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March 20 2012 issue

Tuesday, March 20, 2012
Sandler, Travis & Rosenberg Trade Report

Lawmakers Maintain Pressure for Enforcement Action on Chinese Auto Parts Policies

In a March 16 letter, 188 members of the House and Senate called on President Obama to “use all existing authority under the law” to prosecute “China’s unfair practices in the auto parts sector.” Speculation about possible enforcement action in this sector has been growing for several months and was reinforced by the early February issuance of three reports asserting that China’s policies have had a detrimental effect on U.S. employment (wti/wti.asp?pub=0&story=39066&date=&company=).

The March 16 letter accuses China of employing a variety of discriminatory policies to “advantage its producers.” These include limiting imports of U.S. parts, subsidizing exports of Chinese auto parts to the U.S., imposing restraints on the export of raw materials needed to produce auto parts, and forcing the transfer of technology from U.S. auto parts makers to their Chinese partners. “These tactics are working,” the letter asserts, with exports of Chinese auto parts having increased almost 900% since 2000. They have also had the “unfortunate result” of beginning to “sever the traditional link between auto assemblers, parts producers, and aftermarket producers,” meaning that even as the economic fortunes of U.S. automakers are improving “the auto parts sector faces serious challenges.”

Asserting that “we cannot wait until further damage is done,” the lawmakers called on the president to “develop and implement a much more assertive and comprehensive strategy.” In particular, Chinese auto parts policies should be one of the “first and highest priorities” of the new Interagency Trade Enforcement Center. However, the letter stops short of requesting specific measures, such as a World Trade Organization dispute settlement case.

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

Mexico Agrees to Limit Auto Exports to Brazil

Responding to Brazil’s concern over Mexico’s surging exports of automobiles to that country, Mexico has agreed to a three-year limit on such shipments starting this month. Brazil had considered ending or renegotiating its ACE-55 auto free trade agreement with Mexico in an effort to protect domestic auto manufacturers, which could have resulted in a significant tariff increase on Mexican-made cars. However, several weeks of negotiations yielded a deal under which Mexico will limit auto shipments to Brazil to $1.45 billion in the first year, $1.56 billion in the second year and $1.64 billion in the third year. This represents a significant decline from the $2.1 billion in sales Mexico recorded in 2011, when its share of Brazil’s auto import market soared to almost 20%. Mexico has also agreed to increase the regional content of such vehicles from 30% currently to 35% in March 2013 and then to 40% by March 2016. In addition, Mexico Mexican officials will consider expanding the ACE-55 agreement to include heavy trucks.

Debate on PNTR for Russia Continues

A March 15 Senate Finance Committee hearing on permanent normal trade relations status for Russia highlighted the continuing debate between supporters and opponents. Chairman Max Baucus, D-Mont., indicated that the committee will probably not act on PNTR legislation until closer to the time Russia officially joins the World Trade Organization, which is expected to occur sometime this summer.

The Senate Finance hearing focused on the importance of PNTR to U.S. businesses and workers. The U.S. must grant PNTR to Russia to allow U.S. companies to fully take advantage of the trade liberalization measures Russia will implement as part of its WTO accession. Dozens of business groups organized under the Coalition for U.S.-Russia Trade said in a March 14 letter that these commitments include “adherence to the rules of the international trading system with respect to intellectual property rights, science- and risk-based regulation for animal and plant health, and liberalizations in key sectors such as services.” In addition, Baucus said, Russia will “lower its tariffs and open its market to U.S. exports” and the U.S. will “get new tools … to hold Russia accountable to its obligations,” including “binding legal enforcement and transparency measures.” Without PNTR, the letter said, “all of Russia’s trading partners except the United States will immediately benefit when Russia joins the WTO.” This situation would “not hurt Russia one whit,” Baucus said, but would hurt the U.S. “dramatically.”

Others believe the U.S. should address human rights and other concerns with Moscow before granting PNTR. Two senators wrote to Baucus March 16 vowing to “strongly oppose” PNTR unless it is accompanied by the passage of a bill (S. 1039) that would impose targeted sanctions in response to “the contemporary human rights problems facing the people of Russia.” According to the senators, these “widespread and severe” problems include politically motivated killings by government agents, arbitrary detention and politically motivated imprisonments, and harsh prison conditions. Others have accused Russia of supplying the government of Syria with weapons that have been used in a violent ongoing crackdown against public dissent. At the March 15 hearing Sen. John Kyl, R-Ariz., asserted that “human rights cannot be divorced from the discussion of our economic relationship with Russia, particularly since some of the most egregious cases of abuse involve citizens exercising their economic and commercial rights.” Kyl also said more information is needed to “determine whether America is getting a good deal through Russia’s WTO accession and whether more should be done to protect our interests” given Russia’s “troubling pattern of intimidation, disregard for rule of law, fraudulent elections, human rights abuses, and government-sanctioned anti-Americanism.”

However, supporters say PNTR legislation should advance on its own merits and that human rights issues are more properly addressed through other channels. U.S. Ambassador to Russia Michael McFaul said the Obama administration believes the two issues “are not related” and has already taken a number of actions to try to improve the human rights situation in Russia.

FDA Announces New System for Communication with Import Community

According to a March 16 notice from U.S. Customs and Border Protection, the Food and Drug Administration has announced the Import Trade Auxiliary Communication System to improve communication between FDA and the import trade community. ITACS provides three functions: the ability to check on the status of an entry, the ability to submit entry documentation electronically, and the ability to submit goods availability information for targeted shipments electronically (although CBP notes that the availability of goods for examination should not be submitted through ITACS until the shipment has been unloaded and is physically present for FDA staff to examine). The benefits of the new system to the trade include receiving more detailed entry statuses than what is currently transmitted to filers via the Automated Broker Interface, reducing the need for phone calls inquiring about the status of entries, eliminating the need to mail or fax entry documentation and goods availability to FDA, and no problems with lost documents. A presentation detailing ITACS is available here (

Customs Broker Licenses and Permits Canceled

U.S. Customs and Border Protection has canceled the following customs broker licenses and all associated permits. Readers are reminded that broker licenses may be canceled for a variety of reasons and that the cancellation of a license does not necessarily indicate that the associated customs broker is no longer in business.

- license #12574: Dependable International Services and Transport Inc., New Orleans
- license #22821: Professional Customs Brokers Inc., San Juan
- license #13717: BAX Global Inc., Los Angeles
- license #10165: Air-Worthy Custom Brokers Corp., New York
- license #28432: Horizon Logistics LLC, Dallas
- license #15266: Sandra L. Smith, Dallas
- license #09627: Barry E. Booth, San Francisco
- license #05684: Sandra K. Grider, San Francisco
- license #13241: Max Verne Lund, Los Angeles
- license #06509: Robert Hough, New York

Click here and here for CBP notices

AD Notices: Steel Bar, Silicon Metal, Brass Sheet and Strip

Agency: ITA.
Commodity: Stainless steel bar.
Country: Brazil, India, Japan and Spain.
Nature of Notice: Sunset review determinations that revocation of AD duty orders would be likely to lead to continuation or recurrence of dumping at the following rates: 19.43% for Brazil, 3.87-21.02% for India, 61.47% for Japan, and 7.72-62.85% for Spain.
Details: If the ITC also makes an affirmative sunset review determination, these AD duty orders will be continued for another five years and cash deposits at the above rates will be required for entries of subject merchandise.

Agency: ITC.
Commodity: Silicon metal.
Country: China.
Nature of Notice: March 20 open meeting for vote in sunset review of AD duty order.

Agency: ITC.
Commodity: Brass sheet and strip.
Country: France, Germany, Italy and Japan.
Nature of Notice: March 21 open meeting for vote in sunset review of AD duty orders.

New IPR Infringement Petitions on Consumer Electronics, A/V Components, Food Disposers

The International Trade Commission has received petitions requesting that it institute separate Section 337 investigations regarding the following products.

- consumer electronics, including mobile phones and tablets (respondents located in Taiwan, Korea, Canada and the U.S.)

- certain audiovisual components and products containing the same (respondents located in Japan, Taiwan and the U.S.)

- certain food waste disposers and components and packaging (respondent 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.

Call for Annual Reports on Defense Offsets Agreements

The Bureau of Industry and Security is reminding the public that U.S. firms are required to report annually information on contracts for the sale of defense articles or defense services to foreign countries or foreign firms that are subject to offsets agreements exceeding $5 million in value. U.S. firms are also required to report annually information on offsets transactions completed in performance of existing offsets commitments for which offsets credit of $250,000 or more has been claimed from the foreign representative. Such reports for calendar year 2011 must be submitted no later than June 15.

Offsets are compensation practices required as a condition of purchase in either government-to-government or commercial sales of defense articles and/or defense services, as defined by the Arms Export Control Act and the International Traffic in Arms Regulations. For example, a company that is selling a fleet of military aircraft to a foreign government may agree to offset the cost of the aircraft by providing training assistance to plant managers in the purchasing country. Although this distorts the true price of the aircraft, the foreign government may require this sort of extra compensation as a condition of awarding the contract to purchase the aircraft.

Click here for BIS notice

Iranian Transactions Regulations Get Amended Definition of Government-Owned Entity

The Treasury Department’s Office of Foreign Assets Control has issued a final rule that, effective March 20, amends the Iranian Transactions Regulations to redefine the term “entity owned or controlled by the government of Iran” to substantially conform to the definition in the amended Iranian Financial Sanctions Regulations. As revised, this term includes any corporation, partnership, association or other entity in which the government of Iran owns a 50% or greater interest or a controlling interest as well as any entity otherwise controlled by that government. OFAC states that it intends to issue more thorough amendments to the ITR to implement Executive Order 13599 of Feb. 5, 2012 (“Blocking Property of the Government of Iran and Iranian Financial Institutions”) at a later date.

Click here for OFAC final rule

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