CITA Requests Comments on "Due Diligence" Requirement for DR-CAFTA Commercial Availability Requests
The Committee for the Implementation of Textile Agreements has issued a notice requesting public comment on the due diligence requirement under the Dominican Republic-Central America-U.S. Free Trade Agreement (DR-CAFTA) commercial availability procedures.
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Comments in response to this notice are due January 2, 2008.
The DR-CAFTA commercial availability provision permits the use of non-originating DR-CAFTA products by implementing procedures that allow products to be placed on or removed from a product list, on a timely basis, and in a manner that is consistent with normal business practice. CITA's final commercial availability procedures may be modified to address concerns that arise as CITA gains experience in implementing them. CITA notes that these are administrative procedures rather than regulations, and can be modified as needed.
(As part of CITA's procedures for DR-CAFTA commercial availability1, there is a requirement that a requester and potential supplier engage in due diligence efforts to determine whether a product is available in commercial quantities in a timely manner in the region. The due diligence provisions require communications between the requester and potential suppliers, supported by documentation, to ensure that a proper inquiry into a product's commercial availability has been undertaken prior to the filing of the request.)
CITA is Concerned that Due Diligence Efforts Have Fallen Below Expectations
CITA states that based on its experience, there is a concern that in certain cases, due diligence efforts have fallen short of those expected when its commercial availability procedures were drafted: that product descriptions may not meet recognized standards; that potential suppliers may not be adequately substantiating their claims that they are to be able to supply requested products; and that CITA is not receiving complete information from interested entities regarding meaningful contact between requesters and potential suppliers necessary for CITA to make informed determinations.
Therefore, CITA is requesting public comments and proposals on the operation of the due diligence requirement under the DR-CAFTA commercial availability procedures, including the following areas of concern:
lack of substantive dialogue between requesters and potential suppliers;
methods being used to identify potential suppliers and the means of contacting requesters and potential suppliers have not been effective;
issues regarding the content of communication between requesters and potential suppliers, namely, the description of the product, such as production specifications and performance criteria;
how potential suppliers should identify and describe potentially substitutable products;
whether requests should be rejected or denied when it becomes clear that a production input is not available in commercial quantities in a timely manner rather than the downstream product; and
the information provided by potential suppliers in responses with offers to supply, and that potential suppliers are not demonstrating a legitimate intent to do business by providing a clear, detailed response to the request.
1In its final DR-CAFTA commercial availability procedures, CITA stated that an interested entity must file a Due Diligence Certification with each submission containing factual information. If the interested entity has legal counsel or another representative, the legal counsel or other representative must file a Due Diligence Certification with each submission containing factual information.
In the case of commercial availability requests, CITA stated that due diligence means the requestor has made reasonable efforts to obtain subject product from DR-CAFTA suppliers. Requestors must provide certain specified information in order to demonstrate this requirement. (See ITT's Online Archives or 04/03/07 news, 07040310, for BP summary of CITA's final procedures.)
- comments due by 01/02/08 (must be submitted electronically and in writing)
CITA contact - Richard Stetson (202) 482-2582
CITA notice (FR Pub 12/03/07) available at http://a257.g.akamaitech.net/7/257/2422/01jan20071800/edocket.access.gpo.gov/2007/pdf/E7-23410.pdf.
BP Note
CITA held a meeting on September 19, 2007 to discuss due diligence in the DR-CAFTA commercial availability process. (See ITT's Online Archives or 08/23/07 news, 07082330, for BP summary.)