CBI-related program developments - Caribbean Basin Initiative

CBI-Related Program Developments

As a far-reaching program like the Caribbean Basin Initiative (CBI) goes into effect, many related decisions can have an important impact on the program. Some of these new developments, like the signing of the Lome III agreement in December 1984, have a very positive effect.

Highlights of some of the major CBI-related program developments are discussed below.

The Lome III Convention was signed Dec. 8, 1984, extending duty-free access to the European Economic Community for five years. The aid, trade and investment benefits of Lome III apply to 64 Africa, Caribbean and Pacific (ACP) countries including 11 CBI beneficiaries, as indicated in the County Comparison Chart on page 13. The program provides $6.4 billion in EC economic aid worldwide over the five-year period, and allows one-way, duty-free access for virtually all ACP exports meeting the newly simplified rules of origin. Thus, using both CBI and Lome benefits, U.S. firms can gain access to EC and U.S. markets duty-free through a Caribbean manufacturing site.

Production Sharing between a U.S. or Puerto Rican plant and a Caribbean Basin plant has already proven to be a cost-effective technique for improving U.S. firms' competitiveness in world markets. Prior to the CBI, 806.30/807 imports, which allow reduced duties for production sharing operations, increased from less than $1 billion in 1966 to $21.8 billion in 1983. The Caribbean Basin has traditionally had a higher U.S. content in 806.30/807 operations; in 1983, for instance, Haiti averaged 71 percent U.S. content compared to 18 percent for products assembled in Taiwan and 16 percent for Hong Kong. The CBI eliminated the reduced duty for eligible products produced in beneficiary countries. The newly simplified CBI customs regulations should help production sharing manufacturers to take advantage of the duty-free provisions.

In addition, the new Governor of Puerto Rico, Rafael Hernandez Colon, has announced his intention to make 10 percent of the 936 deposits available on concessional terms for twin plants (see page 10).

Tax Information Exchange Agreements (TIEAs) have taken on double benefits now for Caribbean Basin countries, with both the CBI convention tax deduction benefit and the Foreign Sales Corporation (FSC) incorporation site eligibility. FSCs provide U.S. firms with income tax exemption and low operating costs, while the host country generates government revenue with new incorporation fees and licensing fees, and adds to its international business infrastructure. Jamaica and Barbados are now qualified for both FSC and CBI tourism benefits, while Trinidad has received the FSC benefit only to date. Other Caribbean Basin countries are currently negotiating TIEAa with the United States, and the tourism and FSC benefits could be important areas of business growth in 1985 for the region.

The General System of Preferences (GUP), which allows some 2,800 products into the U.S. duty-free from most developing countries, was renewed this year for eight and a half years, until July 1993. The new bill is similar to the expiring GSP but for the first time gives the President authority to waive competition need limits on product-specific basis. The CBI continues to be much more liberal in product coverage and in rules-of-origin for product eligibility than GSP.

CBI Customs Regulations--The U.S. Customs regulations implementing the trade benefits of the CBI have been the subject of much controversy in 1984. New regulations were published in the Federal Register on Dec. 7, addressing the key issues. The exporters' declaration with the importers' endorsement has been changed to be identical to the GSP certificate of origin, or Form A. Under the CBI, the foreign exporter is directly responsible for certifying product eligibility. While the new regulations eliminate the U.S. Customs requirement for certification by foreign governments, exporters may be asked to submit directly to U.S. Customs detailed product value and processing information to support the Form A.

COPYRIGHT 1985 U.S. Government Printing Office
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