DR-CAFTA was the first U.S. free trade agreement ("FTA") to have a commercial availability or "short supply" procedure. Earlier agreements, such as the North American Free Trade Agreement ("NAFTA") could handle issues of short supply only through a negotiation to change the rules of origin. Prior to DR-CAFTA the only provisions in U.S. law for making short supply determinations in international trade were those found in certain unilateral trade preference programs. The DR-CAFTA short supply procedures have become the model for subsequent U.S. free trade agreements.
DR-CAFTA short supply procedures, on the face, seem a mixture of elements of a free trade agreement and of a unilateral trade preference program, for, on the one hand, they take into consideration commercial availability in the regional FTA but make the determination the unilateral prerogative of the United States.
While the procedure for adding or removing products from the short supply list is covered by Article 3.25: Rules of Origin and Related Matters of Chapter Three -- National Treatment and Market Access for Goods Section G: Textiles and Apparel, the provision allowing the use of short supply components in qualifying apparel is covered by Note 3 of Annex 4.1 Specific Rules of Origin Part II – Specific Rules of Origin Section XI Textile and Textile Articles (Chapters 50 through 63) which says, in effect, if the outer shell of the garment is made of a product on the short supply list, the garment qualifies for DR-CAFTA.
There are two distinct phases to a DR-CAFTA short supply request. Taking them in reverse order, Phase 2, the public filing, is relatively quick and usually results in approval within a month, or at most, a month-and-a-half.
A government that is a Party to the Agreement (other than the United States) or a potential or actual purchaser of a textile or apparel good may submit, to the Committee for the Implementation of Textile Agreements (“CITA”), a request for a finding of commercial non-availability pursuant to the provisions of Section 203(o)(4) of the Dominican Republic-Central America-United States Free Trade Agreement (“the Agreement”) Implementation Act and CITA Final Procedures for implementing Section 203(o)(4) contained in CITA’s Federal Register notices of March 15, 2007 and the Modifications to Procedures of September 12, 2008.
- Business day 0 – Request received by CITA
- Business day 2 – Request accepted or rejected Business day 2 – If accepted, mass e-mail sent to all interested parties
- Business day 10 – Responses with an offer to supply the product are due
- Business day 14 – Rebuttals Comments are due
- Business day 30 – CITA announces determination (unless the time is extended)
- Business day 44 - CITA announces determination (if the time is extended due insufficient information)
Of the 108 requests processed to day, 86 were approved, 12 were denied, and 10 were voluntarily withdrawn by the petitioner.
Sounds quick and easy, right? WRONG.
The reason the government can evaluate and approve requests so quickly is that there is a lengthy “due diligence” process that must be completed before CITA will even accept a request for consideration. This is Phase 1. Before a request can be filed, thus starting the 30-day process, several weeks or months will have been spent in Phase 1. Many would-be requests never make it past Phase 1 to go on to a public filing.
What is due diligence? Every effort should be made to contact potential suppliers. For example, CITA cannot accept that a potential supplier “did not respond” to an e-mail or phone call after only one attempt to contact the supplier. Contact should be attempted with an appropriate official of a potential supplier. As an example, the CEO of a company may or may not be the most appropriate contact for determining whether the company can supply the requested product. When requesting a fiber, yarn, or fabric from a supplier, the requester must describe the product with the same specifications submitted in the ’Request‘. A requester should be able to clearly substantiate its belief that the subject product is not available from a supplier in a DR-CAFTA country. Whether a substitutable product is available from a potential supplier should be addressed in the submissions. In addition to contacting individual suppliers, requesters should consider contacting textile trade associations in all the DR-CAFTA nations.
In the right circumstances, where all potential suppliers promptly respond that they cannot supply the article in question, due diligence can be done in a short a time as a month. However, it usually takes a few months. Looking that the three most recently approved request we find--
- Request #229 started due diligence November 2, 2016, and filed, starting the 30-day process, on April 3, 2017, for five months of due diligence,
- Request #228 started due diligence November 17, 2016, and filed, starting the 30-day process, on March 20, 2017, for four months of due diligence, and
- Request #222 started due diligence February 4, 2016, and filed, starting the 44-day process, on June 1, 2016, for four months of due diligence.
So, how long does due diligence take? It takes however long it takes to demonstrate to CITA that there are no potential suppliers
No comments:
Post a Comment