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Feb 2 2012 issue

Thursday, February 02, 2012
Sandler, Travis & Rosenberg Trade Report

WTO Upholds Ruling Against Chinese Export Restraints on Raw Materials

The World Trade Organization Appellate Body has upheld a dispute settlement panel ruling that export restraints imposed by China on several industrial raw materials are inconsistent with WTO rules as well as China’s commitments in its WTO accession protocol. This decision could increase the prospects for the U.S. and the European Union to file a WTO case against Chinese restrictions on exports of rare earth minerals, which are used in a number of high-tech applications.

The raw materials at issue in the Appellate Body decision include various forms of bauxite, coke, fluorspar, magnesium, manganese, silicon carbide, silicon metal, yellow phosphorus and zinc. These materials are used as key components in the steel, aluminum and chemicals industries to produce goods such as beverage cans, CDs, electronics, automobiles, ceramics, refrigerators, batteries and medicines.

According to a press release from the Office of the U.S. Trade Representative, the Appellate Body rejected “China’s attempts to portray its export restraints as conservation or environmental protection measures or measures taken to manage critical shortages of supply.” The European Union added that “for procedural reasons the Appellate Body was not in a position to rule on some additional claims on technical aspects of China's administration of export quotas and licenses and a minimum export price.”

The U.S., the EU and other co-complainants will now request that the WTO adopt the Appellate Body decision within the next 30 days, after which China will have a reasonable period of time to comply. A Chinese official said Beijing “deeply regretted” the ruling but “will apply reasonable policies to administer resource products in accordance with the WTO rules so as to realize sustainable development.”

This case is seen as a possible precursor to a similar challenge to Chinese restrictions on exports of rare earth minerals, which are used in the manufacture of a number of high-tech products. Last March a group of 28 members of the House of Representatives urged USTR Ron Kirk to file a WTO case against these measures given that China controls the vast majority of the world’s supply of rare earths. While USTR gave no indication this week of whether such a case may be imminent, European Union Trade Commissioner Karel de Gucht opined that the Appellate Body decision should prompt China to “bring its overall export regime – including for rare earths – in line with WTO rules.”

U.S. Exports of Used Electronic Products Subject of New ITC Investigation

The International Trade Commission has instituted an investigation examining U.S. exports of used electronic products. The products at issue include audio and visual equipment, computers and peripheral equipment, digital imaging devices, telecommunication equipment and component parts of these products, and the ITC may add other products that it deems relevant.

As requested by the Office of the U.S. Trade Representative, the ITC’s report will include the following information.

- the type, volume and value of, and significant foreign markets for, exports of used electronic products from the United States

- the forms and activities of enterprises receiving U.S. exporters’ shipments, most common end uses of exports in the foreign market (further processing, final disposal, etc.), and the extent of cross-border, intra-firm shipments by U.S. exporters

- the characteristics of used electronic products exported from the United States, including product condition (working, non-working, remanufacturable, refurbishable, repairable), composition of shipments (single product type, multiple product types), and the extent to which exports are processed (broken down or stripped) or remain intact prior to exportation

- the forms, activities and characteristics of domestic exporting enterprises (original equipment manufacturers, remanufacturers, refurbishers, brokers, recyclers, non-profits, etc.), including the extent to which the exporter is foreign-invested

- the relative share of sales by U.S. companies of used electronic products that are (1) exported, (2) sold to firms in the United States, (3) processed by the exporter itself and (4) disposed of by
the exporter itself

- the factors affecting trade in used electronic products

The ITC will hold a public hearing in connection with this investigation on May 15. Requests to appear at this hearing are due by April 16 and pre-hearing briefs and statements must be submitted by April 30. Post-hearing briefs and statements are due by May 22, and all other written submissions should be filed no later than Sept. 14. The ITC plans to submit its report to USTR by Feb. 8, 2013.

Near-Record Penalties in Auto Parts Price Fixing Probe

The Department of Justice announced this week that two Japanese suppliers of automotive electrical components have agreed to plead guilty and pay a total of $548 million in criminal fines for their involvement in multiple price-fixing and bid-rigging conspiracies in the sale of parts to automobile manufacturers in the United States over a ten-year period. One of the two companies will pay a $470 million criminal fine, the second largest ever obtained for a Sherman Act antitrust violation, while the other will pay $78 million. A department official noted that the auto parts investigation has now yielded more than $748 million in fines, which exceeds the total obtained by DOJ’s Antitrust Division in all of fiscal year 2011.

Four executives, all Japanese nationals, have also agreed to plead guilty and serve prison time ranging from 15 months to two years in the U.S. DOJ notes that both the fine amount and prison sentences are subject to court approval.

Softwood Lumber Agreement with Canada Extended for Two Years

The U.S.-Canada Softwood Lumber Agreement was recently extended without change for two years, through Oct. 12, 2015. The two sides will also consult before that time on whether to extend the agreement further. Canadian trade minister Ed Fast praised the extension for bringing “much-needed stability and predictability to the lumber industry.”

The SLA is designed to constrain softwood lumber exports from Canada to the U.S. when demand in the U.S. is low and to allow unrestricted trade in favorable market conditions. As part of this agreement the U.S. agreed to cease the collection of antidumping and countervailing duties on softwood lumber from Canada and to refund US$5 billion in deposits of AD/CV duties. In exchange, Canada agreed to apply export charges and volume limitations to shipments of softwood lumber to the U.S. when the price of softwood products falls below a certain level.

The SLA also provides for arbitration to resolve disputes regarding its interpretation and implementation. The U.S. has brought three such disputes and won two, which required Canada to impose additional export duties totaling nearly C$130 million. The third dispute is ongoing and deals with the apparent underpricing of public timber in the interior region of British Columbia.

AD/CV Notices: Request Reviews, Shrimp, Magnesium, Steel Plate, Tires, School Supplies, Pipes, Isocyanurates

Following are summaries of current antidumping and countervailing actions taken by the International Trade Administration or the International Trade Commission.

Agency: ITA.
Nature of Notice: Opportunity to request administrative reviews of AD/CV duty orders on the following goods.
- frozen shrimp from Brazil, China, India, Thailand and Vietnam (AD)
- stainless steel bar from Brazil, India and Japan (AD)
- uranium from France (AD)
- cut-to-length carbon-quality steel plate from India, Indonesia and Korea (AD/CV)
- preserved mushrooms from China, India and Indonesia (AD)
- stainless steel butt-weld pipe fittings from Italy, Malaysia and the Philippines (AD)
- carbon steel butt-weld pipe fittings from Japan (AD)
- drill pipe from China (AD)
- heavy forged hand tools from China (AD)
- small diameter graphite electrodes from China (AD)
- uncovered innerspring units from China (AD)
- prestressed concrete steel wire strand from India (CV)
- hot-rolled carbon steel flat products from Indonesia (CV)

Agency: ITA.
Commodity: Frozen warmwater shrimp.
Country: Vietnam.
Nature of Notice: Initiation and preliminary results of changed circumstances review of AD duty order.
Details: The ITA has preliminarily concluded that C. P. Vietnam Corporation is the successor-in-interest to C. P. Vietnam Livestock Corporation and, as a result, should be accorded the same treatment with respect to this order.

Agency: ITA/ITC.
Commodity: Pure magnesium in granular form
Country: China.
Nature of Notice: Initiation of sunset reviews of AD duty order.

Agency: ITA/ITC.
Commodity: Clad steel plate.
Country: Japan.
Nature of Notice: Initiation of sunset reviews of AD duty order.

Agency: ITA.
Commodity: New pneumatic off-the-road tires.
Country: China.
Nature of Notice: Rescission of administrative review of CV duty order for the period Jan. 1 through Dec. 31, 2010, based on timely withdrawal of the requests.

Agency: ITC.
Commodity: Lined paper school supplies.
Country: China, India and Indonesia.
Nature of Notice: Scheduling of full sunset reviews of AD and/or CV duty orders.
Details: Staff report to be made public after May 22; public hearing to be held June 12; requests to appear at hearing due June 6; pre-hearing briefs due by June 1; post-hearing briefs and all other comments due by June 21.

Agency: ITA.
Commodity: Light-walled rectangular pipe and tube.
Country: Taiwan.
Nature of Notice: Continuation of AD duty order for another five years, effective Feb. 2.
Details: Covered items are light-walled welded carbon steel pipes and tubes of rectangular (including square) cross-section having a wall thickness of less than 0.156 inch, classified under HTSUS 7306.61.5000. U.S. Customs and Border Protection will continue to collect AD duty cash deposits at the rates in effect at the time of entry for all imports of subject merchandise.

Agency: ITA.
Commodity: Chlorinated isocyanurates.
Country: China.
Nature of Notice: Extension from Feb. 6 to April 5 of time limit for final results of new shipper review of AD duty order.
Details: The ITA states that the issues raised in the case and rebuttal briefs regarding unreported sales and how they should be evaluated in the context of a new shipper review are complex and multifaceted.

Agency: ITA.
Commodity: Chlorinated isocyanurates.
Country: China.
Nature of Notice: Extension from March 1 to June 29 of time limit for preliminary results of administrative review of AD duty order.
Details: The ITA needs more time to select an appropriate surrogate country and analyze data sources for over 40 factors of production.

IPR Enforcement Actions on Ink Application Devices, LCD Devices

Potential IPR Probe of Ink Application Devices Evaluated for Public Interest Issues. The International Trade Commission is requesting comments no later than Feb. 14 on any public interest issues raised by a Section 337 intellectual property rights infringement complaint against certain ink application devices and components thereof and methods of using the same. Comments should address whether the issuance of exclusion orders and/or cease and desist orders pursuant to this complaint would negatively affect the public health and welfare in the U.S., competitive conditions in the U.S. economy, the production of like or directly competitive articles in the U.S., or U.S. consumers. In particular, the ITC is interested in comments that:

- explain how the articles potentially subject to the orders are used in the U.S.;

- identify any public health, safety or welfare concerns in the U.S. relating to the potential orders;

- indicate the extent to which like or directly competitive articles are produced in or otherwise available in the U.S.; and

- indicate whether the complainants, the complainants’ licensees and/or third-party suppliers have the capacity to replace the volume of articles potentially subject to exclusion orders and cease and desist orders within a commercially reasonable time.

Patent Infringement Probe of LCD Devices Terminated. The International Trade Commission has terminated patent infringement investigation 337-TA-782 of certain liquid crystal display devices and products containing same based on a settlement agreement.

Foreign Regulatory Changes Could Affect Exports of Machinery, Glasses, Hazardous Materials

According to the National Institute of Standards and Technology, the World Trade Organization has been notified of regulatory changes that may affect exports of specific products to the following countries. For more information on how these restrictions may affect your business, contact ST&R.

- China: national standard on pharmaceutical machinery ( (comments due by March 30)

- China: national standard on spectacle lenses with anti-reflective coating ( (comments due by March 30)

- China: national standard on industrial automation products ( (comments due by March 30)

- China: national standard on pressure (differential) transmitters used in industrial processes ( (comments due by March 30)

- China: national standard on temperature transmitters used in industrial processes ( (comments due by March 30)

- India: rules that assign responsibility to the occupier and consigner who handle hazardous substances and/or dangerous goods (comments due by March 30)

Ocean Transportation Intermediary License Revocations, Reissuances, Applicants

OTI Licenses Revoked. The Federal Maritime Commission has given notice that the following ocean transportation intermediary licenses have been revoked. A revocation may occur after a license is surrendered voluntarily by the OTI or for failure to maintain a valid bond.

• license #001890N: JIB International Incorporated d/b/a JIB International Transport d/b/a JIB Worldwide Forwarding, Lodi, Calif.
• license #1923F: Suddath Transportation Services Inc. d/b/a STS, Jacksonville, Fla.
• license #001979F: Gulf States Forwarding LLC, Metairie, La.
• license #3433F: Chun, Song Nam d/b/a Delta Express, Bensenville, Ill.
• license #4437F: Superior Freight Services Inc., Eagan, Minn.
• license #012035N: Abba Shipping Lines Inc., Miami, Fla.
• license #016901F: Ohlson International Logistics Incorporated, Elk Grove Village, Ill.
• license #018027N: Dimex Consulting Inc., Garden Grove, Calif.
• license #018457N: Seatrans Logistics Inc., Seattle, Wash.
• license #019042F: R.G. Associates Inc. d/b/a Interfreight SE, Peachtree City, Ga.
• license #020576NF: AAC Transport Inc., Springfield Gardens, N.Y.
• license #020302N: Frank Noah d/b/a Comis International, Carson, Calif.
• license #020826NF: New World Forwarding LLC, Houston, Texas
• license #021059NF: Trade Logistics Corp., Miami, Fla.
• license #021523F: Allcargo International Shipping Inc., Hampton, Ga.
• license #021734NF: HBI America LLC, Doral, Fla.
• license #021837N: Cargo America Inc., Houston, Texas
• license #022865N: Flier International Cargo Inc., Miami, Fla.
• license #023375F: SDS Trans Inc., Jamaica, N.Y.

OTI Licenses Reissued. The Federal Maritime Commission has given notice that the following ocean transportation intermediary licenses have been reissued.

• license #004437N: Superior Freight Services Inc., Eagan, Minn.
• license #021837F: Cargo America Inc., Houston, Texas
• license #023375N: SDS Trans Inc., Jamaica, N.Y.

OTI License Applicants. The Federal Maritime Commission has provided notice that the following applicants have filed applications for licenses as non-vessel-operating common carrier and/or ocean freight forwarder ocean transportation intermediaries. Persons knowing of any reason why any of these applicants should not receive a license are requested to contact the FMC.

• AGLI Maritime Ltd., Bensenville, Ill.
• Ashimiyu Alowonle d/b/a Classique Companies, Rockford, Minn.
• Direct Express Intermodal LLC, Atlanta, Ga.
• Grupo Delpa Corp., Doral, Fla.
• Iris International USA LLC, Haworth, N.J.

Revised Guidance on Exports to Afghanistan

The State Department’s Directorate of Defense Trade Controls has posted to its Web site a guidance document revised as of Jan. 31 on exports to Afghanistan.

Exports. DDTC policy is to expedite requests for exports directly supporting coalition efforts in Afghanistan, but only requests directly related to coalition operations are afforded this expedited review. To be eligible for expedited handling, requests must be for defense articles and services to forces or organizations either (a) deployed in Afghanistan or (b) within 90 days of a scheduled deployment. License applications requesting expedited handling that do not meet these criteria will be returned without action and the applicant will be instructed to resubmit as a routine license.

For applications in support of Operation Enduring Freedom, the transaction ID should begin with the letters “OEF,” and all requests must note OEF in the first line of purpose block (block 20 for the DSP-5, block 23 for the DSP-73 and DSP-61).

In addition, the following documentation must be included in the requests: (1) a transmittal letter fully explaining the transaction, (2) a complete copy of the contract or purchase order applicable to the proposed export, (3) an end use and end user statement from the foreign purchaser, (4) for licenses in support of U.S. government contracts, a letter from the appropriate service or agency identifying the specific export to be an urgent requirement in support of coalition operations, (5) for exports to coalition partners, a letter from the partner government confirming the transaction and that it is in support of coalition operations, and (6) a copy of product specifications or descriptive literature clearly detailing the commodities requested for export.

DSP-83s are required for all exports of significant military equipment regardless of country of ultimate destination, including Afghanistan.

Reexports. Requests to re-export U.S. Munitions List-controlled defense articles under ITAR §123.9 to coalition partners in Afghanistan will be considered for expeditious handling. To qualify, requests must clearly demonstrate that the re-export is for defense articles for U.S. and/or coalition forces or supporting contractors currently deployed in Afghanistan or scheduled to deploy to Afghanistan within 90 days. Supporting documentation must include the following: (1) a letter that fully explains the transaction and identifies the original license number under which the defense articles were exported, (2) a copy of the purchase order or contract (or other evidence confirming the re-export) from the new ultimate end user, (3) an end use statement from the ultimate end user identifying the transfer as an urgent OEF requirement, (4) a copy of product specifications or descriptive literature clearly detailing the commodities requested for export, (5) a DSP-83 if the transfer includes significant military equipment, (6) certification, as required under ITAR §126.13, if the applicant is a U.S. person, and (7) certification as required under 22 CFR §130.

Automatic Weapons. While DDTC has a longstanding policy of not authorizing fully automatic weapons to private entities, it has made an exception with regard to the activities of private security companies in Afghanistan. The preference is for these weapons to be exported temporarily on DSP-73s, although DSP-5s will be considered only when the security company is itself a foreign person as defined in ITAR §121.16.

For fully automatic firearms proposed for export to a non-Afghanistan government (private) end user in Afghanistan, DDTC requires (1) justification for the number of weapons being requested, with particular attention to follow-on licenses requesting additional quantities; (2) end user assurances using the example provided below; and (3) a letter from the government or international organization responsible for the contract stating that it will send an inventory report of the fully automatic weapons to DDTC within five days of the weapons arrival in Afghanistan and account for the ultimate disposition of the weapons upon completion of the mission or termination of the contract. When a DSP-5 is used, the license must be accompanied by a DSP-83 executed by the parent government of the foreign person. Supporting documentation for the export of USML category I firearms must include those items listed above, and all serial numbers must be listed in Block 20 of the application if available or must be provided to DDTC prior to export.

Monthly Surface Trade with Canada and Mexico Falls 3.0%

U.S. monthly surface transportation trade in goods with NAFTA partners Canada and Mexico fell 3.0% in November after a 1.7% gain in October, according to statistics released Feb. 1 by the Department of Transportation. The November total of $76.7 billion was also up 12.7% from a year before. Over the last ten years total surface transportation trade with Canada and Mexico has risen 72.6%, including an 83.5% gain for exports and a 64.3% increase for imports.

Surface transportation includes freight movements by truck, rail, pipeline, mail, foreign-trade zones and other modes and in November accounted for 84.8% of U.S. trade by value with Canada and Mexico. Surface trade between the U.S. and Canada totaled $44.3 billion, down 4.6% from October but up 12.2% from a year before. Exports fell 5.9% for the month but gained 10.2% from the previous November, while imports saw a 3.5% monthly decline but a 14.1% rise year-on-year. U.S.-Mexico surface transportation trade totaled $32.4 billion, down 0.6% from October but up 13.3% from the previous year. Exports and imports fell 0.3% and 0.9%, respectively, for the month but increased 15.7% and 11.4% over November 2010.

New Maritime Agreements Filed

The Federal Maritime Commission has issued notice that the following new or amended agreements have been filed. Interested parties may submit comments by Feb. 13.

• Nippon Yusen Kaisha and Hapag-Lloyd AG – The agreement authorizes the parties to share vessel space in the trade between U.S. West Coast ports and ports on the west coast of Mexico and Central America.

• APL/Hamburg Sud Space Charter Agreement – The agreement authorizes APL to charter space to Hamburg Sud in the trade from Asia to the U.S. Pacific Northwest.

Of Note: Export Violations, Trade Policy, EU GSP Reform

Links to other headlines of interest to the trade community.

Federal court wants more consideration of duress argument in export violation case

Is U.S. on the brink of a new era in trade liberalization?

European Union proposes GSP reform, other measures to boost trade-led growth

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