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NEWS FROM THE COMMITTEE ON WAYS AND MEANS FOR IMMEDIATE RELEASE Contact: Trent Duffy or Greg Crist March 6, 2001 (202) 225-8933 Thomas & Crane Send Letter to Treasury Secretary on New African Trade Law Customs' Actions Violating What Congress Intended, Chairman, Ways & Means Members Say WASHINGTON - Chairman Bill Thomas, Trade Subcommittee Chairman Phil Crane (R-IL) and eight Members of the Committee today sent Treasury Secretary O'Neill a letter regarding the Administration's implementation of the African Growth and Opportunity Act passed by Congress last year. Specifically, the Chairman is concerned about the U.S. Customs Service's denial of duty-free treatment to "knit-to-shape" apparel products produced in beneficiary sub-Saharan African countries. A copy of the letter is attached. March 6, 2001 The Honorable Paul O'Neill Dear Secretary O'Neill: We are writing to follow up on your comments at the Ways and Means Committee hearing on February 13, 2001 regarding the Customs Service's interim regulations on the African Growth and Opportunity Act (AGOA) and the Caribbean Basin Trade Partnership Act. We were pleased to hear that you are committed to implementing the legislation in a manner that is fully consistent with congressional intent. We outlined some of our concerns in the attached October 18, 2000 letter to Customs Commissioner Kelly. We would like to take this opportunity to highlight one concern specific to AGOA that has recently come to our attention. We understand that the U.S. Customs Service is denying duty-free treatment to sweaters assembled in the region from fabric knit-to-shape from qualifying yarns. We understand that the basis for this denial is the view that AGOA does not provide any benefits for knit-to-shape garments under the regional cap in section 112(b)(3) because of the use of the word "fabric" in the provision. This interpretation is wrong. The word "fabric" cannot be read to preclude apparel made from knit-to-shape fabric. Customs has never made a distinction between "fabric" and "knit-to-shape" fabric in the past, and nothing in the legislation suggests that such a distinction should be made now. Moreover, Customs' interpretation clearly violates legislative intent. The purpose of section 112(b)(3) is to encourage the production of garments in beneficiary countries using regional fabric made with U.S., regional, or in certain circumstances, third country fabric. The only limitation set forth in section 112(b)(3) is that the apparel must be assembled from qualifying material. On this basis, a knit-to-shape panel must be treated as the equivalent of a piece of fabric for purposes of the law, so long as the knitting process occurs within the region (as required for garments under section 112(b)(3)) or assembly occurs in the region (as required under section 112(b)(3)(B)(i). Customs attempts to support its incorrect and counterproductive interpretation with the fact that specific provisions were included for knit-to-shape sweaters made of cashmere and certain merino yarns. As reflected in the legislative history, our intent with respect to the specific provisions on knit-to-shape sweaters made from cashmere and certain merino wools was to provide a benefit to one subset of apparel articles that would not be subject to the quantitative restrictions of the regional cap in section 112(b)(3). The rational for creating a separate category for these apparel products is that there is no competing production of such garments in the United States. These benefits should not be interpreted as an indication of our intent to exclude other knit-to-shape garments from the section 112(b)(3) cap. The Customs Service's present interpretation of these matters threatens to seriously undermine the viability of AGOA. Knit-to-shape sweaters and other knit-to-shape apparel products are viewed as one of the primary products to be produced in the region. Failure to confer benefits for knit-to-shape garments will significantly reduce the value of the benefits that we sought to extend through AGOA. The Customs Service must allow knit-to-shape garments knit in beneficiary countries in the region from qualifying yarns to enter the United States duty-free, consistent with the intent of the legislation. Thank you for your prompt attention in rectifying this important matter.
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