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                                                       Calendar No. 630
108th Congress                                                   Report
                                 SENATE
 2d Session                                                     108-316

======================================================================



 
    UNITED STATES-AUSTRALIA FREE TRADE AGREEMENT IMPLEMENTATION ACT

                                _______
                                

                August 25, 2004.--Ordered to be printed

   Filed under authority of the order of the Senate of July 22, 2004

                                _______
                                

  Mr. Grassley, from the Committee on Finance, submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                         [To accompany S. 2610]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Finance, to which was referred the bill 
(S. 2610) to implement the United States-Australia Free Trade 
Agreement, having considered the same, reports favorably 
thereon without amendment and recommends that the bill do pass.

                                CONTENTS

                                                                   Page
 I. Report and Other Committee Material...............................2
        A. Report of the Committee on Finance....................     2
        B. Summary of Congressional Consideration of the United 
            States-Australia Free Trade Agreement................     2
            1. Background........................................     2
            2. Trade Promotion Authority Procedures in General...     2
            3. Notification Prior to Negotiations................     3
            4. Notification of Intent To Enter Into an Agreement.     3
            5. Development of the Implementing Legislation.......     3
            6. Formal Submission of the Agreement and 
                Implementing Legislation.........................     4
            7. Committee and Floor Consideration.................     5
        C. Trade Relations With Australia........................     5
            1. United States-Australia Trade and Investment......     5
            2. Tariffs and Trade Agreements......................     6
            3. U.S. International Trade Commission Study.........     7
        D. Overview of the United States-Australia Free Trade 
            Agreement............................................     8
            1. Overview of the Agreement.........................     8
            2. Chapter Summaries.................................     8
        E. General Description of the Bill To Implement the 
            United States-Australia Free Trade Agreement.........    27
    Title I--Approval of, and General Provisions Relating to, the 
    Agreement........................................................28
    Title II--Customs Provisions.....................................29
    Title III--Relief From Imports...................................32
    Title IV--Procurement............................................39
        F. Vote of the Committee in Reporting the Bill...........    39
II. Budgetary Impact of the Bill.....................................39
III.Regulatory Impact of the Bill and Other Matters..................41

IV. Additional Views.................................................42
 V. Changes in Existing Law Made by the Bill, as Reported............51

                 I. REPORT AND OTHER COMMITTEE MATERIAL


                 A. Report of the Committee on Finance

    The Committee on Finance, to which was referred the bill 
(S. 2610) to implement the United States-Australia Free Trade 
Agreement, having considered the same, reports favorably 
thereon without amendment and recommends that the bill do pass.

    B. Summary of Congressional Consideration of the United States-
                     Australia Free Trade Agreement


1. Background

    In an address to a joint meeting of the United States 
Congress on June 12, 2002, Australian Prime Minister John 
Howard announced a proposal to negotiate a free trade agreement 
between Australia and the United States. On June 13, 2002, 
Prime Minister Howard met with President George W. Bush at the 
White House, where President Bush expressed willingness to 
negotiate such an agreement as soon as Congress granted him the 
authority. On August 6, 2002, President Bush signed the Trade 
Act of 2002 (Pub. L. 107-210), which grants the President the 
authority to enter into trade agreements and provides expedited 
procedures for consideration of legislation implementing trade 
agreements that meet certain objectives providedfor under the 
Act. On November 13, 2002, President Bush authorized and directed 
Ambassador Robert B. Zoellick, U.S. Trade Representative, to notify the 
Congress of the President's intention to enter into negotiations for a 
free trade agreement with Australia. In letters dated November 13, 
2002, to the Honorable Robert C. Byrd, President Pro Tempore, U.S. 
Senate, and to the Honorable J. Dennis Hastert, Speaker, U.S. House of 
Representatives, Ambassador Zoellick notified Congress of the 
President's intention to negotiate a trade agreement with Australia. On 
February 13, 2004, President Bush notified Congress of his intention to 
enter into the United States-Australia Free Trade Agreement. U.S. Trade 
Representative Robert B. Zoellick and Australian Minister of Trade Mark 
Vaile signed the Agreement in Washington, D.C. on May 18, 2004.

2. Trade Promotion Authority Procedures in General

    The requirements for Congressional consideration of the 
United States-Australia Free Trade Agreement (the Agreement) 
under expedited procedures (known as Trade Promotion Authority 
(TPA) procedures) are set forth in sections 2103 through 2106 
of the Bipartisan Trade Promotion Authority Act of 2002 (the 
Act) (19 U.S.C. Sec. Sec. 3803-3806) and section 151 of the 
Trade Act of 1974 (19 U.S.C. Sec. 2191).
    Section 2103 of the Act authorizes the President, prior to 
June 1, 2005 (or prior to June 1, 2007, if trade authority 
procedures are extended under section 2103(c) of the Act), to 
enter into reciprocal trade agreements with foreign countries 
to reduce or eliminate tariff or nontariff barriers and other 
trade-distorting measures. The purpose of section 2103 
procedures is to provide the means to achieve U.S. negotiating 
objectives set forth under section 2102 of the Act in 
international trade negotiations.

3. Notification Prior to Negotiations

    Under section 2104(a)(1) of the Act, the President must 
provide written notice to the Congress at least 90 calendar 
days before initiating negotiations. In Presidential Memorandum 
of November 13, 2002, President Bush authorized and directed 
Ambassador Robert B. Zoellick, U.S. Trade Representative, to 
notify the Congress, consistent with section 2104(a)(1) of the 
Act, of the President's intention to enter into negotiations 
for a free trade agreement with Australia. Section 2104(a)(2) 
requires the President, before and after submission of the 
notice, to consult regarding the negotiations with the relevant 
Committees of Congress and the Congressional Oversight Group 
established under section 2107 of the Act. The Administration 
engaged in the requisite consultations, including appearances 
by Ambassador Zoellick at meetings of the Congressional 
Oversight Group on January 7, 2003, April 11, 2003, July 24, 
2003, and May 6, 2004.

4. Notification of Intent To Enter Into an Agreement

    Under section 2105(a)(1)(A) of the Act, the President is 
required, at least 90 days before entering into an agreement, 
to notify Congress of his intent to enter into the Agreement. 
On February 13, 2004, President George W. Bush notified 
Congress of his intention to enter into the United States-
Australia Free Trade Agreement. The Agreement was signed on May 
18, 2004.
    Section 2105(a)(1)(B) of the Act also requires the 
President, within 60 days of signing an agreement, to submit to 
Congress a description of changes to existing laws that the 
President considers would be required to bring the United 
States into compliance with such agreement. On July 6, 2004, 
the President transmitted to Congress a description of changes 
to existing laws required to comply with the Agreement.

5. Development of the Implementing Legislation

    Under TPA procedures, the Congress and the Administration 
work together to produce the legislation to implement a free 
trade agreement. Draft legislation is developed in close 
consultation between the Administration and the Committees with 
jurisdiction over the laws that must be enacted or amended to 
implement the Agreement. The Committees then hold informal 
meetings to consider the draft legislation and make 
recommendations to the Administration, if any. The 
Administration then finalizes implementing legislation for 
formal submission to the Congress and referral to the 
Committees of jurisdiction. These procedures are meant to 
ensure that the final legislation reflects only those 
provisions that are necessary or appropriate to faithfully 
implement the agreement.
    The Senate Committee on Finance met in open executive 
session on June 23, 2004, to informally consider draft 
implementing legislation for the Agreement. At that meeting, an 
amendment was offered by Senator Conrad to require approval by 
the Senate Committee on Finance and the House Ways and Means 
Committee before the U.S. Trade Representative could exercise 
waiver authority with respect to two beef safeguard mechanisms 
provided for in the Agreement and included in the draft 
implementing legislation. The amendment was approved by roll 
call vote, a quorum being present, 11 Ayes (6 by proxy), 10 
Nays (6 by proxy). The Committee meeting recessed without final 
consideration of the draft implementing legislation, as 
amended. The Chairman reconvened the meeting on June 24, 2004. 
On approval of the draft implementing legislation, as amended, 
the Committee disapproved the amended draft by roll call vote, 
a quorum being present, 7 Ayes (1 by proxy), 14 Nays (none by 
proxy). As a result, the Committee did not provide an informal 
recommendation of implementing legislation to the 
Administration.

6. Formal Submission of the Agreement and Implementing Legislation

    When the President formally submits a trade agreement to 
Congress under section 2105 of the Act, the President must 
include in the submission the final legal text of the 
agreement, together with implementing legislation, a statement 
of administrative action (describing regulatory and other 
changes that are necessary or appropriate to implement the 
agreement), a statement setting forth the reasons of the 
President regarding how and to what extent theagreement makes 
progress in achieving the applicable policies, purposes, priorities, 
and objectives set forth in the Act, and a statement setting forth the 
reasons of the President regarding how the agreement serves the 
interests of U.S. commerce.
    The implementing legislation is introduced in both Houses 
of Congress on the day it is submitted by the President and is 
referred to Committees with jurisdiction over its provisions. 
President George W. Bush transmitted the final text of the 
United States-Australia Free Trade Agreement, along with 
implementing legislation, a Statement of Administrative Action, 
and other supporting information, as required under section 
2105 of the Trade Act of 2002, to the Congress on July 6, 2004. 
The legislation was introduced that same day in both the House 
and the Senate.
    To qualify for TPA procedures, the implementing bill itself 
must contain provisions formally approving the agreement and 
the statement of administrative action. Further, the 
implementing bill must contain only those provisions necessary 
or appropriate to implement the Agreement. The implementing 
bill reported here--which approves the United States-Australia 
Free Trade Agreement and the Statement of Administrative Action 
and contains provisions necessary or appropriate to implement 
the Agreement into U.S. law--was referred to the Senate 
Committee on Finance.

7. Committee and Floor Consideration

    When the requirements of the Act are satisfied, 
implementing revenue bills, such as the United States-Australia 
Free Trade Agreement Implementation Act (Implementation Act), 
are subject to the legislative procedures of section 151 of the 
Trade Act of 1974. The following schedule for Congressional 
consideration applies under these procedures:
    (i) House Committees have up to 45 days in session in which 
to report the bill; any Committee which does not do so in that 
period will be automatically discharged from further 
consideration.
    (ii) A vote on final passage by the House must occur on or 
before the 15th day in session after the Committees report the 
bill or are discharged from further consideration.
    (iii) Senate Committees must act within 15 days in session 
of receiving the implementing revenue bill from the House or 
within 45 days in session of Senate introduction of the 
implementing bill, whichever is later, or they will be 
discharged automatically.
    (iv) The full Senate then must vote within 15 days in 
session and without amendment on the implementing bill.
    Thus, the Congress has a maximum of 90 days in session to 
complete action on the bill, although the time period can be 
shortened.
    Once the implementing bill has been formally submitted by 
the President and introduced, no amendments to the bill are in 
order in either House of Congress. Floor debate in each House 
is limited to no more than 20 hours, to be equally divided 
between those favoring the bill and those opposing the bill.

                   C. Trade Relations With Australia


1. United States-Australia Trade and Investment

    The United States is the top foreign supplier of goods and 
services to Australia, and the largest foreign investor in 
Australia. According to the World Bank, Australia is the fourth 
largest economy in the Asia-Pacific region and the 14th largest 
in the world, with a gross national income (GNI) of $430.5 
billion and a per capita GNI of $21,650 in 2003. In recent 
years, Australia has pursued a policy of market reform and 
liberalization, and it has ranked as one of the fastest growing 
developed economies.
    Australia is the 21st largest trading partner of the United 
States with two-way merchandise trade of $18.9 billion in 2003. 
Australia is the 13th largest export market for the United 
States, accounting for $12.5 billion in merchandise exports in 
2003. It is the 30th largest source of merchandise imports, 
valued at $6.5 billion in 2003. The United States has had a 
merchandise trade surplus with Australia in recent years: $3.9 
billion in 2001; $5.9 billion in 2002; and $6 billion in 2003. 
Principal U.S. merchandise exports in 2003 included transport 
equipment (mainly aircraft and parts), road vehicles, 
specialized machinery, industrial machinery, equipment and 
parts, and miscellaneous manufactured articles. Principal U.S. 
merchandise imports from Australia in 2003 included meat and 
meat preparations, beverages, metal ores and scrap, road 
vehicles, and petroleum and related products.
    Bilateral private services trade between the United States 
and Australia was $8.1 billion in 2002, and the United States 
has had a surplus in services trade with Australia in recent 
years. Australia was the 13th largest market for private U.S. 
services exports, valued at $5.2 billion in 2002. The United 
States imported private services valued at $2.9 billion from 
Australia, yielding a $2.3 billion surplus in cross-border 
services trade for U.S. service providers. Principal U.S. 
cross-border services exports in 2002 included travel and 
transportation services; business, professional and technical 
services; and financial (non-insurance) services. Principal 
U.S. cross-border services imports in 2002 included travel and 
transportation services, and business, professional and 
technical services.
    The United States is the leading foreign investor in 
Australia with total U.S. investments valued at $36.3 billion 
in 2002. In 2003, U.S. residents received $6.3 billion in 
income from U.S. investments in Australia, while Australian 
residents received $2.1 billion in income from investments in 
the United States. Australia is the third largest destination 
for U.S. investment in the Asia-Pacific region, and the 12th 
largest in the world. U.S. investment in Australia is broadly 
based, with principal sectors including manufacturing, mining, 
finance, and insurance. Australia is the 8th largest foreign 
direct investor in the United States with $24.5 billion in U.S. 
investments, concentrated in manufacturing, real estate, rental 
and leasing, and finance and insurance.

2. Tariffs and Trade Agreements

    Australia's strong economic performance over the past 
decade has resulted from sound macroeconomic policies, far-
reaching structural reforms and past unilateral trade 
liberalization. Australia's gradual reduction of tariffs, prior 
to the initiation of negotiations of a free trade agreement 
with the United States, has brought 86 percent of its tariffs 
to between zero and 5 percent, with more than 99 percent of its 
tariffs applied on an ad valorem basis and more than 96 percent 
of its tariff lines being bound in the World Trade Organization 
(WTO). Australia's average bound normal trade relation/most-
favored-nation (NTR/MFN) tariff rate is 10.5 percent, and its 
average applied NTR/MFN tariff is 4.3 percent. The average 
applied NTR/MFN tariff for industrial products is 4.7 percent, 
with bound rates generally ranging between zero and 55 percent. 
The average applied NTR/MFN tariff for agricultural products is 
1.2 percent, with bound rates generally ranging between zero 
and 29 percent.
    Australia is a member of the World Trade Organization 
(WTO), the Organization for Economic Cooperation and 
Development (OECD), and the Asia-Pacific Economic Cooperation 
(APEC) forum. Australia has been a leader in the so-called 
Cairns Group, which has pressed for agricultural trade reform 
in the WTO. Australia has reached free trade agreements with 
Singapore (effective July 2003) and with Thailand (signed 
October 2003).

                                      U.S. EXPORTS TO AUSTRALIA, 1998-2003
                                          [In millions of U.S. dollars]
----------------------------------------------------------------------------------------------------------------
        Top 15 products, by HTS chapter            1998       1999       2000       2001       2002       2003
----------------------------------------------------------------------------------------------------------------
84  Machinery.................................    2,883.9    2,952.3    2,879.1    2,657.6    2,431.2    2,498.9
88  Aircraft..................................      860.9    1,192.2    1,075.8      895.8    2,980.2    2,161.6
87  Vehicles..................................    1,054.4      873.2    1,060.8      939.6    1,083.2    1,245.3
85  Electrical machinery......................      901.6      969.1    1,236.2      846.7      907.2      944.9
90  Optical, medical equipment................      751.4      777.8      779.4      795.2      783.0      845.6
98  Special classifications...................      631.0      611.8      597.2      533.3      552.4      633.4
30  Pharmaceutical products...................      220.1      221.1      279.1      274.3      361.8      432.1
39  Plastics..................................      375.3      383.2      393.4      354.7      361.9      346.3
29  Organic chemicals.........................      400.9      353.1      367.9      345.1      215.7      250.5
38  Miscellaneous chemicals...................      219.2      207.5      213.1      217.1      223.0      216.6
01  Live animals..............................       10.4       15.1        7.8        7.0        6.7      202.6
48  Paper and paperboard......................      214.1      192.2      186.9      172.9      172.7      176.0
49  Printed matter............................      219.7      202.1      180.7      151.9      156.8      165.7
31  Fertilizers...............................      276.9      220.4      170.9      179.6      150.2      164.5
33  Essential oils............................      110.2      116.1      117.5      158.3      125.1      161.2
                                               -----------------------------------------------------------------
        Subtotal for top 15 products..........    9,130.2    9,287.5    9,545.8    8,529.1   10,511.2   10,445.3
        Subtotal for all other U.S. exports...    2,420.4    2,106.4    2,138.1    1,696.7    1,782.6    2,004.3
                                               -----------------------------------------------------------------
        Total U.S. exports to Australia.......   11,550.6   11,393.9   11,683.9   10,225.8   12,293.8  12,449.6
----------------------------------------------------------------------------------------------------------------
Note.--HTS is the Harmonized Tariff Schedule of the United States.

Source: U.S. International Trade Commission Dataweb.


                                     U.S. IMPORTS FROM AUSTRALIA, 1998-2003
                                          [In millions of U.S. dollars]
----------------------------------------------------------------------------------------------------------------
        Top 15 products, by HTS chapter            1998       1999       2000       2001       2002       2003
----------------------------------------------------------------------------------------------------------------
02  Meat......................................      572.7      621.7      819.5    1,023.5    1,071.4    1,148.8
22  Beverages.................................      151.6      204.7      282.2      346.7      459.2      626.7
98  Special classifications...................      408.5      437.3      427.3      475.3      462.6      591.6
87  Vehicles..................................      264.6      326.4      422.0      434.2      507.0      368.1
27  Fuels.....................................      266.7      254.7      449.5      367.0      495.9      366.9
84  Machinery.................................      304.6      333.7      331.7      307.2      295.8      327.9
28  Inorganic chemicals.......................      607.0      544.5      600.9      388.7      348.2      322.6
90  Optical, medical equipment................      160.3      231.3      311.7      337.9      306.9      276.8
26  Ores, slag and ash........................      144.4      142.5      244.2      230.1      244.0      214.0
61  Knit apparel..............................       66.2      126.2      168.2      209.1      232.7      198.0
85  Electrical machinery......................      137.4      142.3      212.8      193.1      170.3      181.2
72  Iron and steel............................      264.8      198.6      224.0      162.2      167.8      174.3
30  Pharmaceutical products...................       35.0       63.8       58.2      161.7      135.7      143.5
88  Aircraft..................................      152.2      137.5      104.9      131.6      111.3      111.2
75  Nickel....................................       92.2       77.7      136.6      121.4       78.5      100.8
                                               -----------------------------------------------------------------
      Subtotal for top 15 products............    3,628.2    3,842.9    4,792.8    4,889.9    5,087.4    5,152.6
      Subtotal for all other U.S. imports.....    1,649.5    1,351.1    1,420.3    1,443.2    1,311.0    1,315.5
                                               -----------------------------------------------------------------
      Total U.S. imports from Australia.......    5,277.7    5,194.1    6,213.1    6,333.1    6,398.4    6,468.1
----------------------------------------------------------------------------------------------------------------
Note.--HTS is the Harmonized Tariff Schedule of the United States.

Source: U.S. International Trade Commission Dataweb.

3. U.S. International Trade Commission Study

    In May 2004, the U.S. International Trade Commission (ITC) 
released the results of its investigation (Investigation No. 
TA-2104-11) into the probable economic effects of a United 
States-Australia Free Trade Agreement. The ITC concluded that 
the economy-wide effects of the Agreement's tariff reductions 
alone are likely to result in an increase in overall U.S. 
welfare in the range of $434.8 million to $639.4 million. The 
ITC projected that U.S. exports to Australia would increase by 
about $1.5 billion, and U.S. imports from Australia would 
increase by about $1.2 billion.
    At the sectoral level, the ITC report concluded that some 
sectors of the U.S. economy likely would experience increased 
import competition from Australia, while other sectors likely 
would experience increased export opportunities with respect to 
Australia. When the Agreement is fully implemented and the 
tariff reductions are fully phased in, the ITC estimated the 
effects to be greater for U.S. exports of: coal; oil and gas; 
certain processed foods; textile, apparel and leather products; 
motor vehicles and parts; ferrous metals; and wood products. 
For U.S. imports, the likely effects would be greater for: meat 
products; certain processed foods; textiles and apparel; 
chemicals, rubber and plastic; and motor vehicles and parts.

    D. Overview of the United States-Australia Free Trade Agreement


1. Overview of the Agreement

    The United States-Australia Free Trade Agreement 
establishes a bilateral free trade area that eliminates tariffs 
on most bilateral merchandise trade. The Agreement liberalizes 
trade in services, and contains provisions that cover 
investment, intellectual property, environment, labor, 
government procurement, and competition policy. The Agreement 
also contains a mechanism for settling disputes that arise 
under the Agreement. Throughout the Agreement there are 
important provisions that promote bilateral consultation and 
cooperation, procedural and substantive due process, 
administrative and judicial review, transparency, and the rule 
of law.
    Manufactured goods account for 93 percent of U.S. exports 
to Australia, and the import duties applicable under 99 percent 
of Australia's tariff categories for industrial and consumer 
goods will be eliminated on the first day that the Agreement 
enters into force. Australian import duties on the remaining 
manufactured goods will be phased out over the next 10 years. 
Australian import duties on all U.S. agricultural products that 
are currently exported to Australia, valued at nearly $700 
million in 2003, will be eliminated as soon as the Agreement 
enters into force. The Agreement is expected to enter into 
force on January 1, 2005.

2. Chapter Summaries

    Establishment of a Free Trade Area and Definitions. Chapter 
1 provides that the Agreement establishes a free trade area in 
accordance with the provisions of the Agreement, and consistent 
with Article XXIV of the General Agreement on Tariffs and Trade 
1994 (GATT 1994) and Article V of the General Agreement on 
Trade in Services (GATS). In Article 1.1, the Parties affirm 
their rights and obligations under existing bilateral and 
multilateral agreements, including the Marrakesh Agreement 
Establishing the World Trade Organization (WTO). The chapter 
also includes a number of general definitions that apply 
throughout the Agreement, unless otherwise specified.
    National Treatment and Market Access for Goods. Chapter 2 
sets forth the core obligations under the Agreement with 
respect to two-way trade in goods. Article 2.2 provides that 
each Party shall accord national treatment to the goods of the 
other Party in accordance with Article III of GATT 1994. 
Article 2.3 provides that each Party shall progressively 
eliminate its customs duties on originating goods of the other 
Party in accordance with its schedule provided for in Annex 2-B 
(Tariff Elimination) of the Agreement. The term ``originating 
good'' is defined in Article 5.1 of the Agreement.
    Article 2.5 provides that each Party shall grant duty-free 
temporary admission for certain types of goods, regardless of 
origin. Such types of goods include goods intended for display 
or demonstration, commercial samples and advertising films and 
recordings, and goods imported for sports purposes. Article 2.6 
provides duty-free treatment for goods that are imported after 
having been exported temporarily to the other Party for repair 
or alteration, and for goods that are imported temporarily for 
repair or alteration. Article 2.12 provides that neither Party 
may adopt or maintain a merchandise processing fee on an 
originating good.
    Annex 2-B to the Agreement contains the general staging 
categories for tariff elimination, and a specific, item-by-item 
schedule of tariff elimination for each Party. Under the 
general staging categories, originating goods will either: (1) 
remain duty-free, if they are currently duty-free; (2) become 
duty-free on the date that the Agreement enters into force; or 
(3) become duty-free after equal annual reductions over periods 
of 4 years, 8 years or 10 years. In addition, there are some 
special staging categories for certain products that are set 
forth in the general notes that accompany each Party's Schedule 
in Annex 2-B. For certain U.S. imports from Australia, the 
import duties will be reduced over 18 years. U.S. import duties 
on sugar are not reduced under the Agreement.
    A number of product-specific preferential tariff-rate 
quotas (TRQs) for certain sensitive products are included in an 
annex to the general notes accompanying the Schedule of the 
United States in Annex 2-B. Products covered by preferential 
TRQs include beef, cotton, dairy, peanuts,tobacco and wine. 
Separately, in Annex 2-A of the Agreement, each Party exempts certain 
measures from the national treatment obligation of the Agreement and 
the prohibition on import or export restrictions. The United States 
exempts its controls on the export of U.S. logs and certain measures 
under the Merchant Marine Act of 1920 and the Passenger Vessel Act. 
Australia's exemptions include certain agricultural marketing 
arrangements and controls on the importation of used motor vehicles.
    Annex 2-C to the Agreement sets forth certain agreed 
principles with respect to pharmaceuticals and public health 
care; these include: the important role played by innovative 
pharmaceuticals in delivering high quality health care; the 
importance of research and development in the pharmaceutical 
industry and of appropriate government support, including 
through intellectual property protection and other policies; 
the need to promote timely and affordable access to innovative 
pharmaceuticals through transparent, expeditious, and 
accountable procedures, without impeding a Party's ability to 
apply appropriate standards of quality, safety, and efficacy; 
and, the need to recognize the value of innovative 
pharmaceuticals through the operation of competitive markets or 
by adopting or maintaining procedures that appropriately value 
the objectively demonstrated therapeutic significance of a 
pharmaceutical.
    Annex 2-C does not require any changes to how U.S. programs 
operate with respect to pharmaceuticals. Pharmaceutical 
formulary development and management by federal healthcare 
agencies are expressly recognized as aspects of government 
procurement that are covered by Chapter 15 of the Agreement 
(Government Procurement) and not Annex 2-C. Chapter 15 contains 
obligations that the United States has already assumed as a 
signatory to the WTO Agreement on Government Procurement.
    Annex 2-C establishes a Medicines Working Group to promote 
discussion and mutual understanding of issues relating to Annex 
2-C, including the importance of pharmaceutical research and 
development to continued improvement of healthcare outcomes. 
The Parties also commit to advancing the existing dialogue 
between the Australian Therapeutic Goods Administration and the 
U.S. Food and Drug Administration to make innovative medical 
products more quickly available to their nationals. In 
addition, each Party commits to allowing pharmaceutical 
manufacturers to disseminate truthful and not misleading 
information to health professionals and consumers through a 
manufacturer's Internet site registered in the territory of the 
Party and other Internet sites registered in the territory of 
the Party and linked to the manufacturer's site.
    Agriculture. Chapter 3 establishes a Committee on 
Agriculture in order to provide a forum for: promoting trade in 
agricultural goods between the Parties; addressing barriers to 
trade in agricultural goods; conducting consultations between 
the Parties on agricultural export competition issues; and, 
considering any matters arising under Chapter 3. In addition, 
Chapter 3 provides for three agricultural safeguard mechanisms.
    Section A of Annex 3-A provides for a price-based safeguard 
for a specified list of horticulture goods, under which the 
United States shall assess a duty on imports of certain 
Australian horticulture goods if import prices for specific 
shipments fall below specified levels. The rate of additional 
duty under the safeguard increases as the difference increases 
between the unit import price of a shipment and the trigger 
price. The trigger price reflects historic unit import values 
for the relevant horticulture good. The assessment of 
additional duty under this provision terminates on the date on 
which duty-free treatment must be provided to that good under 
the Schedule of the United States to Annex 2-B of the 
Agreement. Specific horticulture goods listed in Section A of 
Annex 3-A of the Agreement include: dried onions and garlic; 
processed tomato products; canned asparagus; canned pears, 
apricots, peaches, and fruit mixtures; and orange and grape 
juices.
    Section B of Annex 3-A provides for a transitional 
quantity-based beef safeguard, which is available during the 
phase-out of over-quota tariffs on certain beef products (i.e., 
years 9 through 18 of the Agreement). The safeguard applies 
when the volume of covered imports exceeds 110 percent of the 
preferential in-quota volume for the specific year. The added 
duty under this safeguard is equal to 75 percent of the 
difference between the normal trade relation/most-favored-
nation (NTR/MFN) duty rate and the applied over-quota duty rate 
for that year. Any additional safeguard duty remains in effect 
until the end of the calendar year. The United States shall 
have the discretion not to apply an agricultural safeguard 
measure under Section B of Annex 3-A.
    Section C of Annex 3-A provides for a permanent price-based 
beef safeguard, which is available after the over-quota tariff 
has been phased out (i.e., beginning in year 19 of the 
Agreement). When the price of beef in the United States falls 
below a calculated trigger price, imports of beef products from 
Australia in excess of specified quota levels are subject to 
additional duties under this safeguard. The safeguard trigger 
is based on a 24-month rolling average index price. For each of 
the first three-quarters of the year, the safeguard is 
triggered when the average index price for any 2 months in a 
given quarter falls below 6.5 percent of the 24-month average 
index price. The safeguard is also triggered if the average 
index beef price falls 6.5 percent below the 24-month rolling 
average in the months of September, October, or November. If 
the safeguard is triggered during the first three-quarters of 
the year, the additional duty is applied in the following 
quarter. If the safeguard is triggered in September, October, 
or November, the additional duty is applied for the remainder 
of the year. The additional duty to be applied is equal to 65 
percent of the applied NTR/MFN tariff rate. This price-based 
safeguard can only be imposed on imports of Australian beef 
that exceed the Agreement's quota amount (i.e., 70,000 metric 
tons in the 19th year, an amount that will grow annually at 0.6 
percent) plus Australia's country-specific quota established 
under the World Trade Organization (currently set at 378,214 
metric tons). The United States shall have the discretion not 
to apply an agricultural safeguard measure under Section C of 
Annex 3-A.
    Article 3.6 provides that upon request after year 20 of the 
Agreement, the Parties shall consult on, and consider the 
possibility of, modifying market access commitments for the 
dairy goods listed in each Party's Schedule to Annex 2-B. 
Unless both Parties agree, however, nochange will occur in U.S. 
commitments on dairy products. The dairy provisions in the Agreement 
are not expected to affect the operation of the Commodity Credit 
Corporation's dairy price support programs. Under the Agreement, the 
United States will create preferential TRQs for certain dairy products 
currently covered by TRQs that are maintained in accordance with WTO 
rules. The in-quota tariff rates for these preferential TRQs will be 
eliminated immediately. However, there will be no change in the normal 
trade relation/most-favored nation (NTR/MFN) rate of duty applied to 
over-quota imports for these products. Initial increases in imports 
from Australia under the preferential TRQs will amount to about 0.17 
percent of the value of annual U.S. dairy production. Increased market 
access will be provided for such products through the expansion of 
quantities eligible for duty-free access under the preferential TRQs. 
These TRQs will expand by rates ranging from 3 percent to 6 percent 
annually, depending on product, with lower growth (i.e., 3 percent) for 
sensitive commodities directly related to the U.S. dairy price support 
program and higher growth (i.e., 4 to 6 percent) for other commodities, 
some of which are not produced in significant amounts in the United 
States. In most cases, tariffs on dairy items not covered by the 
preferential TRQs will be phased out over 18 years. Under the rules of 
origin provided for in the Agreement, dairy products from other 
countries that are transshipped through Australia to the United States 
will not benefit from the preferential TRQs. The Government of 
Australia will administer export certificates for dairy products; this 
will ensure that in-quota preferential TRQ levels are not exceeded and 
that any transshipped third-country dairy products do not benefit from 
the Agreement.
    Textiles and Apparel. Chapter 4 lowers barriers to 
bilateral trade in textile and apparel goods, and establishes 
the rules that govern such trade under the Agreement. Some U.S. 
duties on textiles and apparel articles that qualify for 
preferential treatment under the Agreement will be phased out 
by 2010, but most duties on such products will be phased out by 
2015.
    The Agreement contains a specific safeguard mechanism for 
textiles and apparel, and specific rules of origin for textile 
and apparel goods. The rules of origin include a ``fiber 
forward'' rule of origin for yarns and knit fabrics, and a 
``yarn forward'' rule of origin for woven fabrics and apparel. 
Under a ``fiber forward'' rule, the fiber must come from one of 
the Parties in order for the finished product to qualify for 
preferential treatment under the Agreement. Under a ``yarn 
forward'' rule, the fiber may be imported but the yarn must be 
produced in one of the Parties in order for the finished 
product to qualify for preferential treatment under the 
Agreement. For apparel, the rule of origin applies only to the 
component that determines the tariff classification of the 
apparel (i.e., the component that determines the ``essential 
character'' of the apparel). Visible lining fabrics are subject 
to a ``yarn forward'' rule.
    The Agreement contains a ``de minimis'' rule, which 
provides that a good that does not meet the rule of origin may 
nonetheless qualify for preferential treatment under the 
Agreement as long as no more than 7 percent of the total weight 
of the component that determines the tariff classification is 
from a third country. The Agreement provides for consultations, 
and the possibility of modifying the rules of origin, to 
address the availability of fibers, yarns or fabrics, and 
whether any given input is produced in sufficient commercial 
quantities in a timely manner. The Agreement preserves the 
Berry Amendment for U.S. military procurement, which provides 
that textiles and apparel for the military must be made in the 
United States from U.S. inputs. No tariff preference levels 
(which allow some foreign inputs to be used) are provided for 
in the Agreement.
    The Agreement contains a provision on customs cooperation. 
Article 4.3 provides that the Parties shall cooperate: (1) to 
enforce measures affecting trade in textile and apparel goods; 
(2) to ensure accuracy of claims of origin; (3) to enforce 
measures implementing international agreements affecting trade 
in textile and apparel goods; and (4) to prevent circumvention 
of such international agreements. Article 4.3 provides for 
facility inspections, examinations of records, and other forms 
of verification, to determine the accuracy of claims of origin 
for textile and apparel goods and to determine that exporters 
and producers are complying with applicable laws, regulations, 
and procedures regarding trade in textile and apparel goods.
    Under Articles 4.3.2 and 4.3.3, the United States may 
request that Australia, the United States, or both, conduct a 
verification with respect to an Australian exporter or 
producer. The object of a verification under Article 4.3.2 is 
to determine that a claim of origin for a textile or apparel 
good is accurate. The object of a verification under Article 
4.3.3 is to determine that an exporter or producer is complying 
with applicable customs laws, regulations, and procedures and 
that claims of origin for textile or apparel goods exported or 
produced by that person are accurate.
    Under Article 4.3.7 of the Agreement, the United States may 
take appropriate action during a verification, including 
suspending the application of preferential treatment to textile 
or apparel goods that are subject to verification or that are 
exported or produced by a person subject to verification. Under 
Article 4.3.8, if within 12 months after requesting a 
verification, the United States is unable to make a 
determination, or the United States makes a negative 
determination, the United States may then deny preferential 
tariff treatment to the textile or apparel good that is subject 
to verification or is produced or exported by the person 
subject to verification.
    Rules of Origin. Rules of origin are used to determine 
whether a good is an originating good for purposes of the 
Agreement. A good must be an originating good in order to 
qualify for preferential treatment under the Agreement. Chapter 
5 provides the general rules of origin for goods under the 
Agreement. Chapter 5 rules of origin apply to textile and 
apparel goods, in addition to the rules of origin provided in 
Chapter 4, unless otherwise provided.
    Under Article 5.1, there are several ways for a good to 
qualify as an ``originating good'' and thus be eligible for 
preferential treatment under the Agreement. First, under 
Article 5.1(a), a good is an originating good if it is ``wholly 
obtained or produced entirely in the territory of one or both 
of the Parties.'' The concept of ``wholly obtained or 
produced'' is defined in Article 5.18.5, and includes, for 
example, minerals extracted in the territory of either Party, 
live animals born and raised in the territory of either Party, 
and vegetables harvested in the territory of either Party.
    Second, under Article 5.1(b), a good is an originating good 
if it is ``produced entirely in the territory of one or both of 
the Parties'' and ``each of the non-originating materials used 
in the production of the good undergoes an applicable change in 
tariff classification * * *, or the good otherwise satisfies 
any applicable regional value content (requirement); or the 
good meets any other requirements specified'' in the Agreement. 
Non-originating material is defined in Article 5.18.13 as 
material that does not qualify for preferential treatment under 
the Agreement because it has not satisfied the requirements of 
Chapter 5. The specific changes in tariff classification that 
are required in order for a good to qualify for preferential 
treatment under the Agreement are set forth in Annex 5-A of the 
Agreement.
    Third, a good is an originating good if the good is 
``produced entirely in the territory of one or both Parties 
exclusively from originating materials.'' Originating materials 
are materials that satisfy a rule of origin and are used in the 
production of another good.
    Fourth, under Article 5.1(d), a good can qualify as an 
originating good if the good otherwise satisfies any of the 
specific requirements in Chapter 4 or Chapter 5 of the 
Agreement.
    Article 5.2 provides for a de minimis exception to the 
rules of origin, which applies to goods other than certain 
specified goods such as textile and apparel goods. Under the 
exception, a good that does not undergo a change in tariff 
classification pursuant to Annex 5-A of the Agreement is 
nonetheless an originating good if the value of all non-
originating materials used in the production of the good does 
not exceed 10 percent of the adjusted value of the good. 
Article 5.3 addresses cumulation, while Article 5.4 provides 
several rules for determining regional value content, including 
a specific rule for automotive products.
    The Agreement provides that an importer may make a claim 
for preferential treatment based on the importer's knowledge or 
on information in the importer's possession. A Party may 
require a statement from the importer that includes relevant 
cost and manufacturing information, but the statement, which 
may be submitted electronically, need not be in a prescribed 
format. If preferential treatment under the Agreement is 
denied, a written determination must be issued that contains 
findings of fact and the legal basis for the denial. The 
Parties shall consult and cooperate to ensure the effective and 
uniform application of the rules of origin. The Parties shall 
also consult regularly to discuss necessary amendments to the 
rules of origin, taking into account developments in 
technology, production processes, and other related matters.
    Customs Administration. Chapter 6 contains standard customs 
provisions that provide for transparency, due process, and the 
rule of law. These provisions concern: the prompt publication 
of laws, regulations, guidelines, procedures, and 
administrative rulings on the Internet and in print form; the 
designation of one or more official contacts for information 
requests; a notice and comment process prior to any regulatory 
changes; the opportunity to obtain advance written rulings 
regarding tariff classification, valuation, origin and whether 
a product qualifies for preferential treatment under the 
Agreement; and, an opportunity for administrative and judicial 
review of administrative decisions. The Agreement provides for 
mutual cooperation in implementing the Agreement and prior 
notice of any significant modification of administrative 
policy. The Agreement includes provisions calling for the 
release of goods within 48 hours of arrival (to the extent 
possible), risk assessment procedures to focus inspection 
activities on high-risk goods, and expedited procedures for 
express shipments (i.e., under normal circumstances, release of 
an express shipment no later than 6 hours after the required 
information has been submitted).
    Sanitary and Phytosanitary Measures. Chapter 7 affirms the 
existing rights and obligations of the Parties under the WTO 
Agreement on the Application of Sanitary and Phytosanitary 
Measures (SPS Agreement). The objectives of the chapter are: to 
protect human, animal, or plant life or health in the Parties' 
territories; to enhance the Parties' implementation of the SPS 
Agreement; to provide a forum for addressing bilateral sanitary 
and phytosanitary matters; and, to resolve trade issues, 
thereby expanding trade opportunities. The chapter applies to 
all SPS measures that may, directly or indirectly, affect trade 
between the Parties. Neither Party may have recourse to the 
dispute settlement provisions of the Agreement for a matter 
arising under Chapter 7.
    Article 7.4 of the Agreement establishes a bilateral 
Committee on SPS Matters. The Committee's objectives are: to 
enhance each Party's implementation of the SPS Agreement; to 
protect human, animal or plant life or health; to enhance 
consultation and cooperation between the Parties on SPS 
matters; and, to facilitate trade between the Parties. In 
addition, Article 7.4.9 establishes a Standing Technical 
Working Group on Animal and Plant Health Measures. The Working 
Group's mission, as set out in Annex 7-A, is to facilitate 
``trade between the Parties to the greatest extent possible 
while preserving each Party's right to protect animal or plant 
life or health in its territory and respecting each Party's 
regulatory systems and risk assessment and policy development 
processes.''
    Technical Barriers to Trade. Chapter 8 applies to all 
standards, technical regulations and conformity assessment 
procedures of the central level of government that may, 
directly or indirectly, affect trade in any product between the 
Parties. The Agreement provides for enhanced cooperation and 
consultation with respect to technical barriers to trade. In 
Article 8.2, the Parties affirm their existing rights and 
obligations under the WTO Agreement on Technical Barriers to 
Trade (TBT Agreement). Article 8.5 provides that each Party 
``shall give positive consideration to accepting as equivalent 
technical regulations of the other Party, even if these 
regulations differ from its own, provided it is satisfied that 
these regulations adequately fulfill the objectives of its 
regulations.'' If a Party does not accept a technical 
regulation of the other Party as equivalent to its own, it 
shall, on request, explain its reasons for not accepting the 
regulation. Neither Party may have recourse to the dispute 
settlement provisions of the Agreement for a matter arising 
under Article 8.5.
    Article 8.6 provides that the Parties shall exchange 
information on a broad range of mechanisms that may be used to 
facilitate the acceptance in a Party's territory of the results 
of conformity assessment procedures conducted in the other 
Party's territory. Either Party may haverecourse to the dispute 
settlement provisions of the Agreement for a matter arising under 
Article 8.6. With respect to transparency, Article 8.7 provides that 
``each Party shall allow persons of the other Party to participate in 
the development of standards, technical regulations, and conformity 
assessment procedures on terms no less favorable than those accorded to 
its own persons.''
    Safeguards. Chapter 9 provides for a transitional bilateral 
safeguard mechanism. If, as a result of the reduction or 
elimination of a customs duty according to the terms of the 
Agreement, an originating good of the other Party is being 
imported into the territory of a Party in such increased 
quantities, in absolute terms or relative to domestic 
production, and under such conditions that the imports of such 
originating good constitute a substantial cause of serious 
injury, or threat thereof, to a domestic industry producing a 
like or directly competitive good, that Party may: (1) suspend 
the further reduction of any rate of customs duty on the good 
provided for under the Agreement; (2) increase the rate of 
customs duty on the good, to a level not to exceed the lesser 
of the NTR/MFN rate of duty on the good in effect at the time 
the action is taken and the NTR/MFN rate of duty on the good in 
effect on the day before the Agreement enters into force; or 
(3) in the case of a customs duty applied to a good on a 
seasonal basis, increase the rate of customs duty on the good 
to a level not to exceed the lesser of the NTR/MFN rate of duty 
on the good in effect for the immediately preceding 
corresponding season and the NTR/MFN rate of duty on the good 
in effect on the day before the Agreement enters into force.
    A Party may impose a bilateral safeguard measure only after 
conducting an investigation in accordance with Articles 3 and 
4.2(a) and (c) of the WTO Agreement on Safeguards, which are 
incorporated by reference into the Agreement. A bilateral 
safeguard measure can be imposed for an initial period no 
longer than 2 years, and for safeguards applied for more than 1 
year the Party must progressively liberalize the safeguard 
measure at regular intervals. A bilateral safeguard measure may 
be extended for up to 2 additional years if the Party 
determines that the measure continues to be necessary to 
prevent or remedy serious injury and to facilitate adjustment 
and that there is evidence that the domestic industry is 
adjusting to import competition. A bilateral safeguard measure 
may not be imposed on the same good more than once.
    Upon termination of a safeguard measure, the rate of duty 
on the good shall be no higher than the rate that would have 
been in effect 1 year after the safeguard measure was imposed, 
as set forth in the Party's Schedule to Annex 2-B to the 
Agreement. Beginning on January 1 of the year following the 
termination of the safeguard measure, the Party shall either 
apply the rate of duty set forth in the Party's Schedule to 
Annex 2-B to the Agreement as if the safeguard measure had 
never been applied, or the Party shall eliminate the duty 
applied in equal annual stages ending on the date set forth in 
the Party's Schedule to Annex 2-B to the Agreement for 
elimination of the duty on that good.
    The Party imposing a bilateral safeguard measure shall 
provide mutually agreed-upon trade liberalizing compensation in 
the form of concessions having substantially equivalent trade 
effects, or equivalent value, compared to the additional duties 
resulting from the safeguard measure. If the Parties are unable 
to reach an agreement on compensation, the exporting Party may 
suspend the application of substantially equivalent concessions 
to the other Party. A Party may not impose a bilateral 
safeguard measure after the expiration of the 10-year 
transition period defined in Article 9.6.7, unless the other 
Party consents.
    Each Party retains its rights and obligations under Article 
XIX of GATT 1994 and the WTO Agreement on Safeguards. The 
Agreement does not confer any additional rights or obligations 
on the Parties with respect to actions taken in accordance with 
the WTO Agreement on Safeguards, except that a Party imposing a 
global safeguard measure may exclude imports of an originating 
good from the other Party if such imports are not a substantial 
cause of serious injury or threat thereof.
    Cross-Border Trade in Services. Chapter 10 applies to 
measures that affect cross-border trade in services by service 
suppliers of the other Party, including, inter alia, measures 
that affect the production, distribution, marketing, sale and 
delivery of a service, and the purchase or use of, or payment 
for, a service. The measures covered by the Agreement include 
measures adopted by central, regional, or local governments and 
authorities, and non-governmental authorities exercising 
governmental powers by delegation. Chapter 10 does not apply to 
several service sectors, including: financial services (which 
are covered in Chapter 13 of the Agreement) other than 
financial services relating to the supply of a service by a 
covered investment (as defined in Chapter 1 of the Agreement); 
government procurement (which is covered in Chapter 15 of the 
Agreement), air services other than aircraft repair and 
maintenance and specialty air services; subsidies or grants 
provided by a Party; and services supplied in the exercise of 
governmental authority. While telecommunications services are 
not excluded from the application of Chapter 10, additional 
specific commitments relating to telecommunications services 
are contained in Chapter 12 of the Agreement.
    Chapter 10 further provides that each Party shall accord 
national treatment and most-favored-nation treatment to all 
service suppliers of the other Party. Article 10.6 excludes 
specified non-conforming measures and any measure that a Party 
adopts or maintains with respect to specified sectors, sub-
sectors, or activities, from certain of the obligations in 
Chapter 10. Existing non-conforming measures that are excluded 
from coverage are listed for each Party in their respective 
Schedule to Annex I of the Agreement. Non-conforming measures 
adopted or maintained with respect to specified sectors, sub-
sectors or activities that are excluded from coverage are 
listed for each Party in their respective Schedule to Annex II 
of the Agreement. Any existing non-conforming measure 
maintained by a Party at a local level of government is 
similarly excluded from coverage under Article 10.6.
    Except for measures, sectors, sub-sectors, and activities 
listed on a Party's Schedules to Annex I or Annex II of the 
Agreement, neither Party may impose limitations on: the number 
of service suppliers; the total value of service transactions 
or assets; the total number of service operations or the total 
quantity of services output; or the total number of natural 
persons that may be employed in a particular service sector or 
that a service supplier may employ; nor may eitherParty 
restrict or require a specific type of legal entity or joint venture 
through which a service supplier may supply a service. Similarly, 
unless a measure is listed on a Party's Schedules to Annex I or Annex 
II of the Agreement, ``neither Party may require a service supplier of 
the other Party to establish or maintain a representative office or any 
form of enterprise, or to be resident, in its territory as a condition 
for the cross-border supply of a service.''
    The Agreement provides for services liberalization beyond 
Australia's current commitments under the WTO General Agreement 
on Trade in Services (GATS). The Agreement will provide 
increased market access for U.S. service providers in areas 
such as advertising, asset management, audio/visual, computer 
and related services, education and training, energy, express 
delivery, professional services, and tourism.
    Investment. Chapter 11 applies to measures adopted or 
maintained by a Party relating to investors of the other Party 
and covered investments. Investment is defined to mean every 
asset that an investor owns or controls, directly or 
indirectly, that has the characteristics of an investment, 
including such characteristics as the commitment of capital or 
other resources, the expectation of gain or profit, or the 
assumption of risk. Forms that an investment may take include, 
inter alia: an enterprise; shares, stock, and other forms of 
equity participation in an enterprise; bonds, debentures, other 
debt instruments, and loans; futures, options, and other 
derivatives; intellectual property rights; licenses, permits, 
and similar rights conferred pursuant to domestic law; and 
other tangible or intangible property and related property 
rights, such as leases, mortgages, liens, and pledges.
    Each Party shall accord national treatment and most-
favored-nation treatment to investors of the other Party and to 
covered investments with respect to the establishment, 
acquisition, expansion, management, conduct, operation, and 
sale or other disposition of investments. Each party shall 
permit all transfers relating to a covered investment to be 
made freely and without delay into or out of its territory. 
Such transfers include, inter alia: contributions to capital, 
including the initial contribution; profits, dividends, capital 
gains, and proceeds from the sale or liquidation of some or all 
of the covered investment; interest, royalty payments, 
management fees, and technical assistance and other fees; 
payments made under a contract, including a loan agreement; and 
payments arising out of a dispute. Neither Party may impose or 
enforce any performance requirement in connection with the 
establishment, acquisition, expansion, management, conduct, 
operation, or sale or other disposition of an investment of an 
investor, including, inter alia: requiring an investment to 
export a given level or percentage of goods or services; 
requiring an investment to achieve a given level or percentage 
of domestic content; or requiring an investment to transfer a 
particular technology or other proprietary knowledge to a 
person in the Party's territory.
    Article 11.13 excludes specified non-conforming measures 
and any measure that a Party adopts or maintains with respect 
to specified sectors, sub-sectors, or activities, from certain 
of the obligations in Chapter 11. Existing non-conforming 
measures that are excluded from coverage are listed for each 
Party in their respective Schedule to Annex I of the Agreement. 
Non-conforming measures adopted or maintained with respect to 
specified sectors, sub-sectors or activities that are excluded 
from coverage are listed for each Party in their respective 
Schedule to Annex II of the Agreement. Any existing non-
conforming measure maintained by a Party at a local level of 
government is similarly excluded from coverage under Article 
11.13.
    Current Australian law limits foreign investments in 
certain sectors, and subjects other proposed foreign 
investments to review if the value of the total assets involved 
in the investment exceeds $A50 million. Under Annex I of the 
Agreement, Australia will retain its foreign investment 
screening regime, but will increase the threshold for review to 
$A800 million for U.S. investors in most existing Australian 
businesses. The Agreement exempts U.S. investment in new 
business ventures in Australia from screening altogether. The 
Agreement does not provide a mechanism whereby an investor of a 
Party may submit an investment claim involving the other Party 
to arbitration. The Agreement does provide that, if a Party 
considers that there has been a change of circumstances 
affecting the settlement of investment disputes, the Party may 
request consultations with a view toward establishing 
appropriate investor-state arbitration procedures.
    Telecommunications. Chapter 12 of the Agreement applies to 
measures affecting trade in telecommunication services. In 
general, Chapter 12 does not apply to any measure relating to 
broadcast or cable distribution of radio or television 
programming. Article 12.25 defines the term ``public 
telecommunications service'' as any telecommunications service 
that a Party requires, explicitly or in effect, to be offered 
to the public generally. Such services may include, inter alia, 
telephone and data transmission typically involving customer-
supplied information between two or more points without any 
end-to-end change in the form or content of the customer's 
information. The United States does not classify an 
``information service'' as a public telecommunications service; 
accordingly, ``information services'' are not considered public 
communications services for purposes of the Agreement.\1\
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    \1\ The term ``information service'' is defined at 47 U.S.C. 
Sec. 153(2) to mean the offering of a capability for generating, 
acquiring, storing, transforming, processing, retrieving, utilizing, or 
making available information via telecommunications, including 
electronic publishing, but not to include any use of any such 
capability for the management, control, or operation of a 
telecommunications system or the management of a telecommunications 
service.
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    Article 12.2 stipulates that each Party shall ensure that 
enterprises of the other Party have access to and use of any 
public telecommunications service, including leased circuits, 
offered in its territory or across its borders, on reasonable 
and non-discriminatory terms and conditions. Each Party shall 
also ensure that enterprises of the other Party may use public 
telecommunications services for the movement of information in 
its territory or across its borders and for access to 
information contained in databases or otherwise stored in 
machine-readable form in the territory of either Party or any 
WTO Member. Appropriate measures shall be maintained by each 
Party to prevent suppliers that, alone or together, are a major 
supplier, from engaging in anti-competitive practices.
    Section C of Chapter 12 details additional obligations 
relating to major suppliers of public telecommunication 
services. A major supplier is defined as being a supplier of a 
public telecommunications service that has the ability to 
materially affect the terms of participation in the relevant 
market (with respect to price and supply) as a result of 
control over essential facilities or use of its position in the 
market. Major suppliers must accord suppliers of public 
telecommunications services of the other Party treatment no 
less favorable than such major suppliers accord in like 
circumstances to their subsidiaries, their affiliates, or non-
affiliated service suppliers, regarding the availability, 
provisioning, rates, or quality of like public 
telecommunications services, as well as the availability of 
technical interfaces necessary for interconnection. Additional 
provisions call for major suppliers to provide, on a reasonable 
and non-discriminatory basis: interconnection for the 
facilities and equipment of suppliers of public 
telecommunications services of the other Party; provisioning 
and pricing of leased circuit services for suppliers of the 
other Party; physical co-location of equipment necessary for 
interconnection for suppliers of the other Party; and access to 
rights-of-way for suppliers of the other Party. Significantly, 
neither Party may prevent suppliers of public 
telecommunications services from choosing the technologies that 
they wish to use to supply their services, including packet-
based services and commercial mobile wireless services, subject 
to requirements necessary to satisfy legitimate public policy 
interests.
    Financial Services. Chapter 13 applies to measures adopted 
or maintained by a Party relating to: financial institutions of 
the other Party; investors and investments of such investors in 
financial institutions within the Party's territory; and cross-
border trade in financial services. Financial services are 
defined to include any service of a financial nature, including 
insurance and insurance-related services, banking and other 
financial services, as well as services incidental or auxiliary 
to a service of a financial nature. The provisions of Chapter 
10 (Cross-Border Trade in Services) and Chapter 11 (Investment) 
apply to financial services only to the extent that such 
provisions are incorporated into Chapter 13.
    The Agreement provides that each Party shall accord 
national treatment to investors and financial institutions of 
the other Party, as well as to investments of investors of the 
other Party in financial institutions, with respect to the 
establishment, acquisition, expansion, management, conduct, 
operation, and sale or other disposition of financial 
institutions and investments. It also provides that each Party 
shall accord most-favored-nation treatment to investors of the 
other Party, financial institutions of the other Party, 
investments of investors in financial institutions, and cross-
border financial service suppliers of the other Party.
    Article 13.9 excludes specified non-conforming measures and 
any measure that a Party adopts or maintains with respect to 
specified sectors, sub-sectors, or activities, from certain of 
the obligations in Chapter 13. Existing non-conforming measures 
that are excluded from coverage are listed for each Party in 
Section A of their respective Schedule to Annex III of the 
Agreement. Non-conforming measures approved or maintained with 
respect to specified sectors, sub-sectors, or activities that 
are excluded from coverage are listed for each Party in Section 
B of their respective Schedule to Annex III of the Agreement. 
Any existing non-conforming measure maintained by a Party at a 
local level of government is similarly excluded from coverage 
under Article 13.9. To the extent any non-conforming measure 
listed on a Party's Schedules to Annex I or Annex II of the 
Agreement is also covered by Chapter 13, such measure is also 
excluded from coverage under Article 13.9.
    Except for measures, sectors, sub-sectors, and activities 
listed in Section A or Section B of a Party's Schedule to Annex 
III of the Agreement, a Party shall not impose limitations on, 
inter alia: the number of financial institutions; the total 
value of financial service transactions or assets; the total 
number of financial service operations or the total quantity of 
financial services output; or, the total number of natural 
persons that may be employed in a particular financial service 
sector. Similarly, a Party shall not restrict or require 
specific types of legal entity or joint venture through which a 
financial institution may supply a service.
    Each Party shall permit, under terms and conditions that 
accord national treatment, cross-border financial service 
suppliers of the other Party to supply the services specified 
in Annex 13-A of the Agreement. With respect to the cross-
border supply of insurance and insurance-related services, 
Australia listed a number of sectors under Annex 13-A, 
including, inter alia: maritime shipping and commercial 
aviation; goods in international transit; and reinsurance. With 
respect to the cross-border supply of banking and other 
financial services (excluding insurance), Australia listed a 
number of sectors under Annex 13-A, including, inter alia: the 
provision and transfer of financial information and financial 
data processing.
    Competition-Related Matters. Chapter 14 deals with 
anticompetitive business conduct and competition law. The 
Agreement provides that each Party shall adopt or maintain 
measures to proscribe anticompetitive business conduct, and 
shall maintain an authority or authorities to enforce its 
national competition laws. Each Party shall ensure that any 
designated privately-owned monopoly and any designated 
government monopoly: acts in a manner that is not inconsistent 
with the Party's obligations under the Agreement; acts solely 
in accordance with commercial considerations in its purchase or 
sale of the monopoly good or service in the relevant market; 
provides non-discriminatory treatment to covered investments, 
to goods of the other Party, and to service suppliers of the 
other Party in its purchase or sale of the monopoly good or 
service in the relevant market; and does not use its monopoly 
position to engage in anticompetitive practices in a non-
monopolized market in its territory. Similarly, the Agreement 
provides that state enterprises should not operate in a manner 
that creates obstacles to trade and investment. The Parties 
shall cooperate in the enforcement of competition laws and 
policy, including through mutual assistance, notification, 
consultation, and exchange of information. In addition, the 
Parties shall cooperate to promote policies related to matters 
covered by Chapter 14 that foster free trade and investment and 
competitive markets.
    Government Procurement. Australia is not a party to the WTO 
Agreement on Government Procurement. Thus, by including strong 
provisions on government procurement, the Agreement 
significantly opens Australia's government procurement market 
to U.S. suppliers of goods and services. Chapter 15 applies to 
``covered procurement,'' which is defined as theprocurement of 
goods and services by any contractual means, above a specified 
threshold in value, by a specified procuring entity, and not otherwise 
excluded. Each Party and its procuring entities shall accord national 
treatment to the goods and services of the other Party and to the 
suppliers of the other Party offering goods and services. A procuring 
entity may not discriminate against a locally established supplier 
based upon that supplier's degree of foreign ownership or based upon 
the fact that goods or services offered by that supplier are goods or 
services of the other Party. The Agreement prohibits the use of offsets 
in any stage of a covered procurement. Offsets are defined as any 
conditions or undertakings that require use of domestic content, 
domestic suppliers, the licensing of technology, technology transfer, 
investment, counter-trade, or similar actions to encourage local 
development or to improve a Party's balance-of-payments accounts.
    The Agreement requires each Party to promptly publish all 
laws, regulations, procedures and policy guidelines, as well as 
judicial decisions and administrative rulings of general 
application, related to covered procurement. Each Party shall 
ensure that suppliers may challenge and appeal procurement 
decisions before an impartial body. Each Party shall also 
ensure that criminal or administrative penalties exist to 
sanction bribery.
    Electronic Commerce. In Chapter 16 the Parties acknowledge 
the value of electronic commerce, the importance of avoiding 
barriers to its use and development, and the applicability of 
WTO rules to measures affecting electronic commerce. Neither 
Party may impose customs duties, fees, or other charges on, or 
in connection with, the importation or exportation of digital 
products. Digital products are defined as the digitally encoded 
form of computer programs, text, video, images, sound 
recordings, and other products, regardless of whether they are 
fixed on a carrier medium or transmitted electronically. 
Digital products must receive national treatment and most-
favored-nation treatment under the Agreement, except with 
respect to: a Party's non-conforming measures that are 
identified in accordance with Articles 10.6, 11.13, or 13.9; 
subsidies or grants that a Party provides to a service or 
service supplier; services supplied in the exercise of 
governmental authority; and, except to the extent that the 
national treatment and most-favored nation obligations in 
Chapter 16 are inconsistent with Chapter 17 of the Agreement.
    Intellectual Property Rights. Chapter 17 governs the 
protection of intellectual property rights, including, inter 
alia, patents, copyrights, and trademarks. The Agreement builds 
on the common standards that are already codified in numerous 
international agreements, including the WTO Agreement on Trade-
Related Aspects of Intellectual Property Rights (TRIPS). 
Importantly, the provisions in the Agreement reflect the 
significant technological and commercial developments that have 
occurred since TRIPS was negotiated, particularly with respect 
to the new and rapidly-evolving digital environment in which 
music, videos, software and text can be readily copied and 
transmitted over the Internet.
    Article 17.1 provides that each Party shall have ratified 
or acceded to a number of international agreements by the time 
the Agreement enters into force, including the World 
Intellectual Property Organization (WIPO) Copyright Treaty 
(1996) and the WIPO Performances and Phonograms Treaty (1996), 
which provide the essential legal framework for digital 
products, e-commerce, and the transmission of protected 
material over the Internet. The United States and Australia 
have each ratified or acceded to each of the agreements 
identified in Article 17.1.2. With respect to Article 17.1.4, 
the United States has acceded to the two WIPO treaties, while 
Australia has not. Article 17.1.5 provides that each Party 
shall make its best efforts to comply with the provisions of 
the Patent Law Treaty (2000) and the Hague Agreement Concerning 
the International Registration of Industrial Designs (1999), 
subject to the enactment of laws necessary to apply those 
provisions in its territory. Neither the United States nor 
Australia has yet completed its respective process for 
ratifying those two international agreements.
    The Agreement provides that each Party shall make available 
to right holders civil judicial procedures concerning the 
enforcement of any intellectual property right, and that 
judicial authorities shall have the authority to order, inter 
alia, the infringer to pay the right holder damages adequate to 
compensate for the injury the right holder has suffered as a 
result of the infringement. The Agreement further provides that 
judicial authorities shall have the authority to order the 
seizure of suspected infringing goods and any related materials 
and implements.
    Each Party shall provide that in civil judicial 
proceedings, at the right holder's request, goods that have 
been found to be pirated or counterfeit shall be destroyed, 
except in exceptional circumstances. In addition, judicial 
authorities shall have the authority to order that materials 
and implements that were used to manufacture the pirated or 
counterfeit goods be destroyed without compensation. Judicial 
authorities shall also have the authority to order the 
infringer to disclose information about other persons involved 
in any aspect of the infringement and regarding the means of 
production or distribution. Each Party shall further provide 
that its judicial authorities have the authority to fine or 
imprison a party to a litigation who fails to abide by valid 
orders issued by such authorities, and to impose sanctions on 
parties to litigation, their counsel, experts, or other persons 
who violate a judicial order for the protection of confidential 
business information produced or exchanged in a judicial 
proceeding.
    In addition to civil proceedings, the Agreement provides 
that each Party shall provide for criminal procedures and 
penalties to be applied at least in cases of willful trademark 
counterfeiting or copyright piracy on a commercial scale. In 
such cases, each Party shall provide penalties that include 
imprisonment as well as monetary fines sufficient to provide a 
deterrent to future infringements, consistent with a policy of 
removing the monetary incentive to the infringer. Judicial 
authorities shall have the authority to order the seizure, 
forfeiture, and destruction of counterfeit goods and the 
materials and equipment used to produce counterfeit goods. Each 
Party shall provide that its authorities may self-initiate 
criminal legal action without the need for a formal complaint 
from a private party or right holder. Similarly, each Party 
shall provide that its customs authorities may self-initiate 
border measures against imported merchandise suspected of 
infringing an intellectual property right, without the need for 
a specific formal complaint.
    Labor. In Chapter 18 of the Agreement, the Parties reaffirm 
their obligations as members of the International Labor 
Organization (ILO) and their commitments under the ILO 
Declaration on Fundamental Principles and Rights at Work and 
its Follow-up (1998) (ILO Declaration). Under the Agreement, 
each Party must strive to ensure that such labor principles and 
the internationally recognized labor principles and rights set 
forth in article 18.7 of the Agreement are recognized and 
protected by its domestic law. Article 18.7 defines 
``internationally recognized labor principles and rights'' to 
mean: ``the right of association; the right to organize and 
bargain collectively; a prohibition on the use of any form of 
forced or compulsory labor; labor protections for children and 
young people, including a minimum age for the employment of 
children and the prohibition and elimination of the worst forms 
of child labor; and acceptable conditions of work with respect 
to minimum wages, hours of work, and occupational safety and 
health.'' The Agreement recognizes the right of each Party to 
establish its own domestic labor standards, and to adopt or 
modify its domestic labor laws.
    Under the Agreement, ``a Party shall not fail to 
effectively enforce its labor laws, through a sustained or 
recurring course of action or inaction, in a manner affecting 
trade between the Parties.'' The Agreement recognizes that each 
Party retains the right to exercise discretion with respect to 
investigatory, prosecutorial, regulatory, and compliance 
matters. Also, each Party recognizes that it is inappropriate 
to encourage trade or investment by weakening or reducing the 
protections afforded in domestic labor laws. Accordingly, each 
Party shall strive to ensure that it does not waive or 
otherwise derogate from, or offer to waive or derogate from, 
such laws in a manner that weakens or reduces adherence to 
internationally recognized labor principles and rights. Each 
Party shall ensure that interested persons have access to 
administrative, quasi-judicial, judicial, or labor tribunals 
for the enforcement of its domestic labor laws, and that such 
proceedings be fair, equitable, and transparent.
    Article 18.4 provides that the Joint Committee (established 
under Chapter 21 of the Agreement to supervise the overall 
implementation of the Agreement) shall consider matters related 
to the operation of the labor provisions of Chapter 18, and may 
establish a Subcommittee on Labor Affairs to meet and discuss 
the operation of Chapter 18. The Agreement also establishes a 
consultative mechanism whereby the Parties may cooperate on 
labor matters and explore ways to further advance labor 
standards on a bilateral, regional and multilateral basis. In 
addition, the Agreement provides for consultations on any 
matter arising under Chapter 18 of the Agreement. If bilateral 
consultations do not resolve the matter, then the Subcommittee 
on Labor Affairs shall be convened to endeavor to resolve the 
matter. If a Party considers that the other Party is not 
effectively enforcing its domestic labor laws, through a 
sustained or recurring course of action or inaction, in a 
manner that affects trade between the Parties, then that Party 
may initiate dispute settlement procedures under Chapter 21 of 
the Agreement.
    If pursuant to the dispute settlement procedures of Chapter 
21, a panel determines that a Party has not conformed with its 
obligations to effectively enforce its domestic labor laws, and 
the Parties are unable to agree on a resolution, or there is an 
agreed resolution but the complaining Party considers that the 
other Party has failed to observe the terms of that agreement, 
then the complaining Party may suspend the application to the 
other Party of benefits of equivalent effect. The Party 
complained against may choose to pay an annual monetary 
assessment in lieu of the suspension of benefits. If the Party 
complained against fails to pay the monetary assessment, the 
complaining Party may then suspend the application to the other 
Party of benefits of equivalent effect.
    Environment. Chapter 19 of the Agreement provides that each 
Party shall ensure that its domestic laws provide for and 
encourage high levels of environmental protection, while 
recognizing the right of each Party to establish its own levels 
of environmental protection and to adopt or modify its domestic 
environmental laws and policies accordingly. Article 19.9 
defines ``environmental law'' to mean any statute or regulation 
of a Party, the primary purpose of which is the protection of 
the environment, or the prevention of a danger to human, 
animal, or plant life or health, through: the prevention, 
abatement, or control of the release of pollutants or 
environmental contaminants; the control of environmentally 
hazardous or toxic chemicals, substances, materials, and 
wastes; or, the protection or conservation of wild flora or 
fauna, including endangered species, their habitat, and 
specially-protected natural areas.
    Under the Agreement, ``a Party shall not fail to 
effectively enforce its environmental laws, through a sustained 
or recurring course of action or inaction, in a manner 
affecting trade between the Parties.'' The Agreement recognizes 
that ``each Party retains the right to exercise discretion with 
respect to investigatory, prosecutorial, regulatory, and 
compliance matters.'' Also, each Party recognizes that it is 
inappropriate to encourage trade or investment by weakening or 
reducing the protections afforded in their domestic 
environmental laws. Accordingly, each Party shall strive to 
ensure that it does not waive or otherwise derogate from, or 
offer to waive or derogate from, such laws in a manner that 
weakens or reduces the protections afforded in those laws as an 
encouragement for trade with the other Party. Each Party shall 
ensure that interested persons have access to judicial, quasi-
judicial, or administrative proceedings for the enforcement of 
its domestic environmental laws, and that such proceedings are 
fair, equitable, and transparent.
    Article 19.5 provides that the Joint Committee (established 
under Chapter 21 of the Agreement to supervise the overall 
implementation of the Agreement) shall consider matters related 
to the operation of the environmental provisions of Chapter 19, 
and may establish a Subcommittee on Environmental Affairs to 
meet and discuss the operation of the Chapter. In the 
Agreement, the Parties ``recognize the importance of 
strengthening capacity to protect the environment and to 
promote sustainable development in concert with strengthening 
bilateral trade and investment relations.'' The Parties 
acknowledge the importance of ongoing joint bilateral, 
regional, and multilateral environmental activities, and agree 
to negotiate a United States-Australia Joint Statement on 
Environmental Cooperation to explore ways to support these 
ongoing activities.
    In addition, the Agreement provides for consultations on 
any matter arising under Chapter 19 of the Agreement. If 
bilateral consultations do not resolve the matter, then a 
Subcommittee on Environmental Affairs shall be convened under 
Chapter 21 to endeavor to resolve the matter.If a Party 
considers that the other Party is not effectively enforcing its 
domestic labor laws, through a sustained or recurring course of action 
or inaction, in a manner that affects trade between the Parties, then 
that Party may initiate dispute settlement procedures under Chapter 21 
of the Agreement.
    If, pursuant to the dispute settlement procedures of 
Chapter 21, a panel determines that a Party has not conformed 
with its obligations to effectively enforce its domestic 
environmental laws, and the Parties are unable to agree on a 
resolution, or there is an agreed resolution but the 
complaining Party considers that the other Party has failed to 
observe the terms of that agreement, then the complaining Party 
may suspend the application to the other Party of benefits of 
equivalent effect. The Party complained against may choose to 
pay an annual monetary assessment in lieu of the suspension of 
benefits. If the Party complained against fails to pay the 
monetary assessment, the complaining Party may then suspend the 
application to the other Party of benefits of equivalent 
effect.
    Transparency. Chapter 20 provides that each Party shall 
ensure that its laws, regulations, procedures, and 
administrative rulings of general application regarding any 
matter covered by the Agreement are promptly published or 
otherwise made available so as to enable interested persons and 
the other Party to become acquainted with them. To the extent 
possible, each Party shall publish in advance any such laws, 
regulations, procedures, and administrative rulings that it 
proposes to adopt, and provide interested persons and the other 
Party a reasonable opportunity to comment on such proposed 
measures. To the maximum extent possible, each Party shall 
notify the other Party of any proposed or actual measure that 
might materially affect the operation of the Agreement, and on 
request of the other Party, a Party shall promptly provide 
information and respond to questions pertaining to any actual 
or proposed measure that the other Party considers might affect 
the operation of the Agreement. Wherever possible, each Party 
shall ensure that persons of the other Party directly affected 
by a proceeding are provided reasonable notice when a 
proceeding is initiated, and afforded a reasonable opportunity 
to present facts and arguments in support of their positions 
prior to any final administrative action. Moreover, each Party 
shall maintain impartial and independent judicial, quasi-
judicial, or administrative tribunals or procedures to promptly 
review and, where warranted, correct final administrative 
actions regarding matters covered by the Agreement.
    Institutional Arrangements and Dispute Settlement. Chapter 
21 establishes a Joint Committee to supervise the 
implementation of the Agreement, as well as a dispute 
settlement mechanism to address disputes between the Parties. 
The responsibilities of the Joint Committee include, inter 
alia: to review the general functioning of the Agreement; to 
facilitate the avoidance and settlement of disputes arising 
under the Agreement; to consider and adopt any amendment to the 
Agreement, subject to the completion of necessary domestic 
legal procedures by each Party; to issue interpretations of the 
Agreement, as appropriate; and to take such other action as the 
Parties may agree.
    The dispute settlement provisions apply with respect to the 
avoidance or settlement of all disputes over the consistency of 
a measure with the Agreement or the fulfillment of a Party's 
obligation under the Agreement, unless otherwise provided in 
the Agreement. Article 21.5 provides that either Party may 
request consultations with respect to any matter under the 
Agreement. If consultations fail to resolve the matter within 
60 days (or 20 days if the matter concerns perishable goods), 
then either Party may refer the matter to the Joint Committee 
for resolution. If the Joint Committee is unable to resolve the 
matter within 60 days (or 30 days if the matter concerns 
perishable goods), then the complaining Party may refer the 
matter to a dispute settlement panel. If a dispute settlement 
panel issues a report finding that a Party has not conformed 
with its obligations or has nullified or impaired a benefit to 
the other Party under the Agreement, the Parties shall try to 
agree on a resolution of the dispute. Whenever possible, the 
resolution shall be to eliminate the non-conformity or the 
nullification or impairment; however, if the parties are unable 
to agree on such elimination, resolution of the dispute may 
include mutually acceptable compensation, the suspension of 
benefits of equivalent effect, or an annual monetary 
assessment.
    General Provisions and Exceptions. For the purposes of 
Chapters 2 through 8 (i.e., National Treatment and Market 
Access for Goods, Agriculture, Textiles and Apparel, Rules of 
Origin, Customs Administration, Sanitary and Phytosanitary 
Measures, and Technical Barriers to Trade), the Agreement 
incorporates by reference the general exceptions contained in 
Article XX of GATT 1994 and its interpretive notes. The Parties 
understand that the measures referred to in Article XX(b) 
include environmental measures necessary to protect human, 
animal, or plant life or health, and that Article XX(g) applies 
to measures relating to the conservation of living and non-
living exhaustible natural resources.
    For the purposes of Chapters 10, 12, and 16 (i.e., Cross-
Border Trade in Services, Telecommunications, and Electronic 
Commerce), the Agreement incorporates by reference the general 
exceptions contained in GATS Article XIV, including its 
footnotes. The Parties understand that the measures referred to 
in Article XIV(b) include environmental measures necessary to 
protect human, animal, or plant life or health. The Agreement 
also includes reservations regarding: essential security 
interests; taxation; and disclosure of confidential 
information. The Parties also commit to cooperate in seeking to 
eliminate bribery and corruption and to promote transparency in 
international trade.
    Final Provisions. The Agreement provides for the accession 
of third countries to the Agreement, an amendment process, and 
entry into force and termination of the Agreement. Article 23.4 
provides that the Agreement will enter into force 60 days after 
the United States and Australia exchange written notifications 
certifying that they have completed their respective necessary 
internal requirements (or on such other date as the Parties may 
agree). The exchange of notifications is a necessary 
precondition for the Agreement's entry into force. The 
Agreement's entry into force is thus conditioned on a 
determination by the President that Australia has taken 
measures necessary to comply with those of its obligations that 
are to take effect at the time the Agreement enters into force. 
A Party may terminate the Agreement by written notification to 
the other Party. Such termination shall take effect 6 months 
after the dateof the notification.

   E. General Description of the Bill To Implement the United States-
                     Australia Free Trade Agreement


Sec. 1. Short Title; Table of Contents

    This section provides that the short title of the 
legislation implementing the United States-Australia Free Trade 
Agreement (the Agreement) is the ``United States-Australia Free 
Trade Agreement Implementation Act.'' Section 1 also provides 
the table of contents for the implementing legislation.

Sec. 2. Purposes

    This section provides that the purposes of the implementing 
legislation are: to approve and implement the Agreement; to 
strengthen and develop economic relations between the United 
States and Australia; to establish free trade between the 
United States and Australia through the reduction and 
elimination of barriers to trade in goods and services and to 
investment; and to lay the foundation for further cooperation 
to expand and enhance the benefits of the Agreement.

Sec. 3. Definitions

    This section defines the terms ``Agreement,'' ``HTS,'' and 
``Textile or Apparel Good,'' for purposes of the implementing 
legislation.

TITLE I--APPROVAL OF, AND GENERAL PROVISIONS RELATING TO, THE AGREEMENT


Sec. 101. Approval and Entry Into Force of the Agreement

    This section provides Congressional approval for the 
Agreement and its accompanying Statement of Administrative 
Action. Section 101 also authorizes the President to exchange 
notes with the Government of Australia to provide for entry 
into force of the Agreement on or after January 1, 2005. The 
exchange of notes is conditioned on a determination by the 
President that Australia has taken measures necessary to comply 
with those of its obligations that take effect at the time the 
Agreement enters into force.

Sec. 102. Relationship of the Agreement to United States and State Law

    This section establishes the relationship between the 
Agreement and U.S. law. It clarifies that no provision of the 
Agreement will be given effect under domestic law if 
inconsistent with Federal law; this would include provisions of 
Federal law enacted or amended by the Act.
    Section 102 also provides that no State law may be declared 
invalid on the ground that the law is inconsistent with the 
Agreement, except in an action brought by the United States for 
the purpose of declaring such law invalid. This section 
precludes any private right of action or remedy against the 
Federal Government, or a State government, based on the 
provisions of the Agreement.

Sec. 103. Implementing Actions in Anticipation of Entry Into Force and 
        Initial Regulations

    This section authorizes the President to proclaim such 
actions, and other appropriate officers of the United States 
Government to issue such regulations, as may be necessary to 
ensure that provisions of the implementing legislation are 
appropriately implemented by the date the Agreement enters into 
force if such provisions are required to be implemented by that 
date. Section 103 also provides that, with respect to any 
action proclaimed by the President that is not subject to the 
consultation and layover provisions contained in section 104, 
such action may not take effect before the 15th day after the 
date on which the text of the proclamation is published in the 
Federal Register. The 15-day restriction is waived, however, to 
the extent it would prevent an action from taking effect on the 
date the Agreement enters into force. Section 103 also 
specifies that initial regulations necessary or appropriate to 
carry out the provisions of the implementing legislation shall, 
to the maximum extent feasible, be issued within 1 year after 
the date on which the Agreement enters into force.

Sec. 104. Consultation and Layover Provisions for, and Effective Date 
        of, Proclaimed Actions

    This section sets forth consultation and layover steps that 
must precede the President's implementation of any tariff 
modification, continuation, or additional duty, by 
proclamation. Under the consultation and layover provisions, 
the President must obtain the advice of the relevant private 
sector advisory committees and the U.S. International Trade 
Commission (ITC) on a proposed action. The President must 
submit a report to the Senate Committee on Finance and the 
House Committee on Ways and Means setting forth the action 
proposed to be proclaimed, the reasons therefore, and the 
advice of the private sector advisors and the ITC. The Act sets 
aside a 60-day period following the date of transmittal of the 
report for the Committees to consult with the President on the 
proposed action.

Sec. 105. Administration of Dispute Settlement Proceedings

    This section authorizes the President to establish or 
designate within the Department of Commerce an office 
responsible for providing administrative assistance to dispute 
settlement panels established under Chapter 21 of the 
Agreement. This section also authorizes the appropriation of 
funds to support this office.

Sec. 106. Effective Dates; Effect of Termination

    This section provides the dates that certain provisions of 
the implementing legislationwill go into effect. This section 
also provides that the provisions of the implementing legislation will 
no longer be in effect on the date on which the Agreement ceases to be 
in force.

                      TITLE II--CUSTOMS PROVISIONS


Sec. 201. Tariff Modifications

    Section 201(a) authorizes the President to implement by 
proclamation the continuation, modification, or addition of 
tariffs, or the continuation of duty-free or excise treatment, 
as the President determines to be necessary or appropriate, to 
carry out Articles 2.3, 2.5, and 2.6, and Annex 2-B, of the 
Agreement.
    Section 201(b) authorizes the President, subject to the 
consultation and layover provisions of section 104 of the bill, 
to proclaim any continuation, modification, or addition of 
tariffs, or the continuation of duty-free or excise treatment, 
as the President determines to be necessary or appropriate, to 
maintain the general level of reciprocal and mutually 
advantageous concessions with respect to Australia provided by 
the Agreement.

Sec. 202. Additional Duties on Certain Agricultural Goods

    Section 202 implements three separate safeguard mechanisms 
for agricultural goods; specifically: (1) a price-based 
horticultural safeguard; (2) a quantity-based beef safeguard; 
and (3) a price-based beef safeguard. Section 202(a) contains 
general provisions applicable to each of the safeguards.
    Section 202(b) implements the price-based horticulture 
safeguard, under which the United States shall assess a duty on 
imports of certain Australian horticulture goods if import 
prices for specific shipments fall below specified levels. The 
rate of additional duty under the safeguard increases as the 
difference increases between the unit import price of a 
shipment and the trigger price. The trigger price reflects 
historic unit import values for the relevant horticulture good. 
The assessment of additional duty under this provision 
terminates on the date on which duty-free treatment must be 
provided to that good under the Schedule of the United States 
to Annex 2-B of the Agreement. Products listed in Annex 3-A of 
the Agreement are covered by the horticulture safeguard 
provision, including: dried onions and garlic; processed tomato 
products; canned asparagus; canned pears, apricots, peaches, 
and fruit mixtures; and orange and grape juices.
    Section 202(c) implements the transitional quantity-based 
beef safeguard, which is available during the phase-out of 
over-quota tariffs on certain beef products (i.e., years 9 
through 18 of the Agreement). The safeguard applies when the 
volume of covered imports exceeds 110 percent of the 
preferential tariff-rate quota (TRQ) volume for the specific 
year. The added duty under this safeguard is equal to 75 
percent of the difference between the normal trade relation/
most-favored-nation (NTR/MFN) duty rate and the applied over-
quota duty rate for that year. The safeguard duty remains in 
effect until the end of the calendar year. The U.S. Trade 
Representative (USTR) may waive application of the transitional 
quantity-based safeguard only if the USTR determines that 
extraordinary market conditions demonstrate that the waiver 
would be in the national interest of the United States. It is 
anticipated that such exceptional circumstances will rarely, if 
ever, materialize. The USTR is required to notify the Senate 
Finance and House Ways and Means Committees promptly after 
receipt of a request for a waiver from an agency, Member of 
Congress or interested person, and to consult with the 
appropriate private sector advisory committees and the Senate 
Finance and House Ways and Means Committees regarding the 
reasons supporting a determination to grant a waiver and the 
proposed scope and duration of any waiver prior to making a 
determination under this subsection.
    Section 202(d) implements the permanent price-based beef 
safeguard, which is available after the over-quota tariff has 
been phased out (i.e., beginning in year 19 of the Agreement). 
When the price of beef in the United States falls below a 
calculated trigger price, imports of beef products from 
Australia in excess of specified quota levels are subject to 
additional duties under this safeguard. The safeguard trigger 
is based on a 24-month rolling average of the U.S. Wholesale 
Select Box Beef index price. For each of the first three 
quarters of the year, the safeguard is triggered when the 
average index price for any 2 months in a given quarter falls 
below 6.5 percent of the 24-month average index price. The 
safeguard is also triggered if the average index beef price 
falls 6.5 percent below the 24-month rolling average in the 
months of September, October, or November. If the safeguard is 
triggered during the first three-quarters of the year, the 
additional duty is applied in the following quarter. If the 
safeguard is triggered in September, October, or November, the 
additional duty is applied for the remainder of the year. The 
additional duty to be applied is equal to 65 percent of the 
applied NTR/MFN tariff rate. This price-based safeguard can 
only be imposed on imports of Australian beef that exceed the 
Agreement's quota amount (i.e., 70,000 metric tons in the 19th 
year, an amount that will grow annually at 0.6 percent) plus 
Australia's country-specific quota established under the World 
Trade Organization (currently set at 378,214 metric tons). The 
USTR may waive application of the permanent price-based 
safeguard only if the USTR determines that extraordinary market 
conditions demonstrate that the waiver would be in the national 
interest of the United States. It is anticipated that such 
exceptional circumstances will rarely, if ever, materialize. 
The USTR is required to notify the Senate Finance and House 
Ways and Means Committees promptly after receipt of a request 
for a waiver from an agency, Member of Congress or interested 
person, and to consult with the appropriate private sector 
advisory committees and the Senate Finance and House Ways and 
Means Committees regarding the reasons supporting a 
determination to grant a waiver and the proposed scope and 
duration of any waiver prior to making a determination under 
this subsection.

Sec. 203. Rules of Origin

    This section implements the general rules of origin set 
forth in Chapter 5 of the Agreement. Under these rules, there 
are several ways for a good imported from Australia to qualify 
as an originating good and therefore be eligible for 
preferential tariff treatment, accordingto the terms of the 
Agreement, when the good is imported into the United States.
    First, a good is an originating good if it is wholly 
obtained or produced entirely in the territory of Australia, 
the United States, or both. Second, a good is an originating 
good if those materials used to produce the good that are not 
themselves originating goods are transformed in such a way as 
to cause their tariff classification to change or meet other 
requirements, as specified in Annex 4-A or Annex 5-A of the 
Agreement.
    Third, a good is an originating good if it is produced 
entirely in the territory of Australia, the United States, or 
both, exclusively from materials that satisfy the first two 
rules of origin above. Finally, the remainder of section 203 
sets forth specific rules for determining whether a good 
qualifies as an originating good under the Agreement. Section 
203(c) provides that, with certain exceptions, a good is not 
disqualified as an originating good if it contains de minimis 
quantities of non-originating materials that do not undergo a 
tariff transformation. Section 203(e) implements provisions in 
Annex 5-A of the Agreement that require certain goods to have 
at least a specified percentage of regional value content to 
qualify as originating goods, including a special rule for 
certain automotive goods. Section 203(f) addresses the 
valuation of materials, while section 203(g) addresses the 
treatment of accessories, spare parts, or tools. Section 203(h) 
addresses claims for preferential treatment of fungible goods 
and materials, while section 203(i) addresses the treatment of 
packaging materials and containers for retail sale.
    Additional provisions in section 203 address the treatment 
of: packing materials and containers for shipment; indirect 
materials; third country operations; and textile and apparel 
goods classifiable as goods put up in sets. Section 203(n) 
provides definitions of terms applicable to the rules of 
origin, while section 203(o) authorizes the President to modify 
certain of the Agreement's specific rules of origin by 
proclamation, subject to the consultation and layover 
provisions of section 104 of the implementing legislation.

Sec. 204. Customs User Fees

    This section amends Section 13031(b) of the Consolidated 
Omnibus Budget Reconciliation Act of 1985 (19 U.S.C. 58c(b)) to 
provide for the immediate elimination of the merchandise 
processing fee for goods qualifying for preferential treatment 
under the terms of the United States-Australia Free Trade 
Agreement. Processing of goods under the Agreement will be 
financed by money from the General Fund of the Treasury.

Sec. 205. Disclosure of Incorrect Information

    This section provides that the United States may not impose 
a penalty on an importer who makes an invalid claim for 
preferential tariff treatment under the Agreement if, after 
discovering that the claim is invalid, the importer promptly 
and voluntarily corrects the claim and pays any duty owing, in 
accordance with regulations issued by the Secretary of the 
Treasury. Such regulations shall afford at least 1 year within 
which an importer may correct an invalid claim for preferential 
tariff treatment.

Sec. 206. Enforcement Relating to Trade in Textile and Apparel Goods

    This section authorizes the President to apply anti-
circumvention provisions concerning trade in textile and 
apparel goods. The Secretary of the Treasury may request that 
the Government of Australia conduct a verification to determine 
that an exporter or producer in Australia is complying with 
applicable customs laws, regulations, procedures, requirements, 
or practices affecting trade in textile or apparel goods, or to 
determine that a claim for preferential treatment of textile or 
apparel goods is consistent with the terms of the Agreement. 
Section 206 authorizes the President to order the suspension of 
liquidation of entries from exporters or producers in Australia 
that are subject to a verification, and the suspension of 
liquidation of any entry that is subject to verification. If 
the Secretary of the Treasury determines that information 
obtained within 12 months of a request for verification is 
insufficient to make a determination, section 206 authorizes 
the President to direct the Secretary to: publish the name and 
address of the person subject to verification; deny 
preferential tariff treatment under the Agreement to any 
textile or apparel good exported or produced by the person 
subject to verification; deny preferential tariff treatment 
under the Agreement to the entry subject to verification; deny 
entry into the United States of any textile or apparel good 
exported or produced by the person subject to verification; or 
deny entry into the United States of the entry subject to 
verification.

Sec. 207. Regulations

    This section requires the Secretary of the Treasury to 
prescribe such regulations as may be necessary to carry out the 
provisions dealing with rules of origin, customs user fees, and 
the President's proclamation authority to amend certain of the 
Agreement's specific rules of origin.

                     TITLE III--RELIEF FROM IMPORTS


Sec. 301. Definitions

    This section defines the terms ``Australian article'' and 
``Australian textile or apparel article'' for purposes of the 
general bilateral safeguard provision contained in Chapter 9 of 
the Agreement and the textile and apparel bilateral safeguard 
provision contained in Chapter 4 of the Agreement. The term 
``Australian article'' is defined as an article that qualifies 
as an originating good under section 203(b) of the implementing 
legislation. The term ``Australian textile or apparel article'' 
is defined as an Australian article that is listed in the Annex 
to the Agreement on Textiles and Clothing referred to in 
section 101(d)(4) of the Uruguay Round Agreements Act (19 
U.S.C. Sec. 3511(d)(4)). Section 301 also defines the term 
``Commission'' as the U.S. International Trade Commission.

     Subtitle A. Relief From Imports Benefiting From the Agreement


Sec. 311. Commencing of Action for Relief

    This section requires the filing of a petition with the 
Commission by an entity that is representative of an industry 
in order to commence a bilateral safeguard investigation. 
Section 311(a) permits a petitioning entity to request 
provisional relief as if the petition had been filed under 
section 202(a) of the Trade Act of 1974 (19 U.S.C. 
Sec. 2252(a)). Any request for provisional relief shall include 
an allegation of ``critical circumstances'' in the petition.
    Section 311(b) provides that, upon the filing of a 
petition, the Commission shall promptly initiate an 
investigation to determine whether, as a result of the 
reduction or elimination of a duty provided for under the 
Agreement, an Australian article is being imported into the 
United States in such increased quantities, and under such 
conditions, that imports of the Australian article constitute a 
substantial cause of serious injury, or threat of serious 
injury, to the domestic industry producing an article that is 
like, or directly competitive with, the imported article.
    Section 311(c) applies to any bilateral safeguard initiated 
under the Agreement certain provisions, both substantive and 
procedural, contained in subsections (b), (c), (d), and (i) of 
section 202 of the Trade Act of 1974 (19 U.S.C. Sec. 2252(b), 
(c), (d), and (i)) that apply to global safeguard 
investigations. These provisions include, inter alia, the 
requirement that the Commission publish notice of the 
commencement of an investigation; the requirement that the 
Commission hold a public hearing at which interested parties 
and consumers have the right to be present, to present 
evidence, and to respond to the presentations of other parties 
and consumers; the factors to be taken into account by the 
Commission in making its determinations; and authorization for 
the Commission to promulgate regulations to provide access to 
confidential business information under protective order to 
authorized representatives of interested parties in an 
investigation.
    Section 311(d) precludes the initiation of an investigation 
with respect to any Australian article for which import relief 
has already been provided under this bilateral safeguard 
provision.

Sec. 312. Commission Action on Petition

    This section establishes deadlines for Commission 
determinations following the initiation of a bilateral 
safeguard investigation. Section 312(b) applies certain 
statutory provisions that address an equally divided vote by 
the Commission in a global safeguard investigation under 
section 202 of the Trade Act of 1974 (19 U.S.C. Sec. 2252) to 
Commission determinations under this section. If the Commission 
renders an affirmative injury determination, or a determination 
that the President may consider to be an affirmative 
determination in the event of a divided vote by the Commission, 
section 312(c) requires that the Commission also find and 
recommend to the President the amount of import relief that is 
necessary to remedy or prevent the injury found by the 
Commission and to facilitate the efforts of the domestic 
industry to make a positive adjustment to import competition. 
Section 312(d) specifies the information to be included by the 
Commission in a report to the President regarding its 
determination. Upon submitting the requisite report to the 
President, section 312(e) requires the Commission to promptly 
make public such report, except for confidential information 
contained in the report.

Sec. 313. Provision of Relief

    This section directs the President, not later than 30 days 
after receiving the report from the Commission, to provide 
relief from imports of the article subject to an affirmative 
determination by the Commission, or a determination that the 
President considers to be an affirmative determination in the 
event of a divided vote by the Commission, to the extent that 
the President determines necessary to remedy or prevent the 
injury and to facilitate the efforts of the domestic industry 
to make a positive adjustment to import competition. Under 
section 313(b), the President is not required to provide import 
relief if the President determines that the provision of the 
import relief will not provide greater economic and social 
benefits than costs.
    Section 313(c) specifies the nature of the import relief 
that the President may impose, to include: the suspension of 
any further reduction in duty provided for under Annex 2-B of 
the Agreement; and an increase in the rate of duty imposed on 
such article to a level that does not exceed the lesser of (1) 
the normal trade relation/most-favored-nation (NTR/MFN) duty 
rate imposed on like articles at the time the import relief is 
provided, or (2) the NTR/MFN duty rate imposed on like articles 
on the day before the date on which the Agreement enters into 
force. In the case of a duty applied on a seasonal basis to an 
article, the President may increase the rate of duty imposed on 
such article to a level that does not exceed the lesser of (1) 
the NTR/MFN duty rate imposed on like articles for the 
immediately preceding corresponding season, or (2) the NTR/MFN 
duty rate imposed on like articles on the day before the date 
on which the Agreement enters into force. Section 313(c) also 
requires that, if the period for which import relief is 
provided exceeds 1 year, the President shall provide for the 
progressive liberalization of such relief at regular intervals 
during the period of its application.
    Section 313(d) provides that the initial period for import 
relief in a bilateral safeguard action shall not exceed 2 
years. The President is authorized to extend the effective 
period of such relief under section 313(d) if the President 
determines that import relief continues to be necessary to 
remedy or prevent serious injury and to facilitate adjustment 
to import competition, and that there is evidence that the 
domestic industry is making a positive adjustment to import 
competition. Before the President can extend the period of 
import relief, the President must first receive a report from 
the Commission under section 313(d)(2)(B) containing an 
affirmative determination, or a determination that the 
President may consider to be an affirmative determination in 
the event of a divided vote by the Commission, that import 
relief continues to be necessary to remedy or prevent serious 
injury and that the domestic industry is making a positive 
adjustment to import competition. Section 313(d) also provides 
that the total period for import relief in a bilateral 
safeguard action, including any extension of such import 
relief, shall not exceed 4 years.
    Section 313(e) provides that upon termination of import 
relief under the bilateralsafeguard provision, the rate of duty 
to be applied in the calendar year of termination is the rate of duty 
that would have been in effect 1 year after the provision of import 
relief according to the Schedule of the United States to Annex 2-B of 
the Agreement. The rate of duty to be applied thereafter shall be, at 
the discretion of the President, either (1) the applicable NTR/MFN duty 
rate for that article set out in the Schedule of the United States to 
Annex 2-B of the Agreement, or (2) the rate of duty resulting from the 
elimination of the tariff in equal annual stages ending on the date set 
out in the Schedule of the United States to Annex 2-B of the Agreement 
for the elimination of the tariff.
    Section 313(f) provides that no import relief may be 
provided under the bilateral safeguard mechanism on any article 
that previously has been subject to import relief under the 
bilateral safeguard, or is subject to relief under the textile 
and apparel safeguard under subtitle B of title III of the 
implementing legislation, or is subject to either the 
horticulture safeguard, the transitional quantity-based beef 
safeguard, or the permanent price-based beef safeguard under 
subsections (b), (c), and (d) of section 202 of the 
implementing legislation.

Sec. 314. Termination of Relief Authority

    This section provides that the President's authority to 
impose import relief under the bilateral safeguard mechanism 
ends after the date that is 10 years after the date on which 
the Agreement enters into force, or if the period for tariff 
elimination for an article subject to import relief is greater 
than 10 years, after the date on which such period ends. 
Section 314(c) provides that the President may provide import 
relief under the bilateral safeguard mechanism after the 
foregoing termination dates if the President determines that 
the Government of Australia has consented to the imposition of 
such import relief.

Sec. 315. Compensation Authority

    This section authorizes the President, under section 123 of 
the Trade Act of 1974 (19 U.S.C. Sec. 2133), to grant Australia 
new concessions as compensation for the imposition of import 
relief in a bilateral safeguard investigation, in order to 
maintain the general level of reciprocal concessions.

Sec. 316. Confidential Business Information

    This section applies the same procedures for the treatment 
and release of confidential business information by the 
Commission in a global safeguard investigation under Chapter 1 
of Title II of the Trade Act of 1974 (19 U.S.C. Sec. 2251 et 
seq.) to bilateral safeguard investigations under subtitle A of 
Title III of the implementing legislation.

           Subtitle B. Textile and Apparel Safeguard Measures


Sec. 321. Commencement of Action for Relief

    This section requires the filing of a request with the 
President by an interested party in order to commence action 
for relief under the textile and apparel safeguard provision. 
Upon the filing of a request, the President shall review the 
request to determine, from the information presented in the 
request, whether to commence consideration of the request. 
Section 321(b) provides that an interested party may seek 
provisional relief by including in its request an allegation 
that critical circumstances exist such that delay in the 
provision of relief would cause damage that would be difficult 
to repair. Section 321(c) provides that, if the President 
determines that the request provides the information necessary 
for the request to be considered, the President shall cause to 
be published in the Federal Register a notice of commencement 
of consideration of the request, and notice seeking public 
comments regarding the request. The notice shall include a 
summary of the request and the dates by which comments and 
rebuttals must be received.
    The Committee notes that our regulatory process should be 
administered in an open and transparent manner that can serve 
as a model for our trading partners. For example, in addition 
to publishing a summary of a request for safeguard relief, the 
Committee notes that the President plans to make available the 
full text of the request on the website of the International 
Trade Administration of the U.S. Department of Commerce, 
subject to the protection of business confidential information. 
The Committee encourages this and similar efforts to enhance 
government transparency. In particular, the Committee 
encourages the President to issue regulations on procedures 
for: requesting a textile and apparel safeguard measure; making 
a determination under section 322(a) of the implementing 
legislation; providing safeguard relief under section 322(b) 
and (c) of the implementing legislation; and extending 
safeguard relief under section 323(b) of the implementing 
legislation.

Sec. 322. Determination and Provision of Relief

    This section provides that following the President's 
commencement of consideration of a request, the President shall 
determine whether, as a result of the reduction or elimination 
of a duty under the Agreement, an Australian textile or apparel 
article is being imported into the United States in such 
increased quantities and under such conditions as to cause 
serious damage, or actual threat thereof, to a domestic 
industry producing an article that is like, or directly 
competitive with, the imported article.
    Section 322(a) identifies certain economic factors that the 
President shall examine in making a determination, including 
changes in the domestic industry's output, productivity, 
capacity utilization, inventories, market share, exports, 
wages, employment, domestic prices, profits, and investment, 
none of which is necessarily decisive. Section 322(a) also 
provides that the President shall not consider changes in 
technology or consumer preference as factors supporting a 
determination of serious damage or actual threat thereof.
    Section 322(b) authorizes the President, in the event of an 
affirmative determination of serious damage or actual threat 
thereof, to provide import relief to the extent that the 
Presidentdetermines necessary to remedy or prevent the serious 
damage and to facilitate adjustment by the domestic industry to import 
competition. Section 322(b) also specifies the nature of the import 
relief that the President may impose, to consist of an increase in the 
rate of duty imposed on the article to a level that does not exceed the 
lesser of (1) the NTR/MFN duty rate imposed on like articles at the 
time the import relief is provided, or (2) the NTR/MFN duty rate 
imposed on like articles on the day before the date on which the 
Agreement enters into force.
    Section 322(c) identifies the basis and procedures by which 
the President may impose provisional import relief under the 
textile and apparel safeguard mechanism. Within 60 days of 
receiving a request for provisional import relief based upon an 
allegation of critical circumstances, the President shall 
determine, on the basis of available information, whether there 
is clear evidence that imports from Australia have increased as 
the result of the reduction or elimination of a customs duty 
under the Agreement, and whether such imports are causing 
serious damage, or actual threat thereof, to the domestic 
industry producing an article like or directly competitive with 
the imported article, and whether delay in providing import 
relief under the textile and apparel safeguard mechanism would 
cause damage to the domestic industry that would be difficult 
to repair. If the President's determinations regarding 
provisional relief are affirmative, the President shall within 
30 days determine the extent of provisional relief that is 
necessary to remedy or prevent the serious damage. Provisional 
relief shall not be provided for more than 200 days, and shall 
be comprised of an increase in the rate of duty imposed on the 
article to a level that does not exceed the lesser of (1) the 
NTR/MFN duty rate imposed on like articles at the time the 
import relief is provided, or (2) the NTR/MFN duty rate imposed 
on like articles on the day before the date on which the 
Agreement enters into force. The President shall also order the 
suspension of liquidation of all imports subject to the 
provisional relief. Any provisional relief shall terminate on 
the day on which the President makes a negative final 
determination regarding serious damage or actual threat thereof 
by reason of imports of such article, or the President imposes 
final import relief under the textile and apparel safeguard 
mechanism, or a decision by the President not to take any 
action under the textile and apparel safeguard becomes final, 
or the President determines that, because of changed 
circumstances, such relief is no longer warranted. Any 
suspension of liquidation also terminates on the day on which 
provisional relief is terminated. If there is a difference 
between the level of provisional import relief and the final 
import relief imposed by the President, entries subject to the 
provisional import relief shall be liquidated at whichever of 
such rates of duty is lower. If the President does not provide 
final import relief, imported articles that were subject to 
provisional relief shall be liquidated at the rate of duty that 
applied before the provisional relief was imposed.

Sec. 323. Period of Relief

    This section provides that the initial period for import 
relief in a textile and apparel safeguard action, including any 
provisional relief, shall not exceed 2 years. The President is 
authorized to extend the effective period of such relief under 
section 323(b) if the President determines that import relief 
continues to be necessary to remedy or prevent serious damage 
and to facilitate adjustment by the domestic industry to import 
competition, and that there is evidence that the domestic 
industry is making a positive adjustment to import competition. 
Section 323(b) also provides that the total period for import 
relief in a textile and apparel safeguard action, including any 
extension of such import relief, may not exceed 4 years.

Sec. 324. Articles Exempt From Relief

    This section precludes the President from providing import 
relief under the textile and apparel safeguard mechanism with 
respect to any article to which import relief has already been 
provided under subtitle B of Title III of the implementing 
legislation, or any article that is subject to import relief 
under either the bilateral safeguard mechanism under subtitle A 
of Title III of the implementing legislation or the global 
safeguard mechanism set forth in Chapter 1 of Title II of the 
Trade Act of 1974 (19 U.S.C. Sec. 2251 et seq.).

Sec. 325. Rate After Termination of Import Relief

    This section provides that the duty rate applicable to a 
textile or apparel article after termination of the import 
relief shall be the duty rate that would have been in effect, 
but for the provision of such import relief, on the date the 
relief terminates.

Sec. 326. Termination of Relief Authority

    This section provides that the President's authority to 
provide import relief under the textile and apparel safeguard 
mechanism terminates after the date that is 10 years after the 
date on which duties on the article are eliminated pursuant to 
the Agreement.

Sec. 327. Compensation Authority

    This section authorizes the President, under section 123 of 
the Trade Act of 1974 (19 U.S.C. Sec. 2133), to grant Australia 
new concessions as compensation for the imposition of import 
relief in a textile and apparel safeguard proceeding, in order 
to maintain the general level of reciprocal concessions.

Sec. 328. Business Confidential Information

    This section precludes the President from releasing 
information that the President considers to be confidential 
business information unless the party submitting the 
confidential business information had notice, at the time of 
submission, that such information would be released by the 
President, or such party subsequently consents to the release 
of the information. This section also provides that, to the 
extent business confidential information is provided, a 
nonconfidential version of the information shall also be 
provided in which the business confidential information is 
summarized or, if necessary, deleted.

       Subtitle C. Cases Under Title II of the Trade Act of 1974


Sec. 331. Findings and Action on Goods From Australia

    This section authorizes the President, in granting global 
import relief under Chapter 1 of Title II of the Trade Act of 
1974 (19 U.S.C. Sec. 2251 et seq.), to exercise the discretion 
to exclude imports from Australia from such global import 
relief when certain conditions are present.

                         TITLE IV--PROCUREMENT


Sec. 401. Eligible Products

    This section amends section 308(4)(A) of the Trade 
Agreements Act of 1979 (19 U.S.C. Sec. 2518(4)(A)) to implement 
the government procurement provisions of the Agreement.

             F. Vote of the Committee in Reporting the Bill

    In compliance with section 133 of the Legislative 
Reorganization Act of 1946, the Committee states that on July 
14, 2004, S. 2610 was ordered favorably reported, without 
amendment, by a recorded vote of 17 ayes and 4 nays, a quorum 
being present. Ayes: Grassley, Hatch, Nickles, Lott, Kyl, 
Thomas, Santorum, Frist, Smith, Bunning, Baucus (proxy), 
Breaux, Graham, Jeffords, Bingaman, Kerry (proxy), Lincoln. 
Nays: Snowe, Rockefeller, Daschle, Conrad (proxy).

                    II. BUDGETARY IMPACT OF THE BILL


               CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 30, 2004.
Hon. Charles E. Grassley,
Chairman, Committee on Finance,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 2610, a bill to 
implement the United States-Australia Free Trade Agreement.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Annabelle 
Bartsch.
            Sincerely,
                                      Elizabeth M. Robinson
                               (For Douglas Holtz-Eakin, Director).
    Enclosure.

S. 2610--A bill to implement the United States-Australia Free Trade 
        Agreement

    Summary: S. 2610 would approve the free trade agreement 
(FTA) between the government of the United States and the 
government of Australia that was entered into on May 18, 2004. 
It would provide for tariff reductions and other changes in law 
related to implementation of the agreement.
    The Congressional Budget Office estimates that enacting the 
bill would reduce revenues by $29 million in 2005, by $293 
million over the 2005-2009 period, and by $884 million over the 
2005-2014 period, net of income and payroll tax offsets. The 
bill also would increase direct spending by less than $500,000 
in 2005. Implementing the bill would cost less than $500,000 in 
each year, subject to appropriation of the necessary amounts.
    CBO has determined that S. 2610 contains no 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandates Reform Act (UMRA) and would not affect the 
budgets of state, local, or tribal governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of S. 2610 over the 2005-2014 period is shown 
in the following table.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                           By fiscal year, in millions of dollars--
                                                                    ------------------------------------------------------------------------------------
                                                                      2005    2006    2007    2008    2009     2010     2011     2012     2013     2014
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   CHANGES IN REVENUES

Estimated revenues.................................................     -29     -47     -58     -71     -89     -101     -109     -118     -127     -137

                                                             CHANGES IN DIRECT SPENDING \1\

Estimated budget authority.........................................       *       0       0       0       0        0        0        0        0        0
Estimated outlays..................................................       *       0       0       0       0        0        0        0        0        0
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ S. 2610 also would affect spending subject to appropriation, but the amounts of those changes would be less than $500,000 a year.

Note.--* = increase of less than $500,000.

Basis of estimate

            Revenues
    Under the United States-Australia agreement, all tariffs on 
U.S. imports from Australia would be phased out over time. 
Beginning on January 1, 2005, the tariffs would be phased out 
for individual products at varying rates according to one of 
several different timetables ranging from immediate elimination 
to gradual elimination over 18 years. According to the U.S. 
International Trade Commission, the United States collected 
$109 million in customs duties in 2003 on about $6.5 billion of 
imports from Australia. Those imports consist mostly of chilled 
and frozen meat, wine, certain motor vehicles and motor vehicle 
components, and various products made of metal. Based on these 
data, CBO estimates that phasing out tariff rates as outlined 
in the U.S.-Australia agreement would reduce revenues by $29 
million in 2005, by $293 million over the 2005-2009 period, and 
by $884 million over the 2005-2014 period, net of income and 
payroll tax offsets.
    This estimate includes the effects of increased imports 
from Australia that would result from the reduced prices of 
imported products in the United States, reflecting the lower 
tariff rates. It is likely that some of the increase in U.S. 
imports from Australia would displace imports from other 
countries. In the absence of specific data on the extent of 
this substitution effect, CBO assumes that an amount equal to 
one-half of the increase in U.S. imports from Australia would 
displace imports from other countries.
            Direct spending
    S. 2610 would exempt certain Australian imported goods from 
the merchandise processing fee collected by the Bureau of 
Customs and Border Protection (CBP). Under current law, those 
fees will expire after March 1, 2005. Based on information from 
the CBP, we estimate that enacting the bill would decrease fee 
collections by less than $500,000 in fiscal year 2005.
            Spending subject to appropriation
    Section 104 of S. 2610 would authorize the appropriation of 
whatever sums are necessary to the Department of Commerce (DoC) 
for administrative support for Chapter 21 of the agreement. 
Based on information from DoC regarding its experience with 
similar requirements in recent free trade agreements, CBO 
estimates that implementing section 104 would cost about 
$100,000 per year, assuming appropriation of the necessary 
amounts.
    Intergovernmental and private-sector impact: The bill 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would not affect the budgets of state, 
local, or tribal governments.
    Previous CBO estimate: On July 12, 2004, CBO transmitted a 
cost estimate for H.R. 4759, as ordered reported by the House 
Committee on Ways and Means on July 8, 2004. CBO also 
transmitted an estimate on July 30, 2004, for H.R. 4759, as 
cleared by the Congress on July 15, 2004. Those versions of 
H.R. 4759 were identical to S. 2610, as are CBO's cost 
estimates for the three pieces of legislation.
    Estimate prepared by: Federal Revenues: Annabelle Bartsch; 
Federal Costs: Mark Grabowicz and Melissa Zimmerman; Impact on 
State, Local, and Tribal Governments: Melissa Merrell; and 
Impact on the Private Sector: Crystal Taylor.
    Estimate approved by: Roberton C. Williams, Deputy 
Assistant Director for Tax Analysis; and Peter H. Fontaine, 
Deputy Assistant Director for Budget Analysis.

          III. REGULATORY IMPACT OF THE BILL AND OTHER MATTERS

    Pursuant to the requirements of paragraph 11(b) of rule 
XXVI of the Standing Rules of the Senate, the Committee states 
that the bill will not significantly regulate any individuals 
or businesses, will not affect the personal privacy of 
individuals, and will result in no significant additional 
paperwork.
    The following information is provided in accordance with 
section 423 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
(Pub. L. No. 104-04). The Committee has reviewed the provisions 
of S. 2610 as approved by the Committee on July 14, 2004. In 
accordance with the requirement of Pub. L. No. 104-04, the 
Committee has determined that the bill contains no 
intergovernmental mandates, as defined in the UMRA, and would 
not affect the budgets of State, local, or tribal governments.

                          IV. ADDITIONAL VIEWS

                              ----------                              


                 ADDITIONAL VIEWS OF CHAIRMAN GRASSLEY

    The Committee's informal consideration of draft legislation 
to implement the United States-Australia Free Trade Agreement 
(the Agreement) culminated with a lopsided vote against 
approving an amended recommendation to the President for an 
implementing bill. Though the outcome of the Committee's 
informal consideration was unusual, the process followed by the 
Committee in reaching that outcome was fully consistent with 
the procedures set forth in the Bipartisan Trade Promotion 
Authority Act of 2002 (TPA) and prior practice. Moreover, that 
process completely satisfied the Committee's jurisdictional 
oversight responsibility with respect to the constitutional 
prerogative of the Congress over international trade. Yet the 
circumstances that led to the Committee's vote against approval 
merit additional comment. To start, I sincerely hope that such 
circumstances can be avoided entirely in the future. The 
Committee's informal consideration of implementing legislation 
for a trade agreement should result in a recommendation to the 
President, and I stand ready to work with my colleagues to 
ensure that outcome when it comes time to implement new 
agreements under TPA.
    In this case, the Committee met in open executive session 
on June 23, 2004, to informally consider draft implementing 
legislation for the Agreement. In the days leading up to that 
meeting, some Members had expressed concerns over two 
provisions in the draft implementing bill that would allow the 
United States Trade Representative (USTR) to waive the 
application of two different safeguard mechanisms that would 
apply to imports of beef from Australia. Those safeguards can 
be waived only if the USTR determines that extraordinary market 
conditions demonstrate that the waiver would be in the national 
interest of the United States. I worked with the Ranking 
Member, Senator Baucus, and the Administration to develop an 
additional measure of Congressional oversight before the 
application of either safeguard could be waived. Specifically, 
the Administration added a provision to the draft Statement of 
Administrative Action (SAA) that accompanied the draft 
implementing legislation. The added provision specifies that 
the Administration will consult with the Senate Committee on 
Finance and the House Committee on Ways and Means no less than 
5 business days before a beef safeguard may be waived. The 
inclusion of this additional provision clearly demonstrates 
that Congress was not a ``rubber stamp'' for the U.S.-Australia 
FTA.
    That is how the process should work, with Members working 
together in a bipartisan fashion with the Administration to 
refine draft implementing legislation in a manner that advances 
the objectives identified under TPA while remaining consistent 
with the underlying trade agreement and with the U.S. 
Constitution. And it is that principle of consistency which is 
so critically important. TPA procedures do not require the 
President to accept any recommended changes made by the 
Committee in its informal consideration of draft legislation. 
Thus, if the Committee were to recommend a provision that is 
inconsistent with either the underlying trade agreement or with 
the U.S. Constitution, the President would necessarily have to 
reject the Committee's recommendation when formally submitting 
implementing legislation to the Congress. Opponents of a trade 
agreement could thus engage in political gamesmanship and 
subvert the process by recommending an inconsistent provision 
in order to embarrass the President and tarnish TPA procedures 
with allegations of a failure in the mechanism for 
Congressional oversight under TPA.
    During the Committee meeting on June 23rd, Senator Conrad 
proposed an amendment described as follows:

        The amendment enhances the consultation requirement in 
        the waiver provisions by adding a requirement in 
        paragraphs 202(c)(4) and 203(d)(5) that the Finance and 
        the Ways and Means Committees must both affirmatively 
        approve a proposed waiver before the USTR can waive the 
        application of a safeguard.

At that time, I provided to Committee Members an independent 
analysis of the Conrad amendment prepared by the Congressional 
Research Service (CRS), a copy of which is attached at the end 
of these additional views. CRS identified ``a constitutional 
difficulty with the committee approval device, which flows from 
the decision in INS v. Chadha, 462 U.S. 919 (1983).'' In the 
end, the Conrad amendment passed narrowly on a vote of 11 ayes, 
10 nays. Not having a quorum present, I recessed the meeting 
before calling a final vote to approve the amended draft 
implementing legislation as the Committee's recommendation to 
the President.
    I reconvened the meeting the next day, on June 24th, for a 
vote on final approval of the amended draft legislation. By a 
vote of 7 ayes, 14 nays, the Committee voted against approving 
the amended draft legislation as the Committee's recommendation 
to the President. That vote left the Committee without a 
recommendation to the President.
    Some argue that the process was somehow shortchanged 
because the Committee did not, at that point, proceed to an 
informal conference with the House Committee on Ways and Means. 
That argument ignores one dispositive fact--i.e. a majority of 
the Committee never approved a recommendation to the President 
for implementing legislation. Absent a Committee-approved 
recommendation, there was simply nothing to conference with 
Ways and Means. Consider for a moment a scenario in which 
Committee Members are unanimous in their opposition to a 
particular free trade agreement negotiated under TPA 
procedures. During informal consideration of proposed 
implementing legislation for the agreement, the Committee 
unanimously votes against approval. No recommendation is made 
to the President, for no bill would be acceptable to the 
Committee. Yet TPA does not require a Committee recommendation, 
it merely affords an opportunity for one. The process moves 
forward, with formal submission of an implementing bill by the 
President to the Congress. Approval of the agreement then 
stands or falls on the vote on final passage in each House. 
This case is no different. A large majority of the Committee 
voted against final approval, and so no recommendation was 
made. I certainly agree that if the Finance Committee had 
approved a final recommendation that differed from the 
recommendation approved by the Ways and Means Committee, an 
informal conference would have been warranted to reconcile the 
differences between the two recommendations. But that is not 
the situation that confronted the Finance Committee in this 
case. Instead, the Committee's final decision not to approve 
the amended draft legislation was respected and the integrity 
of TPA procedures was maintained.
    The Senate took up formal implementing legislation for the 
Agreement on July 15, 2004. I am submitting the Committee 
report on August 25, 2004, and so I have the benefit of 
hindsight in preparing these additional views. I find it 
noteworthy that when it came to a vote on final passage of the 
United States-Australia Free Trade Agreement Implementation Act 
on the floor of the Senate, the bill passed overwhelmingly on a 
vote of 80 ayes, 16 nays, 4 not voting. Any member who felt 
that consultations during consideration of the bill or that the 
TPA process itself was inadequate was certainly free to vote 
against the final implementing bill. Further, final passage 
included approval of the SAA containing the compromise 
provision I had negotiated with Senator Baucus and the 
Administration. Thus, any claim that the Committee did not 
exercise its constitutional responsibility is simply erroneous. 
The process followed by the Committee in its informal 
consideration of the draft implementing legislation was open, 
transparent, and entirely consistent with TPA procedures. And, 
as Chairman, I am satisfied that the Committee fully discharged 
its responsibility to ensure meaningful oversight of the 
development of implementing legislation for our free trade 
agreement with Australia and did so in a manner fully 
consistent with the U.S. Constitution.

                                                    Chuck Grassley.
                                ------                                

                            Congressional Research Service,
                                                     June 22, 2004.

                               Memorandum

To: Senate Committee on Finance, Attention: Stephen Schaefer.
From: Johnny H. Killian, Senior Specialist, American Constitutional 
        Law, American Law Division.
Subject: Validity of Provision Conditioning Executive Action on 
        Congressional Committee Approval.

    This memorandum is in response to your request to review a 
provision proposed to be added to the Australian FTA. The 
particular sections authorize quantity and price-based 
safeguards on beef whenever certain conditions apply. The 
sections provide for USTR waivers of application of the 
safeguards ``if the Trade Representative determines that 
extraordinary market conditions demonstrate that a waiver would 
be in the national interest of the United States'' and USTR 
consults with private sector advisors and the Finance and Ways 
and Means Committees. The proposed amendment would add a 
requirement that the Senate Finance Committee and the House 
Ways and Means Committee both affirmatively approve a proposed 
waiver before USTR can waive the application of the safeguards.
    There is a constitutional difficulty with the committee 
approval device, which flows from the decision in INS v. 
Chadha, 462 U.S. 919 (1983). In that case, the Court held 
unconstitutional a provision of the immigration laws that 
authorized either the Senate or the House of Representatives, 
by simple resolution, to disapprove the decision of the 
Attorney General to allow a particular deportable alien to 
remain in the country. The infirmity of the provision, 
according to the Court, was that ``the exercise[s] of 
legislative power'' by Congress or by one House had to comply 
with the Constitution's lawmaking prescription under Article I, 
Sec. 1 and Article I, Sec. 7, that is, passage by both Houses 
and presentment to the President for his approval or veto. In 
order to determine whether a congressional action is an 
exercise of legislative power, one must look to see if ``it 
ha[s] the purpose and effect of altering the legal rights, 
duties and relations of persons, including [in this case] the 
Attorney General, Executive Branch officials and Chadha, all 
outside the legislative branch.'' Id., 952.
    Although Chadha concerned a one-House simply resolution, 
the analysis of the Court made clear that two-House vetoes, 
with regard to presentment, and committee veto devices suffered 
from the same constitutional difficulty. (Needless to say, no 
constitutional significance attaches to whether the device is 
cast as a veto or a necessary approval). And, indeed, the Court 
shortly thereafter summarily affirmed two decisions by the 
District of Columbia Circuit, which had acted pre-Chadha, 
striking down two-House vetoes. Process Gas Consumers Group v. 
Consumer Energy Council, 463 U.S. 1215 (1983), summarily affg. 
691 F.2d 575 (D.C.Cir., 1982) (en banc), and 673 F.2d 425 
(D.C.Cir). 1982. Although the Supreme Court has not passed on a 
provision giving congressional committees veto power or 
necessary approval like that contained in the proposed 
amendment, the D.C. Circuit, contemporaneously with the two 
cited cases, invalidated a section of an appropriations law 
largely identical to the proposal. AFGE v. Pierce, 697 F.2d 303 
(D.C.Cir., 1982) (panel composed of now-Justice Ginsburg and 
Judges Bork and Bazelon).
    In Pierce, the court had before it a limitation on the use 
of funds in an HUD Appropriations Act to implement a RIF 
``without the prior approval of the Committees on 
Appropriations.'' According to the court, the provision could 
be interpreted in one or another of two ways. First, it could 
be read to empower either Appropriations Committee to prevent 
otherwise authorized expenditures of funds. Second, it could be 
read as prohibiting the agency from using appropriated funds 
for certain purposes but empowering both Committees, acting 
together, to lift the prohibition and to authorize the agency 
to make such use of the funds. Under either construction, the 
court stated, the provision was unconstitutional. If the first 
reading was correct, the section conferred a one-House veto on 
the Committees; if the second reading prevailed, the directive 
was a grant of legislative power to the two Committees. 
Legislative power, either way, had to be exercised bicamerally 
and through presidential presentment.
    Little doubt exists that Chadha confirms the D.C. Circuit's 
analysis of such committee provisions of law.
    Now, it is true that Congress has not foresworn use of 
legislative veto devices in the aftermath of Chadha. By one 
authoritative but now dated count, ``Congress [has] enacted 
more than two hundred new legislative vetoes.'' Fisher, The 
Legislative Veto: Invalidated, It Survives, 56 L. & Contemp. 
Prob. 273, 288 (1993). Most of these provisions of law are 
authorizations to committees, often the Appropriations 
Committees, to approve certain executive expenditures before 
they can take place. Id., 288, n. 83. Because of the comity the 
agencies must display to the Appropriations Committees, these 
provisions are rarely challenged, certainly not in court. 
However, Presidents in signing statements have typically 
complained about the measures and announced their intentions to 
ignore them. The format of these presidential statements 
usually follow one highlighted by Dr. Fisher of President 
George H.W. Bush. The President protested that the sections 
``constitute legislative vetoes similar to those declared 
unconstitutional by the Supreme Court in INS v. Chadha. 
Accordingly, I will treat them as having no legal force or 
effect in this or any other legislation in which they appear.'' 
27 Weekly Comp. Pres. Docs. (Oct. 28, 1991).
    In most instances, disputes between Congress and Executive 
over the use of such devices may fail to give rise to 
litigation, or, at least, litigation that enables court to 
reach the merits, because of the absence of Member standing, 
cf. Raines v. Byrd, 521 U.S. 811 (1997), and the lack of 
standing by private parties, and there will be political 
accommodation. But regardless of the justifiability of the 
question in any particular case, the amendment before us now 
certainly appears to meet the judicial definition of an 
impermissible exercise of legislative power and to be subject 
to invalidation in the event of a suit in which the merits are 
reached.

  ADDITIONAL VIEWS OF SENATORS BAUCUS, ROCKEFELLER, DASCHLE, CONRAD, 
                     JEFFORDS, BINGAMAN AND LINCOLN

    We are very disappointed with the process used to move the 
U.S.-Australia Free Trade Agreement Implementation Act through 
the Finance Committee and the Senate.
    We support trade agreements that open markets and level the 
playing field for American workers, farmers, and businesses. 
Although we disagree on whether the U.S.-Australia Free Trade 
Agreement is such an agreement and merits Congressional 
approval, we strongly believe a good agreement is no excuse for 
bad process. And the ill-advised process permitted in this 
instance bodes poorly for the Congressional prospects of future 
trade agreements.
    Congress should never be a rubber stamp for trade 
agreements proposed by the administration. Indeed, the United 
States Constitution gives Congress primary responsibility for 
trade. Article I, section 8, clause 3 says that: ``The Congress 
shall have the power * * * to regulate Commerce with foreign 
Nations.''
    Because it is not practical for members of Congress to 
negotiate trade agreements, our predecessors saw the wisdom in 
delegating the power to conduct negotiations to the executive 
branch. But that does not mean that Congress has delegated its 
Constitutional responsibilities. To the contrary, under United 
states law no trade agreement is self-executing. It has no 
effect on domestic law until Congress passes implementing 
legislation.
    A system where one branch of Government negotiates trade 
agreements and another must accept them and turn them into 
domestic law presented challenges. We meet those challenges 
through the fast-track process first adopted in the Trade Act 
of 1974 and most recently extended in the Trade Act of 2002.
    Fast-track gives the Executive express authority to 
negotiate tariff and non-tariff agreements, so long as our 
trade representatives meet general negotiating objectives set 
out by Congress. It guarantees our trade partners that any 
agreement will receive an up-or-down vote by a date certain. 
That way, when they negotiate with the United States, they know 
that Congress cannot later amend the agreement or kill it with 
a filibuster. Most importantly, fast-track preserves Congress's 
Constitutional primacy on trade. No agreement gets implemented 
unless a majority of Congress approves.
    Fast-track procedures require close collaboration between 
the Executive and Congress at every stage. The President must 
notify committees of jurisdiction and consult with them before 
a negotiation begins and regularly throughout the negotiations. 
Once talks are complete, the President must notify Congress 90 
days before signing the agreement, to permit Congress time to 
review the terms of the deal.
    Once the agreement is signed, the President must submit it 
to Congress, along with a draft implementing bill, for 
approval. Congress has no more than 90 days during which the 
Congress is in session to act. Amendments are not in order.
    But the time when close coordination between the Executive 
and Congress is most critical is the period between when the 
agreement is signed and when the President submits the 
agreement to Congress. This is the time when the administration 
and the trade committees sit down together to craft an 
implementing bill.
    The law requires the Executive to consult with the 
committees of jurisdiction. But because the details of this 
consultative process are not spelled out by law, some call this 
the ``informal process'' or the ``mock process.''
    No one should be fooled by these titles. This cooperative 
drafting ventue--while not spelled out in the law--is the 
centerpiece of the first track process. It is at this stage--
before the implementing bill becomes unamendable--that the 
trade committees can and do shape the final legislation.
    Congress and the President first used the procedures 
adopted in the Trade Act of 1974 to implement the GATT Tokyo 
Round agreements in 1979. The Government has since used these 
procedures to implement the WTO Uruguay Round Agreements, as 
well as free trade agreements with Israel, Canada, Mexico, 
Singapore, and Chile.
    From the beginning, the Finance Committee has strived to 
make the informal process operate as much as possible like the 
normal legislative process. For that reason, the Finance 
Committee always holds a mock markup of the draft implementing 
bill. The Committee always gives its members an opportunity to 
review the draft legislation and has frequently modified the 
draft bill before proceeding to the mock markup. Like any 
markup, a mock markup is open to the public. Members are free 
to offer amendments to the draft bill that has been developed 
by the administration and Committee staff. The Committee holds 
a recorded vote on each amendment offered. It then votes on 
whether to approve the draft bill, as amended, in a recorded 
vote.
    Amendments are common events at mock markups.
     When the Committee considered the U.S.-Israel Free 
Trade Agreement in 1984, Committee Members offered 13 
amendments, and the Committee adopted 3.
     In 1988, when the Committee considered the Canada-
United states Free Trade Agreement, Members offered 9 
amendments, all of which were adopted.
     When the Finance Committee considered draft 
implementing legislation for the North American Free Trade 
Agreement in 1993, members offered at least 15 amendments, of 
which 14 were adopted. There were more than thirty differences 
between the Senate and House versions of the bill at the end of 
the mock markups.
     By contrast, no amendments were offered last year 
when the Committee considered the Singapore and Chile 
implementing bills. That was unusual.
    In each of these cases, consideration of amendments was 
followed by a Committee vote to approve the draft bill, as 
amended.
    In every case except Singapore and Chile, amendments added 
in the mock markup led to differences between the versions of 
the draft bill approved by the Finance Committee and the bill 
approved by the Ways and Means Committee. Consistent with 
normal legislative practice, the two Committees resolved these 
differences in an informal or ``mock'' conference, with each 
House appointing conferees to participate.
    This time-tested process works. It allows Congress to 
exercise its Constitutional prerogatives, while still 
guaranteeing the President and our trading partners a timely 
vote on trade agreements. That is why we firmly believe that 
Congress should continue to insist on a meaningful and robust 
informal process that is as nearly identical as possible to the 
normal legislative process.
    Measured by past experience, the process for considering 
the U.S.-Australia Free Trade Agreement falls short.
    At the informal markup of this bill, Senator Conrad offered 
an amendment. The administration expressed opposition to the 
amendment. The amendment was nevertheless adopted in a roll 
call vote by a majority of Committee members.
    The appropriate next step would have been to proceed to an 
informal conference with the House. A conference would have 
afforded the opportunity to address any concerns raised by the 
amendment. The conference could have approved the amendment 
over the Administration's objection--something that has 
happened before. It could have rewritten the amendment to make 
it acceptable to the Administration. Or it could have debated 
the matter and resolved, by majority vote, to reject the 
amendment.
    We will never know how the conference process might have 
turned out, because, for the first time since fast-track was 
adopted in 1974, the informal process was not followed. The 
conference was simply bypassed in favor of permitting the 
administration to submit its original bill, ignoring the 
clearly expressed concerns of a majority of the Committee.
    In the long run, we do ourselves a disservice by derailing 
the informal process when the Administration's legislation is 
altered in a way not to its liking. At most, we may have saved 
ourselves a few days or weeks getting this bill to a vote. But 
we are concerned that shortchanging the process sets a 
dangerous precedent that could lead to the administration 
ignoring Committee recommendations in the future and unravel 
the consultation and cooperation that are central to the 
Congress's grant on fast track authority to the administration.
    In addition, more complex agreements may be ahead. CAFTA 
involves six countries and could raise controversial new 
issues. Any agreements that come out of the WTO Doha Round or 
the FTAA talks could require extensive new implementing 
legislation. There will surely be amendments offered during the 
informal process on each of these agreements, and some may win 
Committee approval. In sum, we would be foolish to assume the 
process of developing implementing bills will always be as easy 
in the future as our recent experiences with Singapore and 
Chile.
    When we shortchange the process, we shortchange the 
Constitution. When we start cutting corners on process, we 
begin to abdicate Congress's constitutional role in making 
trade law. Short term expediency is no excuse for Congress to 
surrender its Constitutional role. The ends do not justify the 
means.

                                   Max Baucus.
                                   Jay Rockefeller.
                                   Jeff Bingaman.
                                   Tom Daschle.
                                   Kent Conrad.
                                   Blanche L. Lincoln.
                                   Jim Jeffords.

        V. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    Pursuant to the requirements of paragraph 12 of rule XXVI 
of the Standing Rules of the Senate, changes in existing law 
made by the bill, as reported, are shown as follows (existing 
law proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

CONSOLIDATED OMNIBUS BUDGET RECONCILIATION ACT OF 1985

           *       *       *       *       *       *       *


SEC. 13031. FEES FOR CERTAIN CUSTOMS SERVICES.

  (a) *  *  *

           *       *       *       *       *       *       *

  (b) Limitations on Fees.--(1)(A) Except as provided in 
subsection (a)(5)(B) of this section, no fee may be charged 
under subsection (a) of this section for customs services 
provided in connection with--

           *       *       *       *       *       *       *

          (14) No fee may be charged under subsection (a) (9) 
        or (10) with respect to goods that qualify as 
        originating goods under section 203 of the United 
        States-Australia Free Trade Agreement Implementation 
        Act. Any service for which an exemption from such fee 
        is provided by reason of this paragraph may not be 
        funded with money contained in the Customs User Fee 
        Account.

           *       *       *       *       *       *       *

                              ----------                              


TARIFF ACT OF 1930

           *       *       *       *       *       *       *


SEC. 592. PENALTIES FOR FRAUD, GROSS NEGLIGENCE, AND NEGLIGENCE.

    (a) *  *  *

           *       *       *       *       *       *       *

    (c) Maximum Penalties.--
          (1) *  *  *

           *       *       *       *       *       *       *

          (8) Prior disclosure regarding claims under the 
        united states-australia free trade agreement.--
                  (A) In general.--An importer shall not be 
                subject to penalties under subsection (a) for 
                making an incorrect claim that a good qualifies 
                as an originating good under section 203 of the 
                United States-Australia Free Trade Agreement 
                Implementation Act if the importer, in 
                accordance with regulations issued by the 
                Secretary of the Treasury, voluntarily and 
                promptly makes a corrected declaration and pays 
                any duties owing.
                  (B) Time periods for making corrections.--In 
                the regulations referred to in subparagraph 
                (A), the Secretary of the Treasury is 
                authorized to prescribe time periods for making 
                a corrected declaration and paying duties owing 
                under subparagraph (A), if such periods are not 
                shorter than 1 year following the date on which 
                the importer makes the incorrect claim.
          [(8)] (9) Seizure.--If the Secretary has reasonable 
        cause to believe that a person has violated the 
        provisions of subsection (a) and that such person is 
        insolvent or beyond the jurisdiction of the United 
        States or that seizure is otherwise essential to 
        protect the revenue of the United States or to prevent 
        the introduction of prohibited or restricted 
        merchandise into the customs territory of the United 
        States, then such merchandise may be seized and, upon 
        assessment of a monetary penalty, forfeited unless the 
        monetary penalty is paid within the time specified by 
        law. Within a reasonable time after any such seizure is 
        made, the Secretary shall issue to the person concerned 
        a written statement containing the reasons for the 
        seizure. After seizure of merchandise under this 
        subsection, the Secretary may, in the case of 
        restricted merchandise, and shall, in the case of any 
        other merchandise (other than prohibited merchandise), 
        return such merchandise upon the deposit of security 
        not to exceed the maximum monetary penalty which may be 
        assessed under subsection (c).

           *       *       *       *       *       *       *

                              ----------                              


TRADE ACT OF 1974

           *       *       *       *       *       *       *



SEC. 202. INVESTIGATIONS, DETERMINATIONS, AND RECOMMENDATIONS BY 
                    COMMISSION.

    (a) Petitions and Adjustment Plans.--
           (1) * * *

           *       *       *       *       *       *       *

          (8) The procedures concerning the release of 
        confidential business information set forth in section 
        332(g) of the Tariff Act of 1930 shall apply with 
        respect to information received by the Commission in 
        the course of investigations conducted under this 
        chapter, part 1 of title III of the North American Free 
        Trade Agreement Implementation Act, title II of the 
        United States-Jordan Free Trade Area Implementation 
        Act, title III of the United States-Chile Free Trade 
        Agreement Implementation Act, [and] title III of the 
        United States-Singapore Free Trade Agreement 
        Implementation Act, and title III of the United States-
        Australia Free Trade Agreement Implementation Act. The 
        Commission may request that parties providing 
        confidential business information furnish 
        nonconfidential summaries thereof or, if such parties 
        indicate that the information in the submission cannot 
        be summarized, the reasons why a summary cannot be 
        provided. If the Commission finds that a request for 
        confidentiality is not warranted and if the party 
        concerned is either unwilling to make the information 
        public or to authorize its disclosure in generalized or 
        summarized form, the Commission may disregard the 
        submission.

           *       *       *       *       *       *       *

                              ----------                              


TRADE AGREEMENTS ACT OF 1979

           *       *       *       *       *       *       *



SEC. 308. DEFINITIONS.

    As used in this title--
          (1) *  *  *

           *       *       *       *       *       *       *

          (4) Eligible products.--
                  (A) In general.--The term ``eligible 
                product'' means, with respect to any foreign 
                country or instrumentality that is--
                          (i) a party to the Agreement, a 
                        product or service of that country or 
                        instrumentality which is covered under 
                        the Agreement for procurement by the 
                        United States; [or]
                          (ii) a party to the North American 
                        Free Trade Agreement, a product or 
                        service of that country or 
                        instrumentality which is covered under 
                        the North American Free Trade Agreement 
                        for procurement by the United 
                        States[.]; or
                          (iii) a party to a free trade 
                        agreement that entered into force with 
                        respect to the United States after 
                        December 31, 2003, and before January 
                        2, 2005, a product or service of that 
                        country or instrumentality which is 
                        covered under the free trade agreement 
                        for procurement by the United States.

           *       *       *       *       *       *       *