Free Trade Agreement Series: Part 3- Andean Free Trade on a Roller Coaster

The Andean Trade Promotion and Drug Eradication Act (ATPDEA) was enacted in 2002 by the second Bush administration. This trade preference agreement sought to grant four South American nations preferential treatment when exporting goods into the United States. With the purpose to promote economic development and eradicate drug trafficking, the agreement targeted four Andean countries, Bolivia, Colombia, Ecuador, and Peru. However, by the beginning of this year only two of these nations remained eligible for duty free exemptions. ATPDEA has been revised, eradicated, and reinstated continually since creation, today leaving Colombia and Ecuador as the only two beneficiaries. The several revisions made to ATPDEA have become a source of problems, creating confusion and uncertainty for importers and exporters, and even as we try to explain it Colombia is set to exit once its own separate FTA (Free Trade Agreement) is in place, most likely Dec. 1 2013 if there are no other changes.

ATPDEA expired for all beneficiary on December 21, 2009. The only country that maintained duty-free benefits was Peru, which was covered by the Free Trade Agreement it signed with the United States. One week later, on Dec. 28, 2009, an amendment to 123 Stat. 3484; Pub. L.  111-344, title II, Sec. 201(a), was enacted restoring Colombia until February 2011 and Peru through the end of 2010. Then it changed again!  On January 7, 2011 the termination section of ATPDEA was amended to remove all benefits of ATPDEA from Colombia and Peru. Finally, a retroactive provision allowing Colombia, but not Peru, duty free access was enacted by H.R. 3078, 112th Cong. (2011) which further extended the expiration of the ATPDEA to July 31, 2013, and especially for preferential tariff treatment under the regional fabric provision for imports of qualifying apparel articles from Colombia and Ecuador only through September 30, 2012.

All of this back-and-forth has created reams of unnecessary work for Customs at the ports of entry, for customhouse brokers, and for importers.  It has also created a bonanza for U.S. Customs and Border Protection’s (CBP) CBP’s penalty workers, as brokers and importers struggle to pay the correct duties on time and avoid tripping penalty wires.   Manufacturers are caught both in the penalty world and an uncertain universe of where to produce.  Long-term planning is impaired, if not impossible.   Thanks again, Congress!

With the latest renewal of the ATPDEA, which took place on October 21, 2011, CBP issued a memorandum stating that it will refund duties paid on ATDEAP-eligible merchandise imported or exported between February 14, 2011 and November 4, 2011, the period in which the program last lapsed. The memo also stated that ATPDEA benefits would commence again on November 5, 2011, but only for two countries. Those who are seeking refunds have 180 days to send the required documentation to CBP.   Again, the confusion created by the constant change in the ATPDEA ‘s status has effected exporters and importers tremendously. For example, those companies that enjoyed ATPDEA benefits and used raw materials from Peru will no longer receive these benefits although it was a regular ATPDEA member and has an FTA.

The problem with altering these agreements is that many manufacturers are not aware of the changes made to these programs, causing the manufacturers costs to increase due to the extra duties, causing some companies major losses.  In addition, the tariff itself has an error whereby it tells users, primarily customhouse brokers, to continue entering Peruvian goods duty free when in fact they are dutiable.  We have pointed this out to their association (the NCBFAA) so that the defense is available to any penalized importers or brokers.