Morocco: Sources at the Office of the U.S. Trade Representative and the U.S Department of Commerce now confirm that implementation of the U.S. – Morocco Free Trade Agreement (FTA) will be delayed from the anticipated January 1, 2005 date. Implementation is now anticipated for March 1 or April 1, 2005. As we first reported in an ALERT dated December 3, the delay is attributable to the failure of King Mohamed VI of Morocco to call for ratification of the FTA by his council of ministers as of this date. Again, our sources indicate that the delay does not signal any particular problems with the FTA, and no one is indicating that final implementation of the agreement is in jeopardy. Members that are planning to import products from Morocco subject to preferential tariff treatment under the terms of the FTA during the early part of 2005 may want to consider either delaying entry of the merchandise or making arrangements for temporary storage in a bonded warehouse. We will advise Members as soon as the actual implementation date is established.
The Dominican Republic: We had reported in an ALERT dated November 19 that the Bush Administration was seriously considering means to “jettison” the Dominican Republic from the proposed Central American Free Trade Agreement (CAFTA) because that country approved a tax package that contained a tax on soft drinks made with imported high fructose corn syrup (HFCS). The overall tax package was approved in order to meet International Monetary Fund (IMF) conditions for making additional loans available to that country. However, the Bush Administration denounced the HFCS tax as violative of the spirit, if not the letter, of the proposed FTA, and directly warned the Dominican Republic that it would be excluded from the CAFTA if the HFCS tax remained in place.
This week, the Dominican Republic’s senate gave final approval to legislation repealing the HFCS tax. This is viewed as a major step towards salvaging the free trade agreement with that country. However, potential complications remain on the horizon. The Dominican Republic may still be excluded from the CAFTA, depending on the findings of a commission that was created by that country’s senate to explore possible compensation packages that could be given to domestic producers that are adversely impacted by the repeal of the HFCS tax. We will continue to advise Members as developments play out.
In any case, the CAFTA as a whole remains “on hold” here in the United States, as the Administration and supporters of the proposed agreement continue to evaluate the prospects for favorable action on the CAFTA in the upcoming 109th Congress which will convene in January.
Chile: On January 1, 2005, the United States and Chile will implement the second round of tariff reductions effected by the FTA on trade between the two countries. Members are also reminded that products, such as processed artichokes (subheading 2005.90.80, HTSUS) and avocados (subheadings 0804.40.00, HTSUS), which are subject to a tariff-rate quota, are directly affected by the turn of the year. Specifically, under the terms of the Chile FTA, under-quota quantities of products subject to a tariff-rate quota are entitled to duty-free treatment, while over-quota quantities are subject to duties established by the agreement. Under-quota quantities are treated on a first-come, first-serve basis.
We will be disseminating a special year-end Counsel’s Report next week, which will review the current status of all FTAs, evaluate the potential impact of the shifts in the political landscape, and anticipate the major issues likely to take center stage in 2005.
In the meantime, from everyone at Harris Ellsworth & Levin to the entire AFI family, our very best wishes for a very happy and safe Holiday Season and New Year!
