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Cease Zeroing, Brazil Duties on Mexican Cars, Etc.

Tuesday, February 07, 2012
Sandler, Travis & Rosenberg Trade Report

U.S. to Cease Zeroing in AD/CV Proceedings In Return for Suspension of Retaliation Efforts

In a move sure to generate opposition from domestic producers and sympathetic lawmakers, U.S. Trade Representative Ron Kirk announced Feb. 6 that the U.S. has signed agreements with the European Union and Japan under which it will end its use of zeroing practices found to be inconsistent with World Trade Organization rules. In return, the EU and Japan have agreed to suspend WTO proceedings in which they were seeking authorization to impose retaliatory trade measures. Once the U.S. completes its implementation of the agreements those proceedings will be terminated. It was not immediately clear if these agreements may be extended to other countries that have also challenged the U.S. use of zeroing.

Zeroing is a process that generally increases antidumping and countervailing duties on imported goods. The U.S. has lost virtually all of the WTO cases brought against this practice, which have struck down its use in original AD/CV duty investigations as well as administrative, new shipper and sunset reviews. In response, the U.S. already limits the use of zeroing in original investigations and has been considering a further restriction in the context of administrative reviews. According to the EU, the U.S. will now adopt that proposal with certain minor modifications.

The EU explains that the U.S. has committed to apply a new methodology to calculate AD duty rates in all new AD reviews launched as of mid-February. Under this new methodology, when the U.S. compares weighted-average normal values of goods subject to AD duty orders to weighted-average export prices it will offset instances of sales above normal value with sales below normal value rather than “zeroing” them out as it has in the past.

AD duty rates on goods imported into the U.S. after May 2010 will also be determined under the new methodology, which the EU states will benefit about 30 exporters affected by ongoing administrative reviews for 10 different products. In addition, 35 EU exporters of eight different products subject to AD duty orders, some of whom are not currently not taking part in administrative reviews but are affected by zeroing, will have their AD duty rates determined without zeroing. As a result, as of June no EU exporter should be subject to an AD duty affected by zeroing.

The EU acknowledged that in some instances the U.S. may resort to an approach different from that involving weighted averages, in which case the U.S. apparently could still use zeroing, but said that “there is no indication at this stage that the use of such different approaches will be widespread.”

USTR characterized the agreements as part of the White House’s economic recovery efforts. “Had these agreements not been reached today,” a USTR press release asserted, “substantial volumes of U.S. exports could have been closed out of markets in the EU and Japan, resulting in job loss for U.S. workers and financial loss for U.S. farms and businesses.”

That position is not likely to sit well with supporters of zeroing, who say the practice is necessary to counter unfair foreign trade policies and that WTO rulings against it have wrongly expanded the scope of the WTO Antidumping Agreement. USTR has consistently made similar arguments at the WTO across multiple administrations but said that “in these circumstances and at this time, the compliance actions announced today are important in confirming U.S. support for the rules-based system that the WTO provides.” USTR added that it will “continue to press in ongoing WTO negotiations for affirmation that zeroing is consistent with WTO rules,” although the near universal opposition to zeroing on the part of other members means there is little chance the U.S. argument will prevail.

(Click here for text of U.S.-EU “roadmap” - http://trade.ec.europa.eu/doclib/docs/2012/february/tradoc_149066.pdf)

Brazil Considering Reimposition of Import Duties on Mexican Cars

Press sources report that in another effort to protect domestic automakers struggling to deal with various economic conditions Brazil is considering the reimposition of a 35% tariff on cars imported from Mexico in addition to the 30% industrial production tax announced recently. Ending or renegotiating a 2002 agreement under which Mexican cars and automotive parts currently enter Brazil duty-free could have a significant impact on Mexican auto manufacturers and suppliers, which have increased their shipments to Brazil in recent years. However, any such change requires at least 14 months’ prior notice, meaning no additional tariffs or taxes would be imposed until at least April 2013.

Brazilian officials have acknowledged that the bilateral agreement is being reviewed in light of a 40% increase in imports of Mexican vehicles in 2011 and Brazil’s growing bilateral deficit in this sector. So far, however, there has been no formal confirmation of any final decision. Mexican officials will reportedly travel to Sao Paulo later this week for further discussions on the matter.

Stronger Sanctions on Iran Approved by Senate Committee

The Senate Banking, Housing and Urban Affairs Committee approved last week legislation to impose even harsher economic sanctions against Iran to combat what bill supporters say is that country’s continued pursuit of nuclear weapons and support of international terrorist activities. The bill could be taken up by the full Senate later this month. International Trade Daily reports that it is similar to the Iran Threat Reduction Act (H.R. 1905) passed by the House but that a conference would likely be required to resolve a number of differences.

A committee press release states that while existing sanctions and other efforts “have prompted many foreign firms to withdraw from Iran and slowed Iran’s illicit nuclear program,” stronger action is needed. The Iran Sanctions, Accountability and Human Rights Act seeks to provide that by broadening the list of available sanctions, requiring intensified targeting of Iran’s Revolutionary Guard Corps, requiring firms traded on U.S. stock exchanges to disclose Iran-related activity to the Securities and Exchange Commission, sanctioning energy and uranium mining joint ventures with Iran’s government outside of Iran, penalizing U.S. parent firms for certain Iran-related activities of their foreign subsidiaries, and mandating sanctions for those who supply Iran with weapons and other technologies used to commit human rights abuses. Specific measures include the following.

- for the first time, extends U.S. sanctions under the Iran Sanctions Act to firms engaged in new energy-related joint ventures anywhere in the world in which Iran’s government is a substantial partner or investor or by which Iran could otherwise receive critical advanced energy sector technology or know-how not previously available to its government

- extends U.S. sanctions to all suppliers who knowingly provide goods, services and technologies valued at $1 million or more, or $5 million annually, to a person or firm involved in Iran’s energy sector, including petroleum resource projects and domestic production of refined petroleum products (primarily gasoline) in Iran

- extends the U.S. procurement ban to foreign persons who interact with the IRGC, requiring certification by all prospective government contractors that neither they nor any of their subsidiaries have engaged in significant economic transactions with designated IRGC officials, agents or affiliates

- requires blocking of assets of, and other sanctions on, shippers, insurers and reinsurers who knowingly provide ships or insure vessels used in the shipment of materials contributing to Iran’s WMD program or its terrorism-related activities (also applies to parent firms if they knew or should have known of the shipments and to subsidiaries of violators if they knowingly participated in the activity)

- requires the imposition of civil penalties of up to twice the amount of the transaction on U.S. parent companies for the activities of their foreign subsidiaries that, if undertaken in the U.S. or by a U.S. person, would violate U.S. sanctions law (including activities under the current U.S. trade embargo with Iran and regardless of whether the subsidiary had been established to circumvent U.S. sanctions)

- requires all firms whose stock is traded on U.S. stock exchanges to disclose whether they or their affiliates have engaged in activities that may be subject to sanction under U.S. law (related to Iran’s energy sector; conducting or facilitating certain banking violations supporting WMD activities/terrorism, money laundering and the IRGC; transferring weapons and certain other technologies to Iran; transferring sensitive communications jamming or monitoring technology; interacting with person or firms who have been designated for WMD/terrorism sanctions, or engaging in transactions with entities representing the government of Iran), provides for detailed public disclosure of any such information by the Securities and Exchange Commission and conveyance of that information to the president, and requires the president to initiate an investigation into whether such disclosed activities are sanctionable and render a decision within six months

- imposes broad sanctions, including visa denial and freezing of assets, on persons and firms that supply Iran with technologies (e.g., weapons, rubber bullets, tear gas and other riot control equipment, and jamming, monitoring and surveillance equipment) that the president determines are likely to be used by Iranian security forces to commit human rights abuses

- requires sanctions against individuals and firms found to have engaged in censorship, a strategy to promote Internet freedom in Iran, and expedited processing of Iran-related humanitarian, human rights and democratization aid

- requires at least three ISA sanctions to be imposed on firms who knowingly engage in joint ventures with Iran’s government, Iranian firms or persons acting for or on behalf of Iran’s government in the mining, production or transportation of uranium anywhere in the world (with an exemption for persons who agree to withdraw from such projects within six months after the effective date of the bill)

- expands the current menu of sanctions available to the president under the ISA to authorize exclusion from the U.S. of principal corporate officers (or other senior officers performing a similar function) or major shareholders in a sanctioned firm and provides for applicable ISA sanctions to be applied to the CEO or other senior officers of a sanctioned firm, which could include a freeze of their U.S. assets

$35,200 in Penalties Against Three Companies for Antiboycott Violations

The Bureau of Industry and Security announced Feb. 3 that three companies have agreed to pay a total of $35,200 in civil penalties to settle allegations that they violated the antiboycott provisions of the Export Administration Regulations. These provisions prohibit U.S. persons from taking certain actions with the intent to comply with, further or support unsanctioned foreign boycotts, including furnishing information about business relationships with or in a boycotted country or with blacklisted persons. The EAR also require that persons report their receipt of certain boycott requests to BIS. The three companies at issue were charged with violating some or all of these requirements in connection with transactions involving the sale and/or transfer of goods or services from the U.S. to Kuwait, Lebanon, Qatar, Pakistan and Bangladesh, including providing information regarding the blacklist status of other companies and certifying that goods were neither of Israeli origin nor contained Israeli materials.

AD Notices: Citric Acid, Sodium Hexametaphosphate, Graphite Electrodes

Commodity: Citric acid and certain citrate salts.
Country: Canada.
Nature of Notice: Preliminary results of administrative review of AD duty order for the period May 1, 2010, through April 30, 2011.
Details: Preliminary dumping margin of 2.34% for Jungbunzlauer Canada Inc.
Link: http://www.ofr.gov/OFRUpload/OFRData/2012-02802_PI.pdf

Commodity: Sodium hexametaphosphate.
Country: China.
Nature of Notice: Extension from Jan. 30 to March 15 of time limit for preliminary results of administrative review of AD duty order for the period March 1, 2010, through Feb. 28. 2011.
Link: http://www.ofr.gov/OFRUpload/OFRData/2012-02750_PI.pdf

Commodity: Small diameter graphite electrodes.
Country: China.
Nature of Notice: Extension from Feb. 3 to Feb. 28 of time limit for preliminary results of administrative review of AD duty order for the period Feb. 1, 2010, through Jan. 31, 2011.
Link: http://www.ofr.gov/OFRUpload/OFRData/2012-02770_PI.pdf

Foreign-Trade Zones Board Approves Zone Expansions and Reorganizations

The Foreign-Trade Zones Board has recently taken the following actions.

- approved manufacturing authority at the Baxter Healthcare Corporation facility within FTZ 22 in Round Lake, Ill. (source document - http://www.ofr.gov/OFRUpload/OFRData/2012-02788_PI.pdf)

- approved the expansion of FTZ 29 in Henderson County, Ky., adjacent to the Owensboro/Evansville U.S. Customs and Border Protection port of entry (source document - http://www.ofr.gov/OFRUpload/OFRData/2012-02799_PI.pdf)

- approved the reorganization and expansion of FTZ 272 under the alternative site framework with a service area of Lehigh and Northampton counties in Pennsylvania, within and adjacent to the Lehigh Valley CBP port of entry (source document - http://www.ofr.gov/OFRUpload/OFRData/2012-02781_PI.pdf)

- approved the reorganization of FTZ 118 under the ASF with a service area of St. Lawrence County, N.Y., within and adjacent to the Ogdensburg CBP port of entry (source document - http://www.ofr.gov/OFRUpload/OFRData/2012-02786_PI.pdf)

- approved the reorganization of FTZ 124 under the ASF with a service area of St. Charles, St. John the Baptist, St. James, La Fourche and St. Mary parishes in Louisiana (source document - http://www.ofr.gov/OFRUpload/OFRData/2012-02776_PI.pdf)

- approved the reorganization of FTZ 275 under the ASF with a service area of Clinton, Eaton, Gratiot, Ingham, Isabella (portion), Jackson, Livingston and Shiawassee counties in Michigan, adjacent to the user-fee airport designated by CBP at the Capital Regional International Airport in Lansing (source document - http://www.ofr.gov/OFRUpload/OFRData/2012-02773_PI.pdf)

- terminated subzone 176A at the Milk Specialties Company facility in Dundee, Ill., after the grantee advised that zone procedures are no longer needed there (source document - http://www.ofr.gov/OFRUpload/OFRData/2012-02794_PI.pdf)

Environmental Technologies Trade Committee to Meet Feb. 24

The International Trade Administration’s Environmental Technologies Trade Advisory Committee will hold a public meeting via teleconference on Feb. 24. The only agenda item for the Feb. 24 meeting is the presentation of, and deliberation on, a list of Harmonized Tariff Schedule codes that the committee considers relevant to the U.S. environmental industry. Comments should be submitted no later than Feb. 17 to be considered during the meeting.

(click here for source document - http://www.ofr.gov/OFRUpload/OFRData/2012-02719_PI.pdf)

Defense Trade Advisory Group Seeks New Members

The State Department is again accepting applications for membership on the Defense Trade Advisory Group. State is interested in applications from subject matter experts from the U.S. defense industry, relevant trade and labor associations, and academic and foundation personnel. The department originally asked for new applicants last November and is now seeking additional applications to have a more diverse membership. Applications must be postmarked by March 1.

The purpose of the DTAG is to provide State’s Bureau of Political-Military Affairs with a formal channel for regular consultation and coordination with U.S. private sector defense exporters and defense trade specialists on issues involving U.S. laws, policies and regulations for munitions
exports. Major topics addressed by the DTAG include (a) policy issues on commercial defense trade and technology transfer; (b) regulatory and licensing procedures applicable to defense articles, services and technical data; (c) technical issues involving the U.S. Munitions List; and (d) questions relating to actions designed to carry out the Arms Export Control Act and the International Traffic in Arms Regulations.

(click here for source document - http://www.ofr.gov/OFRUpload/OFRData/2012-02803_PI.pdf)

CBP Reviewing Bond Extension Application, Cargo-Related Forms

U.S. Customs and Border Protection is soliciting public comments by April 9 on the proposed extension of CBP form 3173, Application for Extension of Bond for Temporary Importation. Imported merchandise that is to remain in U.S. customs territory for one year or less without the payment of duties is entered as a temporary importation. When this time period is not sufficient an extension may be requested by submitting form CBP 3173. (click here for source document t- http://www.ofr.gov/OFRUpload/OFRData/2012-02765_PI.pdf)

CBP is also extending through March 8 the comment period on the proposed extension of the following information collections (click here for source document - http://www.ofr.gov/OFRUpload/OFRData/2012-02763_PI.pdf)

- CBP form 1302, Inward Cargo Declaration – The master or commander of a vessel arriving in the U.S. from abroad with cargo on board must file this form or submit the information thereon using a CBP-approved electronic equivalent. CBP form 1302 is part of the manifest requirements for vessels entering the U.S.

- CBP form 1302A, Cargo Declaration Outward with Commercial Forms – The master or commander of a vessel departing the U.S. must file this form with copies of bills of lading or equivalent commercial documents relating to all cargo encompassed by the manifest.

- CBP Form 7509, Air Cargo Manifest – The aircraft commander or agent must file two copies of this form with CBP at the departure airport, or respondents may submit the information on this form using a CBP-approved electronic equivalent.

- CBP Form 7533, Inward Cargo Manifest – The master or person in charge of a conveyance files this form, which is required for a vehicle or a vessel of less than five net tons arriving in the U.S. from Canada or Mexico, otherwise than by sea, with baggage or merchandise. Respondents may also submit the information on this form using a CBP-approved electronic equivalent.

- Manifest Confidentiality – An importer or consignee may request confidential treatment of its name and address contained in manifests by following the procedure set forth in 19 CFR 103.31.

- Vessel Stow Plan – For all vessels transporting goods to the U.S., except for any vessel exclusively carrying bulk cargo, the incoming carrier is required to electronically submit no later than 48 hours after the vessel departs from the last foreign port a vessel stow plan that includes information about the vessel and cargo. For voyages less than 48 hours in duration, CBP must receive the vessel stow plan prior to vessel arrival at the first port in the U.S.

- Container Status Messages – For all containers destined to arrive within the limits of a U.S. port from a foreign port by vessel, the incoming carrier must submit messages regarding the status of the events if the carrier creates or collects a container status message in its equipment tracking system reporting that event. These messages transmit information regarding events such as the status of a container (full or empty), booking a container destined to arrive in the U.S., loading or unloading a container from a vessel, and a container arriving or departing the U.S.

- Importer Security Filing – For most cargo arriving in the U.S. by vessel, the importer or its authorized agent must submit the data elements listed in 19 CFR 149.3 via a CBP-approved electronic interchange system within prescribed time frames. Transmission of these data elements provides CBP with advance information about the shipment.

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