motion, these amendments apply with respect to investigations initiated on or after that date.

SUBTITLE D-TEXTILES

The WTO Agreement on Textiles and Clothing (Textiles Agreement) will replace the Multifiber Arrangement (MFA), which has been in effect since 1974. The MFA and its predecessors-the Short-Term Arrangement Regarding International Trade in Cotton Textiles (1961-1962) and the Long-Term Arrangement Regarding International Trade in Cotton Textiles (1962-1973)-have governed world trade in textiles and apparel for over 30 years. Under the new Agreement, textile and apparel articles will be completely integrated into the GATT, that is, subject to GATT rules and disciplines, over a 10-year transition period. The integration, which includes the liberalization and eventual elimination of quotas on textiles and apparel, will occur in four stages: immediately upon entry into force of the WTO, after three years, and after seven years, with full integration to be achieved at the end of 10 years.

Textile Product Integration

(Section 331)

Article 2(6) of the Agreement requires WTO Members, immediately upon entry into force of the WTO, to integrate into the GATT products which, in 1990, accounted for not less than 16 percent of the total volume of imports of the textile and apparel products listed in the Annex to the Agreement. Article 2(8) establishes the integration schedule for the remainder of the 10-year transition period. Three years after the WTO enters into force, Members must integrate products which, in 1990, accounted for not less than 17 percent of the total volume of imports of the products listed in the Annex. After seven years, products which, in 1990, accounted for not less than 18 percent of the total volume of covered products must be integrated. After 10 years, all textile and apparel products will be integrated into the GATT.

Section 331 requires the Secretary of Commerce, within 120 days of entry into force of the WTO, to publish in the Federal Register a notice containing the list of products to be integrated in each of the stages set forth in Article 2(8). In developing the integration schedule, the Committee expects that the Administration will consult with all interested parties. Once the list is published, section 331 provides that it may not be changed unless required by subsequent legislation or superseding international obligations of the United States, to correct technical errors or to reflect reclassifications. The Committee believes that this procedure will ensure that all relevant parties-including domestic producers, retailers and importers-will have adequate and timely notice of the integration schedule, allowing them to take the schedule fully into account in making long-range business plans.

Amendment to Section 204 of the Agricultural Act of 1956

(Section 332)

Section 204 of the Agricultural Act of 1956, as amended, provides the President with the basic statutory authority to enter into agreements with foreign governments to limit their exports of agricultural or textile products to the United States, and to issue regulations to carry out such agreements. In addition, if a multilateral agreement is concluded under the authority of this section among major textile or agricultural exporters, the President is authorized to issue regulations governing the importation of such textile or agricultural products from countries that are not parties to the agreement.

Section 332 of this bill clarifies that the multilateral agreements referred to in section 204 include the Textiles Agreement negotiated as part of the Uruguay Round agreements. Section 332 also clarifies that, in order to carry out any such multilateral agreement, the President may issue regulations governing imports from countries that are not parties to the agreement and also to countries to which the United States does not apply the agreement.

Textile Transshipments

(Section 333)

Article 5 of the Textiles Agreement provides that Members should establish legal and administrative procedures to take action against the circumvention of textile quotas by transshipment, rerouting, false declarations of origin or falsification of official documents and obligates Members to cooperate fully to address circumvention problems. Section 333 adds a new provision to Title IV of the 1930 Tariff Act to address specifically the problem of textile transshipments.

New section 592A authorizes the Secretary of the Treasury to publish semiannually in the Federal Register a list of the names of any foreign producers, manufacturers, suppliers, sellers, exporters or other persons outside the United States against whom the Customs Service has issued a penalty claim or final decision with respect to such claim for certain violations of the customs laws, including using documentation that indicates a false or fraudulent origin for textiles or apparel; using or providing counterfeit visas, licenses, permits, bills of lading or similar documentation subsequently used by the importer for the entry into the United States of textiles or apparel; manufacturing, producing, supplying or selling textile or apparel articles labelled with a false or fraudulent country of origin; or engaging in practices that aid or abet the transshipment of textiles or apparel. After a name has been published, the Secretary must require any importer of record to show that the importer has used reasonable care to ensure that textiles or apparel produced, sold, exported or transported by a named person is accompanied by accurate country of origin documentation, packaging and labeling. Section 333(a) further requires the Secretary to remove persons from the list who petition for removal and

who have not committed any of the violations described above for a period of at least three years.

Section 333(b) authorizes the President or his designee, after seeking the advice of the Secretaries of Commerce and Treasury and any other appropriate agencies, to publish an annual list of countries in which illegal activities involving textile transshipment or activities designed to evade textile quotas have occurred, if such countries do not demonstrate a good faith effort to cooperate with the United States in ceasing such activities. Countries shall be removed from the list if they subsequently demonstrate a good faith effort to cooperate. The Secretary shall require any importer of record importing textiles and apparel from a listed country to show that reasonable care has been taken to ascertain the true country of origin.

It is the view of the Committee that these provisions will serve two important purposes. First, the Committee believes that they will act as a deterrent to transshipment and textile quota evasion as exporters, producers and exporting countries exercise greater care to ensure that goods are properly documented and labelled as to their true country of origin. Second, by publishing the names of offending persons and countries, they will alert U.S. importers to potential problems before they arise, and will encourage importers to ensure that the persons with whom they do business are properly labelling and documenting their textile and apparel shipments. The Committee believes that new section 592A properly allocates responsibility to both exporters/producers and to U.S. importers to ensure against transshipment and quota evasion.

Rules of Origin for Textile and Apparel Products

(Section 334)

Under current law, the origin of textile and apparel products is generally based on a determination by the Customs Service as to where the last substantial transformation with respect to the product in question took place. This general "substantial transformation" principle was set forth in a final rule published by the Department of the Treasury in 1985; the rule is incorporated into the Customs Service regulations. As a practical matter, origin determinations have evolved since 1985 through a series of productspecific rulings, as Customs has interpreted the "substantial transformation" requirement.

Section 334 of the bill directs the Secretary of the Treasury to issue final rules, by July 1, 1995, for determining the origin of textile and apparel products. The new rules, subject to the exceptions described below, will take effect July 1, 1996. Section 334(b) sets forth the general principles that Treasury is to follow in developing the rules. These principles generally conform to existing Customs Service practice with respect to fibers, yarns and fabrics. With respect to apparel products, the principles require that origin will be based on the place of assembly, subject to certain exceptions. Under certain rulings of the Customs Service, the origin of some apparel products is based on where the fabric is cut.

Section 334(b) establishes the following guidelines: (1) a textile or apparel product will be deemed to originate in a country if the

product is wholly obtained or produced in that country; (2) yarns, threads or similar products are deemed to originate in the country in which the fibers are spun or filament extruded; (3) fabrics are deemed to originate in the country in which their fibers, filaments or yarns are woven, knitted or otherwise transformed by any other process; and (4) other textile or apparel products are deemed to originate in the country in which they are assembled. For products that are assembled in more than one country, section 334(b) provides that the product will be deemed to originate in the country in which the "most important" assembly or manufacturing process occurs. If origin cannot be determined on that basis, then origin will be determined by the last country in which important assembly or manufacturing occurs.

The assembly rule of origin will not apply to certain products, including: specifically identified products for which an assembly rule is not appropriate; products that are knit to shape; products whose components are cut in the United States and assembled abroad into an article that is then returned to the United States; and products of Israel. In addition, section 334(b) clarifies that the new rule will not affect either the duty-free treatment under the Caribbean Basin Initiative (CBI) program for articles (except textile or apparel products) assembled in a beneficiary country wholly from U.S. components and imported directly into the United States or the application of the minimum value-added requirement under the CBI program.

As noted above, the new rules will go into effect July 1, 1996. However, section 334(c) provides that existing contracts will be grandfathered. Specifically, the new rules will not apply to goods for which a contract was entered into before July 20, 1994 if the material terms of sale were fixed before that date; a copy of the contract is filed with Customs within 60 days after enactment of this implementing bill; and the goods are imported before January 1, 1998.

In light of the emphasis in Article 5 of the Textiles Agreement on preventing circumvention of textile and apparel quotas and the work program on harmonization of rules of origin established in Part IV of the Agreement on Rules of Origin, the Committee believes that it is appropriate to establish a definitive rule of origin for textile and apparel products. The Committee believes that the new rules, once promulgated, will more accurately reflect where the most significant production activity occurs, providing the United States with a more accurate indication of the source of textile and apparel imports. Further, the Committee understands that the principles established in section 334(b) are principles followed by a number of our major trading partners; section 334 will, therefore, simply bring United States origin rules more into line with those of other countries. It is the Committee's expectation that these new rules will help reduce circumvention of quota limits and help reduce transshipments by providing greater certainty and uniformity in the rules of origin.

The Committee believes that the period between enactment of this implementing legislation and the July 1, 1995 date for issuance of the final regulation will give all interested parties-including importers, domestic producers, and retailers-sufficient oppor

tunity to comment on the implementation and application of the general principles established in section 334(b). The Committee instructs the Department of the Treasury to begin its rulemaking process as soon as possible and take the comments of interested parties fully into account. The Committee also believes that two provisions of section 334-the delay in the effective date until July 1, 1996 and the grandfathering of existing contracts-should minimize any disruptions in trade.

Effective Date

(Section 335)

Section 335 provides that, except for the rule of origin provisions in section 334, the amendments made by Subtitle D will take effect on the date the WTO enters into force for the United States.

SUBTITLE E-TECHNICAL BARRIERS TO TRADE

The provisions in Title III, Subtitle E are within the jurisdiction of the Committee on Commerce, Science, and Transportation.

SUBTITLE F-GOVERNMENT PROCUREMENT

The provisions in Title III, Subtitle F are within the jurisdiction of the Committee on Governmental Affairs and are discussed in Part III of this report.

TITLE IV-AGRICULTURE-RELATED PROVISIONS

SUBTITLE A-AGRICULTURE

The Agreement on Agriculture establishes rules and disciplines to govern agricultural trade in three main areas: market access, domestic support measures, and export subsidies. Each WTO Member's schedule (annexed to the Marrakesh Protocol to the GATT 1994) sets forth its particular commitments with respect to market access for agricultural imports and the maximum amount of domestic support and export subsidies it will provide for agricultural products. The market access provisions in Article 4 of the Agriculture Agreement and the individual Member schedules reflect the required conversion of non-tariff barriers to tariff equivalents (socalled "tariffication") and the subsequent gradual reductions over a specified time period in these and existing tariffs, as well as the commitments to maintain current or minimum market access opportunities. In addition, Article 5 of the Agreement permits the imposition of a "special safeguard" on specified agricultural products. The Agreement's provisions on domestic support measures and export subsidies address the general obligations to reduce assistance and the types of measures that are subject to required reductions. The descriptions below cover provisions in Title IV of the bill that make changes to U.S. law to implement the Agreement's market access commitments, including the required conversion of nontariff barriers to tariffs, in particular tariff-rate quotas (two-tiered tariffs consisting of a lower in-quota rate and a higher over-quota rate).