(Japanese Note)

　Washington, February 6, 1987

　Excellency, I have the honor to refer to the Arrangement Regarding International Trade in Textiles done in Geneva on December 20, 1973 as extended by the Protocols dated December 14, 1977, December 22, 1981 and July 31, 1986 (hereinafter referred to as "the Arrangement Regarding International Trade in Textiles").

　I have further the honor to refer to the recent discussions held between the representatives of the Government of Japan and the Government of the United States of America concerning trade in cotton, wool and man-made fiber textiles between Japan and the United States of America and to confirm, on behalf of the Government of Japan, the understanding reached between the two Governments that, pursuant to the provisions of Article 4 of the Arrangement Regarding International Trade in Textiles and with a view to providing for orderly development of trade in cotton, wool and man-made fiber textiles between Japan and the united States of America, the arrangement attached hereto will be applied by the two Governments.

　I have further the honor to request Your Excellency to be good enough to confirm the foregoing understanding on behalf of the Government of the United States of America.

　Accept, Excellency, the renewed assurances of my highest consideration.

　(Signed) Nobuo Matsunaga
Ambassador Extraordinary and
Plenipotentiary of Japan to
the United States of America

　The Honorable George P. Shultz
Secretary of State of
the United States of America

　Arrangement between the Government of Japan and the Government of the United States of America concerning Trade in Cotton, Wool and Man-made Fiber Textiles between Japan and the United States of America

　Pursuant to the provisions of Article 4 of the Arrangement Regarding International Trade in Textiles permitting bilateral agreements consistent with the basic objectives and principles thereof ' I on mutually acceptable terms in order, on the one hand, to eliminate real risks of market disruption in importing countries and disruption to the textile trade of exporting countries, and on the other hand, to ensure the expansion and orderly development of trade in textiles. II, the following provisions will be applied by the two Governments.

1. The provisions of this Arrangement will be implemented by the two Governments in accordance with the laws and regulations applicable in their respective countries.

2. The two Governments recognize that their rights and obligations under the General Agreement on Tariffs and Trade are not affected by this Arrangement.

3. The Government of Japan will apply the restraints in the manner as provided for in this Arrangement to exports of existing cotton categories 300 through 354, 359 through 369, existing wool categories 400 through 448, 459 through 469 and existing man-made fiber categories 600 through 654, 659 through 670 as specified in the U. S. Correlation of 1986 (Textile and apparel Categories with tariff) Schedules Of the United States Annotated) and any subsequent technical modifications thereof for the period of four years beginning January 1, 1986 and extending through December 31, 1989 (hereinafter referred to as "the Arrangement Period"), and the Government of the United States of America will give consideration in implementing this Arrangement to assuring the full utilization by Japan of levels provided for in this Arrangement.

4. (A) Textile products referred to in paragraph 3 will be divided into three groups as follows.

　The respective Annual Group Limits for the Arrangement Period are set forth in Annex A (1).

(I) Apparel Group   categories 330 through 359, 431 through 459, 630 through 659 Non-Apparel Group categories 300, 301, 310 through 3 20, 3 60 through 369

(II) Non-Apparel Group   categories 300,301,310 through 320,360 through 369, 400, 410 through 429, 464 through 469, 600 pt (TSUSA 310.5015), categories 603 through 605, 610 through 627, 665 through 670

(III) Man-made fiber Yarn Group   categories 600 (excluding TSUSA 310.5015) through 602

(B) If the exports of any 9roup of textile products during the period of twelve months beginning January 1, 1986 and extending through December 31, 1986 (hereinafter referred to as "the First Arrangement Period") have exceeded the relevant Annual Group Limits for the First Arrangement Period, the excess shall be subtracted from the relevant Annual Group Limits for the period of twelve months beginning January 1, 1987 and extending through December 31, 1987 (hereinafter referred to as "the Second Arrangement Period").

5. (A) Within the applicable group limits set forth in Annex A (1), limits for specific categories and sub-limits for specific product for the First Arrangement Period are set forth in Annex A (2).

(B) For the Second Arrangement Period and thereafter, respective limits for specific categories and sub-limits for specific products set forth in Annex A (2), will be increased over the applicable limits and sub-limits for the preceding calendar year by three percent in the case of cotton and man-made fiber products and one percent in the case of wool products.

(C) Notwithstanding the provisions of sub-paragraph (B) above, growth rates for categories set forth in Annex B are stated in the same Annex.

(D) Notwithstanding the provisions of sub-paragraph (B) above,

(i) for combination categories of 300/301 and 342/642 and category 611, respective limits for the Second Arrangement Period are set forth in Annex A (3).

(ii) for the period of twelve month beg inning January 1, 1988 and extending through December 31, 1988 and thereafter, growth rates for combination categories of 300,/301 and 342/642 and for category 6ll will be the rate referred to in sub-paragraph (BJ 6bove and the rate referred to in sub-paragraph (C) above  respectively.

(E) If the exports of textiles of specific categories or specific textile products for the First Arrangement Period have exceeded the limits of the r e1evant categories or the sub-limits of the relevant products for the First Arrangement Period, the excess shall be subtracted from the limits of the relevant categories or the sub-limits of the relevant products for the Second Arrangement Period.

6. (A) In any calendar year during the Arrangement Period (hereinafter refer red to as "the Specific Arrangement Period"), the group limits for Apparel or Non-Apparel set forth in Annex A (1), in addition to adjustments under paragraph 7, may be exceeded by not more than percent (2)percent for the First Arrangement Period) provided that there is an equivalent square yard decrease in the other group in the same Specific Arrangement Period.

(B) Within the applicable group limit, as it may be adjusted under paragraphs 6 (A) and 7,the specific limits and sub-limits set forth in Annex A (2) may be exceeded by not more than 5 percent, except for the categories set forth in Annex C.

(C) Unused square yard equivalents in the categories subject to specific limits may be used for exports in categories not sub2ect to specific limits in the applicable group.

7. (A) (i) In any Specific Arrangement Period, exports may exceed the group limits, specific limits and sub-limits by allocating to the group limits, specific limits and sub-limits for that Specific Arrangement Period an unused portion (shortfa11) of the applicable group limits, specific limits and sub-limits for the preceding Specific Arrangement Period (carryover) or a portion of the applicable group limits, specific limits or sub-limits for the. succeeding Specific Arrangement Period (carry forward).

(ii) For purposes of the Arrangement, a group occurs when exports of 'the products from Japan to the of America during the Specific Arrangement period are below the applicable  set out in Annex A (1), or in group limit decreased pursuant and this paragraph, when such below the group limit as decreased

(iii) For the purposes of the Arrangement, a shortfall in a specific limit or sub-limit occurs when exports of textiles or textile products from Japan to the United States of America during the Specific Arrangement Period  are below the applicable group limit and any specific limit or sub-limit as set out in Annex A (1) and (2) or, in the case of any limit decreased pursuant to paragraph 6 and this paragraph, when such exports are below the specific  limit or sub-limit as decreased.

(B) For any group limit, the total of carry forward and carryover will be, at maximum, three percent of which carryover shall not represent more than one percent.

(C) in the case of specific limits and sub-limits for specific products, total of carry forward and carryover will be, at maximum, two percent of which carryover shall not represent more than one percent.

(D) Adjustments made under this paragraph are in addition to those permitted under paragraph 6. No carryover shall be available for application in the First Arrangement Period. No carry forward shall be available for application during the period of twelve months  beginning January 1, 1989 and extending through December 31, 1989.

8. (A) If, during any Specific Arrangement Period, the Government of the United States of America considers that imports from Japan in any category or specific product not set out in Annex A (2) are increasing so as to cause a real risk of market disruption in the United States market, the Government of the United States of America may request consultations with the Government of Japan.

(B) When the Government of the United States of America requests such consultations, both Governments will consult with in 30 days of receipt of the request to work out a mutually satisfactory solution to such problems as may exist with the category or specific product on which the request for such consultations was made

　. Both Governments agree to make every effort to reach agreement on a mutually satisfactory solution of the problem with in 90-days of the receipt of such request unless otherwise agreed

(C) During that 90-day period, the Government of Japan agrees to hold its exports to the United States of America in the category or product concerned to a level no greater than 35 percent of the amount entered, as reported in the U. S. General Import Statistics, during that latest twelve month period for which data are available at the time of the request for consultations.

(D) If no mutually satisfactory solution is reached during the 90-day consultation period, the Government of the United States of America may request the Government of Japan to limit the exports of the category or specific product on Which the request for such consultations was made, for the duration of the Arrangement, in accordance with paragraph 8 .

(E) The Government of Japan will limit the exports of such category or specific product as referred to in sub-paragraph (D) above. The limit, for the period of twelve months, will not be less than 106 percent of the amount imported into the United States of America in that category or specific product. as reported in the U. S. General Import Statistics, during the first twelve months of the most recent fourteen months preceding the month in which the request for consultations was made. The first term of the limit will begin on the first day following the conclusion of the 90-day consultation period and end on the last day of the Specific Arrangement Period in which the limit is established. If the limit is established during the Specific Arrangement Period, that limit will be prorated to correspond to the period of time remaining in that Specific Arrangement Period.

　Swing or carry forward for the limit established under this sub-paragraph wi11 be available as set out in paragraphs 6 and 7. If the limits are prorated as mentioned above, swing or carry forward will be prorated in the same way. Carryover will not be available in the Specific Arrangement period in which limit is established under this stub-paragraph. For each remaining Specific Arrangement period, the limit will be increased by three  percent for cotton and man-made fiber categories. and by one percent  for wool categories.

(F) Categories or specific products which have become sub 3ect to restraint will be deemed to have been added to Annex A (2).

(G) Consultations provided for in this paragraph will not be requested when imports from Japan in a category or a specific product are at annual levels not more than 1.,000,000 square yards equivalent for each man-made fiber or cotton textile category other than apparel, 700, 000 square yards equivalent for each man-made fiber or cotton apparel category, and 100, 000 square yards equivalent for each wool textile category.

(H) The Government of the United States of America will provide a detailed factual statement of the reasons and justification for its request for consultations provided for in this paragraph including data similar to those contemplated in paragraphs I and II of Annex A of the Arrangement Regarding Inter national Trade in Textiles as well as relevant data on imports from third countries.

(I) This paragraph will be implemented in such a manner as to achieve the principles and objectives set out in the Arrangement Regarding International Trade in Textiles, and will only be resorted to sparingly.

9. If the Government of Japan feels that as a  result of the application of this Arrangement, Japan is, or is threatened to be, placed in an inequitable position vis-a-vis a third country whose exports to the United States of America of cotton, wool and man-made fiber textiles are subject to restraint, or that Japan is, or is threatened to be, put in a substantially disadvantageous position compared with any other exporting country because of such factor s as a remarkable increase in exports by such country to the United States of America, the Government of Japan may request consu1 tat ions with the Government of the United States of America. Such consultations will be held and concluded promptly with a view to taking appropriate remedial action such as a  reasonable modification of this Arrangement. The Government of the United States of America wi11 take such appropriate remedial measures as may be deemed satisfactory by the two Governments in the consultations.

10. The two Governments will exchange current data monthly on exports and imports between Japan and the United States of America of the textiles covered by this Arrangement as promptly as possible.

11. Representatives of the two Governments will meet at the request of either Government and at least  once a year for a general over all review of this Arrangement and its implementation. Such review will include consideration of changing conditions in the industries, markets and trade of the two countries in the textile field, as well as any Particular proposals which may be made under paragraph 18 (B).

12. The Government of Japan will endeavor to space exports as evenly as practicable on a quarterly basis throughout each Specific Arrangement Period, taking seasonal factors in to account.

13. Mutually sat is factory administrative arrangements or adjustments may be made to  reso1ve minor problems arising in the implementation of this Arrangement including differences in points of procedure or opera t ion.

14. (A) For the purposes of this Arrangement, textile products covered by this Arrangement are 1.imited to tops, yarns, piece-goods, made-up articles, garments and other textile manufactured products (being pr o6ucts which derive their chief character is tics from their textile components) of cotton, wool, man-made fibers, or blends thereof, in which any or all of those fibers in combination represent either the chief value of the fibers or 50 percent or more by weight (or 17 percent or more by weight of wool) of the product.

(B) In the implementation of this Arrangement, the sys tem of textile categories and the rates of conversion are set forth in Annex D. The assignments of products to categories listed in Annex D wil1 be determined in accordance with the United States Customs classifications and definitions, subject to further clarification where necessary.

(C) Any question arising out of the implementation of the provisions of this paragraph will be sub3ect to consultations between the two Governments which will be satisfactory solution.

(D) Should consultations be necessary pursuant to paragraph 18 of the Protocol done in Geneva on July 31, 1986 extending the Arrangement Regarding International Trade in Textiles. both Governments agree to consult at the request of either Government at the soonest possible date, with a view to reaching a mutually satisfactory solution with in 30 days of the request.

(E) Certain textiles and textile articles designated as Japan Items will be exempt from the levels of restraint set out in this Arrangement in accordance with the conditions set forth in the Visa Arrangement to be concluded between the two Governments.

(F) Representatives of the two Governments will meet as necessary to discuss the application of the above definitions for cotton, wool and man-made fiber textiles to certain articles which the Government of Japan considers to be products of industries other than the textile and apparel industries, and not to be textile or apparel products.

15. Matters concerning trade in textiles between Japan and the United States of America which are not governed by this Arrangement will be governed by the provisions of the Arrangement Regarding International Trade in Textiles. The Government of the united states of America agrees that insofar as the exports from Japan of the products falling within the scope of this Arrangement are conducted with in the framework thereof the Government of the United States of America will not invoke Article 3 of the Arrangement Regarding International Trade in Textiles with respect to such products.

16. If the two Governments are unable to reach a mutually satisfactory solution with in a  reasonable period of time on problems which have been the subject of consultations under this Arrangement, either Government may, after notification to the other Government, refer such problems to the Textiles Surveillance Body in accordance with Article 11 of the Arrangement Regarding International Trade in Textiles.

17. Both Governments confirm the principles and their rights and obligations set for thin the provisions of the Protocol, done in Geneva on July 31, 1986, extending the Arrangement Regarding International Trade in Textiles.

18. (A) Either Government may terminate this Arrangement on or before the thirty first day of in any year by giving written notice through diplomatic channel the other government and in such event, this arrangement will cease to be effective on the thirty first day of December of the year in which the notice of termination is given.

(B) Each Government may at any time propose modifications of this Arrangement. The other Government will give sympathetic consideration to such proposal.

(U. S. Note )

　Washington, February 6

　Excellency: I have the honor to acknowledge receipt of Your Excellency's Note of today 's date enclosing the arrangement attached thereto concerning trade in cotton, wool and man-made fiber textiles between Japan and the United States of America which reads as follows:

"Japanese Note"

　I have further the honor to confirm the foregoing understanding on behalf of the Government of the United States of America.

　Accept, Excellency, the renewed assurance my highest consideration.

　For the Secretary of state
(Signed) Douglas W

　His Excellency Nobuo Matsunaga
Ambassador Extraordinary and
 Plenipotentiary of Japan to 
the United States of America

(Japanese Letter)

　Letter Washington, February 6, 1989

　Excellency, I have the honor to refer to the recent discuss ions between the representatives of our two Governments regarding trade in textile products between Japan and the United States o America and to the Arrangement between the  Government of Japan and the Government of the United States of America concerning Trade in Cotton, Wool and Man-made Fiber Textiles between Japan and the United States of America effected by the Exchange of Notes of today Is date (hereinafter referred to as "the Arrangements").

　I have further the honor to confirm, on behalf of the Government of Japan, the following understanding reached between two Governments:

1. In view of the results of discussions on statistical discrepancies regarding Japanese export and U. S. import data of light weight polyester filament fabrics (hereinafter referred to as "LPFF"), although the specific limit for LPFF remains at 151,000,000 square yards during the Arrangement Period, the Government of Japan will make an adjustment on the actual export restraint level of LPFF to the United States of America to the following levels for the Second Arrangement Period and thereafter:

　1987   128,000,000   SYD

　1988   129,000,000   SYD

　1989   131,000,000   SYD

2. With regard to paragraph 8 of the Arrangement, in case the category or product concerned is influenced by seasonal factors, consideration will be given to such factors consultations under the said paragraph, ding consultation of possible probation limits established in sub-paragraph (E) said paragraph,

　I have further the honor to request Your Excellency to be good enough to confirm this understanding on behalf of the Government of the United States of America.

　Accept, Excellency, the renewed assurance my highest consideration.

　(Signed) Nobuo Matsunaga
Ambassador Extraordinary and
Plenipotentiary of Japan to
the United States of America

　The Honorable George P. Shultz
Secretary of State of
the United States of America

(U.S. Letter)

　Washington, February 6, 1987

　Excellency, I have the honor to acknowledge  receipt of Your Excellency's Note of today' s date which reads as follows:

"(Japanese Letter)"

　I have further the honor to confirm on behalf of the Government of the United States of America, the understanding set for thin Your Excellency is Note.

　Accept, Excellency, the renewed assurances of my highest consideration.

　For the Secretary of State:
(Signed) Douglas W. McMinn

　His Excellency Nobuo Matsunaga
Ambassador Extraordinary and
Plenipotentiary of Japan to
the United States of America

(Japanese Letter)

　Washington, February 6, 1987

　Excellency,
   With reference to the Arrangement between the Government of Japan and the Government of the United States of America concerning Trade in Cotton, Wool and Man-made Fiber Textiles between Japan and the United States of America effected by the Exchange of Notes today (hereinafter refer red to as "the Arrangement"), I wish to confirm the Record of Understanding attached hereto which contains the views and intentions expressed by the representatives of the two Governments in the discussions leading to the conclusion of the Arrangement.

　I further wish to request Your Excellency to be good enough to confirm the Record of Under standing referred to above.

　(Signed) Nobuo Matsunaga
  Ambassador Extraordinary and
  Plenipotentiary of Japan to
  the United States of America

　The Honorable George P. Shultz
  Secretary of State of
  the United States of America

RECORD OF UNDERSTANDING

　With respect to paragraph of the Arrangement:

1. The Government of the United States of America, when invoking the provisions of paragraph will give full and sympathetic consideration to the views presented by the Government of Japan.

2. As paragraph is implemented in the form of export restraint, the Government of the United  States of America Export licenses Government of exceptionally licenses, part concentration in which lave been a will honor, in principle, the already issued, while the Japan will endeavor to avoid exceptionally extraordinary one category. The contracts entered into by the time of the request for consultations will be duly taken into account in such consultations.

3. Whenever the development and marketing of new products based on technical innovation by Japanese industry requires adjustment in the Arrangement to provide additional flexibility, the Government of the United States of America will give particularly sympathetic consideration to any request by the Government of Japan for such additional flexibility, provided only that such new products are not at the same time displacing existing products falling under the made-up goods or apparel categories.

4. Recognizing difficulties involved in the administration of export restraints on basket categories, the Government of the United States of America will take full account of such difficulties in the event consultations and paragraph of the Arrangement are requested on basket categories.

5. The Government of the United States of America wishes to assure the Government of Japan that its policy is to maintain a uniform system of classification for cotton, wool and man-made fiber textiles at all ports of entry.

　Should any difficulties arise in the implementation of the Arrangement relating to the classification of any cotton, wool or man-made fiber textiles, at any of the several ports of entry into the United States of America, the Government of the United States be America and the Government of Japan will investigate and will take whatever steps may be necessary to address such difficulties.

(U.S. Letter)

　Washington, February 6,

　Excellency,
  This is to acknowledge receipt of Your Excellency's letter of today's date and the Record of Understanding attached thereto relating to the discussions leading to the conclusion of the Arrangement between the Government of Japan and the Government of the United States of America concerning Trade in Cotton. Wool and Man-made Fiber Textiles between Japan and the United States of America effected by the Exchan9e of Notes today.

　I wish to confirm the Record of Under starling referred to above.

　For the Secretary
  (Signed ) Douglas W. Mcminn

　His Excellency
  Nobuo Matsunaga
  Ambassador Extraordinary and
  Plenipotentiary of Japan to
  The United States McMinn