Free Trade Area of the Americas - FTAA


Trade Negotiations

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April 11, 2003

Original: English



Name(s) George Keller President
Organization(s) Customs Advisory Services, Inc
Country United States

Executive Summary

The objectives of the agreement are to promote trade liberalization and promote economic growth and prosperity within the region. Additionally, the agreement is to generate increased levels of trade in goods, services and investment by means of market liberalization through clear, transparent and predicable trade rules. I applaud the committee’s efforts to attempt to promote these objectives. I believe the current trade agreement; however, does not promote nor encourage trade directly among members of the territories but will afford extensive duty-free treatment of goods and services by parties who will not be signatories to the agreement. The rules of origin as proposed in the agreement are so broad that I do not know of any good assembled or produced in the region that will not qualify for preferential treatment. The rules of origin will permit parties outside the limitations to sign certificates of origin. Additionally, pricing arrangements for goods assembled or produced in the territories can be sold by enterprises outside the territories with high intercompany prices that will afford the products to be eligible for preferential treatment when in reality very little value added has been incurred in the territories. The agreement should promote extensive use of raw materials grown or produced within the territories if preferential treatment is to be granted to the article.

Additionally, specific rules of origin should be developed for agricultural products that are mixed or processed in one country from agricultural products of multiple countries within the territory. The blending of these materials often still results in an unfinished article for which no tariff change has resulted. However, as the article is now a combination of raw materials from multiple countries, how will the country of origin for the article be determined?

The agreement should seek to promote expansion of international business activity for small and minority enterprises within the territories. These companies historically create the majority of most new jobs in most economies and the agreement as proposed neither promotes nor faster expansion of international trade for these types of enterprises. Futhermore, clarification is mandatory for which small economies are to be afforded special and differential treatment under the agreement. While this goal is admirable, lowering of the special and differential treatment to small and minority enterprises could significantly lend support to accomplishment of the agreements objectives.

Finally, the agreement should promote an efficient and expeditions method for dispute settlement so small and minority enterprises and small economies will not be unfairly punished through extended administrative and judicial process that are not affordable to them. The process of dispute settlement in most major trade agreements works against small and minority enterprises and smaller economies and this methodology must be avoided if the objectives of the FTAA are to be achieved.

To: Negotiating Group on Agriculture

From: George Keller

Subject: Chapter Agriculture

Tariff Elimination:

Tariff elimination should proceed in a systematic, proportional method that will encourage trade between members but avoid dumping of large quantities of articles on one party by another party.

Significant penalties should be provided in the agreement to prevent dumping of goods between the parties.

Non-Tariff measures:

Certain countries utilize pesticides and herbicides prohibited for use in other countries. The members should evaluate chemical products used in the agriculture industry and develop a list of prohibited pesticides and herbicides.

Chemical inspections of agricultural products should be established within the territories to prohibit sale and shipment of agricultural products that be detrimental to human health.


The automatic incorporation of WTO safeguards into the FTAA insures that the agreement will be ever-changing without input by the parties. Action by the WTO affecting countries that are not a part of the territory will automatically be required by parties within the territory.

A more reasonable approach would be that safeguards adopted by the WTO will be reviewed by parties and a determination by the parties will be made before implementation occurs within the territories.

Export Subsidies:

Elimination of export subsidies will occur on a phased in schedule consistent with reductions and elimination’s negotiated through the WTO to insure competitive equality between parties within the territory and parties outside the territory.

Notification -Section 12.7:

Proposed time frames are too short given ocean shipping timetables. Notification time frames should be expanded in this paragraph to 30 days and 20 days, respectively.

Export Credits.

Definition and Scope:

Definition of “official sources” should be made to identify any governmental or non-governmental source at the federal, state, and local level or private profit or non-profit enterprises.


A rule of origin is specifically required for agriculture because most agricultural articles do not result in new or different after blending or mixing.

A rule of origin should be established for agricultural goods allowing commingling of articles between the parties and within the territories. The rule of origin should specify percentage inputs allowed or country of commingling to determine the country of origin for the article. Inventory methods established and approved in the “Rules of Origin” should be adapted to account for commingled raw material used to produce an article.

To: Negotiating Group on Government Procurement

From: George Keller

Subject: Chapter on Government Procurement

General Principles: Include an item C. as follows:

Expansion of international trade opportunities for small or minority business.

Article III, 2. Include item C as follows:

Discriminate against a small or minority enterprises in favor of a large enterprises

Scope of Applications - h. Item should be modified to small, or medium or minority enterprises.

Definitions of small, medium and minority enterprises should be established. Criteria could be sales based and/ or ownership based.

To: Negotiating Group on Market Access

From: George Keller

Subject: Chapter on Market Access

Article 5 - 5.1.1:

Include a statement allowing refund of customs duties paid on articles imported and subsequently destroyed within the territories.

Article 7 - Customs Valuation - 7.3:

Add the word “uniform” prior to appropriate documentation to insure consistent data requirements are necessitated and acceptable within the territories.

Section Three - Article 8- Article 8.2:

Quantitative restrictions on imports should be permitted to insure fair equitable allocable of market shore between countries of different size economies within the territory. Restrictions of this type will insure equal market access to all enterprises of each party of the agreement to every other party.

Article 11- Export taxes -11.2.

Debts this section. Export taxes are taxes that raise the cost of goods and services within the territory and could effectively make goods and services sold within the territory non-competitive with goods imported into the territories.

Article 17- Definitions:

The definition of identical or similar goods should be expanded to include either industry or government standards must be used to determine commercial interchangeability. Accordingly, the parties must develop uniform government standards and recognized industry standards to insure consistency within the territory.

Article 17- Definitions:

The definition for remanufactured goods should be combined with the definition of repair or alteration. Alternatively, remanufactured goods should only include rework of existing component parts. Replacement component parts is traditionally a repair process and the integrity of the repair or alteration definition should be maintained and include the definition of remanufactured goods.

Additional Definition:

A definition for recycling should be added. Drawback, rebates or remission of duty should be permitted for destruction of an article through a recycling process as long as a new and different article by name, character or use results from the recycling process.

Article 3- Item 3.1:

Safeguards should include tariff rate quotas and or quantitative restrictions in order to insure equal access by tall parties to all market within the territory.

Failure to provide some defined volume level could result in unequal access to large economies by small economies. Additionally, small economies need the protection from large economies potential for dumping products into a small economy to eliminate domestic competition.

Chapter on Origin Regime

In general, the rules of origin proposed in the 2nd draft of the FTAA are so broad that virtually any company anywhere in the world should be able to find a rule of origin that would permit eligibility for preferential treatment of goods imported and exported within the community with minor vale added within the territory. The rules should be strengthened to preserve the prefer of good imported and exported will only receive preferential treatment if significant value is added to an article within the territory. This principle is the fundamental objective of the FTAA.

Specific issues follow.

Article 1.3:

The article needs to be modified to eliminate a good produced “exclusively from non-originating material.” All article that are to receive preferential treatment within the territory must include a portion of materials that are originating in nature and are a direct material or component of the article. The inclusion of such a requirement is fundamental to insure expansion of production or raw materials or components occurs within the territory thereby fastering growth of business with the territory.

Option 1 - 1.3.1:

(a) The transformation process within the territory must include a change to a different classification within the Harmonized System and may not include merely transformation from a parts provision under the Harmonized System to a finished goods provision under the Harmonized System for non-originating materials unless substantial direct materials and direct conversion cost (direct labor and direct factory overhead) that are originating in nature also used in the article.

(b) And (c) The FOB expert value must be a value established between parties residing in the territory in order to prevent enterprises from using artificial transfer values established by selling offices in countries not within the territory to insure a significantly high value for the exported article that would insure the CIF value of non-originating materials is less than the stated percentage.

Option 2 - 1.3.2:

Percentage of non-originating materials used in an article should be set at an extremely low percentage to insure that substantial manufacturing or production efforts are performed by parties within the territory. These low non-originating percentages will insure expansion of manufacturing and production of raw materials within the territory in order that the raw materials will be originating in nature.

Option 3 - 1.3.2:

Change to a good is produced entirely in the territory of a Party if the final process(es) of production of the article are incurred in the territory of a single Party and regional value content requirements are met.

Option 4 - Item 1.4- Option 1-1.4.1:

The methods prescribed under this option are cumbersome and burdensome and will require extensive paperwork flow between parties within the territory section should be deleted and methods used to calculate regional value should be simplified to Option 2 which utilizes more commercial documentation for calculation regional value content.

If the section is maintained, No calculation based on Non-Originating materials should exist. The objectives of the agreement are to expand trade within the territory and any regional value content calculation that encourages use of non-originating materials violates those objectives.

Item 1.4.4.a)(iii) of the section, if maintained, should not include a deduction for renewable scrap. Renewable scrap should be deleted. Authority should be granted that does not include a deduction if the scrap is recyclable and the recycling process results in the creation of a new and different article by name, character or use.

Item 1.4.4 b) (iii) same comment as 1.4.4 a)(iii) above.

Option 2 - 1.4.2 - TV.

FOB value must be a value establish between enterprises within the territory in order to avoid price manipulation by enterprises in countries located outside the territories.

Item 1.4.4. a) Item must be modified to state a sale “by enterprises within the territory”. To omit this requirement subject articles to price manipulation by enterprises in countries not located within the territory.

Item 1.4.5 Net Cost should be defined as direct cost (material, labor and overhead) used to produce an article not solely on exclusion of items not to be included.

4.1 “De Minimis”

4.1 “De Minimis” calculation may only include activities of parties located within the territories. To include other parties to manipulate prices or values from activities outside the territory fails to meet the objectives of the agreement.

4.1.2 Non-originating material percentages should be set extremely low to faster expansion of business within the territories as set forth in the objectives of the FTAA.

4.1.4 Same comment as 4.1.2 above

4.2 The entire section on fungible materials should specific whether the inventory methods are base on inventory value or quantity. Significant variances can exist and specificity would eliminate confusion.

Indirect Materials

Option 1 - 4.8.1

All intermediate materials should be required to contain a percentage of originating material that is at least equal or greater in share than the non-originating material

5) Operations that do non confirm origin

5.1 Items shall not be considered as originating by reason if a tariff classection add (d) A change to a finish article from parts of the article if the parts are non-originating.

6) Direct Shipment

6.1 Return of goods exported from one party of the territory should be permitted to be returned to another party of the territory if documentation can be presented that the goods were originally exported from the territory and the goods have not been used outside the territory.

7) Invoicing-

Origination goods should only receive preferential treatment is done between parties existing within the territory. To permit invoice pricing by a third party that is not a member of the Agreement encourages price manipulation and will afford goods preferential treatment based on artificial or manipulated prices when very little or not value was added within the territory.

10 Definitions

Net Cost should emphasize also what is included (i.e. direct materials, direct labor, and direct factory overhead) as well as what is excluded in the definition

Producer in addition to the phrase add “within the territory” in order to avoid manipulation by parties not subject to the Agreement.

Transaction Value in addition to the definition presented must specify that the Transaction Value is established between parties within the territory in order to avoid manipulation of the rules of origin by parties not subject to the Agreement.

Add definition for Exporter: exporter is a person or enterprise with physical and legal presence within a party (ies) of the territory. This definition will result in parties not subject to the Agreement to establishing a presence within the territory in order to obtain preferential treatment as identified on the objectives.

Customs Procedures

Article 2:

2.5 all administrative rulings issued prospective to the agreement are to be disseminated in broad means and/or on the Internet once the agreement is in force. This modified requirement will insure compliance by persons and enterprises within the territory at the earliest possible date.

Other Customs Procedures


All rulings and revocation of rulings must be published within at least 30 days of their affective date in order to incur timely compliance. All rulings and revocations must be published using broad means and the Internet in order to provide adequate information to persons or enterprises affected by the matter.

Article 14.7

Parties not with a physical or legal presence within the territory should be required to provide a higher amount of security on their transactions in order to (1) promote investment and business expansion within the territory, and (2) insure parties within the territory will not be formed to compensate for default by parties not subject to the Agreement.

Article 19

Reimportation of goods should cover goods exported by one party within the territory imported by another party within the territory. Proof of export must be required in order to obtain preferential treatment upon importation.

Article 24 - Definitions

Definition of “Low Value Shipments” must be uniform within the territory in order to simplify Customs procedure and afford consistency and uniform treatment by parties within the territory.

Procedures Related to Rules of Origin.

Section 1.2.1

Certification must be signed by Party having legal and physical presence within the territory to insure Customs authority may verify authenticity of Party signing certificate.

Persons located within the territory but not within the country of final production can sign the certificate if they control production in the country of production.

1.4 Issuance of Certificate

Issuance of a certificate of origin may only be preformed by a party located within the territory in order to insure Customs officials’ ability to authenticate the certificate.

1.5.1 Add an article that the certificate and all supporting data be submitted to the cognizant Customs authority within one year of the date of importation of the subject articles.

1.10.3 Retention of certificates should be no more than 5 years in order to simplify recordkeeping requirements.

1.10.4 Period for past importation of preferential claim should be one year from the dated of importation.

1.12.1 Recordkeeping limitation should be no more than 5 years in order to avoid costly and burdensome requirements on enterprises, persons, and Custom officials.

1.12. New. Add a section that permits importers and exporters to refer Customs authorities to producers who issue certificates. Producers may be unwilling to share confidential sourcing and pricing information with producers or exporters but these parties should not be denied preferential treatment if verification can be done through the Producer. The producer must be located within the territory.

2.4 Advance Rulings - Option 1 A ruling on origin may be obtained by any party exporter, producer or importer located in territory. The ruling must be issued by a Customs authority in either the country of importation or exportation. Additionally, any entities have a legal presence within either the country of importation or exportation may also obtain a ruling on origin.

Section 2.4.5 All advance rulings and revocations must be published in a broad manner and on the Internet within 30 days of their effective date.

6 Definitions


Definition should be modified to include only entities with a physical and legal presence within the territory.

Chapter on Standards

2.4 Standards adopted by any party should be uniformly adopted by all parties whenever possible. Varying standards between parties is the significant most single issue that discourages international trade by small and minority businesses.

Article 9-9.2 Clear definition of countries with smaller economies must be defined for purposes of the Agreement.

To: Negotiating Group on Subsides, and Countervailing Duties

From: George Keller

Subject: Chapter on Subsidies, Anti-dumping and Countervailing Duties.

Article 3 -3.3 Definition of small economy is mandatory.

3.7 Additionally requirement to proof dumped or subsidized imports constitute the principal or document cause of the industry is burdensome and costly should be deleted.

To: Negotiating Group on Dispute Settlement

From: George Keller

Subject: Chapter Dispute Settlement.

Article 6 Linkage to WTO and choice of WTO or FTAA settlement of disputes would almost assure disputes would not be settled in a timely and efficient matter. Disputes arising under the FTAA should be limited to FTAA resolution. Mechanisms for efficient, quick settlement of disputes should be developed to insure that small and minority enterprises receive fair and equal treatment under the Agreement as do large enterprises under the Agreement.

49. Consultation should commerce as early as possible to insure efficient quick settlement occurs.

57. Same comment as 49 above. Item a. no more than 30 days Item b no more than 5 days.

65. Roster members must have technical or industry experience.

172. Reasonable period of time must be defined as “short time”, hopefully within 30 days. A temporary correction of the problem should be made pending final resolution of the dispute. Temporary relief will insure equal access to justice and fair treatment for small and minority enterprises.

Alternative Dispute Resolution

228. Arbitration should be encouraged whenever possible. Arbitration cases must be quick and efficient, no more than 30 days, in order to timely resolve disputes, especially for small and minority enterprises. Arbitrators should be randomly selected from lists of qualified individuals within the party. Results of arbitration shall be binding on the parties.

To: Negotiating Group on Services

From: George Keller

Subject: Chapter on Services

Market Access

Criteria should be added to authorize special priority be given to small and minority enterprises from all economies within the territory in the implantation of 7.2 and 7.3. Expansion of small and minority business opportunities should be a priority under the Agreement.

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