certifying telecommunications 
terminals for safe use.  The issue was largely solved  in bilateral negotiations  and Mexico was found in 
                                                     
 
166A panel was established on 9 January 1998, but the Un ited States withdrew the request for a panel on  
11 June 1998, and the section 301 investigation was terminated. 
 167In 1993, 1995 and 1996 the United States and Korea concluded understandings on a range of issues 
pertaining to market access for equipment, procurement pr actices, standards, and inte llectual property protection 
in the area of telecommunications.  As a result of the 1996 review, the USTR initiated, in March 1996, a 
monitoring period in which to determine the extent to which existing agreements with Korea achieved new 
market access objectives.  Due to inadequate progress in  two rounds of talks the USTR decided to identify 
Korea as a PFC in July 1996 (USTR Press Release , 96-63, 26 July 1996). United States WT/TPR/S/56 
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compliance with its telecommunications oblig ations under the NAFTA in the 1997 review.168 
However, in its 1998 review, the USTR stated th at the United States had serious concerns about 
Mexico’s implementation of its commitments under the WTO Agreement on Telecommunications, 
particularly regarding a discriminatory surcharge placed on inbound internatio nal calls, and a failure 
to permit carriers to engage in unrestricted resale of telecommunications services in Mexico.169 
148. In the 1997 review, focussed on U.S. concerns regarding the implementation of bilateral 
agreements with Korea, Japan, Mexico and Chinese Taipei, the USTR announced that the 
United States would be monitoring an agreement with the American Institute in Chinese Taipei 
regarding the licensing and provision of wireless services.170  During the 1998 review process, some 
U.S. firms raised concerns about Chinese Taipei's  compliance with the agreement.  An agreement 
settling the issue was concluded on 20 February 1998.171 
149. Japan's telecommunications equipment procur ement practices, particularly by Nippon 
Telegraph and Telephone (NTT), and NTT's personal handy phone subs idiary were the subject of 
talks during the 1996 review, which resulted in en hanced access to the Japanese market for U.S. 
suppliers.172  The 1997 review also examined teleco mmunications procurement by the Japanese 
Government and by NTT.  The first issue, rela ting to the development of a radio communications 
system for the Japanese National Police Agency (N PA), which had been removed from the disciplines 
of the WTO Agreement on Government Procurement,  was settled when the Government of Japan  
cancelled its development plans and accepted to c onduct the procurement (with the exception of the 
encryption module) in accordance with the Agreement.173  The procurement was reopened in 
August 1997.  Regarding NTT, ex cessive reliance on NTT-specific product-based specifications was 
again identified;  in the 1998 review, the United St ates expressed concern regarding the pace at which 
Japan was introducing competition into its basic telecommunications service market. 
150. Canada was identified in the 1998 review for applying restrictions preventing U.S.-based 
carriers from enjoying the same oppor tunities for transmitting internationa l traffic to and from Canada 
                                                      
168Another pending issue, regarding Mexico's establishment of standards for terminal attachment for 
telecommunications equipment, was solved in February 1997 at the meeting of the NAFTA Telecommunications Standards Subcommittee. 
169USTR Press Release 98-38, 1 April 1998. 
170USTR Press Release 97-27, 2 April 1997. 
171Based on a complaint by U.S. carriers that the sign ificantly above-cost interconnection rates charged 
by the dominant carrier Chunghwa Telecommunications Co. (CHT) were creating a  major barrier to 
competition in the wireless services ma rket, and apparently breaching the te rms of the 1996 agreement, which 
mandated cost-based interconnection rates, the USTR negotiated an agreement, concluded on 20 February 1998, 
requiring CHT to reduce its interconnection rates by almo st 30% in 1998, and to en sure that these rates are 
completely cost-based by 2001.  
172Section 1377 has been used before with respect to access to the Japanese telecommunications 
market, i.e., to enforce the 1989 Third Party Radio and Ce llular Telephone Agreement with Japan, and to sign a 
new agreement on cellular telephones in 1994.  
173The United States was concerned with the specifi cations development process that the Japanese 
National Police Agency (NPA) was using for its next generation VHF mobile communications system, particularly with the way the procurement process was conducted and with the possibility  that the selected 
Japanese firms would develop specifications that U.S. firms would not be able to meet.  The United States also 
stated that, in accordance with both the WTO Agreement on Governme nt Procurement and the 1994 U.S.-Japan 
Framework Agreement on Japanese public sector tel ecommunications procurement (Framework Agreement), 
the companies involved in the development of specifications should not be allowed to participate in the 
procurement if it would result in an unfair competitive advantage over other suppliers, and determined that Japan was potentially in violation of its obligations under both agreements. WT/TPR/S/56 Trade Policy Review 
Page 96 
 
 
that are being enjoyed by carriers in other count ries.  The issue was settled later in 1998, when 
Canada terminated this practice.174 
151. In the 1999 review, completed on 30 March 1999,  Mexico was singled out as having made 
strides toward satisfactory implementation of its commitments under the WTO Agreement on Basic 
Telecommunications, including the removal of a su rcharge on inbound interna tional calls. However, 
due to concerns with respect to the implem entation of Mexico's commitments under the WTO 
Agreement with respect to international services a nd interconnection rates, it was decided that USTR 
would conduct an out-of-cycle examination by 30 July 1999 to examine progress in this respect.175 
Japan's practices regarding interconnection rates, and the prohibition on the routing of both domestic 
and international traffic via combinations of owned and leased network facilities, were also 
scrutinized. The review also raised concerns about Germany’s practices regarding interconnection 
rates, terms, and conditions. 
(c) Foreign Government Procurement (Title VII of the Omnibus Trade and Competitiveness Act 
 of 1988) 
152. Title VII of the Omnibus Trade and Competitiv eness Act of 1988, was enacted for the 1989-
96 period.  In March 1999, President Clinton issu ed an Executive Order reinstating Title VIII for 
1999, 2000, and 2001.  Under the Executive Order,  the USTR identifies countries that are 
discriminating against U.S. goods and services in  government procuremen t, or violating the 
GATT(WTO) Government Procurement Code (Agr eement), or other government procurement 
agreements.  During the 90 days that follow identification, a satisfactory resolution is sought.  A 
section 301 investigation will be initiated for each pr actice for which a satisfactory resolution is not 
achieved during that period. The investigation period is 18 months for practices involving the 
Agreement on Government Procur ement and 12 months for other practices. At the end of the 
investigation, the USTR must make a determinati on in accordance  with section 301 and take action in 
accordance with that section. 
153. In the 1996 review, Germany was identified for not complying with market access 
procurement requirements in the heavy electrical e quipment sector.  The imposition of trade sanctions 
provided under Title VII was dela yed until 30 September 1996.  On 1 October 1996, it was announced 
that Germany had agreed to open the heavy electrical equipment market to competition .  According to 
the authorities, the United States continues to  monitor Germany's implementation of this 
announcement.  The 1996 review also announced th at the United States would continue to monitor 
Japan's compliance with agreements on government procurement of telecommunications products and 
services, and medical technology products and services, reached as a result of 1994 Title VII investigations.  Furthermore, the review covered th e implementation of two ot her bilateral agreements 
signed with Japan (the 1994 Public Works Agreem ent and the 1991 Major Projects Arrangement). 
(4) I
NTERNAL MEASURES  
(i) Taxation176 
154. Internal taxation may have direct or indir ect implications for international trade and 
investment as well as competitiveness .  In this context, the tax incen tives offered both by the Federal 
Government and U.S. states are designed, inter alia , to encourage certain typ es of investment and to 
attract geographically mobile investment.  The Un ited States is one of the few Members to have 
                                                      
174USTR Press Release 98-87, 1 October 1998. 
175USTR Press Release 99-29, 30 March 1999. 
176See USITC (1998c) for a more complete summary of the current U.S. tax system. United States WT/TPR/S/56 
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provided the WTO with a notification concerning s ubnational subsidies, most of which involve tax 
measures;  the document contains ove r 200 subsidies maintained by 43 states.177 
155. Among OECD members, the United States is one of the countries least dependent on taxes on 
goods and services (indirect taxes), which together accounted for only 17.2% of total federal, state 
and local tax revenues in 1996 (the latest y ear for which information is available).178  Roughly one 
third of these taxes involve federal customs duties an d excises;  state and local sales taxes account for 
most of the remaining two thirds.  By contrast, revenues from corporate and personal incomes taxes, 
levied mainly by the Federal Government, amount to nearly half of total federal, state and local tax 
revenues.  The other major direct levy involves social security contributions, which account for 
roughly one quarter of total federa l, state and local tax revenues. 
(a) Taxes on goods and services (indirect) 156. All but five states and many cities currently levy retail sales taxes (RST) at rates that range in 
most cases between 4% and 6%.  While the tax is s upposed to be levied solely on final purchases of 
consumer goods, it also applies to business pur chases, notably machinery and equipment.
179  To the 
extent that businesses pay RST on their inputs, and the tax is levied again when they sell their goods 
and services, "cascading" develops;  that is, goods  and services requiring more intermediate steps in 
production and distribution end up be ing taxed more heavily.  This may constitute a distortion both to 
consumption and production patterns as well as to the way busin esses are organized.  Such cascading 
may also favour imports over domestically produced  goods and hamper exports, insofar as an element 
of the tax gets built into export prices.180  Most states try to avoid the problem of cascading by giving 
businesses a registration number to present when purchasing goods and services, thus exempting them 
from RST.  In practice, however, this procedure may work somewhat poorly, judging from the high percentage of RST revenues that are derived from business purchases.
181 
157. A variety of excise taxes are levied by the Federal Government on specific goods and 
services, including alcoholic beverages,  tobacco products, luxury automobiles182, motor fuels, coal, 
firearms, air and sea transportation, telephone  communications, and certain environmentally 
hazardous products.  Some of these taxes are earmark ed for special trust funds to support designated 
expenditures (such as harbour maintenance a nd development);  they are levied on an ad valorem  or 
per unit basis.  While the taxes usually apply to imported and domestically produced products alike, 
there are a few exceptions.  For instance, reduced federal excise tax rates apply to beer and wine 
produced by small producers; some states have simi lar provisions.   Furthermore, ozone-depleting 
chemicals that are diverted or recovered in the United States as part of a recycling process are not 
subject to the federal excise taxes levied on newly manufactured or imported ozone-depleting 
                                                      
177WTO document G/SCM/N/38/USA, 19 November 1998. 
178OECD (1998a). 
179Joulfaian and Mackie (1992) conclude that sales taxe s on purchases of capital can be fairly large. 
180On the other hand, as pointed out in Chapter I, any possible adverse effect on the trade balance 
would tend to be offset by an adjustment in the exchange rate of the U.S. dollar. 
181 Slemrod and Bakija (1996, p. 209).  Ring (1999) estimates that 59% of sales tax was paid on final 
consumption, most of the remainder was derived from business purchases (pp. 79-90). 
182Cars sold in 1999 are subject to a 6% federal excise tax to the extent that the retail sales price 
exceeds US$36,000.  The thresh old price is indexed for inflation and th e tax rate is to be reduced  by one 
percentage point annually until it reaches  3% in 2002.  The tax expires at the end of 2002.  According to the 
authorities, no data are available on the extent to which cars subject to the tax are domestically produced or 
imported. WT/TPR/S/56 Trade Policy Review 
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chemicals.183  The Federal Government and several states al so provide fuel tax exemptions or rebates 
for certain activities, including ag riculture and commercial fishing. 
158. The harbour maintenance tax (HMT), is closely re lated to trade and is collected by the U.S. 
Customs Service;  introduced in 1986, it is an ad valorem  levy of 0.125% on shippers in respect of 
imports and exports shipped through U.S. ports.  Th e tax was earmarked to defray the costs of harbour 
maintenance and development but some WTO Memb ers have complained of large surpluses and 
many exemptions for domestically owned ships.184  On 31 March 1998, the U.S. Supreme Court ruled 
that the portion of the HMT levied on exported car go violated the Export Clause of the Constitution, 
which bans taxes on exports, but not user fees.185  In response, the U.S. Customs Service stopped 
collecting the HMT from exporters on 25 April 1998,  but left the tax in place for imports and 
domestic cargo.  In its FY 2000 budget, the Admi nistration made proposals to replace the remaining 
portions of the HMT as well as the previous export  portion with a cost-based user fee intended to 
yield roughly US$1 billion annually.  Unlike the HMT,  the fee would be charged to vessel owners and 
operators and assessed on the basis of ship size, sa iling frequency, and other factors, instead of the 
value of shipments, to ensure that the fee corresponds more closely to the use of port services and 
facilities.  This proposed user fee has not yet been implemented. 
(b) Direct taxes and tax measures 
159. The Federal Government levies a graduated personal in come tax, involving five tax brackets, 
ranging from 0 to 39.6% (for taxable income over US$283,150 for 1999 and indexed annually), while 
long-term capital gains are generally taxed at the rate of 10% or 20%.  A special maximum rate 
of 25% applies to the recapture of normal depreci ation on real estate.  A special maximum rate 
of 28% applies to capital gains on collec tibles, e.g. gold, coins, or art. 
160. The double taxation of saving intrinsic to a co mprehensive income tax constitutes a potential 
disincentive to save.  However, the United States do es not fully tax all saving.  As pointed out in 
Chapter I, double taxation affects only about one half  of total personal saving;  pension (including IRA 
and Keogh plan) contributions and earnings are, by and large, taxed only once. 
161. In addition to the personal income  tax, the Federal Government levies a corporate income tax, 
with most profits being taxed at the rate of 35%.186  (45 states levy their own corporate taxes, at rates 
of up to 12%.)187  Thus, profits that are distributed as divide nds or capital gains are also taxed twice:  
                                                      
183In addition, there is an exemption for recycl ed halon-1301 and halon-2402 imported after 
31 December 1996  from countries that are signatories to the Montreal Protocol on Substances that Deplete the 
Ozone Layer.   A similar provision for imported, recycl ed halon-1211 was repealed effective 5 August 1997.  
The Congress understood that in response to the profit incentive created by the higher price for ozone-depleting 
chemicals that resulted from the tax on these chemicals, entrepreneurs have developed and are marketing a 
substitute halon-1211 that is not ozone-depleting.  The Congress believed that permitting imported recycled halon-1211 to compete tax-free in th e market could destroy this entrepreneurial and environmental success story 
(see U.S. Congress, Joint Committee on Taxation) (1997). 
184As of 31 December 1998, US$1.2 billion was held  in the Harbor Maintenance Trust Fund.  This 
amount includes funds allocated to on-going harbour ma intenance projects; it excludes estimated receipts for 
1998. 
185Writing for the Court, Justice Ruth Ginsburg said that the 1986 law allowed a tax that "is not a fair 
approximation of services, facilities or benefits furnishe d to exporters".  "If we are to guard against the 
imposition of a tax under the pretext of fixing a fee … we must hold that the (1986 law) violates the export clause." ( Dow Jones News , 31 March 1998).  
186There are also alternative minimum corporate and personal taxes designed to prevent apparently 
profitable corporations and high-income individuals from reducing their taxes "too much" by tax planning. 
187The federal and state rates are not additive as st ate taxes are deductible for federal tax purposes. United States WT/TPR/S/56 
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once at the corporate level and then again at the pe rsonal level when distributed to shareholders or 
realized in the form of capital gains.  Unlike in most other OECD countries, no relief is provided for 
such double taxation of corporate profits.  The same corporate tax rules apply to U.S.-controlled 
companies and foreign-controlled compan ies that are "in like circumstances". 
162. The corporate income tax is primarily a backstop to the personal income tax;  in its absence, 
personal taxes on income earned by corporations coul d be deferred indefinitely.  The corporate tax is 
also used as an instrument of government policy; that is, it embodies tax relief measures that assist 
some activities or industries relative to others.  Among the main forms of  tax relief accorded to 
companies are accelerated depreciation, deferral of  income from controlled foreign corporations, 
reduced corporate tax rates, tax credit for corpora tions receiving income from doing business in U.S. 
possessions, exclusion of income of foreign sales corporations, and a credit for increasing research 
activities.  These are among the more than 100 pr eferential measures iden tified by the Treasury 
Department as tax expenditures (tha t is, deviations from a hypothetical tax system that is loosely 
based on the ideal of a comprehensive federal income tax).188  Tax expenditures are recognized as an 
alternative to other government policy instruments, such as direct expenditures and regulations.  They 
are estimated to cost the Federal Government billions  of dollars in lost tax revenues (Table III.13);  
such measures are aimed in partic ular at sectors such as agriculture189, energy, natural resources, and 
the environment (Table III.14).  The Administra tion's Budget for the fiscal year 2000 contains a 
proposal that would extend the carry-back period fo r net operating losses of steel companies from two 
to five years at an estimated cost of US$292 m illion during the period 1999-2004. The outcome is that 
effective tax rates can vary widely depending on the type of investment, the sector in which the 
investment is undertaken, the manner in which the investment is financed, and the source of funds.190 
Table III.13 
Selected major federal tax expe nditures in income tax, ranked by total 2000 revenue loss, 1998-2000 
(US$ million) 
Provision 1998 1999 2000 2000-04 
Capital gains (except agriculture, timber, iron ore, and coal) 38,275 39,415 40,585 215,350 
Accelerated depreciation of machiner y and equipment 28, 885 32,505 35,465 181,645 
Net exclusion of pension contributions and earnings :  Individual Retirement Accounts 10,565 10,770 11,170 56,915 
Deferral of income from controlled fo reign corporations 5,500 5,800 6,200 35,150 
Graduated corporation income tax rate 5,400 5,360 5,360 30,900 
Earned income tax credita 6,351 5,118 4,971 26,531 
Net exclusion of pension contributions and earnings:  Keogh plans 3,930 4,025 4,255 23,795 
Tax credit for corporations receiving income from doing business in U.S. po ssessions 3,960 4,000 4,120 21,015 
Accelerated depreciation of buildings ot her than rental hous ing 6,270 4,895 3,430 10,640 
Lifetime learning tax credit 110 2,510 2,655 16,560 
Exclusion of income earned abroad by U.S. citizens 1,990 2,235 2,500 15,715 
Exclusion of income of foreign sa les corporations 2,150 2,250 2,400 13,650 
Expensing of certain small investments 1,185 1,235 1,275 6,780 
Credit for increasing research activities 2,125 1,665 980 1,645 
Special ESOP rules 920 950 980 5,300 
Exemption of credit union income 785 840 905 5,235 
Table III.13 
                                                      
188Tax expenditures are revenue losses due to preferen tial provisions of tax laws, such as special 
exclusions, exemptions, deductions, credits, deferrals or  reduced tax rates (see United States Treasury, 1998).  
The Congressional Budget Act of 1974 requires that a list of tax expenditures be included in the budget. 
189The total revenue loss due to income tax concession amounted in FY 1996 to US$660 million (WTO 
document G/SCM/N/38/USA, 19 November 1998). 
190Fullerton and Karayannis (1993), for example.  Diffe rences in effective tax rates also arise as a 
consequence of tax provisions not included in tax expenditure lists;  for instance, to the extent that investment in 
housing is financed by equity, the exclusion of implicit rental income on owner-occupied housing from the personal tax base reduces the effective tax rate on owner-occupied housing. WT/TPR/S/56 Trade Policy Review 
Page 100 
 
 
Provision 1998 1999 2000 2000-04 
Alternative fuel production credit 860 810 760 2,715 
Capital gains treatment of certain income 605 630 655 3,590 
Expensing of research and experi mentation expenditures 260 330 510 3,295 
Expensing of multiperiod timber growing costs 485 500 510 2,750 
Excess of percentage over cost depletion,  fuels, and non-fuel minerals 475 500 510 2,725 
Work opportunity tax credit 170 335 330 535 
Tax exemption of certain insurance companies owned by tax-exempt or ganizations 210 225 240 1,410 
Amortization of start-up costs 205 215 220 1,140 
Enhanced oil recovery credit 140 160 180 1,225 
Expensing of environmental remediation costs 90 110 145 135 
Small life insurance company deduction 100 100 100 520 
Tax credit and deduction for clean -fuel burning vehicles 75 80 90 410 
Expensing of certain multiperiod production costs 80 85 85 475 
Exclusion from income of conservation s ubsidies provided by public utilities 80 80 80 385 
Expensing of certain capital outlays 65 70 70 385 
Capital gains treatment of certain timber income 60 65 65 360 
Deferred taxes for financial firms on certa in income earned overseas 400 1,075 65 65 
Capital gains treatment of royalties on coal 60 65 65 360 
Exception from passive loss limitation for worki ng interest in oil and gas properties 30 35 35 190 
New technology credit 25 30 35 185 
Welfare-to-work tax credit 15 35 35 70 
Investment credit for rehabilitation of stru ctures (other than historic) 30 30 30 150 
Expensing of exploration and development costs, non-fuel minerals 25 25 25 135 
Deferral of tax on shipping companies 15 15 15 75 
Alcohol fuel creditb 15 15 15 75 
Treatment of loans forgiven for solvent farmers 10 10 10 50 
Excess bad debt reserves of financial institutions 70 30 10 25 
Investment credit and seven-year amortiza tion for reforestation expenditures 10 10 10 65 
a The figures in the table indicate the effect of the earned inco me tax credit on receipts.  The effect on outlays (in US$ mill ion) is as 
follows:  1998, $23,239; 1999, $26,273;  2000, $26,882;  2001, $27,667;  2002, $28,632;  2003, $29,566;  and 2004, $30,578. 
b In addition, the partial exemption from the excise tax for alcohol fuels results in  a reduction in excise tax receipts (in US $ million) 
is as follows:  1998, $680;  1999, $725;  2000, $755;  2001, $765;  2002, $790;  2003, $805;  and 2004, $830. 
Note: All estimates have been rounded to the nearest US$5 million.   Provisions with estimates that rounded to zero  in each yea r are not 
included in the table. 
Source : Budget of the United States Government – Fiscal Year 2000 , Office of Management and Budget (U.S. Government Printing Office, 
Washington D.C.), 1999. 
163. While tax reform during the past decade or  so has reduced some tax expenditures and 
eliminated others, such as the investment tax cr edit, thereby greatly increasing the neutrality of the 
corporate (and personal) income tax system, a cons iderable number still remain.  Some tax measures 
encourage activities with positive ex ternalities, as in the case of research and development (R&D) and 
environmental protection for instance191, although it is difficult to determine whether the amount of 
assistance in the form of tax expenditure is commensur ate with the size of the externality.  In order to 
enhance transparency and, thus, public accountability  the rationale for federal tax expenditures and 
their effectiveness in achieving their objectives (in relation to tax revenue losses) are evaluated by, 
inter alia , the Office of Management and Budget (OMB ), the General Accounting Office and the 
                                                      
191Undertaking R&D can be very costly and when it results in a new idea or invention, the benefits 
seldom accrue entirely to the researcher or his/her employ er.  Even though the patent  system is intended to 
ensure that inventors are adequately rewarded for their ideas, beneficiaries inevitably include people other than 
the persons bearing the cost of the R&D.  The outcome may be that so me R&D projects that are not worth 
undertaking from the perspective of a private individual or  firm, are beneficial to soci ety as a whole.  The U.S. 
income tax system attempts to address this externality  by granting preferential tax treatment to R&D expenses, 
which unlike other investment expenditures can be fully deducted immediately for tax purposes. United States WT/TPR/S/56 
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Congressional Budget Office, whose reports are published.192  The use of tax expenditures by federal 
and state governments to attract geographically mob ile investment may contribute to an "incentives 
race" not just domestically, but internationally.193 
Table III.14 
Tax expenditures for selected sectorsa, 1997-2004 (fiscal year) 
(US$ million) 
 Total revenue loss from corpor ate and individual income taxes 
 1997 1998 1999 2000 2000-04 
Energy 
Expensing of exploration and deve lopment costs, fuel 160 130 90 20 40 
Excess of percentage over cost depletion, fuels 830 285 295 300 1,590 
Alternative fuel production credit 710 1,100 1,030 975 3,470 
Capital gains treatment of royalties on coal 50 80 85 85 480 
Enhanced oil recovery credit 95 215 245 285 1,900 
New technology credit 60 30 40 45 245 
Alcohol fuel creditb 20 15 15 15 75 
 
 
Natural resources and environment 
Expensing of exploration and development costs, non fuel 
minerals 45 30 30 30 170 
Excess of percentage over cost deple tion, non fuel minerals 335 275 280 300 1,625 
Special rules for mining recl amation reserves 20 20 20 20 100 
Capital gains treatment of certain timber income 50 80 85 85 480 
Expensing of multiperiod timber growing costs 460 485 500 510 2,750 
Investment credit and seven-year amortization for 
reforestation expenditures 45 15 15 15 75 
 
Agriculture 
Expensing of certain capital outlays 65 65 70 70 385 
Expensing of certain multiperiod production costs 80 80 85 85 475 
Treatment of loans for solvent farmers 10 10 10 10 50 
Capital gains treatment of certain income 505 805 840 875 4,790 
 
Community and regional development 
Empowerment zones and enterprise communities 255 290 380 430 1,875 
a These programmes have been notified to the WTO. 
b In addition, the partial exemption from the excise tax for alcohol fuels results in  a reduction in excise tax receipts (in US $ million) 
 is as follows:  1998, $680;  1999, $725;  2000, $755;  2001, $765;  2002, $790;  2003, $805;  and 2004, $830. 
Source : Data provided by the U.S. authorities. 
                                                      
192According to most econometric studies, the amount of investment generated by tax incentives 
usually falls short of the tax revenue losses.   See OECD (1995a, p. 30). 
193Direct tax measures at the state level include corporate income tax cred its, local property tax 
abatement and exemptions (WTO document G/SCM/N/38/USA, 19 November 1998). WT/TPR/S/56 Trade Policy Review 
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164. Tax relief is provided for international doubl e taxation (including withholding taxes on 
interest, dividends and royalties).  International doubl e taxation arises to the extent that income of 
U.S. multinationals (MNEs) are ta xed first in the source country, wh ere the affiliate of the MNE is 
located, and again in the United States once those profits are received by the parent (as interest, 
dividends or royalties).  The United States has devel oped a network of over 50 bilateral tax treaties, 
however, designed to avoid international double taxati on (and combat tax evasion).  By statute, the 
U.S. grants a credit for foreign income taxes;  under the foreign tax credit provisions of the U.S. 
Internal Revenue Code, income taxes paid abroad can be offset dollar for dollar against U.S. tax 
liabilities.  Treaties may more precisely identify the taxes that meet the requirements of the statute.  
This form of relief for interna tional double taxation is in accordance with the residence (or "world-
wide") principle, which is necessary for the achie vement of capital export neutrality (CEN);  CEN 
reflects the view that tax policy ought not to influence decisions on where  to invest.194  As in most 
other countries, however, international double ta xation has not been entirely eliminated, although 
residual U.S. tax on foreign income is very small.  
165. The United States has a set of "special (inc ome) tax provisions that provide an export 
incentive";195 they involve a tax exemption for certain  export-related income of foreign sales 
corporations (FSCs).196  The FSC provisions of the U.S. Internal Revenue Code provide that a portion 
of the foreign trade income of an eligible  FSC will be exempt from Federal income tax.197  I n  
addition, a domestic corporation receives a 100% dividends-received de duction for dividends 
distributed from the FSC out of earnings attributable to certain foreign trade income.  Thus, there is no 
corporate level tax imposed on a portion of the FSC's income from exports.  The FSC provisions are 
currently subject to dispute at the WTO, where the European Union alleges th at the provisions violate 
the Agreements on Subsidies and Counterv ailing Measures (SCM) and on Agriculture.198  However, 
the United States maintains that the FSC is fully consistent with its WTO obligations.199  T h e  t a x  
expenditure accounts published by the Treasury Depa rtment (Table III.13) indicate that the revenue 
cost of the FSC provisions is ar ound US$2.2 billion (in 1998 and 1999). 
(ii) Non-tax measures affecting investment 
166. For many years, the United States has played a l eading role in promoting the liberalization of 
foreign investment.200  Indeed, the long-standing commitment of the United States to an open and 
                                                      
194CEN obtains when the same amount of foreign and domestic taxes are paid on an identical 
investment no matter where  the investment is undertaken.  An alternative definition of neutrality involves 
capital import neutrality (CIN).  For CIN to prevail, th e same amount of foreign an d domestic taxes would be 
paid irrespective of where the investor resides;  hence, taxation would not influence who invests in the U.S.  
CIN would be accomplished if income from investment abroad were entirely exempt from taxation in the 
capital-exporting country.  This reflect s the "source" (or "territorial") prin ciple of international taxation, which 
has been adopted by, inter alia , Australia, Canada, France, Germany,  the Netherlands and Switzerland. 
195Daily Tax Congressional Documents (1996), p. 720. 
196Sections 921-927 of the Internal Revenue Code. 
197Foreign trade income is defined as the gross income of a FSC attributable to foreign trading gross 
receipts.  The term foreign trading gr oss receipts means the gross receipts of a FSC that are attributable to the 
sale, lease or rental of export property (not more than 50% of the fair market value of which can be attributable 
to articles imported into the United States) and certain services. 
A FSC must be created or organized under the laws of a foreign country (which meets certain 
requirements) or possession of the United States.  In other words, the FSC must be formed under the laws of a 
jurisdiction outside U.S. customs territory.  A FSC must meet certain requirements of foreign management, foreign presence and fore ign economic processes. 
198WTO documents WT/DS108/1, 28 November 1997, and WT/DS108/Add.1, 12 March 1998. 
199USTR and the Department of Commerce (1999). 
200OECD (1995b). United States WT/TPR/S/56 
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non-discriminatory investment regime in most areas of  economic activity have contributed to its being 
the largest recipient and source of foreign investme nt in the world.  The high degree of openness of 
the U.S. investment regime together with lucra tive domestic investment oppor tunities have continued 
to attract foreign investors, who have been more  than willing to make up the widening gap between 
national savings and domestic investment, especially si nce the eruption of the Asian financial crisis in 
July 1997.  Foreign direct investment (FDI) infl ows have thus helped sustain the U.S. economy's 
impressive growth and pr oductivity performance duri ng the review period. 
167. Notwithstanding the Government's basic comm itment to an open investment regime, 
reciprocity or other conditions to national treatme nt or restrictions on market access on national 
security grounds do exist.  At the same time, howev er, incentives, including subsidies, are offered by 
the Federal Government and especially by states in or der to attract investment to certain activities and 
locations. 
(a) Restrictions on foreign investment 
168. The Government's desire to strengthen U.S.  firms' competitiveness has led to a stronger 
emphasis on opening foreign markets.  Consequently, in specific instances, the U.S. Government links 
its treatment of foreign investors in the United Stat es to the way in which U.S. investors are treated 
abroad, reserving the right to adopt or maintain  measures against foreign investors whose home 
countries do not accord equivalent treatment to U.S. investors.  The outcome is conditional "national 
treatment" (CNT).201  These reciprocity conditions are not always related to the sector to which the 
foreign investor is seeking access.  In bilateral,  regional (in the context of NAFTA), plurilateral 
(OECD) and multilateral negotiations (WTO), the Unite d States has taken exceptions to the principles 
of MFN and unconditional national treatment.  While for the most part, no new legislative measures 
have been taken during the period under review, there are long-standing reciprocity provisions 
pertaining to certain indirect air transportation activ ities (air freight forwarding and charter), maritime 
shipping, oil and gas pipelines across on-shore fede ral lands, leases to develop mineral resources on 
federal lands, and primary dealers in financial services.   Some of these, and other provisions 
pertaining to selected service sectors, are described in  more detail in Chapter IV.  However, no denials 
pursuant to these provisions have been reported for the period under review. 
169. Foreign-controlled enterprises do not unconditiona lly receive national treatment under certain 
U.S. technology assistance programmes, specifically  the 1992 Advanced Technology Programme, the 
1993 Technology Reinvestment Project and the 1992 Energy Policy Act. These statutes stipulate that 
recipients' participation be in the economic interest  of the United States and that if the recipient is 
foreign-owned, its parent company's home country  provide comparable opportunities for U.S.-owned 
firms to participate in similar programmes.  Other government-supported technology programmes, 
like the clean car partnership and the semiconduc tor technology research consortium (SEMATECH), 
do not contain reciprocity or CNT provisions. 
170. In addition, blanket restrictions on foreign ow nership apply to a few subsectors, including 
certain telecommunications services and several activ ities in the energy sector.  Nonetheless, in some 
cases, such as the Federal Power Act, while limiting natural persons licences to U.S. citizens, 
legislation permits the licensing of  foreign-controlled companies inco rporated in the United States for 
any construction, operation, or maintenance of fac ilities for the development, transmission, and use of 
power on federal land or water. 
171. A feature of the U.S. investment regime is legislation that authorizes the President to 
undertake a national security investigation of foreign mergers, acquis itions and takeovers.  
                                                      
201OECD (1995b). WT/TPR/S/56 Trade Policy Review 
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Section 721 of the Defense Production Act of 1950, th e so-called "Exon-Florio" provision, was part of 
the 1988 Trade Act.  It authorizes the President to  suspend or prohibit proposed foreign investments 
(mergers or acquisitions) or divest completed transact ions that constitute a threat to national security.  
Subsequent amendments to the provision require special scrutiny of a proposed acquisition by 
companies with foreign control that could affect national security.  The President delegated authority 
to review proposed foreign mergers, acquisiti ons and takeovers to the Committee on Foreign 
Investment in the United States (CFIUS), an inte r-agency group that is chaired by the Treasury 
Department.  Foreign investors have criticized Exon- Florio's lack of a clear definition of "national 
security", the possibility of ex-post divestment, and th e lack of a procedure to review decisions.  In 
practice, however, it would appear that implementa tion of the Exon-Florio has served to protect the 
national security without chilling the climate for foreign investment in  the United States.  Since the 
provision was first introduced in 1988, as few as 17 of the 1,180 transactions notified have proceeded 
to the investigative phase and only one tr ansaction has actually been prevented. 
172. Although it has not done so, the United States may retaliate against countries that discriminate 
against U.S. investors.  Furthermore, in 1998 the President reinstated Super 301 trade law provisions 
that require the Administration to identify prio rity countries and practices from the National Trade 
Estimate report on foreign trade barriers, in cluding barriers to FDI (section (3)(v)). 
173. Like the Federal Government, state governme nts also generally pursue liberal policies 
towards foreign investors.  Ind eed, states often compete to attract FDI by offering tax and non-tax 
incentives.  Nevertheless, limited restrictions at th e state level do exist in some sectors where state 
regulation plays a major role, as in banking, insu rance and other financial services, energy utilities 
and land, all of which are important sectors for intern ational investors.  In some cases, the effects of 
certain restrictions on initial entry are mitigated by choice of the state of entry.  In banking, for 
example, foreign investors could seek to enter the U. S. via states with less restrictive regimes and then 
take advantage of opportunities crea ted under 1994 interstate banking le gislation to expand to other 
states on a national treatment basis. 
(b) Assistance for investment and other economic activities 
174. The United States has notified the WTO of subsidies applied in some specific sectors, 
namely:  aerospace and aeronautics;  agriculture;  automotive;  building and equipment;  ceramics;  chemical energy;  fisheries;  lumber and timber;  metal and minerals;  textiles and clothing;  and timepieces.  It has also notified other subsidies at the federal level including regional assistance and 
Eximbank's export credit programmes.  In addition , in 1998, for the first time, the United States 
notified some 210 measures maintained by 43 U.S. states;  most of these measures involve tax concessions. 
175. As shown in Chart III.8 the agriculture sector be nefits from the most programmes.  Some of 
the programmes, whose continuation was continge nt upon ongoing annual appropriations by the 
Congress, seem to have been discontinued during calendar year 1998, these include, inter alia,  those 
affecting the automotive, textile, energy and building sectors.
202 
                                                      
202In its last notification ("U.S. New and Full Notif ication" (WTO G/SCM/N/38, 19 November 1998)) 
the U.S. did not notify the following programmes:  (a) Partnership for a New Generation of Vehicles;  (b) the 
Textile/Clothing Technology Corporation Programme (TC2 );  and the AMTEX programme;  (c) the Alternative 
Fuel Vehicle Development Programme,  the Motor Challenge Programme and the Heat Engines Programme;  (d) 
the Building Equipment Programme, the Building Systems Programme and the Building Envelope Programme;  
(e) the Lightweight Transportation Materials Programme;  (f) the Membrane Programme, the Geothermal Energy Programme, the Energy Storage Systems Programme, the Biomass Power Programme, the Advanced United States WT/TPR/S/56 
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Chart III.8
Subsidy programmes by sector, 1996 and 1998
Ceramics & light-
weight materials
2.6Automotives 
& engines  6.5Agriculture
28.5
Metals, minerals & 
extractions   6.5Other
7.8
Metals, minerals & 
extractions  8.3Other
8.3 Energy & fuels 
& related 
sectorsAerospace & 
aeronautics
10.4
Lumber & timber     
8.3
Source : WTO Secretariat.Per cent
Lumber & timber 
 5.2Energy & fuels
 & related sectors
28.6Agriculture
35.4
Aerospace &
 aeronautics
7.8Building equip. 
& systems  3.9Automotives 
& engines  2.1
Ceramics & 
light-weight
 materials
2.6
Total:  77 programmes Total:  48 programmes1996 1998
Textiles & 
clothing  2.6
 
176. The form of the subsidy varies according to sect or, and includes grants, contracts, cooperative 
agreements, cost sharing, cash bonuses, non-recourse loans, and tax concessions.203  Tax concessions 
are especially important at the state level, accoun ting for some 64% of total subsidies granted.  
Table III.15 shows estimated revenue loss due  to subsidies granted (section (4)(i)(b)).204 
177. In general the purpose of most (some 330) subsidy programmes, notified to the WTO, is to 
promote the development of a sector through R&D aimed at designing technologies to improve a firm's competitiveness and efficiency;  other programmes promote development of a specific product within a sector, and exploration and prod uction (e.g. energy and fuel sector). 
178. In agriculture however, programmes are aimed mainly at stabilizing and supporting farm 
income and prices, and at enhancing agricultura l exports.  Programmes providing income and price 
support, as well as marketing assistance, are still av ailable for specific crops through the Production 
Flexibility Contract (PFC) payment and the non-recourse commodity loan programmes.
205  T h e  
                                                                                                                                                                     
Turbine System Programme, the Isotope Production an d Distribution Programme, the Coal Research and 
Development Programme, the Fuel Cell for Stationary Applications Programme, the Oil Programme and the 
Natural Gas Programme;  and (g) the Materials and Metals Processing Metals Initiative.  The authorities noted 
that they are in the process of notifying additional programmes. 
203Contracts are procurements by th e U.S. Government of goods or services, conducted in accordance 
with the Federal Acquisition Regulations.  A cooperative agreement is an agreement between the Government 
and a non-federal party whereby money or property is tr ansferred to the recipient to support or stimulate 
research.  A cost-shared contract is a contract entered into between the Government and a non-federal party in 
which costs associated with the work ar e shared as specified in the contract. 
204These programmes were authorized by the Comm odity Credit Corporation (CCC) Charter Act, the 
Agriculture Adjustment Act of 1938, as amended, the Agricultural Act of 1949, as amended, and the Federal 
Agriculture Improvement and Reform Act of 1996.  The programmes are financed by the CCC and administered 
by the Farm Service Agency (FSA). 
205WTO document G/SCM/Q2/USA/10, 3 July 1997, (p. 31). WT/TPR/S/56 Trade Policy Review 
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objective of these programmes are three fold:  to stabilize, support, and protect farm income and 
prices;  to help ensure adequate supplies of quality food, feed and fibre;  and to assist in the orderly 
marketing of farm commodities.  Statutory spendi ng levels for the PFC as specified in the 1996 Act 
are:  FY 1998, US$5,800 billion;  FY 1999, US$5 ,603 billion;  FY 2000, US $5,130 billion;  FY 2001, 
US$4,130 billion;  and FY 2002,  US$4,008 billion.   Net lending costs during FY 1997 were US$85.4 
million206 (Annex III.2). 
179. The United States notified all programmes falling within the meaning of Articles 1 and 2 of 
the WTO Agreement on Subsidies and Counterva iling Measures (SCM).  However, in certain 
instances the United States was not in a position to confirm the notifiability of specific programmes, 
since some programmes may not constitute subs idies within the meaning of the Agreement.207  Thus, 
in two instances, as permitted under Article 25.10  of the SCM Agreement, the EU has counter-
notified a list of state measures applied by the United States.208  In addition to these subnational 
measures the United States has other federal assi stance programmes, which are contained in the 
Catalog of Federal Domestic Assistance.209 
180. The Maritime Administration (MARAD) has provide d financial assistance to U.S. shipowners 
through the Federal Ship Financing Programme (T itle XI) and the Capital Construction Fund (CCF) 
programme.210  Title XI provides for federal government guarantees of private sector financing or 
refinancing obligations for the cons truction or reconstruction of U.S. flag vessels in U.S. shipyards.  
These financing guarantees are also available to fo reign shipowners.  During FY 1997 and the first 
half of FY 1998, MARAD approved 17 applications for Title XI financing for vessel construction.  
Included in these were two export projects.  In addition, approval was given to two shipyard 
modernization projects.  The estimated cost of all the approved Title XI projects was US$803 million, 
with Titles XI guarantees totalling US$572 million of this amount.211  The Federal Government 
continues to provide direct support to the indus try through the procurement of goods and services 
from a large number of shipyards and related i ndustries to repair government owned vessels.  
Additional support is provided through the MARITE CH programme.  This is a federal programme 
funded jointly by Government and industry, to encourage the shipbuilding industry to lead in the 
development and application of ad vanced technology, to improve competitiveness, and to preserve its 
industrial bases. 
181. During 1996-98 no countervailing measures were imposed on the United States 
(cross-reference).  However, for the first time, th e United States is a defendant in a WTO dispute 
involving subsidies.  In November 1997, the EU re quested consultations con cerning the Foreign Sales 
Corporation (FSC) provisions of the U.S. Internal Revenue Code, which, in the EU's view, constitutes 
a prohibited subsidy in violation of the WTO SCM and Agriculture Agreements. 
                                                      
206The Conservation Reserve Programme (CRP), as note d by the U.S. authorities, is not notifiable to 
the Subsidies Committee because it is generally availabl e to all agricultural prod ucers and is, therefore, 
non-specific.  The programme has been notified to the WTO Committee on Agriculture as a "green box" 
programme. 
207WTO documents G/SCM/Q2/USA/11, 5 August 1997 and G/SCM/Q2/USA/14, 18 January 1999. 
208http://www.gsa.gov/fdoc, 17 February 1999. 
209The EU noted that this latter programme, which provides considerable tax benefits to U.S. 
shipbuilders in the form of deferrals, has not been notified (G/SCM/Q2/USA/14, 18 January 1999). 
210The United States has not ratified the OECD Shipbuilding Agreement concluded in 1994, which is 
meant to eliminate all direct and indi rect support and to combat injurious pricing practices.  Provisions are made 
for a standstill on existing subsidy levels and on new measures of support during the intervening period, but 
allow for the continuation of previously committed aid subject to certain conditions. 
211U.S. Department of Transportation, Maritime Administration (1998a). United States WT/TPR/S/56 
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(iii) Trade-related intellectual property rights 
(a) Economic value of intellectual property rights 
182. The economic value of intellectual property right s may be measured as the present value of 
the stream of revenue generated by holding a right .  However, the value of intellectual property as 
embodied in designs, copyrights, patents, and trad e marks may be well beyond the payment made for 
the use of the right.  This can also be extended to  licensing.  One way of measuring the importance of 
the economic value of intellectual property rights is by  looking at international payments and receipts.  
In this respect, the United States has traditionally enjoyed a significant surplus of intellectual property 
payments, as measured by royalties and license fees .  Net receipts in 1997, before deduction of 
withholding taxes, were US$24.3 billion .  Receipts totalled US$33.7 billion (some 3.8% of goods 
exports), and payments were US$9.4 billion .  In the first eleven months of 1998, net payments totalled 
US$17.8 billion, with receipts reaching US$26.1 billion and payments amounting to US$8.3 billion. (Table III.15).
212 
183. Almost half the U.S. foreign earnings from ro yalties and licence fees are from countries in the 
European Union.  At a country level, Japan tops th e list, accounting for some 20% of such receipts.  
Receipts from the European Union, Japan, Canada, Singapore, Korea, Australia and Switzerland 
together account for over 80% of total U. S. receipts for royalties and licence fees. 
Table III.15 
Royalties and licence fees, 1993-98 
(US$ million) 
 1993 1994 1995 1996 1997 1998a 
Receipts       
Royalties and license fees 21,695 26,712 30,289 32,823 33,676 26,126 
Affiliated 15,688 20,275 22,859 24,710 25,515 19,808 
Unaffiliated 6,007 6, 437 7,430 8,113 8,161 6,318 
Payments       
Royalties and license fees 5,032 5,852 6,919 7,854 9,411 8,279 
Affiliated 3,386 3,934 5,257 5,506 7,087 6,063 
Unaffiliated 1,646 1, 919 1,663 2,347 2,324 2,213 
Net payments 16,663 20,860 23,370 24,969 24,265 17,847 
a Three first quarters.  
Source : U.S. Department of Commerce, Bureau of Economic Analysis, Survey of Current Business , various issues. 
(b) U.S. intellectual property laws 
184. The United States notified the WTO of its laws and regulations on trade-related aspects of 
intellectual property rights in 1996.213 The United States is a member of the World Intellectual 
Property Organization (WIPO), and participates, inter alia,  in the Paris Convention for the Protection 
of Industrial Property, and the Berne Convention fo r the Protection of Literary and Artistic Works .  It 
is also a party to the Patent Cooperation Treaty (PCT).214  The United States is not a member of the 
                                                      
212U.S. Department of Commerce (1999), February. 
213WTO document IP/N/1/USA/1, 21 January 1997. 
214The Patent Cooperation Treaty allows parties to file  an international  patent application which then 
has the effect of national application in any of the 98 sign atories countries designated in  the application.  In the 
case of the United States, applications may be filed w ith the Patent and Trademar k Office (PTO) or with the 
WIPO. WT/TPR/S/56 Trade Policy Review 
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International Convention for the Protection of  Performers, Producers of Phonograms and 
Broadcasting Organizations (Rome Convention). 
Patents 
185. The Constitution of the United States gives Congr ess, as opposed to the states, the power to 
enact laws relating to patents  (Article I, section 8) .  The first patent law dates from 1790;  the current 
patent law, which came into effect on 1 January 1953,  is codified in Title 35 of the U.S. Code 
(35 U.S.C.) .  It has been amended many times in the inte rvening years, and was modified by the 
Uruguay Round Agreements Act, which extended the rights granted to a patent holder to include 
"offering for sale" and "importing" and introduced the possibility of filing provisional applications 
(without patent claims) for a period of twelve months .  Other changes brought about by the Uruguay 
Round Agreements Act (URAA) include the possibilit y of determining the da te of invention in a 
foreign country in any interference proceeding.   This change was initially introduced in the NAFTA 
in 1994 and, since 1 January 1996, applies to all WTO Members. 
186. Patents are granted by the Patent and Trademark Office (PTO) using a first-to-invent rule;  the 
United States is the only country using this rule,  which is a longstanding provision of U.S. patent law.  
Patents granted are published, but applications are not.  Patents are considered valid from the day of 
issuance.   A decision by the PTO refusing a patent may be  appealed to the Board of Patent Appeals 
and Interferences or in a federal court.   Patents of invention (utility pate nts) are granted to any new 
useful, and non-obvious process, machin e, manufacture or composition of matter.   The period of 
protection for utility patents was changed as a result of the WTO Agreement on Trade-Related 
Aspects of Intellectual Property Rights (TRIPS);  th e term of protection is now 20 years from the date 
the first U.S. patent application was filed 215, compared to 17 years from the date of grant before the 
provisions of the TRIPS Agreement beca me applicable for the United States.   For applications filed 
before 8 June 1995, the term of protection is 20 year s from the filing date, or 17 years from the date of 
grant, whichever is longer.   The period of protection is subject to possible extension by up to five 
years to compensate for delays due to interferenc e proceedings, patent secrec y orders and appellate 
review by the Board of Patent Appeal s and Interferences or by federal courts.216  Design patents 
continue to have a term of 14 years from the date of grant.   There is no loss of protection stemming 
from non-use (commercial) of the patent. 
187. The only changes to patent legislation since the l ast U.S. Review are incorporated in the Plant 
Patent Amendments Act of 1998 (P.L. 105-289), signed by the President on 27 October 1998 .  The 
Act contains legislation to protect plant owners against unauthorized sale of plants. 
188. Revisions to patent legislation currently  being considered by Congress include: the 
Technology Transfer Commercialization Act of 1999 (S 810);  a bill to make technical corrections in 
Title 17 U.S.C., and other laws (HR 1189 RFS)  passed by the House of Representatives on 
13 April 1999;  and the Collections of Informa tion Antipiracy Act (HR 354).  The latter two would 
mainly introduce technical corrections to ex isting legislation.  The Technology Transfer 
Commercialization Act of 1999 would amend existing legislation (the Stevenson-Wydler Technology 
Innovation Act of 1980) to permit government laboratories, under a cooperative research and development agreement, to grant li cences to federally owned inventions  for which a patent application 
was filed before the granting of the licence.  The Act would also ame nd the terms under which a 
federal agency may grant an exclusive or partially  exclusive licence on a federally owned invention. 
                                                     
 
21535 U.S.C. section 173. 
21635 U.S.C. section 151. United States WT/TPR/S/56 
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189. Changes in the PTO's rules and proce dures are currently under consideration .  This may result 
in the PTO being ready to deploy electronic processing of patent applications by 2003, and, in cooperation with the WIPO, achieve electronic fili ng and processing of PCT applications by 2000.
217 
190. As in other countries, protection of foreign patents (and trade marks) is not automatic;   
however, in accordance with the Paris Convention, patent applicati ons filed in a foreign country that 
is a WTO Member or a signatory to the Convention are granted a twelve-month priority period (six 
months in the case of trade marks) counted from the date of application to the PTO.   As a result of 
this, in the event that a U.S. application is filed for the same patent during or be fore the priority period 
granted to a foreign patent, the foreign patent seek ing protection in the United States will generally be 
entitled to the benefit of the filing date.  This pro cedure applies only when the applicant is not from a 
country member of the Patent Cooperation Treaty.  Compulsory licensing of patents is authorized under the Atomic Energy Act, the Clean Air Act and the Energy Policy Act. 
191. In the calendar year 1996, 122, 839 patents were issued in the United States;  during 1997-98, 
295,107 patents were issued (166,739 in 1998, a third more than in 1997), of which 266,794 were utility patents, 972 were plant patents, 614 we re re-issues, and 26,727 were design patents   
(Table III.16). 
Table III.16 
Summary of patent examining activities, 1993-98 
Patent examining activity 1993 1994 1995 1996 1997 1998 
Total applications filed 188,099 201,554 236,679 206,276 237,045 .. 
Utilitya 173,619 185,087 220,141 189,979 219,453 .. 
Re-issue 572 430 647 573 606 .. 
Plant 362 606 516 564 714 .. 
Design 13,546 15,431 15,375 16,272 15,160 .. 
Patents granted 110,388 114,143 114,744 122,839 125,802 166,739 
Utility 98,959 102,512 102,29 8 110,761 113,641 150,958 
Re-issue 338 320 321 281 289 312 
Plant 444 498 387 362 395 570 
Design 10,647 11,113 11,738 11,435 11,477 14,899 
Average pendency timeb, c 19.5 19.0 19.2 20.8 22.2 .. 
PCT int. app., PTO as receivi ng office 12,389 14,265 15,941 20,106 22,767 .. 
   Not available. 
a Utility patents include chemical, electrical and mechanical applications. 
b Average time (in months) between filing and issuance or abandonment of utility, plant, and re-issue applications, but excludi ng 
design patents. 
c Fiscal year. 
Source : United States Patent and Trademark Office. 
192. Non-U.S. residents filed 102,249 patent appli cations in FY1997, or about 43% of all 
applications.  The country filing the largest number of applications was Japan (44,318 or some 43% of 
foreign patent applications), followed by Ge rmany, Chinese Taipei, the United Kingdom, France, 
Canada, the Republic of Korea, Italy, Sweden, the Netherlands, and Switzerland (Table III.17).  
                                                      
217Federal Register , 5 October 1998, Vol. 63, No. 192. WT/TPR/S/56 Trade Policy Review 
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Among the top ten entities granted patents in 1998, were six Japanese corporations, three U.S. 
corporations, and one Korean corporation.   The U.S. Government was eleventh.218 
Table III.17  
U.S. patent applications by non-U.S. residents, ten main countries, FY 1993- 97 
Country 1993 1994 1995 1996 1997 
Japan 36,148 36,912 42,994 39,810 44,318 
Germany 10,550 11,539 12,421 11,515 12,963 
Chinese Taipei 3,370 3,847 4,729 5,108 6,349 
United Kingdom 4,503 5,104 5,577 4,804 5,589 
France 4,554 4,790 5,389 4,678 5,093 
Korea 1,512 2,177 2,943 3,932 4,957 
Italy 2,159 2,160 2,512 2,152 2,472 
Sweden  1,162 1,492 1,674 1,439 2,062 
Netherlands 1,548 1,549 1,727 1,594 1,978 
Switzerland 1,937 1,922 2,075 1,639 1,782 
Source : United States Patents and Trademark Office.  
193. The average pendency period for patent applica tions with the PTO was 22.2 months in 1998, 
up from 20.8 months in 1996 and 19 months in 1994 .  The PTO has the goal of reducing the average 
pendency period to 12 months by 2003.219 
Trade marks  
194. Trade mark rights in the United States arise from the actual use of the mark, or from the filing 
of an application to register a mark;  applicants mu st state their bona fide inte ntion to use the mark in 
the ordinary course of trade .  Use of a mark in promotion or adve rtising before the product or service 
is actually provided under the mark does not qualify as use in commerce .  Federal registration is not 
required to establish rights to a mark, or to use it, but may secure some benefits beyond the rights 
acquired by merely using a mark, by granting the hol der ownership of the mark and an entitlement to 
use it in all U.S. territory.  Trade ma rks are also protected by state law. 
195. Applications for registration are filed with the PTO.220  Notices of marks entitled to 
registration are published in the PTO's Official Gazette.221  The federal registration of trade marks and 
other marks is governed by the Trademark Act of 1946, as amended222, the Trademark Rules (37 CFR 
Part 2) and the Trademark Manual of Examining Procedures .  Trade marks have a renewable term of 
ten years, for as a long as the mark is in use.223  Although in general terms, a trade-mark must be used 
commercially before it is registered for protection,  the Paris Convention allows registration before 
                                                      
218The top ten patenting organizations receiving utility  patents in 1998 were: IBM (2,657 patents);  
Canon Kabushiki Kaisha (1,928);  NEC Corporation (1,627);  Motorola Inc. (1,406);  Sony Corporation (1,316);  
Samsung Electronics Co., Ltd. (1,304);  Fujitsu Limited (1,189);  Toshiba Corporation (1,170);  Eastman Kodak 
Company (1,124);  Hitachi, Ltd. (1,094).  The U.S. Government dropped off the list of the top ten patenting 
organizations (1,017 patents received in  1998) after having been on the list each year since 1969.  U.S. Patents 
and Trademark Office, "List of Top Patenting Organizations, Calendar Year 1998".  Available at: http://www.uspto.gov/web/offices/ac/ido/oeip/taf/top98cos.htm. 
219Patent and Trademark Office (1998), p.8. 
22015 U.S.C. section 1051.  
22115 U.S.C. section 1062(a). 
22215 U.S.C. section 1051 et seq. 
223Up to 1988, when the Trademark Law Revision Act of 1988 was implemented, the term was 
20 years. United States WT/TPR/S/56 
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use.  This benefit, which applied originally only to  non-U.S. individuals or firms from countries that 
are parties to the Convention, was extended to U.S.  citizens and firms by the 1988 Act which, since 
November 1989, has allowed the filing of applica tions based on the bona fide intention to use the 
mark commercially, and not necessarily on the basis of actual use .  The protection granted to a mark 
may be cancelled if an affidavit of use is not pr ovided between the fifth and sixth year of use.  
196. The first party using a mark in commerce or f iling an application in the PTO has the ultimate 
right to register that mark .  The PTO determines the right to regist er but not the right to use a mark, 
which must be determined by a court.  Registra tion with the PTO provides protection for the mark 
only in the United States and its territories .  Foreigners registering a mark with the PTO, if not 
represented by an attorney in the United Stat es, must designate a U.S. representative under 
Section 1(e) of the Trademark Act of 1946. 
197. Disputes regarding trade mark infringement may be taken to court or settled in the PTO's 
Trademark Trial and Appeal Board (TTAB) through an opposition or cancellation proceeding.224  
Opposition to a mark's registration may be filed up to 30 days after registration;  this period may be 
extended for another 30 days .  In cases of conflict between two marks, the PTO determines the 
likelihood of confusion as a result of the u se of the marks at issue by both parties .  The main factors 
considered in determining likelihoo d of confusion are the similarity of the marks and the commercial 
relationship between the goods and services identified by the marks .  If the goods are identical, the 
likelihood of confusion is  generally presumed;  fame of a mark is also taken into account when 
determining likelihood of confusion .  However, there are no lists of famous marks .  Marks are 
protected against dilution (loss of image due to use of an identical or similar mark for dissimilar goods 
or services of others), both at the state and the federal level .  At the federal level, the Federal 
Trademark Dilution Act, enacted on 16 January 199 6, enables the owner of a well-known mark to 
obtain an injunction against commercial use of the ma rk which dilutes its distinctive quality.  A trade-
mark registration can be cancelled at any time by the PTO if there is evidence of non-use or if it has been discontinued. 
198. Trade mark legislation, as embodied in the Trademark Act of 1946, was amended by the 
Trade mark Law Treaty Implementation Act (P.L. 105-350), signed by the President on 30 October 1998, which revises trade mark registra tion requirements by requiring owners of trade 
marks, as well as persons with bona fide intentions  to use trade marks, to provide verifications 
attesting to the accuracy of facts in registration applications .  The 1998 Act also prohibits the 
registration of any trade mark until the applicant h as met certain existing requirements with respect to 
its use in commerce .  The new Act makes changes to registra tion renewal requirements and extends 
the period in which a renewal may be filed from si x months to one year, before the end of each 
successive ten-year period for which the registration was issued or renewed .  Other changes to the 
Trademark Act of 1946 include the removal of a requ irement that an application for registration of a 
foreign trade mark be accompanied by a certification of the foreign registration, and the extension of 
renewal periods for expired registrations from three to six months .  The Omnibus Appropriations Bill 
of 1999 contains language that prohi bits U.S. courts from enforcing trade marks held by a designated 
national or "successor-in-interest" that was used with a business that was confiscated. 
199. In FY 1997, 112,509 trade marks were registered, up from 91,339 in FY 1996 .  
Approximately two thirds of applications resulted in registra tions, while one third were abandoned.  A 
total of 839,071 trade marks were protected in FY 1997;  the average pendency time was 16.3 months  
(Table III.18). 
                                                     
 
22415 U.S.C. section 1063(a)). WT/TPR/S/56 Trade Policy Review 
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Table III.18 
Summary of trademark  ex amining activities, 1993-97 
(As of 30 September of each fiscal year) 
 1993 1994 1995 1996 1997 
Applications for registration       
Applications fileda 122,644 135,096 150,508 170,783 188,080 
App. including additional classes 139,735 155,376 175,307 200,640 224,355
Disposal of trade mark a pplications   
Registrations 86,122 68,853 75,372 91,339 112,509
Abandonments  40,752 42,467 42,214 49,189 64,409
Trade mark first actions  131,191 147,343 176,764 198,160 226,651
App. approved for publication  94,161 97,347 118,727 127,481 149,721
Certificates of re gistration issued  74,349 59,797 65,662 78,674  97,294
Total active certificates  of registration (1997)b 712,000 727,983 751,783 784,667 839,071 
Renewal of re gistration   
Applications file d 7,173 7,004 7,220 7,543 6,720
Registrations renewed 6,182 6,136 6,785 7,346 7,389
Notices of Allowance  (NOAs) issued 53,053 40,741 51,473 71,117 80,693
Average pendency timec (months)  13.0 15.9 16.4 15.9 16.3 
a Refers to individual trade mark applications submitted to the PTO. 
b Refers to applications for all the 47 cla sses of trade marks.  An application can be submitted to several classes at the same  time. 
c Between filing and issuing a NOA. 
Source : United States Patent and Trademark Office.  
Geographical indications 
200. U.S. law concerning geographic indications underwent changes when the NAFTA was 
implemented in 1994 .  After 8 December 1993, geographic terms that are primarily deceptive 
geographically and non-descriptive can no  longer be shown to be distinctive.225  Geographical 
indications may be registered as certification marks with the PTO. Registration is refused, or may be 
cancelled if the use of the geographical indication does not state true origin.226  Civil action can be 
undertaken as provided under Section 43(a) of the Trademark Act of 1946 in case of fraudulent use of 
a geographical indication. 
201. Protection of geographical indications of wines and spirits is also granted under the Federal 
Administration Act of 1935, the Alcohol, Tobacco a nd Fire-Arm Regulations, and by 27 Code of 
Federal Regulations (CFR), Parts, 4, 5, 7 and 12 .  Protection is granted indefinitely, as long as the 
conditions that make this prot ection necessary remain unchanged .  The granting of federal trade mark 
registrations for misleading geographic indications of  origin for wines and spirits is prohibited under 
Section 522 of the Uruguay Round Agreements Act for  a pplications of indication of origin filed since 
1 January 1996.227  Indications in use before that date are a llowed, and label correction is not required.   
202. The Bureau of Alcohol, Tobacco and Fire-Arms (BATF) regulates the use of geographical 
indications in the labelling and advertising of distilled spirits, wine and malt beverages .  The BATF 
has sole authority to determine whether a name of  geographic significance with respect to wine has 
                                                      
22515 U.S.C. sections 1063 and 1064. 
22615 U.S.C. section 1052(a). 
227As a result of the WTO TRIPS Agreement, Section 2 of the Act of 1946 (15 U.S.C. 1052) was 
amended to provide that registration will be refused if the mark consists of or comprises a geographical 
indication which, when used in connec tion with wines and spirits, identifies a place other than the origin of the 
goods. United States WT/TPR/S/56 
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become "generic" or "semi-generic".228  The criteria used to determine whether a name is generic is 
based on loss of geographical significance.  A sem i-generic name of geographical significance for 
wine may be used to describe wine that is not of  the indicated origin, so long as it is accompanied by 
an indication disclosing the wine's true place of origin.229 
Copyright  
203. The Constitution grants the Federal Government  jurisdiction over copyright protection.  
Copyright is protected under the Copyright Ac t of 1976, as amended, which took effect on 
1 January 1978.   The Act, embodied in Title 17  of the U.S. Code (17 U.S. C.), pre-empts any state law 
that provides equivalent rights in copyrightable subject-matter.230  The Uruguay Round Agreements Act 
(URAA) added section 104A to the Copyright Act, wh ich provided for the restoration of protection of 
all copyrighted works from WTO Members that ha d fallen into the public domain because of the 
formalities of pre-1978 U.S. copyright law or because of a lack of a treaty relationship.   In November 
1995, the Digital Performance Right in Sound Recordings Act of 1995 amended the Copyright Act to provide an exclusive public performance right fo r sound recordings that extends to many digital 
performances.  The Legislative Branch Appropriations  Act, 1997, introduced amendments to Title 17 
of the U.S. Code, concerning the limitation on exclus ive copyrights for literary  works in specialized 
format for the blind and disabled. 
204. The United States grants automatic protection to copyrighted works, including computer 
programs, from all  WTO Member s and Berne Convention signatories.   Copyrighted works 
originating in a country other than the United States , need not be registered at the Copyright Office 
before an infringement suit can be brought .  Works originating in the Unite d States must comply with 
this registration requirement .  The United States signed the WIPO Performances and Phonograms 
Treaty and the WIPO Copyright Treaty in Apr il 1997;  they were ratified in March 1999. 
205. Section 104 of Title 17 of the U.S. Code as amended by the Uruguay Round Agreements Act 
automatically restored copyright prot ection, as of January 1996, to elig ible foreign works that fell into 
the public domain in the United States due to failure  to comply with earlier U.S. copyright formality 
requirements or because the United States did not have copyright agreements with the country .  
Additionally, in the case of sound recordings, protec tion was restored to recordings made prior to 
15 February 1972  when copyright protection was established for sound recordings.   Protection was 
extended for the remainder of the time during which the work would have been protected had it not 
entered the public domain. 
206. In U.S. copyright legislation there is no concept of "neighbouring rights" separate from 
copyright.  Sound recordings from broadcast progr ammes and fixed performances are considered to 
be works of authorship under the Copyright Act bu t have a more limited sc ope of right than other 
categories of works.  U.S. federal law provides protection to live musical performances
231;  however,  
unauthorized performance of a non-dr amatic literary or musical work, where there is no direct or 
indirect admission charge, is not c onsidered a breach of copyrights.232  U.S. copyright law does not 
grant rights for broadcast organizations per se, but protects the subject matter of broadcasts, including 
the right to prevent unauthorized reproduction, di stribution, public display and public performance.233 
Broadcasters may also own copyright in the comp ilation of works of a br oadcast day, provided it 
                                                      
22827 CFR, section 4.24. 
22927 CFR,  section 4.24(b)(1). 
23017 U.S.C. section 30. 
23117 U.S.C. section 110 (4)(A). 
23217 U.S.C. section 1101. 
23317 U.S.C. section 1106. WT/TPR/S/56 Trade Policy Review 
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contains sufficient authorship.  Computer programmes are treated as literary works;  compilations of 
data that constitute original work s of authorship are also protecte d as literary works. Owners of 
copyrighted works enjoy an exclusive right to create  derivative works based on the copyrighted works. 
207. The United States is not a party to the Rome Convention.  Neighbouring rights (certain 
elements of the rights of performers, producers of sound recordings and broadcasters) are protected 
domestically through the application of copyright legislation as well as by telecommunications law and collective bargain rights.  The United States is a party to the Geneva Phonograms Convention which is used to protect sound recordings in fore ign countries.  Until 1995, the United States did not 
provide any public performance rights for sound record ings.  However, as a result of the Digital 
Performance Right in Sound Recordings Act of 1995, the United States now provides public 
performance rights for sound recordings in digital fo rmat that are distributed by subscription and 
interactive services. 
208. The Audio Home Recording Act of 1992 requires that manufacturers and importers of digital 
audio recorders and digital recording media pay f ees that are distributed to recording artists and 
copyright owners on a national treatment basis.  There is no reciprocity requirement for the 
distribution of such fees to foreign recording artists and copyright owners. 
209. The right to authorize or prohibit the rental of computer software was made permanent by the 
Uruguay Round Agreements Act. Civil remedies a nd criminal penalties were established respectively 
for the unauthorized fixation and trafficking in so und recordings and music videos of live musical 
performances.
234  The United States does not confer on c opyright owners of cinematographic works the 
right to authorize or prohibit the rental of such works to the public. 
210. Compulsory licences consistent with the Berne Convention are applied, for example for the 
production and distribution of phonorecords of a non-dramatic musical work, for secondary transmissions by cable and satellite, and for the use of certain works in connection with non-
commercial broadcasting.  The Copyright Act cont ains a compulsory licensing requirement that 
mandates the payment of royalties for most secondary transmissions by cable system.
235  T h i s  
remuneration is distributed to U.S. and foreign right  holders through their filing with the Librarian of 
Congress of a claim for a share of such fees.236 
211. Until October 1998, copyrighted works created on or after 1 January 1978 were protected 
throughout the life of the author plus 50 years,  in accordance with the Berne Convention and the 
WTO TRIPS Agreement.237  Work produced anonymously or under a contract was protected for a 
term of 75 years from publication, or 100 years from creation, whichever was the shortest. 
212. The Sonny Bono Copyright Term Extension (P .L. 105-298), signed by the President on 
27 October 1998, extends by 20 years the periods of copyright protection.  Authored works created after 1 January 1978 are now protected for life plus 70 years;  for anonymous works, protection extends to 95 years after publication, or 120 y ears from creation, whichever is the shortest.
238  The 
duration of copyright provisions was extended to  15 February 2067 for works created on or after 
1 January 1978, and to 15 February 2047 to works created but not published or copyrighted before 
1 January 1978 (if the work is published before 31 December 2002).  The Act "grandfathers" acquired 
copyrights: subsisting copyrights are granted an added protection of 20 years, and any copyright in its 
                                                      
234Sections 512 and 513 of the Uruguay Round Agreements Act. 
23517 U.S.C. section 111 (c)-(d) 
23617 U.S.C. section 111(d)(3)-(4). 
237Copyrighted works created before 1 January 1978 are granted a protection period of 75 years. 
238In the case of a joint work, the term of protection is  70 years after the last surviving author's death. United States WT/TPR/S/56 
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renewal term at the time of the effective date of the Act is granted a copyright term of 95 years from 
the date the copyright was originally secured.  Termin ation rights that expired on or before the date of 
entry into force of the Act may be  exercised at "any time during a period of five years, beginning at 
the end of 75 years from the date copyright was originally secured" (Title I, section 101 (d) (D)(2)).  
This new Act was joined with the "F airness in Music Licensing Act of 1998". 
213. The Digital Millennium Copyright Act of 1998 (P.L. 105-304) was signed into law by the 
President on 28 October 1998.  Title I of the Act implements the WIPO Copyright Treaty (WCT)  and 
the WIPO Performances and Phonograms Treaty (W PPT), by making technical amendments to the 
Copyright Act in order to comply with the requirements of both treaties.239  Title I of the Act added a 
new Chapter to Title 17 of the U.S. Code to prohi bit the circumvention of technological measures of 
protection240;  to protect the integrity of copyright management information;  to provide for civil and 
criminal remedies for violations241;  and to preserve the effectiveness of federal and state laws in 
protecting individual privacy on the Internet.  Title II, the Online Copyright Infringement Liability Limitation Act, limits the liability of service provide rs (providers or operators of online services or 
network access) when material transmitted does not or iginate with the provider.  To benefit from this 
liability limitation, the service provider must not tole rate infringement of copyrights by subscribers, 
and must not interfere with the adoption of stan dard technical measures by copyright owners.  
Title III, the Computer Maintenance Competition A ssurance Act, expands the scope of exemptions 
relating to computer programmes in the Copyright Ac t by allowing the owner or lessee of a computer 
to make a copy of a programme in the course of main tenance or repair of the computer.  Title V, the 
Vessel Hull Design Protection Act (VHDPA), which added a new Chapter 13 to the 17 U.S. Code, 
creates a  new system for the protection of certa in types of vessel hull designs.  The VHDPA is 
subject to a sunset provision and expires on 28 October 2000. 
214. Other legislation regarding copyright that came in to effect in the period under review include: 
the Copyright Technical Amendments Act, P.L. 105-80, signed into law on 13 November 1997 ; and the No Electronic Theft Act, P.L. 105-147, signed into law 16 December 1997.  The Copyright 
Technical Amendments Act amends the Satellite Ho me Viewer Act of 1994 and various federal 
copyright provisions to make technical and conf orming amendments with respect to licensing and 
royalty fees charged for the retransmission for hom e viewing of superstati on and network station 
transmissions; the copyrighting of restored  works; licences for non-exempt subscription 
transmissions; royalties payable under compulso ry licences;  negotiated licences for jukeboxes; 
copyright registration and infringement actions; and  digital audio recording devices and media. The 
No Electronic Theft Act amends federal copyright law to define "financial gain" to include the receipt 
of other copyrighted works; sets penalties for willfully infringing a copyright for purposes of 
commercial advantage or private financial gain, or by reproducing or distributing, including by 
electronic means, during any 180-day period, one or more copies of one or more copyrighted works 
                                                     
 
239Section 102(b) of the Digital Millennium Copy right Act of 1998 amends section 104 of the 
Copyright Act to extend protection under U.S. law to works from foreign countries protected under the WCT 
and the WPPT.  Section 102(d) of the Millennium Act am ends Section 411(a) of the Copyright Act to exempt 
all foreign works from registration requirements with the Copyright Office as a prerequisite to the initiation of a 
lawsuit.  The Digital Millennium Copyright Act of 1998 , U.S.  Copyright Office Summary, December 1998, pp. 
2-3. 
240Except for non-profit libraries, archives and ed ucational institutions;  reverse engineering;  
encryption research;  protection of minors, personal privacy;   and security testing.  This prohibition takes effect 
on 28 October 2000. 
241In the case of circumvention of technological protection measures constituting a violation of 
copyrights, section 1204 of Title's 17 new chapter 12 sets penalties of up to US$500,000 or five years imprisonment for a first offence, and up to US$1 million or ten years imprisonment for a subsequent offence.  WT/TPR/S/56 Trade Policy Review 
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with a total retail value of more than US$1,000; a nd extends the statute of limitations for criminal 
copyright infringement from three to five years. 
215. The number of copyright registrations were 569,200 in 1997, up from 550,400 in 1996, but 
below registrations in 1995.  The largest number of registrations (176,400)  related to monographs, 
which include computer software, followed by musical works (154,400 registrations). 
Trade secrets 
216. Trade secrets are generally protected by state and not federal law in the United States.  Each 
state has its own legislation on trade secrets;  however, 36 states have adopted the Uniform Trade 
Secrets Act.  Trade secret protection continues so long as the information has potential or actual 
commercial value due to the fact that it is not know n or readily ascertainable and so long as the party 
in control of the information takes appropriate st eps to protect the secrecy by, for example, using 
corporate security measures and confidentiality clauses in employment, technology licensing, distributorship and joint-venture agreements.  The Uruguay Round Agreements Act did not change 
U.S. laws protecting trade secrets. 
217. The theft or misappropriation of trade secrets is a federal crime since October 1996, when 
Congress enacted the Economic Espionage Act of  1996, P.L. 104-294.  Economic espionage is 
defined by the Act as theft, or any other form of mi sappropriation, of trade secrets that is intended to 
benefit a foreign government or foreign agent.   The Economic Espionage  Act imposes prison 
sentences of up to 15 years and fines of US$500, 000 for individuals, and up to US$10 million for 
organizations in cases of economic espionage.  In the case of theft of trade secrets not falling within 
the definition of economic espionage,  prison sente nces of up to ten years and a fine of up to 
US$500,000 for individuals, and up to US$5 mill ion for organizations may be imposed.  The 
Economic Espionage Act also contains provisions th at authorize the forfeiture of proceeds derived 
from an illegal activity falling within its scope.  Pr operty used in carrying out actions prohibited by 
the Act may also be forfeited. 
Integrated circuit layout designs 
218. Integrated circuit layout designs, also known as mask works, are protected by the 
Semiconductor Chip Protection Act of 1984.  The Act gr ants the owner of an integrated circuit layout 
design the exclusive right to reproduce, import and distribute it for a period of ten years from the date on which the layout design is registered with the U.S. Copyright Office or from the date on which it is first commercially exploited anywhere in the world, whichever occurs first.
242  The WTO TRIPS 
Agreement is the basis for providing national treatment for WTO Members under this law. 
Parallel imports  
219. Parallel importation of goods containing protect ed intellectual property, in the form of 
patents, copyrights, or industrial designs may genera lly be prevented by the holder of the right.  This 
may lead to goods being stopped at the border by Customs under certain circumstances.  Parallel 
imports of goods bearing trade marks are allowed if  there is common ownership and control between 
the producer of the foreign product and that of the domestic products.  Exceptions to this are cases 
where there is a contract containing clauses prev enting this or when the parallel imports embody 
physical differences to the goods tr ade marked in the United States. 
                                                      
24217 U.S.C. sections 904 and 905. United States WT/TPR/S/56 
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(c) Bilateral and regional intell ectual property agreements 
220. The United States has signed a number of b ilateral intellectual property agreements.  
(Table AIII.4) Five of these agreements were si gned between 1996 and 1998, with China, Nicaragua, 
Paraguay, Peru, and Viet-Nam.  In  general terms, clauses related to intellectual property in these 
agreements are tailored to the TRIPS Agreement;  in  some cases they go beyond the provisions of the 
TRIPS Agreement;  in a few instances they are limite d to a specific issue (copyrights, enforcement of 
protection).  They do not norma lly provide transition periods. 
221. Chapter 17 of the NAFTA contains provisions re lated to intellectual property rights.  The 
NAFTA does not provide for the exceptions to national treatment included in the WTO TRIPS 
Agreement.  The only exception to national treatme nt, as specified in Article 1703 of the NAFTA, 
relates to treatment provided to performers of sound recordings from another Party, whose rights may 
be limited to those granted to nationals in that  Party.  Chapter 17 of the NAFTA also includes 
reference to the obligation of each  Party to allow the free transfer of rights regarding copyright, and 
creates an obligation to protect encrypted pr ogramme-carrying satellite signals (Article 1707). 
222. Regarding patents, the NAFTA provisions go beyond those of the WTO TRIPS Agreement in 
that they make protection for pharmaceutical and agricultural chemical inventions compulsory for 
"the unexpired term of the patent for su ch product granted in another Party".243  The NAFTA does not 
contain provisions allowing transition periods fo r the application of intellectual property right 
protection.  The enforcement procedures stated in the NAFTA are similar to those contained in the 
TRIPS Agreement. 
(d) Enforcement activities  
Special 301 
223. The Special 301 intellectual property provisions of the Omnibus Trade and Competitiveness 
Act of 1988 (19 U.S.C. section 2242) were implemented by the USTR in April 1989.  Since then, the USTR must make its Special 301 determinations by 30 April of each year, identifying foreign 
countries denying adequate and effec tive protection of intellectual propert y rights or fair and equitable 
market access to U.S. persons that rely upon intellectual property protection. 
Section 337 investigations 
224. Section 337 of the Tariff Act of 1930 (19 U. S.C. section1337), declares illegal "unfair 
methods of competition and unfair acts in the import ation and sale of products in the United States, 
the threat or effect of which is to destroy or su bstantially injure a domestic industry, prevent the 
establishment of such an industry, or restrain  or monopolize trade and commerce in the United 
States."  The injury requirement does not apply to  cases of alleged infringement of a valid and 
enforceable U.S. patent, registered trade mark, copyright, or mask work (19 U.S.C. section 1337(a)). Section 337 was modified by sections 321 and 322 of the Uruguay Round Agreements Act, to bring it into line with U.S. obligations under the WTO.
244 
225. Investigations under Section 337 are carried out by the USITC, which must establish a target 
date for its final determination, within 45 days afte r an investigation is initiate d.  Many investigations 
                                                      
243NAFTA, Chapter 17, Article 1709, section 4. 
244Certain aspects of Section 337 had been found to violate U.S. national treatment obligations under 
Article III of the GATT in a November 1988 GATT panel report adopted by the GATT Council in November 1989. WT/TPR/S/56 Trade Policy Review 
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are terminated through settlement between the parties.  If the USITC determines that Section 337 has 
been violated, it may issue orders excluding the products involved from entry into the United States, directing the violating parties to cease and desist fro m certain actions, or both.  USITC orders become 
effective, unless disapproved by the President for policy reasons, within 60 days of a USITC 
determination to issue an exclusion order.  Excl usion orders can be used to bar entry into the 
United States of infringing goods from whatever source (general exclusion orders) or from specifically identified manufacturers and producers (l imited exclusion orders).  Both permanent and 
temporary orders can be issued by the USITC.  US ITC determinations are subject to review by the 
U.S. Court of Appeals for the Federal Circuit.  Counterclaims under Section 337 may also be raised. 
226. Most Section 337 investigations involve allega tions of patent, copyright, or trade mark 
infringement;  others may involve misappropriation of trade secrets,  violations of antitrust laws, 
passing off, and false advertising.  Of the 39 i nvestigations initiated in the 1996-98 period (13 in 
1996;  14 in 1997 and 12 in 1998), 35 involved pa tent infringement (one case included copyright 
infringement);  three cases involved trade marks infringement, and one case entailed mask work 
infringement.  Twenty-eight cases had been completed, and only eleven were pending at the end 
of 1998.  In 1996, the USITC issued one general ex clusion order, three limited exclusion orders, one 
temporary limited exclusion order covering imports from one or more foreign firms, and four cease 
and desist orders.  In 1997, one general exclusi on order, five limited exclusion orders, and 14 cease 
and desist orders to named U.S. firms regardi ng their use or further sale of imported infringing 
products (11 were in one investigation), were issued  (Table III.19).  In 1998 no exclusion or cease and 
desist orders were issued by the USITC (Table AIII.5). 
WTO dispute settlement 
227. Between 1995 and 1998, the United States brought ten complaints related to intellectual 
property rights to the WTO's dispute settlement m echanism.  The first case, regarding patent 
protection for pharmaceuticals and agricultural ch emical products, ended on 19 December 1997 when 
the report of the WTO Appellate Body, which held that India had not complied with Articles 70.8 and 
70.9 of the WTO TRIPS Agreement, was adopted.
245  The Panel recommended that the Dispute 
Settlement Body request India to bring its transiti onal regime for patent protection of pharmaceutical 
and agricultural chemical products into confor mity with its obligations under the WTO TRIPS 
Agreement.  In the second case regarding certain m easures affecting the automobile sector taken by 
Indonesia, trade mark protection was one of the i ssues.  The case ended on 23 July 1998 with the 
adoption of a Panel report, which stated that the United States had "not demonstrated that Indonesia 
was in breach of its obligations under the WTO TR IPS Agreement in respect of the acquisition of 
trade mark rights".246  Other complaints that had not been resolved at the end of 1998 are against the 
European Communities and against Greece regarding the enforcement of intellectual property rights 
for motion pictures and television programmes in Greece (consultations were requested on 
                                                      
 245WTO document WT/DS50/AB/R.  On 2 July 1996, the United States had requested India to hold 
consultations pursuant to Article 4 of the DSU and Artic le 64 of the TRIPS Agreemen t regarding the absence in 
India either of patent protection for pharmaceutical and agricultural chemical  products or formal systems that 
permit the filing of patent applications for pharmaceutical  and agricultural chemical products and that provide 
exclusive marketing rights in such products (WT/DS50/1).  No  mutually satisfactory solution was reached in 
these consultations, held on 27 July 1996.  The United States requested the Dispute Settlement Body (DSB), in a 
communication dated 7 November 1996, to establish a pa nel to examine the matter (WT/DS50/4).  At its 
meeting of 20 November 1996, the DSB agreed to establish a panel with standard terms of reference in 
accordance with Article 6 of the DSU.  The Panel report was circulated on  5 September 1997.  India appealed 
the report;  the Appellate Body's re port was adopted on  19 December 1997. 
246WTO document WT/DS59/R, 28 July 1998. United States WT/TPR/S/56 
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30 April 1998)247;  against Denmark and Sweden regardi ng measures affecting the enforcement of 
intellectual property rights248;  against Ireland regarding measures affecting the grant of copyright and 
neighbouring rights249;  and against the European Communities regarding measures affecting the grant 
of copyright and neighbouring rights in Ireland250, for which the establishment of a panel was 
requested on 8 January 1998. 
228. During the period since the last Review of the United States, the following cases have been 
settled:  a U.S. complaint against Pakistan re garding patent protection for pharmaceuticals and 
agricultural chemical products251, a U.S. complaint regarding measures concerning sound recordings 
against Japan252, a case against Portugal related to patent  protection under Portugal's Industrial 
Property Act253, and a complaint against Sweden regardi ng measures affecting the enforcement of 
intellectual property rights.254  The complaints against Pakistan and Portugal, as well as the complaint 
against India gave place at the same time to in itiations of Special 301 investigations, which were 
channelled through the WTO. 
229. The United States was the subject of a compla int in the WTO by the European Communities 
in respect of section 110(5) of the U.S. Copyright Act, as amended by the Fairness in Music Licensing 
Act, enacted on 27 October 1998.  The EC requ ested consultations with the United States on 
26 January 1999255, contending that section 110(5) of the Act, which exempts, under certain 
conditions, the communication by an establishment of  a transmission or retransmission embodying a 
performance or display of a non-dramatic musical wo rk intended to be received by the general public 
from obtaining an authorization to do so by the ri ghtholders of the music works, may result in the 
playing of radio and television music in public places (bars, shops, restaurants, etc.) without the 
payment of a royalty fee.  The EC considered this statute to be inconsistent with U.S. obligations 
                                                      
247WTO documents WT/DS/124/1 and WT/DS/125/1, 7 May 1998.  The complaint stated that: "a 
significant number of television st ations in Greece regularly broadcas t copyrighted motion pictures and 
television programmes without the au thorization of copyright owners",  that "Copyrights owned by U.S. 
nationals have been infringed in this manner repeatedly", and that "This situation appears to be inconsistent with 
the obligations of Members under Article s 41 and 61 of the TRIPS Agreement." 
 248WTO document WT/DS/83/1, 21 May 1997.  The complaint stated that Denmark did not appear to 
make available provisional measures in the context of civil proceedings involving intellectual property rights and their laws would appear to be inconsistent with its obligations under the TRIPS Agreement, including but 
not necessarily limited to TRIPS Agreement Articles 50, 63 and 65. 
249WTO document WT/DS/82/1, 22 May 1997.  The complaint claimed that Ireland did not appear to 
grant copyright and neighbouring rights in accordance with section 1 of Part  II, and Article 70 of the TRIPS 
Agreement, which appeared to be inconsistent with Ire land's obligations under the TRIPS Agreement, including 
but not necessarily limited to Articles 9-14, 63 and 65 of  that Agreement. 
250WTO document WT/DS/115/1, 12 January 1998. 
251WTO document WT/DS/36/1, 6 May 1996. 
252WTO document WT/DS/28/1, 14 February 1996. 
253WTO document WT/DS/37/1, 6 May 1996. 
254This request, dated 28 May 1997 (WTO document WT/DS86/1, 2 June 1997), is similar to the 
complaint against Denmark.  In a communication da ted 2 December 1998, the Un ited States and Sweden 
notified a mutually agreed solution to this dispute resultin g from the Parliament of Sweden's decision to pass 
legislation on 25 November 1998, effective 1 January 1999, amending Sweden's Copyright Act, Trade marks Act, Patents Act, Design Protection Act, Trade Names Act, Act on Protection of Semiconductor Products, and 
Plant Breeders Protection Act to grant judicial authorities in Sweden the authority to order provisional measures 
in the context of civil proceedings involving intellectual property rights. 
255WTO document WT/DS160/1, 4 February 1999. WT/TPR/S/56 Trade Policy Review 
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under Article 9(1) of the TRIPS Agreement, which requires Members to comply with Articles 1-21 of 
the Berne Convention.256 
Table III.19  
Section 337 investigations, 1996-98 
Inv. 
no. Status/Date of notice Investigation Title/Act Investigated Country 
380 Pending/22-2-96 Agricultural Tractors Under 50 PTO Horsepower/Registered Trademark Infringement Japan 
381 Completed/22-2-96 Electronics Products/ Patent Infringement a 
382 Completed/26-02-96 Flash Memory Circuits/ Patent Infringement a 
383 Completed/8-03-96 Hardware Logic Emulation Systems/ Patent Infringement France 
384 Completed/14-03-96 Monolithic Microwave Integrated Circuit Down converters/Mask Work Infringement Japan 
385 Completed/19-03-96 Random Access Memories/ Patent Infringement Japan, 
Singapore 
386 Completed/28-03-96 Global Positioning System Coarse Acquisition Code Receivers/ Patent Infringement Canada 
387 Completed/25-04-96 Self-Powered Fibre Optic Modems/ Patent Infringement Israel 
388 Completed/19-06-96 Dynamic Access random Memory Controllers/ Patent Infringement a 
389 Completed/29-07-96 Diagnostic Kits for the Detection and Quantification of Viruses/ Patent Infringement Netherlands 
390 Completed/7-08-96 Transport Vehicle Tyres / Patent Infringement a 
391 Completed/27-11-96 Toothbrushes and the Packaging Thereof/ Patent Infringement; Copyright Infringement Japan 
392 Completed/18-12-96 Digital Satellite System (DSS) Receivers/ Patent Infringement Mexico 
393 Completed/26-02-97 Ion Trap Mass Spectrometers and Components/Patent Infringement Germany 
394 Completed/5-03-97 Screen Printing Machines, Vision Alignment Devices/ Patent Infringement United 
Kingdom 
395 Completed/21-03-97 EPROM, EEPROM, Flash Memory and Flash Microcontrollers/ Patent Infringement Chinese 
Taipei, Japan 
396 Completed/2-04-97 Removable Electronic Cards and Electronic Card Reader Devices/ Patent Infringement Mexico 
397 Completed/10-04-97 Dense Wavelength Division Multiplexing Systems/Patent Infringement Italy 
398 Completed/27-05-97 Multiple Implement, Multi-Function Pocket Knives/ Common Law Trademark infringement, 
etc. a 
399 Completed/1-07-98 Fluid-Filled Ornamental Lamps/Registered Trademark Infringement a 
400 Completed/20-08-97 Telephonic Digital Added Main Line Systems and Components/ Patent Infringement a 
401 Completed/27/08/97 CD-ROM Controllers/ Patent Infringement Malaysia 
402 Completed/5-11-97 Integrated Circuits/ Patent Infringement Korea 
403 Pending/20-11-97 Acesulfame Potassium and Blends/ Patent Infringement China 
404 Completed/20/11/97 SDRAMs,  DRAMs, ASICs, RAM-and Logic Chips, Microprocessors/ Patent Infringement Japan 
405 Completed/19-12-97 Automotive Scissors Jacks/ Patent Infringement Canada 
406 Pending/25-3-98 Lens-Fitted Film Packages/ Patent Infringement China, Korea, 
and Hong 
Kong, China 
407 Completed/17-04-98 Remodulating Channel Selectors and Systems/ Patent Infringement Italy 
408 Completed/11- 05-98 Certain Recombin antly Produced He patitis B Vaccines/ Patent  Infringement Belgium 
409 Pending/13-5-98 CD-ROM Controllers/Patent Infringement Chinese Taipei 
410 Completed/13-5-98 Coated Optical Waveguide Fibers/ Patent Infringement Netherlands, 
China 
Table III.19 (cont'd) 
    
411 Pending/4-6-98 Organic Photoconductor Drums/Patent Infringement Germany, 
Japan, Hong 
Kong, China, 
                                                      
256The EC claimed that section 110(5) of the U.S. Copyright Act, as amended, did not appear to be in 
conformity with Article 11 bis(1) of the Berne Convention, as revised by the Paris Act of 1971 (which grants the 
right holders of literary and artistic works, including musi cal works, the exclusive right of authorizing not only 
the broadcasting and other wireless communication of their works, but also the public communication of a broadcast of their works by loudspeaker or analogous instrument), and with Article 11(1) of the same 
Convention (which grants the rightholders of musical works the exclusive right of authorizing the public 
performance of their works, including such public performance by any means or process, and any communication to the public of the performance of  their works). United States WT/TPR/S/56 
 Page 121 
 
 
Inv. 
no. Status/Date of notice Investigation Title/Act Investigated Country 
Chinese Taipei 
412 Pending/31-7-98 Video Graphics Display Controllers/Patent Infringement Canada 
413 Pending/4-9-98 Rare-Earth Magnets and Magnetic Materials/Patent Infringement Japan 
414 Pending/25-9-98 Semiconductor Memory Devices/Patent Infringement Chinese Taipei 
415 Pending/29-9-98 Mechanical Lumbar Supports/Patent Infringement Austria, 
Canada, 
Germany 
416 Pending/30-9-98 Compact Multi-purpose Tools/Patent Infringement China, Chinese 
Taipei 
417 Pending/1-12-98 Code Hopping Remote Control Systems Mexico 
a Investigations involving U.S. firms regarding their use or further sale of imported infringing products. 
Source : USITC. 
(iv) Standards, sanitary requirements , and environmental regulations 
(a) Standards, technical regulations and conformity assessment 
230. Standards are developed and adopt ed on a voluntary basis, either by private or government 
bodies.  Private standards seldom become public law in  the United States, more often they are used in 
the private sector between buyers and sellers. In th e United States, standards can be incorporated in 
technical regulations in part or in whole.  The American National Standards Institute (ANSI) 
coordinates the development of private standards, bu t coordination of standards is not mandatory.  If 
the standard is approved by ANSI, it may be rec ognized as an American National Standard.  ANSI is 
the U.S. representative to the International Or ganization for Standardization (ISO) and the 
International Electrotechnical Commission (IEC) .  ANSI may designate private standards 
organizations to represent the United States in the work of the different ISO technical committees and 
hence participate in the formulation of internati onal standards.  ANSI adheres to the TBT Code of 
Good Practice for the Preparation, Adoption, and A pplication of Standards on behalf of its member 
organizations. 
231. The National Center for Standards and Certif ication Information (NCSCI) of the National 
Institute of Standards and Technology (NIST) is  the designated U.S. enquiry point under the 
Agreement on Technical Barriers to Trade, as well as for information on U.S., foreign and 
international government and voluntary standards requirements.  International standards may be 
adopted or adapted by ANSI:  U.S. equivalents of in ternational standards are used in many cases.  For 
example, the U.S. equivalent of the ISO 9000 seri es of standards are the ASQ Q9000 series, managed 
by the American Society for Quality.   In othe r cases, U.S. standards are developed based on 
international standards, but adapted to specific industry guidelines.  As an example, automotive 
vehicles are covered by QS-9000 certification, wh ich is based on ISO 9000 standards combined with 
automotive industry guidelines.  As of 1998, more than 50,000 standards had been established by 
some 400 organizations, mainly in the private sector. 
232. Product standards developed privately or pub licly may be incorporated in technical 
regulations in part or in whole (Title 1 CFR Pa rt 51;Title 5 U.S. Code 552(a)) through notice and 
comment rulemaking  when regulatory agencies choose to adopt them as mandatory.  These and other requirements are set at the federal, state and local le vel.  The U.S. Customs Service is responsible for 
their enforcement at the border, in cooperation w ith the agencies responsible for regulated products;  
imported products may be refused admission if they fa il to comply with certain standards embodied in 
technical regulations, or if they are deemed to be hazardous. WT/TPR/S/56 Trade Policy Review 
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233. U.S. government policy with respect to st andardization, as expressed in the National 
Technology Transfer and Advancemen t Act (NTTAA) of 1995 and in guidelines issued by the Office 
of Management and Budget (OMB) pu rsuant to that Law, directs fe deral agencies to participate in 
voluntary standards development activities and to use voluntary consensus standards in lieu of 
government standards except where inconsiste nt with the law or otherwise impractical. 
234. Standardization activities at the government level are coordinated by the National Institute of 
Standards and Technology.  NIST's primary mi ssion is to develop and apply technology, 
measurements and standards in c ooperation with industry.  The NTTAA requires NIST to coordinate 
activities with other federal agencies to achie ve greater reliance on voluntary standards and 
conformity assessment bodies with lessened depende nce on in-house standards.  Coordination takes 
place through the Interagency Committee on Standards Policy (ICSP). 
235. Conformity assessment may be conducted by the U.S. Government, state or local 
governments, an independent testing au thority, or the producer or importer.257  Although most 
standards and technical regulations are enforced th rough self-declaration, third-party certification is 
becoming increasingly important and approval of certifi ers or of products by government agents, such 
as the Occupational Safety and Health Ad ministration (OSHA) and the Food and Drug 
Administration, is mandatory for selected produc ts.  Third-party certification programmes may be 
private-sector led, or conducted by the federal or by state governments.  Private-sector certification 
programmes are conducted by professional or technical  societies, independent testing or inspection 
organizations, trade associations, producer or consumer organizations, and other types of 
organizations.  Federal government certification prog rammes may be geared to certifying the health or 
safety of the user or of the general public (i.e., a pproval of new drugs by the FDA), at testing products 
to avoid retesting at local levels (i.e., the Depa rtment of Defense's Qualified Products Listing 
Program), or at assessing the quality and conditions of  products offered for sale (i.e., USDA's grading 
and certifying meat and meat products programme).  At state level, certification programmes cover a 
wide range of products.258 
236. The NAFTA allows its signatory countries to  apply health, safety and environmental 
standards and technical regulations that go beyond inte rnational standards in terms of stringency. At 
the same time, the NAFTA contains language establishing discip lines to prevent the use of standards 
and regulations as discriminatory or unnecessary trad e barriers. NAFTA countries are expected to 
provide to each other national treatment regarding participation in the development of a standard, 
transparency, and notification.259  NAFTA dispute settlement panels may call on scientific experts for 
advice regarding trade disputes where environmental a nd health issues arise;  burden is placed on the 
complaining party to prove the inconsiste ncy of a measure with NAFTA provisions. 
237. The United States and Mexico agreed to  exchange product safety test data for 
telecommunications equipment in May 1997.  Under the agreement, U.S. or Mexican laboratories 
may test telecommunications equipment in accordance  with the other country's testing procedures for 
conformity with product safety standards;  it also guarantees that the certifying bodies in each country accord national treatment to product safety test data .  As a result of the agreement, all product safety 
                                                     
 
257Conformity assessment includes tes ting, certification, management system registration, accreditation 
and accreditation prog ramme recognition. 
258Breitenberg (1997), pp. 24-25.  
259This goes beyond the commitment under the TBT Agreement for standardization bodies having 
adopted the Code of Good Conduct.  According to paragr aph L of the Code, there is a requirement to allow 60 
days for comments before a standard is adopted, but in the case of NAFTA, firms of other member countries are 
allowed access to the development proces s on the same basis as U.S. firm s (Dun and Bradstreet Exporters' 
Encyclopaedia  (1998)).  United States WT/TPR/S/56 
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standards and certification procedures of the U.S. Occupational Safety and Health Administration and 
the Mexican Sistema Nacional de Acreditamiento de Laboratorios de Pruebas will be recognized. 
238. As at 31 December 1998, the United States had no tified 124 technical regulations to the WTO 
Committee on Technical Barriers to Trade.  Of th ese, 29 were notified in 1995, 36 in 1996, 26 in 
1997, and 33 in 1998.  Most notif ications regarded measures adopted for health or safety reasons, 
particularly in the food, pharmaceutical and auto motive industries.  Other measures were taken for 
environmental or consumer protection purposes.  In accordance with the TBT Agreement, these 
notifications were submitted prior to the measures en tering into force, that is, immediately after their 
publication in the Federal Register for comments.  The agencies r esponsible for the technical 
regulations notified in 1998 include the Depart ment of Energy, the Consumer Product Safety 
Commission, the Department of Ag riculture, the Department of Tran sportation,  the Department of 
the Treasury, the National Highway Safety Administration, the Federal Communications Commission, the Food and Drug Administration, the Federal Highway Administration, and the Federal Aviation Administration. 
(b) Sanitary and phytosanitary measures
260 
239. In the United States, responsibility for food  safety is shared among several federal  
government agencies and departments in cooperation w ith state and local governments.  In addition to 
strict regulations, the safety and wholesomeness of U.S. food products are safeguarded through pre-
market clearances, mandatory production practices,  inspections, and random, ongoing sampling.  The 
food safety standards that apply to domestically pr oduced foods also apply to imported foods.  The 
Food Safety and Technical Services Division of the Foreign Agricultural Service with the U.S. 
Department of Agriculture (USDA) provides U.S. and foreign governments with information on food 
and agricultural technical requirements.261 
240. The Food and Drug Administration (FDA) of the Department of Health and Human Services 
is the scientific regulatory agency responsible for the safety of all U.S. food (except for certain 
meats262, poultry263, frozen and dried eggs264, and the labelling  of alcoholic beverages containing 7% or 
more of alcohol), tobacco, cosmetics, drugs, biologics, medical devices, and radiological products.  
The law that provides FDA’s regulatory authority for food and cosmetics is the Pure Food and Drugs 
Act of 1906, superseded by the Federal Food, Dr ug, and Cosmetic Act (FD&C Act) of 1938, as 
amended by the Infant Formula Act of 1980, the Nutrition Labelling and E ducation Act of 1990 and 
the Dietary Supplement and Health Education Act of 1994.  The FDA also derives certain regulatory 
authority from the Pesticide Monitoring and Impr ovements Act of 1988.  The Food Quality Protection 
Act of 1996 also affects the FDA, albeit very little, since it is mainly an Environmental Protection 
Agency (EPA) Act.  FDA's activities are directed toward safeguarding health  in the United States 
against impure, unsafe, and fraudulently labelled food,  drugs, medical devices, and cosmetics, and 
against potential hazards from radiation-emitting equipment. 
                                                      
260This section was based on:  "Food and Agricultural Import Regulations and Standards Report" 
(FAIRS).  Available at:  http://www.f as.usda.gov/itp [20 November 1998]. 
261This division is the designated U.S. enquiry point under the Agreement on Sanitary and 
Phytosanitary Measures. 
262Cattle, swine, goats,  horses, mules or other equines and products with 3% or more red meat on a wet 
basis. 
263Chickens, turkeys, domestic ducks, domestic geese and guineas, and products containing 2% or more 
poultry on a wet basis. 
264Grading of shell eggs, egg processing plants (egg washing, sorting, egg breaking, and pasteurising 
operations) and products that are basically known for their egg content (e.g. egg rolls for slicing, heat-and-serve omelettes, etc.) WT/TPR/S/56 Trade Policy Review 
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241. The FDA's  "Food Defect Action Levels” are guidelines established on the basis of no hazard 
to health.  Any products that might be harmful to  consumers are subject to regulatory action whether 
or not they exceed the defect levels.  The FD&C Act imposes Good Manufacturing Practices (GMP) concerning personnel, buildings and facilities, equipment and product process controls, and 
warehousing and distribution, which the FDA consider s necessary and adequate in the production of 
safe and sanitary food.  The sanitation provisions of the FD&C Act require that food be produced in sanitary facilities that ensure its protection from c ontamination at all stages of production.  These 
regulations, which apply to all businesses,  establish a minimum level of safety. 
242. Within the United States, compliance with the FD&C Act is secured through periodic 
unannounced inspections of facilities and products, analysis of samples, educational activities, and 
legal proceedings.  It is the responsibility of the ow ner of the food involved in interstate commerce to 
ensure that the article complies with the safety provisions of the FD&C Act, and the labelling requirements of the Fair Packaging and Labe ling Act, and their implementing regulations. 
243. The FDA has promulgated food safety and labelli ng regulations together with a number of 
compulsory standards of identity and quality under provi sions of the FD&C Act.  These standards 
give consumers some guarantee of the kind and amount of ingredients that must be present and/or the 
ingredients that may be present in these products. 
244. The Environmental Protection Agency (EPA) estab lishes standards of tolerance for pesticides, 
herbicides, and fungicides used on food and other ag ricultural products.  Tole rance levels are applied 
to all chemically treated products intended for human and animal consumption domestically produced 
or entering the United States.  Domestic producers mu st use only those chemicals registered with EPA 
for use on a specific commodity or group of comm odities and only according to the directions on the 
package.  All imported foods with pesticide resi dues, established through FDA tests, must comply 
with EPA residue tolerance levels ;  the FDA also monitors food for unsafe and/or illegal pesticide 
levels, and undertakes research and develops st andards on the composition, quality, nutrition and 
safety of food and colour additives. 
245. USDA's regulatory activities are en forced by several services, inter alia , the Animal and Plant 
Health Inspection Services (APHIS), the Food Sa fety Inspection Services (FSIS), the Grains 
Inspection Packers and Stockyards Administrati on (GIPSA)/Federal Grains Inspection Service 
(FGIS), and the Agricultural Marketing Services (A MS).  In addition, the U.S. Customs Service 
participates in this effort by detaining impor ts when USDA requirements have not been met. 
246. APHIS is responsible for enforcing regulations governing imports and exports of plants and 
animals and certain agricultural products.
265  The agency protects U.S. bor ders against entry of foreign 
pests and diseases, protects endangered species, en sures that veterinary biologics are safe, pure, 
                                                      
 265The laws that provide APHIS’s regulatory auth ority include the Plant Quarantine Act; Plant 
Protection Act; Honey Bee Act; Federal Seed Act; Animal  Import-Export Regulations (19 CFR 1306, 21 USC 
103, 21 USC 105, and 21 CSC 134); Endangered Species  Act (Plants).  In addition, the Federal Agriculture 
Improvement and Reform (FAIR) Act of 1996, also known as the Farm Bill contained several provisions 
affecting the authorities and programmes of the APHIS including:  (1) improvements in the way agricultural quarantine and inspection (AQI) user-fee funds are accessed;  (2) new authority for humane transport of horses 
going to slaughter;  (3) protection against tort claims for employees carrying out programme activities overseas;  
(4) establishment of a more efficient mechanism for reim bursable agreements for pre-clearance of commodities;  
(5) language urging consideration of im pacts of certain quarantin es on travel and trade from States comprised 
entirely of islands;  (6) language concerning research into alternatives for, and the ultimate phase-out of, methyl 
bromide;  (7) language re-authorizing certain author ities related to the pseudo-ra bies eradication programme 
(The 1996 Farm Bill and APHIS, (Home Pa ge APHIS Activities, November 1998)). United States WT/TPR/S/56 
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potent, and effective, and that agricultural biotechno logy products are safe.  It issues regulations and 
conducts control programmes to protect and improve animal and plant health.  APHIS administers federal laws and regulations pertaining to animal  and plant health and quarantine, humane treatment 
of animals, and the control and eradication of p ests and diseases.  Within APHIS, the Plant Protection 
and Quarantine (PPQ) Program conducts activities at  various ports to prevent the introduction and 
spread of foreign pests.  APHIS' Veterinary Serv ice (VS) has responsibility for protecting the health 
of livestock, poultry, and other an imals and enforces various laws.
266  When feasible, and if volume 
warrants it, foreign governments and exporter grou ps may request pre-clearance inspection and/or 
treatment by APHIS officers in the country of orig in.  The VS must ensure that U.S. exports meet 
domestic health, testing and certification criteria, as well as those of the importing country. 
247. The Food Safety Inspection Service (FSIS) is responsible for ensuring that meat (derived 
from cattle, sheep, swine, goats, and horses), poultry and egg products moving in interstate and 
foreign commerce are safe, wholesome for consumption, and accurately labelled.   Under the Federal 
Meat Inspection Act and the Poultr y Products Inspection Act, FSIS in spects all meat and poultry sold 
in interstate and foreign comme rce, including imported products. 
248. Since 1995, FSIS has adopted a system of pro cess controls to prevent food safety hazards 
known as the Hazard Analysis and Critical Control Points (HACCP).267 HACCP was first adopted for 
the seafood industry, and was later extended to all meat and poultry plants.  These standards apply 
both to domestic and imported foods, i.e. to expor t meat and poultry to the U.S., all countries must 
implement equivalent HACCP requirements.268  FSIS also requires processing plants to adopt and 
follow written Standard Operating Procedures for san itation, to reduce the likelihood that harmful 
bacteria will contaminate the finished product. 
249. Meat and poultry (including game and fowl) products can only be im ported from countries 
and plants approved by the United States.  The Fede ral Meat Inspection Act, requires countries that 
export meat and poultry to the United States to impose inspection requirements equivalent to  U.S. requirements.  Imported meat and poultry products must  be inspected in the country of origin just as 
domestic products are inspected in U.S. slaughter  and processing plants.  The FSIS reviews foreign 
inspection systems to ensure that they are equal to the U.S. system.  The FSIS also re-inspects 
imported meat and poultry products on a sample basis as they enter the United states. 
250. To determine if a country is eligible to expor t meat to the United States, the FSIS evaluates 
the country’s entire inspection system.  FSIS review s the country’s laws, regulations, directives, and 
other written material that govern its inspection programme;  reviews the administration of the 
programme;  and conducts an on-site review  of the country’s inspection operations.  A 
multi-disciplinary team, typically composed of a veterinarian, chemis t, food technologist, 
microbiologist, statistician, and compliance officer, conducts the review.  After a country is granted 
eligibility to export its products to the United States, the FSIS relies on the exporting country to 
certify plants and carry out daily inspection.  Indivi dual plants must apply to the country’s national 
inspection authorities for certification to export to the United States. In tu rn, the chief inspection 
                                                     
 
266Some of the most important statutes and Regulations are: Plant Quarantine Act;  Plant Protection 
Act;  Honey Bee Act;  Federal Seed Act;  Animal Import- Export Regulations;  Endangered Species Act (Plants);  
Swine Health Protection Act;  and Virus Serum Toxin Act.  
267To verify  that HACCP systems are effective in reducing contamination with harmful bacteria, FSIS 
is setting pathogen reduction performance standards for salmonella, which slaughter-plants and plants that produce raw, ground meat and poultry will have to meet .  In addition, slaughter-plants will be required to 
conduct microbial testing for generic E. Coli to verify  that their process contro l systems are working as 
intended. 
268 The FDA has proposed a HACCP regulation for fruit and vegetable juices. WT/TPR/S/56 Trade Policy Review 
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official in the country certifies to the FSIS those pl ants that meet all applicable standards and are 
authorized to export to the United States.  The number of re-inspections in a given year are 
determined by the country’s adherence to the require ments.  There may be up to four inspections per 
year by FSIS. 
251. Thirty-six countries are eligible to export me at, poultry and egg products to the United States, 
namely:  Argentina;  Australia;  Austria;  Belgium;   Brazil;  Canada;  Costa Rica;  Croatia;  Czech 
Republic;  Denmark;  the Dominican Republic;  Finla nd;  France;  Germany;  Guatemala;  Honduras;  
Hong Kong, China;  Hungary;  Iceland;  Ireland;  Israel;  Italy;  Japan;  Mexico;  Netherlands;  
New Zealand;  Nicaragua;  Northern Ireland;  Pola nd;  Romania;  Slovenia;  Spain;  Sweden;  
Switzerland;  United Kingdom;  and Uruguay.  FSIS  conducts on-site audits in each of these 
countries, usually once a year, to verify that the inspection systems are equivalent to U.S. 
requirements.  FSIS re-inspects product from these c ountries at port of entry, as another means of 
verifying that the systems are equivalent to the U. S. system.  The U.S. authorities noted that all 36 
countries have indicated that they have impl emented systems equivalent to U.S. HACCP 
requirements.  At present, FSIS is verifying wh ether the systems in place in these countries are 
equivalent. 
252. The Federal Grains Inspection Service (FGIS) , created by Congress under the U.S. Grain 
Standards Act of 1976 (USGSA), establishes and main tains official U.S. standards for grain  and 
provides the agricultural industry with a national in spection and weighing system.  It also monitors 
grain handling practices to prevent deceptive practices.   The Grain Inspection Packers and Stockyards 
Administration (GIPSA) provides farmers, grain ha ndlers, processors, exporters, and international 
buyers with information that accurately and cons istently describes the quality and quantity of grain 
being bought and sold. 
253. The Agricultural Marketing Service (AMS) carries out a wide range of programmes aimed at 
facilitating the marketing of agricultural products.  AMS offers a voluntary grading service to provide 
the industry with third-party certification of qualit y and condition of any fresh or processed products; 
in cooperation with the industry, the AMS devel ops and maintains quality standards for different 
products as well as grading and certification servic es (a user-fee service) based on the standards 
developed for each product.269  Grading services are often operated cooperatively with state 
departments of agriculture.  Certain agricultural commodities must meet United States import requirements related to grade, size, quality and maturity (7 United States Code, 608 (e)).
270  These 
commodities are inspected;  an inspection certificate must be issued by the AMS to indicate import 
compliance. 
254. Food inspection programmes also exist at the le vel of state and local governments; in some 
cases in cooperation with federal agencies, to ensure  that state standards meet federal rules.  For 
example, roughly half the states have their ow n meat and poultry inspection programmes.  State 
inspected meat and poultry products may be sold only within that State.  The FDA's model Food 
Code, which is neither a federal law nor regulation, assists food control jurisdictions at all levels of 
government by providing them with a scientifically sound technical and legal basis for regulating the 
retail segment of the food industry.  The model F ood Code represents FDA's best advice for a uniform 
system of regulation to assure that food at re tail is safe and properly protected and presented. 
                                                      
269Products include fresh fruit, vegetables, and specia lity crops, processed fruit and vegetables, milk 
and other dairy products, cattle, hogs, sheep, pou ltry, eggs, cotton, tobacco, and organic products.  
270These products include fresh tomatoes, avocados, mangoes, limes, oranges, grapefruit, green 
peppers, Irish potatoes, cucumber, eggplants, dry onions, walnuts and filberts, processed dates, prunes, raisins, and olives in tins.  
 United States WT/TPR/S/56 
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255. The FD&C Act also establishes la belling requirements.  A food label must contain specified 
information, displayed conspicuously and in terms th at the ordinary consumer is likely to read and 
understand.271  Labels must contain the name of the food;   net quantity of contents, both metric and 
U.S. Customary System;  the name, street address, state and zip code of either the manufacturer, 
packer, or distributor;  and a statement of ingredients listed by their common name, and if fabricated 
from two or more ingredients, each ingredient must  be listed in descending order of predominance by 
its common or usual name.  In addition, for mo st foods in consumer-size packages, nutrition 
information must be supplied in the specified format .  Spices, flavoring and most coloring, other than 
those sold as such, may be designated as spi ces, flavouring and colouring without naming each.272  If 
the label is not in English only, it must bear all the required statements in the foreign language, as well 
as in English. 
256. Importation of beef from countries where cases of Bovine Spongiform Encephalopathy (BSE) 
have been detected (the United Kingdom, Belgium,  France, Ireland, Liechtenstein, Luxembourg, 
Netherlands, Oman, Portugal and Switzerland) is fo rbidden.  Ruminant meat and edible products 
other than meat are allowed entry under certain, re strictive conditions and require a certificate from a 
veterinarian employed by the government of the country of origin.273  The  use of protein from any 
ruminant animal in the production of ruminant feed s was prohibited in April 1997.  Additionally, as of 
11 December 1997, the USDA stopped issuing import permits for all live ruminants, including cattle 
and sheep, and certain ruminant animal products, in cluding bone meal and fresh meat, from countries 
considered at risk of BSE, namely:  Albania, Austria, Bosnia-Herzegovina, Bulgaria, Croatia, Czech 
Republic, Denmark, Federal Republic  of Yugoslavia, Finland, Germany, Greece, Hungary, Italy, 
Former Yugoslav Republic of Macedonia, Norway , Poland, Romania, Slovak Republic, Slovenia, 
Spain and Sweden.  Import restrictions will be lifte d on an individual basis when and if countries are 
found to have surveillance programmes conforming to  international standards, as well as adequate 
import controls from countries affected by the disease. 
257. In addition to the requirements of the FDA, imports of seafood are subject to the Marine 
Fisheries Service of the Department of Commerce.  Stricter FDA regulations apply since 
December 1995;  these require seafood products to be analyzed for chemical and biological hazards, identify potential hazards in processing, and establish and record preventative measures. 
258. A first step towards the international recogn ition of sanitary inspection standards for beef, 
poultry and pork meat was taken on 1 October 1997, when the United States and the European Union 
agreed on a framework for recognized equivalence. 
259. The Public Health Service Act regulates th e manufacture and importation of pharmaceutical 
products for human consumption.  Production and import licences must be obtained from the FDA. 
Products must comply with FDA guidelines to be granted approval for sale in the United States.  
Non-approved drugs may not be imported, except fo r personal use.  The Drug Price Competition and 
Patent Restoration Act of 1984 allows the marke ting of generic drugs, unde r certain conditions.  A 
mutual recognition agreement with Sweden for pha rmaceutical products standards is currently in 
place.  Drugs for animals are regulated under the Vi rus Serum Toxin Act administered by the USDA.  
                                                     
 
271Details concerning type sizes, location, etc., of  required label information are contained in FDA 
Regulations (21 CFR 101), which cover the requirements of both the FD&C Act and the Fair Packaging and 
Labeling Act. 
272 However, a food containing a colour additive that is subject to certification by the FDA (21 CFR 
Part 74) must be labelled in the ingredients statement as containing that colour.  Fruit and vegetable juices that 
have not achieved at least a 5-log reduction in the pertinent micro-organism for at least as long as the shelf life 
of the product must bear a warning statement. 
273Code of Federal Regulations, Title 9, Part 94.18. WT/TPR/S/56 Trade Policy Review 
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The importation of viruses, serums, toxins and anal ogous products, a nd organisms and vectors for use 
in the treatment of domestic animals is prohibited unless the importer holds a permit from the USDA.  These importations are also subject to special labelling requirements. 
260. Importation of any virus, therapeutic serum , toxin, antitoxin or analogous products, 
arshenamine or its derivatives, or any other trival ent organic arsenic compound (except materials to be 
used in research experiments for the prevention,  treatment or cure of diseases or injuries) is 
prohibited, unless prepared at an establishmen t holding an unsuspended or  unrevoked manufacturing 
licence issued by the Department of Health  and accompanied by samples of the product. 
261. The United States has submitted 144 notifica tions to the Committee on Sanitary and 
Phytosanitary Measures since the establishment of  the WTO (up to end 1998);  21 in 1995, 53 in 
1996, 34 in  1997, and 36 in 1998.  Most of the measures notified were taken for health, safety or environmental reasons.  In some cases measures have been notified to relieve existing import 
restrictions.
274  The majority of them fall within the responsibility of the USDA;  in a few cases the 
Environmental Protection Agency (EPA) or the Food and Drug Administration have been the responsible agencies. 
(c) Environmental regulations 
262. Environmental regulations may be issued at the federal or at the state level.  Environmental 
regulations are enforced under the Fisherman's Protective Act of 1967 
275,  the Marine Mammal 
Protection Act of 1972, Section 609 of Public Law 101-162, the Endangered Species Act of 1973, as 
amended, the High Seas Driftnet Fisheries Enforcemen t Act, the Energy Policy and Conservation Act, 
the Clean Air Act, as amended by the Cl ean Air Act Amendments of 1990, etc. 
263. A number of environmental management system s registrars have been granted conformity 
assessment accreditation under the National Accredit ation Programme jointly managed by ANSI and 
the Registrar Accreditation Board (RAB).  Th e first approvals were granted in 1997. 
264. Under the Marine Mammals Protection Act of 1972,  the United States put in place in 1991 an 
embargo on yellowfin tuna imports from countries failing to protect dolphins when fishing for 
yellowfin tuna in the eastern tropical Pacific Ocean (Colombia, Mexico , Panama, Vanuatu and 
Venezuela).  Imports from Costa Rica, Italy and Jap an, identified as intermediary nations, were also 
banned.276  The ban, challenged in the GATT in 19 91 (the panel report was not adopted), was 
conditionally lifted in 1997 as a result of the intr oduction of the International Dolphin Conservation 
Program Act (P.L. 105-42), which gave effect to the Declaration of Panama, establishing the 
International Dolphin Conservation Program.277  The Act amended the Marine Mammal Protection 
Act of 1972 to allow authorizations for the incide ntal taking of marine mammals during commercial 
purse-seine yellowfin tuna fishing in the eastern tropical Pacific Ocean and to remove provisions 
                                                      
274Such as the notification of the removal of the im port prohibition on certain fruit, contained in WTO 
document G/SPS/N/USA/76, 4 April 1997. 
275 The FPA provides for trade measures other than product regulation. 
276The MMPA banned the importation of yellowfin tuna ha rvested with purse-seine nets in the eastern 
tropical Pacific ( primary nation embargo)  from countries without regulations for the taking of marine mammals 
comparable to those of the United States, and with averag e incidental taking rates (in terms of dolphins killed) 
for their tuna fleet exceeding 1.25 times the U.S. vessels average in the same period.  Imports of tuna from countries purchasing tuna from a country subject to the primary nation embargo were also prohibited 
(intermediary nation embargo ). 
277The Declaration of Panama was signed on 4 October 1995 by Belize, Colombia, Costa Rica, 
Ecuador, France, Honduras, Mexico, Panama, Spai n, the United States, Vanuatu and Venezuela. United States WT/TPR/S/56 
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requiring that the goal of reducing incidental kill or serious injury to insignificant levels (approaching 
zero) be satisfied by the best safety techniques and equipment practicable.278  The ban on imports 
from countries in compliance with the Internationa l Dolphin Conservation Program was removed.  
However, imports of yellowfin tuna harvested in the eastern tropical Pacific Ocean are now required 
to be accompanied by documentary evidence supp lied by the exporting country stating, among other 
things, that dolphin mortality limits permitted for the exporting country are not exceeded.279  T h e  
International Dolphin Conservation Program Ac t includes provisions that amend the labelling 
requirements of tuna products c ontained in the Dolphin Protec tion Consumer Information Act.280  
Tuna products harvested in the eastern Pacific Ocean  may be labelled "dolphin safe" only if the vessel 
used corresponds to requirements set by the De partment of Commerce, or the product shows 
compliance with International Dolphin Conservation Program requirements.  U.S. vessels operating in the eastern tropical Pacific Ocean yellowfin tuna fishery are required to obtain a licence from the 
Department of Commerce. 
265. Regulations prohibiting imports of Atlantic bluefin tuna and its products in any form 
harvested by vessels of Belize, Honduras (as of 4 August 1997) and Panama (as of 1 January 1998) 
were put in place in 1997 (section III(a)).
281  The regulations are aimed at achieving the 
implementation of International Commission for th e Conservation  of Atlantic Tunas (ICCAT) 
recommendations.  Under the High Driftnet Fisherie s Enforcement Act of 1992, imports of fish and 
fish products from Italy require a government certificate stating the non-use of large-scale driftnets. 
266. Following a ruling of the U.S. Court of International Trade (29 December 1995), the scope of 
Section 609 of Public Law 101-162, which prohib its the import of shrimp and shrimp products 
harvested with commercial fishing technology that may adversely affect sea turtles, was extended to 
all countries that harvest shrimp.  As of 1 May 1996, shrimp imports are prohibited unless the USDA certifies either that the harvesting nation has adopted  a comparable programme to protect sea turtles 
(use turtle-excluder devices) or that the fishing environment of the harvesting nation does not pose 
risk to sea turtles.  Imports not certified by USDA are allowed for shrimp harvested from aquaculture 
facilities;  by boats using turtle-excluder devices or th at retrieve nets through non-mechanical means;  
or in areas with no sea turtles, provided they are accompanied by certification from the harvester and 
a government official of exporting country.  This practice has been the object of a dispute in the WTO, leading to a ruling by the WTO Appellate Body (see below). 
                                                     
 
278The signatories of the Declaration of Panama agreed to allow a maximum annual dolphin mortality 
of 5,000 in the purse-seine fishery for yellowfin tuna in the eastern tropical Pacific Ocean, "with the objective of 
progressively reducing dolphin mortality to a level approaching zero through the setting of annual limits" (P.L. 105-42, section 2(b)(4)).  This is expected to be achieved through compliance with per-stock per-year dolphin 
mortality limits, set at between 0.1% of the minimum dolphin population estimate for the period 1998-2000, and 
at 0.1% beginning with 2001.   
279Exporting countries are also requir ed to supply evidence that they are a member or have taken steps 
to become a member, of the Inter- American Tropical Tuna Commission. 
28016 U.S.C. 1385. 
281Federal Register , 17 July 1997, Vol. 62, No. 137. WT/TPR/S/56 Trade Policy Review 
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(d) Dispute settlement 
267. U.S. standards for reformulated and conventi onal gasoline and the policies adopted by the 
Environmental Protection Agency282, were subject to a complaint in the WTO by Venezuela and 
Brazil in 1995.  The dispute was resolved as the United States announced implementation of the 
recommendations of the DSB as of 19 August 1997.283 
268. In the period 1996-98, there were six cases deali ng with standards, sanitary and phytosanitary 
standards and environmental protection involving th e United States as complainant or defendant were 
brought to the WTO;  three have been finalized. 
269. The first finalized case involv es the United States as a defendant, with India, Malaysia, 
Pakistan and Thailand as complainants, and rega rds the ban on importation of shrimp and shrimp 
products from these countries imposed by the Un ited States under Section 609 of U.S. P.L.101-162.284  
Violations of Articles I, XI and XIII of GATT 1994,  as well nullification and impairment of benefits, 
were alleged.  The DSB established a Panel, on 25 February 1997, which found that the ban was 
inconsistent with Article XI:1 of GATT 1994, and could not be justified under Article XX of 
GATT 1994.  On 13 July 1998, the United States notified its intention to appeal certain issues of law 
and legal interpretations contained in the Panel Report.  The Appellate Body reversed the Panel's 
finding that the measure at issue was not within the scope of meas ures permitted under Article XX of 
GATT 1994, but concluded that it failed to meet th e requirements of Article  XX.  The DSB adopted 
the Appellate Body Report and the Panel Report, as  modified by the Appellate Body Report, on 
6 November 1998.  The United States informed the DSB on 25 November 1998, that it was 
committed to implementing its recommendations;  it was agreed subsequently that the period of 
implementation would be 13 months from the date  of adoption of the Appellate Body and Panel 
Reports. 
270. The second of these cases, involved a complaint by the United States on measures by the EC 
affecting meat and meat products.285  On 25 April 1996, the United States requested the establishment 
of a panel, claiming that measures taken by the EC , under the Council Directive Prohibiting the Use in 
Livestock Farming of Certain Substances Having a Ho rmonal Action, restricted or prohibited imports 
of meat and meat products from the United States,  and were apparently inconsistent with GATT 
Articles III or XI, Articles 2, 3 and 5 of the SPS Ag reement, Article 2 of the TBT Agreement, and 
Article 4 of the Agreement on Agriculture.  A pa nel, established on 20 May 1996, found the EC ban 
inconsistent with Articles 3.1, 5.1 and 5.5 of the SPS Agreement.  The report of the Panel was 
circulated to Members on 18 August 1997;  certain fi ndings were appealed by the EC.  The Appellate 
Body upheld the Panel's finding that the EC impor t prohibition was inconsistent with Articles 3.3 
and 5.1 of the SPS Agreement, but reversed the Pa nel's finding that the EC import prohibition was 
inconsistent with Articles 3.1 and 5.5 of the SPS Ag reement.  The report of the Appellate Body, and 
                                                      
282Following a 1990 amendment to the Clean Air Act, the EPA promulgated the Gasoline Rule, which, 
from 1 January 1995, permitted only reformulated gasoline to be sold to consumers in the most polluted areas of 
the country.  In the rest of the country, only gasoline not more polluting than that sold in 1990 ("conventional 
gasoline") could be sold.  The Gasoline Rule applied to a ll U.S. refiners, blenders and importers of gasoline.  
Refiners in operation for at least six months in 1990 were required to establish an individual refinery baseline, which represented the quality of gasoline produced by that  refiner in 1990.  A statutory baseline established by 
the EPA reflecting average U.S. 1990 gasoline quality was assigned to those refiners who were not in operation 
for at least six months in 1990, and to importers and blenders of gasoline.. 
283WTO document WT/DS2, and WTO document WT/DS4.  The Appellate Report, together with the 
panel report as modified by the Appellate Report, was adopted by the DSB on 20 May 1996. 
284 WTO document WT/DS58, 8 October 1996. 
285WTO document WT/DS26. United States WT/TPR/S/56 
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the Panel Report, as modified by the Appellate Body , were adopted by the DSB on 13 February 1998.  
The EC was given a period of impl ementation of 15 months from the date of adoption, expiring on 
13 May 1999. 
271. The third finalized case concerned a compla int by the United States against quarantine 
measures on agricultural products applied by Japan.  The United States claimed that Japan prohibits 
the importation of each variety of a product requiring quarantine treatment until the quarantine treatment has been tested for that variety, even if  the treatment has proved to be effective for other 
varieties of the same product, violating Articles 2, 5 and 8 of the SPS Agreement, Article XI of 
GATT 1994, and Article 4 of the Agreement on Agriculture.  The DSB established a panel, on 
18 November 1997, which found that Japan acted in consistently with Articles 2.2 and 5.6 of the SPS 
Agreement, and Annex B and, conse quently, Article 7 of the SPS Agre ement.  The report of the Panel 
was circulated to Members on 27 October 1998.  On  24 November 1998, Japan notified its intention 
to appeal aspect of the Panel Report.  The report of the Appellate Body was issued on 
22 February 1999.
286 
272. Other cases involving the TBT or SPS Agreem ents, which are still pending, include a 
complaint against Korea with regard to inspection measures for agricultural products287; complaints 
against the United States by the EC regarding a ban on imports of poultry and poultry products from the EC by the USDA Food Safety Inspection Service
288, and a complaint by Canada, regarding certain 
measures affecting the importation of cattle, swine and grain.289 
(v) Government procurement 
(a) Overview 
273. As a party to the WTO Agreement on Governme nt Procurement, the United States grants 
MFN and national treatment on federal and stat e procurement covered by the Agreement.  
Procurement from designated countries under the Trade Agreements Act of 1979 is also granted MFN 
treatment.  U.S. procurement legislation has been  notified to the WTO.  Information regarding 
government procurement legislation a nd regulations, as well as with respect to different aspects of the 
procurement system and procedures is widely ava ilable, including on the Internet, thus promoting 
transparency.  Procurement by government agen cies relies increasingly on electronic commerce, 
especially for small transactions. 
                                                      
286WTO document WT/DS76/1, 7 April 1997. 
287WTO document WT/DS41, 24 May 1996, concerning testing, inspection and other measures 
required for the importation of agricultural products into Korea deemed by the United States to restrict imports and appearing to be inconsistent with GATT Articles III and XI, Articles 2, 5 and 8 of the SPS Agreement, 
Articles 2, 5 and 6 of the TBT Agreement, and Article 4 of the Agreement on Agricult ure.  The United States 
requested consultations with Korea on si milar issues on 4 April 1995 (WT/DS3/1). 
288WTO document WT/DS100/1, 18 August 1997.  The EC claims that the ban does not indicate the 
grounds upon which EC poultry products have suddenly become ineligible for entry into the U.S. market and is hence inconsistent with Articles I, III, X and XI of GATT 1994, Articles 2, 3, 4, 5, 8 and Annex C of the SPS 
Agreement, and Articles 2 an d 5 of the TBT Agreement. 
289WTO document WT/DS144/1, 25 September 1998, regarding certain measures, imposed by the State 
of South Dakota and other states, prohibiting entry or transit to Canadian trucks carrying cattle, swine, and 
grain, alleged to violate Articles 2, 3, 4, 5, 6, 13 and Annexes B and C of the SPS Agreement; Articles 2, 3, 5 
and 7 of the TBT Agreement;  Article 4 of the Agreement on Agriculture;  and Arti cles I, III, V, XI and 
XXIV:12 of GATT 1994. WT/TPR/S/56 Trade Policy Review 
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(b) Value of government procurement 
274. The value of U.S. government expenditure has declined as a share of GDP in the 1990s;  it 
represented less than 32% of GDP in 1998, down from 34.4% of GDP in 1992.  Government consumption expenditure and gross i nvestment were US$1.49 trillion in 1998.
290  Expenditure in 
goods totalled US$35.5 billion at the federal level a nd US$94.5 billion at the state and local level.  
Expenditure on services, excluding depreciation and employee compensation, was US$143.8 billion at the federal level and US$39.8 billion at the st ate and local level, while gross investment 
expenditure (structures and equipment) totalle d US$59.6 billion for the Federal Government and 
US$177.4 billion for state and local governments. 
(c) Main U.S. laws and regulati ons on government procurement 
275. The Agreement on Government Procurement (GPA ) entered into force in the United States on 
1 January 1996.
291  Policies, practices and regulations regarding purchases by all U.S. central 
government agencies are codified in the Federal Acquisition Regulation (FAR) System, consisting in 
the FAR per se (48 CFR parts 1-99) and agency-spe cific acquisition regulations that supplement FAR 
provisions or implement them.  These regulations do not apply, in general terms, to state government 
procurement.  Amendments to the FAR were propo sed in September 1998 (see below).  The GPA is 
implemented in U.S. law primarily through the Trad e Agreements Act, as amended (19 U.S.C. 2501 
et seq.).  Other legislation dealing with govern ment procurement includes the Armed Services 
Procurement Act (10 U.S.C section 2301 et seq.);  the Federal Property and Administrative Services 
Act (40 U.S.C. section 471 et seq. and 41 U.S.C. section 251 et seq.);  and the Office of Federal 
Procurement Policy Act (41 U.S.C. section 401 et seq.) .  Additionally, there is legislation at the state 
level for the implementation of the Agreement on Government Procurement in each of the 37 states listed in Annex 2 of the United States' GPA Schedule. 
276. The United States has notified the WTO of its legislation on government procurement;  it has 
also notified the WTO that it ma intains an electronic website, the Acquisition Reform Network 
(ARNET), containing information regarding U. S. government procurem ent laws, regulations, 
executive orders, and other relevant  information, including the FAR and Bid Protest Decisions of the 
U.S. General Accounting Office (GAO).
292  Information technology is used throughout the 
government procurement process;  contracts are managed through computer systems. 
277. At the subfederal level, state procurement is ruled by laws enacted and procurement 
regulations applied by each state or other subfed eral government.  However, in certain cases where 
procurement is funded by federal money, states  must comply with certain federal statutory 
requirements.  An example of federal statutory requireme nts are those on mass transit and highway 
projects under the Intermodal Surface Transportation Efficiency System (ISTEA). A total of 37 states are covered under the GPA.
293  Additionally, as the result of a b ilateral memorandum of understanding 
                                                      
290This represents a 2.2% nominal increase with resp ect to 1997, compared with nominal GDP growth 
of 4.9% (U.S. Department of Commerce, April 1999). 
291After amendment of the Trade Act of 1979 (19 U.S.C. section 3501 et seq.);  and WTO document 
GPA/23, 15 July 1998. 
292The Acquisition Reform Network (ARNET) is available at:  <www.arnet.gov>. 
293The states applying the provisions of the Agreemen t on Government Procurement are:  Arizona, 
Arkansas, California;  Colorado;  Connecticut;  Delaware;  Florida;  Hawaii;  Idaho;  Illinois;  Iowa;  Kansas;  
Kentucky;  Louisiana;  Maine;  Maryland;  Massachusetts;  Michigan;  Minnesota;  Mississippi;  Missouri;  
Montana;  Nebraska;  New Hampshire;  New York; Okla homa;  Oregon;  Pennsylvania;  Rhode Island;  South 
Dakota, Tennessee, Texas;  Utah;  Vermont;  Washington;  Wisconsin;  and Wyoming.  The scope of coverage varies according to the state.  In so me states (California, Colorado, Flor ida, etc), procurem ent in all executive United States WT/TPR/S/56 
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with the European Union, the United States confir med that two additional states, North Dakota and 
West Virginia, and seven cities, Boston, Chicago, Dallas, Detroit, Indianapolis, Nashville and San 
Antonio, treat European Union (EU) suppliers , goods and services no less favourably than U.S. 
suppliers of goods and services from outside their jurisdictions. A number of public utilities also 
apply the Agreement.294  Since the last review, agreements between the United States and Norway (in 
July 1996)295 and the United States and Switzerland (in May 1997)296 have been concluded and these 
countries are no longer excepted from MFN treatment for procurement of goods and services at the 
subfederal government and public  utilities level (Table III.20). 
278. The Federal Supply Classification system (FSC) is used for most procurement contracts.  
Thresholds for procurement contracts have rema ined unchanged, in SDRs , since the Agreement 
entered into effect on 1 January 1996 .  Thresholds in U.S. dollars are, however, revised periodically 
(generally every two years) by the USTR .  For the period 1998-99, an exchange rate of US$1.4275 
per SDR has been applied and notified to the WT O together with thresholds of US$186,000 for 
supplies at the federal level (US$507,000 for st ate supplies) and US$7,143,000 for construction 
contracts  (Table III.21). 
279. Acquisitions subject to the U.S.-Canada Free Trade Agreement have a threshold value of 
US$25,000.297  Acquisitions that are subject to NAFTA and not covered by the U.S.-Canada Free 
Trade Agreement have a threshold of US$50,000 for supplies and US$6.5 million for construction 
services.  The NAFTA also covers, with some exceptions298, the procurement of services by a firm 
established in a NAFTA partner, provided the service  contract has an acquisition value of US$50,000 
or more (US$6.5 million or more for construction) .  A NAFTA classification system  based on the 
U.S. Federal Supply Classification System (FSC),  covering both goods and services, is applied 
specifically for government procurement purposes. 
280. Under the U.S.-Israel Trade Act, U.S. acquisiti ons of supplies from Israel with a value under 
the threshold set by the Agreement on Government  Procurement (US$186,000) are allowed for most 
agencies (except the Departments of Defense, Energy , and Transportation, the Bureau of Reclamation 
of the Department of the Interior, the Federal Housing Finance Board, and the Office of Thrift 
Supervision)  if the estimated value of the acquisition is US$50,000 or more .  Acquisitions from Israel 
of US$186,00 or more are covered by th e Agreement on Government Procurement. 
                                                                                                                                                                     
branch agencies is covered by the Agreement);  in other states, coverage is much more limited.  For a completed 
list of agencies see WTO docu ment GPA/23, 15 July 1998. 
294Some of these utilities are subject to specific laws and regulations;  i.e., the Tennessee Valley 
Authority's (TVA) procurements are subject to the Tennessee Valley Authority Procurement Standards and 
Guidelines, in accordance with the Te nnessee Valley Authority Act (16 U.S. C. section 831h);   the Bonneville 
Power Administration's procurement operations are c onducted under the Bonneville Power Administration Act 
(16 U.S. Code section 832 et seq.;  the Port Authority of New York and New Jersey has written instructions in 
the form of administrative procedures and memoranda for its purchasing agents;  the New York Power 
Authority is required by state law to follow comprehensive guidelines detailing operating policy and instructions 
regarding procurement contracts. 
295WTO document WT/GPA/W/23, 17 July 1996. 
296WTO document WT/GPA/W41, 23 May 1997. 
297NAFTA, Part Four, Article 1101.  Section (c)(ii) sets a threshold of US$250,000 for contracts for 
goods and services from government enterprises, and of US$8 million for contracts for construction services. 
298Exceptions include: information processing and related telecommunications services;  maintenance, 
repair, modification, rebuilding, and installation of equi pment related to ships;  non-nuclear ship repair;  
operation of facilities of the Department of Defense, Department of Energy, and the NASA;  operation of 
research and development facilities;  u tilities;  transportation, travel, and re location services, except travel agent 
services, services pu rchased in support of military forces ove rseas, and construction dredging services. WT/TPR/S/56 Trade Policy Review 
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Table III.20 
U.S. commitments under the WTO Plurilateral Agreement on Government Procurement 
 Goods Services Construction 
Federal 
governmenta Threshold SDR 130,000; MFN treatment.  
Fed. Aviation Admin. (FAA) excepted. Threshold SDR 130,000;  reciprocal 
access.  FAA excepted. Threshold:  SDR 5 million; 
MFN treatment.  FAA excepted. 
Subfederal 
governmentsb Threshold:  SDR 355,000;  MFN treatment 
for procurement by 37 States.  Canada 
excepted.  National treatment of EU bids on 
contracts procured by North Dakota and West Virginia and 7 large U.S. cities. Threshold:  SDR 355,000;  reciprocity for 
37 States.  Canada excepted.  National 
treatment of EU bids on contracts 
procured by North Dakota and West Virginia and 7 of the 24 largest U.S. 
cities. Threshold:  SDR 355,000;  
reciprocity for 37 States. 
Canada excepted.  National 
treatment of EU bids on contracts procured by North 
Dakota and West Virginia and 
7 of the 24 largest U.S. cities. 
Public utilitiesc Threshold:  SDR 400,000 MFN treatment 
for procurement by the New York and New 
Jersey Port Author ity, the Port of 
Baltimore, and New York Power Authority, 
as well as power generation projects funded 
by Rural Electrification Administration.  Canada excepted. (Japan is excluded from 
entities responsible for generation and 
distribution of electricity.) Threshold:  SDR 400,000;  reciprocity for 
procurement by the New York and New 
Jersey Port Author ity, the Port of 
Baltimore, and New York Power 
Authority, as well as power generation 
projects funded by the Rural Electrification Administration.  Canada 
excepted. (Japan is excluded from entities 
responsible for generation and distribution of electricity.) Threshold:  SDR 5 million (for 
Korea SDR 15 million);  MFN 
treatment for procurement by the New York and New Jersey 
Port Authority, the Port of 
Baltimore, Tennessee Valley Authority, Power Marketing 
Administrations, St. Lawrence 
Seaway, and New York Power Authority, as well as power 
generations project funded by 
the Rural Electrification Administration. 
 Threshold:  SDR 182,000;  MFN treatment 
for procurement by Tennessee Valley 
Authority, Power Marketing Administrations, and St. Lawrence Seaway.  
Canada excepted.  National Treatment of 
EU bids on contracts tendered by Massachusetts Port Authority. (Japan is 
excluded from entities responsible for 
generation and distribution of electricity.) Threshold:  182,000;  reciprocity for 
procurement by Tennessee Valley 
Authority, Power Marketing  Administrations, and St. Lawrence 
Seaway.  Canada excepted.  National 
Treatment of EU bids on contracts tendered by Massachusetts Port Authority. 
(Japan is excluded from entities 
responsible for generation and distribution of electricity.) Canada excepted.  National 
treatment of EU bids on 
contracts tendered by Massachusetts Port Authority. 
(Japan is excluded from 
entities responsible for generation and distribution of 
electricity.) 
a Except Japan for contracts procured by the N.A.S.A. 
b State mass-transit and highway improvement  projects that receive federal funding, ar e exempted from these commitments.  
States may still apply restrictions that promote the general envi ronmental quality in that state, as long as such restrictions are not 
disguised barriers to international trade. 
c Airports that receive federal funding are exempted from these commitments. 
Source : The 1994 WTO Plurilateral Agreement on Government Procurem ent, Geneva;  WTO document GPA/W/66/Add.5, 15 July 1998. 
 
  
Table III.21 
United States threshold calculations under the Agreeme nt on Government Procurem ent for the period 1998-99 
 SDR ('000) US$ ('000) 
Federal agencies (Annex I of the Agreement)   
1. Supplies and services 130 186 
2. Construction 5,000 7,143 
Subfederal governments (Annex 2 of the Agreement)   
1. Supplies and services 355 507 
2. Construction 5,000 7,143 
Public utilities (Annex 3 of the Agreement)   
1. Supplies and services (e xcept entities identified in 
 Annex 3 to which threshold of US$250,000 
 applies) 400 571 
2. Construction 5,000 7,143 
Source : WTO document WT/GPA/W/66/Add.5, 15 July 1998. United States WT/TPR/S/56 
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(d) Waiver of customs duties 
281. In certain cases, imported supplies for use in government contracts may be exempted from 
customs duties.  These goods are listed in subcha pters VIII and X of Chapter 98 of the HSTUS.  
Certification of use from the contracting agency is sometimes required .  Supplies not identified in the 
tariff schedule may also, in some circumstances, be granted duty-free entry into the United States.  In 
this case, it is generally the contracting officer who must determine whether imported supplies should 
be accorded duty-free treatment.299  If duty-free entry is granted, the contract price must be reduced by 
the amount of duty that would be payable if the supplies did not enter the United States duty free. 
(e) Tendering and purchasing procedures 
282. In general terms, government agencies are re quired, under Part 5 of the FAR, to publish 
notices of proposed procurement opportunities in excess of US$25,000 in the Commerce Business 
Daily (CBD).300  There are some exceptions to this re quirement, for instance, when perishable 
subsistence supplies are being purchased or when publi cation of a notice could result in serious injury 
to the Government .  State governments are also required to publish invitations to tender .  Advertising 
procurement opportunities is an obligation for the 37 states that have made commitments under the 
Agreement .  Some of this advertising is done through tenders in the CBD. 
283. In addition to notices of proposed procuremen t, some states use notices of planned 
procurement .  Tenders for federal government procurements subject to the FAR must be submitted in 
English.  The format and content of such notices va ry from state to state.  In general, a notice of 
planned procurement (or procurement "forecast") identifies future procurement needs and the time 
periods in which the procuremen t will be made, but does not incl ude an explicit call for tenders. 
284. Regarding the timetable set for procurement activitie s, at the federal level, a time period of at 
least 45 days is stipulated by the FAR: a notice of proposed procurement must be published in the CBD at least 15 days before a solicitation for bids is issued;  from that date, prospective suppliers 
must be given at least 30 days to submit bids .   For the procurement of commercial items valued at or 
below US$100,000, shorter tim e-frames may be established .  When procurement falls within the 
scope of the GPA, a time period of not less than 40 days must be granted, in accordance with 
Article XI of the Agreement, unless a procuremen t "forecast" was previously publicized in the CBD 
not less than 40 days in advance of the deadline, in which case the time-period may be reduced to not 
less than ten days .  States covered by the GPA must also c onform to deadlines in the Agreement;  
these are implemented through state legislation or regulations. 
285. Lists of suppliers may be prepared by a federal government agency, provided the agency 
prepares a written justification explaining the circum stances for the need of  such a list.  These 
non-exhaustive lists may include  both national suppliers and potential foreign suppliers from 
countries that are party to the GPA.  Most of the 37 states covered by the Agreement do not resort to lists of suppliers when tendering;  suppliers are in  this case selected on a contract-by-contract basis .  
Where lists of qualified or registered suppliers  are used,  their existence is advertised. 
286. Since the last U.S. Trade Policy Review in 1996, the use of electronic means for 
disseminating government procurement information has been considerably enhanced, to the benefit of 
transparency.   The CBD is now also available on the Internet.
301  This site is the official online listing 
                                                      
299This applies to supplies of US$10,000 or more (19 CFR, 52.225-8). 
30048 CFR 5.201. 
301The Internet site address is http://cbdnet.access.gpo.gov/index.html .  WTO document WT/GPA/23, 
15 July 1998. WT/TPR/S/56 Trade Policy Review 
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of government contracting opportunities published in the CBD .  Access to CBDnet, which is free of 
charge, also allows suppliers to conduct search ope rations related to procurement opportunities.  A 
number of government agencies also provide acquisition information, including draft requests for proposals and advanced procurement planning, on the Internet .  The Office of Federal Procurement 
Policy (OFPP) has requested agencies to  link their home pages to ARNET. 
287. Linked to the use of electronic means, a new characteristic of the procurement system is the 
increasing reliance of agencies on electronic commerce,  especially for small operations.  Reliance on 
electronic commerce is envisaged as a means of simplifying operations and enhancing the transparency of transactions .  As notified by the United States to the WTO, agencies are using 
purchase cards (credit cards for business) to make pur chases of US$2,500 or less.  The Strategic Plan 
for Electronic Commerce for Buyers and Sellers, issued in March 1998 by the President's Management Council's Electronic Processes Init iatives Committee, introduced guidelines and 
principles to encourage the use of electronic comme rce in government agencies.  Another initiative to 
increase the use of electronic commerce in government  procurement activities is the requirement that 
all federal payments be made electronically by 1999, as specified by the Debt Collection 
Improvement Act of 1996. 
(f) Buy American provisions 
288. The principal legal authorities for the federal "Buy American" provisions are the Buy 
American Act and the Balance of Payments Program.  For procurement not cove red by the plurilateral 
Agreement on Government Procurement, the North Am erican Free Trade Agreement, the plurilateral 
Agreement on Trade in Civil Aircra ft, and bilateral procurement agre ements with the Canada, the EU 
and Israel, the United States applies certain domest ic purchasing preferences.  Those preferences are 
also applied to the products and services of a ll least developed countries (designated countries) and 
for certain products and services of the Caribbean Ba sin countries, in accordance with Part 25 of the 
FAR (48 CFR 25.402).
302 
Buy American Act 
289. The Buy American Act of 1933, as amended in 1988 (41 U.S.C. 10a-10d), and Executive 
Order 10582, 17 December 1954 (as amended), apply to supplies and construction material acquired 
for use inside the United States, including, unde r certain circumstances, supplies acquired under 
contracts set aside for small business concerns .  The Act restricts the purchase of supplies by 
government agencies to those defined as "domestic e nd-products" in accordance with a two-part test 
that must establish that the article is manufactured in the United States, and that the cost of domestic 
components exceeds 50% of the cost of all the components .  In principle, foreign products and U.S. 
products that fail to comply with the definition of "domestic end-product" are ineligible for 
procurement .  The Act does not apply to services. 
290. Exceptions to the Buy American Act can be granted if it is determined that domestic 
preference is inconsistent with the public interes t;  in case of U.S. non-availability of a supply or 
                                                      
302The designated countries are:  Aruba;  Austria;  Ba ngladesh;  Belgium;  Benin;  Bhutan;  Botswana;  
Burkina Faso;  Burundi;  Canada;  Cape Verde;  Central African Republic;  Chad;  Comoros;  Denmark;  
Djibouti;  Equatorial Guinea;  Finland;  France;  the Gambia;  Germany;  Greece;  Guinea;  Guinea-Bissau;  
Haiti;  Hong Kong, China;  Ireland;  Israel;  Italy;  Japa n;  Korea;  Lesotho;  Liechtenstein;  Luxembourg;  
Malawi;  the Maldives;  Mali;  Mozambique;  Nepal;  the Netherlands;  Niger;  Norway;  Portugal;  Rwanda;  
Sao Tome and Principe;  Sierra Leone;  Singapore;  Somalia;  Spain;  Sweden;  Switzerland;  Tanzania;  Togo;  Tuvalu;  Uganda;  the United Kingdom;  Vanuatu;  Western Samoa;  Yemen. United States WT/TPR/S/56 
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material;  or for reasonableness of cost.303  The cost of the domestic offer is considered unreasonable 
if the cost of the foreign (non-eligible) product, in clusive of import duty and a 6% added margin, is 
below the lowest domestic offer when th is offer is from a large business concern .  If the lowest 
domestic offer is from a small business concern, the added margin considered is 12% (Box III.3).   For 
purchases by the Defense Department the price difference must be of at least 50% .  National 
preferences for defence are also allowed under other legislation, su ch as the Department of Defense 
Appropriations Act of 1992. 
291. Also under the Buy American Act, only domes tic construction materials may be used in 
construction contracts performed in th e United States by government agencies .  The exceptions are 
similar to those for supplies, including,  additionally, impracticability of supply .  The cost of domestic 
construction material is considered unreasonable if it  exceeds the cost of foreign construction material 
by more than 6%. 
Box III.3 Example of an acquisition under the Buy American Act/Balance of Payments Program 
(From the examples of the Proposed Rule on Federal Acquisition Regulation; Foreign Acquisition (Part 25 
Rewrite) by the Department of Defense, the General Services Administration, and the National Aeronautics 
and Space Administration).  Federal Register , 28 September 1998, Vol. 63, No. 187. 
(a) Acquisition of end products for use in the United States. The Buy American Act applies: all foreign end  
products are noneligible 
---------------------------------------------------------------------------------------------------------------- 
Offer A.......................... US$11,000  Do mestic end product, small business. 
Offer B.......................... US$ 10,700  Domestic end product, large business. 
Offer C.......................... US$10,000  Foreign end product (noneligible). 
---------------------------------------------------------------------------------------------------------------- 
The low domestic offer, Offer B, is from a large business, so a 6 % factor must be applied  to the  foreign 
offer (Offer C). The resulting evaluate d price of US$10,600 remains lower than Offer B, which  cost is; 
therefore,  
unreasonable. The award is granted to Offer C at US$10,000 despite the fact that it was originally 
noneligible. 
(b) Acquisition of end products for use outside the Unite d States. The Balance of Payments Program applies 
and the Buy American Act does not. 
---------------------------------------------------------------------------------------------------------------- 
Offer A..........................      US$11,000  Domestic end product, small business. 
Offer B..........................      US$10,700  Domestic end product, large business. 
Offer C..........................      US$10,200  Foreign end product (noneligible). 
---------------------------------------------------------------------------------------------------------------- 
A 50% factor must be applied  to Offer C to determin e whether the low domestic offer is reasonable or not. 
The evaluated price of US$15,300 exceeds the price of Offer B . The procurement is awarded to Offer B. 
       Box III.3 (cont'd) 
                                                      
303A material or supply is "non-available" when it is not mined, produced, or manufactured in the 
United States in sufficient and reasonably available comme rcial quantities of a satisfactory quality.  There is a 
non-availability list, which includes a range of chemical s (acetylene, bephenium hydroxynapthoate, colchicine, 
erythrityl tetranitrate, etc);  minerals and ores (antimony, bauxite, bismuth, chrome, diamonds, nickel, 
petroleum, platinum, quartz crystals, iodine, tungsten, tin, etc.);  agricultural products (anise, bananas, corned beef, Brazil and cashew nuts, chestnuts spices and herbs, green olives, olive oil and certain other oils, cocoa 
beans, coconut, tapioca flour, raw co ffee, raw sugars, etc.);  certain textile fibres;  books, newspapers, 
magazines, etc., not printed in the Un ited States and for which domestic editions are not available;  sheepskin 
leather;  microprocessor chips (for incorporation into building systems during construction or repair and 
alteration of real property);  rabbit fur felt;  rubber;  raw silk;  spare and replacement parts for equipment of 
foreign manufacture, and for which domestic parts are not available;  and certain woods ( Federal Register , 
28 September 1998, Vol. 63, No. 187, p. 51648). WT/TPR/S/56 Trade Policy Review 
Page 138 
 
 
(c) The Trade Agreements Act applies 
This example contains two U.S. product offers: one of them qualifies as a domestic end-product under the 
Buy American Act (Offer B), and the other one does  not (Offer A). There are also two non-U.S. product 
offers: Offer C is eligible under the Trade Agreements Act (the product comes from a designated country 
(party to the WTO Agreement on Government Procurement or designated  developing country) or from a 
CBERA beneficiary, and exceeds the US$186,000 threshold); Offer D is noneligible. 
---------------------------------------------------------------------------------------------------------------- 
Offer A..........................       US$204,0 00  U.S. made end pr oduct (not domestic). 
Offer B..........................       US$203,000  U.S. made end product, small business (domestic). 
Offer C..........................      US$200,000  Eligible product. 
Offer D..........................      US$195,000   Noneligible product (not U.S. made). 
---------------------------------------------------------------------------------------------------------------- 
Offer D is eliminated because the Trad e Agreements Act applies and there is  an offer of a U.S. made or an 
eligible product. If the agency gives the same considera tion given eligible offers to offers of U.S. made end 
products that are not domestic offers, it is unnecessary to determine whether U.S. made end products are 
domestic. No further analysis is necessary. Award on the low remaining offer, Offer C.  
(d) The same case, but now  
---------------------------------------------------------------------------------------------------------------- 
Offer A..........................       US$200,0 00  U.S. made end pr oduct (not domestic). 
Offer B..........................       US$203,000  U.S. made end product, small business (domestic). 
Offer C..........................      US$204,000  Eligible product. 
Offer D..........................      US$195,000   Noneligible product (not U.S. made). 
---------------------------------------------------------------------------------------------------------------- 
If the agency gives the same consideration given eligible offers to offers of U.S. made end products that are 
not domestic offers, it would award on Offer A. If it di d not, it would award on Offer B, which is not the low 
U.S. made end-product offer, because Offer A would be non eligible. With the proposed revision of the FAR, 
this last situation would be avoided. 
Source : Federal Register, 28 September 1998, Vol. 63, No. 187.  
 
(g) Sanctions 
292. Under Section 305(g) (1) of the Trade Agreemen ts Act of 1979, the United States has, since 
28 May 1993, applied sanctions on EU countries that are considered to disc riminate against U.S. 
products and services in their government procurement practices.304  The sanctions do not apply to 
any contracts that are awarded by the Departme nt of Defense or covered by the Agreement on 
Government Procurement (that is, with a value greater than US$186,000 for supplies, and 
US$7,143,000 for construction services), or to an y contracts which will be performed outside the 
United States. 
293. The procurement of goods and services from c ountries subject to import bans (Cuba, Iran, 
Iraq, Libya, North Korea, and Sudan) is prohibited, as well as the purchase of supplies or services from entities controlled by the Government of Iraq.
305 
(h) Proposals for regulatory changes 
294. Proposed amendments to the FAR (48 CFR, Part  25) were introduced by the Civilian Agency 
Acquisition Council and the Defense Acquis ition Regulations Counc il in September 1998.306 One of 
                                                      
304Austria, Belgium, Denmark, Finland, France, Ireland, Italy, Luxembourg, the Netherlands, Sweden 
and the United Kingdom. 
30548 CFR, subpart 25. 701. 
306Federal Register , 28 September 1998, Vol. 63, No. 187. United States WT/TPR/S/56 
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the main issues addressed was the discrepancy betw een the definitions of "U.S. made end products" 
for acquisitions subject to the Trade Agreemen ts Act and "domestic e nd products" under the Buy 
American Act .  As stated above, to qualify as a domestic end-product under the Buy American Act, 
the end-product must be manufactured in the United States and the cost of the components 
manufactured in the United States must ex ceed 50% of the cost of all components .  Under the Trade 
Agreements Act, the country of origin of an e nd-product that is not wholly the growth, product or 
manufacture of that country, is the country in which the end-product is substantially transformed into 
a new and different article, without re gard to the source of the components .  This discrepancy has 
resulted in some cases where products classifi ed as "U.S. made end products" under the Trade 
Agreements Act country of origin test, did not qualify as "domestic end products" under the Buy 
American Act.307  Moreover, although the Trade Agreements Act does not specifically address the 
treatment of "U.S. made end products" that do not qualify as domestic end-products under the Buy 
American Act, it does prohibit the purchase of forei gn end-products, except for  eligible products.  
Hence, because "U.S. made end products" that do not comply with the definition of "domestic end 
product" are foreign end-products under the Buy Ameri can Act, and since they are not the products of 
an eligible country, they are in principle banned from procurement when the Trade Agreements Act 
applies.308 
295. The proposed amendment to the FAR seeks to re ctify this discrepancy by introducing the 
definition of "U.S. made end products" as products th at are manufactured or substantially transformed 
in the United States, regardless of the source of th e components, thus allowing the purchase by federal 
agencies of all U.S. made end-products, whether or not they are defined as "domestic end products" 
under the Buy American Act.  This would allow products that are "substantially transformed" in the 
United States to be treated on the same footing as eligible imports309, without the need for a 
determination as to whether a U.S.  made end-product is domestic. 
(i) Domestic challenge procedures 
296. The U.S. General Accounting Office ( GAO) deals with challenge procedures.310  Procedures 
for the filing of protests are included in Title 4 of th e Code of Federal Regulati ons, Part 21.  Suppliers 
and potential suppliers may also challenge a proc urement decision by protesting directly to the 
procuring agency.  Since 1995 all agencies are required, under Executive Order No. 12979, to establish alternative dispute resolution procedures for bid protests
311;  protests may also be taken to 
U.S. federal courts .  The GAO's recommendations are in principl e not reviewable by a court, but a 
                                                      
307Federal Register , 28 September 1998, Vol. 63, No. 187, p. 35633. 
308In practice, however, federal agencies have been in some cases procuring "U.S. made end products" 
since the General Services Administration Board of Contract Appeals (GSBCA) ruled in 1990 that the 
Trade Agreements Act does not prohibit the purchase of U.S. products and that "U.S. made end products" that 
do not meet the definition of "domestic end product" under the Buy American Act are not "foreign end 
products" included in the Trade Agreements Act procurem ent prohibition.  Each agency has been applying this 
ruling separately, for which they needed to deviate from the FAR.  For example, GSA and the Department of 
Commerce treat all "U.S. made end produ cts" the same when the Trade Agr eements Act applies, irrespectively 
of whether they comply with the Buy American Act definition of domestic end products or are other "U.S. made 
end products".  The Department of Defense, on the other hand, provides a preference to "domestic end product" 
with respect to other "U.S. made end products", except for all U.S. made information technology end products, 
for which the Buy American act has been waived and the Trade Agreements Act applies.  The proposed 
amendment to the FAR implements the GSBCA decision eliminating the need for deviations from the FAR 
(Federal Register , 28 September 1998, Vol. 63, No.187). 
309The proposed amendments would also end the discrimination against imports of foreign components, 
even if from eligible countries, with respect  to imports of final eligible end supplies. 
310Authorized under 31 U.S.C. section 3552. 
31160 FR 55171 (1995). WT/TPR/S/56 Trade Policy Review 
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judicial review may be sought under the Administrative Procedures Act.312  At state level, protests are 
generally taken to an independent re view entity and may be subject to judicial review in state courts. 
297. At the federal level, protests with the GAO must be filed no later than ten calendar days after 
the protester knew of the basis of the protest, excep t when debriefings are required, in which case they 
must be filed within five calendar days of the debr iefing.  At the state level, time limits vary between 
ten and 14 days;  some states have specific rules applicable only to contracts covered by the GPA .  
When a protest is filed with the GAO, the contrac ting agency may be required to withhold award and 
to suspend contract performance .  Most states also allow for the suspension of the procurement 
process, but a  few require an appeal bond to stay a contract award. 
298. Challenges to federal agency contracts are ge nerally resolved by the GAO within 100 days 
from the date of filing .  An express procedure may be used in some cases;  this allows the GAO to 
reach a decision within 65 days. 
(j) Disputes in the WTO 
299. The EU requested consultations with the Unite d States on 20 June 1997 with respect to the 
Act Regulating State Contracts with Companies doi ng Business with or in Burma (Myanmar) enacted 
by the Commonwealth of Massachusetts on 25 June 1996.313  This Act prohibits Massachusetts public 
authorities from procuring goods or services from any persons, whether U.S or foreign citizens, who 
do business with Burma (Myanmar) .  The EU felt that Massachusetts, a state covered by the GPA, 
violated the obligations of the United States under the Agreement by contravening Article VIII(b);  
Article X;  and Article XIII .  The EC also claimed that the Massachusetts legislation limited the 
access of EU suppliers to procurement by a s ubfederal authority covered by the Government 
Procurement  Agreement.   Japan requested consultations with th e United States on the same issue in 
July 1997.314  A panel was established on 21 October 1998 for both requests .  However, a federal 
district court found the Massachusetts law to  be unconstitutional in  1998 and barred its 
implementation.315  The dispute was suspended when  the EU and Japan requested, on 
10 February 1999, that the panel proceedings be su spended in the context of the U.S. court ruling.316 
300. A second dispute involving government procurement,  this time with the United States as a 
complainant, involves the procurement practices  of the Korea Airport Construction Authority 
(KOACA), which Korea asserted were not covere d by its commitments under the Government 
Procurement Agreement.  The United States requested, on 11 September 1998, that Korea respond in 
writing to a list of questions relating to KOACA and its procurement practices.317  On 
16 February 1999, the United States requested cons ultations, claiming that practices relating to 
qualification for bidding as a prime contractor, dom estic partnering, and the absence of access to 
challenge procedures were inconsis tent with Korea's obligation under the GPA.  The United States 
                                                      
312The Act includes in its scope all actions taken by any United States governme nt agency, including an 
agency's implementation of a GAO decision. 
313WTO document GPA/D2/1, 26 June 1997. 
314WTO document WT/DS95/1 and GPA/D3/1, 21 July 1997. 
315The case against Massachusetts was brought to court by the National Foreign Trade Council 
(NTFC), which has asked cities in California, Colorado, Maryland, Massachusetts, Michigan, Minnesota, New 
Jersey, New York, North Carolina, Oregon and Wisconsin with similar purchasing laws, to revoke them. 
316WTO documents  WT/DS88/5, 12 February 1999;  and WT/DS95/5, 12 February 1999. 
317WTO document GPA/W/76,18 September 1998 United States WT/TPR/S/56 
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also contended that the KOACA was within the sc ope of Korea's list of central government entities 
covered by the Agreement.318 
(vi) Corporate governance 
301. The U.S. has long maintained legislation desi gned to combat corrupt (as distinct from 
anti-competitive) business practices domestically and abroad.319  Under U.S. law, corporations are 
prohibited from contributing to federal election camp aigns.  In addition, corporations are subject to 
extensive reporting requirements that are enforc ed by the Securities and Exchange Commission, 
which also enforces rules designed to  prevent "insider trading" on th e stock market.  Furthermore, any 
attempt to bribe U.S. government officials is a criminal offence, punishable by fines and/or 
imprisonment. 
302. Until recently, the United States was one of the few countries with legislation punishing 
bribery abroad.  Under the Foreign Corrupt Practices  Act (FCPA) of 1977, which was introduced in 
the wake of the Watergate scanda l that followed the 1972 presidential election, firms caught paying 
bribes face fines of up to US$1 million, and individu al employees face fines of up to US$10,000 and 
can receive prison sentences of up to five years.320  The FCPA includes provisions designed to prevent 
firms from paying bribes through third parties or  other covert channels.  Moreover, the FCPA 
stipulates strict accounting and control practices inte nded to make it difficult for firms to conceal 
bribe payments.  Although amendments to the Act in  1988 expanded the range of permissible "grease" 
payments (to officials of foreign governments  who would otherwise perform their duties too 
slowly)321 and raised the standards of proof of malfeasa nce by U.S. firms, it would appear that these 
changes had little practical significance.322  Nevertheless, they did reflect concern that U.S. anti-
bribery legislation has placed U.S. companies undertaking business abroad at a competitive 
disadvantage – costing US$15 billion in orders lost to firms from countries that did allow bribes, according to a Commerce Department estimate for 1997.
323 
303. This disadvantage will be greatly reduced, howev er, as a result of the "bribery convention" 
signed in December 1997 by all 29 OECD members, including the U.S., plus five non-members 
(Argentina, Brazil, Bulgaria, Chile and the Slovak Republic).324  The convention, which entered into 
force on 15 February 1999 in the United States, requires signatories, inter alia,  to make it a crime to 
bribe any foreign public official in order to obt ain or retain business, or  for any other "improper 
advantage" in the conduct of international bus iness, and to remove tax-deductibility of bribery 
payments as business expenses.  The U.S. is also ac tively involved in OECD efforts to prepare draft 
corporate governance guidelines. 
                                                      
318WTO document WT/DS163/1, 22 February 1999. 
319Corruption is equivalent to a tax on foreign direct investment.  It is much more damaging than a tax, 
however, because of its arbitrariness and la ck of transparency (Wei ,1997a and b). 
320The Tax Reform Act of 1976 had already introduced penalties for U.S. companies paying bribes to 
foreign officials.  Under the Act, bribe payments cannot be deducted in calculating the earnings and profits of 
controlled foreign corporations (CFCs), thereby reducing  their ability to claim foreign tax credits.  Bribe 
payments represent deemed distributed income of CFCs, subjecting them to immediate U.S. taxation.  Similarly, 
U.S. exporters caught paying bribes lose U.S. tax deferral (through FSCs) of the bribery component of their export incomes. 
321U.S. law prohibits such "grease" payments to U.S. government officials. 
322Hines (1995). 
323As indicated by the post-1977 record of prosecutions, U.S. legislation has not eliminated foreign 
bribery by U.S. multinationals (Prasad, 1993). 
324Convention on Combating Bribery of Foreign Pu blic Officials in International Business 
Transactions. WT/TPR/S/56 Trade Policy Review 
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(vii) Competition policies 
(a) Antitrust policy 
Antitrust legislation 
304. U.S. antitrust laws apply to all industries and t ouch every type of activity, i.e. manufacturing, 
transportation, distribution, and marketing;  th ey cover a wide range of competition restricting 
practices, such as cartels and other price-fixing conspiracies, bid rigging, corporate mergers likely to substantially reduce or eliminate competition, and ex clusionary acts designed to attain or maintain 
monopoly power.
325  Federal antitrust laws also apply to fo reign trade.  Federal antitrust laws are 
enforced through criminal and civil actions brought  by the Antitrust Division of the Department of 
Justice;  civil enforcement actions brought by the Federal Trade Commission (FTC);  parens patriae  
actions brought by states on behalf of their citizens;   and lawsuits brought by private parties asserting 
damage claims. 
305. There are three major federal antitrust laws: The Sherman Antitrust Act, the Clayton Act and 
the Federal Trade Commission Act.  All states, ex cept Georgia, Pennsylvania, and the District of 
Columbia have antitrust laws similar to federal laws , which generally apply to  violations that take 
place wholly in one state.  Many of  those state laws are comparable to the Sherman Act; a smaller 
number of states have counterparts to the Clayton Act. 
The Sherman Act 306. The Sherman Antitrust Act (15 U.S.C. sections 1-7) of 1890 prohibits all contracts, 
combinations, and conspiracies that "unreasonably" restrain trade among the states or with foreign 
countries, including price-fixing agreements, bid rigging and agreements between competitors to 
allocate customers.  Section 1 of the Sherman Ac t also applies to "vertical" agreements between 
sellers and buyers, such as exclusive dealing c ontracts, tying arrangements, and resale price 
agreements.  The Sherman Act prohibits conduct that amounts to monopolization of trade among the 
states or with foreign countries, as well as atte mpts to monopolize (section 2).  Under the case law 
pursuant to the Sherman Act, conduct that is almost  always anti-competitive, such as price fixing, bid 
rigging, and market allocation, is treated as illegal per se , while other conduct is evaluated under a 
"rule of reason" standard, pursuant to which a c ourt weighs the anti-competitive effects against any 
efficiencies flowing from the conduct.  Pursuant  to the Foreign Trade Antitrust Improvements Act 
of 1982, the Sherman Act applies to anti-compe titive conduct involving foreign trade other than 
import commerce, only when this has a "direct, subs tantial, and reasonably foreseeable effect" on U.S. 
commerce (section 7 (1)). 
307. Violations of the Sherman Act may be prosecute d as civil or criminal offences.  Only the 
Antitrust Division of the Department of Justice ma y bring criminal prosecutions under the Act.  
Criminal offences typically involve price fixing, customer allocation, bid rigging or other cartel 
activities.  Criminal violations of the Sherma n Act are punishable by fines and imprisonment;  
individuals may be subject to fines of up to US$350, 000 and sentenced to up to three years in federal 
prison for each offence;  corporations can be fined up to US$10 million for each offence.
326  This limit 
                                                      
325 Price fixing occurs when two or more sellers agree to increase prices by a certain amount, or not to 
sell below a certain price. Bid rigging occurs when two or more firms agree not to bid against each other to supply products or services to government agencies , or when they agree on the level of their offers. 
326A violation of the Sherman Act may be accompanied by the violation of a number of statutes that 
may require additional or related criminal enforcement.   These include conspiracy to defraud the Government 
(18 U.S.C. Section 371);  false statements made to go vernment entities and officials (18 U.S.C. Section 1001, United States WT/TPR/S/56 
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may be occasionally exceeded, however, if the An titrust Division decides to use an alternative 
sentencing provision contained in 18 U.S.C. Section 3571( d), which allows fines to be raised to twice 
the gain to the conspirators or twice the loss to th e consumers.  This alternative is used sometimes 
when the estimated loss exceeds the US$10 million limit.327 
308. In a civil proceeding, the Department of Justice may obtain injunctive relief against 
prohibited practices.  If the U.S. Government is th e  purchaser, it may obtain treble damages.  Private 
plaintiffs may also obtain injunctive and treble damage relief for violations of the Sherman Act. 
Conduct that violates the Sherman Act may also be  challenged by the FTC pursuant to its mandate 
under Section 5 of the Federal Trade Commission Act. 
The Clayton Act 
309. The Clayton Act of 1914 (15 U.S.C. Section 12 et seq), amended in 1950, is a civil statute 
prohibiting mergers or acquisitions that are lik ely to lessen competition substantially, as well as a 
variety of other conduct.  Section 2 of the Clay ton Act, also known as the Robinson-Patman Act, 
outlaws price discrimination in certain situations (e xcept for non-profit institutions);  investigations 
under this statute generally are handled by the FTC, and there are many privat e cases.  Section 3 of 
the Act prohibits the lease or sale of goods or commodities conditioned upon the purchaser's 
agreement not to use the products of a competitor, if  its leads to a lessening of competition or to the 
creation of a monopoly.  Section 7 of the Clayton Act (15 U.S.C. Section 18) prohibits any merger or acquisition of stock or assets that may lessen compe tition substantially or tend to create a monopoly.  
The analytical framework used by the FTC and the De partment of Justice in their review of mergers 
and acquisitions is contained in the 1992 Horizontal Merger Guidelines, issued jointly by those 
agencies. 
310. Section 7A of the Clayton Act, called th e Hart-Scott-Rodino Antitrust Improvements Act 
of 1976 (15 U.S.C. 18a), contains pr ovisions to facilitate enforcement of antitrust laws with respect to 
anti-competitive mergers and acquisitions.  In accord ance with the Hart-Scott-Rodino Act pre-merger 
notification must be filed with the FTC and the Department of Justice for acquisitions of voting 
securities or assets when as a result of the acquisiti on, the acquirer would hol d 15% or more of the 
voting securities or assets of the acquired business, or a total amount of assets or voting securities 
exceeding US$15 million.
328  This applies only if the acquired business (in manufacturing or services) 
has total assets (or annual net sales in the case of manufacturing) of US$10 million or more, and the acquirer has annual net sales or total assets of US$100 million or more;  or, for acquisitions of voting 
securities or assets of businesses with  total assets or annual net sales of US$100 million or more, if the 
acquirer has annual net sales or total assets of US$10 million or more.
329  Upon receipt of the 
notification by the FTC and by the Department of Justice, the acquirer must wait 30 days (15 days in the case of a cash tender offer) before proceeding w ith the acquisition or merger.  The FTC or the 
Department of Justice may, before the end of th e waiting period, request additional information (make 
a "Second Request") concerning a transaction and ex tend the waiting period to ten days after the 
                                                                                                                                                                    
 
False Statements Accountability Act of 1996);  major fraud  against the United States (18 U.S.C. Section 1031);  
mail fraud (18 U.S.C. Section 371);  wire fraud (18 U.S.C. Section 1343);  actions under the Racketeering 
Influenced and Corrupt Organizations Act (RICO, 18 U.S.C. Sections 1961-1968);  and tax offences (26 U.S.C. Section 7201). 
327Department of Justice, Press Release,  7 April 1998. The Antitrust Division of the Department of 
Justice is advocating an increase in the maximum fine under the Sherman Act, from the current US$10 million, 
to US$100 million (Spratling, 1998, p.15). 
328Except if the acquirer owns at least 50% of the voting securities of the acquired business prior to 
acquisition. 15 U.S.C. Section 18a (c). 
32915 U.S.C. Section 18a (a) (2). WT/TPR/S/56 Trade Policy Review 
Page 144 
 
 
receipt of the additional material required for cash  tender offers and 20 days for other transactions.  
Failure to comply with the Hart-Scott-Rodino Act is punishable by civil penalties of up to US$11,000 
for each day a violation continues. 
311. Reporting obligations also are governed by a set of rules promulgated pursuant to the Hart-
Scott-Rodino Act.330  Businesses may seek from the FTC an interpretation of the Hart-Scott-Rodino 
Act or of the rules and how they may a pply to particular kinds of transactions.331  Effective 
1 March 1999, the Premerger Notification Office of the FTC adopted a Formal Interpretation of the 
Hart-Scott-Rodino Act with respect to the notifi cation obligations under the Hart-Scott-Rodino Act 
regarding the creation of, or acquisition of an interest in a Limited Liability Company (LLC).332  
Under the new rules, the PNO will view as reportabl e only those LLC formations originated from two 
or more pre-existing, separately controlled bus inesses, which meet the Hart-Scott-Rodino Act 
requirements, and where at least one of the memb ers will control the LLC, i.e. have an interest 
entitling it to 50% of the profits or 50% of the assets of the LLC upon dissolution.333 
312. Lawsuits under the Clayton Act may be brought to any district court of the United States  that 
has jurisdiction over the defendant (Section 4);  th e Act allows for the recovery of threefold the 
damage inflicted to the aggravated party plus the cost of the suit.  Foreigners are granted national 
treatment and may therefore sue for the same amount , although this does not apply to foreign states, 
which may recover only an amount equal to the damage inflicted plus the cost of the suit.  When the 
suit involves damages inflicted on the United States, the calculation of the fine may be retroactive, 
and simple interest may be applied on threefold th e damage inflicted.  Enforcement of the Act is 
vested generally in the FTC (Section 11(a) of the Clayton Act334, and the Attorney General (Section 
15 of the Clayton Act).  The FTC is entitled (under Section 13(b) of the FTC Act ) to seek a court order to prevent a merger that threatens to create  a monopoly or substantially lessen competition, and 
to issue a cease and desist order in an administrative proceeding against a merger.
335  The Attorney 
General may seek a court order to enjoin a merger  under Section 15 of the Clayton Act.  Private 
parties may also seek injunctive relief under Section 16 of the Clayton Act (15 U.S.C. Section 26). 
The Federal Trade Commission Act 
313. The Federal Trade Commission Act prohibits, under Section 5 of the Act, "unfair methods of 
competition" and "unfair or deceptive acts or pr actices in or affecting commerce."  The FTC’s 
authority to prohibit unfair methods of competition is the basis for its antitrust jurisdiction, while the proscription against unfair or deceptive acts or practices is the basis for its other mission, consumer 
protection.  The authority to define unfair methods of competition is vested in the FTC in the first 
instance, subject to review by federal appellate c ourts.  The U.S. Supreme Court has ruled that unfair 
methods of competition include conduct that violates the Sherman Act or the Clayton Act, as well as 
anti-competitive practices that violate the spirit of the antitrust laws but do not fall precisely within 
the scope of these two Acts.  Most of the FTC’s  enforcement activities under Section 5 involve 
application of Sherman Act or Clayton Act standard s.  The FTC has authority to enforce the FTC Act 
only through the use of civil actions.  The Act empo wers the FTC to carry out investigations relating 
to practices of entities engaged in commerce;  initiate  administrative proceedings when it has reason 
                                                     
 
33016 C.F.R. Sections 801-803. 
331Information concerning Hart-Scott-Rodino premerger requirements is available on the FTC's 
website.  Available at:  http//www.ftc.gov. 
332Federal Register , 13 October 1998,  Vol. 63, p. 54713. 
333Previously, the treatment of LLCs depended on a determination of whether the interest acquired in 
the LLC was more like a voting security or more like a partnership interest. 
334There are certain exceptio ns for regulated industries subject to the jurisdiction of other agencies. 
335Section 11 of the Clayton Act, 15 U.S.C. Section 21.  United States WT/TPR/S/56 
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to believe that a violation of the Act has occurred;  and to issue a cease and desist order if it finds a 
violation.  The FTC Act does not provide for the levy of fines or damage awards for violations of the 
Act, although the FTC may apply to a court for an  award of civil penalties for violations of FTC 
orders. The FTC may file an action in a federal district court for a preliminary or permanent 
injunction and other equitable relief,  including monetary relief such as restitution, pursuant to Section 
13(b) of the FTC Act, if it has reason to believe th at a law enforced by the Commission has been or is 
about to be violated.  The FTC also has authority to prescribe trade regulation rules defining unfair or deceptive acts or practices and establish requirement s to prevent them, and to make reports and 
legislative recommendations to Congress.  The FTC also may use administrative action or 
Section 13(b) of the FTC Act to challenge unfair or  deceptive acts or practices by foreign companies 
that harm consumers in the United States. 
Other legislation 314. The Wilson Tariff Act (15 U.S.C. Sections 8- 11) outlaws agreements between a person or 
corporation and an importer, which restrain trade or free competition in trade, or raise the price of an 
imported product in the United States.  Violation of  the Act may lead to fines of between US$100 and 
US$5,000 and to imprisonment. 
315. The National Cooperative Research and Production Act of 1993 (NCRPA), 
(15 U.S.C. 4301-06), clarifies the application of U. S. antitrust laws to joint research and development 
(R&D) activities and joint production activities.  Th e NCRPA requires U.S. courts to examine the 
competitive effects of a challenged joint R&D or jo int production venture in relevant markets and 
under a "rule-of-reason" standard, which must take  into account all relevant factors affecting 
competition, including pro-competitive benefits of the joint activities in research and development, 
process and product development, and service markets.  Participants in a joint venture that is within 
the scope of the Act may file a voluntary notificatio n of the venture with the Department of Justice 
and the FTC, which has the effect of limiting the mone tary relief that may be obtained in private civil 
suits against the participants to actual rather than  treble damages, provided the conduct challenged is 
within the scope of the notification.
336  In the case of joint production ventures covered by the Act, 
national treatment to foreigners is  conditioned by reciprocity.  Th e limitation on recoverable damages 
applies only if the main production facilities are locate d within the United States or its territories, and 
each participant in the venture is either a U.S. citizen or a citizen from a country according national 
treatment in the application of its antitrust laws  regarding participation in joint ventures for 
production. 
316. The Webb-Pomerene Act (15 U.S.C. Sections  61-65), grants limited immunity from the 
antitrust laws for the formation and operation of associations of competing businesses solely for the 
purpose of engaging in collective exports of goods, pr ovided this does not result in conduct that has 
anti-competitive effects in the United States or in jures domestic competitors (Box III.4).  In 1996, 
16 associations filed to the FTC under the Act;  13 associations filed in 1997 ;  and 12 associations 
filed in 1998. 
317. Like the Clayton Act, the Unfair Competiti on Act of 1916, sometimes referred to as the 
Antidumping Act of 1916, enacted as Title VII (U nfair Competition) of the Revenue Act of 1916, 
prohibits an importer from selling goods in the United St ates at a price substantially lower than their 
market value in the country of production.  Th e 1916 Act allows private parties whose property or 
business is injured by a violation of the Act to sue in federal court for three times their actual damages 
plus court costs and attorneys' fees. 
                                                      
336The rule-of-reason standard applies even if the venture is not notified to the antitrust agencies. WT/TPR/S/56 Trade Policy Review 
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318. The Energy Policy and Conservation Act (42 U.S.C. Sections 6201-6422) provides for the 
participation of the Department of Justice and the FTC in voluntary agreements established by oil 
companies to deal with emerge ncy international oil shortages.337  It also mandates the FTC to issue 
regulations establishing labelling requirements for ce rtain household appliances to show their energy 
efficiency ratings.  The Act also grants the FTC th e power to recommend that fi nes, determined by the 
Department of Transportation against automobile  manufacturers for violating average fuel economy 
standards, be reduced if they are believed to result in decreased competition in the automobile 
industry.  Under the Outer Continenta l Shelf Lands Act Amendments of 1978  (43 U.S.C. 
Section 1337), the Department of Justice and the FTC must report  to the Secretary of the Interior with 
respect to the expected competitive effects of pr oposed leases for the extrac tion of oil and gas from 
the Outer Continental Shelf. 
319. The Lanham Trademark Act (15 U.S.C. Section 1051-1127) authorizes the FTC, under 
certain conditions, to apply to the PTO for the can cellation of registered trade marks.  Under the 
Packers and Stockyards Act (7 U.S.C. Sections 181-229), the FTC also has jurisdiction over certain activities of meat packers.  The International Antitrust Enforcement Assistance Act of 1994 (15 
U.S.C. Sections 46 et al.) authorizes the Departme nt of Justice and the FTC to enter into mutual 
assistance agreements with foreign antitrust authorities. 
320. A number of statutes provide for limited immun ity from antitrust laws in specified cases.  
Immunity applies especially in agriculture ( under the Capper-Volstead Agricultural Producers’ 
Associations Act, and the Agricultural Ma rketing Agreement Act of 1937);  fishing   (Fishermen’s 
Collective Marketing Act);  insurance  (McCarran-Ferguson Insurance Regulation Act);  and for 
exports (Export Trading Company Act of 1 982, and the Webb-Pomerene Export Trade Act)  
(Box III.4).  International ocean carriers are a llowed to engage in conferences (price-fixing 
arrangements) by the Shipping Act of 1984 if they are not contested by the Federal Maritime Commission.
338 
321. Also, some statutes have antitrust provisions that  pertain specifically to certain sectors, such 
as banking, telecommunications, transportation, and energy (Box III.5). 
322. Proposed antitrust legislation currently being examined by Congress includes the Protect 
American Jobs Through the Foreign Trade Antitrus t Improvements Amendments Act of 1998, and the 
Antitrust Improvements Act of 1998. 
                                                      
337This requirement is also contained in the Defense Production Act of 1950 (50 U.S.C. App. 
Sections 2061-2169). 
338Prior to the 1984 Act, and under the 1916 Shipping  Act, U.S. ocean carrier s required approval from 
the U.S. shipping board to engage in conferences (Clyde and James, 1995, pp. 4-12). United States WT/TPR/S/56 
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Box III.4:  Selected statutory antitrust immunities 
(i) Agricultural sector: 
(a) Clayton Act, Section 6 (15 U.S.C. Section 17):   Allows the operation of agricultural or horticultural 
mutual assistance organizations when such organizations do not have capital stock or are not conducted for 
profit. 
(b) Capper-Volstead Agricultural Producers’ As sociations Act (7 U.S.C. Sections 291-292):   Allows 
persons engaged in the production of agricultural products to act together for the purpose of "collectively 
processing, preparing for market, handling, and marketing" their products and permits cooperatives to have 
"market agencies in common", and authorizes the Secretar y of Agriculture to proceed against cooperatives that 
monopolize or restrain commerce to increase prices. 
(c) Agricultural Marketing Agreement Act of 1937 (7 U.S.C.  Section 608b-c):   Authorizes the 
Secretary of Agriculture to enter in to marketing agreements with producers and processors of agricultural 
commodities.  These arrangements are exempted from th e application of  antitrust laws. The Secretary of 
Agriculture may also enter into marketing orders, except for milk, that control the amount of an agricultural 
product to increase the price.  (Milk marketing orders es tablish a minimum price for milk rather than levels of 
maximum output.) 
(ii) Export trade 
(a) Export Trading Company Act of 1982 (15 U.S.C.  Section 4001 et seq.):   Provides a limited 
antitrust immunity for export trade, and export trade activi ties specified in a certificate of review issued by the 
Secretary of Commerce w ith the concurrence of the Attorney General.  To obtain the certificate it must be must 
shown that the proposed activities will not substantially lesse n competition or restrain trade in the United States 
nor substantially restrain the export trade of any comp etitor of the applicant; will not unreasonably enhance, 
stabilize, or depress prices in the Unite d States of the class of goods or serv ices exported by the applicant; will 
not constitute unfair methods of competition against compe titors engaged in the export of the class of goods or 
services exported by the applicant; and will not include any act that may reasonably be expected to result in the 
sale for consumption or resale in the United States of the goods or services exported by the applicant.  While a 
certificate is in effect, the persons named in it are immune  from federal or state antitrust liability with respect to 
the conduct specified.  However, parties injured may sue for actual damages on the ground that the conduct does 
not comply with the statutory criteria, and the Attorney  General may sue under Section 15 of the Clayton Act. 
(b) Webb-Pomerene Export Trade Ac t (15 U.S.C. Sections 61-64):   Provides antitrust immunity for the 
formation and operation of associations of otherwise compe ting businesses to engage in collective export sales.  
The immunity conferred by this statute does not extend to actions that have an anticompetitive effect within the 
United States or that injure domestic compet itors of members of export associations.   
(iii) Insurance  
McCarran-Ferguson Insurance Regulation Act (15 U.S.C. Sections 1011-1015):   The insurance business is  
exempted from antitrust laws to the extent "regulat ed by state law".  The Sherman Act applies only to 
agreements or acts to boyco tt, coerce, or intimidate. 
(iv) Fishing  
Fishermen’s Collective Marketing Ac t (15 U.S.C. Sections 521-522):   Immunity patterned after the Capper-
Volstead Act, permits fishermen to act together for the purpose of catching, producing, preparing for market, 
processing, handling and marketing their products. Allows the issue of cease and desist orders by the Secretary 
of the Interior if interstate or foreign commerce is rest rained or monopolized by any association of fishermen. 
(v) Local governments 
Local Government Antitrust Act of 1984 (15 U.S.C. Sections 34-36):   Provides antitrust immunity for local 
government officials and empl oyees acting in an official capacity with respect to actions brought for damages, 
fees or costs, and for claims directed  at a person based on an official action directed by a local government. 
Source :  Federal Trade Commission. 
 WT/TPR/S/56 Trade Policy Review 
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Box III.5:  Antitrust provisions applied on specific sectors 
(i) Banking 
Bank Merger Acts of 1960 and 1966 (12 U.S.C. Section 1828(c)):   Provide that planned bank or saving 
association mergers must not be consummated until 30 da ys after the date of approval by the appropriate 
banking agency.  The merger may proceed if a suit under antitrust laws is not initiated during the 30-day period; 
thereafter it will be exempt from challenge except suits br ought under Section 2 of the Sherman Act.  The Acts 
also allow anti-competitive mergers if the banks can show that the anti-competitive effects of the merger will be 
outweighed by an increased ability to meet the convenience and needs of the community to be served. The 
Department of Justice is required to report to the Comptroller of Currency, the Board of Governors of the 
Federal Reserve System, the Federal Deposit Insurance Corp oration, or the Office of Thrift Supervision on the 
competitive factors involved in any proposed merger, c onsolidation, acquisition of assets, or assumption of 
liabilities of any bank insured by the Federal Deposit Insurance Corporation. 
Bank Holding Company Act (12 U.S.C. Sections 1841-1850, 1971-1978):   Provides that the Federal Reserve 
Board must apply the standards set out in the Bank Merger Act to mergers and acquisitions involving bank 
holding companies.  This Act also governs any acquisition of a non-bank by a bank holding company.  The 
parties to a bank holding company transaction must file copies of their application to the Department of Justice 
at least 30 days before consummation for it to be exempt from Harding-Scott-Rodino reporting requirements.  
The Act also prohibits certain tying arrangements by banks , as well as certain exclusive dealing agreements with 
customers. 
(ii) Communications 
Communications Act of 1934 (47 U.S.C. Section 151 et seq.), as amended by the Telecommunications Act 
of 1996:  Under Section 402(a) of the Act, the Antitrust Divi sion, representing the United States, is automatically 
a party respondent in most appeals from Federal Communications Commission (FCC) common carrier and rule-
making actions.  The stated purposed of the Telecommunications Act of 1996 was to encourage competition 
over regulation in the telecommunications markets.  In so doing, it repealed the few previous immunities the 
FCC could confer (for, e.g., telephone mergers). 
Cable Communications Policy Acts of 1984 and 1992, (47 U.S.C. Sections  521-559):   The FCC is given 
authority to approve transfers of cable television relay service licences. Government entities are immune from 
claims for damages under any federal law for conduct related to the regulation of cable services after 
2 October 1992. 
(iii) Energy 
Department of Energy Organization Ac t (42 U.S.C. Section 7101 et seq.):   The Act established the Federal 
Energy Regulatory Commission (FERC) as an independent regulatory commission within the Department of 
Energy, to establish rates for the transmission and sale of electric energy and the transportation and sale of 
natural gas.  The FERC has authority to regulate merg ers and acquisitions, except for acquisitions of voting 
securities of natural gas companies, under the Federal Power Act and the Natural Gas Act. 
Atomic Energy Act of 1954 (42 U.S.C. Section 2135):  Requires the Department of Justice to advise the 
Nuclear Regulatory Commission whether granting a licen ce as proposed or certifying a plant would create or 
maintain a situation consiste nt with the antitrust laws. 
Naval Petroleum Reserves Production Act of 1996 (10 U.S.C. Section7430(g), (h), (i), § 7431(b)):  Requires 
the Secretary of Energy to consult with the Attorney General prior to promulgating any rules and regulations 
and prior to entering into contracts or agreements for the production or sale of petroleum from the naval 
petroleum and oil shale reserves.  An arrangement can be entered into only if the Attorney General  finds no 
violation to antitrust laws. 
National Petroleum Reserves in Alaska (42 U.S.C. Sections 6504(d), 6506):  Provides that no contract for the 
exploration of the National Petroleum Reserve in Alaska ma y be executed by the Secretar y of the Interior if the 
Attorney General finds that such contract w ould be inconsistent with the antitrust laws. 
Deepwater Port Act (33 U.S.C. Sections 1501-1524):   Before granting deepwater port licences, the Secretary 
of Transportation must obtain the opinion of the Attorn ey General and the FTC as to whether the grant of the 
licence would adversely affect competition or be otherwise inconsistent with the antitrust laws. United States WT/TPR/S/56 
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(iv) Transportation 
Federal Aviation Act of 1958 (49 U.S.C. Sections 408, 409, 412):  The Department of Justice reviews domestic 
airline mergers, acquisitions, and interlocking directorates  under the antitrust laws as it does in other industries.  
The Department of Transportation approves and may gran t antitrust immunity for agre ements between U.S. and 
foreign carriers. 
Shipping Act of 1984 (46 U.S.C. Sections 1701-1721):   Provides that the Federal Maritime Commission 
(FMC) may approve the participation of domestic ocean carriers in international rate-making conferences.  
FMC-approved conferences are im munized from anti-trust laws. 
Source: Federal Trade Commission. 
 
323. The Protect American Jobs Through the Foreign Trade Antitrust Improvements Amendments 
Act of 1998 envisages an amendment to the Sher man Act and the Federa l Trade Commission Act 
with respect to trade with foreign nations.  The Act would reaffirm the scope of the Sherman Act 
regarding anti-competitive conduct involving foreign trade by codifying an earlier change to the 
agencies Guidelines for International Operations;  the effect of this change was to provide for actions 
based on harm to U.S. exports or exporters independe nt of any harm to U.S. consumers.  In this 
respect, the Act proposes changes to the amendment (to the Sherman Act) introduced by the Foreign 
Trade Antitrust Improvements Act of 1982 regarding application of the Sherman Act only when the 
anti-competitive policy or conduct involving foreign trade has a "direct, substantial, and reasonably 
foreseeable effect on U.S. exports, imports, or inte rnal trade" by adding "without regard to effect of 
such conduct on consumers in the United States".  The proposed Act also stipulates that "a 
determination of whether the effect of such (an ti-competitive) conduct is substantial may be made 
solely with reference to the product or type of product affected by the conduct and the geographical 
area in which the conduct occurs."  The proposed  amendment to the Federal Trade Commission Act 
goes in the same direction and contains similar wording.339 
324. The Antitrust Improvements Act of 1998 amends th e Clayton Act to enhance the authority of 
the Attorney General to prevent certain mergers a nd acquisitions that would limit competition in the 
telecommunications industry in cases where certain federal requirements to enhance competition are not met.  The Act proposes adding a new section at the end of the Clayton Act (section 27) dealing with "restraint of trade regarding telecommunications ".  The new section bans mergers of "large local 
telephone companies"
340, including affiliates, unless the Attorney General finds that the proposed 
merger or acquisition will promote competition fo r telephone exchange services and exchange access 
services.  Additionally, the proposed merger must also be cleared by the Federal Communications 
Commission.  Each "large local telephone company"  that is a party to the proposed merger or 
acquisition, must have fully implemented the comp etition requirements of sections 251 and 252 of the 
Communications Act of 1934 (47 U.S.C. 251, 252) with respect to at least half of the access lines in 
each state served by that company, of which at least half must be residential access lines.341 
                                                      
339Section 5(a)(3) of the Federal Trade Commission Act (15 U.S.C. 45(a)(3)) is amended by inserting a 
provision stating that: "a determination of whether the ef fect of methods of competit ion are substantial may be 
made solely with reference to the product or type of product affected by such methods of competition and the 
geographical area in which such methods  of competition occurs", and without regard to effect of such methods 
of competition on consumers in the United States. 
340A large local telephone company is defined in the Act as a local telephone company serving, at the 
date of a proposed merger or ac quisition, over 5% of the telephone  access lines in the United States. 
341Antitrust Improvements Act of 1998 (as introduced in the Senate), S.2207, p.2. WT/TPR/S/56 Trade Policy Review 
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Enforcement activities 
325. The Antitrust Division of the Department of Jus tice and the FTC are the federal agencies in 
charge of enforcing antitrust laws.  The Department of Justice is headed by the Attorney General who 
has responsibility for enforcing the Sherman and Clayton Acts.  The Antitrust Division of the 
Department of Justice is headed by  an Assistant Attorney General, appointed by the President.  Only 
the Department of Justice may prosecute crimin al violations.  The FTC shares responsibility for 
enforcing the Clayton Act and has sole responsib ility for enforcing the Federal Trade Commission 
Act.  The FTC is an independent agency, comprised of five members appointed by the President for a 
period of seven years.  Within the FTC, the Bureau  of Competition is responsible for the enforcement 
of antitrust legislation.  Enforcement guidelines for international operations are contained in the 1995 
Antitrust Enforcement Guidelines for International Op erations, issued jointly by the Department of 
Justice and the FTC.  U.S. antitrust laws are enfor ced mainly through proceed ings brought in federal 
courts, either by the Department of Justice, privat e parties, or state attorneys general, and in FTC 
administrative proceedings.  The FTC also brings ac tions in federal court to obtain preliminary or 
permanent injunctive relief and othe r equitable remedies, and to enforce violations of its remedial 
orders. 
326. The International Competition Policy Adviso ry Committee (ICPAC) was formed in 
November 1997 to address global antitrust issues.  The ICPAC's role is to provide advice and information to the Attorney General on internatio nal antitrust issues, such as transnational cartels, 
multi-jurisdictional merger reviews, and in ternational anti-competitive business practices. 
327. One of the Department of Justice's main an titrust enforcement activities is the criminal 
prosecution of bid rigging and price fixing.  In recent years, price-fixing and bid-rigging convictions have been obtained in a number of industries, including soft drinks, motion pictures, trash-hauling, road-building, and electrical contracting;  inves tigations have also cove red display materials;  
aluminum extrusions;  bread;  carpets;  doors;  explosives;  fax paper;  milk and diary products
342;  
plumbing supplies;  and other produc ts and services.  The number of investigations under the Clayton 
Act involving mergers has increased substantiall y during the 1990s, from 93 in FY 1990 to 276 in 
FY 1997;  most of these have taken place under the Hart-Scott-Rodino Act (Table III.22).  By contrast, the number of investigations under the Sh erman Act has diminished, but fines have been 
greatly increased;  they have been focused mainly  on international cartel activities in the past few 
years. 
328. The amount of fines collected by the Departme nt of Justice increased substantially during 
FY 1997, when it reached over US$205 million for bot h corporations and individuals, an eight-fold 
increase from the previous fiscal year.
343  This figure was largely due to a fine of US$100 million 
applied on Archer Daniels Midland (United Stat es) and of US$50 million to Haarman and Reimer 
Corp. (German parent) in a case involving an interna tional cartel of lysine.  In fiscal year 1998, fines 
collected reached US$265 million, largely du e to a US$110 million fine applied on UCAR 
International, Inc., the largest producer of graphite electrodes in the United States, for its participation 
in an international cartel to fix the price and allo cate the volume of graphite electrodes sold in the 
United States and in other countries.  Other inte rnational cartels uncovered in 1997 and 1998 involved 
marine transportation, food preser vatives, and sodium gluconate.  Of  the combined figure of roughly 
US$470 million collected in fines during the fiscal years 1997 and 1998, the majority (US$440 
                                                      
342A large number of criminal cases against milk and dairy products suppliers have been brought by the 
Antitrust Division in the last ten years:  since 1988, the Division has filed 134 milk bid-rigging cases, involving 
81 corporations and 84 individuals.  Criminal fines imposed on corporations and individuals between 1988 and 
1998 reached some US$69. 8 million, and civil damage settlements were in excess of US$8 million. 
343 Spratling (1998). United States WT/TPR/S/56 
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million) involved international cartel practices.344  In May 1999, SGL Carbon Aktiengesselschaft 
(SGL AG), the world's largest producer of gra phic and carbon products was fined a record of 
US$135 million for participation in a conspiracy to  eliminate competition on the graphic electrodes 
industry.345  Sherman Act violations yielding a fine of US$10 million or more during fiscal years 1997 
and 1998 are shown in Table III.23. 
Table III.22 
Antitrust division activities and case results 1990-98 (fiscal years) 
Investigation 1990 1991 1992 1993 1994 1995 1996 1997 1998 
Sherman Act Section 1:  
Restraint of Trade 71 77 84 110 136 98 93 73 80 
Sherman Act Section 2: 
Monopoly 4 5 3 7 22 16 14 8 5 
Clayton Act Section 7:  
Mergers of which: Hart-Scott-Rodino 
investigations 93 
 
59 92 
 
67 84 
 
52 102 
 
72 102 
 
57 134 
 
88 237 
 
186 276 
 
220 228 
 
176 
C a s e  R e s u l t s           
Number of corporations fined 73 55 45 64 59 32 31 30 18 
Amount of fines to corporations (US$'000)  22,658 17,573 22,430 40,427 38,996 40,222 25,245 203,931 241,645 
Amount of fines to individuals 
(US$'000) 917 2,806 1,275 1,868 1,240 1,211 1,572 1,247 2,499 
Hart-Scott-Rodino fines 
(US$'000) 275 6,775 2,000 1,976 2,600 425 7,650 5,796 500 
Source : Department of Justice, Antitrust Division.  
329. Of the 17 fines of US$10 million or more applied in fiscal years 1997 and 1998, four, 
including the two largest, were on U.S. compan ies.  Fines on U.S. companies accounted for 
US$231 million, or around half of the total (US$311 million including subsidiaries of foreign firms).  
Among companies from foreign countries fined, four were Japanese (with fines totalling 
US$69 million);  two were Dutch (US$59 million);  two were Swiss (US$25 million), and one was 
Belgian, and three were U.S. subsidiaries of fore ign companies.  The average fine applied in FY1998 
was US$12 million.346 
330. One of the main ongoing antitrust investigations  is the Microsoft case.  The Department of 
Justice filed an antitrust suit against Micros oft, on 16 May 1998, for allegedly engaging in 
anti-competitive and exclusionary practices to main tain its monopoly in personal computer operating 
systems and to extend that monopoly to Internet br owsing software.  The Department alleged that 
Microsoft feared competitive browsers would facilitate competition in the PC operating systems market by freeing consumers from dependence on a particular operating system when selecting 
applications programmes.  The Depa rtment also filed a motion seeking a preliminary injunction.  The 
District Court consolidated a parallel action of 19  state attorneys general with the Department’s 
action, and consolidated the trial on the merits with the preliminary injunction hearing.  Trial 
commenced on 19 October 1998, and is currently under way.  The Department contends that 
Microsoft, with its monopoly power in the operating system, has not only unnecessarily tied its 
browser to the operating system, but has used its po wer to prohibit companies such as Apple and Intel 
                                                     
 
344 The total fines applied in fiscal years 1997 and 19 98 are the same as the combined fines applied by 
the Antitrust Division in the previous 20 years. The Antitr ust Division estimates that the activities of the cartels 
prosecuted in fiscal years 1997 and 1998 affect over US$10 billion of U.S. trade. 
345Department of Justice, Press Release , 4 May 1999. 
346Spratling (1999). WT/TPR/S/56 Trade Policy Review 
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from promoting competing technologies.  The Departme nt also contends that Microsoft attempted to 
persuade Netscape Communications to divide the browser market.347 
Table III.23 
Fines of US$10 million or more applied by the Department of Justice due to Sherman Act Violations, 1997-98 (fiscal years) 
Company Product Fine 
(US$ million) Scope  Country 
UCAR International Inc. Graphite electrodes 110 International United States 
Archer Daniels Midland Lysine and citr ic acid 100 International United States 
Haarman & Reimer Corp. Citric acid 50 International German parent 
HeereMac v.o.f. Marine construc tion 49 International Netherlands 
Showa Denki Carbon, Inc. Graphite  electrodes 29 International Japan 
Fujisawa Pharmaceuticals Sodium gluconate 20 International Japan 
Dockwise, N.V. Marine transpor tation 15 International Belgium 
F. Hoffman-La Roche, Ltd. Citr ic acid 14 International Switzerland 
Eastman Chemical Company Sorbates 11 International United States 
Jungbunzlauer International Citric  acid 11 International Switzerland 
Akzo Nobel Chemicals, BV & 
Glucona, BV. Sodium gluconate 10 International Netherlands 
ICI Explosives Explosives 10 Domestic British parent 
Dyno Nobel Explosives 10 International Norwegian parent 
Mrs. Baird's Bakeries Bread 10 Domestic United States 
Ajinomoto Co. Lysine 10 International Japan 
Kyowa Hakko Kogyo, Ltd. Lysi ne 10 International Japan 
Source : Department of Justice, Antitrust Division . 
331. Microsoft had been the object of two previ ous antitrust investigations.  In 1994, the 
Department of Justice had brought a civil action to pr event a violation of Section 7 of the Clayton Act, 
namely to prevent the proposed acquisition by Micr osoft of Intuit, Inc., the dominant producer of 
Personal Finance/Checkbook software.  The Departme nt of Justice determined that the proposed 
acquisition would eliminate competition between Mi crosoft and Intuit, and threatened to harm 
consumers in other important areas of commerce, especially the area of personal-computer based (PC-based) home banking.  A second investigation re garded violations of Se ctions 1 and 2 of the 
Sherman Act led the Attorney General to bring ci vil action to prevent and restrain Microsoft from 
using exclusionary and anti-competitive contracts to  market its personal-computer operating-system 
software.  This case was ended through the issue of a consent order.  Microsoft was enjoined not enter 
into any licence agreement for any product covered in the investigation for a duration exceeding one 
year;  not to impose a penalty or charge of any ki nd on a manufacturer for its election not to renew all 
or any portion of a licence agreement;  all licence agreements should be per copy, and should preclude 
conditions regarding the licensing of any other product payments. 
332. In March 1998, the Department of Justice sued  Lockheed Martin and Northrop Grumman to 
block their proposed merger – the largest merger ever  challenged by the Department up to that point.  
Both firms are major suppliers of technology to the U.S. military and are the only producers of several 
advanced defence products.  The challenge followe d an investigation conducted jointly by the 
Department of Justice and the Department of De fense.  In July 1998, the firms announced their 
intention to abandon the transaction;  the Depart ment of Justice then dismissed its lawsuit. 
333. The FTC has enforcement and administrative r esponsibilities under 37 separate Acts that deal 
with either of its two main missions-competition a nd consumer protection - or with both of them.  
                                                     
 
347Statement by Assistant Attorney General Joel I. Klein, Filing of Antitrust Suit Against Microsoft, 
18 May 1998. United States WT/TPR/S/56 
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Antitrust law enforcement by the FTC may be tri ggered by letters from consumers or businesses, 
Congressional inquiries, pre-merger notification filin gs under the Hart-Scotting-Rodino Act, etc.  If 
the FTC has "reason to believe" a violation of the law has occurred, several courses of action are available.  First, it may accept a proposed Part 2 administrative consent agreement from the company 
or individual respondent.
348  After soliciting and consideri ng public comment on the proposed 
resolution of the matter, the FTC may incorporate the agreement in a consent order, request the parties 
to modify it, or reject it if, on further consideration,  it is deemed not to be in the public interest.  A 
company or individual signing a c onsent agreement need not admit a violation of the law, but must 
agree to stop the injurious practices, and sometimes to  additional, "fencing-in" relief.  Second, if an 
agreement with the respondent is not reached, th e FTC may issue a Part 3 administrative complaint 
that commences a formal trial held before an Ad ministrative Law Judge.  If a respondent decides to 
settle the charges against it, it may enter into a Part 3 consent agreement, which ends the proceeding if 
the FTC accepts the agreement and, after the consid eration of public comment, issues a consent order.  
If the proceeding continues to completion, the Judge issues an initial decisi on and the case moves to 
the FTC for final disposition.  If a violation is found, the FTC may issue a cease-and-desist order or 
other relief.  Final orders of the FTC against a comp any or individual are appealable to a United States 
Court of Appeals.  Third, the FTC may file an action in federal district court for a preliminary injunction pursuant to Se ction 13(b) of the FTC Act to stop an anticompetitive practice temporarily 
pending an administrative proceeding.   Given the time constraints, this is the course most commonly followed in merger cases that are not  resolved by a consent order.  Fourth, the FTC may file an action 
in federal district court for a permanent injuncti on and other equitable relie f under Section 13(b) of 
the FTC Act.  This procedure h as been used to seek monetary relief such as restitution under the 
court’s equitable powers in addition to an injunc tive remedy.  In a case filed in December 1998 under 
Section 13(b), the FTC sought US$120 million in eq uitable relief from Mylan Laboratories and three 
other companies who were charged with restrain t of trade, monopolization and conspiracy to 
monopolize the market for two kinds of wide ly prescribed anti-anxiety pharmaceuticals. 
334. The number of investigations initiated by the FTC has gone hand-in-hand with the increase in 
the number of mergers and acquisitions, which has more than tripled during the 1990s, rising from 
1,529 transactions in fiscal year 1991, to 4,728 in fiscal year 1998 (Table III.24).
349 
335. Most FTC cases are resolved through the nego tiation of consent agreements through which 
the party in breach of some antitrust statute consents  to comply with an order that will bring it into 
compliance with the breached stat ute.  However, consent agreements do not constitute an admission 
of a law violation.  When an agreement has been  reached, the agreement is placed on the record for 
receipt of public comment, after which the FTC may i ssue a consent order that carries the force of law 
with respect to future actions.  Such orders apply to U.S. and foreign companies on a national 
treatment basis.  Violation of a consent order may result in a civil penalty of US$11,000.350  I n  
FY 1996, 31 consent orders were issued by th e FTC under its "competition mission";  their number 
declined to 23 in FY 1997 (Table AIII.8).  Addi tionally, 60 consent orders were issued under the 
FTC's "consumer protection mission".  Also in FY 1 997, four civil penalty actions, involving fines of 
between US$150,000 and US$5.6 million were settled w ith companies alleged to have violated the 
pre-merger notification requirement of the Hart-S cott-Rodino Act.  In FY 1998, a total of 50 
enforcement actions were undertaken by the FTC, a nd 23 consent orders were issued (Table III.25). 
As regards anti-competitive non-merger practices , the FTC brought 13 enforcement actions in 
                                                      
348"Reason to believe" is a legal standard that is applicable to FTC decisions to commence an 
enforcement action. 
349Federal Trade Commission (1998). 
350Violations of orders issued pursuant to Section 5 of the FTC Act carry a maximum penalty of 
US$11,000 per day;  violations of orders issued pursuant to Section 11 of the Clayton Act carry a maximum 
penalty of US$5,500 per day.  Orders in some cases, su ch as merger cases, may be issued under both the FTC 
Act and the Clayton Act. WT/TPR/S/56 Trade Policy Review 
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FY 1998 challenging a variety of anti-competitive  practices;  11 were resolved by consent 
agreements.  The FTC also won more than US$4.5 million in civil penalties in fiscal year 1998 for violations of pre-merger notification requirement s and FTC divestiture order in merger cases. 
Table III.24 
Summary of mergers reported and ac tions taken (fiscal years 1990-98) 
 1990 1991 1992 1993 1994 1995 1996 1997 1998 
Transactions reported 2,262 1,529 1,589 1,846 2,305 2,816 3,087 3,702 4,728 
Filings receiveda 4,272 2,914 3,030 3,559 4,403 5,410 6,001 7,199 9,284 
Transactions in which a second request 
could have been issued 1,955 1,376 1,451 1,745 2,128 2,612 2,864 3,438 4,575 
Investigations in which second requests 
were issued 89 64 44 71 73 101 99 122 125 
Federal Trade Commission 55 33 26 40 46 58 36 45 46 
Department of Justice 34 31 18 31 27 43 63 77 79 
Transactions involving a request for 
early termination 1,975 1,321 1,403 1,689 2,081 2,471 2,861 3,363 4,323 
Granted 1,299 907 1,020 1,201 1,508 1,869 2,044 2,513 3,234 
Not granted 676 414 383 488 573 602 817 850 1,089 
a Two filings are usually received for each transaction; one fr om the acquirer, the other one from the acquired company. 
Source : Federal Trade Commission.  
336. One of the most prominent FTC cases in 1997 was the challenge of the proposed merger 
between Staples, Inc. and Office Depot, Inc., th e two leading retailers of office supplies in the 
United States.  Despite the presence of numerous othe r retailers of office supplies, the court found that 
Staples and Office Depot were in a separate, “su perstore” category  because of product mix and 
service attributes that were not matched by other kind s of retailers.  Staples and Office Depot were the 
only superstores in many local markets, and had only one other superstore competitor in other 
markets.  The FTC presented extensive pricing da ta and documentary evidence demonstrating that 
other retailers were not able to constrain the pricin g of the superstores.  Upon the court’s issuance of a 
preliminary injunction against the merger, the companies abandoned the transaction.  The FTC 
estimated that by stopping the merger, consumer s were saved approximately US$1.1 billion over a 
five-year period.  Another major action in 1997 involved the merger of Ciba-Geigy Limited and 
Sandoz, two large multinational pharmaceutical firms.   The  FTC’s concern was that the merger 
would result in a monopoly in certain key patents re lating to research in gene-therapy treatments for 
various forms of cancer and AIDS, and thereb y lessen innovation in these products.  The FTC 
contended that the merger would make it less likel y that the combined firm would be willing to 
cross-licence these patents with other firms engaged in research in this area, and thereby lessen both 
the incentives and the ability of these firms to c ontinue development a nd commercialization of 
gene-therapy products.  The matter was resolved w ith a consent order allowing the transaction to 
proceed on the condition that the merged firm licence  certain patents and other technologies to other 
firms so that they may continue to compete. United States WT/TPR/S/56 
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Table III.25 
Principal FTC anti-trust actions, fiscal year 1998 
Action Nr. Cases 
Merger preliminary injunctions 3 Ca rdinal Health/Bergen Brunswig;  McKesson/AmeriSource Health;  Tenet 
Healtcare/Doctors Regional. 
Merger consents 21 Dow Chemical/S entrachem;  Guiness PLC/Grand Me tropolitan;  CUC International/HFS 
Inc.;  Shell Oil Co. (joint-venture with Tex aco Inc.);  Cablevision/Tele-communications;  
S. C. Johnson/DowBrands;  Landamerica Financial Group, Inc./Commonwealth and 
Transnation;  Roche Holdings Ltd./C orange;  Federal Mogul/T&N;  Williams 
Companies/MAPCO;  Degussa Corporation;  Intel Corp./Digital Equipment;  Global 
Industrial Technologies/AP Green;  Gerald W.  Schwartz/Ogden Aviation Food Services;  
Nortek Inc/NuTon Inc.;  Albertson's/ Buttrey;  Shell Oil/Coastal Corp.;  
Medtronic/Physio-Control. 
Merger administrative complaints 2 Tenet Healthcar e/Doctor's Regional;  Boral Ltd. (Monier Lifetitle) 
Merger-related civil penalty actions 4 Rite Aid Corp.;  CV S Corporation;  Loewen Group and Loewen International;  
Columbia/HCA Healthcare. 
Non-merger consents 11 Urological St one Surgeons, Inc. and Parkside Kidney Stone Centers;  Checkpoint 
Systems Inc.;  Sensomatic Electronics Cor poration;  Stone Cont ainer Corporation;  
Fastline Publications;  Institutional Pharmacy Network;  M. D. Physicians of Southwest 
Louisiana;  South Lake Tahoe Lodging Associ ation;  Chrysler Dealers;  Unnamed;  
Dentists of Juana Diaz;  Cuoma. 
Non-merger complaints 2 Summit Technology Inc. and VISX Inc.;  Intel Corporation. 
Source : Federal Trade Commission.  
337. Some of the most significant cases investigated  by the FTC in fiscal year 1998 included the 
proposed mergers of the United States' four largest  pharmaceutical wholesalers into two companies. 
The FTC prevented the mergers, involving McK esson Corp's acquisition of AmeriSource Health 
Corp, and Cardinal Health, Inc's acquisition of Be rgen Brunswig Corp, arguing in court that they 
would substantially reduce competition.  Another important case involved Tenet Healthcare where the 
FTC obtained a preliminary injunction against the pr oposed merger of the only two commercial acute 
care hospitals in Butler County, Missouri.351  Among non-merger cases, the FTC challenged boycott 
activity in  the Internet Auto Dealers matter ( Fair Allocation System) , where a group of 25 automobile 
dealerships threatened to boycott Ch rysler if it did not agree to change its vehicle allocation system so 
as to restrict the number of vehicles available to  competing dealers who offered low prices through 
marketing on the Internet.  The FTC obtained the d ealers' agreement to an order prohibiting any such 
boycotts in the future.  In a case involving intellectual property, the FTC filed an administrative 
complaint against Summit Technology and VISX, Inc., the only two firms authorized to sell the equipment and technology used for laser eye surgery,  on grounds that they had formed a joint venture 
to pool their patents in order to fix the level of royalty fees.  The firms dissolved the patent pool 
pending trial and subsequently agreed to a consent or der, under which they agreed not to fix prices for 
the use of their lasers and patents (one remain ing charge involving monopolization through fraud on 
the patent office is still in litigation).  An administ rative case against Intel charged that the company 
sought to maintain a monopoly position in microprocessors by coercing certain customers, who also had microprocessor-related technologies, to license those technologies to Intel on Intel's terms.  According to the FTC, Intel accomplished this by refusing to provide information on its new 
technologies to customers that sued it over use of patents.  The case was settled in March 1999, when 
Intel agreed not to withhold information from such  customers except in certain limited situations.  
Another major action in 1998 was an administrative case that charged Toys “R” Us, the largest toy 
retailer in the United States, with suppressing comp etition by enlisting the agreement of major toy 
manufacturers to refrain from suppl ying the same toys to low-pric ed competitors such as "warehouse 
clubs" that sell products at a very low mark-up.  Th e FTC found that Toys “R” Us was able to extract 
such agreements  from manufacturers because of its market power as the nation’s leading toy retailer, 
                                                     
 
351Appeal pending at the time of this report. WT/TPR/S/56 Trade Policy Review 
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and that the agreements in fact had lessened comp etition.  The FTC issued a cease-and-desist order 
prohibiting Toys "R" Us from e ngaging in the challenged conduct.352 
Competition policy enforcement agreements 
338. The United States has competition policy enforcemen t agreements with Australia, Canada, the 
EU, Germany and Israel.  New agreements with Aust ralia and the European Union were concluded in 
the 1996-98 period.  Additionally, a U.S.-Japan  Enhanced Initiative on De regulation and Competition 
Policy under the U.S.-Japan Framework for a New Economic Partnership was subscribed in 
June 1997. 
339. The United States and the European Union reach ed a new agreement, in June 1998, on the 
application of positive comity principles in the enforcement of their competition laws.  The new 
agreement elaborates on the 1991 U.S.-EC Agre ement Regarding the Application of Their 
Competition Laws, particularly on Article V, whic h calls for cooperation re garding anti-competitive 
activities occurring in the territory of one Party that adve rsely affect the interests of the other Party.  It 
supplements the 1991 agreement, which remains in fo rce.  The 1998 agreement is aimed at ensuring 
that trade and investment flows between the signa tories, and competition and consumer welfare are 
not impeded by anti-competitive activities.  The new agreement is also designed to rationalize the 
allocation of enforcement resources, by establishing cooperative procedures to relieve each Party from 
having to deal with anti-competitive activities that occu r mainly in the other Party's territory.  In the 
case of the United States, the competition laws cove red by the agreement are the Sherman Act, the 
Clayton Act (except as it relates to investigations  pursuant to the Hart-Scott-Rodino Act), the Wilson 
Tariff Act, and the Federal Trade Commission Act (except as these sections relate to consumer 
protection). 
340. The U.S.-Japan Enhanced Initiative on Dere gulation and Competition Policy signed in 
June 1997 under the U.S.-Japan Framework for a New Economic Partnership is aimed at addressing 
reform of relevant government la ws and regulations which impede  access to the Japanese market for 
U.S. goods and services.  Deregulation matters unde r the Enhanced Initiative are discussed in an 
expert-level group chaired by the Ministry of Foreig n Affairs and the Ministry of International Trade 
and Industry for Japan, and chaired by the United St ates Trade Representative for the United States.  
Under the Initiative, five working  groups were created, dealing with telecommunications, housing, 
medical devices/pharmaceuticals, financial service s, and structural issues (competition policy, 
distribution, and transparency).  The main dere gulatory measures undertaken by Japan and linked to 
the Enhanced Initiative include a commitment to amend the Telecommunications Business Law to 
implement a long-run incremental cost methodology for interconnection rates;  the widening of the 
scope of business activities for subsidiaries of financ ial institutions;  and a commitment by the Japan 
Fair Trade Commission (JFTC) to effectively enfor ce and strictly apply the Antimonopoly Act.  Japan 
also agreed to establish study groups to consider systems to permit private parties to sue for 
injunctions against violations of the Antimonopoly Ac t, to submit legislation to abolish or narrow 
exemption systems including anti-depression and rationalization cartels, and to increase transparency in the government procurement bidding process by disclosing the scheduled price for public works 
projects after the results of the tenders are released. 
Consumer Protection 
341. Consumer interests are protected in U.S. legislation by the provisions of the Consumer 
Product Safety Act (15 U.S.C. Section 2051, et seq.).  The agency in charge of enforcing the Act is 
the Consumer Product Safety Commission, an inde pendent regulatory agency created in 1973.  The 
Commission's main tasks include the protection of th e public against risks of injury associated with 
consumer products;  the assistance of consumers in evaluating the safety of consumer goods;  the 
                                                     
 
352Appeal pending at the time of this report. United States WT/TPR/S/56 
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development of uniform safety standards for cons umer products;  and to minimize conflict between 
state and local regulations.353  The Commission, composed of five members appointed by the 
President for terms of seven years, administers four laws apart from the Consumer Product Safety Act: the Flammable Fabrics Act (15 U.S.C. Section 1 191, et seq.);  the Federal Hazardous Substances 
Act (15 U.S.C. Section 1261, et seq.);  the Refrige rator Safety Act of 1956 (15 U.S.C. Section 1261, 
et seq.;  and the Poison Prevention Packaging Act of 1970 (15 U.S.C. Section 1471, et seq.). 
342. Consumer interests are also protected by th e FTC under the FTC Act, which prohibits unfair 
or deceptive acts or practices, as well as a number of other Acts.  Some of these other Acts deal with consumer credit protection, and are under different  Titles of the Consumer Credit Protection Act 
(15 U.S. Sections 1601-1693r).
354  Others refer to labelling or to false advertising355, to consumer 
fraud prevention (Telemarketing a nd Consumer Fraud and Abuse Prevention Act), etc.  The 
Telephone Disclosure and Dispute Resolution Act of  1992 (15 U.S.C. Section 5701 et seq.) mandates 
the FTC to regulate pay-per-call services.  Secti on 701(b)(1) of the Telecommunications Act of 1996 
extends the FTC 's regulation manda te by expanding the definition of pay-per-call services to include 
audio information or entertainment. 
(b) Regulatory framework and reform 
343. The Administrative Procedures Act (APA) de fines the basic rulemaking process to be 
followed by federal government agencies.  The pr ocess is, in general, transparent and open to 
participation by foreigners.  Under the APA, petitions  to issue, amend or repeal a regulation may be 
addressed to government agencies, whic h are obliged by law to respond.356 
344. The general rule is a publication of a notice of proposed rulemaking in the Federal Register 
(available online free of charge), which contains th e proposed rule or regulation, the name of the 
responsible agency for it, and invites public partic ipation.  This invitation allows all interested 
persons, national or foreign, to provide their comments on the proposed rulemaking.  Once comments 
have been received and taken into account a no tice of final rulemaking is published in the 
Federal Register , at the latest thirty days before the co ming into effect of the proposed rules.  
Responses to comments are included in notices of  final rules.  Advance notices of proposed 
rulemaking may also be published in some cases, to  allow for comments on certain issues prior to the 
formulation of a new or am ended regulatory framework. 
345. The APA does not require that the effect of ne w regulations on international trade be taken 
into account.  Additionally, there is no statutor y requirement to incorporate MFN and national 
treatment principles in U.S. domestic legislation.   However, the Office of Management and Budget 
(OMB) and the USTR are consulted occasionally when  a proposed regulation touches trade issues, so 
as to verify its WTO-consistency. 
346. The main instrument used to evaluate the imp act of new regulations is the development of 
Regulatory Impact Analyses (RIAs), a process started in 1974.  RIAs are developed by the agencies 
responsible for rule-making;  they analyse the ec onomic effects of proposed regulations.  While these 
                                                      
353CFR Title 16, Volume 2, Parts 1000 to end. Revised as of 1 January 1998. 
354These include the Truth in Lending Act;  the Fair Credit Billing Act;  the Fair  Credit Reporting Act; 
the Fair Credit and Charge Card Disclosure Act; the Equal Credit Opportunity Act; the Fair Debt Collection 
Practices Act;  the Consumer Leasing Act;  and the Electronic Fund Transfer Act. 
355The Acts that refer to labelling include the Wool Products Labelling Act, Fur Products Labeling Act; 
Textile Fibre Products Identification Act; Federal Cigarette Labeling and Advertising Act of 1966;  and Fair 
Packaging and Labeling Act).  The Dolphin Protection Consumer Information Act (16 U.S.C. Section 1385) makes it unlawful to deceptively claim th at a tuna product is "dolphin safe".   The FTC is also in charge of 
establishing the domestic-content requirements to use "Made in America" or "Made in U.S.A." labelling, in 
accordance with the Violent Crime C ontrol and Law Enforcement Act of 1994 (15 U.S.C.  Section 45a). 
356OECD (1999c), Ch. 4, p. 7. WT/TPR/S/56 Trade Policy Review 
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studies are generally structured as benefit/cost analyses, they vary in scope and detail.  Some are 
limited to a simple cost-benefit analysis;  others may consider (particularly for "significant" rules) 
social and environmental effects, effects on em ployment and productivity, effects on market 
efficiency, etc.  In some cases an assessment of alternative courses of action is provided, to highlight 
the reasons behind certain proposed regulations. 
347. The first major effort aimed at regulatory refo rm in the United States was undertaken in 1981, 
when Executive Order 12291 was issued.  This Order required agencies to issue only regulations that 
maximized net benefits, and to se nd their proposed regulations, together with a cost-benefit analysis, 
to the OMB for approval before the regulations became final.  It also  required agencies to review their 
existing regulations with a view to eliminating those deemed unnecessary.  No time limit was 
specified for these reviews. 
348. The Executive Order on Regulatory Planning and Review (Executive Order 12866), issued on 
30 September 1993, continued the reform programme  started in 1981, but introduced several 
modifications to the framework in which it was conduc ted.  First, it limited the review mandate of the 
OMB:  in accordance with Executive Order 12866, only  rules identified as "significant" must be sent 
to the Office of Management and Budget for review prior to publication in the Federal Register of 
their notice of proposed or final rulemaking.357  Since the OMB no longer reviews proposed 
regulations or amendments that are not defined as "significant", this has limited considerably the 
number of reviews undertaken.358  Executive Order 12866 also introduced a limited time frame for the 
conduct of reviews by the OMB, which now has a 90-day review period to offer recommendations to 
an agency.359  In case of disagreement with the OMB's recommendation, the President, or the Vice 
President on the President's behalf, may resolve the dispute.360  Recommendations made by the OMB 
are kept in public records, which ar e generally available to the public. 
                                                      
357"Significant" rules are defined as those that have an annual economic effect estimated at 
US$100 million or more, or that affect adversely th e economy, a particular econo mic sector, productivity, the 
labour market, competition, the environment, or public he alth or safety.  Regulations that affect state, local 
governments, or tribal communities are also considered "significant". 
358According to a report from the Office of Inform ation and Regulatory Affairs (OIRA) of the OMB, 
the number of economically "significant" rules revi ewed by the OMB declined  from 2,200 before the 
implementation of Executive Order 12866, to around 900 af ter it was implemented, with an average time of 30  
days per review. It was estimated that about 15% of the rules were defined as "significant".  OMB (1994). 
359The establishment of a 90-day review period fo r the OMB was introduced by Executive Order 12866 
to prevent the OMB from de facto blocking the adoption of rules it did not approve of in some cases.  Former 
practice allowed the OMB to do this by extending the review, sometimes over a period of years. 
See:  John F. Morrall III (1997). 
360This is also a departure from practice under the previous Executive Orders, which allowed the Office 
of the Vice President to review regulations directly in  case of controversy between an agency and the OMB. United States WT/TPR/S/56 
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Annex III.1:  Textiles 
1. In 1997 the United States was the world's leading importer of textiles (US$12.46 billion) and 
clothing (US$50.30 billion); it was also among th e ten most important exporters of textiles 
(US$9.19 billion) and clothing (US$8.67 billion).1  The United States imports textiles mainly from 
Canada, China, the European Union (EU) and Mexico  (52.5% of total textiles in 1997).  Canada and 
the EU are also the main U.S. ma rkets for exports of textiles, followed by Mexico;  together they 
accounted for 44.02% of total U.S. exports of textil es in 1997.  Imports of clothing into the United 
States originate mainly in China;  Hong Kong, Chin a;  and Mexico, which together account for 36% 
of total imports.  Since 1992, Mexico has become an increasingly important supplier of clothing to the 
United States;  its share in total imports increased from 2.7% to 10.7% during 1992-97.  Mexico is 
also a major market for U.S. exports of clothing,  followed by the Caribbean Basin Initiative (CBI) 
countries as a group.2  Most of these goods being exported from the U.S. are "parts" of clothing, to be 
sewn into finished products and then re-imported into the United States.  There has been an ongoing 
shift in U.S. textile and clothing imports in th e 1990s towards countries benefiting from preferential 
access to the U.S. market;  thus NAFTA partners  and CBI countries have assumed a growing role.3 
2. For 1999, the average MFN tariff on U.S. imports is 5.7%;  however, industries such as 
textiles (ISIC 321) and clothing (ISIC 322) operate behind average tariffs of 10.3% and 11.3% respectively.
4  Some subsectors, including clothing (HS 61), man-made filaments (HS 54), and staple 
fibre (HS 55) benefit from higher than average tariff protection, at 13.7%, 13.3%, and 13.2%.5  
Effective protection for the textile industry is high er, since the nominal average tariff on textile inputs 
is 3.0% while the nominal average tariff on fully processed goods is 10.1%.6  Additional protection 
for textiles and clothing is provided through the quota system maintained under the WTO Agreement 
in Textiles and Clothing, although this protection is  decreasing under the integration plan agreed in 
the Uruguay Round.  The subsidies that affected this  sector seem to have been eliminated in fiscal 
year 1998.7 
3. In 1998, the United States maintained quotas on im ports of textile and clothing products of 
cotton, other vegetable fibers, wool, man-made fibr es, and silk blends from 45 countries, of which 37 
are WTO Members.  The quotas with WTO Members were carried over on 1 January 1995 from the 
former MFA regime and are now subject to the provisions of the WTO Agreement on Textiles and 
Clothing (ATC).8  Imports of the aforementioned products from non-WTO members are subject to 
                                                      
1WTO (1998). 
2The CBI shipments (imports and exports) consist almost entirely of clothing, most of which enters 
under the HS 9802 tariff provision.  Under a special access programme set up for CBI countries within the 
framework of the 9802 provision, clothing assembled in participating countries from U.S.-made and U.S.-cut fabric is eligible to enter under preferential quotas known as guarantee d access level (GALS), with the tariff 
being paid only on the value added abroad.  Clothing assembled in Mexico from U.S.-made and U.S.-cut fabric 
enter free of duty under NAFTA;  similar CBI goods ar e still subject to duty on the value added offshore.  
USITC (1998e).
 
3USITC (1998e). 
4In fact, 10.4% of the tariffs that apply to textiles and 20.2% of the tariffs that apply to clothing are 
three times higher than the overall average nominal tariff. 
5Some 8.8% of the tariff lines in HS Section 11 (Textiles and Textiles Articles) are subject to specific 
duties. 
6Estimates by the WTO Secretariat, based on data pr ovided by the U.S. authorities.  Tariff estimates 
calculated excluding "in-quota" tariff rates. 
7Subsidies under the AMTEX Programme and the Textile/Clothing Technology Corporation 
Programme were notified to the WTO in WTO docu ments G/SCM/N/16/USA, 26 September 1997, and 
G/SCM/N/25/USA, 11 May 1998. 
8WTO documents G/TMB/N/63, 19 April 1995, and G/TMB/N/63, 28 April 1995. WT/TPR/S/56 Trade Policy Review 
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Section 204 of the Agricultural Act of 1956.9  For Mexico, imports are now both quota and duty free, 
or subject to reduced duties, for "originatin g" textile and clothing products;  limits on 
"non-originating" textiles and clothing will be freed by 2004. 
4. The United States maintains a special programme with five WTO Members (Costa Rica, the 
Dominican Republic, El Salvador, Guatemala, and Jamaica) under the Caribbean Basin Economic and 
Recovery Act (CBERA), providing additional access to specific products through the establishment of 
guaranteed access levels (GALs), in addition to traditional specific limits established on similar 
products.  GAL-qualifying products must be assembl ed in the designated country from U.S.-formed 
fabrics cut in the United States, for re-export to th e United States, or from U.S.-formed fabrics cut in 
the United States and subject to certain furthe r processing in the designated country following 
assembly, for re-export to the United States.10  These imports are subject to duty on the value added 
offshore. 
5. The ATC provides for the gradual and complete in tegration of clothing and textile products 
into WTO rules over a ten-year transition period.  As these products are in tegrated, any quantitative 
restriction on them is removed.  Full integratio n of all textile and cl othing products and the 
consequent removal of all quotas is to be achiev ed by 1 January 2005.  Until the quotas are removed, 
they are subject to automatic increases in the annual growth rates, to be applied at each stage of the 
transition period.  In addition, more than 20 countries qualified under the ATC for small supplier 
status in the first and second stages, thus the growth  rates applied on their existing restraints were 
advanced by one stage.11 
6. Imports of textiles and clothing into the Unite d States generally require an export visa, by 
agreement with the exporting countries involved.  A vi sa is an endorsement in the form of a stamp on 
an invoice or an export control licence executed by a foreign government.12  It is used to control the 
exportation of textile and clothing products to the United States and to prohibit unauthorized entry of 
merchandise into the country.  A visa may cover e ither quota or non-quota merchandise, although in 
certain cases quota merchandise does not require a visa depending upon its country of origin.13  
Following a complaint to the WTO Textiles Monito ring Body (TMB) by India;  Pakistan;  and 
Hong Kong, China (in 1998), about the maintenance of this requirement for integrated goods, the 
United States decided to eliminate the visa re quirement for imports of these goods, as of 
1 January 1999.14 
7. The United States met its ATC obligations for th e first and second product integration stages 
on 1 January 1995 and 1 January 1998, respectively.15  While integrating products from the four 
                                                      
9USITC (1998e). 
10WTO Agreement on Textiles and Clothing: An  Explanatory Note (mimeo), 1998;  and 
G/TMB/N/63/Add. 6, 19 June 1996. 
11Bahrain, Colombia, Costa Rica, th e Czech Republic, the Dominican Republic, Egypt, El Salvador, 
Fiji, Guatemala, Haiti, Hungary, Jamaica, Kenya, Kuwait, Macau, Mauritius, Po land, Qatar, Romania, 
the Slovak Republic, United Arab Emirates and Uruguay for the first stage plus Bulgaria for the second stage 
(WTO documents G/TMB/N/184, 26 July 19 96, and G/TMB/N/311, 18 December 1997). 
12The paper visa can also be replaced by an Electr onic Visa Information Syst em (ELVIS) transmission, 
which certifies the country of origin and authorizes the shipment to be charged against applicable import quotas. 
13U.S. Customs Service Textile (1998). 
14WTO documents G/TMB/N/333, 27 July 1998 and G/TMB/N/336, 27 July 1998; and 
Federal Register , 7 October 1998, Vol. 63, No. 194.  Available at: http://frwebgate…/waisgate.cgi 
[14 December 1998]. 
15The integration of textiles and clot hing products into the WTO is taki ng place in four stages:  in 1995, 
16% of the total volume of textile and apparel trade in 1990 was integrated;  at the beginning of year four and year eight, an additional 17% and 18%, respectively, w ill be integrated:  and after year ten, all remaining United States WT/TPR/S/56 
 Page 161 
 
 
required categories of tops and yarns, fabrics,  made-up textiles products and clothing, in both 
instances the integration of products was concentrat ed in yarns and was least noticeable in clothing.16  
In terms of products for integra tion, tops and yarns and fabric s represented roughly 65% of the 
imported volume (taking stages 1 and 2 together), while  the share of clothing in the volume of imports 
integrated was 12.4%. 
8. In the first integration stage for the United States, the products involved were not subject to 
quotas and, hence, no restrictions were eliminat ed.  However, as a result of the second stage, 
24 categories or parts of categories on which the U.S.  maintained restrictions have been integrated 
and, as a result, such restrictions were elimin ated on 1 January 1998.  Goods involved included, inter 
alia, babies clothing, down clothing, footwear, handkerc hiefs, hosiery and carpets produced mainly in 
Asian countries, Brazil and Romania.17  In addition, the United States agreed to eliminate restraints 
applied to imports of several product categories from Romania.18 
9. Since 1996 the United States has made use of the special transitional safeguard mechanism in 
the ATC on four occasions:  once in 1996, involving El Salvador 19;  twice in 1997, involving 
Pakistan and Thailand;  and once in 1998, involving Pakistan.20  The United States reached an 
agreement with El Salvador on a restraint measure on cotton and man-made fibre skirts 
(Category 342/642).21  In the case of Pakistan the request to apply a safeguard measure was dropped 
after consultations;  while the United States and Th ailand agreed on a restraint measure for synthetic 
yarn (Category 603).22  On 24 December 1998, the United States requested consultations with 
Pakistan with respect to combed cotton yarn (Cat egory 301) produced and manufactured in Pakistan.23 
10. On 7 February 1995, the United States requested  consultations with Pakistan on grounds of 
alleged circumvention of quotas by transshipment by Pakistani companies of products falling under 
U.S. Category 361 (cotton bedsheets).24  Following consultations, a mutually satisfactory 
understanding was reached.25 
11. On 19 November 1998, the EU requested consulta tions with the United States on the latter's 
alleged failure to implement commitments under a 1997 agreement regarding U.S. rules of origin.26  
The EU held that changes in 1996, disadvantage Eu ropean textile exports since some EU textile 
products (e.g. certain fabrics, scarves and other fl at textiles products) were no longer recognized as 
having EU origin.  The consultation was joined by:  the Dominican Republic;  El Salvador;  
Honduras;  Hong Kong, China;  India;  Japan;  Pakistan;  and Switzerland.27  Rules of origin have an 
                                                                                                                                                                     
products will be integrated.  "Integrated products" are removed from the scope of the ATC's special safeguard 
mechanism, and any applicab le quotas are eliminated. 
16WTO documents TMB/W/5, 10 October 1994;  G/TMB/N/213/Corr.1, 20 March 1997;  and 
G/TMB/N/213/Add.1, 23 May 1997. 
17WTO document G/TMB/N/213/Add.1, 23 May 1997. 
18WTO document G/TMB/N/310, 17 December 1997. 
19WTO document G/TMB/R/19, 8 November 1998. 
20Federal Register , 31 December 1998, Vol. 63 , No. 251.  Available at: 
http://frwebgate.../waisgates.cgi [15 January 1999]. 
21WTO document G/TMB/N/200, 29 November 1996. 
22WTO document G/TMB/N/323, 14 May 1998. 
23Federal Register , 31 December 1998, Vol. 63 , No. 251.  Available at: 
http://frwebgate.../waisgates.cgi [15 January 1999]. 
24WTO document G/TMB/R/45, 20 July 1998. 
25WTO documents G/TMB/N/327, 27 July 1998, and G/TMB/N/328, 27 July 1998. 
26WTO (1996a). 
27 WTO document WT/DS151/series. WT/TPR/S/56 Trade Policy Review 
Page 162 
 
 
impact on imports of textiles and clothing into  the United States, since these determine where a 
product has been manufactured for duty and quota purposes. 
12. A U.S. anti-dumping investigation was initiate d, on 20 August 1996, regarding imports of 
spun rayon single yarn originating in Austria;  it was concluded with a nega tive determination by the 
USITC, and the decision was published on 26 Sept ember 1997.  U.S. anti-dumping duties applied on 
imports of cotton shop towels and greige polyester  cotton print cloth from China, imposed in 1983, 
are still in force and are subject to the sunset re views by the U.S. Department of Commerce (DOC) 
and USITC.  A countervailing duty, applied in 1977, on cotton yarn from Brazil was revoked on 
22 October 1998 as result of a sunset review, effective 1 January 2000.28  Other goods subject to U.S. 
countervailing duties include wool from Argentina (1 983);  cotton shop towels from Pakistan (1984), 
subject to a sunset review, with DOC determinati on due on 4 May 1999, and Peru (1984), subject to a 
sunset review, with determination due on 1 Sept ember 1999;  and textiles and textile products from 
Thailand (1985), which will be terminated on 1 Janua ry 2000 as a result of sunset determination made 
on 26 February 1999 (Chapter III(2)(iv)). 
13. Imports from China, the largest supplier of tex tiles to the United States, are regulated by a 
bilateral agreement.  The United States reduced Ch ina's textile quotas due to the illegal transshipment 
of Chinese-made textiles through third countries to circumvent quotas.29 
                                                      
28Department of Commerce, ITA [online].  Available at:  http://www.ita.doc.gov. 
29Financial Times , 8 May 1998. United States WT/TPR/S/56 
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Annex III.2:  Agriculture 
(i) Trade in agriculture1 
1. In calendar year 1998, the United States was the world's leading exporter of agricultural 
products (US$51.7 billion) and the sec ond largest importer (US$36.7 billion).2  M a j o r  U . S .  
agricultural exports are cereals (wheat and coarse gr ains), soybeans and products, cotton, and meats 
(including edible meat offals).  In 1998, expor ts of these products accounted for some 48% of total 
agricultural exports.  The relative importance of co rn, wheat and soybeans dec lined from the previous 
year due to lower prices.  With respect to impor ts, vegetables and preparations thereof, fruit and 
preparations thereof, coffee beans and products, a nd wine and beer are the top agricultural imports 
accounting for 42% of total imports in 1998. 
2. In 1999, U.S. agricultural exports to the Asia n Pacific Rim are expected to fall by about 
US$3 billion to US$16.7 billion. About half of this dec line is due to an expected fall in sales to Japan 
alone.  China;  Hong Kong, China;  the Republic of  Korea;  and Taiwan should account for most of 
the remaining decline.  Sales to the Europ ean Union are forecasted to drop US$1 billion to 
US$7.3 billion.  On the other hand, the forecast fo r agricultural exports to Mexico and Canada calls 
for a modest $450 million increase to $13.4 billion.  Sm all declines are forecast for U.S. exports to the 
Middle East and Africa.  Exports to Russia should hold at about US$1.1 billion due to the food aid package.
3 
(ii) Border measures 
3. The average nominal MFN tariff for agricultu re (WTO definition) was 10.8% in 1999 
compared to an overall average of 5.7%.4  Some 42% of the duties applied on agricultural goods are 
non-ad valorem .  As shown in Annex Table III.2.1 some agricultural subsectors, such as dairy 
products, sugar and sugar confec tionery, and tobacco and manufact ured tobacco products, benefit 
from higher than the average protection, at 22.3%, 15.7%, and 53.3%.  These subsectors also bear the 
highest percentage of tariff peaks (i.e. tariff rate s three times higher than the simple applied MFN 
average). 
4. In the United States tariff quotas apply, inter alia , to beef, dairy products, sugar and some 
sugar products, peanuts, tobacco and cotton;  such measures cover 1.9% (some 198) of all tariff lines.  
Over 90.8% of the out-of-quota tariffs are non- ad valorem  duties compared to 28.3% of the in-quota 
rates.  The simple average in-quota MFN tariff ra te is estimated at 9.5%;  while the corresponding 
average out-of-quota MFN tariff is set at 55.8%.  The degree to which tariff quotas are filled varies 
according to product.  Tariff quotas for products such  as mandarin oranges, peanuts, and raw sugar 
have been filled for calendar years 1996-98;  wh ile tariff quotas for other products including, cotton 
and dried cream have not been used at all or filled at very low levels (Annex Table III.2.2).5  
However, in most instances quotas are filled at levels above 90%. 
                                                      
1Information provided by the U.S. authorities. 
2Unlike definitions used by FAO and most other countries, the U.S. definition of “agricultural” 
products excludes spirits and cigarettes.  Trade in spir its and cigarettes adds about another $5-6 billion to U.S. 
export and import totals (U.S. authorities). 
3This forecast was released in February 1999 and will be re-examined in May 1999. 
4WTO definition of agriculture, this average includes  both in- and out-of-quota rates.  The average 
tariff for agriculture (HS 01-24) including in- and out-of-quota tariff lines is 10.5%. 
5WTO documents G/AG/N/USA/9, 11 March 1997, G/AG/N/USA/16, 28 March 1998, and 
G/AG/N/USA/12, 3 March 1999. WT/TPR/S/56 Trade Policy Review 
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Annex table III.2.1 
Protection in selected agricultural sectors, 1999  
(Per cent) 
HS Chapter/Description Ave. tariff Max. tariff Tariff peaksa Specific tariff 
04 Dairy produce, etc. 22.3 232.2 42.2 50.2 
17 Sugars and sugar conf ectionery 15.7 168.7 18.2 51.5 
18 Cocoa and preparations 14.7 191.5 19.2 43.6 
19 Preparations of cereals, etc. 19.0 151.7 30.9 26.5 
21 Miscellaneous edible preparations 14.9 109.8 22.7 44.3 
24 Tobacco, etc. 53.3 350.0 25.0 51.8 
a Three times the average simple MFN tariff. 
Note: All indicators were calculate d including in-quota tariff lines. 
Source:  WTO Secretariat. 
5. In accordance with Article 5 of the WTO Agr eement on Agriculture, products subject to tariff 
quotas may also be subject to special safeguard provisions.6  The United States notified the WTO that 
the volume-based special safeguard was applied in 1998 (from 10 August to 31 December) to imports 
of sheep meat (HS 0204.21.00, 0204.22.40, 0204.23 .40, 0204.41.00, 0204.42.40, and 0204.43.40).7  
Lamb meat imports, not subject to the special safeguard are the object of a Section 201 (Escape 
Clause) investigation (section (2)(iv)).  Although price-based safeguards are in effect for all tariff 
quota products, the United States notified the actua l application of safeguard duties during 1996 to 
dairy products, sugar and cocoa preparations.8 
6. Import permits are required for most plants and some plant products to prevent the 
introduction of pests and diseases, and to protect endangered plant species.  To protect U.S. livestock 
and poultry against the introduction of diseases that do not exist in the United States, certain animals 
and animal products, organisms and vectors, and veterinary biological products are also subject to 
import permits granted by the U.S. Department of Agriculture (USDA). 
7. A licensing system is also in place for imports of sugars and syrup described in HTSUS 
subheadings 1701.12.10, 1701.91.10, 1701.99.10, 1702.90.10 and 2106.90.10 and certain dairy 
products that are subject to tariff quotas under the WTO Agreement on Agriculture.9 
                                                      
6Exceptions involve green olives (HTS 0711.2028 and 2005.70.08) and tob acco (HTS 2401.10.65, 
2401.20.35, 2401.20.87, 2401.30.70, 2403.10.90, 2403.91.47 and 2403.99.90). 
7WTO document G/AG/N/USSA/18, 16 September 1998. 
8WTO document G/AG/N/USA/24, 10 March 1999. 
9The administration of tariff quotas is described in WTO documents G/AG/N/USA/2, and Adds.1 
and 2. United States WT/TPR/S/56 
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Annex table III.2.2 
In-quota tariff use, 1996-98 
(Per cett) 
 In-quota imports during 
period/Tariff quota quantity 
Description of products/Tariff item number(s) 1996 1997 1998 
Beef:  fresh, chilled or frozen                                                                                       
0201.10.10, 0201.20.10, 0201.20.30, 0201.20.50, 0201.30.10, 0201.30.30,0201.30.50 
0202.10.10, 0202.20.10, 0202.20.30, 0202.20.50, 0202.30.10, 0202.30.30, 0202.30.50 59.0 66.5 70.8 
Cream                                                                                                                               
0401.30.05, 0403.90.04 73.0 52.6 97.8 
Evaporated/condensed milk                                                                                          
0402.91.10, 0402.91.30, 0402.99.10, 0402.99.30 36.0 45.9 71.1 
Nonfat dried milk                                                                                                         
0402.10.10, 0402.21.05 94.0 76.8 96.4 
Dried whole milk                                                                                                          
0402.21.30, 0403.90.51 75.0 99.5 98.2 
Dried cream                                                                                                                   
0402.21.75, 0403.90.61 0.27 0.29 1.0 
Dried whey/buttermilk                                                                                                     
0403.90.41, 0404.10.50 9.9 42.8 38.5 
Butter                                                                                                                             
0401.30.50¸ 0403.90.74, 0405.10.10 88.2 96.8 99.4 
Butter oil/substitutes                                                                                                     
0405.20.20, 0405.90.10, 2106.90.24, 2106.90.34 90.0 100.0 97.8 
Dairy mixtures                                                                                                               
0402.29.10, 0402.99.70, 0403.10.10, 0403.90.90, 0404.10.11, 0404.90.30, 0405.20.60, 
1517.90.50, 1704.90.54, 1806.20.81, 1806.32.60, 1806.90.05, 1901.10.35, 1901.10.80, 
1901.20.05, 1901.20.45, 1901.90.42, 1901.90.46, 2105.00.30, 2106.90.06, 2106.90.64, 2106.90.85, 2202.90.24 53.0 67.8 68.5 
Blue cheese                                                                                                                     
0406.10.14, 0406.20.24, 0406.20.61, 0406.30.14, 0406.30.61, 0406.40.54, 0406.40.58, 
0406.90.72 95.0 93.5 94.3 
Cheddar cheese                                                                                                                  
0406.10.24, 0406.20.31, 0406.20.65, 0406.30.24, 0406.30.65, 0406.90.08, 0406.90.76 96.0 87.2 98.3 
American type cheese                                                                                                        
0406.10.34, 0406.20.36, 0406.20.69, 0406.30.34, 0406.30.69, 0406.90.52, 0406.90.82 94.0 86.6 91.2 
Edam and Gouda cheese                                                                                               
0406.10.44, 0406.20.44, 0406.20.73, 0406.30.44, 0406.30.73, 0406.90.16, 0406.90.86 87.0 77.0 86.3 
Italian type cheese                                                                                                         
0406.10.54, 0406.20.51, 0406.20.77, 0406.30.77, 0406.90.31, 0406.90.36, 0406.90.41, 
0406.90.66 .. 94.0 94.6 
Swiss/Emmenthal cheese                                                                                                 
0406.90.46 .. 73.0 81.2 
Gruyere process cheese                                                                                                 
0406.10.64, 0406.20.81, 0406.30.51, 0406.30.81, 0406.90.90 .. 71.0 86.8 
Other cheese NSPF                                                                                                          
0406.10.04, 0406.10.84, 0406.20.89, 0406.30.89, 0406.90.95 .. 75.0 85.7 
Lowfat cheese                                                                                                                   
0406.10.74, 0406.20.85, 0406.30.85, 0406.90.93, 1901.90.34 74.5 55.6 40.0 
Peanuts                                                                                    
1202.10.40,1202.20.40,2008.11.25, 2008.11.45 100.0 100.0 100.0 
 Table III.2.2 (cont'd) WT/TPR/S/56 Trade Policy Review 
Page 166 
 
 
 In-quota imports during 
period/Tariff quota quantity 
Description of products/Tariff item number(s) 1996 1997 1998 
Chocolate crumb                                                                                                               
1806.20.24, 1806.32.04, 1806.90.15 25.8 78.0 77.2 
Lowfat chocolate crumb                                                                                              
1806.20.34, 1806.20.85, 1806.32.141806.90.25 0.0 0.0 0.0 
Infant formula containing Oligosaccharides                                                                 
1901.10.15, 1901.10.60 5.5 3.4 100.0 
Green ripe olives                                                                                                           
2005.70.02  0.0 0.0 0.0 
Place packed stuffed olives                                                                                            
2005.70.16  30.0 36.7 45.5 
Green olives, other                                                                                                         
2005.70.91  40.0 81.5 51.8 
Green whole olives                                                                                                         
0711.20.18, 2005.70.06 26.0 26.0 25.3 
Mandarin oranges (Satsuma)                                                                                        
2008.30.52  100.0 100.0 100.0 
Peanut butter and paste                                                                                                
2008.11.05 95.5 97.6 92.0 
Ice cream                                                                                                                        
2105.00.10 1.0 0.5 1.4 
Animal feed containing milk                                                                                       
2309.90.24, 2309.90.44 17.6 20.6 14.4 
Raw cane sugar                                                                                                              
1701.11.10 100.0 97.0 96.5 
Other cane or beet sugars or syrups                                                                           
1701.12.10, 1701.91.10, 1701.99.10, 1702.90.10, 2106.90.44 93.0 92.5 92.5 
Other mixtures over ten per cent sugar                                                                          
1701.91.54, 1704.90.74, 1806.20.75, 1806.20.95, 1806.90.55, 1901.90.56, 2101.12.54, 
2101.20.54, 2106.90.78, 2106.90.95 100.0 100.0 100.0 
Sweetened cocoa powder                                                                                                
1806.10.10, 1806.10.34, 1806.10.65 98.0 97.8 57.7 
Mixes and doughs                                                                                                         
1901.20.30, 1901.20.65 71.5 62.0 100.0 
Mixed condiments and seasonings                                                                                  
2103.90.74 39.0 24.4 24.8 
Tobacco                                                                                                                            
2401.10.63, 2401.20.33, 2401.20.85, 2401.30.33, 2401.30.35, 2401.30.37, 2403.10.60, 
2403.91.45, 2403.99.60  77.0 51.5 
Short staple cotton                                                                                                        
5201.00.14 5.2 0.04 0.34 
Harsh or rough cotton                                                                                                         
5201.00.24 0.0 0.0 0.0 
Medium staple cotton                                                                                                   
5201.00.34 0.0 0.0 0.0 
Long staple cotton                                                                                                          
5201.00.60 0.0 0.05 0.0 
Cotton waste                                                                                                                     
5202.99.10 0.0 0.82 0.0 
Cotton processed but not spun                                                                                          
5203.00.10 80.0 9.2 0.0 
.. Not available. 
Source:  WTO documents G/AG/N/USA/9, 11 March 1997, G/AG/ N/USA/16, 28 May 1998, and G/AG/N/USA/23, 3 March 1999.  United States WT/TPR/S/56 
 Page 167 
 
 
(iii) Support programmes 
8. The Federal Agriculture, Improvement and Refo rm Act of 1996 (1996 FAIR Act) is the basic 
legislation governing farm policy for the peri od 1996-2002, which authorizes commodity support 
programmes for that period.10  The 1996 Act removed the link between income support payments and 
current commodity prices and production.  It el iminated deficiency payments and the Acreage 
Reduction Programme (ARP).11  The Export Enhancement Program (EEP), which has been in place 
since May 1985, was re-authorized until the year  2001 in the Uruguay Round Agreements Act of 
1994.12 The purpose of the programme is to enable exporte rs to offer prices that are competitive with 
those being offered by other countries ' exporters in selected  foreign markets.  Commodities eligible for 
assistance under this programme are wheat, wheat flour, feedgrains, rice, vegetable oil, frozen poultry, 
barley malt, pork and eggs.13  No EEP bonuses were granted in fiscal year 1997.14  In FY 1998 the EEP 
was used for coarse grains and poultry meat;  outlays amounted to US$1. 205 million and US$862,500 
respectively.15 
9. The Dairy Export Incentive Programme (DEIP) , was re-authorized by the Uruguay Round 
Agreements Acts of 1994, until 2001, and extended  to 2002 by the Farm Bill.  Under the DEIP, 
payments are made in cash on a bid basis to en tities that sell U.S. dairy products for export.16  I n  
FY 1997 government awards under DEIP amounted to  US$121.5 million and in FY 1998 the awards 
totalled US$110.2 million. 
10. Export promotion is provided through the Mark et Access Program (MAP), which uses funds 
from USDA's Commodity Credit Corporation (CCC) to enter into agreements with the U.S. 
agricultural trade organizations, state regional groups , and cooperatives.  CCC funds are used to share 
the cost of overseas marketing and promotional ac tivities, both of brand and generic promotions, in 
specified countries.  The MAP is administered by USDA's Foreign Agricultural Services.  The total 
allocation for MAP in FY 1998 was US$90 million.17 
11. The CCC, administers export credit guarantee pr ogrammes for commercial financing of U.S. 
agricultural exports.  The Export Credit Guarant ee Programme (GSM-102), which covers credit terms 
up to three years, and the Intermediate Export Credit Guarantee Programme (GSM-103), which 
covers longer credit terms up to ten years, underwr ite credit extended by the private banking sector in 
the United States.  Products eligible for GSM-102 and GSM-103, are also eligible for the Supplier 
Credit Guarantee Programme (SCGP), under which the CCC guarantees a portion of payments due from importers under short-term  financing (up to 180 days)  extended  directly by U.S. exporters to the 
importers for the purchase of U.S. agricultural commodities and products. 
12. As mentioned above, the 1996 FAIR Act repl aced the production adjustment programmes 
(including planting restrictions, acreage idling, target prices, and deficiency payments) that were in 
                                                     
 
10P.L. 104-127, 110 Stat. 888. 
11WTO document G/AG/N/USA/5, 16 September 1996. 
12The Federal Agricultural Improvement and Reform Act of 1996, enacted on 4 April 1996 further 
extends funding through 2002. 
13Since 1 July 1995, the terms of the WTO Agreement on Agriculture established annual ceilings, by 
commodity, with respect to maximum quantity and budgeta ry expenditures permitted for export subsidies (WTO 
documents G/SCM/N/3/USA, 15 March 1996, and G/SCM/N/3/USA/Suppl.1, 19 November 1998). 
14WTO document G/SCM/N/3/USA/Suppl.1, 19 November 1998. 
15WTO document G/AG/NU/SA/22, 22 February 1999. 
16The terms of the Uruguay Round Agreement on Agriculture established annual ceilings for both the 
EEP and the DEIP, by commodity, with respect to maximum quantity and budgetary expenditures permitted for 
export subsidies. 
17USDA [online].  Available at:  http://www.fas.usdea.gov/ [30 September 1998]. WT/TPR/S/56 Trade Policy Review 
Page 168 
 
 
effect for the 1991-95 programme crops (wheat, feed  grains, upland cotton, and rice), with a fixed 
production flexibility contract (PFC) payment progra mme for 1996-2002.  The objective of the PFC is 
to support farming flexibility, while ensuring c ontinued compliance with farm conservation and 
wetland protection requirement. 
13. Total annual PFC payments were established and fi xed by law at the national level for each of 
the seven years of the contract period (1996-2002).  The distribution of these fixed annual payments was statutorily allocated among the contract commoditi es by a single set of percentages for all seven 
years.
18  Total spending levels for each fiscal y ear were also specified in the 1996 Act.19 
14. To be eligible for coverage under a PFC, land must have attributable to it at least one crop 
acreage base  established for contract commodities for th e 1996 crop under previous law.  This would 
include land that participated in 1991-95 progra mmes for contract commodities and land that did not 
participate but was reported to USDA county offic es and recorded as certified planted acreage for 
contract commodities.  The contract acreage for th e commodity on the farm is the crop acreage base 
that would have been effect for the 1996 crop had deficiency payment provisions not been suspended. 
15. To be eligible for PFC payments producers are required to:  (a) comply with conservation and 
wetland protection requirements as es tablished in the FAIR Act of 1996 on all of the producer's farms;  
(b) comply with planting flexibility requirements;  (c) use the contract acreage for an agricultural or 
related activity;  (d) obtain at least the "catastrophic level" of crop insurance for each crop of economic significance or provide a written statemen t that waives any eligibility for emergency crop 
loss assistance;
20  and (e) file annual acreage reports on any fruit or vegetable plantings on contract 
acreage. 
16. The PFC payments for the 1997 crops (as of 31 December 1997) amounted to a total of  
US$6,3 billion, of which 61.2% was allocated to feed  grains, 22.2% to wheat, 9.5% to upland cotton, 
and 7.1% to rice.21  The PFC advance payments for th e 1998 crop as of 31 December 1997 were 
US$5.7 billion of which 53.9% was for feed grains, 26.4% for wheat, 11.2% for upland cotton, and 8.4% for rice.  Annual payments are made no la ter than 30 September of each of fiscal years 
1997-2002.  Producers may elect to receive 50% a dvance payments on 15 December or 15 January of 
the respective fiscal year.  There is an annual PFC payment limitation of US$40,000 per person.
22 
17. The non-recourse commodity loan programme, admi nistered by the CCC, remains in effect 
for certain commodities.  This programme provi des operating capital to producers of wheat, feed 
grains, cotton, peanuts, tobacco, rice, and oilseeds23;  other objectives of this programme are to  bring 
about a better balance between supply and demand of the commodities;  and to assist farmers in the 
orderly marketing of their crops.  Sugar processors are also eligible for non-recourse loans.  Farmers 
or processors of eligible products may pledge a quantity of a commodity as collateral and obtain a 
loan from the CCC at a commodity-specific, per unit lo an rate.  The borrower may repay the loan with 
                                                      
18Thus, to the extent practicable each  crop's share of total expenditure  is: 26.3% for wheat, 46.2% for 
corn, 5.1% for sorghum, 2.2% for barley;  0.2% for oats, 11.6% for upland cotton, and 8.5% for rice. 
19Statutory spending levels are: FY 1998 US$5,800 million;  FY 1999 US$5,603 million;  FY 2000 
US$5,130 million;  FY 2001 US$4,130 million;  and FY 2002 US$4,008 million. 
20This requirement was waived for assistance (e.g . Disaster Assistance Paym ents) provided in 1998 
(information provided by the U.S. authorities). 
21For the 1997 crop, 1.5 million farms for feed grains were enrolled;  followed by 966,349 farms for 
wheat; 166,623 contract enrolled farms for upland co tton; and 22,930 contract  enrolled farms for rice 
22"Production Flexibility Payments for Contracts Commodities", Agricultural Marketing Service.  
Available at: http://ffas.usda.gov [17 February 1999]. 
23Soybeans, sunflower seed, flaxseed, canola , rapeseed, safflower, and mustard seed. United States WT/TPR/S/56 
 Page 169 
 
 
interest within a specified period and regain contro l of the commodity, or forfeit the commodity to the 
CCC after the specified period as full settlement of the loan with no penalty.  Producers of rice, 
upland cotton, wheat, feed grains, and oilseeds are allowed to repay non-recourse loans at less than 
the announced loan rate whenever the world market  price (rice and upland cotton) or posted local 
price ("county" price) (wheat, feed grains, and oil seeds) for the commodity is  less than the commodity 
loan rate.24 
18. The CCC supports milk prices by buying bu tter, cheese, and non-fat dry milk from 
manufacturers at announced prices.25  Under the Farm Bill Act of 199 6, starting in the year 2000, a 
recourse loan programme, in which loans must be repaid, with interest26, will be implemented for 
butter, non-fat dry milk, and cheese at loan rates equi valent to US$9.9 per hun dredweight for milk, to 
assist processors in the management of dairy product inventories.27 
19. Sugar prices are supported through non-recourse loans to sugar processors, available when the 
tariff-rate quota for sugar imports exceeds 1.5 million short tons (i.e . 2000 pounds).  Sugar 
programme loans are recourse loans in  years when the tariff-rate quota is at or below 1.5 million short 
tons, but revert to non-recourse loans if the tariff-ra te quota is increased above 1.5 million short tons.  
The sugar loan rate remained fixed at its level of 19 95.  The raw cane sugar loan rate is at 18 cents per 
pound and the sugar beet loan rate is 22.90 cents per pound. 
20. The peanut programme includes non-recourse loans, purchase agreements and a supply 
management programme.  Tobacco producers are s upported through a price support loan programme 
and a national marketing quota for flue-cured and burley tobacco. 
21. Direct government payments for the 1997 prog rammes were US$5.2 billion.  Net lending 
costs (including marketing assessment receipts) during fiscal year 1997 were US$110.0 million.  During FY 1998, direct government  payments amounted to US$6.6 billion and net lending costs were 
US$970.4 million.
28 
22. The Conservation Reserve Programme (CRP), which is aimed at reducing soil erosion, and 
sedimentation, improving water quality, and creat ing a better habitat for wildlife was extended by 
the 1996 Farm Act.  The participants in this pr ogramme, in return for annual payments, agree to 
implement a conservation plan for converting highl y erodible cropland or other environmentally 
sensitive land to a long-term resour ce-conserving cover;  i.e. eligible land must be planted with a 
vegetative cover, such as perennial grasses, le gumes, fobs, shrubs, or trees.  In FY 1997, 
US$1,6 billion were spent in this programme;  in FY 1998 US$1.8 billion;  and payments are 
estimated to amount to US$1.7 billion for FY 1999.29 
23. The United States also notified other agricultural programmes of indefinite length, in the form 
of income tax concessions or exemption from otherwi se applicable excise tax.  The total revenue loss 
                                                      
24WTO document G/SCM/N/38/USA, 19 November 1998;  "Commodity Loans and Purchases", 
Agricultural Marketing Service.  Available at: http://ffas. usda.gov [17 February 1999];  and Young and Westcott 
(1996). 
25The support price for milk dropped from US$10.20 per hundredweight in 1997 to US$10.05 in 1998, 
and US$9.90 in 1999. 
26The interest is calculated according to the CCC borrowing rate from the Department of Treasury plus 
one percentage points. 
27Young and Westcott (1996). 
28Information provided by the U.S. authorities. 
29Conservation Reserve Programme (…/waisgate?WAIS, 18 February 1999). WT/TPR/S/56 Trade Policy Review 
Page 170 
 
 
due to such income tax concessions amounted to US$660 million in FY 1997;  the total revenue loss 
arising from excise tax exemptions, as notified by the authorities, cannot be calculated.30 
24. As measured by the Producer Subsidy Equi valent (PSE), overall support has decreased 
significantly since 1986-88, from 32.5% to 22.8% in 1997.  This decrease is due to the marked fall in 
commodity-linked deficiency payments and non-commodity-linked PFC payments for crop 
producers.  However, there were slight incr eases in 1996 and 1997.  In 1997 the total PSE was 
estimated to have increased by 1%,  due to a 19% increase in the overall direct payments, which was 
partly offset by an 8% reduction in market price support for milk.  Market price support is reflected 
over the last decade in the Consumer Subsidy E quivalent (CSE) and, given the heavy reliance on 
budgetary support, is much lower than the PSE.  As  a result of the reduction in market price support 
for milk, the total CSE is estimated to have decreased in 1997.31 
Annex table III.2.3 
Transfers associated with agricultural policies  
(US$ billion and per cent) 
 1986-88 1996a 1997b % Changec 
1996 to 1997 
Producer Subsidy Equivalent (PSE)d 
Total PSE (US$ billion) 32.5 22.6 22.8 0.8 
Percentage PSE 30 15 16  
     
Consumer Subsidy Equivalent (CSE)d 
Total CSE (US$ billion) -11.67 -9.99 -9.16 -8.3 
Percentage CSE -13 -8 -8  
a Provisional 
b Estimated. 
c Percentage changes in the PSE and CSE totals and to tal transfers have been calculated from unrounded data. 
d Calculated for a common set of 13 agricu ltural commodities (see Volume II, Part II). 
Source:  OECD (1998c). 
25. During the period under review the United States has notified the WTO of three safeguard 
investigations involving agricultural goods.  No sa feguard measures were imposed as a result of the 
first investigation in 1996, which involved fresh tomatoes and bell peppers.  The USITC continues to 
monitor imports of tomatoes and peppers into the Un ited States.  This monitoring is required by the 
NAFTA Implementation Act.  In 1998, the United Stated notified the WTO of the imposition of a 
safeguard measure on imports of wheat gluten, for a period of three years.32  A third investigation 
dealing with lamb meat is currently being held (section (2)(iv)(b)). 
26. Anti-dumping duties imposed on agricultural goods accounted for 3.3% of total anti-dumping 
duties in effect on January 1999.  Products affected  include sugar from Belgium, Canada, and France;  
fresh cut flowers from Chile, Colombia, Ecuador, a nd Kenya;  red raspberries from Canada;  kiwi 
fruit from New Zealand;  fresh garlic from China;  pistachio nuts from Iran;  canned pineapple fruit 
from Thailand;  frozen concentrate orange jui ce from Brazil;  preserved mushrooms from Chile;  and 
pasta from Turkey (section (2)(iv)(c)).33  Sugar from the EC, fresh cut flowers from Chile, and pasta 
from Turkey are also subject to countervailing duti es.  Other products subject to countervailing duties 
are fresh cut flowers from the Netherlands, and Peru ;  pasta from Italy;  castor oil products from 
                                                      
30WTO document G/SCM/N/38/USA, 19 November 1998. 
31OECD (1998c). 
32WTO documents G/SG/N/10/USA, and G/SG/N/USA/2, 8 June 1998. 
33WTO document G/ADP/N/41/USA, 25 September 1998. United States WT/TPR/S/56 
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Brazil;  live swine and fresh, chilled and frozen pork from Canada;  pistachios from Iran;  and sugar 
from some EC countries.  A total of ten counterva iling duty orders in effect on January 1998 applied 
to agricultural goods. 
(iv) Dispute settlement 
27. During 1996-98 the United States was involved in ten disputes regarding the Agreement on 
Agriculture and the Agreement on the Application of Sanitary and Phytosanitary Measures.  In seven 
cases the United States was a complainant;  ther e were three cases against the United States. 
(a) Complaints against the United States 
28. There have been five complaints against the United States all of which are still pending.  
Canada requested consultations with the United States on 19 March 1999 regarding the initiation on 
22 December 1998, of a countervaili ng duty investigation with respect to live cattle.  Canada contends 
that the initiation of this investigation is incons istent with U.S. obligations under the Subsidies 
Agreement, including the fact that the written a pplication filed with the U.S. Department of 
Commerce was not made by or on behalf of the domestic industry, and that there was not sufficient information provided with respect to the measures or  actions alleged to be subsidies, for purpose of 
initiating an investigation under the SCM Agreement (WT/DS167/1). 
29. On 17 March 1999, the European Communities requ ested consultations with the United States 
concerning definitive safeguard measures on imports  of wheat gluten. The European Communities 
consider that these measures are in breach of U.S.  obligations under the provisions of the Agreement 
on Safeguards, in particular, but not necessarily exclusively, of Articles 2, 4, 5, 8 and 12 of the said 
Agreement, and in violation of Ar ticle 4.2 of the Agreement on Agriculture, and Articles I and XIX of 
GATT 1994 (WT/DS166/1). 
30. Canada raised a complaint against the United States on 25 September 1998, regarding certain 
measures, imposed by the U.S. state of South Dakota and other states, prohibiting entry or transit to Canadian trucks carrying cattle, swine, and grai n (WT/DS144/1).  Canada contends that these 
measures adversely affect the importation into the Un ited States of cattle, swine, and grain originating 
in Canada.
34  Canada also makes a claim of nullification or impairment of benefits accruing to it under 
the cited Agreements. Canada invoke d Article 4.8 of the DSU for expe dited consultations in view of 
the perishable nature of the goods in question. 
31. Argentina requested consultations with th e United States on 19 December 1997, concerning 
alleged commercial detriment to Argentina resu lting from a restrictive interpretation, by the 
United States, of the tariff rate quota negotiated by the two countries during the Uruguay Round, 
regarding the importation of groundnuts (WT/DS111/1).35 
32. The European Communities requested consultati ons on 18 August 1997 regarding U.S. ban 
on imports of poultry and poultry products from the EC by the U.S. Department of Agriculture's Food Safety Inspection Service (FSIS), and any relate d measures (WT/DS100/1).  The EC contended that 
although the ban was allegedly on grounds of prod uct safety, the ban did not indicate the grounds 
                                                     
 
34Canada alleges violations of Articles 2, 3, 4, 5, 6, 13 and Annexes B and C of the SPS Agreement; 
Articles 2, 3, 5 and 7 of the TBT Agreement; Article 4 of  the Agreement on Agriculture; and Articles I, III, V, 
XI and XXIV:12 of GATT 1994. 
35Argentina alleges violations of Articles II, X and XII of GATT 1994, Articles 1, 4 and 15 of the 
Agreement on Agriculture, Article 2 of the Agreement on Ru les of Origin, and Article 1 of the Import Licensing 
Agreement. Nullification and impairment  of benefits is also alleged. WT/TPR/S/56 Trade Policy Review 
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upon which EC poultry products had suddenly become ineligible for entry into the U.S. market.36  
According to the authorities, the FSIS m easure was lifted after the consultations. 
(b) Complaints by the United States 
33. On 25 April 1996, the United States requested th e establishment of a panel regarding EC 
measures affecting meat and meat products (Hor mones) (WT/DS26).  In this dispute, the 
United States claimed that measures taken by th e EC, under the Council Directive Prohibiting the Use 
in Livestock Farming of Certain Substances Having a Hormonal Action, restrict or prohibit imports of meat and meat products from the United States, a nd are apparently inconsistent with some GATT 
Articles and some articles of the SPS Agreement,  the TBT Agreement, and the Agreement on 
Agriculture.  A panel was established on 20 May 1996. 
34. The Panel found that the EC ban on imports of  meat and meat produc ts from cattle treated 
with any of six specific hormones for growth promo tion purposes was inconsistent with Articles 3.1, 
3.3, 5.1 and 5.5 of the SPS Agreement.  The repo rt of the Panel was circulated to Members on 
18 August 1997.  On 24 September 1997, the EC notified its intention to appeal certain issues of law 
and legal interpretations de veloped by the Panel.  The Appellate Body upheld the Panel's finding that 
the EC import prohibition was inconsistent with Articles 3.3 and 5.1 of the SPS Agreement, but 
reversed the Panel's finding that the EC import prohi bition was inconsistent with Articles 3.1 and 5.5 
of the SPS Agreement.  The report of the A ppellate Body was circulated to Members on 
16 January 1998.  The Appellate Body Report and the Panel Report, as modified by the Appellate 
Body, were adopted by the DSB on 13 February 1998. On 16 April 1997, the respondent requested 
that the "reasonable period of time" for implementation of the recommendations and rulings of the 
DSB be determined by binding arbitration.  The Arbitrator found the reasonable period of time for 
implementation to be 15 months fro m the date of adoption (i.e. 15 months from 13 February 1998);  it 
expires on 13 May 1999. 
35. A panel examined a U.S. complaint against Canada, dated 8 Octobe r 1997, concerning export 
subsidies allegedly granted by Ca nada on dairy products and the ad ministration by Canada of the 
tariff-rate quota on milk.  The United States contends  that these export subsidies distort markets for 
dairy products and adversely affect  U.S. sales of dairy products.
37  On 2 February 1998, the United 
States requested the establishment of a panel, which was established on 25 March 1998 (WT/DS103/1). 
36. In April 1997, the United States requested cons ultations with the Philippines regarding  the 
implementation of its tariff-rate quotas for pork a nd poultry.  The United States claimed that the 
delays in permitting access to the tariff-quotas may be inconsistent with se veral provisions of the 
GATT and the Agreement on Agriculture.  A mu tually acceptable solution was found when the 
Philippines agreed to modify its regulations as of 5 March 1998. 
37. The United States also brought a complaint, da ted 7 April 1997, regarding Japan's quarantine 
measures on imports of agricultural products (WT/ DS76/1). The United States alleged that Japan 
prohibits the importation of each variety of a product requiring quarantine treatment until the 
quarantine treatment has been tested for that variety,  even if the treatment has proved to be effective 
                                                     
 
36The EC considers that the ban is inconsistent with Articles I, III, X and XI of GATT 1994, Articles 2, 
3, 4, 5, 8 and Annex C of the SPS Agreement, or Article 2 and 5 of the TBT Agreement. 
37The United States alleges violations of Articles II, X and X1 of GATT 1994, Articles 3, 4, 8, 9 and 10 
of the Agreement on Agriculture, Article 3 of the Subs idies Agreement, and Articles 1, 2 and 3 of the Import 
Licensing Agreement. United States WT/TPR/S/56 
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for other varieties of the same product.38  On 3 October 1997, the United States requested the 
establishment of a panel, which was established on 18 November 1997.  The Panel found that Japan 
acted inconsistently with Articles 2.2 and 5.6 of the SPS Agreement, and Annex B and, consequently, 
Article 7 of the SPS Agreement.  The report of  the Panel was circulated to Members on 
27 October 1998.  The Appellate Body, in a report circulated on 22 February 1999, recommended that 
the DSB request that Japan bring its varietal testing requirements  into conformity with its obligations 
under the SPS Agreement.39  The DSB adopted the Appellate Body Report, and the Panel Report as 
modified by the APB, on 19 March 1999. 
38. At present two complaints by the United States are pending.  On 1 February 1999, the United 
States requested consultations with Korea in respect  of an alleged Korean regulatory scheme that 
discriminates against imported beef by, inter alia , confining sales of imported beef to specialized 
stores, limiting the manner of its display, and othe rwise constraining the oppo rtunities for the sale of 
imported beef (WT/DS161/1). The United States also  alleges that Korea imposes a mark-up on sales 
of imported beef, limits import authority to cer tain so-called "super-groups" and the Livestock 
Producers Marketing Organization ("LPMO"), and pr ovides domestic support to the cattle industry in 
amounts that cause Korea to exceed its aggregate measur e of support as reflected in Korea's schedule.  
The United States contends that these restrictions  apply only to imported beef, thereby denying 
national treatment to beef imports, and that the s upport to the domestic industry amounts to domestic 
subsidies that contravene the Agreement on Agriculture. 
39. On 8 October 1997, the United States requested c onsultations with the EC regarding alleged 
export subsidies on processed cheese conferred without regard to export subsidy reduction 
commitments of the EU. The United States claims th at these export subsidies distort markets and may 
be inconsistent with seven provisions of the GATT, the Agriculture Agreement and the Subsidy 
Agreement. 
                                                      
38The United States alleged violations of Articles 2,  5 and 8 of the SPS Agreement, Article XI of 
GATT 1994, and Article 4 of the Agreement on Agriculture. 
39WTO document WT/DS76/AB/R, 22 February 1999. WT/TPR/S/56 Trade Policy Review 
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Annex III.3:  Steel 
(i) The steel industry in the United States 
1. The steel industry represented around 1% of  U.S. GDP in 1998 and employed some 
226,300 persons. The importance of the sector has been declining since the mid 1970s, when the 
sector accounted for 3.5% of GDP and employed over 500,000 people. Betwee n one fourth and one 
fifth of U.S. domestic consumption of steel involves imports. The United States has been a net importer of steel since the mid 1980s. 
2. Steel production reached a peak of close to 150 million tonnes in the mid 1970s before 
starting a declining trend.  An all time produc tion-low of 74.5 million tonnes was reached in 1982, 
after which production has generally  been above 90 million tonnes per year.  Steel production in the 
United States has generally followed economic cycles closely:  it reached a low of 88 million tonnes in 1991, before rebounding during the 1990s, to a le vel of 97.5 million tonnes in 1998.  An exception 
to this linkage to the general economic cycle w as observed in 1998, when steel production fell by 
some 1%, while consumption increased and imports so ared.  Despite this decline in production,  the 
United States became the world's largest steel produ cer in 1998 due to a sharp contraction in Japan's 
production.  Steel-making capacity in the United St ates was substantially increased between 1995 and 
1998, by about 11 million tonnes for crude steel. Capac ity utilization stood at 74% at the end of 1998. 
(ii) Trade policy measures applied on steel imports 
3. U.S. imports of steel were subject to voluntary restraint agreements (VRAs) for over 20 years.  
VRAs were negotiated export restraints, which were  generally used as safeguard measures to prevent 
imports from exceeding certain limits.  The existe nce of VRAs did not prevent domestic producers 
from filing Section 201(Escape Clause) petitions;  in  fact, a number of VRAs were negotiated as a 
result of an escape clause petition and to avoid the imposition of safeguard measures.  The first VRAs 
were negotiated in 1969 with the EC and Japan, and were widely used during the subsequent twenty 
years.  In July 1989, the Administration launche d the Steel Liberalization Programme, designed to 
eliminate VRAs in two-and-a-half years.  The use of VRAs was consequently terminated in 
April 1992. 
4. Apart from using VRAs, the United States has engaged in a number suspension agreements 
with foreign countries to obtain volume or price unde rtakings in the context of an anti-dumping or 
countervailing duty investigation (section (4)(iv)).   The WTO Agreement on Safeguards outlaws the 
use of voluntary export restraints such as the VRA. Suspension agreemen ts with WTO Members 
involving export volume undertakings have been outlawed as a result of the Anti-Dumping 
Agreement and are no longer used.  They are still used, however, in the case of non-WTO members. 
In the case of WTO Members, suspension agreements  of anti-dumping investigations must involve 
price undertakings: an example of this is the susp ension agreement with South Africa on cut-to-length 
carbon steel plate, concluded in November 1997.  Suspension agreements of countervailing duty 
investigations involving export volume undertakings  are not explicitly outlawed by the Agreement on 
Subsidies and Countervailing Measures.  The United States maintains one such  agreement, regarding 
steel products, with Argentina.  Four suspension ag reements, with China, Russia, South Africa, and 
Ukraine were reached in 1997, re ducing imports of Chinese, Russian and Ukrainian plate by 45%, 
55% and 72%, respectively.  A total of five susp ension agreements regarding steel products (with 
Argentina, China, Russia, South Africa, and Ukraine) were in effect on 1 January 1999. 
5. Between 1996 and 1998, 39 anti-dumping invest igations regarding steel products were 
initiated in the United States, of which 22 were  in 1998.  There were 13 countervailing duty United States WT/TPR/S/56 
 Page 175 
 
 
investigation initiations in the same peri od:  five in 1997 and eight in 1998.1 In 1998, the number of 
completed or initiated anti-dumping and countervailing duty investig ations involving steel products 
reached 35.  These investigations focused both on unfair pricing practices and on subsidies, and in 
many cases, anti-dumping and countervailing duty inves tigations for the same product of the same 
country were conducted, leading to the imposition of both anti-dumping and countervailing duties. An 
example is the determination by the USITC, on 1 September 1998 2, regarding imports of stainless 
steel wire rod from Germany, Italy, Japan, Korea, Spain, Sweden, and Chinese Taipei (Investigations 
Nos. 701-TA-373(F) and 731-TA-769-775(F)), whic h resulted in the imposition of anti-dumping 
duties on imports from Italy, Japan, Korea, Spain,  Sweden, and Chinese Taipei, and of countervailing 
duties also for imports from Italy.  Over 100 anti-dumping and countervaili ng duty orders were in 
place on 1 January 1999, covering various steel  products from 30 countries. (Table AIII.1)3.  New 
final countervailing duty regulations were put in pl ace in November 1998 (Section (4)(iv)), for which 
the Department of Commerce considered comments received from the steel industry. 
(iii) Recent developments 
6. Partly as a result of the Asian crisis and of st rong economic conditions in the United States, in 
the first ten months of 1998, steel imports rose 30% over the same period in 1997, to 31.4 million 
tonnes.  Import penetration rose from 24.2% in the first ten months of 1997 to 29.5% in the same period in 1998.  Steel imports from Japan, Russia an d Korea account for 78% of the increase.  Imports 
from Japan, for example, tripled in 1998 from the prev ious year, to some seven million tonnes.  Japan 
moved from being the third largest supplier of steel imports into the U.S. market in 1997, to the 
largest source of U.S. steel imports in 1998.  Im ports from Russia increased by 47%.  Imports of 
hot-rolled sheet and coils, mostly from Japan and Ru ssia, were among the fastest growing, increasing 
by 66.3% in the first ten months of 1998 compared  to the same period the previous year;  they 
accounted for over one quarter of tota l steel imports.  Preliminary data  from the Bureau of the Census, 
shows that steel imports, especially from Russia, Japan and Brazil, declined substantially in 
December 1998 and January 1999. 
7. The increase in imports, combined with a declin e in domestic production, lower prices, falling 
capacity utilization and a decline in employment, pr ompted an increase in the number of petitions for 
anti-dumping and countervailing duty investigations by  domestic producers, giving rise to a number 
of other actions and events, concluding with a Pl an of Action for the industry prepared by the 
Executive. 
(a) Anti-dumping and countervailing duty investigations 
8. On 30 September 1998 a petition was submitted to th e Department of Commerce to initiate an 
investigation to determine whether imports of certain hot-rolled flat-rolled carbon-quality steel products
4, from Brazil, Japan, and the Russian Federation, we re being, or were likely to be, sold in the 
                                                      
1The products affected by anti-dumping and countervailing duty investigations include hot-rolled 
carbon-quality products;  stainless steel plate in coils;  st ainless steel round wire;  stainless steel sheet and strip 
in coils;  and cut-to-length carbon st eel plate.  The countries whose import s are subject to investigations are 
Belgium;  Brazil;  Canada;  Chinese Taipei;  France;  German y; India;  Italy;  Korea;  Japan;  Mexico;  Russia;  
South Africa;  Spain;  Sweden;  Trinidad and Tobago;  Turkey;  Ukraine;  United Kingdom;  and Venezuela. 
2Department of Commerce News Release, 98-062, 1 September 1998. 
3Besides the countries mentioned above, anti-dumping and countervailing duties are applied on steel 
imports from Argentina;  Australia;  China;  Hungary;  the Netherlands;  New Zealand;  Poland; Romania;  
Singapore;  and Thailand. 
4Products classified under HS subheadings: 7208.10.15.00, 7208.10.30.00, 7208.10.60.00, 
7208.25.30.00, 7208.25.60.00, 7208.26.00.30, 7208.26.00.60,7208.27.00.30, 7208.27.00.60, 7208.36.00.30, WT/TPR/S/56 Trade Policy Review 
Page 176 
 
 
United States at less than fair value and to make  a "critical circumstances" determination (which 
would allow duties to be levied retroactively, from a date 90 days prior to the preliminary 
determination of dumping by the Department of Co mmerce).  On 8 October 1998, in a policy bulletin 
(Change in Policy Regarding Timing of Issuance of Critical Circumstances Determinations), the 
Department of Commerce amended its previous practice with respect to the issuance of a 
critical circumstances determination.  The new policy allows a preliminary determination of 
critical circumstances to be issued prior to the date of the preliminary determination of dumping, 
provided there is adequate evidence of critical circumstances.5  On 15 October 1998, the Department 
of Commerce initiated the investiga tions requested on 30 September6, five days ahead of the statutory 
deadline.  On 13 November 1998, the USITC issu ed an affirmative preliminary determination of 
threat of material injury to the domestic industr y from imports of hot-rolled steel from Brazil, Japan, 
and Russia. 
9. Subsequently, and in accordance with its revised  policy, the Department of Commerce issued 
preliminary critical circumstances decisions in the investigations of imports of hot-rolled steel from 
Japan and Russia (but not from Brazil).  Additiona lly, the Department of Commerce expedited its 
preliminary determination by 20 days (prior to the statutory deadline);  it was announced on 
12 February 1999, 25 days earlier than if a regular deadline had been followed.  Preliminary anti dumping duties of between 25% and 67.5% were imposed for imports from Japan, and between 50.66% and 71.02% for imports from Brazil.
7  The duties may be applied retroactively from 
14 November 1998 (due to the "critical circumstance s" determination) if final duties are applied. 
10. In the case of Russia, a preliminary determination of dumping was issued on February 19998.  
In the same month the Department of Commerce and the Ministry of Trade of the Russian Federation 
entered into negotiations pursuant to Article XI of the Agreement on Trade Between the United States 
of America and the Russian Federation, and reach ed an agreement whereby Russia would establish 
export limits and the United States would establish import restrictions on Russian exports to the 
United States for 16 steel products.9  The agreement, which has a duration of five years, sets the 
                                                                                                                                                                     
7208.36.00.60, 7208.37.00.30, 7208 .37.00.60, 7208.38.00.15, 7208.38.00. 30, 7208.38.00.90, 7208.39.00.15, 
7208.39.00.30, 7208.39.00.90, 7208.40.60.30, 7208.40.60.60, 7208.53.00.00, 7208.54.00.00,7208.90.00.00, 
7210.70.30.00, 7210.90.90.00, 7211.14.00.30,7211.14.0 0.90, 7211.19.15.00, 7211.19.20.00, 7211.19.30.00, 
7211.19.45.00, 7211.19.60.00, 7211 .19.75.30, 7211.19.75.60, 7211.19.75. 90, 7212.40.10.00, 7212.40.50.00, 
7212.50.00.00.  Certain hot-rolled flat-rolled carbon-qu ality steel covered by this investigation, including: 
vacuum degassed, fully stabilized; high strength low alloy; and the substrate for motor lamination steel may also 
enter under the following tariff numbers:  7225.11.00.00, 7225.19.00.00, 7225.30.30.50, 
7225.30.70.00,7225.40.70.00, 7225.99.00.90, 7226.11.10.00, 7226.11.90.30, 7226.11.90.60, 7226.19.10.00, 
7226.19.90.00, 7226.91.50.00,7226.91.70 .00, 7226.91.80.00, and 7226.99.00.00. 
5Federal Register , 8 October 1998, Vol. 63, p. 55364.  In  accordance with 19 CF R 351.206( c)(2)(i), 
when petitioners submit a critical circumstances allegation more than 20 days before the scheduled date of the 
preliminary determination, the Department of Comm erce must issue a prelimin ary critical circumstances 
determination not later than the date of the preliminary determination. 
6Federal Register , 22 October 1998, Vol. 63, p. 56607. 
7Federal Register , 19 February 1999, Vol. 64, p. 8299. 
8Federal Register ,25 February 1999, Vol. 64, p. 9312.  The margins of dumping determined were:  
70.66% for JSC Severstal;  217.67% for Novolipetsk Iron and Steel Corporation; 149.54% for Magnitogorsk 
Iron and Steel Works; an d 156.58% for all others. 
9the quantitative export limits for the first export li mit period, which are pro-rated from the annual 
limits provided for each product cate gory, are as follows:  cold-rolled st eel products 520,000;  semi-finished 
steel products 385,000;  galvanized sheet products 65,000 (of which, 60,000 hot-dipped and 5,000 electrogalvanized);  other metallic coated flat-rolled produ cts 1,552;  certain tin mill products 5,000;  electrical 
sheet products 14,337;  heavy structural shapes 65,000; rails  2,350;  hot-rolled bars  20,000;  cold-finished bars 
11,349;  pipe and tube poducts 3,000;  wire rod products 15,000;  tool steel 800;  hot-rolled steel stainless and alloy products 1,000;  drawn wire products 250;  pig iron 575,000. United States WT/TPR/S/56 
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beginning of the first export limit period on 22 February 1999, ending on 31 December 1999.  
Subsequent export limit periods begin on 1 January a nd end on 31 December of each subsequent year;  
export limits are to be increased by 3% of the previ ous year's export limit;  and this limit is to be 
increased or decreased by the result of multiplying the previous export limit by the percent change (up 
to 3%) in "Apparent U.S. domestic c onsumption of Certain Steel Products"10, during the most recent 
twelve months for which data is available.  The De partment of Commerce is in charge of making this 
calculation.11 
(b) Steel action plan  
11. The Clinton Administration presented a report to Congress in January 1999 for a 
"Comprehensive Plan for responding to the Increase in Steel Imports" in response to a request from 
Congress.  The report contained a seven-point action plan, with a number of specific actions, some of 
which have already been put in place, including:  b ilateral efforts to counter unfair trade practices;  
enforcement of U.S. laws against unfair trade practices, including anti-dumping and countervailing 
duty and safeguards investigations;  expedited investigations;  tax relie f;  and adjustment assistance 
for steel workers. 
Bilateral negotiations 
12. Efforts have focused on Japan, Korea and Russi a, which account for 78% of the increase in 
U.S. steel imports in 1998.  Attention has also turned to the European  Union as a major steel 
consumer.  The United States reached an agreemen t with Japan to create a Steel Task Force to 
monitor steel imports on a monthly basis, with the expectation that Japan's exports would return to 
1997 levels in 1999.  The Action Plan calls for the use of WTO-consistent actions under U.S. trade 
laws, including self-initiated actions under Section 201, and anti-dumping inv estigations, to ensure 
that imports from Japan return to 1997 levels.  As mentioned earlier, the Department of Commerce 
decided to negotiate a suspension agreement with Russia.  Negotiations with Korea focused on the 
Korean Government's role with respect to steel pr oducers, in response to a complaint from U.S. steel 
producers alleging that Hanbo Iron and Steel, a Kor ean mini-mill, had been provided government 
subsidies.  Korea pledged not to support or dir ect others to support Hanbo, which is now to be 
privatized.  Korea has also initiated the priv atization of the Pohang Iron and Steel Company 
(POSCO), the world's second largest steel producer.  Fu rthermore, in talks with the European Union, 
the United States expressed its concern that EU quotas on steel imports from Russia may be causing a 
diversion of Russian steel exports into the United States, and pressed for further opening of the EU 
market to steel imports from Russia. 
Trade law enforcement 
13. The Action Plan reaffirmed the administration' s intention to "enforce U.S. trade laws to 
address the adverse impact that unfairly traded steel  imports have on U.S. steel companies and jobs in 
a manner consistent with in ternational obligations". 
                                                      
10"Apparent U.S. Domestic Consumption'' is defined in the Agreement as being equal to:  Domestic 
Shipments + Imports - Exports (Appendix D);  it is dete rmined for each of the sixteen product categories 
covered by the Agreement using statistics of the U.S. Census Bureau regarding imports and exports, and data 
from the American Iron and Steel Institu te (AISI) regarding domestic shipments. 
11Federal Register , 26 February 1999, Vol. 64, p. 9891. WT/TPR/S/56 Trade Policy Review 
Page 178 
 
 
Expedited investigations 
14. As mentioned above, the Department of Co mmerce expedited the procedures in dumping 
cases on hot-rolled steel from Japan, Russia and Brazil filed on 30 on September 1998.  The Department of Commerce intends to expedite investigations as much as possible.  Critical 
circumstances determinations, which allow assessed anti-dumping duties to be applied retroactively, 
reaching back 90 days before the preliminary an ti-dumping determination, are to be used when 
required, as demonstrated by the Department of Commerce's preliminary ruling of "critical 
circumstances" with respect to hot-rolled sheet imports from Japan and Russia on 23 November 1998.  
The Action Plan also mentions the possibility of expediting safeguards investigations. 
Early warning system 
15. The Department of Commerce developed in early  1998 an internal system to monitor and 
provide early warning on import trends for steel and other sensitive products (such as semiconductors, 
autos, paper, textiles and chemicals).  The system  was designed to allow a swift response to potential 
import surges;  it uses preliminary import data, wh ich could, in extraordinary circumstances, be 
released to the public by the Department of Comm erce approximately 20 to 25 days prior to the 
current release date. 
Tax relief 
16. Steel companies experiencing losses related to the manufacture or production of steel and 
steel products may, under the Action Plan, be allo wed to offset these losses against taxes paid during 
the prior five years, instead of the current two- year carry-back period.  This would permit steel 
companies to obtain refunds for prior taxable years.  The amount of tax relief provided is estimated at 
more than US$300 million fo r the period 1999-2004. 
Adjustment assistance for steelworkers 
17. The Action Plan established the creation of an interagency task force on steel adjustment 
assistance to help workers and co mmunities identify and secure access to federal resources.  The task 
force includes the Departments of Labor, Co mmerce, Housing and Urban Development, 
Transportation, Education, Health and Human Serv ices, Energy, and Interior, as well as the Small 
Business Administration.  The Department of Labor is in charge of certifying workers in steel and 
steel product plants to receive benefits and servi ces under the Trade Adjust ment Assistance (TAA) 
programme.  The Department of Commerce's Econom ic Development Administration (EDA) is in 
charge of developing economic adjustment strategies .  The EDA has been provided with an additional 
US$50 million in FY1999 for economic assistance, including assistance to communities harmed by 
increased steel and other imports.  Under its Economic Development Assistance Programme, the EDA can provide grants to help implement an economic adjustment strategy;  revolving loan funds (RLFs), 
to support start-up or expansion activities of small businesses;  and grants for physical infrastructure 
improvements. 