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March 23 2012 issue

Friday, March 23, 2012
Sandler, Travis & Rosenberg Trade Report

Consumer Products Containing Metal Found to Possess Trace Amounts of Radiation

Importers Advised to Establish Safeguards Now to Minimize Potentially Serious Negative Consequences

The recent discovery of radioactive materials in some imported consumer goods that have made it to store shelves is prompting U.S. Customs and Border Protection to step up its related scanning activities, resulting in processing delays for dozens of shipments from China, India and other countries. Importers and exporters should act now to address this new and significant business risk. ST&R offers a full range of services to help companies avoid or resolve such problems.

The underlying issue is that scrap metal composed of melted-down items containing radioactive materials is often used in the production of unrelated consumer goods imported from overseas manufacturers. Some foreign-sourced items also contain naturally occurring radioactive isotopes. U.S. Customs has long had processes in place to detect and prevent such materials from entering the United States, but concerns are now being raised that those safeguards may not be strict enough.

Given the potential damage that can result when goods are found to contain radioactive materials, from the costs of shipping delays to penalties to negative media exposure, companies are advised to take all necessary steps to minimize associated risks. Sandler, Travis & Rosenberg can assist in this process by helping you establish a “Risk Assessment Review” to better qualify and quantify your likelihood of importing potentially radioactive shipments and assisting in the development of processes, procedures and controls to detect radiation threats. If your goods are found to have potentially unlawful amounts of radiation when they arrive in the U.S., ST&R can help you pursue a variety of remedial actions, including retesting to avoid false positive indications, working with government agencies to export or destroy any contaminated materials, and pursuing compensation for lost product, liability and consequential damages. Most importantly, we can work discreetly with you and CBP to minimize unfavorable media attention.

For more information on this issue, or to schedule a risk assessment for your goods, please do not hesitate to contact Chuck Crowley at (212) 590-4890 (office) or (914) 433-6178 (mobile);

Cargo Theft Report Shows Increase in Reported Incidents, Changes in Targeted Products

CargoNet recently released its 2011 report on cargo theft in the United States. Highlights of this year’s report include the following.

More Incidents. There was a 17% increase in reported cargo theft incidents, from 1,035 at the end of 2010 to 1,215 at the end of 2011. With delays in incident reporting the 2010 total was 1,284 (a 24% increase), and if that trend holds the 2011 total will be about 1,507. The total related economic loss in 2011 is estimated at $130 million.

Most Targeted Areas. The 10 states with the highest number of reported incidents were California, Texas, Florida, New Jersey, Illinois, Georgia, Tennessee, Pennsylvania, Indiana, North Carolina and New York. These states made up 85% of total reported incidents in 2011. Six of these states showed a decrease in cargo theft reports in 2011.

Cargo theft incidents are more likely to happen in a cargo-rich environment, such as economically developed areas with clusters of distribution centers, warehouses, transportation network hubs and container ports.

Locations with the most reported thefts include truck stops, warehouses and distribution centers, parking lots, carrier and terminal lots, and unsecured yards. More than 75% of all reported incidents, accounting for 60% of total reported loss value, occurred within these areas. The longer the distance cargo is hauled, the higher the chance it will be stolen due to the increased number of stops at unsecured locations.

Most Targeted Goods. Prepared food and beverage products became the most stolen commodity in 2011 with 19% of the total, followed by electronics (18%), base metals (9%) and apparel (8%). Electronics accounted for 47% of total loss value, followed by apparel and accessories (11%), prepared food and beverage products (10%), base metals (6%), machinery (6%) and personal care and beauty items (5%).

Most Incidents on Weekends. Cargo thefts reported to have occurred during a Friday through Monday period were significantly higher than those reported to have happened during the week. The report attributes this trend to the fact that trailers and warehouses are left unattended during non-working hours.

Click here for report

Trade Policy Review of the Philippines Cites Slow Pace of Reform

The World Trade Organization recently completed its fourth review of the trade policies and practices of the Philippines. The WTO report states that the Philippines economy has performed well since 2005, based on a relatively open trade regime, but nonetheless is operating below potential due to the slow pace of reform that has left some of the key constraints on overall growth (e.g. inadequate infrastructure, low investment and governance issues) intact. The WTO states that improved productivity is essential for the Philippines to compete with low-cost neighboring economies and that additional steps are needed to promote more competition, improve human capital, eliminate limitations on foreign investment, reduce incentives and reform state-owned institutions.

Some of the specific findings of the WTO’s review are as follows.

Trade Activity. The Philippines was the world's 37th largest exporter and 29th largest importer of goods in 2010. In services trade it ranked 27th among exporters and 36th among importers. Greater trade diversification would help the Philippines since it relies heavily on manufactured products (85% of exports and 67% of imports).

Foreign Investment. Foreign investment is encouraged in some sectors, particularly manufacturing, which mainly takes place within export processing zones where substantial fiscal incentives are offered. While this policy has supported manufacturing employment and exports, it adds pressure on the budget deficit and discourages efficiency.

The Philippines maintains its overall policy of ensuring that key sectors are effectively controlled by Filipinos and remain restricted for foreign investors, notably agriculture, fisheries and a large number of services. While the government has expressed concern, no concrete changes are foreseen to open up these sectors to foreign investment.

Trade Agreements. Since 2005 new regional trade agreements have entered into force between the Association of Southeast Asian Nations (of which the Philippines is a member) and Australia and New Zealand, China (services), India, Japan and Korea. In addition, a bilateral agreement between the Philippines and Japan entered into effect, bringing the total number of the Philippines' preferential partners to 15. However, only under ASEAN has tariff liberalization been fully implemented.

Tariffs. The tariff schedule has been simplified and now comprises 8,299 lines at the eight-digit level, compared with 10,688 in 2004. The simple average MFN applied tariff (6.4%) is 19.3 percentage points lower than the simple average bound rate (25.7%). Tariffs average 10.2% on agriculture and 5.8% on non-agricultural products. Positive tariff escalation (when tariff rates increase from basic goods through semi-finished goods to finished goods) is most pronounced in textiles and leather, followed by wood and furniture, paper and printing, chemicals, and non-metallic mineral products, thereby providing higher levels of effective protection to those industries than that reflected by the nominal tariff rates.

Customs. Customs procedures have been automated through the Electronic-to-Mobile (E2M) system to streamline the payment and clearance processes. Under ASEAN, the Philippines is in the process of finalizing a national single window in order to expedite intra- and extra-ASEAN trade.

Import Restrictions. The Philippines’ import licensing system remains complex, with fees varying by product. Imports of some goods are prohibited and a few very sensitive goods, notably rice, are subject to import quotas.

Standards. National standards and technical regulations appear to follow international guidelines whenever possible, and the number of national standards that correspond to international standards has increased since 2005. Sanitary and phytosanitary regulations appear to be stringent.

Trade Remedies. Since 2005, the Philippines has initiated three antidumping investigations (compared to 13 during the previous review period), with one definitive measure applied against clear float glass from Indonesia. No countervailing actions have been initiated since 1999. The Philippines has seven definitive safeguard measures in force and a special safeguard measure on frozen chicken.

Government Procurement. Participation by foreigners in the government procurement regime remains restricted and seems to depend on the source of the funds for the project and the domestic availability of the procured goods and services. The Philippines is neither a signatory nor an observer to the Government Procurement Agreement.

Click here for more information

Of Note: EU Trade Remedies, Taiwan Seeks FTA with U.S., Brazil Wants Higher Duties, Trade Facilitation Symposium, Expansion of Korea FTAs

European Commission publishes independent evaluation of trade defense instruments

Taiwan president presses for trade talks with US

Brazil sees WTO's duties as insufficient: sources

ICC to host first Symposium on Trade Facilitation

North Korea’s Gaeseong Pushed for Inclusion in FTA

Court Rules on Assessment of Duties After Revocation of AD Duty Order

The Court of International Trade issued March 21 a ruling on the assessment of antidumping duties on unliquidated entries of goods subject to an AD duty order after that order is revoked. This case concerns the AD duty order on extruded rubber thread from Malaysia, which was revoked effective Oct. 1, 2003, after the Department of Commerce determined in a changed circumstances review that the sole U.S manufacturer of domestic like product had ceased operations. Previously DOC had suspended liquidation of entries of subject merchandise covered by the 1995-1996 administrative review after the results of that review were challenged by the plaintiff.

The plaintiff had argued that revocation of the order should be retroactive to Oct. 1, 1995, to cover the unliquidated entries subject to the 1995-1996 review, and after a 2005 settlement representatives of the U.S. manufacturer expressed their support for that position. DOC refused a subsequent request for a second changed circumstances review and the Court of Appeals for the Federal Circuit upheld that decision but noted that the plaintiff could pursue this issue by filing suit against DOC’s decision in the first review, which it did.

The CIT now rejects DOC’s argument that the AD duties determined in the final results of the 1995-1996 review must be assessed on the unliquidated entries from that period. DOC claims that the AD law (19 USC 1675) does not envision the inclusion of entries subject to completed administrative reviews within the scope of a changed circumstances review because such entries must be liquidated in accordance with the final results of the appropriate administrative review or an associated final court decision. However, the court notes, 19 USC 1675(d)(3) states that a determination to revoke an AD duty order applies to unliquidated entries, without exception for entries subject to completed administrative reviews. This provision therefore does not limit DOC’s discretion to select a revocation date that predates a completed administrative review. Given that the affected domestic industry no longer exists, the court concludes, requiring the assessment of AD duties on the unliquidated entries at issue “contravenes the remedial purpose” of the AD duty law.

Click here for CIT decision

EPA Proposes to Limit New Uses of Five Groups of Potentially Harmful Chemicals

The Environmental Protection Agency has proposed that companies be required to report all new uses, including in domestic or imported products, of five groups of potentially harmful chemicals: polybrominated diphenylethers (PBDEs), benzidine dyes, a short chain chlorinated paraffin, hexabromocyclododecane (HBCD) and phthalate di-n-pentyl phthalate (DnPP). These chemicals have been used in a range of consumer products and industrial applications, including paints, printing inks, pigments and dyes in textiles, flame retardants in flexible foams, and plasticizers. An EPA official noted that although a number of these chemicals are no longer manufactured or used in the U.S. they can still be imported in consumer goods or for use in products.

According to an EPA press release, the proposed significant new use rules under the Toxic Substances Control Act would require anyone who intends to manufacture, import or process any of these chemicals for an activity that is designated as a significant new use to submit a notification to EPA at least 90 days before beginning the activity. This notification means that EPA can evaluate the intended new use and take action to prohibit or limit that activity if warranted.

In addition, EPA plans to issue a proposed test rule that would require manufacturers or processors to conduct testing on the health and environmental effects of PBDEs.

FTZ Board Gets Applications for Furniture Covering Sets, Reorganized Florida Zone

Upholstered Furniture Covering Sets. The Foreign-Trade Zones Board has received an application from the Greater Mississippi Foreign-Trade Zone Inc., grantee of FTZ 158 in Vicksburg/Jackson, Miss., requesting manufacturing authority on behalf of Morgan Fabrics Corporation to manufacture upholstered furniture covering sets under FTZ procedures within FTZ 158. The application proposes that MFC would utilize foreign-origin micro-denier suede fabric (up to three million square yards per year) to be cut and sewn into upholstery covering sets (i.e., furniture parts) under FTZ procedures. These sets would be shipped from the zone to U.S. furniture manufacturing plants, where they would be incorporated into upholstered furniture.

The proposed scope of authority would only involve duty savings on foreign origin micro-denier suede fabrics finished with a caustic soda wash process, which the applicant maintains are not produced by U.S. mills. The application indicates that MFC does not seek FTZ benefits on any other foreign fabrics that it may use in production at the facility (i.e., full duties would be paid on all such fabrics).

Comments on this application are due no later than May 22.

Click here for FTZB notice

Reorganization of Florida Zone. The Jacksonville Port Authority, grantee of FTZ 64, is requesting authority to reorganize its zone to expand its service area under the alternative site framework. The zone currently has a service area that includes Baker, Clay, Columbia, Duval and Nassau counties in Florida. The applicant is requesting authority to expand this service area to include Putnam, St. Johns and Bradford counties, within and adjacent to the Jacksonville U.S. Customs and Border Protection port of entry. Comments on this request are due no later than May 22.

Click here for FTZB notice

AD Notice: Sodium Hexametaphospate from China

Agency: ITA.
Commodity: Sodium hexametaphosphate.
Country: China.
Nature of Notice: Preliminary results of administrative review of AD duty order for the period March 1, 2010, through Feb. 28, 2011.
Details: Dumping margin for sole reviewed exporter is 52.39%. This rate will be used to determine AD duties assessed on entries of subject merchandise made during the period of review, and AD cash deposits at this rate will be required for entries of subject merchandise from the named exporter that are made on or after March 23.

Potential IPR Probe of Food Waste Disposers Evaluated for Public Interest Issues

The International Trade Commission is requesting comments no later than April 2 on any public interest issues raised by a Section 337 intellectual property rights infringement complaint against certain food waste disposers and components and packaging thereof. Comments should address whether the issuance of exclusion orders and/or cease and desist orders pursuant to this complaint would 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 complainant, the complainant’s licensees and/or third-party suppliers have the capacity to replace the volume of articles potentially subject to the requested orders within a commercially reasonable time; and

- explain how the requested orders would impact U.S. consumers.

Click here for ITC notice

Annual Surface Trade with Canada and Mexico Up 14.3% in 2011

Annual surface transportation trade between the U.S. and its NAFTA partners Canada and Mexico reached $904 billion in 2011, the Bureau of Transportation Statistics reports, a 14.3% jump that was the third-largest increase since NAFTA took effect in 1994. U.S. imports from Canada and Mexico via truck, rail and pipeline were up 13.8% while exports rose 14.8%. Total U.S.-NAFTA trade is up by 42% since 2009, when it fell to a recent low due to an economic recession.

U.S. surface transportation trade with Canada totaled $537 billion in 2011, up 14% from a year before. Imports carried by truck rose 10% by value while exports gained 12.4%. The top commodity category transported between the U.S. and Canada via surface modes was vehicles and vehicle parts, which accounted for $96.1 billion in trade and was roughly split between exports and imports.

Total surface transportation trade between the U.S. and Mexico reached $367.1 billion, up 14.6% from 2010. The value of imports by truck saw a 12.4% gain while exports climbed 14.9%. The top commodity transported between the two countries via surface modes was electrical machinery at $80.5 billion.

Click here for BTS notice

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