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Feb 9 2012 issue

Thursday, February 09, 2012
Sandler, Travis & Rosenberg Trade Report

New Mechanical Seal Standard for Cargo Containers Takes Effect March 1

(We have been advised that the link that should have taken readers to this article in the Feb. 8 issue instead linked to a different article. We regret the error and are reprinting this article in full below.)

U.S. Customs and Border Protection recently advised members of the Customs-Trade Partnership Against Terrorism that effective March 1 the current International Organization for Standardization (ISO) mechanical seal standard (ISO/PAS 17712) will be replaced with new standard ISO 17712:2010. CBP is not requiring C-TPAT participants to discard any high-security container seals that may not comply with the new standard that are currently in stock but is encouraging them to purchase compliant seals when their existing stocks are exhausted. CBP also states that when C-TPAT companies transition to new seals they should request documentation (lab reports) to confirm that the seals comply with the new standard.

CBP states that the updated standard includes the following requirements: testing to determine a seal’s classification for physical strength (as a barrier of entry), process auditing of the manufacturer’s security-related business practices, testing (pass/fail) of a seal’s ability to indicate evidence of tampering, and a new 18mm minimum width diameter for bolt seals. CBP adds that benefits of complying with the revised standard include a reduced possibility of cargo theft or tampering, fewer shipping delays resulting from missing or broken seals, and easier detection of compromised seals.

Auto Parts from China Could be Subject of New Enforcement Action

Speculation is growing that the Obama administration could soon announce some sort of enforcement action against auto parts from China. The Alliance for American Manufacturing recently released three reports drawing a line between China’s “illegal trading practices” and U.S. employment in this sector, and in an election year with a still-struggling domestic economy the White House could see that link as an opportunity to “get tough” with Beijing.

The AAM asserts that more than 400,000 jobs in the U.S. auto supply chain have been lost since 2000 and that another 1.6 million are at risk unless the U.S. takes action against “China's blatant use of illegal government subsidies and a web of predatory trade practices on a massive scale.” These practices include “generous government subsidies, performance requirements for foreign investors, technology transfers, discrimination against imported goods, restrictions on raw material exports, and priority support for exports of vehicles and parts.” As a result of these measures, the AAM states, China’s exports of auto parts to the U.S. have surged and the U.S. trade deficit with China in this sector increased from $1.03 billion in 2001 to $9.95 billion in 2011.

The AAM and supportive lawmakers have called on the White House to respond but appear to be leaving the nature of that response it up to the administration. AAM Executive Director Scott Paul said it is “essential that federal action be taken,” and Sen. Sherrod Brown of Ohio urged “an aggressive approach.” Press sources have indicated that new antidumping and/or countervailing duty petitions could be filed, notwithstanding the recent federal court decision that the U.S. cannot impose CV duties against products imported from non-market economy countries like China. Another possibility is a complaint at the World Trade Organization, a tactic that has been fairly successful in overturning objectionable Chinese trade policies. However, Brown also mentioned the new interagency Trade Enforcement Unit the president said he would create in his Jan. 24 State of the Union address, perhaps suggesting that the TEU should take up the auto parts issue to demonstrate the administration’s commitment to tougher trade enforcement against China. It remains unclear what sort of measures the TEU might consider.

For more information on this issue, please contact Mark Ludwikowski or Kristen Smith at (202) 216-9307.

Progress of Export Control Reform Effort Subject of House Hearing

The House Foreign Affairs Committee held a hearing Feb. 7 to examine export control reform efforts. The hearing featured conflicting opinions on how far those efforts should go and what Congress can and should do to support them.

Committee Chair Ileana Ros-Lehtinen, R-Fla., reiterated her concern with the Obama administration’s goal of moving numerous products from the U.S. Munitions List, where they are tightly regulated as defense items, to the Commerce Control List, which provides for less restrictive controls. She noted that many committee members “want to help make common sense improvements in our export control system that will enhance U.S. national security, protect critical technologies, and make our system easier to navigate for our American businesses” and that “in this regard there are some constructive elements of the current reforms,” such as the development of a shared information technology platform across export control agencies. And while a review of the USML also has merit, she said, the large-scale transfer of items from the USML to a proposed Commerce Munitions List “raises a number of questions.” For example, there appear to be no safeguards on allowing CML-controlled items to be “eligible for a broad new license exception to 36 countries deemed as friendly,” which could leave those goods “vulnerable to exploitation by grey market brokers, foreign intelligence entities, front companies, and even terrorists.”

Ros-Lehtinen characterized an export control reform bill she introduced last year as a more sensible alternative. The Export Administration Renewal Act (H.R. 2122) would re-enact the Export Administration Act and raise the maximum civil penalty amount under that law, increase criminal penalties for willful violations of the Export Administration Regulations, and establish greater congressional oversight over the administration and enforcement of U.S. export controls. Items removed from the USML would have to be subjected to controls that are as stringent as their previous USML control levels, unless less restrictive controls are in the economic and national security interests of the U.S.; a policy of denial would be implemented for any license application submitted for items removed from the USML and designated on the Wassenaar Arrangement’s “Very Sensitive List” or “Sensitive List” that are intended to be shipped to China; and there would be a policy of denial for any license application submitted for items removed from the USML that are intended to be exported to an ITAR proscribed country or a country subject to a United Nations arms embargo.

Ranking Member Howard Berman, D-Calif., countered that “our out-of-date export controls are more unilateral –and therefore less effective – than they were in the past and are fast becoming a burden on our defense industrial base, our scientific leadership, and our national security.” He indicated support for the Obama administration’s Export Control Reform Initiative and said “there is much that Congress can do to help this effort.” One step would be to update the EAA, which was the goal of a bill Berman introduced last summer. The Technology Security and Antiboycott Act (H.R. 2104) would serve as the underlying statutory authority for U.S. export controls and go beyond the previous emphasis on preserving U.S. military superiority to also reflect the importance of strengthening scientific and technological leadership, high-technology manufacturing and the U.S. defense industrial base.

Berman also called on Congress to restore the president’s authority to remove less-sensitive satellites, related components and technology from the USML. Congress required all U.S. satellites and components to be moved from the CCL to the USML in 1998 following an incident in which two U.S. companies provided unlicensed technical assistance to China’s space launch program. However, Berman said, “this well-intended restriction is now causing unintended consequences,” such as U.S. components being designed out of foreign satellite systems. A potential solution is the Safeguarding United States Satellite Leadership and Security Act (H.R. 3288), which would ease current restrictions while prohibiting satellite technology exports to “the countries that pose the biggest risks to our national security” and banning any foreign satellite with a U.S. component from being launched on a Chinese rocket. This bill received support at the hearing from the Aerospace Industries Association of America and the Satellite Industry Association.

CBP Proposes to Expand Defense-Related Entry Exemption for Vessels and Aircraft

U.S. Customs and Border Protection is proposing to expand the exemption from entry and reporting requirements for certain vessels and aircraft owned or chartered by the Department of Defense. Comments on this proposed rule are due no later than April 9.

Vessels and aircraft arriving in the U.S. from a foreign place are generally required to report their arrival to CBP and make entry. Certain vessels and aircraft owned or chartered by the DoD are exempt from such entry requirements and in some cases the reporting requirements as well. These exemptions generally apply when the vessel or aircraft is transporting cargo that is solely the property of DoD or transporting passengers traveling on official U.S. business. However, many vessels and aircraft that are under DoD control and used to support DoD missions do not fit within the current exemptions, either because the cargo is not the property of DoD or because the vessel or aircraft is a chartered vessel or aircraft.

CBP is therefore proposing to expand the existing exemptions to improve the flow of cargo and passengers that support DoD missions. Specifically, these exemptions would cover vessels and aircraft owned by, under the complete control and management of, or chartered by DoD that transport only cargo and/or passengers that have been approved for carriage in the Defense Transportation System. Such vessels and aircraft would also be exempt from the requirement to present advance cargo information.

Of Note: Anti-Bribery Case, Pakistan-Indonesia Pact, KORUS

U.S. prosecutors weigh dropping bribery sting case

Indonesia, Pakistan Sign Preferential Trade Agreement

South Korea opposition party says it will repeal U.S. trade deal

Newly Introduced Legislation on Exports, Duty Suspensions

H.R. 3914 – to amend the Export Apple Act to permit the export of apples to Canada in bulk bins without certification by the Department of Agriculture (introduced Feb. 7 by Rep. Owens, referred to the House Committee on Agriculture)

H.R. 3917-3972 – to suspend duties on Disperse Red 60, Disperse Yellow 64, Vat Blue 66, Acid Black 172, Reactive Blue 224, Cuprate (4-), Reactive Yellow 27, Disperse Blue 77, Solvent Yellow 163, 1H-Xantheno, Reactive Red 123, Reactive Black 5, Disperse Blue 284, Reactive Red 198, Acid Blue 324, Acid Yellow 151, Acid Blue 221, Acid Yellow 137, Acid Yellow 230, Acid Red 414, mixtures of Disperse Red 367, Reduced Vat Blue 1, Acid Red 278, Direct Red 84, acetic acid, Acid Yellow 79, Acid Blue 171, Reactive Blue 19, Disperse Yellow 184:1, Acid Red 182, Direct Green 91, Disperse Red 159, Reactive Red 122, mixtures of Cobaltate (2-) and Cobaltate (3-), Disperse Red 311, Reactive Blue 187, Disperse Yellow 71, mixtures of Acid Black 244, (Chromate(2-), (Cobaltate(1-), and (Chromate(1-), Acid Blue 284, Basic Blue 94:1, Disperse Orange 288, Disperse Blue 284, Disperse Blue 56, Acid Blue 264, Acid Red 426, mixtures of Reactive Blue 250 and Reactive Black 5, mixtures of Reactive Black 5, Benzenesulfonic acid and 1-Naphthalenesulfonic acid, mixtures of Disperse Red 367, Benzo and acetic acid, mixtures of Disperse Blue 77, mixtures of Reactive Red 198 and Reactive Red 239, mixtures of Reactive Blue 19, mixtures of (3-Pyridinecarbonitrile, 5-[(2-cyano-4-nitrophenyl)diazenyl]-2-[[2-(2-hydroxyethoxy) ethyl]amino]-4-methyl-6-(phenylamino)-) and (3-Pyridinecarbonitrile, 5-[(2-cyano-4-nitrophenyl)diazenyl]-6-[[2-(2-hydroxyethoxy) ethyl]amino]-4-methyl-2-(phenylamino)-), mixtures of (9,10-Anthracenedione, 1,5-diamino-4,8-dihydroxy(4-hydroxyphenyl)-) and (9,10-Anthracenedione, 1,5-diamino-4,8-dihydroxy(4-methoxyphenyl)-), certain woven fabrics of cotton, and certain other made up articles, other knitted or crocheted fabrics, of cotton, dyed, other, of single knit construction

CBP Forms on Bonded Warehouses, Country of Origin Marking Under Review

U.S. Customs and Border Protection is requesting public comments no later than April 9 on the proposed extension without change of the following information collections.

- CBP Form 300, Bonded Warehouse Proprietor's Submission: This form is filed annually by each warehouse proprietor, and the information thereon helps CBP determine all bonded merchandise that was entered, released and manipulated in the warehouse. (click here for CBP notice

- Country of Origin Marking Requirements for Containers or Holders: Each imported article of foreign origin or its container must be marked with the English name of the country of origin in a conspicuous place as legibly, indelibly and permanently as the nature of the article or container permits. (click here for CBP notice

Foreign Regulatory Changes Could Affect Exports of Appliances, Food, Personal Care Items, Breast Implants, Medical Devices, Containers

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. More details, including regulatory texts, can be accessed here ( For information on how these restrictions may affect your business, contact ST&R.

- Australia: showers, tap equipment, flow controllers, toilets, urinal equipment, clothes washers, dishwashers (comments due by April 6)

- Brazil: technical regulations and conformity assessment procedures for commercial electric ovens

- Brazil: conformity assessment for systems and equipment for water heating using solar energy

- Brazil: draft technical regulations establishing formulas (comments due by March 19) and nutrient compounds and substances for enteral nutrition

- Brazil: draft technical regulation establishing rules for classification of non-proprietary names (comments due by Feb. 19)

- Brazil: draft technical regulation establishing minimum requirements of identity and quality for breast implants (comments due by Feb. 19)

- Brazil: resolution regulating use of pyrogallol, formaldehyde, paraformaldehyde and lead acetate in personal care products, cosmetics and perfumes (comments due by March 23)

- France: amended regulations on alcohol breath-testing devices (comments due by April 11)

- Kenya: guidelines on submission of documentation for registration of medical devices (comments due by April 3)

- Kenya: legislation providing for consumer protection and prohibiting unfair trade practices in consumer transactions (comments due by April 3)

- Kenya: mandatory standard on plastics considered suitable for food packaging (comments due by April 3)

- Mexico: draft amended standard on labeling of pre-packaged cosmetic products (comments due by March 16)

- Mexico: official standard on specifications for the manufacture and remanufacture or reconditioning of intermediate bulk containers used to transport hazardous substances, materials and waste

- Switzerland: draft ordinance on receptacles for the transport of dangerous goods by road, rail and cableway (comments due by May 31)

AD/CV Notices: Wind Towers, Polyester Staple Fiber

Agency: ITC.
Commodity: Utility scale wind towers.
Country: China and Vietnam.
Nature of Notice: Feb. 10 open meeting for vote on preliminary AD/CV injury determinations.

Agency: ITA.
Commodity: Polyester staple fiber.
Country: China.
Nature of Notice: Extension from March 1 to April 2 the time limit for the preliminary results of the administrative review of this AD duty order for the period June 1, 2010, through May 31, 2011.

$30,385 Penalty for Exports to Sudan

The Treasury Department’s Office of Foreign Assets Control reported Feb. 7 that a company has agreed to pay a $30,385 penalty to settle charges that it violated the Sudanese Sanctions Regulations by indirectly exporting acoustic Doppler current profilers to Sudan. The base penalty amount was $61,383, but OFAC determined that the company voluntarily self-disclosed this matter and that it constitutes a non-egregious case. OFAC also took into account that the company has no history of prior OFAC violations, the exports at issue caused minimal harm to sanctions programs objectives, and the company took appropriate remedial action upon learning of the potential OFAC violations.

Renewable Energy and Energy Efficiency Committee to Meet Feb. 23

The Renewable Energy and Energy Efficiency Advisory Committee will hold an open meeting Feb. 23 in Washington, D.C. At this meeting, which will also be available via conference call, the committee will hear presentations from the departments of State and Commerce, the Office of the U.S. Trade Representative and the Export-Import Bank on efforts to address issues that affect the competitiveness of U.S. renewable energy and energy efficiency companies. The committee will also review subcommittee work on recommendations related to the development and administration of programs and policies to enhance the competitiveness of the U.S. renewable energy and energy efficiency industries, including specific challenges associated with exporting.

Public seating at this meeting is limited and available on a first come, first served basis. Those wishing to participate, either in person or through the conference call, must pre-register no later than Feb. 17.

IPR Enforcement Actions on Cigarette Wrappers, Mobile Devices

Exclusion Orders Recommended for Infringing Cigarette Wrappers. The International Trade Commission is soliciting public comments through March 2 on public interest issues raised by recommendations on remedy in patent infringement investigation 337-TA-756 of certain reduced ignition proclivity cigarette paper wrappers and products containing same. An ITC administrative law judge has recommended the issuance of a limited exclusion order directed to infringing products of any respondent that the ITC finds in violation of section 337 and a cease and desist order directed to any respondent found to be in violation of section 337 and to have a commercially significant infringing inventory.

Comments should address whether such orders 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;

- identify like or directly competitive articles that the complainant, its licensees or third parties make in the U.S. that could replace the subject articles if they were to be excluded;

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

- explain how any such order would impact consumers in the United States.

New IPR Infringement Petition on Mobile Devices. The International Trade Commission received Feb. 7 a petition requesting that it institute a Section 337 investigation regarding certain mobile devices incorporating haptics. The proposed respondents are located in the U.S.

Section 337 investigations primarily involve claims regarding intellectual property rights violations by imported goods, including the infringement of patents, trademarks and copyrights. Other forms of unfair competition involving imported products, such as misappropriation of trade secrets or trade dress and false advertising, may also be asserted. The primary remedy available in Section 337 investigations is an exclusion order that directs U.S. Customs and Border Protection to stop infringing imports from entering the U.S. In addition, the ITC may issue cease and desist orders against named importers and other persons engaged in unfair acts that violate Section 337, including selling infringing imported articles out of U.S. inventory.

Export Privileges Suspended for Singapore Man for Illegal Exports to China

The Bureau of Industry and Security has taken action against a Singapore man for violating the International Emergency Economic Powers Act by conspiring to illegally export wound carbon fiber to an entity in China. Specifically, BIS has issued an order suspending through Oct. 9, 2019, the man’s export privileges relating to any commodity, software or technology subject to the Export Administration Regulations. This order does not prohibit any export, reexport or other transaction subject to the EAR where the only items involved that are subject to the EAR are the foreign-produced direct product of U.S.-origin technology.

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