Caribbean Basin Initiative
DESCRIPTION OF THE CARIBBEAN BASIN INITIATIVE
Key Product Eligibility Provisions
The Caribbean Basin Economic Recovery Act of 1983 allows the President
to grant unilateral duty-free treatment on imports of certain eligible articles
from CBI beneficiary countries. In order to receive benefits, products generally
must: a) be imported directly from a CBI beneficiary country into the U.S.
customs territory; b) be wholly the growth, product or manufacture of a
CBI beneficiary country or be substantially transformed into a new or different
article in the CBI beneficiary country; and c) contain a minimum of 35 percent
local content of one or more CBI beneficiary countries (15 percent of the
minimum content may be from the United States.)
In 1990, the CBERA was made permanent and at the same time amended modestly
to increase market access to the United States. These amendments expanded
certain trade and tax benefits of the original statute, including: a 20
percent tariff reduction on certain leather products; duty-free treatment
for products produced in Puerto Rico and further processed and imported
from CBI beneficiary countries; and duty-free treatment from CBI beneficiary
countries for products made from 100 percent U.S. components. Textile and
apparel articles, and petroleum and certain products derived from petroleum,
were excluded from duty-free treatment.
In addition, as part of the ongoing efforts to make the program more
effective through administrative enhancements, the list of products eligible
for duty-free treatment was expanded through two proclamations intended
to make the language of CBERA parallel the language of the Generalized System
of Preferences (GSP). Effective September 28, 1991, 94 tariff categories,
affecting $47 million in 1991 imports, were provided new or expanded duty-free
treatment. A second expansion, effective July 17, 1992, provided 28 tariff
categories new or expanded status as goods eligible for preferential tariff
treatment under CBI.
In May 2000, the United States enacted a further enhancement of the CBI
through the U.S.- Caribbean Basin Trade Partnership Act. The new legislation
was implemented on October 2, 2000. The CBTPA recognizes the importance
of apparel as a component of CBI exports to the United States, and expands
the degree of preferential treatment applied to U.S. imports of apparel
made in the Caribbean Basin region.
Under the CBTPA, duty- and quota-free treatment is provided for apparel
assembled in CBI countries from U.S. fabrics formed from U.S. yarns and
cut in the United States. If the U.S. fabrics used in the production of
such apparel are cut into parts in the CBTPA beneficiary countries rather
than in the United States, the apparel must also be sewn together with U.S.
thread in order to qualify for preferential treatment. Duty- and quota-free
treatment is also available for certain knit apparel made in CBTPA beneficiary
countries from fabrics formed in the Caribbean Basin region, provided that
the fabric is formed from U.S. yarns. This regional fabric benefit for knit
apparel is subject to an annual quantitative limit, with a separate limit
provided for t-shirts. The limits were subject to annual growth rates of
16 percent through September 30, 2004. (These limits were later amended
by the Trade Act of 2002 (the Act), discussed below). Duty- and quota-free
treatment is also available for certain brassieres, certain textile luggage,
apparel made in CBI countries from fabrics determined not to be available
in commercial quantities in the United States, and designated hand-loomed,
handmade, or folklore articles.
In addition to these apparel preferences, the CBTPA provides tariff treatment
equivalent to that extended to Mexican products under the NAFTA for certain
items previously excluded from duty-free treatment under the CBI program.
These products are: footwear, canned tuna, petroleum products, certain watches
and watch parts, certain handbags, luggage, flat goods, work gloves and
leather wearing apparel.
In contrast to CBERA, which is permanent, the CBTPA benefits by statute
expire on September 30, 2008, or upon entry into force of the Free Trade
Area of the Americas (FTAA) or another free trade agreement between the
United States and a beneficiary country, whichever comes first.
Trade Act of 2002 Preferences
The Trade Act of 2002 amended the CBERA to grant additional benefits
to Caribbean Basin apparel products. Specifically, these changes permitted
the use of U.S. and regional knit-toshape components in eligible apparel
articles. The Act also grants preferences to hybrid articles, which are
articles that contain U.S. and regional components, and specified that both
fabric and knit-to-shape components may be used in eligible articles. In
addition, the Act substantially increased the annual quantitative limit
for eligible knit apparel articles and nearly doubled the separate limits
for t-shirts. The Act also added a requirement, effective September 1, 2002,
that for apparel assembled in the region from U.S. knit or woven fabrics,
all dyeing, printing, and finishing must be done in the United States.
HOPE Act of 2006
The Haitian Hemispheric Opportunity through Partnership Encouragement
Act of 2006 (HOPE Act) makes Haiti eligible for new trade benefits, in addition
to those it currently receives under CBI. Under CBTPA, apparel imports from
Haiti qualified for duty-free treatment only if they were made from U.S.
or Haitian fabric. However, the HOPE Act also allows apparel imports from
Haiti to enter the United States duty free if at least 50 percent of the
value of inputs and/or costs of processing are from any combination of U.S.,
FTA partner countries, and regional preference program partner countries.
The quantity of apparel eligible for duty-free treatment under this provision
is subject to a limit in the first year equivalent to one percent of overall
U.S. apparel imports. This limit will expand gradually over five years,
reaching two percent in the fifth year.
The HOPE Act also removes duties for three years on a specified quantity
of woven apparel imports from Haiti made from fabric produced anywhere in
the world. Finally, the HOPE Act will allow automotive wire harnesses imported
from Haiti that contain at least 50 percent by value of materials produced
in Haiti, U.S., FTA partner countries, or regional preference program countries
to qualify for duty-free treatment.
Currently 19 countries and dependent territories receive CBI benefits.
Chapter 3 discusses the eligibility criteria related to the designation
of countries and dependent territories as CBERA and CBTPA beneficiary countries
and provides a summary of current compliance with these criteria on the
part of CBI countries. The President is authorized to limit, suspend or
withdraw CBI benefits if conditions change with regard to performance in
connection with the statutory eligibility criteria.
Twenty countries and dependent territories were designated to receive
benefits on January 1, 1984: Antigua and Barbuda, Barbados, Belize, British
Virgin Islands, Costa Rica, Dominica, Dominican Republic, El Salvador, Grenada,
Guatemala, Haiti, Honduras, Jamaica, Montserrat, Netherlands Antilles, Panama,
St. Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, and
Trinidad and Tobago. The Bahamas was designated on March 14, 1985. On April
11, 1986, Aruba was designated retroactively to January 1, 1986, upon becoming
independent of the Netherlands Antilles. Guyana was designated effective
November 24, 1988, and Nicaragua was designated effective November 13, 1990.
This brought the total number of beneficiary countries to 24.
Anguilla, Cayman Islands, Suriname, and Turks and Caicos Islands have
also been identified by Congress as potentially eligible for benefits, but
have not yet requested beneficiary status. Based on the criteria described
in Chapter 3 of this report, on October 2, 2000, President Clinton designated
all 24 of the then-existing CBERA beneficiary countries as eligible beneficiaries
under the CBTPA. The CBTPA requires an additional determination that countries
and dependent territories have implemented or are making substantial progress
toward implementing certain customs procedures based on those contained
in the NAFTA. (See discussion below.) As of late 2007, the following nine
countries have satisfied this requirement and have been designated as fully
eligible to receive the enhanced benefits of the CBTPA: Barbados, Belize,
Costa Rica, Guyana, Haiti, Jamaica, Panama, Saint Lucia, and Trinidad and
Tobago. Additional CBTPA beneficiary counties may be designated in the future
as fully eligible for CBTPA benefits, provided that the customs-related
requirements are satisfied.
On August 2, 2005, President Bush signed implementing legislation for
the Dominican Republic-Central America-United States Free Trade Agreement
(CAFTA-DR). The CAFTA-DR entered into force for El Salvador on March 1,
2006; for Honduras on April 1, 2006; for Nicaragua on April 1, 2006; for
Guatemala on July 1, 2006; and for the Dominican Republic on March 1, 2007.
When the CAFTA-DR entered into force for each of these countries, it ceased
to be designated as a CBERA and CBTPA beneficiary country. When the CAFTA-DR
enters into force for Costa Rica, that country will also cease to be designated
as a CBERA and CBTPA beneficiary country. The United States and Panama signed
a free trade agreement on June 28, 2007, but that agreement has not yet
entered into force.
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