OBJECTIVES

The Preferences Act goal is to promote countries' development giving a bigger access to the North American market, and encouraging investment in non-traditional sectors in order to diversify exportable supply of Andean commodities.

The ATPA is an unilateral trade program, designed to promote the economic development through the private sector initiative within the four Andean countries: Bolivia, Colombia, Ecuador, and Peru, adversely affected by drugs producing problems, offering options to the coca crop and processing activities (the President's Bush "War against Drugs" commercial component).

Through the ATPA the USA unilaterally releases from import taxes to commodities originating from beneficiary countries for a ten (10) years period, from December 4, 1991 to December 4, 2001. In Ecuador, this program is in force since July, 1992.

THE ATPA IMPORTANCE AND DIMENSIONS

Through this mechanism, 75% of tariff universe has access to the North American market.  The main buyer-country of the Ecuadorian commodities is the USA (1997), thus it is a very important market due to its purchase/consumption capacity, geographic location, transportation and communication facilities. The USA relationship with the South American countries engender favourable conditions for new trading trends development. Approximately 6,100 commodities of the 8,000 commodities of the harmonized tariff system of the USA, enjoy of a customs franchise abatement (AGRICULTURAL AND NON-AGRICULTURAL), under this special regime.

Products categories without custom franchise are:

· Canned tuna-fish

· Any agricultural commodity included within chapters 2 to 52 of the USA Harmonized Tariff System, subjected to a quota, if overpasses the established quota quantity.

· Sugar, syrups, and treacles, included within the USA Harmonized System's tariff items 1701.11.50, 1701.12.50, 1701.99.50, 1702.90.2, and 2106.90.46. These commodities are subject to the tariff quota proclaimed on September 13, 1990, through which a tariff system of two grades was created. The ATPA beneficiary countries can export under a free tariff system a quantity called "low rate"; any sugar import higher than what have been designed before is subject to a "high rate" tariff.

· Most textile fibers and made-up articles (under the ATPA, textile commodities made of combined silk fibers or vegetables, except cotton, could enter free of tariff).

· Other non-agricultural commodities: footware, globes, luggage, and other leather manufactures, watches, rum, etc.

Certain commodities, such as bear and liquors, although they have duty free entrance, could be subject to federal taxes over consumption. Moreover, duty free commodities originating from the ATPA beneficiary countries, must fulfill all established laws, regulations, and standards, such as those designed to North American consumer and industry trade disloyal practice protection.

ORIGIN REQUIREMENTS

Commodities must fulfill the following conditions in order to have tariff free entry:

1. The merchandise should be imported directly from a beneficiary country to the USA's customs territory (including Columbia and Puerto Rico).

2. The merchandise must be produced in a beneficiary country. This requirement is fulfilled when (a) the good has been produced or manufactured in a beneficiary country, (b) it has substantially been transformed into a brand new and different trade commodity in the beneficiary country, as the United States Customs Service determines.

3. At least 35% of the taxable value of the imported article in the United States must consist of commodities produced in one of the ATPA beneficiary countries (Ecuador, Colombia, Peru, or Bolivia), or any of the CBI (the Caribbean Basin Initiative) countries: Antigua and Barbuda, Antilles, Aruba, Bahamas, Barbados, Belize, Costa Rica, Dominica, Dominican Republic, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Montserrat, Nicaragua, Panama, Saint Kitts and Nevis, Saint Vincent and the Grenadines, Trinidad and Tobago, and the Virgin and British Islands, and/or direct cost of processing operations (including incurred direct costs, or reasonably applied to manufactured production or an article assembly such as labor force, parts, molds, tools, machinery depreciation, research and development programs, inspections and tests. General expenses, management expenses and profits, as well as looses and liability insurance, advertisement, sellers' wages are not considered like direct costs in processing operations) should be performed in one or more of the aforementioned countries.

The cost or value of those materials produced in the USA territory (except Puerto Rico) should be considered, but just till a maximum of 15% of the imported article's tax value.

For admissible articles under the ATPA, cultivated, produced or manufactured in the ATPA beneficiary countries, any calculation of the aforementioned costs will be necessary.

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